Doing business in Uganda

An overview of corporate structuring

1 Introduction

There are seven main business structures in Uganda. These are sole proprietorships, private companies limited by
shares or guarantee, public limited companies, unlimited companies, statutory corporations, branches of foreign
legal entities and partnerships. Branches of foreign legal entities and locally incorporated private limited companies
however predominate. The structure of doing business in Uganda is influenced by legal, tax and commercial con-
siderations though in some cases the law is specific on the entity type to undertake regulated business.
In this publication, we provide an overview of the legal, tax and commercial considerations of doing business in
Uganda as a branch, local company or partnership. The discussion herein is high level and may not address the
consequences that arise from the specific circumstances of the underlying business structures.

2 Locally incorporated companies

With the exception of statutory corporations that are established by respective Acts of Parliament, local companies
are incorporated under the provisions of the Companies Act 2012. Any one or more persons, associated for any
lawful purpose, may by subscribing their names to a memorandum of association and otherwise complying with
the requirements of the Companies Act 2012 form an incorporated company with or without limited liabilities.
The first step in incorporating a company is to reserve and obtain the approval of the registrar of companies for the
name of the company. The founder members (subscribers), who can be nominees for the true shareholders, then
sign the company constitution documents namely the memorandum and articles of association in the presence of
a witness. The memorandum provides the following information:

• Company’s name;
• Company’s objectives;
• The situation of the company’s legal address or registered office (which must be in Uganda);
• The company’s limited liability status or otherwise;
• The amount of the company’s authorized share capital or otherwise; and
• A list containing the names, addresses and number of shares taken by each shareholder.

The articles of association regulate the company’s internal management and the rights of its members. The signed
memorandum and articles with other information such as the members, directors, registered office, passport sized
photographs and identification documents for the shareholders and directors are submitted to the registrar of com-
panies who then issues a certificate of incorporation that brings the company into existence.

a) Private companies limited by shares

Private companies limited by shares are those entities whose articles limit membership to 100 persons. The right
of transfer of shares is restricted so is the subscription for the company’s shares and debentures by the public. The
liability of the members is also limited to their shareholding in the company.

It is noteworthy that the Companies Act 2012 introduced the concept of a single member company. This compa-
ny is akin to sole proprietorship but with limited liability protection.

b) Private companies limited by guarantee

A private company limited by guarantee is also known as a guarantee company. The purest form of a guarantee
company is one having the liability of its members limited by the memorandum to the amount that the members
undertake to contribute to the assets of the company if it is wound up. This organization is common with charities,
sports clubs and professional bodies.

There is also a hybrid form of a guarantee company that can raise capital from its members by way of issue of
shares but also provide for its members to guarantee contributing to the assets of the company on winding up. The
memorandum of association should state the authorized capital of the company and a statement relating to the
amount each member would contribute to the assets of the company on winding up.

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 Doing business in Uganda
An overview of corporate structuring

c) Public limited companies

Public limited companies are entities which under the Companies Act 2012 are not private limited companies. Such
entities can offer their shares to the general public but also have limited liability. The shares can be acquired during
an initial public offering or through trading on the stock exchange.

A public company must at the time of its incorporation adopt and incorporate into its articles the provisions of the
code of corporate governance that the Companies Act 2012 lays out. This code should provide among others for
a board, define the board composition and duties, remuneration, board meetings, board committees and financial
reporting guidelines.

d) Unlimited companies

Unlimited companies are a type of private company where the shareholders have unlimited liability. This means
each member is jointly and severally liable for the debts of the company in the event of winding up. It is fairly easy
to return capital to shareholders as the restrictions on the reduction of capital contained in the Companies Act 2012
only apply to limited companies.

e) Statutory corporations

Statutory corporations or public corporations are public bodies that are established by respective Acts of Parlia-
ment. Statutory corporations are usually managed by Board of Directors appointed by the government through the
line Minister or the President and are accountable to the public and Parliament.

3 Foreign registered companies

Foreign companies or branches are registered in Uganda under the Companies Act, 2012 and a certificate of
compliance is issued upon registration. To facilitate registration of a branch in Uganda, the following documents
must be provided by the parent company and submitted to the registrar of companies.

• A certified copy of the mother company’s own Memorandum and Articles of Association or equivalent con-
stitution documents (with an English translation if necessary);
• A certified copy of the certificate of incorporation;
• A list containing the names, addresses, nationalities and occupation of its directors and company secretary;
• A statement of existing mortgages and charges created by the company in Uganda, if any;
• The names and addresses of one or more Ugandan residents who are authorized to accept legal notices on
the company’s behalf; and
• The address of the company’s registered or principal office.

The documents above must be prepared by a Notary Public registered in the country of origin. If satisfied that these
documents and particulars comply with the provisions of the Companies Act, the registrar issues a certificate of
registration and the company is registered in the branches/foreign companies register.

4 Partnerships

A partnership is a type of business organization where two or more persons but not exceeding 20 pool money,
skills, and other resources to carry on business with a view to making a profit. Where a partnership is formed in
Uganda for the purpose of carrying on a profession, the number of professionals, which constitutes the partnership
should not exceed 50 persons. There are two main types of partnerships namely general partnerships and limited
liability partnerships.

a) General partnerships

General partnerships carrying on business in Uganda under a business name not consisting of the true surnames
of all partners who are individuals must register their name under the Business Names Registration Act

All partners have unlimited liability in respect of the debts and obligations incurred by the partnership. Partner’s per-
sonal assets are liable to the partnership obligations and all partners can be sued for the entirety of a partnership’s

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