LAW
DEVELOPMENT CENTRE
POST
GRADUATE BAR COURSE 2024/2025
FIRST TERM,
WEEK THREE
CORPORATE
& COMMERCIAL PRACTICE
WEEK OF 14TH– 18TH OCTOBER 2024 CORPORATE PRACTICE (1) – MODULE 1
Introduction
This module deals with the establishment of various businesses and
structures that enable clients effectively run their businesses.
There is a very wide range of businesses that can be set up in
Uganda. Legal practitioners are oftentimes called upon to advise on formalities
for the formation and management of these businesses. It is therefore important that lawyers are
equipped with skills to enable facilitate the set up and running of these
businesses.
WORKSHOP 1
Aims:
The aims of this workshop are to:
The aim of this module is to:
1.
Develop the
ability to advise on business setup and management.
2.
Develop ability to
set up businesses,
3.
Develop the
ability to structure the management of businesses.
4. Recognise and resolve ethical issues arising in set up and management of business entities.
Learning outcomes
Learning
outcomes
By the end of this module, you
should be able to;
1. Explain features of various Business Associations; Sole
proprietorship, Partnership – General, LLP, Professional, Company- Private, NGOs,
Incorporated Trusts, SMC, Private & Public Companies.
2. Establish an appropriate Business Association for your clients;
3. Draft documents necessary for the establishment of business
association
4. Recognise and resolve ethical issues relating to business establishment and management of Business entities.
PART A
Jackson Mazimoto (“Jackson”) is in your chambers and relays the following information to you: He has been engaged in the business of selling Sports jerseys and casual wear for men. He carries out his business along Luwuum Street, Kampala on Mugaga Mall. Because of challenges of high rent in Kampala, he convinced his friend Jonah “Fire-man” (“Jonah”) whom he went to High School with to come and carry out his business of selling perfumes in the same premises so as to reduce rent. This was way back in 2020 after Covid-19 lockdown. The two friends would contribute money for rent every month to reduce costs. This went on for three years and the two friends were really happy.
In 2023 November, they decided to make the business bigger. They decided to combine their resources so that they could import merchandise directly from China and Indonesia. They started running their business under the name & style of “NRA COMMANDOS” because they sold a lot of military-looking cargo pants similar to the ones used by the U.S Military in Desert Storm in 1990. These pants are popular among the young generation. They did not formally register their business or carry out any formalities. They raised the sum of USD 29,000 and started business. Their business has since grown and their capital has risen to over USD 35,000. Jonah’s brother-in-law Sepriano Makhosi (“Sepiriano”) (a South African National) has picked interest in the business of Jackson and Jonah. He is ready to invest a sum of USD 100,000 in the business and benefit from the growth of the business. However, he has no time to run the business with Jonah and Jackson. He works in Ethiopia and comes to Uganda once or twice a year to check on his family. He wants to be protected from any business failure to the best possible extent. Jackson’s girlfriend Shirley Murungi (“Shirley”) graduated from Makerere University 4 years ago with a degree in Marketing. However, she has failed to get a job. She is a very good marketeer and can offer her services to the business in return for a stake in the business.
Jackson tells you that he along with Jonah, Sepiriano & Shirley would like to formalise their business to carry out their affairs. They do not want a lot of formalities and would like to run a simple and efficient business which relies on and benefits from their personal expertise without creating unnecessary corporate structures. They believe this will make their business flourish and quicken decision making.
TASK 1:
1. Formalise your instructions.
2. Extract any missing information to enable you
execute your instructions.
3. Advise your clients on the nature of the
business relationship between them tracing it from the time Jackson started
running the business.
4. Advise your clients on any potential breaches of
the law committed thus far, and challenges they may encounter in registering
their business.
5. Assuming Jackson & Jonah are agreeable to
co-opting Sepiriano and Shirley, Draft the documents necessary to register the
most appropriate business for them. Explain the core provisions and components of
the documents. The documents should offer as much protection to the parties
as possible considering their unique circumstances as highlighted in the facts.
