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Uganda In Brief – Securities

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Jul 28, 2022 #Securities, #Uganda


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Welcome to the first issue of ENSafrica’s Uganda in
brief
, focusing on the latest legal and regulatory updates
across Uganda’s corporate commercial and banking and finance
industries.

corporate and commercial

  • Contracting with the government: Parliament of Uganda
    issues directives on the controversial coffee agreement between the

    Government of Uganda and Uganda Vinci Coffee Company
    Limited
    .

    • On 18 May 2022, the Parliamentary Standing Committee on
      Tourism, Trade and Industry recommended that government terminate
      the agreement with Vinci Coffee Company on the grounds that the
      agreement violates the constitution and several other laws of
      Uganda. In 2015, the Government of Uganda entered into an agreement
      with the company for the setup of a plant to add value to Ugandan
      coffee by making products including soluble coffee.

    • Under the agreement, government gave the company several tax
      and other incentives and undertook to take reasonable measures
      ensure that the company had an ample supply of quality coffee.


  • Insolvency: The High Court of Uganda highlights rights
    of secured creditors in insolvency proceedings

    • In the recent case of
      Bank of India (U) Ltd Vs NC Beverages Limited & Uganda Revenue
      Authority
      (“URA“), the High Court
      reaffirmed the protection accorded to secured creditors by the
      Insolvency Act, 2011 against preferential creditors in respect to
      the assets charged by the secured creditor. In this case, the High
      Court faulted the URA for seizing and disposing of assets that were
      subject to a registered charge.


  • Doing business in Uganda: The High Court issues a
    decision requiring foreign partnerships to register in Uganda in
    order to conduct business in the country

    • The High Court, in the recent decision of Vantage Mezzanine
      Fund II Partnership Vs Uganda Registration Services Bureau and
      others, declined to grant standing to sue to a South African
      partnership on grounds that it did not register in Uganda under
      Ugandan law. Vantage Mezzanine Fund had lent over USD10-million to
      a Ugandan business and was seeking to enforce recovery. The
      decision is under review but appears flawed.



    Non-governmental organisations: High Court overturns the
    decision of the National Bureau for Non-Governmental Organisations
    (“NGO Bureau”) to indefinitely suspend an NGO’s
    permit

    • The High Court has ruled, in the case of Chapter Four Uganda Vs
      National Bureau of Non-Governmental Organisations, that the actions
      of the NGO Bureau to indefinitely and without a specific timeframe
      suspend an NGO’s permit to operate and to halt all its
      transactions were irregular, unreasonable, illegal and not
      rationally justified. The High Court ruling follows an application
      by an NGO Chapter Four Uganda, challenging the NGO Bureau’s
      decision to indefinitely suspend its permit to operate for not
      submitting its annual returns or furnishing information to the NGO
      Bureau as required under the law.

    • The court held that whereas the NGO Bureau has the power to
      suspend an NGO, the bureau cannot indefinitely suspend an NGO’s
      permit. The power to suspend must be checked with a timeframe or
      definite period within which the suspension must end.

banking and finance

  • Stamp duty tax: amendments to the Stamp Duty Act, 2014 in
    relation to financing transactions

    • The Stamp Duty (Amendment) Act 2022 waived the stamp duty
      payable on various security documents including:

      • Item No. 6- Stamp duty payable on the execution of agreements
        relating to deposits of title-deeds and pawn pledges; and

      • Item No. 56- Stamp duty payable on the execution of instruments
        relating to security bonds or mortgage deeds executed by way of
        security for the due execution of an office, or to account for
        money or other property received by virtue of a security bond or
        mortgage deed executed by surety to secure a loan or credit
        facility


    • The stamp duty payable on these agreements was previously at 1%
      of the total value of the transaction. The amendment will reduce
      the cost of accessing credit by borrowers intending to rely on such
      security arrangements as security for financing.


  • Pensions: The Uganda Retirement Benefits Regulatory
    Authority passes regulations allowing savers to assign a portion of
    their savings to mortgages and housing loans

    • The Uganda Retirement Benefits Regulatory Authority recently
      passed the Uganda Retirement Benefits Regulatory Authority
      (Assignment of Retirement Benefits for Mortgages and Loans)
      Regulations, 2022 which allows a member of a retirement benefits
      scheme to assign up to 50% of their accrued benefits to secure a
      mortgage or loan for purchasing a residential house.

    • The effect of these regulations is that borrowers can now use
      part of their pension savings as collateral for mortgages and
      housing loans.


  • Tax: Kansai Plascon Uganda v Uganda Revenue Authority
    (TAT Application 64 of 2020)

    • The Tax Appeals Tribunal delivered a ruling dealing with the
      voluntary disclosure under Uganda’s tax regime. The voluntary
      disclosure provisions introduced in 2019 were yet to be adjudicated
      on. The ruling details the steps required for a taxpayer to make a
      voluntary disclosure to the tax body.


  • Construction contracts and performance bonds: (AC
    Yafeng v Registered Trustees of Living Word Assembly Church (Misc
    Application 1 of 2021)

    • The Commercial Court has delivered a sterling ruling on the
      duty of an issuer of a performance security (bond) and whether
      court may stay the honouring of such performance security. The
      decision clarifies that a performance security is usually an
      independent obligation of the issuer and a dispute between the
      parties to the underlying contract is not sufficient ground to
      prevent the issuer from honouring a demand made on the
      security.

    • This decision has already been followed in another Commercial
      Court decision (DFCU Bank v Polat Yol Yapi (Misc Application No.
      217 of 2022)).


  • Regulation of Financial Institutions: CBL (In
    receivership) v Sudhir Ruparelia & Anor (SCCA No. 7 of
    2020)

    • The Supreme Court delivered a ruling in a protracted insolvency
      dispute involving Crane Bank (In Receivership) and Sudhir
      Ruperalia. The court held that the receivership had ended after 12
      months by operation of law. The implication is that the management
      of the CBL reverted to the shareholder after 20 January 2018.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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