The Legal Requirements for Incorporation / Registration / Formation and Operation of a Company in Uganda
The legal requirements for the incorporation / registration / formation of a company in Uganda are contained in the Companies Act Cap 110 laws of Uganda 2000 edition. The registration/ formation and management of companies are governed by the companies Act and several other laws such as the Investment Code Act, The income tax Act, Value Added Tax Act, Uganda Citizenship and Immigration Control Act, National Social Security Fund Act among others.
The requirements are listed hereunder:
(1) Legal Requirements for incorporation of a company in Uganda.
(a) Name of the company
It is the responsibility of the promoters of the company to select a name for their company. The company must have a name which must not be identical with another registered company or offensive. Availability of the name must be by way of a search and app roval of the name in the company registry by the Registrar of companies to verify the suitability of the selected name.
(b) Registered office and address
The company must have a registered business address within Uganda. This may be filed at the time of submitting documents for the incorporation / registration / formation of the company or within twenty one days from the date of incorporation / registration / formation of the company.
(c) Type of company
The law allows for registration of companies limited by shares, limited by guarantee and unlimited liability companies. Under those companies limited by shares, a company can be a private company limited by shares or a public limited liability company. At incorporation / registration/ formation, all the legal objects of the company must be contained in its memorandum and articles of Association. The legal objects are the major business objectives of the company and the framework which it intends to run its business. The articles of association of the company operates as the company’s constitution.
(d) Share capital.
There are several types of shares such as ordinary shares, preference shares and deferred shares. The most popular shares are ordinary shares. The currency allowed for shares in Uganda is shillings. There is currently no minimum authorized share capital for companies. Shares can be paid for in cash or other valuable consideration. Return of allotment of shares must be filed with the registrar of companies within sixty days from the date of such allotment.
(e) Objects of the company
The objects of the company must be legal and lawful. Ugandan and Non- Ugandans can undertake all forms of legal businesses. It is lawful for all the shareholders and directors in a company to be non Ugandans.
(f) Particulars of Directors and company secretary.
The directors are elected into office by the shareholders. The directors then have a duty to appoint the management team of the company to run it profitably for the shareholders. Some or all the directors can be involved in its management especially small and family owned companies. For purposes of separation of powers in corporate governance, the directors should be different from management. The minimum number of directors is two and maximum number 50 for private companies. There is no maximum for public companies.
(2) Requisite documents
Before a company is registered by the registrar of companies, certain documents need to be provided by the promoters of the company. The documents are:
(a)Reservation of name form. Evidence that the name is available for use and its use was approved.
(b) Four sets of memorandum and Articles of Association of the company.
(c)Notice of situation of the office of the company.
(d) Particulars of directors and company secretary.
(e) Statement of authorized share capital of the company.
(f) Statutory declaration of compliance with the requirements for registration of a company. This is a statement provided by a legal practitioner engaged in the formation of the company to the effect that all legal requirements have been complied with.
(g)Evidence of Payment of Registration fees and Stamp duty which depends on the share capital of the company.
3. Tax requirements
(a) Company Taxes.
Under Ugandan tax laws, companies are subject to taxation under the Income Tax Act at the rate of 30% per annum. There is also Capital Gains tax which is levied on disposal of company’s assets. Then there is value added tax for goods and several services which is 18%. Then there is a withholding tax for dividends earnings. There is Pay as You Earn tax applied to the employment income of the employees of companies. There is also local service tax.
There are several incentives for foreign companies under the Investment Code Act. These include; A drawback of duties and sales tax payable
on imported inputs used in producing goods for export, Tax holidays. Under the same Act, a company shall not be entitled to any incentives if it engages in trading activities under third schedule. Other incentives under the Value Added Tax Act are claims for local value added which is 18%.
4. Foreign Investment in Uganda
Under Ugandan law, foreigners are allowed to wholly own companies or part own companies with Ugandans. The laws that govern foreign investments are the Investment Code Act, the Foreign Exchange Act, Citizenship and Immigration Control Act, Land Act among others.
(a) Entry requirements
Foreign investors are required to incorporate a company and provide evidence of investment of at least USD$ 100,000 to be issued with investment license. Must apply and obtain the relevant license of the sector it intends to invest and apply for work permit.
(b) Protection of investments
The Investment Code Act provides that the business enterprise of an investor which is licensed
shall not be compulsorily taken possession of or acquired except in accordance with the
Constitution of Uganda. The Constitution of the Republic of Uganda 1995 provides for the right
to property and adequate compensation where an individual has been denied of his property
rights. Compensation is at fair market value with respect to the enterprise acquired shall not be subject to exchange control restrictions.
(c) Transfer of invested funds
Under the Investment Code Act, an investor is entitled to externalize his funds for the purposes of; repayment of foreign loans or interest on those loans, payments of dividends of shareholders who are not citizens of Uganda or to citizens of Uganda residing abroad, payment of royalties or fees in respect of an agreement for the transfer of foreign technology; payments of emoluments and other benefits to foreign staff employed in Uganda in connection with the business enterprise, among other instances.
(d) Land ownership
Under the Land Act as amended in 2010, foreign companies and individuals can only acquire leasehold land as opposed to Ugandans who can acquire freehold and land under different land tenures.
ABOUT THE AUTHOR: Angualia Daniel (LLM)
is a Ugandan corporate lawyer. He is a Partner in the firm of Angualia Busiku & Co. Advocates and a corporate law lecturer in a number of Law Schools in Uganda.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.