Introduction
In 2023, we expressed concerns that Uganda's shiny new Companies Regulations were riddled with ambiguities around striking off, restoration, and the novel concept of deregistration. We highlighted several issues, including the uncertain legal footing, conflicts between the Companies Act and its regulations, unclear consequences for struck-off companies, and a dubious "purgatory" stage before deregistration. We also questioned the legality of restoration and deregistration processes and the fate of company assets. Fast forward to 2025, and the chickens have come home to roost. Uganda's courts have stumbled over these provisions, turning administrative processes into a legal quagmire. This article revisits our concerns, exposes the courts' missteps, and calls for immediate reform to save Uganda's business landscape from further chaos.
The warning signs in 2023
Back in 2023, the Companies Regulations 2023 aimed, among other things, to streamline the striking-off process, removing dormant or non-compliant companies from the register. We applauded the Registrar's regained power to strike off Ugandan companies, a welcome return after its absence since the Companies Act overhaul in 2012. But we sounded the alarm on glaring weaknesses:
- Ambiguities in striking off: The Act and Regulations were vague on what happens when a company is struck off. The Act required that a company that had been struck off cease to do business, and it was an offence for the company to continue to do business. However, it wasn't entirely clear what else the company could or could not do. What about the status of contracts, banking relationships, or employee obligations after a company is struck off?
- Restoration doubts: The restoration process, allowing applications within 12 months by the company or five years by others aggrieved by the striking off, lacked clarity. Grounds like "readiness to comply" or "proper reason to continue" were subjective, inviting inconsistent application.
- Deregistration confusion: The introduction of "deregistration" as a step after failed restoration was baffling. Unlike Kenya or Tanzania, which lack this concept, Uganda's deregistration suggested a company is not fully defunct post-strike-off, only dissolving after the Registrar notifies the official receiver of the deregistration. We likened it to "purgatory", where the company was between the hopes of a new life or the curse of eternal damnation. Worse, the regulations muddled timelines, implying a company's name becomes available 12 months after strike-off, contradicting the deregistration step.
We also questioned whether these provisions on restoration and deregistration that just appeared magically in the Regulations exceeded the Act's authority, risking legal invalidity.
Our warnings were rooted in real-world fallout. When the Registrar struck off thousands of companies in 2023, some of whom were active businesses with contracts and employees, leaving stakeholders stranded. We hoped the courts or legislature would address these gaps, but the situation has only worsened.
The courts' costly chaos
Ugandan courts have turned these ambiguities into a minefield.
First, there was Schenker NV v URA, where after recounting the process for striking off, the court concluded that "A company struck off the register ceases to have legal existence and is required to cease its operations...". It is not clear from the Act or the Regulations where the judge concludes that a company ceases legal existence after a strike off. The Regulations only refer to the particulars of a company ceasing to exist on the register after it has been deregistered.
In A.K.T Project Management v dfcu Bank, the court again stated that the plaintiff company ceased to legally exist when it was struck off, and any actions it undertook after that were an illegality. The court ruled further that during the period that the company was struck off, it lacked the capacity to sue or be sued. The court accordingly dismissed the case and ordered costs against the very company that it had just ruled non-existent.
Then in comes Ndawula v Hiraa Traders, where Justice Mubiru, well known for his erudite decisions, issued a judgment that seemed to depart from his usual standard of excellence. First, a credit to Justice Mubiru as he recognised that striking off was an option by the Registrar of Companies to enforce compliance by companies in filing their returns. Therein lies the clue, then, that striking off cannot mean the death of the company, as you do not get compliance from a dead company.
However, the judge then conflated both striking off and liquidation as having the same effect, i.e the company ceasing to exist as a legal entity, and that therefore proceedings for or against the corporation cannot be initiated or pursued unless the company has been restored. The judge says this multiple times: "Striking off effectively removes the company from the register and means it cannot legally operate since it ceases to exist as a legal entity".
Further on, the judge then adds de-registration into the mix, stating that "the respondent by reason of being de-registered, ceased to exist as a legal person on 14th August 2023 and is therefore unable to carry out any of the legal functions of a company. Proceedings for or against the respondent cannot be pursued unless and until it has been restored to the Register".
However, all that had happened to the company on 14 August was a strike off and not the further step of deregistration.
The clear pattern is that the courts have treated strike-off as immediate dissolution, voiding all company actions post-strike-off. This is not the correct interpretation of the law. All the law says is that a company that has been struck off shall cease to do business. That's not the same thing as saying the company ceases to exist!
These judicial missteps stem from the Act's and Regulations' original sins: vague drafting and conflicting and ultra vires provisions. The courts' inability to harmonise interpretations has amplified the chaos, turning a routine administrative process into a legal minefield.
A call for reform
Our 2023 article was a plea for clarity, and 2025's confusion proves reform is overdue. To restore order, Uganda's legislature and URSB must act swiftly:
- Clarify striking-off consequences: Amend the Companies Act to define a struck-off company's status, including its capacity to act, contract status, and employee protections. Align the Act with the Regulations to eliminate conflicts.
- Abolish or define deregistration: Either scrap the deregistration concept or clarify its purpose, timeline, and legal effects. A single dissolution step, as in Kenya, would simplify the process.
- Judicial guidance: Issue practice directions to harmonise court interpretations until legislative fixes are in place.
Conclusion
In 2023, we foresaw the cracks in Uganda's Companies Act and Regulations 2023. Today, those cracks have become chasms, with courts stumbling over ambiguous provisions and businesses paying the price. The striking-off process, meant to cleanse the register, has instead sullied Uganda's business landscape. Urgent reform is needed to clarify striking-off, end deregistration's purgatory, secure assets, and restore judicial coherence. Until then, our 2023 warnings serve as a stark reminder: foresight ignored is chaos invited. Uganda's entrepreneurs deserve better.
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