6. Advise Jackson, Jonah, Sepiriano, Shirley on the
necessary licenses and registrations to lawfully carry on business.
7. What are the likely challenges you envisage
considering the business entity your clients opted for and the unique
circumstances as highlighted in the facts.
Task 2:
Assuming that, on 11th July 2024,
Jonah, Sepiriano & Shirly perished in a road accident. This was after the
business had been formalised as envisaged under Task 1 above. The business had
no business continuity provisions in its documentation. At the time of death,
the business owed several suppliers and creditors the sum of UGX 56,780,000.
The business itself was worth UGX 450,001,000/=.
(1)
What are the rights and obligations arising between and amongst
Jackson and the families of his deceased business partners?
(2) Draft and register the necessary documentation to reflect the changes arising from the deaths of Jonah, Sepiriano, and Shirley.
Assuming further, that after fulfilling the obligations under Task 2 (1) & (2) above), Jackson has learnt from experience. He is wary of his business collapsing in the event of him dying in an untimely manner as his former business associates. He has continued in business alone since the death of his business associates but wants to formalise the business. He intends to continue owning it alone. He wants to ensure that even if he dies, his business continues as an entity of its own. Jackson is married to Sheila Mumba (“Sheila”) and they are blessed with one child. Jackson has a brother a one Peter Mukunzi (“Peter”) who occasionally helps him with purchases. He trusts his wife and Peter in the event that he meets his maker in an untimely manner.
(3)
Advise Jackson on the most appropriate business entity to set up.
(4)
What roles would Sheila & Peter play in the business.
(5)
Extract any missing information necessary to execute your
instructions.
PART B:
Use the facts in Part A Task 2 (2) & (3) with the following modifications, Jackson has since decided to set up another entity with good and sound corporate structures. He wants the entity set up under Part A Task 2 (3) to hold a significant stake in the new entity so as to be able to make any decisions. He also wants to co-opt his wife, and son of minority age into the new entity as co-owners. His wife is not bringing any money into the business but will help in managing it. Jackson wants to protect the stakeholders of the new entity from loss of personal property in case the business gets into financial distress. Because Jackson is not very well educated like his wife, he wants the wife to help him in managing the business but with him (Jackson) being the overall person in charge of managing the business. Jackson also wants to ensure that through the entity set up Part A Task 2 (3) he maintains control of the business just in case his wife ‘grows a big head’ and tries to disturb him.
Task 3:
1.
Extract any missing information to execute your instructions.
2.
Advise Jackson on the most appropriate entity to set up.
3.
Draft the necessary documents for 2. Above, using information you
have obtained to set up the entity that suits Jackson’s interests.
4.
Ensure that your fees get paid.
5.
Assuming the entity above has been set up, draft the necessary
documentation to call the necessary meeting(s) and set up management structures
of the new entity. Ensure that all the legal processes are followed.
6.
Assume that the business you have lawfully set up has been running
for a period of 55 days, complete and file the necessary documentation ‘post
set up’.
PART C:
Task 4:
Through the entity set up in Part B Task 3, Jackson wants to help
poor vulnerable children from his village in Kyasampata, Busunju, Wakiso
District. He wants to put aside a fund from the profits that his business (in
Part B) makes so that the entity can sponsor education of the best student at
Primary Level Education amongst all the UPE schools in the Subcounty. The
directors in the entity (setting up the entity to cater for the children) are
Jackson and his wife.
1. Advise Jackson on the most appropriate entity to
set up to help vulnerable children in his village, give reasons for your answer.
2. Extract the information required to execute
these instructions
3. What are the authorisations and process flows required to set up the entity in task 4 (part 1.) above?
4. Draft the relevant document authorising the
entity set up in Part B Task 3 to set up whichever charitable
organisation/entity you will have opted for.
PERSONAL READING/EXERCISES.
1. Draft documents for resignation from a
partnership.
2. Draft pleadings for dissolution of partnership
by way of court order. State the grounds for dissolution succinctly.
