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THE ART OF SHARING II

INCREASING SHARE CAPITAL OF A COMPANY.

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Acquiring shares in a company is a constant desire that most people trying to grow their capital this season are looking into. Given that MTN called the public to purchase shares, it was pretty vague what these rights gave the Ugandan. In case you have a company that is thinking of opening it out to members of the public, this article will resonate with you. Given the fact that MTN is a private company, opening its doors to the public to purchase shares is something we call an Initial Public Offering (IPO). An IPO gives the company a greater ability to grow and expand, giving investors a chance to buy shares in the company and contribute capital to a company’s shareholder’s equity. MTN is just one popular example, but there are several companies within our borders looking for a way to increase their share capital.

Companies that build scale for the benefit of their customers and shareholders more often succeed over time.

-Jamie Dimon

The first thing you will need to know is that anyone can own shares in a company according to the Company’s Act, however, the knowledge of how shares are acquired/distributed is a whole other narrative. Share capital awards a shareholder part of the capital of a said company and is divided into two that is; issued share capital which is capital that has already been allocated to members of a company and unissued share capital which relates to shares that have not been allotted to any members. Shares are acquired either through allotment or by transfer

An allotment of shares is the process by which a company finds someone willing to become a shareholder of a company, an issue of shares is followed and the interested shareholder is issued a share certificate that is entered into the member’s register. A company then files a return of allotment to the Registrar of a company within 60 days from the date of allotment. 

A transfer of shares on the other hand is subject to the company’s memorandum and articles of association. It is completed by the execution of a transfer certificate to the new shareholders. 

The directors of a company are ideally the majority shareholders and have the responsibility to act in the best interest of the company. Section 73 of the Companies Act gives a step-to-step breakdown of an increase in share capital in Uganda. The decision to increase share capital cannot simply be made by one director/shareholder in a company. Under this section of the Act, the company secretary issues notice to the shareholders inviting them to attend a company meeting for purpose of increasing the company’s share capital. At the company meeting, shareholder(s) propose an increase of share capital to a particular amount and also class. Upon discussion, the company members agree and resolve to increase the company’s share capital in particular, the number of shares and the value of each share unit through a vote. The resolution is then placed in writing and members append their signatures to the resolution. The resolution should be paid for and filed at the registrar of companies at URSB. The Company Registrar will then review the company documents submitted including the verification of signatures and if all is well he or she will register them accordingly.

PROCEDURE FOR ACQUISITION OF SHARES

Allotment

  1. Convening the Board of Directors 
  2. Passing and filing of a board resolution allotting shares.
  3. Filing a return of allotment to the Company Registry. This is done within 60 days.
  4. Issuance of a share certificate. This shows the number of shares held by the member. 

Transfer of shares. 

  1. Execution of a transfer from the transferor to the transferee
  2. Authorisation from the Board of Directors
  3. Payment of Stamp duty and registration fees 
  4. Lodgment of the transfer of share stock form with the registrar of companies
  5. Issuance of a share certificate by the company

ARTS AND TECHNOLOGY

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Though the pandemic may be in the past, its effects and new norms are far from over. As we dispose of facemasks and continue to purchase hand sanitizer, the new normal has still left us with the growth of the digitalisation of goods and services. Surprisingly, music is no exception. Kenya recently introduced a mobile application called Hustle Sasa which has enabled creatives to sell their art directly to consumers. The most recent evidence of this was with Kenyan musician Bein-Aime Alusa’s concert at the beginning of the year. Through the application, the renowned artist can keep making connections and profit through digital streaming and payment. Hustle Sasa is meant to help artists recover revenues lost during the coronavirus lockdown as the stages that many artists know, and love was bare for a season. 

The application allows creatives to stream music, and sell branded merchandise, concert ticket and services all on one application. The win of it all is that artists are not required to pay any set-up costs or monthly fees but receive their payment instantly in their desired revenue outlets. 

As the creative co-founders of hustlesasa, we are thrilled to be part of this game-changing mix of art and tech to help the next generation of African creatives get paid to do what they love.

– Sauti Sol

This has not been the only development in the Kenyan creative scene as it was also announced that artists were to be availed of free legal services and another digital platform to help them benefit from their works. The platform will seek to identify, develop and monetise the talent of artists from various sectors within Kenya. 

