An Act to amend, replace and reform the law relating to the incorporation, regulation and administration of companies and to make provision for related matters.
BE IT ENACTED by Parliament as follows:
Part I – Preliminary
1. Commencement
(1)This Act shall come into force on a date appointed by the Minister by statutory instrument.
(2)The Minister may, under subsection (1), appoint different dates for different provisions of this Act.
2. Interpretation
In this Act, unless the context otherwise requires—“accounts” includes a company’s group accounts whether prepared in the form of accounts or not;“annual return” means the return required to be made in the case of a company having a share capital, under section 132 and in the case of a company not having a share capital, under section 133;“approved stock exchange” means a stock exchange approved under section 26 of the Capital Markets Authority Act and includes an interim stock trading facility approved under section 89 of that Act;“articles” means the articles of association of a company as originally framed or as altered by special resolution, including, so far as they apply to the company, the regulations contained in Table A in the First Schedule to the repealed Companies Act or in Table A in the Third Schedule to this Act;“book or paper” includes accounts, deeds, writings and documents;“capital markets authority” means the capital markets authority established by the Capital Markets Authority Act;“charge” means a form of security for the payment of a debt or performance of an obligation consisting of the right of a creditor to receive payment out of some specific fund or out of the proceeds of the realization of specific property; and includes a mortgage;“company” means a company formed and registered under this Act or an existing company or a re-registered company under this Act;“company limited by guarantee” and “company limited by shares” have the meaning assigned to them respectively by section 4(2);“court” used in relation to a company, means the court having jurisdiction under this Act;“currency point” has the value assigned to it by the First Schedule to this Act;“debenture” includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not;“director” includes any person occupying the position of director by whatever name called and shall include a shadow director;“document” includes summons, notice, order and other legal process and registers, indices, reports, certificates and accounts and may be in any form including any writing, any material, and any information recorded or stored by means of any mechanical or electronic device and any material derived from them;“dormant company” means a company that is not doing business and does not have accounting transactions in a financial year;“existing company” means a company formed and registered before the coming into force of this Act;“financial year” means in relation to a body corporate, the period in respect of which any financial statements of the body corporate laid before it in a general meeting is made up whether that period is a year or not;“group accounts” has the meaning assigned to it by section 157(1);“holding company” means a company as defined by section 161;“insurance company” means an insurance company within the meaning of the Insurance Act which carries on the business of insurance either solely or in conjunction with any other business or businesses;“limited liability company” means a company limited by shares or a company limited by guarantee;“lifting the corporate veil” means disregarding the corporate personality of a company in order to apportion liability to a person who carries out any act;“members voluntary winding up” has the meaning assigned to it by the law that governs insolvency in Uganda;“memorandum” means the memorandum of association of a company as originally framed or as altered from time to time;“Minister” means the Minister responsible for justice;“officer” in relation to body corporate, includes a director, manager or secretary;“personal representative” means—(a)in the case of a deceased person to whom the Succession Act applies either wholly or in part, his or her executor or administrator;(b)in the case of any other deceased person, any person who, under law or custom is responsible for administering the estate of such deceased person;“printed” means reproduced by original letterpress or by such other means as may be prescribed;“private company” has the meaning assigned to it by section 5(1);“prospectus” means a prospectus, notice, circular, advertisement or other invitation, offering to the public securities for subscription or purchase and includes—(a)a prospectus relating to an offer of debt securities to the public;(b)a prospectus in respect of any other offer of securities to the public;“registrar” means the registrar of companies or an assistant registrar or other officer performing the duty of registration of companies under this Act;“repealed Companies Act” means the Companies Act repealed under section 298;“resolution for reducing share capital” has the meaning assigned to it by section 76(2);“shadow director” means a person in accordance with whose directions or instructions the directors of a company are accustomed to act but does not include a person who gives advice to the directors in a professional capacity;“share” means share in the share capital of a company and includes stock except where a distinction between stock and shares is expressed or implied;“share warrant” has the meaning assigned to it by section 95(2);“statutory meeting” means the meeting required to be held by section 137(1);“statutory report” has the meaning assigned to it by section 137(2);“subsidiary” means a subsidiary as defined by section 161;“unlimited company” has the meaning assigned to it by section 4(3)(c).
(2)A provision of this Act overriding or interpreting a company’s articles, shall, except as otherwise provided by this Act, apply in relation to articles in force at the commencement of this Act, as well as to articles coming into force after the commencement of this Act and shall apply also in relation to a company’s memorandum as it applied in relation to its articles.
3. Register of companies
There shall be kept by the registrar a record called “the Register of Companies” where all the matters prescribed by this Act shall be entered.
Part II – Incorporation of companies and related matters
4. Mode of forming an incorporated company
(1)Any one or more persons may for a lawful purpose, form a company, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability.
(2)The company may be—
(a)a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them in this Act referred to as “a company limited by shares”; or
(b)a company having the liability of its members limited by the memorandum to the amount that the members undertake in the memorandum to contribute to the assets of the company if it is being wound up, in this Act referred to as “a company limited by guarantee”;
(c)a company not having any limit on the liability of its members in this Act referred to as “an unlimited company”; or
Private companies
5. Meaning of a private company
(1)For the purpose of this Act, “private company” means a company which by its articles—
(a)restricts the right to transfer its shares and other securities;
(b)limits the number of its members to one hundred, not including persons who are employed by the company and persons who, have been formerly employed by the company; and
(c)prohibits any invitation to the public to subscribe for any shares or debentures of the company.
(2)Where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this section, be treated as a single member.
Public companies
6. Meaning of a public company
A company which is not a private company under section 5 is a public company.
Memorandum of association
7. Requirements with respect to memorandum
(1)The memorandum of every company shall be printed in the English language and shall state—
(a)the name of the company, with “limited” as the last word of the name in the case of a company limited by shares or by guarantee;
(b)that the registered office of the company is to be situated in Uganda; and
(c)may also state the objects of the Company.
(2)The memorandum of a company limited by shares or by guarantee must also state that the liability of its members is limited.
(3)The memorandum of a company limited by guarantee must also state that each member undertakes to contribute to the assets of the company if it is being wound up while he or she is a member or within one year after he or she ceases to be a member, for payment of the debts and liabilities of the company contracted before he or she ceases to be a member and of the costs, charges and expenses of winding up and for adjustment of the rights of the contributories among themselves such amount as may be required, not exceeding a specified amount.
(4)In the case of a company having a share capital—
(a)the memorandum must also, unless the company is an unlimited company, state the amount of share capital with which the company proposes to be registered and the division of that share capital into shares of a fixed amount;
(b)a subscriber of the memorandum may not take less than one share; and
(c)each subscriber shall write opposite his or her name the number of shares he or she takes.