3. Read (in their entirety) Tables A (Parts I &
II and determine which part applies to Private Companies and Public Companies),
B, C, D, E & F of the Companies Act. You ought to know when to apply each
of these Tables.
4. Fill in the necessary statutory forms under Part
C (Parts 1. 2. & 3) above.
5. Look up a Minute Book of any company or online
and note how resolutions are registered in the minute book. Attempt to fill in
details of resolutions in the minute book. Please note: Resolutions
registered in the minute book include those outside section 150 of the
Companies Act. Resolutions relating to internal management of the company e.g.
appointment of employees in top management, payment of bonuses, e.t.c will also
be registered in the Minute Book.
6. Assume you are company Secretary of a private
Company:
ii.
What documents would you need to maintain to ensure good sound
corporate governance?
iii.
what evidence will you keep to ensure that: you have evidence that
any meeting in issue was called according to the law; notice, where necessary,
was served; the meeting had the requisite quorum was present at the meeting;
and the minimum threshold for voting was realised.
5.
Company XYZ Limited was incorporated with share capital of UGX 100,000,000
divided into 100 ordinary shares of 1,000,000 each, and the following persons
subscribed for shares as follows: Billy Wang (60 shares), Jane Wang (10 shares)
and Jiao Wang (15 shares).
i.
Fill in a return of allotment for the shares above.
ii.
Assuming that later another 15 shares are allotted to Billy Wang,
fill in a return of allotment in respect of these shares so allotted.
- Draft a Trust Deed for Part C.
Special Note:
When filling in statutory forms or drafting any agreements for
this workshop and any future workshops, DO NOT leave any gaps. The
agreements or forms MUST be complete. Where you have not been
given enough information from the facts, feel free to assume any given set of
facts/information which does not deviate from the facts given so as to fill in
forms or draft agreements.
Allocation of Workshop Tasks
Firm leader to split the firm into 4 groups.
Group 1 to handle task 1
Group 2 to handle task 2.
Group 3 to handle task 3.
Group 4 to handle task 4.
Lesson Plan.
1. Introduction of workshop by Professional
advisor (10 Minutes)
2. Analysis of facts (30 Minutes)
Group Presentations.
o Group 1 – 20 minutes
o Group 2 – 15 minutes
o Group 3 – 15 minutes
o Group 4 - 15 Minutes
o
Wrap up &
questions – 15 Minutes
Notes:
1.
Students
who refuse to participate when picked upon will be ejected from the class.
2.
Every
student must prepare personal notes.
3.
The
respective groups must have their presentations ready before class.
5. All
students should endeavour to prepare the necessary document(s).
Statutes
1.
The Partnerships Act, Cap 110.
2.
The Contracts Act Cap 284.
3.
The Business Names Registration Act, Cap 105.
4.
The Registration of Documents Act, Cap 291.
5.
The Companies Act Cap 106.
6.
The Trade Licensing Act, Cap 79.
7.
The Stamp Duty Act, Cap 339.
8.
Uganda Registration Services Bureau Act, Cap 217.
9.
The Advocates Act, Cap 295.
10. The Non-Governmental Organisations Act, Cap 109
11. The Trustees Incorporation Act, Cap 271
12.
The Investment Code Act Cap
74 -
Part III
Rules/Regulations
1.
The Business Names Registration Rules S.I 109-1.
2.
The Business Names Registration (Amendment) Rules S.I 53 of 2005.
3.
The Registration of Documents (Fees) (Amendment) Rules S.I 55 of
2005.
4.
The Registration of Documents Rules S.I 81-2.
5.
The Companies Act (Single Member) Regulations,
S.I 72/2016
6.
The
Companies (General) Regulations S.I 7/2016
7.
The
Companies (Powers of the Registrar) Regulation S.I 71/2016
8.
The
Companies (Single Member) Regulations S.I 72/2016
9. Trustees Incorporation (Beneficial Owners) Regulations, 2023.
Cases
a) Formation of Partnerships
1.
W. Vs. Commissioner of taxes (1969) 1. ALR. Comm. 91
2.
