LAW DEVELOPMENT CENTRE

POST GRADUATE BAR COURSE 2023/2024

FIRST TERM, WEEK TEN
CORPORATE & COMMERCIAL PRACTICE
WEEK OF 4TH- 8TH DECEMBER, 2023 CORPORATE PRACTICE – MODULE 2

Introduction

After the incorporation of a company, there are several legal obligations that arise.
One of them is to raise the necessary capital/finances to run the business. The
following workshops focus on internal processes of raising capital, corporate
management, duties and powers of Directors and Company Secretary in the
circumstances, subscription for and allotment of shares, call on shares, rights of
subscribers, shareholders, and members. Additionally, the workshops shall dwell on
how a company may raise capital externally through borrowing and the perfection of
securities thereof. We shall also deal with some aspects of raising capital on the
Stock Exchange and Venture Capital.

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WORKSHOP 1

Aims:

The aims of this workshop are to:

a) Develop the ability to advise on corporate financing as provided

under the Companies Act, 2012.
b) Develop the ability to effect corporate financing.
c) Develop the ability to recognise ethical issues arising from
corporate financing.

Learning outcomes

By the end of this workshop, you should be able to;

1. Advise on the different processes and sources of corporate finance by a

private limited liability company.
2. Advise on the process of affecting corporate financing through issuance of
shares, shareholder loans, and borrowing from the banks.
3. Advise on the procedure of making calls on shares, pre-emption and forfeiture
of share.
4. Draft the relevant documents.
5. Identify any ethical issues disclosed above.

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Upon the incorporation of Josrich Trading company Ltd. The company started
operating business. The company has implemented various construction projects in
Kampala where it was contracted to by KCCA to upgrade various city suburb roads.

Immediately after incorporation of the Company, Richard Mubi paid 150,000,000/=

out of the Ug Shs. 300,000,000/= (Three Hundred Million) he promised to invest in
the company. Alice Kenyab and Jojo Kembabazi each paid 5,000,000/= out of the
25,000,000/= each promised to invest in the business.

The company adopted Table A as its Articles of Association. The initial capital of the
company was Ug. Shs.500,000,000/= divided into 1000 shares of 500,000/= each.
The company allotted shares as follows;
1. Richard Mubi 300 shares
2. Alice Kenyab 50 shares
3. Jojo Kembabazi 50 shares

Richard Mubi and Alice Kenyab are Directors of the company. You have recently
been appointed a secretary of the company.

In June 2023, the company won a tender with KCCA to upgrade the Busabala- Kazi
Road in Makindye Division. The tender is worth over Ug. Shs.15,000,000,000/=
(Uganda Shillings Fifteen Billion).

The company signed a contract with KCCA where it was agreed that the work should
commence by the end of February 2024.

The Directors of the company are worried about raising over Ug Shs
8,000,000,000/= (Uganda Shillings Eight Billion) needed to start the works on the
project.

Richard Mubi has approached Equity Bank to borrow on behalf of the company at
least Ug Shs. 5,000,000,000/= (Uganda Shillings Five Billion) using his personal land
comprised in Kibuga Block 20 plot 143 land at Lubigi in Rubaga Division where he
has constructed several residential apartments as security.

Alice Kenyab is willing to mobilize at least Ug Shs. 1,000,000,000/= from her big
brother Matthew Keinamura, a well-known tea grower in Kyenjojo District. This
money, if secured can be invested in the company business. Mathew is excited
about the tender. He wants a stake in the company provided he gets paid his interest
in the business immediately the company is fully paid by KCCA.

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Jojo Kembabazi has been saving with UAP Unit Trust. Her savings have
accumulated to Ug.Sh. 500,000,000/=. She is willing to withdraw the money and lend
it to the company at an interest rate of 10 percent per annum.

The Directors are worried about how to raise the other required monies since they
don’t have any other securities which could enable the company to secure more
credit from financial institutions.

The directors have approached you as the company secretary for legal guidance.

TASKS:
Task 1.
1. Advise the company how it can acquire money from Jojo Kembabazi
2. Advise the Company on how it raise money through a call on shares. Pay
special attention to the maximum call that can be made and the duration
between calls.
3. Advise on the process of forfeiture of shares in case Alice Kenyab does not
respond to the call. Ensure that you address rights of pre-emption in the
process.
4. Advise the company on how it can raise capital from forfeited shares in 3
above.
5. Draft the necessary documents above.
Task 2
1. Advise the company on how it can raise capital from unissued shares in
these circumstances?
a. Consider the option of issuing shares at a premium and the
circumstances under which this can be done.
b. What can premium on shares be used by a company?
2. Assume Richard Mubi wants to sell and transfer 10 of his shares to Bemuga
Katochi. Advise the company on the process?
3. Draft the necessary documents

Task 3:

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 1. Advise on the process of getting money from Matthew Keinamura who wants
to have some stake in the company as shown above.
2. What rights will he acquire because of the above transaction?
3. How can he be paid back and what funds are used for this purpose?