(5)Notwithstanding subsection (1)(c), where the company’s memorandum states that the object of the company is to carry on business as a general commercial company the memorandum shall state that—
(a)the object of the company is to carry on any trade or business whatsoever; and
(b)the company has power to do all such things as are incidental or conducive to the carrying on of any trade or business by it.
8. Signature of memorandum
(1)The memorandum shall be dated and shall be signed by each subscriber in the presence of at least one attesting witness who shall state his or her occupation and postal address.
(2)Opposite the signature of every subscriber there shall be written in legible characters his or her full name, occupation and postal address.
9. Restriction on alteration of memorandum
A company may not alter the conditions contained in its memorandum except in the cases in the mode and to the extent for which express provision is made in this Act.
10. Mode in which and extent to which objects of company may be altered
(1)A company that has included in its memorandum its objects, may, by special resolution, alter its memorandum with respect to the objects of the company, so far as may be required to enable it to—
(a)carry on its business more economically or more efficiently;
(b)attain its main purpose by new or improved means;
(c)enlarge or change the local area of its operations;
(d)carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company;
(e)restrict or abandon any of the objects specified in the memorandum;
(f)sell or dispose of the whole or any part of the undertaking of the company; or
(g)amalgamate with any other company or body of persons, except that if an application is made to the registrar in accordance with this section for the alteration to be cancelled, it shall not have effect except in so far as it is confirmed by the registrar.
(2)A resolution under this section may be passed—
(a)by the holders of not less in aggregate than fifteen percent in nominal value of the company’s issued share capital or any class of them, if the company is not limited by shares, not less than fifteen percent of the company’s members; or
(b)by the holders of not less than fifteen percent of the company’s debentures entitling the holders to object;
except that an application shall not be made by any person who has consented to or voted in favour of the alteration.
(3)An application for the cancellation of a resolution altering the memorandum shall be made to the registrar within twenty-one days after the date on which the resolution altering the memorandum was passed.
(4)On application to the registrar under sub section (3), the registrar may make an order cancelling the alteration or confirming the alteration either wholly or in part.
(5)Where parties propose an arrangement, the registrar shall adjourn the proceedings in order to allow an arrangement to be made for the purchase of the interests of the dissenting members and may give such directions and directions as he or she may think fit.
(6)Where an arrangement is proposed to be entered into in accordance with sub section (5), no part of the capital of the company shall be expended in any such purchase.
(7)The debentures entitling the holders to object to alterations of a company’s objects shall be any debentures secured by a floating charge or which form part of the same series as any debentures issued.
(8)A special resolution altering a company’s objects shall require the same notice to the holders of any such debentures as to members of the company and in default of any provisions regulating the giving of notice to any debenture holders, the provisions of the company’s articles regulating the giving of notice to members shall apply.
(9)In the case of a company which is, by virtue of a licence from the registrar exempt from the obligation to use the word "limited" as part of its name, a resolution altering the company’s objects shall also require the same notice to the registrar as to members of the company.
(10)Where a company passes a resolution altering its objects—
(a)if no application for cancellation is made to the registrar under this section, it shall, within fourteen days from the end of the period for making the application deliver to the registrar a printed copy of its memorandum as altered; and
(b)if the application for cancellation is made, the registrar shall stay registration of the resolution for alteration until the application is heard and disposed of.
Articles of association
11. Articles prescribing regulations for companies
It shall be lawful for a company to register in addition to its memorandum and articles of association, such regulations of the company as the company may deem necessary.
12. Regulations required in case of unlimited company or company limited by guarantee
(1)In the case of an unlimited company, the articles must state the number of members with which the company proposes to be registered and, if the company has a share capital, the amount of share capital with which the company proposes to be registered.
(2)In the case of a company limited by guarantee, the articles must state the number of members with which the company proposes to be registered.
(3)Where an unlimited company or a company limited by guarantee has increased the number of its members beyond the registered number, it shall, within fourteen days after the increase was resolved on or took place, give to the registrar notice of the increase and the registrar shall record the increase.
(4)Where default is made in complying with subsection (3), the company and every officer of the company who is in default is liable to a default fine of twenty five currency points.
13. Adoption and application of Table A
(1)Articles of association may adopt all or any of the regulations contained in Table A.
(2)In the case of a company limited by shares and registered after the commencement of this Act, if articles are not registered or, if articles are registered in so far as the articles do not exclude or modify the regulations contained in Table A, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in the duly registered articles.
14. Adoption and application of Table F
(1)A public company shall, at the time of registration of its articles, adopt and incorporate into its articles the provisions of the code of corporate governance contained in Table F.
(2)A private company may, at the time of registration of its articles or subsequently, adopt and incorporate into its articles the provisions of the code of corporate governance contained in Table F.
(3)Where a company adopts all or any Part of the codes in Table F, a printed copy of that table shall be annexed to or incorporated in each copy of its articles of association.
(4)A company that has adopted the code of corporate governance shall annually file a statement of compliance with the registrar and the Capital Markets Authority.
(5)A company that fails to comply with sub section (4) shall be liable to pay a fine of fifty currency points.
(6)The Minister shall in consultation with the Capital Markets Authority by statutory instrument amend Table F.
15. Printing and signature of articles
Articles shall be—
(a)in the English language;
(c)divided into paragraphs numbered consecutively; and
(d)signed by each subscriber to the memorandum of association in the presence of at least one witness who shall attest the signature and add his or her occupation and postal address.
16. Alteration of articles by special resolution
(1)Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter its articles.
(2)An alteration made under subsection (1) in the articles shall, subject to this Act, be as valid as if originally contained in the articles and be subject to alteration by special resolution.
Form of memorandum and articles
17. Statutory forms of memorandum and articles
The form of—
(a)the memorandum of association of a company limited by shares;
(b)the memorandum and articles of association of a company limited by guarantee and not having a share capital; and
(c)the memorandum and articles of association of an unlimited company having a share capital,
shall be respectively in accordance with the forms set out in Tables B C, D and E in the Third Schedule to this Act or as near to them as circumstances permit.
Registration
18. Form for registration of a company
(1)A company shall be registered by filling in the particulars contained in the registration form in the second schedule to this Act.
(2)On filing of the form under sub section (1), the registrar shall register the company and assign to it a registration number if the registrar is satisfied that the applicant has complied with the Act.
(3)On registration of the company, the registrar shall issue a certificate signed by him or her that the company is incorporated and in the case of a limited liability company, that the company is limited.
19. Registration of memorandum and articles
(1)The memorandum and the articles, if any, shall be delivered to the registrar and he or she shall retain and register them and shall assign a registration number to each company so registered.