Mercantile Credit Co Ltd v. Garrod (1962) 3 ALL ER 1103.
3.
Dubai Aluminum Co Ltd v. Salaam (2003) 1 ALL ER 97; (2002) 3 WLR
1913.
4. Lord Millett, Bristol & West Building Society v. Mothew (1998) Ch D.1.
b) Existence of Partnership
1.
Bubare Company v. Meble Kente [1982] HCB 143.
2.
Wilson v. Commissioner of Taxes 161 F.2d 661 (7th Cir. 1947).
3.
All port Ports Freight Service v. Julius Kamanyi & Anor.
[1996] V KALR 21.
4.
Kafero Mohamed v. Turyagenda [1980] HCB 122.
5.
Dr. Okello N. David v. Komakech Steven, HCCS No. 30 Of 2006.
6.
Sonko v. Patel 20 (EACA) 99.
7.
Omella Emorut v. Raymond Ojakol [1984] HCB 62.
8.
Okwera Donation Henry v. Abdalla Saleh [1982] HCB 123.
9.
Uganda Freight Forwarders Association and Another
v. Attorney General and Another, Constitutional Petition No. 22/2009.
10.
Francis Sembuya v. Allports Services (U) Ltd – SCCA No. 6 of 1999.
11.
National Drug Authority v. John Chris Bakiza T/A Kabyesiza and Co.
Advocates HCCS NO. 34 of 2008.
12.
Nankya Faridah T/a Offenders Rehabilitation International v.
Tinasah Investments Limited M.A 648 of 2011 (Commercial Court).
c) Pre-incorporation agreements.
1.
Salmon v. Salmon [1897] AC 22.
2.
Kelner v. Baxter [1866] LR 2 CP 174.
3.
Price v. Kelsall [1954] EA 752.
4.
Ngaremntoni Estates Ltd. v. CIT [1969] 1 ALR Comm 186.
5.
Kololo Curing Co. Ltd v. West Mengo Co-op Union Ltd (1981) HCB 60.
d) Name of a Company
1. Java Coffee & Tea
Limited v. Uganda Registration Services Bureau, Café Javas Limited &
Mandela Auto Spares Limited Company Cause No. 16 of 2014.
4.5.5.4 Text Books
1. Halsbury’s Laws of England, 4th Edition, Vol 35.
WORKSHOP 2
Aims:
The Aims of this workshop are to:
a)
Develop your ability to hold various company meetings.
b)
Develop the identify and deal with shareholder rights.
c)
Develop your capacity to convert a company from a private Company
to a Public Company.
d)
Address ethical issues arising from shareholder disputes.
Learning outcomes:
By the end of this workshop, you should be able to;
1. Illustrate the process of holding Company meetings.
2. Illustrate regulatory compliance processes.
3. Illustrate enforcement of shareholders rights.
4. Demonstrate the process of converting a private company into a
private company.
5. Recognise and deal with ethical issues relating to business
establishment and management.
PART A:
Assume that the entity set up in Workshop 1 Part B (Task 3) has been operational for a period of one year. You are the Company Secretary. You have been tasked with the duty of calling for an Annual General Meeting. The ‘Constitutuion’ of the Company that you adopted in Workshop No. 1 Part B (Task 3) shall be your guide.
Task 1:
1.
Draft the necessary notices to convene the meeting.
2.
Draft the Agenda of the meeting.
3.
Assuming that due to emergency and poor planning on your part, the
meeting is called with notice shorter than the statutory minimum, what steps
will you take to rectify this? Document
this process.
4. What documentation will you provide to the Members prior to the
meeting?
