UGANDA Law and Practice Contributed by: Onyango Owor, Miriam Babirye Kaggwa and Namugera Joel Peter, Onyango & Company Advocates
equity stakes, governance rights and exit strategies. Legal counsel ensures compliance with the Compa- nies Act Chapter 106 and other applicable laws and regulations. Change of corporate form or migration Companies may change their corporate form from LLC to PLC, to attract public investment or facilitate M&A transactions. Such changes are made by appli- cation to the URSB. Migration to another jurisdiction is rare but possible upon shareholder approval and through a member’s voluntary winding-up in accord- ance with the Companies Act. 2.2 Liquidity Events Initial Public Offering (IPO) as a Liquidity Event IPO v Sale IPOs are less common than private sales in Uganda’s energy and infrastructure sector due to the limited size of the USE and high compliance costs. Private sales offer much faster liquidity and flexibility, making them the preferred exit strategy for venture capital-backed companies. On the other hand, IPOs should only be considered for larger firms seeking broader market exposure. Choice of listing Companies pursuing an IPO typically list on the USE, which offers a Growth Enterprise Market Seg- ment (GEM) for smaller firms. Dual listing on regional exchanges, such as the Nairobi Securities Exchange (NSE), is rare but possible for major projects seeking wider investment pools. For example, UMEME Lim- ited, which is Uganda’s former main electricity distri- bution company, is listed both on the USE and NSE. Impact of listing on future M&A transactions A USE listing enhances a company’s visibility and credibility, with the potential of attracting larger M&A partners. However, it imposes stricter disclosures and governance requirements, which may complicate future M&A negotiations due to shareholder scrutiny. Sale as a Liquidity Event Selling a privately held company is a common liquidity event in Uganda within the energy and infrastructure sector. Investors often exit through share sales to stra- tegic buyers, such as TotalEnergies’ acquisition of a
stake in Bujagali Energy Limited and the government’s acquisition of a stake in Roko Construction Limited. These transactions are always driven by the need for rapid capital recovery, market consolidation or even government bailout, as was the case with Roko Con- struction Limited. Transaction structure Sales are typically structured as share purchases or asset transfers. Share purchases are preferred for their simplicity, while asset sales are used when buy- ers seek specific project components, such as power plants or pipeline infrastructure. Form of consideration Cash is the dominant form of consideration in Ugan- da’s M&A transactions due to its simplicity and inves- tor preference for immediate liquidity. Stock-for-stock deals are rare but may occur in cross-border transac- tions involving regional or global players. Certain transaction terms Key terms include warranties, indemnities, and earn- out clauses to address project risks. Non-compete clauses are also common and intended to protect buyers from a seller’s re-entry into the market. Trans- actions often require ERA approval, particularly for energy projects. Spin-offs are uncommon in Uganda’s energy and infrastructure sector due to the market’s nascent stage in core operations. However, some companies separate renewable energy units to attract specialised investors, particularly in solar and hydropower. 3.2 Tax Consequences In Uganda, spin-offs can be structured as tax-free transactions at both the corporate and shareholder levels under Section 76 of the Income Tax Act Chap- ter 338, which provides roll-over relief, exempting the parent company from capital gains tax on asset transfers to a spun-off entity and allowing sharehold- ers to receive shares without recognising gains, with the cost base carried over. Key requirements for tax- 3. Spin-Offs 3.1 Trends: Spin-Offs
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