(2)A company shall indicate its registration number on all its official documents.
20. Lifting the corporate veil
The High Court may, where a company or its directors are involved in acts including tax evasion, fraud or where, save for a single-member company, the membership of a company falls below the statutory minimum, lift the corporate veil.
21. Effect of memorandum and articles
(1)Subject to this Act, the memorandum and articles shall, when registered, bind the company and the members of the company to the same extent as if they had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the memorandum and articles.
(2)All money payable by any member to the company under the memorandum or articles shall be a debt due from him or her to the company.
22. Conclusiveness of certificate of incorporation
(1)A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental to registration have been complied with and that the association is a company authorized to be registered and duly registered under this Act.
23. Re-registration of unlimited company as limited
(1)Subject to this section, a company registered as unlimited may re-register under this Act as limited or a company already registered as a limited liability company may re-register under this Act as unlimited.
(2)The re-registration of an unlimited company as a limited liability company shall not affect the rights or liabilities of the company in respect of any debt or obligation incurred or any contract entered into, by, with or on behalf of the company before the re-registration.
(3)On re-registration under this section, the registrar shall close the original registration of the company and may dispense with the delivery to him or her of copies of any documents furnished on the occasion of the original registration of the company, but, subject to this subsection, the re-registration shall take place in the same manner and shall have effect as if it were the first registration of the company under this Act.
24. Re-registration of private company as a public company
(1)Subject to this section, a private company, other than a company not having a share capital, may be re-registered as a public company if—
(a)a special resolution that it should be so re-registered is passed; and
(b)an application for re-registration is delivered to the registrar, together with the documents specified in subsection (4).
(2)A company shall not be re-registered under this section if it has previously been re-registered as unlimited.
(3)The special resolution under subsection (1) shall—
(a)alter the company’s memorandum so that it states that the company is to be a public company;
(b)make such other alterations in the memorandum as are necessary to bring it, in substance and in form, into conformity with the requirements of this Act with respect to the memorandum of a public company; and
(c)make such alterations in the company’s articles as may be necessary in the circumstances.
(4)The application shall be in the prescribed form and be signed by a director or secretary of the company and the documents to be delivered with it are the following—
(a)a printed copy of the memorandum and articles as altered in accordance with the resolution;
(b)a copy of a written statement by the company’s auditors that in their opinion the relevant balance sheet shows that at the balance sheet date the amount of the company’s net assets was not less than the aggregate of its called-up share capital and undistributable reserves;
(c)a copy of the relevant balance sheet, together with a copy of an unqualified report by the company’s auditors in relation to that balance sheet; and
(d)a statutory declaration in the prescribed form by a director or secretary of the company stating—
(i)that the special resolution required by this section has been passed and that the conditions specified in sections 25 and 26 so far as applicable, have been satisfied; and
(ii)that between the date of the balance sheet and that of the application for re-registration, there has been no change in the company’s financial position that has resulted in the amount of its net assets becoming less than the aggregate of its called-up share capital and undistributable reserves.
(5)In this section, “relevant balance sheet” means a balance sheet prepared as at a date not exceeding seven months before the company’s application under this section.
(6)A resolution that a company be re-registered as a public company may change the company name by deleting the word “company” or the words “and company” including any abbreviations of them.
(7)A private company not being a single member company which has two or more members on the commencement of this Act shall not become a single member company.
25. Consideration for shares recently allotted to be valued
(1)This section applies if shares have been allotted by the company between the date as at which the relevant balance sheet was prepared and the passing of the special resolution under section 24 and those shares were allotted as fully or partly paid up as to their nominal value or any premium on them otherwise than in cash.
(2)Subject to this section the registrar shall not entertain an application by the company under section 24 unless—
(a)the consideration for the allotment has been valued; and
(b)a report with respect to the value of the consideration has been made to the company in accordance with that section during the six months immediately preceding the allotment of the shares.
(3)Where an amount standing to the credit of any of the company’s reserve accounts or of its profit and loss account, has been applied in paying up to any extent any of the shares allotted or any premium on those shares, the amount applied does not count as consideration for the allotment and accordingly subsection (2) does not apply to it.
(4)Subsection (2) does not apply if the allotment is in connection with an arrangement providing for it to be on terms that the whole or part of the consideration for the shares allotted is to be provided by the transfer to the company or the cancellation of all or some of the shares or of all or some of the shares of a particular class in another company, with or without the issue to the company applying under section 20 of shares or of shares of any particular class in that other company.
(5)Subsection (4) does not exclude the application of subsection (2), unless under the arrangement it is open to all the holders of the shares of the other company in question or, where the arrangement applies only to shares of a particular class, all the holders of the other company’s shares of that class to take part in the arrangement.
(6)In determining whether subsection (2) is excluded under subsection (5), shares held by a company or by a nominee of the company allotting shares in connection with the arrangement by a company or by a nominee of the company which is that company’s holding company or subsidiary or a company which is a subsidiary of its holding company shall be disregarded.
(7)Subsection (2) does not preclude an application under section 24 if the allotment of the company’s shares is in connection with its proposed merger with another company; where one of the companies concerned proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities of that one to shareholders of the other, with or without any cash payment to shareholders.
(8)In this section—
(a)“arrangement” means any agreement, scheme or arrangement including an arrangement sanctioned in accordance with the insolvency laws on a company compromise with creditors and members or liquidator in winding up accepting shares as consideration for sale of company’s property; and
(b)“another company” includes any body corporate.
26. Additional requirements relating to share capital
(1)For a private company to be re-registered under section 24 as a public company, the following conditions with respect to its share capital must be satisfied at the time the special resolution under that section is passed—
(a)the nominal value of the company’s allotted share capital must not be less than the authorized minimum; and
(b)each of the company’s allotted shares must be paid up at least as to one-quarter of the nominal value of that share and the whole of any premium on it.
(2)In addition to the conditions specified in subsection (1), if any shares in the company or any premium on them have been fully or partly paid up by an undertaking given by any person that he or she or another person should do work or perform services whether for the company or any other person, the undertaking must have been performed or otherwise discharged.
(3)Subject to subsection (4), if shares have been allotted as fully or partly paid up as to their nominal value or any premium on them otherwise than in cash and the consideration for the allotment consists of or includes an undertaking to the company other than one to which subsection (4) applies, then either—
(a)the undertaking must have been performed or otherwise discharged; or
(b)there must be a contract between the company and some person under which the undertaking is to be performed within five years from the time the resolution under section 24 is passed.
(4)For purpose of determining whether subsections (1)(b), (2) and (3) are complied with, certain shares in the company may be disregarded if any share was allotted in accordance with an employees’ share scheme and by reason of which the company would but for this subsection, be precluded under subsection (1)(b) from being re-registered as a public company.
(5)A share is not to be disregarded under subsection (4), if the aggregate in nominal value of that share and other shares proposed to be so disregarded is more than one-tenth of the nominal value of the company’s allotted share capital; but for that purpose the allotted share capital is treated as not including any shares disregarded under subsection (4).
(6)Any shares disregarded under subsection (4) shall be treated as not forming part of the allotted share capital for the purposes of subsection (1) (a).
27. Certificate of re-registration
(1)Where the registrar is satisfied, on an application under section 24, that a company may be re-registered under that section as a public company, the registrar shall—
(a)retain the application and other documents delivered to him or her under that section; and
(b)issue the company with a certificate of incorporation stating that the company is a public company.
(2)The registrar may accept a declaration under section 24(4)(d) as sufficient evidence that the special resolution required by that provision has been passed and the other conditions of re-registration have been satisfied.
(3)The registrar shall not issue the certificate if it appears to him or her that the court has made an order confirming a reduction of the company’s capital which has the effect of bringing the nominal value of the company’s allotted share capital below the authorised minimum.
(4)Upon the issue to a company of a certificate of incorporation under this section—
(a)the company by virtue of the issue of that certificate becomes a public company; and
(b)any alterations in the memorandum and articles set out in the resolution take effect accordingly.
(5)The certificate is conclusive evidence—
(a)that the requirements of this Act in respect of re-registration and of matters precedent and incidental to it have been complied with; and
(b)that the company is a public company.
28. Modification for unlimited company to re-register
(1)The special resolution required by section 24(1)(a) must, in addition to the matters mentioned in subsection (3) of that section—
(a)state that the liability of the members is to be limited by shares and what the company’s share capital is to be; and
(b)make such alterations in the company’s memorandum as are necessary to bring it in substance and in form into conformity with the requirements of this Act with respect to the memorandum of a company limited by shares.
(2)The certificate of incorporation issued under section 27(1)(b) shall in addition to containing the statement required by paragraph (b) of that subsection, state that the company has been incorporated as a company limited by shares, and—
(a)the company by virtue of the issue of the certificate becomes a public company limited by shares; and
(b)the certificate is conclusive evidence of the fact that it is such a company.
Limited liability company becoming unlimited
29. Re-registration of limited liability company as unlimited
(1)Subject to this section, a company which is registered as a limited liability company may be re-registered as an unlimited company on an application for the purpose of complying with the requirements of this section.
(2)A company is excluded from re-registering under this section if it is a limited liability company by virtue of re-registration under section 23.
(3)A public company cannot be re-registered under this section as an unlimited company.
(4)An application under this section must be in the prescribed form and be signed by a director or the secretary of the company and be lodged with the registrar, together with the documents specified in subsection (8).
(5)The application must set out such alterations in the company’s memorandum which—
(a)if it is to have a share capital, are required to bring it in substance and in form into conformity with the requirements of this Act with respect to the memorandum of a company to be formed as an unlimited company having a share capital; or
(b)if it is not to have a share capital, are required in the circumstances.
(6)If articles have been registered, the application must set out such alterations in them which—
(a)if the company is to have a share capital, are required to bring the articles in substance and in form into conformity with the requirements of this Act with respect to the articles of a company to be formed as an unlimited company having a share capital; or
(b)if the company is not to have a share capital, are required in the circumstances.
(7)Where articles have not been registered, the application must have annexed to it and request the registration of printed articles and these must, if the company is to have a share capital, comply with the requirements mentioned in subsection (6)(a) and, if not, be articles appropriate to the circumstances.
(8)The documents to be lodged with the registrar in respect of an application under this section are—
(a)the prescribed form of assent to the company’s being registered as unlimited, subscribed by or on behalf of all the members of the company; and
(b)a statutory declaration made by the directors of the company stating—
(i)that the persons by whom or on whose behalf the form of assent is subscribed constitute the whole membership of the company; and
(ii)if any of the members have not subscribed that form themselves; that the directors have taken all reasonable steps to satisfy themselves that each person who subscribed it on behalf of a member was lawfully empowered to do so;
(c)a printed copy of the memorandum incorporating the alterations in it set out in the application; and
(d)if articles have been registered, a printed copy of them incorporating the alterations set out in the application.
(9)For the purposes of this section—
(a)subscription to a form of assent by the personal representative of a deceased member of a company is taken to be subscription by him or her; and
(b)a trustee in bankruptcy of a member of a company is, to the exclusion of the latter, taken to be a member of the company.
30. Certificate of re-registration
(1)The registrar shall retain the application and other documents lodged with him or her under section 29 and shall—
(a)if articles are annexed to the application, register them; and
(b)issue to the company a certificate of incorporation appropriate to the status to be assumed by it by virtue of section 29.
(2)On the issue of the certificate—
(a)the status of the company, by virtue of the issue is changed from limited to unlimited;
(b)the alterations in the memorandum set out in the application and if articles have been previously registered, any alterations to the articles in the application shall take effect as if duly made by resolution of the company; and
(c)the provisions of this Act apply accordingly to the memorandum and articles as altered.
(3)The certificate is conclusive evidence that—
(a)the requirements of section 29 in respect of re-registration and of matters precedent and incidental to it have been complied with; and
(b)the company was authorised to be re-registered under section 29 and was duly so re-registered.
Unlimited company becoming limited
31. Re-registration of unlimited company as limited
(1)Subject to this Act, a company which is registered as unlimited may be re-registered as limited if a special resolution that it should be so re-registered is passed and, the requirements of section 27 are complied with in respect of the resolution and otherwise.
(2)A company cannot under this section be re-registered as a public company; and a company is excluded from re-registering under it if it is unlimited by virtue of re-registration under section 29.
(3)The special resolution under subsection (1) shall state whether the company is to be limited by shares or by guarantee and—
(a)if it is to be limited by shares, must state what the share capital is to be and provide for the making of such alterations in the memorandum as are necessary to bring it, in substance and in form, into conformity with the requirements of this Act with respect to the memorandum of a company so limited and such alterations in the articles as are necessary in the circumstances;
(b)if it is to be limited by guarantee, must provide for the making of such alterations in its memorandum and articles as are necessary to bring them in substance and in form into conformity with the requirements of this Act with respect to the memorandum and articles of a company limited by guarantee.
(4)The special resolution is subject to the provisions on the registration of resolutions under this Act; and an application for the company to be re-registered as limited, in the prescribed form signed by a director or by the secretary of the company, must be lodged with the registrar, together with the documents specified in subsection (5), not earlier than the day on which the copy of the resolution forwarded is received by him or her.