PART B:
Assuming further, that after the AGM in PART A above, Jackson and his wife developed a serious misunderstanding. The accounts presented at the AGM were also far from satisfactory and showed a dire state of affairs. This followed disputes between Jackson and his wife, stemmed from Jackson over fraternising with one of the sales girls in the business. Jackson has also taken advantage of his wife’s forced absence and his being a sole signatory to company accounts to use company funds in any manner he deems fit. He goes for expensive trips abroad with his new love using company resources. Jackson’s wife, has found out that the company is now indebted to Uganda Revenue Authority for taxes to the tune of UGX 67,000,000. Suppliers are also demanding a sum of UGX 7,000,000 for supplies made but not paid for. This had never happened while she was in charge. Jackson denied his wife access to company premises and will not let her look at the books of account. The company books of account of the company are also poorly kept. In fact, Jackson’s wife has never been received a share certificate. She knows she is a shareholder but has never got any documentation save for signing the Memorandum & Articles of Association.
TASK 2:
1. Advise Jackson’s wife on her
a.
rights in the circumstances
.
b.
Remedies in the circumstances.
in
the circumstances
2. Draft and explain the necessary documents to seek the remedy you have proposed in 1. above.
PART C
Assume that further to the conflict between Jackson & his wife above, Jackson was ordered by court to compensate his wife for her shares, which he has since done. The wife has since left the company. Jackson has since brought in extra shareholders in the company to stabilise it and ensure that it gets sound corporate management. His entity’s shareholding in the Company has also been diluted to just 20%. The new shareholders have decided that the company should restructure so as to attract enough financing. They want the company to be open to any member of the public with capital to invest in it.
TASK 3:
1. Advise the Company on the steps to take to transform it as per the wishes of the new shareholders.
2. Draft the necessary documentation authorising the transformation in Task 3 (Part 2. Above). DO NOT draft documents for raising capital from the public.
Allocation of Workshop Tasks
Firm leader to split the firm into 4 groups.
Group 1 to handle task 1
Group 2 to handle task 2.
Group 3 to handle task 3.
Lesson Plan.
1.
Introduction of workshop by Professional advisor (10 Minutes)
2.
Analysis of facts (20 Minutes)
Group Presentations.
o Group 1 – 25 minutes
o Group 2 – 25 minutes
o Group 3 – 25 minutes
o
Wrap up &
Questions – 15 Minutes
Notes:
1. Students who refuse to participate when picked upon will be ejected from the class.
2.
Every
student must prepare personal notes.
3.
The
respective groups must have their presentations ready before class.
4.
All
students should endeavour to prepare the necessary document(s).
Statutes and Statutory Instruments
Statutes
1.
The Partnerships Act, Cap 110.
2.
The Contracts Act Cap 284
3.
The Companies Act Cap 106.
4. The Uganda Registration Services Bureau Act Cap 217
Rules/Regulations
1.
The
Companies (General) Regulations S.I 7/2016
2.
The
Companies (Powers of the Registrar) Regulation S.I 71/2016
Cases
1.
Mathew Rukikaire v. Incafex S.C.C.A No. 3 of 2015.
2.
Salim Jamal & Others v. Uganda Oxygen Ltd & Ors, S.C.C.A
No. 64 of 1995.
3.
Kakooza Lugunju Joseph v. Ethiopian Airlines Ltd. (1982) H.C.B
111.
4.
Ssenyonga Ali & Ors v. Kakooza Rajab Hussein &Ors
(1992-93) H.C.B 93.
5.
Kenya Seed Company Limited v. Nathaniel Kipkorir Tum &
Eufrazio Juliao Goes HCCS No 180 of 2010 (unreported).
6.
Twycross v. Grant (1877) 2 CPD 469.
7. Mawogola Farmers
and Growers Ltd Vs. Kayanja & Ors
8. Olive Kigongo V.
Mosa Courts Apartment Ltd Co. Cause No. 1/2015
WORKSHOP THREE
You are required to set up a class firm to take you
through LDC.
You must indicate what should be in a professional
law firm.
What is the Mission, vision, and values of the firm
you have set up?
Suppose some members having contributed to
partnership property, the LDC decided to discontinue them from the Bar course
and they have to leave, what is their fate and how do you handle them?
Suppose LDC admits new students who are meant to join your firm, how would you admit them.
TASKS:
1.Discuss the process of establishment of the said firm,
admission of new members and retirement of the partners.
2.Draft all the necessary documents
3.Calculate all the fees payable.
PREPARED BY: