Background

The Companies Act 2012 was recently amended by the Companies (Amendment) Act 2022. The Amendment Act was assented to on 7 September 2022 and commenced on 16 September 2022. The Amendment Act introduced a raft of amendments including the elimination of the form for registration of a company (S.18) in the incorporation process, the inapplicability of the code of corporate governance to private companies, repeal of share warrants, and the introduction of a procedure for the re-registration of a company limited by guarantee as a company limited by shares.

One of the most notable amendments is the requirement for the register of beneficial owners. Additional guidance on this requirement is provided under the Companies (Beneficial Owners) Regulations 2023 (Beneficial Ownership Regulations). The Uganda Registration Services Bureau (URSB) (Companies Registry) issued a notice on 9 January 2023 requiring compliance with the register of beneficial owners’ requirement within 30 days of the notice, failing which company documents would not be registered. Accordingly, all companies must comply by 8 February 2023.

Complying with this requirement would be straightforward for private companies whose shareholders/members are individuals. Companies whose shareholders/members are companies would need to provide details of the individuals who ultimately own or control their respective shareholder companies. Subsidiaries would need to provide details of the individuals who ultimately own or control their respective holding companies.

Public companies that are listed or publicly traded, or private companies with shareholder companies that are listed, present a unique challenge. Considering the fluidity of movement in shares of listed companies, the huge number of shareholders involved and the sheer impracticality of constantly keeping the registrar of companies apprised of changes in the shareholding of a listed company, it is usually necessary for reporting thresholds and parameters for listed companies and private companies whose beneficial owners are listed companies to be provided.

However, the Beneficial Ownership Regulations do not provide a percentage threshold beyond which a beneficial owner is to be disclosed, or some other precise definition which can be used to impose a limit to the disclosure obligation.

In doing so, Uganda has not adopted the approach commonly taken by other countries.  In Kenya, a beneficial owner is defined as one who owns at least 10% of the issued shares; exercises at least 10% of the voting rights; holds a right to exercise or remove a director; or exercises “significant” influence or control over the company, which means participation in the finances or financial policies of the company.

In the United Kingdom, a beneficial owner is one who holds directly or indirectly more than 25% of the shares in the subject company; holds, directly or indirectly more than 25% of the voting rights; holds the right directly or indirectly to appoint or remove a majority of the board of directors; or has the right to exercise, or actually exercises, significant influence or control over company. The UK also issued additional guidance in 2017 regarding what constitutes “significant control”.

Beneficial ownership percentage thresholds are generally in line with global norms set by the Financial Action Task Force, the global money laundering and terrorist financing intergovernmental watchdog, for what is considered “significant influence or control”. However, even in cases where there is cosmetically or deceptively low shareholding, the rules may require the disclosure and registration of persons who have a right to or actually exercise significant influence or control over a company.

Therefore, for Ugandan law compliance purposes, this implies that companies are currently required to disclose and register every ultimate individual beneficial owner irrespective of the level of shareholding. It may be the case that in future, the registrar of companies will issue additional guidelines setting both objective and subjective qualifying conditions for a person to be disclosed and registered as a beneficial owner.

This alert seeks to answer the following questions regarding compliance with the beneficial owner disclosure and registration requirement in Uganda:

Who is a beneficial owner?

 The Amendment Act defines a beneficial owner as a natural person who has the final ownership or control of company or a natural person on whose behalf a transaction is conducted in a company, including a natural person who exercises ultimate control over a company.  Simply put, a beneficial owner is an individual who has final ownership or who exercises ultimate control over a company.

Who is required to maintain a register of beneficial owners?

 The following types of companies would be expected to comply:

• a private company limited by shares including a single member company;
• a public company, including companies that are listed on a recognised stock exchange in Uganda;
• a company limited by guarantee; and
• a company registered as a foreign company or a branch.

What information must be included in the register of beneficial owners?

The register of beneficial owners must contain the following particulars:

• name, national identification number, occupation, postal address, mobile telephone number, tax identification number and email address of each beneficial owner;
• number of shares held by each beneficial owner;
• amount paid/unpaid on the shares held by the beneficial owner;
• summary of the activities in which the beneficial owner is engaged;
• date on which the beneficial owner is entered on the register; and
• the immigration status, passport and visa details, work permit status, where the relevant beneficial owner is foreigner resident in Uganda.

Where should the register of beneficial owners be kept?

The register must be kept at the registered office of the company, save for instances where it is created at an office other than the company’s registered office.

Can a company outsource the creation and the maintenance of the register of beneficial owners to a third party?

Yes. In this case, the register may be kept at the offices of the third party to whom its creation or maintenance was outsourced.

Must the registrar of companies be notified of the creation of the register of beneficial owners and the place where it is kept?

Yes, a company must notify the registrar of companies using a prescribed statutory form of the creation of the register and the place where it is kept within 14 days of creating the register. This form is provided for under Schedule 1 of the Beneficial Ownership Regulations.  

What if a company changes the place where the register of beneficial owners is kept after it is created?

In this case, the company must notify the registrar of companies using a prescribed statutory form of the change within 14 days of the change.

Can the register of beneficial owners be kept outside Uganda?

No, the register of beneficial owners must always be kept in Uganda.

What if a company’s beneficial shareholders change after the register of beneficial owners has been filed with URSB?

In this case, the company must notify the registrar of companies of the changes in its beneficial owners using a prescribed form. This form is provided for under Schedule 1 of the Beneficial Ownership Regulations. 

Are there any penalties imposed for non-compliance with the requirement to maintain a register of beneficial owners?

How is the registrar of companies notified of the beneficial owners?

As indicated above, the registrar is notified using a prescribed form stated in the regulations. 

Please refer to the mock form here.

Conclusion

Companies are required to maintain a register of beneficial owners in addition to the registers that are already required to be maintained under the Companies Act. It is noteworthy that the registrar of companies is also an accountable person under the Anti Money Laundering Act 2013 (as amended) and must specifically enforce the requirement for a register of beneficial owners. The registrar may cooperate with government agencies and other international bodies in the exercise of his mandate.