In the second part of the business associations series, we will discuss partnerships, business names and companies.
Small businesses and partnerships:
Smaller businesses run informally could be registered as a business name. For example, if one is operating a bakery or a supermarket alone, or even in conjunction with other people, they can register that as a business name. You don’t absolutely need to register a company. To run a company, you have to adhere to stricter rules which many people don’t have a clear understanding about.
However, there are some instances in which registering a company is preferred; for example, if you intend to apply for a tender, entities usually require that the bidder be a company. We discuss companies below.
If you have registered a business name, where need arises, you can later on convert it into a company by following certain prescribed procedures.
If there are more persons than one operating this type of business together, the law deems them partners and the laws governing partnerships may apply.
See: https://ulii.org/system/files/legislation/act/2010/2/partnership_act_2010_pdf_10654.pdf
Registering a business name does not confer legal personality but is only meant to identify the owner/owners of the business and the services it provides.
For a partnership to be registered as such, it must not have more than 20 people.
The agency responsible for registering business names and partnerships in Uganda is the Uganda Registration Services Bureau. Their headquarters are located at Georgian House, George Street in Kampala, although they have branches in different locations in Uganda. Visit their website at www.ursb.go.ug for further details about their location and the process of registration of your business. Otherwise, contact your lawyer who has the expertise to handle the process for you expeditiously.
Companies:
Companies are also a type of business association in which people especially buy and own shares or other stake in the business.
There are two types of companies: public companies and private companies.
Public companies, as the name suggests, are companies which offer their shares for sale to the public through the prescribed process of an Initial Public Offering. A recent example you might most easily remember is when UMEME called on the public to buy its shares.
Private companies, on the other hand, are not permitted by law to offer their shares for sale to the public, but only to specific people who are interested in investing in the business of the company.
This discussion will focus on private companies, for the time being.
The most common types of private companies in Uganda are:
– Private companies limited by shares: these are profit-making businesses in which shares are bought and owned by certain people known as shareholders, and whose profits are shared between the shareholders as dividends, according to the number and value of shares they hold.
The shareholders of a company can either be individuals or companies. As discussed above, a company is a single legal entity and can therefore buy and own shares in its own names. A company which holds controlling shares in another company is known as a holding company and the company in which these shares are held is known as a subsidiary company.
– Private companies limited by guarantee: these are companies in which the owners undertake only to contribute to the assets of the company or to be liable to pay for the debts of the company upon its dissolution (when the company winds up its operations). The company does not offer shares for sale. These are usually registered as churches or Non-Governmental Organisations (not-for-profit organisations).
The maximum number of members a private company can have is 100 members. The affairs of the company are run by directors appointed and agreed on by the members of the company. The members of a company have a right to make decisions on how the company is run through voting on motions and the decisions made are written down as resolutions. Upon registration, a company is given a Certificate of Incorporation which is conclusive evidence of the existence of the company.
A foreign company incorporated in another country, which would like to conduct business in Uganda, must be registered in Uganda. The company then obtains a Certificate of Registration which is a requirement before the company is issued with a licence to operate in Uganda.
Companies are registered by the Uganda Registration Services Bureau. Visit their website above for further details the process of registration of your company, or seek the services of your lawyer to have your company properly registered.
Do read again; this series will continue next week.
Kokunda Patience- Associate Partner, Lawgic Advocates