(5)The documents to be lodged with the registrar are—
(a)a printed copy of the memorandum as altered in accordance with the resolution; and
(b)a printed copy of the articles as altered.
(6)This section does not apply in relation to the re-registration of an unlimited company as a public company under section 24.
32. Certificate of re-registration
(1)The registrar shall retain the application and other documents lodged with him or her under section 31 and shall issue to the company a certificate of incorporation appropriate to the status to be assumed by the company by virtue of that section.
(2)On the issue of the certificate—
(a)the status of the company is, by virtue of the issue, changed from unlimited to limited; and
(b)the alterations in the memorandum specified in the resolution and the alterations in and additions to the articles so specified take effect.
(3)The certificate is conclusive evidence that the requirements of section 31 in respect of re registration and of matters precedent and incidental to it have been complied with and that the company was authorised to be re-registered under that section and was duly so reregistered.
Public company becoming private
33. Re-registration of public company as private
(1)A public company may be re-registered as a private company if—
(a)a special resolution complying with subsection (2) that it should be so re-registered is passed and has not been cancelled by the court;
(b)an application for the purpose in the prescribed form and signed by a director or the secretary of the company is delivered to the registrar, together with a printed copy of the memorandum and articles of the company as altered by the resolution;
(c)the period during which an application for the cancellation of the resolution under this Act may be made has expired without any such application having been made; or
(d)where an application under this section is made and the application is withdrawn or an order is made under section 34(5) confirming the resolution and a copy of that order is delivered to the registrar.
(2)The special resolution must alter the company’s memorandum so that it no longer states that the company is to be a public company and must make such other alterations in the company’s memorandum and articles as are required in the circumstances.
(3)A company shall not under this section be re-registered otherwise than as a company limited by shares or by guarantee.
(4)The re-registration of a public company as a private company shall not affect the rights or liabilities of the company in respect of any debt or obligation incurred or any contract entered into, by, with or on behalf of the company before the re-registration.
34. Objection to resolution under section 33
(1)Where a special resolution by a public company to be reregistered under section 31 as a private company has been passed, an application may be made to the registrar for the cancellation of that resolution.
(2)The application under subsection (1) may be made—
(a)by the holders of not less in aggregate than five percent in nominal value of the company’s issued share capital or any class of shares in the company;
(b)if the company is not limited by shares, by not less than five percent of its members; or
(c)by not less than fifty of the company’s members, but not by a person who has consented to or voted in favour of the resolution.
(3)The application must be made within twenty eight days after the passing of the resolution and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(4)Where such an application is made, the company shall give notice in the prescribed form of that fact to the registrar.
(5)On the hearing of the application, the registrar shall make an order cancelling or confirming the resolution and—
(a)may make that order on such terms and conditions as he or she thinks fit and may adjourn the proceedings in order that an arrangement may be made to the satisfaction of the registrar for the purchase of the interests of dissenting members; and
(b)may give such directions and make such orders as it thinks expedient for facilitating or carrying into effect the arrangement.
(6)The order of the registrar may provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company’s capital and may make such alterations in the company’s memorandum and articles as may be required in consequence of that provision.
(7)Where the order of the registrar requires the company not to make any or any specified alteration in its memorandum or articles, the company shall not without the leave of the registrar make any such alteration.
(8)An alteration in the memorandum or articles made by virtue of an order under this section, if not made by resolution of the company is of the same effect as if duly made by resolution and this Act applies accordingly to the memorandum or articles as so altered.
(9)A company which fails to comply with subsections (4) or (7) and any officer of it who is in default is liable to a fine of twenty five currency points and, for continued contravention, to a daily default fine of five currency points.
(10)A person aggrieved by a decision of the registrar made under this section may appeal to court
35. Certificate of re-registration
(1)If the registrar is satisfied that a company may be re-registered under section 33 he or she shall—
(a)retain the application and other documents delivered to him or her under that section; and
(b)issue the company with a certificate of incorporation appropriate to a private company.
(2)On the issue of the certificate—
(a)the company by virtue of the issue becomes a private company; and
(b)the alterations in the memorandum and articles set out in the resolution under section 33 take effect accordingly.
(3)The certificate is conclusive evidence that—
(a)the requirements of section 33 in respect of re-registration and of matters precedent and incidental to it have been complied with; and
(b)the company is a private company.
Provisions with respect to names of companies
36. Reservation of name and prohibition of undesirable names
(1)The registrar may, on written application, reserve a name pending registration of company or a change of name by an existing company, any such reservation shall remain in force for thirty days or such longer period, not exceeding sixty days as the registrar may, for special reasons, allow and during that period no other company is entitled to be registered with that name.
(2)No name shall be reserved and no company shall be registered by a name, which in the opinion of the registrar is undesirable.
(3)Upon registration, a limited liability company shall add the initials “LTD” or the word “Limited” at the end of its name.
37. Power to require company to abandon misleading name
(1)Where in the registrars’ opinion the name by which a company is registered gives a misleading indication of the nature of its activities as to be likely to cause harm to the public, the registrar may direct it to change its name.
(2)The direction shall, if not duly made the subject of an application to the court under subsection (3), be complied with within six weeks from the date of the direction or such longer period as the registrar may think fit to allow.
(3)The company may, within a period of twenty one days from the date of the direction, apply to the court to set it aside and the court may set the direction aside or confirm it and, if it confirms the direction, shall specify a period within which it must be complied with.
(4)Where a company makes default in complying with a direction under this section, it is liable to a fine of twenty five currency points and, for continued contravention, to a daily default fine of five currency points.
(5)Where a company changes its name under this section, the registrar shall enter the new name on the register in place of the former name and shall issue a certificate of incorporation altered to meet the circumstances of the case and the change of name has effect from the date on which the altered certificate is issued.
(6)A change of name by a company under this section does not affect any of the rights or obligations of the company or render defective any legal proceedings by or against it and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.
38. Prohibition on trading under misleading name
(1)A person who is not a public company commits an offence if he or she carries on any trade, profession or business under a name which includes as its last part, the words “public limited liability company”.
(2)A public company commits an offence if in circumstances in which the fact that it is a public company is likely to be material to any person, it uses a name which may reasonably be expected to give the impression that it is a private company.
(3)A company or officer of a company who contravenes subsection (1) or (2) is liable to a fine not exceeding one thousand currency points or imprisonment not exceeding two years or both and, for continued contravention, to a daily default fine not exceeding twenty thousand currency points.
39. Prohibition of improper use of “limited”
A person shall not trade or carry on business under a name or title of which “limited” or any contraction or imitation of that word is the last word, unless duly incorporated with limited liability.
40. Change of name
(1)A company may by special resolution and with the approval of the registrar signified in writing change its name.