It is no secret that the creative industry reaps little returns within East Africa and yet if organisations and countries were able to provide platforms for creatives to earn from their art then this industry would truly flourish. This incentive is urged by the number of artists who are continuously exploited and some enter bad contracts. The legal services that are provided will protect artists within Kenya from entering mentioned contracts as they will be thoroughly scrutinised. In an ideal world, the laws governing copyright infringement should protect artists from this, however, this is not the case. There have been instances of non-compliant users and evidence of fraud. 

Below are a few measures that are to be enforced to promote the arts in Kenya;

i) Encouragement of collaboration between countries. It was shared that with the audio-visual co-production agreement signed between Kenya and South Africa, more artists from the two countries would collaborate. This means that there will be more output of music from Kenyan artists as a whole.

ii) Any individuals found to have stolen earnings from artists generated through creative work shall face penalties. 

iii) As of this year,2023, licencing will only be issued to Collective Management Organisations that have fulfilled their statutory provisions. 

iv) Media houses will be required to clear their royalties before their licences are renewed. 

With all this said and done, Kenya appears to be on the right track to inspiring the arts to thrive. With this said, we need to ask ourselves what measures government can enforce to promote the arts in Uganda. We currently have mobile applications like Quicket.com that helps artists with a platform to sell their products but itis safe to say that a lot more can be done.

Growth of Publishing in Uganda

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It is more evident that the African literary scene has expanded massively over the past few years. The notable African Books of the Year list was launched in 2018 to highlight the most impactful books in a given year to show the world how richly and expansively African literary culture is growing, and to introduce readers to new books, particularly books from under-represented parts of the continent. The year 2022 highlighted 100 notable African books with one book from author Okot p’Bitek from Uganda. Are we doing enough as Ugandans to create?

There is no friend as loyal as a book.

Ernest Hemingway

If you have read any African book, you are possibly conversant with the fact that many African storytellers re-live African experiences through their pages, Uganda is no exception. But with the rise of African literature, Uganda doesn’t appear to be at the top even with the various copyright protections. As of this year, Uganda has ratified and acceded to four key copyright treaties – the Berne Convention, the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and the Beijing Treaty on Audiovisual Performances. These four treaties combined provide creatives with the rights needed to protect and benefit from their works. 

Creators have exclusive rights to publish, reproduce, perform, broadcast, and communicate the work to the public. With the expansion and use of the internet, their work can be shared globally with no limitation except the risk of piracy. What opportunities are currently available for Ugandan creatives? 

It is easy to say that with over 100 African books published in the last year, there is room for Ugandan authors and creatives to shine as they seize every opportunity that comes their way. 

How do I publish a book in Uganda?

Publishers who require the issuance of ISBN should contact the National Library of Uganda division at the National Library of Uganda offices at Buganda Road. A new publisher should apply for your own ISBN publisher prefix and plan to identify and circulate your books properly in the industry supply chain.

Museum and Monuments Bill 2022 returned to Parliament.

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Par­lia­ment at the fi­nal stage of passing a Bill into law as an Act of Parliament sends said Bill to the President for assent. President Museveni has recently held his assent of the recent Museum and Monuments Bill 2022 back to parliament for reconsideration.

As discussed previously, the Act seeks to consolidate and reform the law relating to cultural and natural heritage; to strengthen the administrative structures for the effective management of the cultural and natural heritage.

The President’s reservations stemmed from the fact that Kilembe Mines should not be considered a protected area as stated by the Act because it possesses a mining license and the company is a state enterprise with majority public ownership. 

Kilembe Mines is Uganda’s largest copper mine. In 2015, the managers at Kilembe decided to resume copper extraction and upon said decision, the mine was revived in stages. The president’s concern is based on the fact that if the Kilembe mine is declared a protected area according to the Act, its operations would cease. In other words, the mine’s inclusion in the bill should be deleted as it does not fit the description of a protected area. A few other areas are to be struck off the list of protected areas. These include:

  1. Acherer Gold Mine in Nakapiripirit
  2. Part of Panyimur Sub-County in Pakwach District, which is a fossil site, not the entire sub-county.

“I don’t like museums, there’s nothing to buy”

Violet Trefusis

What are protected areas under the Act?

‘Protected area’ under the Act means a site which has been and remains declared by the Minister to be a protected area. The sites mentioned above are listed under the second schedule as protected sites under the Bill. These sites are protected under Part X of the Bill that provides for the guardianship of sites and monuments, agreement for the protection and preservation of said sites and monuments and discoveries.

The President advised that the following changes be made to the Bill;

The Parliament has the absolute power to pass a Bill into law after following the correct procedure. The assent of the president is the final stage a Bill has to undergo before it passes as an Act of Parliament. In this case, because the President withdrew his assent, the Bill will be taken back to Parliament for consideration.

