ABM Chambers, House 42 | 54 Kanjokya


The Art of Sharing

If you have binged watched YouTube lately, you have probably seen several Ads featuring the lovely Kansiime Anne promoting shares on Chipper cash. Ideally, the Ad states that chipper cash allows its customers to enjoy the pleasure of sending money and broadens its services to international stock markets where a customer can become a shareholder in companies like Facebook. A few months ago as well, MTN announced that it was opening the company to the public, allowing its customers to invest in shares. The term shareholding is not a new one on Kampala streets. A shareholder is a person, company, or organization that holds stock(s) in a given company, and while this definition may be easy to understand, the bigger question would be at what point does one become a shareholder? 

The customer is number one, the employee is number two and the shareholder is number three. If the customer is happy, the business is happy, and the shareholders are happy.

Jack Ma

In Matthew Rukikaire v Incafex Limited, a dispute arose between the two parties. The subject in question was whether the Applicant was the holder of 450 ordinary shares in the Respondent Company. The Respondent company refused to recognize the applicant’s claim to those shares and as a result, the Applicant filed a case with the High Court. Matthew Rukikaire petitioned the High Court, alleging that the affairs of Incafex Limited (the “Company”) were being conducted in a manner oppressive to him as a member of the company. He claimed that he had been excluded from meetings and the company had refused to convene any meetings at his request.

The company refined this stating that Matthew was not a member of the company as he had not paid for the shares allotted to him and he, therefore, had no standing at company meetings or to file the petition. Matthew had no proof of payment for the shares he claimed to own nor did he have a share certificate. In addition to this, his name was not entered into the members’ register. As proof of his membership in the company, Matthew submitted annual returns form with his name included, a return of allotment form, and a memorandum of understanding naming him as a signatory to the company’s bank accounts. He argued that non-payment for the allotted shares did not bar his membership in the company. The High Court decided in his favour.

Dissatisfied, Incafex Limited appealed to the Court of Appeal which overturned the High Court’s decision, holding that Matthew was not a member of the company as he had failed to furnish proof of his subscription to the allotted shares. The court also stated that his lack of membership in the company deprived him of any legal basis to sue the company to enforce his rights as a member and barred him from claiming oppression. Matthew did not rest and continued to appeal his case to the Supreme court where the precious decision was overturned and the High Court’s decision reinstated. The Supreme Court agreed that Matthew was a member of the company and that he was oppressed. Here are two reasons why Matthew was still considered a shareholder according to the case;

1. Under the Companies Act, 2012, a member is either a subscriber to the memorandum of a company and on its registration entered into its register of members, or upon agreement to become a member of a company and entry into the register of members. Matthew attained his membership in the company through an allotment of shares. Membership isn’t proved exclusively by the presence of an individual’s name on the register but rather by the steps taken between a shareholder and the company; for example, possession of a share certificate and appearance of the name on company returns which Matthew possessed.

2. One would think that because Matthew had not paid off his shares, then that would disqualify him as a shareholder. The obligation of a shareholder of a company limited by shares to pay for the shares arises either when the company calls upon the shareholder to make payment for the unpaid shares during its operation or when the company is being wound-up. Therefore, the lack of evidence that Matthew had paid for the shares did not affect his membership in any way.

Given this scenario, I believe Matthew got off on a technicality. Even still, one needs to know why Matthew was head bent on claiming his shares. Below are the rights awarded to a shareholder in Uganda according to the Companies Act;

i) The right to vote

He may use his right to vote once a year at the Annual General Meeting, at which all owners of the company are invited. During the Annual General Meeting, the investor first has a right to information. 

ii) A right to dividends

The most important reason people buy shares is to increase their income. Make your money work for you. A shareholder is entitled to an appropriate share in the business success of the company. This participation is usually effected through a quarterly or annual profit distribution, this is the so-called dividend. 

​iii) To proceed against the company by way of civil or criminal proceedings

iv) To apply for the winding up of the company

v) To requisite an extraordinary general meeting

vi) To demand a poll on any resolution

To that, I say, Happy sharing.