(2)Where, through inadvertence or otherwise, a company on its first registration or on its registration by a new name is registered by a name which, in the opinion of the registrar, is too similar to the name by which a company in existence is previously registered, the first-mentioned company may change its name with the consent of the registrar and, if the registrar so directs within six months after it is registered by that name, shall change it within six weeks from the date of the direction or such longer period as the registrar may allow.
(3)Where a company defaults in complying with a direction under this subsection, it is liable to a fine of five currency points or a fine of five currency points for every day on which the offence continues.
(4)Where a company changes its name under this section, it shall, within fourteen days, give to the registrar notice of the change of name and the registrar shall enter the new name on the register in place of the former name, and shall issue to the company a certificate of change of name and notify the change of name in the Gazette and in a newspaper of wide circulation.
(5)A change of name by a company under this section shall not affect any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.
41. Power to dispense with “Ltd” or “Limited” in the name of charitable organisations and other companies
(1)Where it is proved to the satisfaction of the registrar that—
(a)an association about to be formed as a limited liability company is to be formed for promoting commerce, art, science, religion, charity or any other useful object; and
(b)the association intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members;
the registrar may by licence direct that the association may be registered as a company with limited liability, without the addition of the word “limited” to its name, and the association may be registered accordingly and shall, on registration, enjoy all the privileges and, subject to the provisions of this section, be subject to all the obligations of a limited liability company.
(2)Where it is proved to the satisfaction of the registrar that—
(a)the objects of a company registered under this Act as a limited liability company are restricted to those specified in subsection (1) and to objects incidental or conducive to them; and
(b)that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members,
the registrar may by licence authorise the company to make by special resolution a change in its name including or consisting of the omission of the word “limited”, and sections 40(4) and (5) shall apply to a change of name under this subsection as they apply to a change of name under that section.
(3)A licence by the registrar under this section may be granted on such conditions and subject to such regulations as the registrar thinks fit, and those conditions and regulations shall be binding on the company to which the licence is granted, and where the grant is under subsection (1) shall, if the registrar so directs, be inserted in the memorandum and articles or in one of those documents.
(4)A body to which a licence is granted under this section shall be excepted from the provisions of this Act relating to the use of the word “limited” as any part of its name, the publishing of its name and the sending of lists of members to the registrar.
(5)The registrar may, upon the recommendation of the registrar, revoke a licence under this section, and upon revocation the registrar shall enter in the register the word “private limited liability company” at the end of the name of the company to which it was granted, and the company shall cease to enjoy the exemptions and privileges or, as the case may be, the exemptions granted by this section; but before a recommendation is made to the registrar, the registrar shall give to the body notice in writing of his or her intention and shall afford it an opportunity of being heard in opposition to the revocation.
(6)Where a company in respect of which a licence under this section is in force alters its memorandum with respect to its objects, the registrar may, unless he or she sees fit to recommend the revocation of the licence, recommend to the registrar the variation of the licence by making it subject to such conditions and regulations as the registrar may think fit, in lieu of or in addition to the conditions and regulations, if any, to which the licence was formerly subject.
General provisions with respect to memorandum and articles
42. Interpretation of certain provisions in the memorandum, articles or resolutions of a company limited by guarantee
(1)In the case of a company limited by guarantee and not having a share capital, every provision in the memorandum or articles or any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member is void.
(2)For the purposes of the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles, or in any resolution, of a company limited by guarantee purporting to divide the undertaking of the company into shares or interests shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified.
43. Alterations in memorandum or articles increasing liability to contribute to share capital not to bind existing members without consent
(1)Notwithstanding anything in the memorandum or articles of a company, a member of the company is not bound by an alteration made in the memorandum or articles after the date on which he or she became a member, if and so far as the alteration requires him or her to take or subscribe for more shares than the number held by him or her at the date on which the alteration is made, or in any way increases his or her liability as at that date to contribute to the share capital of, or otherwise to pay money, to the company.
(2)This section does not apply where the member agrees in writing before or after the alteration is made, to be bound.
44. Power to alter conditions in memorandum which could have been contained in articles
(1)Subject to sections 43 and 247, any condition contained in a company’s memorandum which could lawfully have been contained in articles of association instead of the memorandum may, subject to this section, be altered by the company by special resolution.
(2)Where an application is made to the registrar for the alteration to be cancelled, it shall not have effect except in so far as it is confirmed by the registrar.
(3)This section does not apply where the memorandum itself provides for or prohibits the alteration of all or any of the conditions referred to in subsection (1) and does not authorise any variation or abrogation of the special rights of any class of members.
(4)Sections 10(2)(a), (3), (4), (7) and (8) apply in relation to any alteration and to any application made under this section as they apply in relation to alterations and to applications made under that section.
(5)This section applies to a company’s memorandum whether registered before or after the commencement of this Act.
(6)A person aggrieved by a decision of the registrar under this section may appeal to court
45. Copies of memorandum and articles to be given to members
(1)A company shall, when required by any member, send to him or her a copy of the memorandum and articles, if any and a copy of any written law which alters the memorandum, subject to payment in the case of a copy of the memorandum and articles, of one currency point or such less sum as the company may prescribe and in the case of a copy of a written law, of a sum not exceeding the published price of the written law as the company may require.
(2)Where a company defaults in complying with this section, the company and every officer of the company who is in default is liable to a fine of twenty five currency points for each default.
46. Issued copies of memorandum to embody alterations
(1)Where an alteration is made in the memorandum of a company, every copy of the memorandum issued after the date of the alteration shall be in accordance with the alteration.
(2)Where an alteration has been made under section 43 and the company at any time after the date of the alteration issues any copies of the memorandum which are not in accordance with the alteration, the company is liable to a fine of twenty five currency points for each copy issued and every officer of the company who is in default is liable to the same penalty.
Membership of company
47. Definition of member
(1)The subscribers to the memorandum of a company shall be taken to have agreed to become members of the company, and on its registration shall be entered as members in its register of members.
(2)A person who agrees to become a member of a company, and whose name is entered in its register of members shall be a member of the company.
48. Membership of a holding company
(1)Except as otherwise provided in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company to its subsidiary is void.
(2)Nothing in this section shall apply where the subsidiary is concerned as personal representative, or where it is concerned as trustee, unless the holding company or a subsidiary of it is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of business which includes the lending of money.
(3)This section shall not prevent a subsidiary which is, at the commencement of this Act, a member of its holding company, from continuing to be a member but, subject to subsection (2), the subsidiary shall have no right to vote at meetings of the holding company.
(4)Subject to subsection (2), subsections (1) and (3) shall apply in relation to a nominee for a body corporate which is a subsidiary, as if references in subsections (1) and (3) to such a body corporate include references to its nominee.