WHAT TO LOOK FORWARD TO IN 2023

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The New Year always comes with new resolutions. While many of us are possibly drafting our vision boards and letting go of past mistakes, the new year is not void of new experiences and fun-filled expectations. Here are a few things we can look forward to seeing in the new year. 

A few Bills are still tabled by parliament and are yet to be passed into law. As mentioned previously, we can look forward to seeing the changes that will be made to the Museum and Monuments Bill of 2022 as the H.E. President Museveni sent the bill back to the table. with recommendations up to be discussed by the house. Here are a few Bills to look out for; The National Sports Bill 2021, Competition Bill 2022, Employment Amendment Bill 2022, and the National Aid Bill 2022. 

It appears that constitutional and electoral reforms are at the top of the opposition’s resolution list for the year 2023. The Opposition in Parliament mentioned that their focus for the next session of Parliament will be on pushing for constitutional and electoral reforms which have been tabled as an afterthought. This venture will include the establishment of the Constitutional Review Commission to help with this. 

The past three years have been the most unpredictable for the education system. With the covid pandemic causing a complete shutdown, the Ebola outbreak caused the premature closing of schools before the expected term’s end last year. As previous reports showed the high rise in teenage pregnancies throughout the pandemic, this could be another concern for the year 2023. The question as to whether we are losing yet another year of education or not remains to be answered. Will the Ministry of Education and Sports announce the opening of our schools come February? 

If you belong or are thinking of forming a SAACO, then you are in luck. The Speaker of Parliament, Anita Among, instructed the House Committee on Finance which is currently considering the Microfinance Deposit-Taking Institutions (Amendment) Bill, 2022, to ensure the inclusion of laws protecting Members of Savings and Credit Cooperatives (SACCOs). She advocated for interventions that can enable the growth and transformation of the numerous Merry-go-rounds these also included the Rotating Savings and Credit Association (ROSCA), Accumulating Savings and Credit Associations (ASCA), and Village Savings and Loan Association (VSLA). Currently, the Microfinance Deposit-Taking Institutions (Amendment) Bill, 2022, has been tabled for first reading. We can look forward to new developments in that regard. 

It is quite clear that with everything that has happened this year, the economy is not the happiest. The Ministry of Finance stated earlier this year that the budget for the financial year 2022/2023 would mainly focus on addressing health and economic challenges presented by the COVID-19 global pandemic. The Ebola outbreak has not helped this endeavour in any way. It should be expected that the next year will be better for all Ugandan citizens and business owners as a whole. 

With that said, what are you looking forward to this new year?

What amounts to matrimonial property? (Ambayo v Aserua Civil Appeal No.0100 0F 2015)

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One of the saddest things about marriage today is the fact that many couples have decided to dissolve their union. Divorce and separation are one topic that we cannot ignore and with the latest news coming from the Court of Appeal, the distribution of property is one topic that is in dire need of discussion.

Marital property under Ugandan law strictly refers to property that is acquired by persons who were legally married ignoring the fact that several parties within our borders are cohabiting. This is the foundation upon which this article is based. The case of Muwanga Vs Kintu attempted to define marital property, where it was stated that “Matrimonial property is understood differently by different people.

There is always a property that the couple chose to call home. There may be a property which may be acquired separately by each spouse before or after marriage. Then there is the property that a husband may hold in trust for the clan. Each of these should in my view be considered differently. The property to which each spouse should be entitled is that property which the parties chose to call home and which they jointly contribute to.”

This definition was used to justify the previous decision made in the judgment upon which the recent civil appeal case of Ambayo v Aserua was based. The facts of the case were as follows; the appellant and respondent started cohabiting in 1989 to about 2005 when they solemnised their marriage. Within the said period, the couple sired four children and before officially getting married, they acquired land upon which their marital home stands and was purchased and all developments were made to make it a home.

The plot of land was registered solely in the name of the appellant as the purchaser. Proceedings for divorce started in 2012 upon which the judge issued a decree nisi to dissolve the marriage. The judge decided that even though the house was solely in the appellant’s name, it was marital property and it belonged to the couple in equal share. Therefore they were ordered to value and sell it. 

The appeal’s outcome has set a precedent in our law as the appellant was aggrieved with the judgement. Under Ugandan law, a spouse is entitled to an equal share in the matrimonial home, property owned jointly, and property acquired during the subsistence of marriage which the parties jointly contributed. The previous judgement considered the plot upon which their marital home stood to be matrimonial property even though it was purchased before their marriage. 

