OBLIGATIONS OF A COMPANY LISTED ON THE UGANDA SECURITIES EXCHANGE

 

Obligations of a company listed on the Uganda Securities exchange.

The obligations of a company listed on the Uganda securities exchange are governed by the Capital Markets Authority Act Cap 84 and Uganda Securities Exchange Listing Rules 2021.

A company listed on the Uganda securities Exchange is known as an issuer in accordance with Rule 2 of the Uganda Securities Exchange Listing Rules 2021. Under section 90A of the Capital Markets Authority Act Cap 84, an issuer is defined as a company or other body corporate or government that makes offering of securities.  A listed company is defined as a company which has entered into and is party to a listing undertaking with a stock exchange approved by the Authority under this Act or a stock exchange outside Uganda recognized and approved by the Authority in a country specified by the Authority in regulations under this Act.  The Capital Markets Authority is mandated under section 5 to create, maintain and regulate a system in which a market of securities can be issued and traded in an orderly, fair and efficient manner. To that effect, the Uganda Securities Exchange was established.

A company that is listed on the Uganda Securities Exchange has general obligations, obligations to make disclosure of periodic financial information and other obligations listed within the miscellaneous provisions of the Uganda Securities Exchange Listing Rules 2021 as well as the Capital Markets Authority Cap 84. These obligations are further elaborated on as follows;

1.    General obligations.

Section 90I of the Capital Markets Authority Act Cap 84 provides that where a material change occurs in the business of the issuer, or  in any other matter which would have the effect of rendering the prospectus or a statement required to be contained in the prospectus or any other matter concerning the issue to the public generally, untrue, incomplete, misleading or non-compliant with any law applicable or any listing rules to the issuer, the issuer shall promptly inform the Authority of the occurrence of the change and the Authority shall give directions as it considers appropriate in the circumstances including the revocation of the approval granted.

 

Section 90AD of the Capital Markets Authority Cap 84 provides that every issuer of securities that are the subject of a public offer or which are publicly held, in the case of a non listed issuer, shall keep the Authority and in the case of a listed issuer, the stock exchange, informed promptly of any information relating to the issuer and its subsidiaries if any, that—

(a)       is necessary to enable them and the public to appraise the financial position of the issuer and of its subsidiaries;

(b)       might reasonably be expected materially to affect market activity in securities of or otherwise affect its subsidiaries; or

(c)       might reasonably be expected materially to affect market activity in the price of its securities.

 

 

 

Rule 36(1) of the Uganda Securities Exchange Listing Rules of 2021 provides that an Issuer shall, as soon as possible but not later than 24 hours following the event or circumstance, release an announcement giving details of –

a. circumstances or events that have or are likely to have a material effect on the financial results, the financial position or cash flow of the Issuer, or information necessary to enable holders of the Issuer’s listed securities and the public to avoid the creation of a false market in its listed securities; and

b. New developments in its sphere of activity which are not public knowledge, and which may lead to material movements in the ruling price of its listed securities.

Rule 36(2) of the Uganda Securities Exchange Listing Rules of 2021, provides that the requirements of subrule (1) are in addition to any Material Information and the following specific requirements regarding notification –

a) any information concerning the Issuer or any of its subsidiaries necessary to avoid the establishment of a false market in the Issuer's securities or which would be likely to materially affect the price of its securities;

b) any intention to fix a books closing date and the reason therefore, stating the books closure date, which shall be at least 21 days after the date of notification to the Exchange, and the address of the share registry at which documents shall be accepted for registration;

c) any recommendation or declaration of a dividend (including bonuses, if any), the rate and amount per share, date of payment, and the date of books closure. Where there is a variation in an interim or final dividend for the corresponding period in the previous year, the directors shall state the reasons for the variation at the time of the recommendation or the declaration. In making the announcement, the Issuer shall specify whether the dividend is interim, special or final and the total dividend paid to that date;

d) any recommendation or decision that a dividend shall not be declared and the reasons for that recommendation or decision;

e) any general meeting at least twenty-one days before such meeting is held or such shorter notice period as is permitted under the Issuer's articles of association or other constitutive document or the Companies Act. All notices convening meetings shall specify the place, date and hour of the meeting. If the conventional meeting place is changed, full justification for the change shall be given. The place chosen shall be convenient to the general body of shareholders;

f) all special resolutions put to a general meeting of a listed company (as provided by the Issuer’s articles) and immediately after such meeting, whether or not the resolutions were carried;

g) any change of address of the registered office of a listed company or of any office at which the register of securities of a listed company is kept;

h) any change in the directors, secretary or auditors of the Issuer;

i) any proposed alteration of the memorandum and articles of association of a listed company;

j) any notice of change of substantial shareholdings or changes received by the Issuer and details thereof;

k) any application filed with a court to wind up the Issuer or any of its subsidiaries. Details of the suit and the probable outcome of the suit shall be confidentially submitted to the Exchange;

l) the appointment or imminent appointment of a receiver or liquidator of the Issuer or any of its subsidiaries;

m) any acquisition of shares of another company or any transaction resulting in such a company becoming a subsidiary or associated company;

n) any sale of shares in another company resulting in a company ceasing to be a subsidiary of the Issuer;

o) any substantial sale of assets involving 10 % or more of the value of net assets of the Issuer; and

p) any major change of business policy or operations.