(5)In relation to a company limited by guarantee or unlimited which is a holding company, the reference in this section to shares, whether or not the company has a share capital, shall be construed as including a reference to the interest of its members as such, whatever the form of that interest.
Reduction of number of members below a legal minimum in case of a public company
49. Members severally liable for debts where a business is carried on with fewer than the required number of members
Where a company, other than a private company limited by shares or by guarantee, carries on business without having at least two members and does so for more than six months, a person who, for the whole or any part of the period that it so carries on business after those six months—
(a)is a member of the company; and
(b)knows that it is carrying on business with only one member,
is liable jointly and severally with the company for the payment of the company’s debts contracted during the period or as the case may be, that part of it.
Contracts and related particulars
50. Form of contracts
(1)A company may make a contract, by execution under its common seal or on behalf of the company, by a person acting under its authority, express or implied.
(2)Contracts on behalf of a company may be made as follows—
(a)a contract which if made between private persons would by law be required to be in writing, signed by the parties to be charged with, may be made on behalf of the company in writing executed by any person acting under its authority, express or implied; or
(b)a contract which if made between private persons would by law be valid although made orally and not reduced into writing may be made orally on behalf of the company by any person acting under its authority, express or implied.
(3)A contract made according to this section shall be effectual in law and shall bind the company and its successors and all other parties to it.
(4)A contract made according to this section may be varied or discharged in the same manner in which it is authorised by this section to be made.
51. A company’s capacity not limited by its memorandum
(1)The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything contained in the company’s memorandum.
(2)A member of a company may bring proceedings to restrain the doing of an act which but for subsection (1) would be beyond the company’s capacity; but no such proceedings shall lie in respect of an act to be done in fulfdlment of a legal obligation arising from a previous act of the company.
(3)The directors shall observe any limitations on their powers contained in the company’s memorandum, and any action by the directors which but for subsection (1) would be beyond the company’s capacity may only be ratified by the company by special resolution.
(4)A resolution ratifying the action under subsection (3) shall not affect any liability incurred by the directors or any other person and relief from the liability must be agreed to separately by special resolution.
52. Power of directors to bind the company
(1)The power of the board of directors to bind the company or authorise others to do so in favour of a person dealing with the company in good faith shall not be limited by the company’s memorandum.
(2)For the purposes of subsection (1)—
(a)a person “deals with” a company if he or she is a party to any transaction or other act to which the company is a party; and
(b)a person shall be presumed to have acted in good faith unless the contrary is proved.
(3)The references in this section to limitations on the directors’ power under the company’s memorandum include limitations deriving from—
(a)a resolution of the company in a general meeting or a meeting of any class of shareholders; or
(b)any agreement between the members of the company or of any class of shareholders.
(4)Subsection (1) does not affect any right of a member of the company to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfillment of a legal obligation arising from a previous act of the company.
(5)Subsection (1) does not affect any liability incurred by the directors or any other person, by reason of the directors’ exceeding their powers.
53. No duty to enquire as to capacity of a company or authority of directors
A party to a transaction with a company is not bound to enquire whether it is permitted by the company’s memorandum or as to any limitation on the powers of the board of directors to bind the company or authorize others to do so.
54. Pre-incorporation contracts
(1)A contract which purports to be made on behalf of a company before the company is formed, has effect, as one made with the person purporting to act for the company.
(2)A company may adopt a pre-incorporation contract with its formation and registration made on its behalf without a need for novation.
(3)In all cases where the company adopts a pre-incorporation contract, the liability of the promoter of that company shall cease.
55. Documents executed
A document executed by a director and the secretary of a company or by two directors of a company and expressed to be executed by the company has the same effect as if executed under the common seal of the company.
56. Bills of exchange and promissory notes
A bill of exchange or promissory note shall be taken to have been made, accepted or endorsed on behalf of a company if made, accepted or endorsed in the name of or by or on behalf or on account of, the company by any person acting under its authority, express or implied.
57. Execution of deeds abroad
(1)A company may, by writing under its common seal or a signature by a person acting under its authority empower any person, either generally or in respect of any specified matters as its attorney, to execute deeds on its behalf in any place not situated in Uganda.
(2)A deed signed by an attorney under subsection (1) on behalf of the company and under his or her seal shall bind the company and have the same effect as if it were under the common seal of the company.
58. Power for a company to have official seal for use abroad
(1)A company whose objects require or comprise the transaction of business beyond the limits of Uganda may, if authorised by its articles, have for use in any place outside Uganda, an official seal which shall take the form of an embossed metal die which shall be a facsimile of the common seal of the company, with the addition on its face of the name of every place where it is to be used.
(2)A deed or other document to which an official seal is duly affixed shall bind the company as if it has been sealed with the common seal of the company.
(3)A company having an official seal for use in a place referred to in subsection (1) may, by writing under its common seal, authorise any person appointed for the purpose in that place, to affix the official seal to any deed or other document to which the company is party in that place.
(4)The authority of a person appointed under subsection (3) shall, as between the company and any person dealing with that person, continue during the period, if any, mentioned in the instrument conferring the authority or if no period is mentioned, then until notice of the revocation or determination of that person’s authority has been given to the person dealing with him or her.
(5)The person affixing an official seal under subsection (3) shall, by writing signed by him or her, certify on the deed or other instrument to which the seal is affixed, the date and place at which it is affixed.
59. Authentication of documents
A document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorised officer of the company and need not be under its common seal.
Part III – Share capital and debentures
60. Registration of prospectus
A prospectus shall not be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication—
(a)the Capital Markets Authority has approved the company’s prospectus in accordance with the Capital Markets Authority Act; and
(b)there has been delivered to the registrar for registration a copy of the prospectus signed by every person who is named in it as a director or proposed director of the company or by his or her agent authorised in writing.
Allotment
61. Return as to allotment
(1)Whenever a private company limited by shares or a company limited by guarantee and having a share capital makes any allotment of its shares, the company shall, within sixty days thereafter, deliver to the registrar for registration—
(a)a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and descriptions of the allottees and the amount if any, paid or due and payable on each share; and
(b)in the case of shares allotted as fully or partly paid up otherwise than in cash, a contract in writing constituting the title of the allottee to the allotment together with any contract of sale or for services or other consideration in respect of which that allotment was made such contract being duly stamped and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up and the consideration for which they have been allotted.
(2)Where a contract under subsection (1) is not reduced into writing, the company shall, within sixty days after the allotment deliver, to the registrar for registration the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced into writing and those particulars shall be deemed to be an instrument within the meaning of the Stamps Act and the registrar may, as a condition of filing the particulars, require that the duty payable on it be adjudicated under section 36 of that Act.