Task 4:
1. Advise the Board on the restrictions (if any), on its powers to borrow from
Equity Bank in the circumstances.
2. Draft the necessary documents that would authorize the borrowing from
Equity Bank in the circumstances.
3. Assume you have been hired by Equity Bank to carry out a corporate due
diligence in this matter, advise on what considerations the Bank will consider.
Please restrict your answers to the provisions of the Companies Act, 2012.
4. Advise the company on the process of perfecting securities in the event
Equity Bank decides to lend the required money to the company.
5. What is the effect of not perfecting securities?

Special Note: Your discussion should make specific references to the

Companies Act, 2012, the Memorandum & Articles of Association
of the Company, and where applicable table A of the Companies
Act, 2012.

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)

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 Group Presentations.
o Group 1 – 10 minutes
o Group 2 – 25 minutes
o Group 3 – 15 minutes
o Group 4 - 25 Minutes
o Wrap up – 5 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 endeavor to prepare the necessary document(s).

Statutes and Statutory Instruments

1. The Companies Act No. 1 of 2012 including Table A.

2. Companies Amendment Act 2022
3. The Electronic Transactions Act
4. The Electronic Signatures Act
.
5. The Companies (General) Regulations SI No. 7 of 2016

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WORKSHOP 2
Aim:
The Aims of this workshop are to:
(a) Advise on new forms of private external corporate finance such as venture
capital, private equity and mezzanine finance.
(b) Develop the ability to source capital through existing structures of
external/public corporate finance such as public capital markets.
(c) Advise on the roles played by the respective organs such as shareholders,
board, regulators, and the Uganda Securities Exchange in corporate finance
transactions/practice.
(d) Develop the ability to recognize ethical issues and responsibilities involved in
effecting external corporate finance transactions.

Learning outcomes
By the end of this workshop, you should be able to:
1. Advise on the various modes of external corporate financing.
2. Advise on the salient aspects of both private and public external corporate
financing transactions.
3. Draft the essential documents required by the respective role players in the
external corporate financing above.
4. Recognize and address the ethical issues arising.

FACTS
Imara Ventures (the company) is an existing Telecommunications company in
Uganda dealing in both voice and internet services. The Company shareholders
have approached your firm and are desirous of undertaking two major transactions.
Under the first transaction (Project Link), they are interested in raising funds to the
tune of United States Dollars Ten Million (USD 10,000,000) from a Mauritius Venture
Capital Fund, Otis Capital Partners for working capital. The anticipated close of this
financing round is 31st December 2023. Under the second transaction (Project
Mega), they are interested in “taking the company public” in order to comply with the

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licensing requirements of the Uganda Communications Commission by 31 st
December 2024.

TASKS

Task 1
1. Advise on the procedural steps of venture capital financing as a form of
external corporate finance in the above set of facts.
2. Advise on the pros and cons of venture capital and private equity as methods
of corporate finance.
3. Structure the salient aspects of Simple Agreements for Equity (SAFEs) and
Convertible Notes as financial instruments in venture capital transactions.
Task 2
1. Advise on the due diligence aspects you would undertake as Legal Counsel
advising a prospective financier in a venture capital investment transaction.
2. Assume the company has stabilized and is cash flow positive but still has
senior debt. However, the company wishes to expand further. Advise it on the
form of financing it can undertake.
3. Assuming the company wanted to issue corporate bonds instead of listing,
how different would your advice be?
Task 3
1. Prepare a legal opinion to the Board of Directors of Imara Ventures on the
regulatory requirements that the Uganda Securities Exchange (USE) will
expect before accepting to list the company on the securities exchange.
2. Assuming that Imara Ventures were a Kenyan company listed on the Nairobi
Securities Exchange but intending to cross-list in Uganda as well, would your
advice be different? Please confine your response to Ugandan law.
3. If during the process of advising Imara Ventures, you discover that some
Board members are in the process of floating another company to the public,
what would your advice be?

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 4. Assuming the venture debt by Otis Capital Partners involved syndicated
lending pooled by two lenders (a Venture Capital Fund and a Private Equity
Fund), how would you advise the syndicate lenders on protection of their
respective commercial interests?

Task 4
1. Draft the necessary documents Imara Ventures and Otis Capital Partners
would require to affect the financing transaction in the task above.
2. Draft the necessary documents Imara Ventures would need to submit to the
CMA for regulatory approval before undertaking the anticipated transaction.
3. Advise on the fees payable for each process.

