A Tale Of Two Cities: Foreign Lending In Nairobi And Kampala

East Africa faces a persistent shortfall in domestic capital. Infrastructure deficits run into the tens of billions of dollars. Manufacturing, agriculture, and technology sectors hunger for investment. Commercial banks, constrained by regulatory capital requirements and a limited depositor base, cannot alone meet the demand. Nor do the local entities necessarily offer the most competitive terms. These shortfalls are redressed by foreign capital, flowing in from international development finance institutions, private equity funds, commercial lenders, and foundations.

For foreign capital to flow, however, the legal environment must be hospitable with easy access to courts or other agreed modes of dispute resolution that facilitate, rather than undermine effective relief in event of default. It is to give effect to this, that common law countries have established specialized divisions known as commercial courts. As Robert Goff famously remarked in the context of the much older English Commercial Courts: “We are there to help businessmen, not to hinder them: we are there to give effect to their transaction, not to frustrate them: we are there to oil the wheels of commerce, not to put a spanner in the works, or even grit in the oil.”

Unfortunately, the jurisprudence in both Kenya and Uganda has not always been consistent with this promise. For example, lenders have been prevented from pursuing recovery from defaulting borrowers when a court strikes out their claims on the technicality of registration, or when a trial court declares an entire loan agreement illegal for want of a licence. Years of appellate litigation are required to correct the error, the signal travels fast through international capital and decisions of this kind risk placing grit in the oil of the wheels of international commerce. The cost of capital rises. Investment is diverted elsewhere.

This article examines how Kenyan and Ugandan Courts have addressed the same fundamental question: when a foreign lender extends credit to a local borrower and a dispute arises, can the borrower defeat the lender's claim by pointing to a failure to register locally or obtain a local licence? In Kenya, reversing a controversial High Court decision with commendable and encouraging dispatch, the Court of Appeal answered part of that question swiftly, and correctly in Stichting Rabobank Foundation v Ava Chem (2026).

In Uganda, the same answer was ultimately reached, but only after years of costly litigation across multiple cases, including the Supreme Court's decision in Ham Enterprises v Diamond Trust Bank (2023), Justice Mubiru's seminal analysis in Simba Properties v Robert Kirunda (2022), and the earlier, now out of favour ruling in Vantage Mezzanine Fund II Partnership v Uganda Registration Services Bureau (2022).

The good news for foreign lenders is that in both jurisdictions the law is now clear: registration requirements do not, without more, extinguish contractual rights or bar access to courts. The cautionary tale lies in how long it took Uganda to get there, and at what cost.

Nairobi: The Rabobank decision

On the peril of criminal sanction, the Kenyan Companies Act prohibits a foreign company from carrying on business in Kenya unless it is registered.

Stichting Rabobank Foundation, a Dutch entity, extended financial facilities to Ava Chem, a Kenyan company. The borrower defaulted, and Rabobank sued it before the commercial division of the High Court at Nairobi for recovery of the outstanding debt.

Seeking to prevent its adjudication by the High Court, Ava took a preliminary point as to the propriety of the claim against it since Rabobank was a foreign company that had not been registered. In a decision that generated significant concern among commercial practitioners, though in line with at least one earlier precedent, the High Court agreed holding that “The Law in Kenya requires that a foreign company be registered under … the Companies Act, to enable it to acquire the locus standi. A non-existent person is incapable of maintaining a cause of action”  

With respect, the decision conflated three distinct legal concepts in a manner that, was difficult to sustain. Not only was it a somewhat quixotic reading of the law, but it was also an odd conflation and misapplication of two wholly distinct doctrines, capacity to sue (whether or not a non-existent entity can sue) and locus standi - interest in the subject matter of a suit to qualify to sue over it.

Happily, both decisions did not endear themselves across the High Court. While, probably in the interests of judicial comity, it was done ever so politely, in decisions such as Superon Schweisstechnik India v Oxychem Africa; Registrar of Trademarks (Interested Party) and Bruton Gold Trading LLC v Amadi (t/a Amadi Associates Advocates), other High Court judges have demurred, finding that lack of registration as required under the Companies Act was irrelevant to the issue of locus standi, nor did it bar the filing of a suit.