(3)Where default is made in complying with this section, every officer of the company who is in default is liable to a fine of twenty five currency points and an additional fine of five currency points for every day during which the default continues.
Commissions, discounts and financial assistance
62. Power to pay certain commissions; prohibition of payment of all other commissions, discounts and related particulars
(1)A company may pay a commission to any person in consideration of his or her subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in the company if—
(a)the payment of the commission is authorised by the articles;
(b)the commission paid or agreed to be paid does not exceed ten percent of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is less;
(c)the amount or rate percent of the commission paid or agreed to be paid is—
(i)in the case of shares offered to the public for subscription, disclosed in the prospectus; or
(ii)in the case of shares not offered to the public for subscription disclosed in the statement in lieu of prospectus or in a statement in the prescribed form signed in the same manner as a statement in lieu of prospectus and delivered before the payment of the commission to the registrar for registration and, where a circular or notice, not being a prospectus, inviting subscription for the shares is issued also disclosed in that circular or notice; and
(d)the number of shares which persons have agreed for a commission to subscribe absolutely is disclosed in the manner described in paragraph (c).
(2)Except as provided in this section, a company shall not apply any of its shares or capital money either directly or indirectly in payment of any commission, discount or allowance to any person in consideration of his or her subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares of the company, or procuring or agreeing to procure subscriptions whether absolute or conditional for any shares in the company, whether the shares or money be so applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or the money be paid out of the nominal purchase money or contract price, or otherwise.
(3)Nothing in this section shall affect the power of a company to pay such brokerage as it has before the commencement of this Act been lawful for a company to pay.
(4)A vendor, promoter or other person who receives payment in money or shares from a company shall have and shall be deemed always to have had power to apply any part of the money or shares so received in payment of any commission, the payment of which, if made directly by the company, would have been legal under this section.
(5)If default is made in complying with the provisions relating to the delivery to the registrar of the statement in the prescribed form, the company and every officer of the company who is in default is liable to a fine of twenty five currency points and in case of continued default, five currency points for each day on which the default continues.
63. Prohibition of provision of financial assistance by company for purchase of or subscription for its own or its holding company’s shares
(1)Subject to this section, a company shall not give, whether directly or indirectly, and whether by means of a loan, guarantee, security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company, or, where the company is a subsidiary company in its holding company.
(2)Nothing in this section shall be taken to prohibit—
(a)the lending of money by the company; where the lending of money is part of the ordinary business of a company;
(b)the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company including any director holding a salaried employment or office in the company;
(c)the making by a company of loans to persons, other than directors, in good faith in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership; and
(d)the assistance is given in good faith in the interests of the company.
(3)This section does not prohibit—
(a)a distribution of a company’s assets by way of dividend lawfully made or a distribution made in the course of the company’s winding up;
(b)the allotment of bonus shares;
(c)a reduction of capital confirmed by order of the court under this Act;
(d)a redemption or purchase of shares made in accordance with this Act;
(e)anything done in accordance with an order of court under this Act and compromises and arrangements with creditors and members;
(f)anything done under an arrangement made in accordance with the insolvency law acceptance of shares by liquidator in winding up as consideration for sale of property; or
(g)anything done under an arrangement made between a company and its creditors which is binding on the creditors by virtue of the insolvency laws.
(4)Where a company acts in contravention of this section, the company commits an offence and is liable to a fine not exceeding one thousand currency points.
(5)Where a company commits an offence under subsection (4), every officer of the company who contributes to the default commits an offence and is liable on conviction to imprisonment not exceeding two years or a fine not exceeding two hundred currency points or both.
(6)For the purposes of this section, “financial assistance” means—
(a)financial assistance given by way of gift in the best interests of the company;
(b)financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier’s own neglect or default or by way of release or waiver;
(c)financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement, any obligation of another party to the agreement remains unfulfilled or by way of the novation of or the assignment of rights arising under a loan or such other agreement; or
(d)any other financial assistance given by a company the net assets of which are by reason of the financial assistance reduced to a material extent or which has no net assets.
64. Special restrictions for public companies
(1)In the case of a public company, financial assistance may only be given if the company has net assets which are not reduced by the financial assistance or, to the extent that those assets are reduced by the financial assistance, if the assistance is provided out of distributable profits.
(2)For the purposes of subsection (1)—
(a)“net assets” means the amount by which the aggregate of the company’s assets exceeds the aggregate of its liabilities taking the amount of both assets and liabilities to be as stated in the company’s accounting records immediately before the financial assistance is given; and
(b)“liabilities” includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.
65. Relaxation of the rule in section 63 for private companies
(1)A private company is not prohibited from giving financial assistance—
(a)for the acquisition of its shares; or
(b)for the acquisition of shares in another company where the acquisition of shares is in its holding company and—
(i)the holding company is a private company; and
(ii)giving the assistance complies with the requirements of sections 70 and 72.
(2)The financial assistance may only be given if the company has net assets which are not reduced by the financial assistance or, to the extent that they are reduced, if the assistance is provided out of distributable profits.
(3)A private company, which is a subsidiary company, shall not give financial assistance for the acquisition of shares in its holding company, where the subsidiary is also a subsidiary of a public company which is a subsidiary of the holding company in which the shares were or are to be acquired.
(4)Unless the company proposing to give the financial assistance is a wholly-owned subsidiary, the giving of financial assistance under this section shall be approved by special resolution of the company in a general meeting.
(5)Where the financial assistance is to be given by the company in a case where the acquisition of shares in question is or was an acquisition of shares in its holding company, that holding company and any other company which is both the company’s holding company and a subsidiary of that other holding company except in any case, a company which is a wholly-owned subsidiary shall also approve by special resolution in a general meeting the giving of the financial assistance.
(6)The directors of the company proposing to give the financial assistance and, where the shares acquired or to be acquired are shares in its holding company, the directors of that company and of any other company which is both the company’s holding company and a subsidiary of that other holding company shall, before the financial assistance is given, make a statutory declaration stating that this section has been complied with.
Issue of shares at premium, discount and redeemable preference shares
66. Application of premiums received on issue of shares
(1)Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called “the share premium account”, and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the share premium account were paid-up share capital of the company.
(2)The share premium account may, notwithstanding anything in subsection (1), be applied by the company in paying up un-issued shares of the company to be issued to members of the company as fully paid bonus shares in writing off—
(a)the preliminary expenses of the company;
(b)the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or
(c)in providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the company.
(3)Where a company has before the commencement of this Act issued any shares at a premium, this section shall apply as if the share had been issued after the commencement of this Act.
(4)Any part of the premium which has been applied as referred to in subsection (3) that it does not at the commencement