REGISTRATION OF FOREIGN COMPANIES

SHOULD A FOREIGN COMPANY INTENDING TO CARRY ON BUSINESS IN UGANDA REGISTER UNDER THE LAWS OF UGANDA?

As the Ugandan economy is growing there are a number of foreign companies that are steadily increasing their investment portfolio in Uganda, the million-dollar question then is whether or not the foreign companies are required by law to register in Uganda before transacting business in Uganda or not.

The law governing registration of foreign companies is set out under sections 251 to 260 of the Companies Act, 2012.

A foreign company is one that is incorporated outside Uganda [section 251) and is required to register with the registrar of companies within 30 days of establishing a place of business in Uganda [section 252).

If a foreign company fails to adhere to the requirements interalia above it commits an offence and is liable to a fine  under section 260 of the Companies Act of UGX.20,000,000; or UGX.100,000 for each day on which the offence continues.

Obligation of Registration

It is important to note however that a foreign company is only required to register if and after it establishes a place of business in Uganda.

This is well illustrated by the case of Krone Uganda Ltd v Kerilee Investments Ltd (2021) UGCommC 16. The judge in this case states that:

"Under the law, once a company is incorporated, it obtains legal personality as against the whole world. The legal personality is not diminished by legal boundaries. Like natural citizenship, it is only restricted to what it can do outside its geographical boundaries." -

Therefore, a foreign company can carry on business in Uganda without registering provided that company does not establish a place of business in Uganda. The only shortfall is that without registration, the activities of the company will be limited in some aspects.

Conclusion

The question of whether or not the foreign company will be required to register depends on the facts.

If it intends to establish a place of business in Uganda, then it will be   obligated to register with the registrar of companies. Upon registration, the company will be governed by the laws governing companies in Uganda (with necessary modifications), and the company will be bound to adhere to them.

On the other hand, if you wish to transact without establishing a place of business or if it?s a one-off transaction it is not necessary for the company to be registered as the company already has legal status by virtue of its incorporation in its country of Origin.

Carolynn Kintu Bainomugisha.

Managing Partner Muwema & co. Advocates