UGANDA Law and Practice Contributed by: Onyango Owor, Miriam Babirye Kaggwa and Namugera Joel Peter, Onyango & Company Advocates
• where a person holds 50% or more of the voting rights of a listed company and acquires additional voting rights in the listed company; • where a person acquires a company that holds effective control in the listed company, or effec- tive control together with the voting rights already held by an associated person or related company, resulting in the acquisition of effective control; or • where a person acquires any shareholding of 20% or more in a subsidiary of a listed company that has contributed 50% or more to the average turno- ver in the last three financial years of the listed company preceding the acquisition. Acquisitions of public companies in Uganda are pri- marily shaped as share purchases or tender offers. Share purchases involve acquisition through direct negotiations with shareholders or open market pur- chases, and this structure is favoured for its simplicity and speed. Tender offers, on the other hand, involve a public offer to all shareholders to purchase shares at a specified price, subject to CMA approval. Regulation 9 ensures tender offers meet transparency and fair- ness requirements, making them suitable for acquir- ing broad shareholder acceptance to achieve effective control. Availability of Mergers and Other Structures 4.3 Transaction Structures Typical Transaction Structures Mergers are available, legally permitted in Uganda and regulated under the Companies Act Chapter 106, the Competition Act Chapter 66 and its regulations, as well as under the Capital Markets (Takeovers and Mergers) Regulations 2012. Despite their availability, mergers are rarely used for the acquisition of public companies in Uganda’s energy and infrastructure sector for several reasons, including the limited market size since few public com- panies are players in these sectors, and the regulatory complexity involved in merger transactions and sector dynamics. Asset purchases, where specific infrastruc- ture assets (eg, a power plant) are acquired, are less common for public companies due to the complexity of separating the assets of a listed entity’s operations. Schemes of arrangement, permitted under Section 234 of the Companies Act, allow court-sanctioned
restructuring or acquisitions but are rarely used due to judicial oversight and shareholder approval require- ments. These alternative structures are less prevalent in Uganda’s public company acquisitions due to the preference for simpler, control-focused transactions like share purchases, which align with the regulatory framework and market dynamics. 4.4 Consideration and Minimum Price Cash v Stock-for-Stock Transactions Public company acquisitions in Uganda’s energy and infrastructure sector are predominantly cash transac- tions rather than stock-for-stock deals. The limited size of the USE, with few listed companies in these sectors, and the preference for immediate liquidity among shareholders and companies drive the use of cash in acquisitions. While permissible, stock-for- stock transactions remain rare. Cash in Mergers v Takeover Offers Cash is both permissible and commonly used in merg- er transactions and takeover offers within Uganda’s energy and infrastructure sector. Under the Capital Markets (Takeover and Mergers) Regulations (Regula- tion 25), cash is an acceptable form of consideration for both takeover offers and mergers. Minimum Price Requirements There is no prescribed statutory minimum price requirement for takeover offers in public company acquisitions. However, on submitting the offer, the consideration must be indicated in the offer docu- ment, which is reviewed by the CMA to ascertain fair- ness to the shareholders. Use of Contingent Value Rights and Other Mechanisms Contingent value rights (CVRs) are not commonly used in Uganda’s energy and infrastructure M&A market to bridge valuation gaps in transactions with high uncertainty. The sector’s preference for cash transactions minimises the need for complex finan- cial instruments like CVRs, which are more prevalent in markets with advanced financial systems. Instead, parties often use earn-out clauses or deferred pay- ment structures in transaction agreements to address valuation uncertainties, particularly in energy projects with long-term revenue projections such as oil and
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