“A good marriage is one where each partner secretly suspects they got the better deal.”

Unknown

So what is marital property?

  1. According to Rwabinumi vs. Bahinbisonwe, all property acquired before marriage is the separate property of the spouse who purchased it. 
  2. Matrimonial property is a property whose purchase both husband and wife make monetary and/or non-monetary contributions. The non-monetary contribution would include instances where a spouse offers domestic services. In Kagga v. Kagga, it was stated that “when distributing the property of a divorced couple, it is immaterial that one of the spouses was not as financially endowed as the other as this case clearly showed that while the first respondent was the financial muscle behind all the wealth they acquired, the contribution of the petitioner is no less important than that made by the respondent.

With the case at hand, we agree with the judge. The state of the property in question is matrimonial property even though it was purchased before the appellant and respondent were married. The key is to look at the intention of the parties, in this case, it was to have it as a family home.

Here are the new rules pertaining marital property;

i) Marriage does not give a spouse automatic half-share in marital property upon divorce as was previously expected.

ii) A spouse’s share in marital property is dependent on his or her contribution to it.

iii) Contributions to marital property can either be monetary, not monetary or both.

iv) The non-monetary contribution consists of unpaid care and domestic work rendered by a spouse during the course of the marriage. When court is determining the value of unpaid care and domestic work, it will take into consideration the monetary value principles like the value of cost of similar or substitute services available on the labor or service market.

PRIVITY OF CONTRACT

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Building a connection is one of the most vital things in any relationship and a business relationship is no different. As you run a business and sign a contract, this relationship is described as privity. The major rule under the privity of a contract is that no one may be entitled to or bound by the terms of a contract to which he or she is not an original party.

This allows only parties involved in a contract to sue each other against said contract and not a third party. A third party may be a person who is likely to gain something of value from the contract (also known as a third-party beneficiary). Said person has no legal right to take any contract-enforcing action if they do not receive the promised benefits. In the case of Tweddle v Atkinson, it was stated that “no stranger to the consideration can take advantage of a contract, although made for his benefit.”

The perfect example to explain this would be in a tenancy arrangement. If a tenant to a piece of property that was purchased by someone else and a contract stating that the person that sold the property was required to make certain repairs exist. If the said seller did not fulfill the obligation, then a tenant would not be able to sue the seller because they are not in privity with this person. Instead, it would be expected that the party who is named in the contract be the one to bring up a lawsuit. 

 It’s not all cases that privity to a contract does not rule out the possibility of that entity suing or being sued over matters arising from the contract. The  Asante Aviation Ltd V Star Of Africa Air Charters Ltd & 3 Orshis case was an application for an order of specific performance compelling the defendants to sign transfers of an aircraft. The court relied on the concept that only parties to a contract can sue for breach (privity of contract). It observed that one of the exceptions to this rule is where a third party can prove that he/she is a beneficiary of the contract between the two people. The court held that the defendants were third-party beneficiaries since the loan agreement between the first defendant and the second defendant was for their benefit.

Here are a few exceptions where a third party is able to sue under a contract to which they are not privy;

1) Third parties can sue contracting parties if it is proven that the contracting parties were negligent.

2) In instances benefits of a contract may be assigned to a third party. 

3) Insurance is the most common exception. A party involved in a car accident can benefit from an insurance company.

4) A third party may sue the seller over defective goods if the third party is affected by the flaws in the goods. 

RIGHT TO ACTION

Under the exceptions that have been shared, a third party is allowed to sue for the following remedies;

i) Specific performance

ii) Damages

EAST AFRICAN LAW SOCIETY

East Africa Law Society is the apex regional bar Association of East Africa. It was jointly founded in 1995 by a group of Lawyers with the support of the leadership of the national Bar Associations of the member states.

The East Africa Law Society works to promote good governance and the rule of law in the East African region. It also has the objective to fast-track the integration of East African communities through targeted support to cross-border commerce, the legal profession, civil societies, business communities and governments. The EALS has a membership of six National Bar Associations of Burundi, Kenya, Rwanda, Tanzania, Uganda and Zanzibar, with procedures to include South Sudan underway. 

A community that is engaged and working together can be a powerful force.”

-Idowu Koyenikan

OBJECTIVES OF THE EAST AFRICAN COMMUNITY 

With the recent East African Law Society elections, our very own Naomi Byabazaire was appointed the Treasurer of the organization. Below is a list of council members who will be governing EALS from 2022-2024. 

