What are the legal requirements and costs for operating a foreign branch in Uganda by setting up a representative office in Uganda as compared to incorporating a local company in Uganda?
A. Foreign branch or representative office
3.1. To set up a representative office in Uganda, The Company will have to be registered in Uganda as a foreign Company.
3.2. In the recent decision of the High Court of Uganda in Krone Uganda Limited versus Kerilee Investments Limited Miscellaneous Application No. 306 of 2019 arising from HCCS NO. 365 OF 2015, court held that in order to establish a place of business in Uganda, a foreign company must be registered in Uganda pursuant to sections 251, 252 and 253 of the Companies Act No. 1 of 2012.
3.3. Section 251 provides that sections 252 shall apply to all foreign companies, being companies incorporated outside Uganda which, establish a place of business in Uganda and companies incorporated outside Uganda which have, established a place of business in Uganda and continue to have a place of business in Uganda.
3.4. Section 252 of the Act states that a foreign company which establishes a place of business within Uganda shall, within 30 days after the establishment of the place of business, deliver to the registrar;
(a) Certified copy of the charter, statutes or memorandum and articles of association of the company, where not in English a certified translation. The Certification has to be done by the Registrar of Companies in Kenya by stamping the documents with a certified true copy stamp.
(b) Certified/Notarized certificate of Incorporation. This has to be certified by the Registrar of Companies in Kenya.
(c) a list of directors and secretary of the company; form 24. Copies of passports for directors/secretary who are not Ugandan citizens and National Identity Cards for directors/secretary who are Uganda citizens should be availed. In addition to that, their telephone contacts and email addresses are required as well.
(d) statement of all subsisting charges, the kind set out in section 105(2) such as debentures or charge over immovable property; form 13.
(e) the names and postal addresses of one or more persons resident in Uganda authorized to accept on behalf of the company service of process; form 25.
(f) the full address of the registered office of the company; form 26.
(g) Notice of beneficial ownership, form 1.
3.5. Section 253 provides that upon registration of the above documents, the registrar issues a certificate of registration as a foreign company under the Companies Act.
(i) Registration of certified copy of memorandum or equivalent – USD 300 (United States Dollars Three Hundred).
(ii) 4 Company forms as detailed in 3.4 above with the exception of certified copy of memorandum – each at USD 65 which totals to up to USD 260 (United States Dollars Two Hundred Sixty).
3.7. Other associated costs and expenses for setting up a representative office in Uganda are as follows;
(iii) Opening Bank Account – This depends on the bank rates for corporate banking but usually around USD 50 (United States Dollars Fifty) for a UGX account and USD 100 (United States Dollars One Hundred) for a USD account.
There must be a certified board resolution authorizing the company to open up a bank account. Registration fees for a board resolution is approximately USD 30 (United States dollars Thirty).
(iv) Trading License – approximately USD 110 (United States Dollars One Hundred Ten). This requirement is waived once the branch obtains a license from any other regulatory authority, in this case the Capital Markets Authority.
(v) Tax Registration to obtain Tax Identification Number – USD 100 (United states Dollars One Hundred).
(vi) Processing work Permit – fees depend on nationality of expatriate and duration of stay in Uganda.
B. Incorporating a local company in Uganda.
3.8. Search of the name at the company registry. The first step is to carry out a name check on the OBRS system to ascertain of the company name can be reserved.
3.9. Reserve the name to be used; This is done by filling a name reservation form. Section 36 of the Companies Act provides that the registrar may, on written application reserve a name pending registration of company. Reservation shall remain in force for 30 days or such period not exceeding 60 days as the registrar may allow.
3.10. Filing company registration form contained in the second schedule; Section 18 – the Company shall be registered by filling in the particulars contained in the registration form in the second schedule to this Act and if satisfied that the provisions of the Act have been complied with, shall register the company.
3.11. Section 19(3) of the Act states that on registration of the company, the registrar shall issue a certificate of incorporation signed by him or her that the company is incorporated. Rule 6 of the Companies Regulations, 2023 states that the certificate of incorporation shall be in Form 1 in the schedule.
3.12. Filing the memorandum and articles of association (if any); Regulation 5 of the Company Regulations, 2023 states that the application for registration is accompanied with the memorandum and articles of association.
3.13. The following forms signed by atleast two directors or one director and the company secretary must be filed on the Online Business Registration Services (OBRS) portal during the process of registering a company (Company returns). These include;
(i) Notice of situation/place; Form 18.
(ii) Particulars of directors and secretaries; Form 20. Copies of passports for directors/secretary who are not Ugandan citizens and National Identity Cards for directors/secretary who are Uganda citizens should be availed. In addition to that, their telephone contacts and email addresses are required as well.
(iii) Return of allotment; Company form 10.
(iv) Beneficial ownership form.
3.14. The costs involved in incorporation of a local private company limited by shares are in accordance with the Company (Fees) (No.2) Regulations 2023 and they are as follows;
(v) Name reservation - UGX 30,000/= (Uganda Shillings Thirty Thousand Only)
(vi) Memorandum and Articles of association – UGX 50,000/= (Uganda Shillings Fifty Thousand Only)
(vii) Search fees – UGX 20,000/= (Uganda shillings Twenty Thousand Only)
(viii) Registration fees of a company whose nominal share capital does not exceed UGX 5,000,000 – UGX 100,000/= (Uganda shillings One Hundred Thousand Only)
(ix) Registration fees of a company whose nominal share capital exceeds UGX 5,000,000 – 1.5% of the nominal share capital.
(x) Stamp duty is 0.5% of share capital with share capital above 5m.
Pros and cons of either setting up a representative office in Uganda or a local incorporated company.
3.15. Setting up a representative office is not as tedious as incorporating a local private company limited shares since the foreign company already has incorporation documents i.e., certificate of incorporation and Memorandum and Articles from the company registry in Kenya.
3.16. There is therefore no need to incorporate the company afresh in Uganda but rather, one can have the company registered in Uganda if it wishes to set up a place of business in Uganda. This takes a relatively shorter time to accomplish.
3.17. Whereas the process of registering a representative office is relatively easier than incorporating a local private company limited by shares, it is more costly in terms of statutory fees paid to register a representative office company.
3.18. It is more costly for foreign companies with representative offices to do continuous filings like resolutions, annual returns, company notices which are USD 65 (United States Dollars Sixty-Five) compared to local companies that whose continuous filings range from UGX 30,000 (Uganda Shillings Thirty Thousand)– 50,000 (Uganda Shillings Fifty Thousand).
3.19. Most sectors in Uganda now have national content requirements and give priority to local entities in Uganda. Therefore, in the long run, local entities may be a more attractive option for sectors that give preference for local content like mining, oil and gas etc.
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