Rather swiftly, by local standards, slightly over a year after the High Court’s decision, the Court of Appeal intervened correcting High Court’s trifecta of error and restoring a measure of legal certainty. The Companies Act can no longer be deployed by defaulting local borrowers to blunt claims by unregistered foreign lenders.

Distinguishing legal personality, capacity and registration

The Court of Appeal first disentangled three concepts that the High Court had conflated: legal personality, locus standi, and statutory registration. Legal personality concerns whether an entity is recognised by law as capable of bearing rights and obligations. Locus standi concerns whether a claimant has a sufficient interest in a case. Statutory registration concerns compliance with a regulatory regime.

As the Court of Appeal observed, "A foreign corporation does not become a non-entity at Kenya's border". Rabobank was incorporated in the Netherlands. Its juridical existence under Dutch law was not extinguished merely because it had not registered with the Kenyan Registrar of Companies. The debt was owed to Rabobank itself; it plainly had a direct and substantial interest in its recovery. To deny it locus standi on the sole ground of non-registration was, in the Court's words, an "impermissible conflation of separate legal questions".

The statutory text: What the Companies Act does and does not say

The Court then turned to the Companies Act with the close textual attention that statutory interpretation demands. The Act prohibits a foreign company from "carrying on business in Kenya" unless registered. It provides an inclusive, not exhaustive, definition of that phrase, specifying that it includes offering debentures or guaranteeing debentures offered in Kenya. It also prescribes a criminal penalty for contravention.

The Court identified what the Act does not say. It does not provide that an unregistered foreign company ceases to be a juristic person. It does not declare void every contract entered by such a company. It does not extinguish debts owed to such a company. It does not prohibit such a company from instituting proceedings. "Those omissions," the Court held, "cannot be casually supplied by judicial interpretation".

This is an application of the well-established principle that where Parliament prescribes a specific consequence for breach of a statutory obligation, in this case, a criminal penalty, courts should not superimpose an additional and far more drastic civil disability unless the statute expressly or by necessary implication requires it.

The meaning of "carrying on business"

On the factual question of whether Rabobank was "carrying on business in Kenya," the Court declined to make a definitive finding, properly, since the issue had never been tried. It did, however, articulate a framework for future cases. The expression connotes "a degree of commercial activity, continuity, system, or presence sufficient to connect the foreign entity's operations to the jurisdiction". Relevant factors, with none predominate or decisive, include the number and frequency of transactions, the place of negotiation and conclusion, the place of performance, the existence of an office or employees, and the degree of commercial presence maintained.

The Court was careful to emphasise that "the mere fact that a foreign company has entered into a transaction with a Kenyan person or entity does not, without more, necessarily establish that the foreign company is carrying on business in Kenya". Equally, a loan is not invariably synonymous with a debenture, and the statutory reference to "offering debentures in Kenya" cannot be treated as capturing every financial arrangement with a Kenyan counterparty.

An important consideration that influenced the Court of Appeal’s decision was the Constitution’s access to justice guarantee which should not be compromised by technicalities.

Kampala: A more tortuous route to the same destination

The Kenyan Court of Appeal's decision invites comparison with Uganda's far more protracted journey to the same legal conclusion. In Uganda, three distinct cases over several years were required to establish what the Kenya Court of Appeal articulated in a single, cleanly reasoned judgment.

Uganda's Rabobank moment

The closest Ugandan case to the Rabobank first-instance decision is in Vantage Mezzanine Fund II Partnership v Uganda Registration Services Bureau (2022). Vantage, a South African partnership, had extended a substantial credit facility to Ugandan borrowers and sought to enforce its security by lodging share transfer documents with the Registrar of Companies. When the Registrar refused to process the documents, Vantage brought judicial review proceedings.

The court dismissed the application on the ground that Vantage lacked locus standi. His reasoning was strikingly like that of the Kenyan High Court in Rabobank: because the Partnership Act required registration of partnerships carrying on business in Uganda, and because Vantage had not registered, it had "no legal presence and locus (capacity) to commence this application." The judge further held that "international partnerships or foreign partnerships just like the Ugandan partnership cannot be recognized once they are not registered since their identities are unknown and it may open the door wide for fraud in their transactions and dealings."