Hon. Justice Dr. Fauz Twaib

Ramadhan Abubakar

Florida Kabasinga

David Sigano

Naomi Byabazaire

Minani Salvator

Hafsa Sasya

Bernard Oundo

Moise Nkundabarashi

Dr. Edward Hoseah

Eric Theuri

Muhuzenge Jean de Dieu

Slim Abdallah

James El-Taib

WHAT IS A TRUST?

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If you have ever shared a secret with a friend, this article is for you. Once you open your safety net and share a secret with a friend, you have trusted them with something important with the expectation that they will keep it safe. Forming a trust is similar to this. A trust refers to the duty that rests upon a person described as a trustee. In this type of relationship, one party (called the trustor) gives a second party (called the trustee) the right to hold title to assets or property for the benefit of a third party (called the beneficiary). This type of relationship is fiduciary which means the person who holds this relationship is in a position of trust with one or more parties. 

Trust, honesty, humility, transparency and accountability are the building blocks of a positive reputation. Trust is the foundation of any relationship.

Mike Paul

There are various reasons why one would form a trust. Various reasons for using a trust exist, these include:

A trust comes in various categories, namely:

i) Funded or Unfunded Trusts

With a funded trust, a trustor places assets into a funded trust during their lifetime while in an unfunded trust, said trust is only in existence as a trust agreement and does not include funding however, it may become funded upon the death of the trustor, but it might also stay unfunded. 

ii) Living or Testamentary Trusts

Living trusts are written documents that provide an individual’s assets as a trust for their benefit and use during their lifetime. Once that individual dies, the assets are transferred to their beneficiaries. 

Testamentary trusts on the other hand specify how the individual’s assets are designated once that individual dies.

iii) Revocable or Irrevocable Trusts

Revocable trusts can change or be altered during a trustor’s lifetime. However, a trustor cannot alter an irrevocable trust once they establish the trust. 

Trusts given their nature may also become irrevocable upon the death of the trustor making them the most desirable because they cannot be changed.

Viable examples of trusts in Uganda 

In Uganda, the government administers trust by holding property on behalf of its citizens. Article 237(b) of the 1995 Constitution of Uganda has created a public trust over specified important renewable natural resources such as natural lakes, rivers, wetlands, forest reserves, game reserves and National parks, vesting them in the state to hold and protect for the common good of all citizens of Uganda. 

The National Social Security Fund (NSSF) is in charge of the collection of workers’ savings, so they are the trustees and workers are the beneficiaries. 

DIGITAL TAX STAMPS

It appears that everything is going digital, and taxes are no exception. With this said, if you are in business and deal with the sale of excise goods then you are in this is important for you to note. URA has encouraged every manufacturer, importer, distributor, agent or trader of particular goods to ensure all stock of goods bears a Digital Tax Stamp. These goods include goods such as beer, soda, bottled water, wines, spirits, tobacco products, sugar, cement, cooking oil, juices, and alcoholic, non-alcoholic and fermented beverages. All these products have been gazetted for public knowledge. In case you are wondering what a digital tax stamp is, we are here to help you out. Digital tax stamps are unique labels applied on packages of products which contain security features and codes to prevent counterfeiting of products and also enable track and trace capabilities, the main purpose of this was to allow consumers/customers to consume authentic products and protect them from any subsidised products.

Objectives for the introduction of Digital Tax Stamps.

i) To protect government revenues
ii) To combat trade in counterfeit goods
iii) To enhance fair competition in the market
iv) To provide statistical data for both tax policy and administration.

Overall the main reason why digital tax stamps were introduced is to combat tax fraud within the country, however, this introduction comes with a few implications. The major one would be who would bear the cost implications that come with this new introduction. Digital tax stamps have been shown to have a few negative effects on firm sales revenues and Government excise tax revenues in the first year of post-digital tax stamp introduction. This was due to implementation challenges and delays in embracing the new technology. With these findings, the majority of the burden of implementing these stamps lies on the manufacturer.

How to register for a digital tax stamp.

i) To qualify, a manufacturer and importer should be registered for excise duty
ii) Manufacturer or importer must be registered for URA and goods should be certified by UNBS
iii) All registration will be done on the URA portal, all applicants should have a TIN.
iv) A manufacturer or importer needs to register their product.
v) Once this is done, the manufacturer or importer should order the stamps for each product. An approval notice from URA will be sent.

In case a manufacturer or importer has products that do not possess these stamps, they are advised by URA to dispose of said products or take steps to place stamps on desired products.