IBA Guide on Shareholders Agreements

Transcription

1 IBA Guide on Shareholders Agreements Uganda Brian Kalule AF Mpanga Advocates 1. Are shareholders agreements frequent in Uganda? Shareholders agreements are increasingly becoming common among medium to large companies but are very rare among the small companies especially the family owned. 2. What formalities must shareholders agreements comply with in Uganda? Apart from the usual requirements that are necessary to validate any contract, Ugandan law does not prescribe any special formalities to be complied with by shareholder agreements. 3. Can shareholders agreements be brought to bear against third parties such as purchasers of shares or successors? They can bear against such third parties if the terms, as they often do, expressly make such third party interests subject to the agreement. 4. Can a shareholders agreement regulate non-company contents? Although in theory it is possible, in practice however, a shareholders agreement cannot regulate non-company content. Page 1

2 5. Are there limits on the term of shareholders agreements under the law of Uganda? The only limit is that the terms of the shareholders agreement should not violate the express provisions of the law, especially the Companies Act, Are shareholders agreements related to actions by directors valid in Uganda? Actions by directors under Ugandan law are expressly regulated by the Companies Act, As a result, it may not be necessary to cater for them in the shareholders agreement. However, if they are catered for in the shareholders agreement, they should not be contrary to written law otherwise they will be invalid. 7. Does the law of Uganda permit restrictions on transfer of shares? Yes, certain restrictions on the transfer of shares may be permitted. The companies Act provides that shares are moveable property transferred in the manner provided for by the Articles of Association. It is not unusual to find restrictions in the Articles in respect of transfer of shares. For instance, shares may not be transferred to a person whom the directors do not approve (for companies limited by shares but which are not private companies), or such a transfer may be subject to payment of fees duly determined by the directors. 8. What mechanisms does the law of Uganda permit for regulating share transfers? Under the Companies Act, 2012, a transfer of shares shall not be registered unless a proper instrument of transfer has been delivered to the Company. Once the Instrument is Page 2

3 delivered, the transfer of shares is registered and a certificate of a transfer is issued by the company. Further, in practice any transfer of shares is to be approved by a resolution of the Directors and which resolution is registered with the registrar of companies. The companies Act 2012 also provides for transmission of shares in case of death of a member. In such a situation, the personal representative of the deceased shall be entitled to the shares of the deceased. 9. In Uganda, do bylaws tend to be tailor-drafted, or do they tend to use standard formats? The Companies Act contains a standard format of the Articles of Association which is usually adopted in its entirety (save for a few changes depending on the company) by most companies. 10. What are the motives in Uganda for executing shareholders agreements? The main motive is to execute shareholders agreements and regulate matters that may not have been catered for in the constitutional documents but are very material to the shareholders relationship. The other reason is to capture the shareholders expectations and insecurities so as to avoid misunderstandings in so far as each of their rights, duties and obligations are concerned. 11. What contents tend to be included in shareholders agreements in Uganda? Page 3

4 Although the Articles of Association to a lesser degree stipulate how the relationship between shareholders is to function, the shareholders agreement tends to be more detailed and tries to capture all the minutiae of that relationship. Thus, unlike the Articles of Association, it contains issues like duties of shareholders, the actual capital contribution of the shareholders, what form the contribution is to take and the schedule of payment, what will happen in the event of default etc. It also covers conduct of company business, disposal of shares by the parties in more detail, pre-emptive rights, financial planning and accounting, dividend policy and dispute resolution, termination and restrictive covenants among others. 12. What determines the content included in shareholders agreements in Uganda? The primary determinant of the content is the desire to regulate conduct of company business to the extent not provided for under the law and the articles of association. Ultimately, the parties try to capture in the shareholders agreement that which they deem essential for their relationship but which the law and articles of association do not provide for. 13. What are the most common types of clauses in shareholders agreements in Uganda? The most common clauses in shareholders agreements in Uganda are:- funding of the company, duties, liabilities and obligations of shareholders, disposal of shares by the parties, distribution of profits, payment of shareholders loans, matters relating to the Board of Directors. Page 4

5 14. What mechanisms does the law of Uganda permit to ensure participation of minorities on the board of directors and its control? The Companies Act, 2012 entitles a member who feels the affairs of a company are being run in a manner which is unfairly prejudicial to the interests of its members or some of them to apply to court for various relief. The court may make orders that regulate the future conduct of the company s affairs, refrain the company from continuing the act complained of, among others. 15. Is it possible in Uganda to ensure minority shareholder control by means of a shareholders agreement? The Companies Act, 2012 provides for division of shares into different classes each with different rights as may be determined in the shareholders agreement. It is therefore possible for minority shareholders to be in a class of shares that may have control over the company. 16. What are the usual valuation mechanisms in connection with rights of first refusal or share transfer regulations? The valuation mechanisms differ with different shareholders agreements. However, they usual ones include: market value, expert assessment mostly without a predefined criterion to be used, shareholders accepted value and value based on a multiple of EBITDA. 17. Is it admissible for a shareholders agreement clause to refer dispute resolution to the courts other than those of Uganda and/or under a law other than that of Uganda? This is a gray area in Ugandan jurisprudence. However, I think that although it is possible to refer disputes to courts of other Page 5

6 jurisprudence, such courts should however resolve the disputes under Uganda law and not under any other law in as far such issues relate to incorporation, regulation and their administration (as discerned from the long title to the Companies Act, 2012). 18. Is it admissible for a shareholders agreement to include an arbitration clause with seat outside Uganda and/or under a law other than that of Uganda? The same is true for arbitration as Uganda is a signatory to the Newyork Convention and ICSID Convention. However, although the parties can choose a seat outside and a law other than Ugandan law, issues relating to incorporation, regulation and administration of the company have to be construed in accordance with Ugandan law. Page 6