UGANDA Law and Practice Contributed by: Arnold Lule Sekiwano, Ritah Nakalema, Evelyn Maria Nakigudde and Collette Melvina Awano, Engoru, Mutebi Advocates
ited from rendering advice on transactions where they have a material interest or where, on account of a past relationship, a conflict of interest has arisen. Fur - thermore, advisers are obligated to have measures in place to ensure that their employees and/or agents do not solicit inducements that are likely to conflict with any duties owed to their clients. Companies are generally expected to adopt a policy on related-party transactions and disclose all such transactions in their financial statements. The Takeovers and Mergers Regulations make no dis - tinction between friendly and hostile takeovers. Hos - tile tender offers are not common in Uganda. 9.2 Directors’ Use of Defensive Measures The use of defence by directors is not regulated under Ugandan law. However, directors may adopt com - monly used defensive strategies from other jurisdic - tions, provided they act within the limits of their fiduci - ary duties and in the best interests of the company. Any defensive action taken must be justifiable and aligned with both their statutory duty and common law duties to promote the success of the company. 9.3 Common Defensive Measures There are no examples of a transaction in Uganda where common defensive measures have been imple - mented. 9.4 Directors’ Duties 9. Defensive Measures 9.1 Hostile Tender Offers The duties set out in the Companies Act remain in effect throughout a director’s tenure. However, in the context of a takeover bid, the most significant obliga - tions include the following: • Acting within their authority: Directors must exer - cise their powers strictly within the limits set by the company’s constitution and for their intended purpose. Even if directors believe they are acting in the company’s best interests, using these powers for any other reason is not permitted.
• Avoiding conflicts of interest: Directors must take care to avoid situations where they have, or could have, a direct or indirect interest that conflicts, or may conflict, with the company’s interests. • Promoting the company’s success: Directors have a duty to act in a manner that furthers the com - pany’s growth and long-term value. While the meaning of “success” may vary depending on the circumstances, it is ultimately determined by the directors’ good faith judgement. 9.5 Directors’ Ability to “Just Say No” Directors cannot “just say no” to a business combina - tion, as their fiduciary duty requires them to act in the best interests of the company. Their decisions must be well reasoned and consider not only the company’s success but also the interests of its employees, share - holders and broader stakeholders. This assessment is based on an objective test rather than a subjective one, ensuring that directors act with proper justifica - tion rather than personal discretion. Disputes in M&A transactions in Uganda are rarely resolved through litigation. Definitive agreements for private M&A deals typically include clauses specifying arbitration as the preferred dispute resolution mecha - nism. Additionally, in cross-border M&A transactions, parties frequently opt for a foreign jurisdiction as the governing law, with either English law or New York law being most commonly chosen. 10.2 Stage of Deal Please refer to 10.1 Frequency of Litigation . 10.3 “Broken-Deal” Disputes Please refer to 10.1 Frequency of Litigation . 10. Litigation 10.1 Frequency of Litigation
11. Activism 11.1 Shareholder Activism
Shareholder activism is a growing trend in Uganda, allowing investors to actively engage in shaping the policies and practices of the companies they invest in.
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