UGANDA Law and Practice Contributed by: Onyango Owor, Miriam Babirye Kaggwa and Namugera Joel Peter, Onyango & Company Advocates
8.4 Disclosure of Transaction Documents M&A transactions within the energy and infrastructure sector require disclosure of transaction or transaction- related documents with different public bodies. For example, takeover offers must be submitted to the CMA, to the ERA (for energy companies), and to the Ministry of Trade, Industry and Cooperatives (for anti- trust assessments). Companies are also required to register their agreements with the company registry (URSB), which makes them publicly available on the companies’ file upon payment of search fees. Due to public access, parties may choose to include confi- dentiality clauses within their transaction agreements. 9. Duties of Directors 9.1 Principal Directors’ Duties In Uganda, the board of directors has the following duties during a business combination: • a duty to ensure compliance – it is the duty of the directors to ensure the company complies with all the applicable laws, the company’s articles of association as well as the company resolutions; • a duty to avoid a conflict of interest – if any director has a conflict of interest within a business combi- nation, they are expected to declare this conflict and recuse themselves from any involvement; and • a duty to act in the best interest of the company – decisions made during a business combination must be in the best interest of the welfare of the company, and not in the interest of the directors. While they are required to act in the best interest of the company (which also means acting in the best interest of the shareholders and beneficial owners), the directors are expected to take into consideration the interests of other stakeholders (eg, the employees, creditors, etc). 9.2 Special or Ad Hoc Committees It is common for the board of directors in Uganda to establish special or ad hoc committees during busi- ness combinations. Such committees assist with han- dling specific tasks in relation to the business com- bination and report to the full board for necessary approvals. This allows the board to remain focused on strategic oversight while the special committees
ensure partiality in evaluating offers and negotiating terms. These committees are very helpful, even where some directors have a conflict of interest. 9.3 Role of the Board In Uganda, the board of directors plays a key role in M&A transactions through negotiating the deals, overseeing due diligence and ensuring the compa- nies’ long-term goals are considered when choosing to accept a deal. Shareholder litigation is not common in Uganda but can occur if the shareholders believe the board has breached its duties, such as by prioritising personal benefit rather than acting in the company’s best inter- est. Shareholder litigation can be combatted by: • ensuring any potential conflicts of interest among directors are addressed; • keeping the communication channel with the shareholders open and transparent throughout the transaction; • ensuring a fair valuation of the offer price to avoid undervaluation claims; and • conducting proper due diligence of the bidder with emphasis on liabilities and financial health. To minimise shareholder risks, buyers should: • ensure they conduct proper due diligence with emphasis on the liabilities and financial standing of the target company; and • ensure transparency when communicating with the board. 9.4 Independent Outside Advice In Uganda, directors are required to appoint a CMA- approved independent adviser (investment adviser/ broker/dealer) who provides an opinion on the takeo- ver offer which is shared with the CMA and the share- holders. The directors may also seek further outside advice, including: • legal advice to ensure compliance with the law, conducting due diligence, drafting and reviewing transaction documents; and • tax advice to understand the transaction’s tax implications.
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