An analysis of the legal framework on the duties and liabilities of company directors and other officers in Uganda

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Kampala International University, School of Law
The purpose of the study was to analyze the legal framework on the duties and liabilities of company directors and other officers in Uganda. The study was guided by the three objectives: 1 to examine what roles the director of a company and other officers can play. 2. Their liabilities in case of breach of their duties. 3. Whether directors and other officers of the company hold a fiduciary relationship with the company. The findings discovered that though the principle of corporate personality makes companies distinct from their members, they can sue or be sued but although the principle is clear it has been subjected to some exceptions and they arise where officers act outside their scope making the company suffer losses, They can be pinned personally responsible if they do not use their powers vested in them very well. Recommendations were made: the United Kingdom (British Companies Act) which was uprooted and imposed to Uganda during the reception of the English law into Uganda has been amended several times and therefore there is still need for Uganda Law Reform Commission to make sure that the Act suits the current situation, both in terms of economic, social politically and culturally. Though still the Act remains intact even though there have been several attempts to amend it, The Uganda Companies Act should contain also provisions that will make shareholders and creditors responsible in other words holding them liable in case of any breach of their obligations. In addition to that it should be able to provide the role that is to say the duties of workers in the company because its main focus is always on the directors and other officers of the company in general as regards other forms of businesses that is to say partnership business, co-operations among others. The effectiveness of company meetings should be emphasized. This is so because directors rarely attend meetings which serve as a loophole in the fulfillment of their duties which they owe to the company, There should be proper management in books of accounts, monitoring them regularly so that the shareholders and creditors of the company are not disadvantaged brought about by the improper imbalances of the books of accounts which for example provide for the profit and loss statements that have accrued to the company in the financial year., There is need to sensitize the public on the operation of the law. Many people in our Uganda today lack the knowledge on how they can fight for their rights, they are not aware of the Companies Act which can provide a remedy to them in case directors or other officers breach their duties. Business law should not only stop in the law school, other colleges like ICT ,engineering humanities should also get that chance of knowing how people can startup businesses due to the fact our economy in order for it to develop, it needs a lot of business entrepreneurs to discouraging people from becoming directors, the provision of liabilities of the directors tends to discourage people from taking on the director job, this is because the duty of care imposed on them is high and also the consequence of breach of duty is also severe due to the fact they pressure imposed onto them is too much, Creditors should also take measures in their protection. Creditors do not need the benefit of regulation, for they are able to take care of themselves by means of “an entire armory of techniques D Goddard Corporate Personality —Limited Recourse and its limits in C. Rickett and R Grantham (Ed’s) Corporate Personality in the 20th Century (Oxford 1998)22 These include the Creditor’s ability to negotiate the terms of the contract, he enters into with the company. Conclusion were also made: This case study on the duties and liabilities of company directors and other officers in Uganda emphasizes directors’ duties and shareholders rights in the company. The Companies Act plays a role in the protection of shareholders rights and enforcement of directors and other officer’s duties. It is well established in English Law and the law applying in other Common Wealth Countries, that certain times in life of the company, the interests of shareholder and creditors is paramount. The directors and other officers in performance of their duties should do that not only to the company but also to its creditors and share holders’ interests at large. Laws of Uganda have created clear lines between the Companies running day to day businesses that is Companies Act 2012 (As Amended) and the ones that can no longer run day to day businesses which are on the verge of collapsing and a receiver .an administrator ,has been appointed to handle their businesses which is the Insolvency Act 2011. Company Laws in Uganda have gone ahead to acknowledge other forms of businesses which have also got their statutes like the Partnership businesses regulated by the Partnership Act 2010. Company law has led to the establishment of a lot of companies due to the fact that the shareholders and creditors are assured of relief where any factor that is likely to lead to the closure of the company is to occur. That is to say when the company can no longer pay its debts and is put under liquidation or receivership. The creditors can be able to repossess their money that they had given the company. Our Uganda today is among the countries that are growing at a faster rate because of the laws under the businesses that encourage investors to bring in a lot of funds leading to the development of companies.
A research report submitted to the school of law in partial fulfilment of the requirements of the award of a bachelor’s degree of laws of Kampala International University
Legal framework, Duties and liabilities of company directors and other officers