This ruling suffered from the same analytical deficiency that the Kenya Court of Appeal later identified in the Rabobank first-instance decision: it conflated regulatory registration with juridical existence, and it failed to interrogate whether the entity was in fact "carrying on business" in the jurisdiction. The ruling left a foreign lender, which had advanced substantial sums under binding contractual arrangements, without access to the courts of the jurisdiction where its security was situated.

Ham Enterprises v Diamond Trust Bank: The Supreme Court speaks

The second strand of the Ugandan story is Ham Enterprises v Diamond Trust Bank (Uganda), which reached the Supreme Court in June 2023. The borrowers had obtained credit from Diamond Trust Bank Kenya ("DTB Kenya") through a syndicated arrangement in which Diamond Trust Bank Uganda ("DTB Uganda") acted as agent for disbursement and recovery. When disputes arose, the borrowers claimed that DTB Kenya had been carrying out "financial institution business" in Uganda without a licence from the central Bank, in contravention of the law. The trial judge accepted this argument, declared the credit facilities illegal and void ab initio, and entered judgment for the borrowers. The Court of Appeal reversed on procedural grounds but declined to address the substantive illegality question. The Supreme Court, in a unanimous decision, finally resolved the matter, holding that the syndicated credit facility was lawful.

Justice Mubiru's correction: Simba Properties v Robert Kirunda

The third strand is Justice Mubiru's decision in Simba Properties v Robert Kirunda (2022), which directly confronted and departed from the earlier Vantage ruling. Where Vantage had treated non-registration as fatal to locus standi without examining whether the entity was carrying on business in Uganda, Justice Mubiru undertook the factual and legal analysis that the earlier court had omitted.

The overall picture

Both jurisdictions ultimately reached the right answer: foreign lenders participating in cross-border lending arrangements are not, by that participation alone, carrying on regulated business in the borrower's jurisdiction. Registration requirements do not extinguish contractual rights. The critical difference lies in how long it took and at what cost. In Kenya, the error was corrected at the first appellate level in a single judgment. In Uganda, it required three separate cases, over a period of years.

The common legal question: what does "carrying on business" mean?

Across all these cases, the same fundamental question recurs: what degree of commercial activity by a foreign entity within the jurisdiction triggers local regulatory requirements? The Kenya Court of Appeal's multi-factor test, examining continuity, system, presence, and territorial connection, represents the orthodox common law approach, consistent with the English Court of Appeal's decision in Adams v Cape Industries Plc, which Justice Mubiru also cited.

Justice Mubiru, drawing on the Supreme Court of Canada's decision in H.M.B. Holdings Ltd v Antigua and Barbuda, held that the concept requires "actual presence" in the jurisdiction, whether direct or through a representative, "plus a degree of business activity that is sustained for a period of time". A "virtual presence alone will not suffice". He further emphasised that "a single act or business transaction is not sufficient" unless it is intended to be repeated. Justice Mubiru observed that it could not have been Parliament's intention "that all firms digitally and remotely carrying on business, without a physical presence in Uganda" should be required to register locally, and that to hold otherwise "would create an absurdity in the wake of the modern exponential growth of global digital businesses".

The Supreme Court in Ham Enterprises reached the same conclusion through a different route, holding that the syndicated arrangement between DTB Kenya and DTB Uganda was "a global lending phenomenon practised by local and foreign banks or non-bank lenders" and that no law "forbids foreign financial institutions from extending credit facilities to any financial institution or person in Uganda."

The Kenya Court of Appeal's observation that "the consequences of statutory illegality depend upon the particular legislation, its purpose, language, and context" represents the same principled approach, one that asks what Parliament intended rather than imposing the most draconian consequence available. Across both jurisdictions, the law now recognises that a single cross-border transaction, a loan advanced from abroad to a local borrower, does not automatically constitute "carrying on business" in the borrower's jurisdiction. Both demand something more: regularity, physical presence, continuity.