Laws Applicable
The Companies Act, 2012 (as amended) and Regulations thereunder
The Registration of Documents Act
The Capital Markets Authority Act, Cap 84 (as amended)
The Capital Markets Authority (Licensing) (Amendment) Regulations, 2016
The Capital Markets (Conduct of Business) Regulations, 1996
The Capital Markets (Establishment of Stock Exchanges) Regulations, SI 84 - 3
The Capital Markets (Prospectus Requirements) (Amendment) Regulations, 2001
The Capital Markets (Takeovers and Mergers) Regulations (SI No. 55 of 2012)
The Capital Markets (Cross Border Introductions) Regulations, 2004
The Capital Markets (Fund Managers) Regulations, (SI No. 42 of 2004)
The Capital Markets Authority (Prospectus Requirements) (Amendment)
Regulations, 2008
The Capital Markets Authority (Prospectus Requirements) Regulations, SI 84-2
The Capital Markets (Licensing) (Amendment) Regulations, 2003
The Capital Markets (Licensing) Regulations, SI 84 - 1
The CMA (Advertising) Regulations 1996

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The Capital Markets (Book Building) Regulations, 2016
The Capital Markets Authority (Accounting And Financial Requirements)
Regulations, 2022
The Capital Markets Authority (Prescription of Securities Instrument) Regulations,
2022
The Capital Markets Corporate Bond Guidelines, 2003
The Capital Markets Conflict of Interest Guidelines, 2001
The Capital Markets Corporate Governance Guidelines, 2003
The Capital Markets Commercial Paper Guidelines, 2003
The USE Listing Rules, 2021
The USE Fees Charges and Penalties Rules of 2012

Cases
1. ALTX East Africa Ltd v Capital Markets Authority (MISCELLANEOUS CAUSE
NO. 426 OF 2019)
2. KCC Football Club Ltd v Capital Markets Authority (HCT-00-CC-CS 367 of
2007) [2009] UG CommC 32
3. Ernst & Young LLP v Capital Markets Authority & Another [2017] EKLR
4. Republic v Capital Markets Authority & Another Ex-Parte Jonathan Irungu
Ciano [2018] eKLR
5. Simba Properties Investment Co. Limited and Others v Vantage Mezzanine
Fund 11 Partnership and Others (Miscellaneous Application No. 414 of 202

6. Matthew Rukikaire Versus Incafex Limited S.C.C.A Civil Appeal No.03 Of

2015.
7. Olive Kigongo Versus Mosa Courts Apartment Ltd Company Cause No. 01 of
20101
8. Mawogola Farmers & Growers Ltd vs. Kayanja [1971] E.A. 272.

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Please look out for part of the holding in this case which is contrary to legal positions as enunciated in the
Rukikaire case above and therefore was decided per incurium

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9. Lutaaya vs. Gandesha [1986] HCB 46
10. Re Nakivubo Chemists (U) Ltd [1977] HCB 311(HC)
11. Foss v Harbottle (1843) 2 Hare 461
12. National Westminster or Bank Plc vs. IRC (1995) A.C111 at 126.
13. Gower and Davies, in Principles of Modern Company Law, 8 th edition at page
845
14. Israel Kabwa Versus Martin Banoba Musinga S.C.C.A 52 of 1995 (reported in
1996 Vol II Kalr 109
15. Re Bank of Credit and Commerce International SA (No. 8) [1998] AC 214 HL,
288
16. Re Bank of Credit and Commerce International SA (No. 8) [1998] AC 214 HL,
288
17. Barclays Bank Limited –vs_ WJ Simms & Son & Cooke (Southern) Ltd. [1980]
1 QBD 699
18. Multi Constructors Limited v Uganda Commercial Bank (SCCA No.25 Of
1994)
19. Pearl Motors Ltd v Bank of Baroda (U) Ltd SCCA No.15 of 2002
20. Gower, LCB Principles of Modern Company Law, 5 th Edn. Pg 379 –
Knightsbridge Estates Trust – v- Byrne [1940] AC 613 HL
21. Illingworth – v- Houldsworth [1904] AC 355 HL, 358
22. Siebe Gorman & Co. Ltd. –v- Barclays Bank Limited [1979]2 Lloyd’s Rep. 142
23. Fredrick J.K Zaabwe V Orient Bank Ltd and 5 Others-SCCA No. 04 of 2006 –
various points on powers of attorney and execution of documents.
24. Salomon Vs. A Salomon & Co Ltd [1897] AC 22. Corporate legal personality.
Apply to how and when to circumvent this when lending.

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WORKSHOP THREE

Imara Ventures (the company) is an existing Telecommunications company in

Uganda dealing in both voice and internet services. The Company wishes to go
Public and raise funds.

1. Assume that you are a Legal Officer at the Capital Markets Authority (CMA),
what essential steps would you expect Imara ventures to undertake before
granting regulatory approval to the intended transaction?
2. Advise on the essential elements that you would include in a prospectus of
Imara Ventures.
Task
Students will be divided into two groups, there will be a group of students
representing the CMA and the Uganda Securities Exchange on one side and a
second group representing Imara Venture Limited.

PREPARED BY CCP TEAM 2023

MR RICHARD MWEBEMBEZI HOS

MR EMMANUEL META ALORO AHOS

MR SILVER KAYONDO PA

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