An Analysis On the Protection of the Minority Shareholders' Rights in Uganda

SAMORA MACHEL 53 PAGES (14811 WORDS) Law Dissertation
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TABLE OF CONTENTS

DECLARATION ................................................................................................................................................. i

APPROVAL ........................................................................................................................................................ ii

DEDICATION .................................................................................................................................................... iii

ACKNOWLEDGEMENT ................................................................................................................................... iv

TABLE OF STATUTES ...................................................................................................................................... v

ABSTRACT ........................................................................................................................................................ ix

CHAPTER ONE ................................................................................................................................................ 1

INTRODUCTION ............................................................................................................................................. 1

1. 0 Introduction ................................................................................................................................................... 1

1.1 Background to the study ................................................................................................................................ 1

1.2 Statement of the Problem ............................................................................................................................... 4

1.30bjectives ...................................................................................................................................................... 5

1.3.1 Specific objectives ...................................................................................................................................... 5

1.4 Research Questions ........................................................................................................................................ 5

1.5 Hypothesis ..................................................................................................................................................... 5

1. 6 Scope of the study ......................................................................................................................................... 5

1.7 Significance of the study ................................................................................................................................ 6

1. 8 Literature Review .......................................................................................................................................... 6

1.9.Research Methodology .................................................................................................................................. 9

1.10 Synopsis ...................................................................................................................................................... 9

CHAPTER TW0 .............................................................................................................................................. 11

LEGAL FRAMEWORK ON THE PROTECTION OF MINORITY SHAREHOLDERS ........................... ll

2.1 Introduction .................................................................................................................................................. ll

2.2 Minority shareholders protection imder the Companies Act of2012 .............................................................. 11

2.3 Importance of minority shareholder protection .............................................................................................. 12

2.3 .1 Access to information concerning the affairs of the company especially the financial affairs of the

company ............................................................................................................................................................. 13

2.3.2 Dividend policy ......................................................................................................................................... 13

2.3.3 Exit mechanisms ........................................................................................................................................ 13

2.4 Essential of the minority claim; ..................................................................................................................... 13

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2.5 Enforcement of minority shareholders' rights ................................................................................................ 14

2.5.1 Introduction ............................................................................................................................................... 14

2.5.2 The Requirement for special resolutions ..................................................................................................... 14

2.5.3 Requirements for court to sanction some matters; ....................................................................................... 15

2.5.4 Request for extra-ordinmy General meeting ............................................................................................... 15

2.5 .5 Petition to registrar of companies and courts for redress; ............................................................................ 15

2.5 .6 Altemative remedy to winding up- protection of minority shareholder from oppression conduct. .............. 16

2.5.7 Shareholder huy out ..................................................................... :·····················-······························· ......... 17

2.6 Protection mechanism under common law .................................................................................................... 18

2.6.1 Introduction ............................................................................................................................................... 18

2. 7 Conclusion ................................................................................................................................................... 20

CHAPTER THREE .......................................................................................................................................... 21

RIGHTS AND INFRINGEMENTS ON THE MINORITY SHAREHOLDERS RIGHTS IN

UGANDA .......................................................................................................................................................... 21

3.1 Introduction .................................................................................................................................................. 21

3.2 Rights of the minority shareholders ............................................................................................................... 22

3 .2.1 Rights to vote at mmual shareholders meeting ............................................................................................ 22

3.2.1.1 Introduction ............................................................................................................................................ 22

3.2.2 The legal rights ofthe minority shareholders .............................................................................................. 23

3.2.3 Shareholder representation on the board ..................................................................................................... 24

3.2.4 Dividend Policy ......................................................................................................................................... 24

3.2.5 Right to vote on major corporate events ..................................................................................................... 24

3.2.6 Fiduciary duties owed by majority shareholders towards minority shareholders .......................................... 24

3.2.6.1 Duty to issue of certificates ..................................................................................................................... 24

3.2.6.2 Minority discount .................................................................................................................................... 25

3.2.7 Benefits from shareholdings as the right of the shareholders or minority shareholders ................................ 26

3.3 The unfairly prejudicial corducts on the minority shareholders ..................................................................... 26

2.3.1 Exclusion from management ...................................................................................................................... 26

3.3 .2 Diversion of business to another company to which the majority shareholders have interest ....................... 27

3.3.3 Abuse of power m1d breaches of Articles of Association ............................................................................ 27

3.3.4 Repeated failure to hold Ann\ml General Meeting ...................................................................................... 28

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3.3.5 Delaying accounts and depriving members of the rights to know the state of the Company's Affairs .......... 29