The position that the Kenyan and Ugandan Courts eventually landed on chimes with those taken across the commonwealth for pretty much the same reasons- fidelity the statutory texts as written and enforcement of legal agreements. A notable example is the decision of the Privy Council Hawkins v Abarbanel upholding that approach taken by Cayman Island Courts that lack of compliance with local laws by foreign entities which advance money did not render those arrangements unenforceable. The relevant holdings:

''Where the relevant illegality is laid down in a statute, an essential question in relation to a contract formed, or performed, in breach of the statute, is whether the statute has dealt with the effects of the illegality on the enforceability of the contract.''

Here it is clear that there is no express [statutory] prohibition […] of a contract made in breach of the licensing requirements. But is there any implied prohibition? That turns primarily on a consideration of the purpose of the statutes.

On the face of it, there would be commercial chaos if every contract made by a non-licensed business in the course of carrying on business were to be unenforceable.

The conclusion is that, as a matter of statutory interpretation, neither Act impliedly prohibits a contract made by a company that is carrying on a business without a licence. Moreover, there is nothing to suggest that either Act was concerned to protect a consumer by rendering an unfair contract unenforceable.

In the Board’s view, section 23 is an express provision making clear that a contract made in breach of the licensing regime in the LCCA is not unenforceable.

The comfort for foreign lenders

The combined effect of these decisions across both jurisdictions is that foreign lenders now have clear appellate authority for the following propositions:

1. A foreign entity's juridical existence is not extinguished by non-registration in the borrower's jurisdiction.
2. Non-registration does not automatically deprive a foreign lender of locus standi or capacity to institute proceedings.
3. Whether a foreign entity is "carrying on business" locally is a question of fact requiring evidence of actual presence, continuity, and commercial activity, not a conclusion to be assumed from a single cross-border transaction.
4. A syndicated credit arrangement in which a local bank acts as agent for a foreign lender does not constitute unlicensed "financial institution business" by the foreign lender.
5. The consequences of any regulatory contravention must be derived from the statute, not assumed.

These principles provide real comfort. The Kenya Court of Appeal articulated them in a single, authoritative judgment. The Ugandan Supreme Court, Justice Mubiru, and the weight of considered judicial opinion have converged on the same position.

The lesson: speed matters

The critical difference between the two jurisdictions is not the destination but the journey. In Kenya, the Court of Appeal corrected the High Court's error swiftly and comprehensively. The principles it articulated are clear, practical, and immediately available to guide both lower courts and commercial parties. Foreign lenders transacting in Kenya can rely on Rabobank with confidence.

In Uganda, the same legal certainty was achieved only after the ruling in Vantage (denying locus to a foreign partnership), the trial judge's sweeping declarations of illegality in Ham Enterprises, years of appellate litigation, and Justice Mubiru's careful voice in Simba Properties. The Supreme Court's decision in Ham Enterprises is now the authoritative statement of Ugandan law, and Justice Mubiru's analysis of "carrying on business" provides the most rigorous framework yet available. But the period of uncertainty between the trial court decisions and the final appellate corrections caused real commercial damage: the broader lending market absorbed the signal that Ugandan courts might not enforce cross-border lending arrangements.

Conclusion: enforcement and the remaining challenge

The law is now settled in both jurisdictions. Foreign lenders can take comfort that the highest courts in Kenya and Uganda have affirmed their right to lend across borders, to enforce their contracts, and to access local courts. The Kenya Court of Appeal's decision in Rabobank is a model of how commercial law should work: principled, textually grounded, commercially aware, protective of access to justice, and delivered with the speed that commercial certainty demands. Lord Goff would approve

But obtaining a correct statement of the law is only the first step. In Uganda, even where a foreign lender succeeds in obtaining a favourable ruling, the questions about the independence and predictability of enforcement processes in high-value Ugandan commercial matters remain a concern for market participants.

Uganda's challenge, then, is not only to get the law right at the apex court level, which it has now done, but to ensure that the legal system as a whole, from trial courts to enforcement mechanisms, provides capital with the basic certainty it requires. Kenya, through the Rabobank decision, has demonstrated that this can be done efficiently and at the first appellate level- a promising sign that should be continued. Uganda’s judiciary has demonstrated, through decisions such as Justice Mubiru’s, that it possesses the analytical rigour to deliver the same clarity at first instance.