Rule 36(3) of the Uganda Securities Exchange Listing Rules of 2021 provides that any information released to the public under subrule (1) shall be accurate in all aspects.

1.1.                Confidentiality

Rule 37 of the Uganda Securities Exchange Listing Rules of 2021 imposes a duty of confidentiality in respect of Information that is required to be announced in terms of rule 36 (1) and (2) until such information has been released to the Exchange and arrangements have been made for that information to be published. The only exceptions are where the information is given in strict confidence to advisers or to persons with whom the issuer is negotiating with a view to effect a transaction, disclosure required by law.

Rule 37(5) requires that whenever an Issuer becomes aware of a rumour or report, true or false, that contains information that is likely to have, or has had, an effect on the trading in the issuers securities or would be likely to have a bearing on investment decisions, the Issuer is required to publicly clarify the rumour reports as promptly as possible.

1.2.                Cautionary announcements.

Rule 38 of the Uganda Securities Exchange Listing Rules 2021 provides that an Issuer shall submit to the Exchange and publish a cautionary announcement as soon as possible after it is in possession of any material price sensitive information, if at any time the necessary degree of confidentiality of such information cannot be maintained, or if the Issuer suspects that confidentiality has or may have been breached.

Rule 38 (2) provides that an Issuer who has published a cautionary announcement shall provide updates on it in the required manner and within the time limits prescribed.

1.3.                Profit Warnings

Rule 38(3) provides that an Issuer shall submit to the Exchange and publish a profit warning as soon as it is in possession (but in any case, not later than 24 hours) of information indicating a decline in profit or loss for a financial period.

Profit warnings shall be issued

(i)            where an Issuer registered a profit in the previous reporting period but has registered a loss in the current reporting period

(ii)           (ii) where an Issuer registered a loss in the previous reporting period and registers a consecutive loss in the current reporting period

(iii)          (iii) where an Issuer has not registered a loss but registers a decline in profits by 25% or more compared to the same reporting period in the prior year.

 

2.    Disclosure of Periodic Financial Information

2.1.                Dividends and Interest.

Rule 41(1) of the Uganda Securities Exchange Listing Rules provides that the declaration of an intention to pay dividends or interest in respect of listed securities should be communicated to the Exchange immediately but in any event not later than 24 hours after the decision to declare a dividend is made. A copy of the announcement should be published and sent to shareholders.

 

Rule 41(2) provides that the announcement of the book closure date shall first be made to the Exchange at least 21 days prior to the last day to register and shall contain the following minimum information) the day the register shall be closed for purposes of payment; b) the date on which the dividend/interest shall be paid; and c) the cash amount that shall be paid for the dividend/interest.

 

Rule 41(3) provides that if an Issuer decides not to declare dividends or interest, this shall be announced to the Exchange immediately after the decision is taken.

a) At least 21 days notice shall be given to shareholders and the Exchange prior to the last day to register for the dividend or interest.

b) Payment of dividends and interest shall be effected within twenty one (21) days after the books closing date.

2.2. Interim and quarterly reports.

Rule 42(1) provides that Interim reports shall be published through a daily newspaper of nationwide circulation printed in the English language, as early as possible after the expiration of the first six months of a financial year, but not later than three months after that date. The newspaper announcement shall include information on the address at which a shareholder can obtain a copy of the report.

Rule 42(2) provides that where an Issuer has changed the end of its financial year by more than 3 months, an additional interim report shall be released, for the period from the beginning of the financial year so changed to the date of the end of the financial year before it was so changed.

Rule 42(3) provides that Subrule (2) does not apply to companies that are applying for listing.

2.3. Review by auditors.

Rule 44 provides for review by auditors. It states that un-audited interim reports shall be reviewed by the auditor of an Issuer, at the cost of the Issuer, if the Exchange, in its sole discretion, deems it necessary.

2.4. Annual Financial Statements.

Rule 45 provides that every Issuer shall, within four months after the end of each financial year and at least twenty-one days before the date of the annual general meeting, distribute to all shareholders and submit to the Exchange and publish

a) a notice of annual general meeting; and

b) the annual financial statements for the relevant financial year, which financial statements shall have been reported upon by the Issuer’s auditors.

 

3.    Miscellaneous Provisions.

3.1.                Directors

Rule 53 (1) provides that An Issuer shall notify the Exchange of any change to its board of directors including

a) the appointment of a new director;

b) the resignation, removal or retirement of a director; and

c) changes to any important functions or executive responsibilities of a director; without delay and no later than by the end of the business day following the decision or receipt of notice about the change by the Issuer. No such notification is required where a director retires and is re-appointed at a shareholders’ general meeting.

Rule 53(2) provides that the notification shall state the effective date of the change if it is not with immediate effect. If the effective date is not yet known or has not yet been determined, the notification should state this fact, and the Issuer shall notify the Exchange when the effective date has been determined.