3.4 Conclusion; .................................................................................................................................................. 29

CHAPTER FOUR ............................................................................................................................................ 30

PROTECTION MECHANISM AND APPROPRIATE REMEDIES TO THE MINORITY

SHAREHOLDER ............................................................................................................................................. 30

4.1 Introduction; ................................................................................................................................................. 30

4.2 Capital markets and securities laws ............................................................................................................... 30

4.2.1 The capitalmarkets; ................................................................................................................................... 30

4.2.2 The Uganda Securities Exchange (USE) Listing Rules; .............................................................................. 31

4.2.2.1 Transferability of securities ..................................................................................................................... 31

4.2.2.2 Continuous Disclosure Obligation of the USE; ........................................................................................ 31

4.3 The Capital Market Corporate Governance Guidelines of2003; .................................................................... 31

4.3.1 The Board of Directors; ............................................................................................................................. 32

4.3.2 Rights ofshareholders; ............................................................................................................................... 32

4.3.3 The conduct of the general meeting; .......................................................................................................... .32

4.4 Use of Altemative Investment Vehicle; ......................................................................................................... 33

4.5 Minority petition for a just and equitable winding up; ................................................................................... 33

4.6 Relief available; ............................................................................................................................................ 35

4.6.1 Specific damages: ...................................................................................................................................... 35

4.6.2General damages; ....................................................................................................................................... 36

CHAPTER FIVE .............................................................................................................................................. 37

CONCLUSIONS AND RECOMMENDATIONS ........................................................................................... 37

5.0 Introduction .................................................................................................................................................. 37

5.1 Conclusion ................................................................................................................................................... 37

5.2 Recommendations ........................................................................................................................................ 39

5.3 CONCLUSION ............................................................................................................................................ 40

REFERENCES ............................ , ..................................................................................................................... 42

ABSTRACT The study aimed at examining the extent to which minority shareholders are protected by the Uganda's legal framework in publicly held companies. The objectives of the study were; to examine the legal framework for protection of minority shareholders rights in Uganda, to examine the rights and infringements on the minority shareholders rights in Uganda, to identify the remedies for the minority shareholders in case of infringement of their rights. The researcher used qualitative research that used desktop review of primary and secondary data on the legal frameworks for minority shareholder protection. Primary sources will include the Constitution, legislation, company's Annual Reports, decided cases relevant to the study. Secondary sources of information used include textbooks, relevant newspaper articles, Journal Articles, and on-line sources. During the field studies, the researcher applied the questionnaire approach to the main directors and some shareholders which involved interviewing them and getting reliable primary information on the subject matter of the study. The purpose for visiting or going to the field was to gather the primary and reliable source of information, to find out the problems or prejudices that are faced by the minority shareholders. The legislators who enacted the Companies Act of 2012 which establishes the division of the shares among the shareholders in the company had in !llind that people of shareholder in that area of study and Ugandans as a whole have been suffering with cost involved in institution of case in the formal court, transp01t expenses, legal professional fees expenses due to the high level of poverty and the high court of the proceedings in court. Minority shareb.olders who may be the majority company members you find they cannot find or afford the legal representation in the formal courts. Therefore, it is incumbent upon the directors and the majority shareholders to abide the Articles of Associations and the memorandum of associations which govern the company. They should have the inner courts or proceedings or tribunal to control the evil of the violation of other members' rights so that justice can be seen done in the company and among the shareholders and other company members.

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APA

MACHEL, S (2022). An Analysis On the Protection of the Minority Shareholders' Rights in Uganda. Afribary. Retrieved from https://afribary.com/works/an-analysis-on-the-protection-of-the-minority-shareholders-rights-in-uganda

MLA 8th

MACHEL, SAMORA "An Analysis On the Protection of the Minority Shareholders' Rights in Uganda" Afribary. Afribary, 19 Jul. 2022, https://afribary.com/works/an-analysis-on-the-protection-of-the-minority-shareholders-rights-in-uganda. Accessed 09 Aug. 2022.

MLA7

MACHEL, SAMORA . "An Analysis On the Protection of the Minority Shareholders' Rights in Uganda". Afribary, Afribary, 19 Jul. 2022. Web. 09 Aug. 2022. < https://afribary.com/works/an-analysis-on-the-protection-of-the-minority-shareholders-rights-in-uganda >.

Chicago

MACHEL, SAMORA . "An Analysis On the Protection of the Minority Shareholders' Rights in Uganda" Afribary (2022). Accessed August 09, 2022. https://afribary.com/works/an-analysis-on-the-protection-of-the-minority-shareholders-rights-in-uganda