UGANDA: An Introduction to General Business Law

Recent Legal Developments Affecting Business in Uganda

Employment law 

In a recent groundbreaking decision of Stanbic Bank (Uganda) Limited vs Nassanga Saphinah Kasule CACA 182 of 2021, the Court of Appeal of Uganda has affirmed the position that an employer has the right to terminate an employee’s employment by simply issuing the employee notice or paying the employee wages equivalent to the length of their statutory notice period, in lieu of actual notice without the need to assign an additional justifying reason for the same, provided that the contract of employment between the employee and the employer expressly provides for it.

Conceptually, employment laws in Uganda define terminations as separations typically at the behest of the employer that are for justifiable reasons other than the conduct or performance of the employee while dismissals are separations at the behest of the employer based on the conduct and/or performance of the employee.

However, there has been a long-standing controversy with respect to the question of whether an employer has the right to unilaterally terminate their employee based solely on a termination clause in the employee’s contract of employment by giving the said employee notice or paying them notice in lieu. This controversy arises from the opposing viewpoint that insists upon a justifiable reason for termination, such as reaching retirement age or ill-health retirement, in addition to contractual termination by notice.

This case has effectively settled all controversy in the courts of Uganda, by affirming that an employer can indeed terminate an employee and that simply having a termination provision in the contract is reason enough to terminate without the need for any additional reason.

This decision will provide clarity to employers and no doubt streamline the process of employee separations going forward.

Competition law 

On 1 September 2023, the Parliament of Uganda passed the Competition Bill 2023 into law with the stated objective of promoting and sustaining fair competition in markets in Uganda as well as preventing practices that could have an adverse effect on competition in markets in Uganda. The Bill was then forwarded to the office of the President for his assent and, as of 7 February 2024, has been assented to by the President of Uganda.

Uganda is a member state of both the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) and has, as a result, been subject to the COMESA and EAC Competition regimes prior to the enactment of the Competition Act 2023. It is worth noting, however, that these regimes apply to matters with a cross-border effect.

From a domestic perspective, save for a few industry-specific regulations such as in the communications industry, there has not been a general domestic competition law applicable in Uganda governing matters that did not have a cross-border effect, but which nonetheless had an impact on local competition.

The newly enacted Competition Act 2023 is designed to address this gap by establishing a robust framework for the regulation of players with dominant positions in their respective markets, proscribing the abuse of dominance, and for the regulation of mergers, acquisitions, and joint ventures in Uganda.

The Act places particular emphasis on anti-competitive practices and/or agreements and it takes specific aim at any practice that would result in an adverse effect on competition in the market including, but not limited to:

The Act further provides that where the competition authorities receive a complaint that there is an anti-competitive practice or agreement in place between two or more enterprises, they (the relevant competition authorities) will conduct an inquiry into the same. Should the inquiry establish that there is in fact an anti-competitive practice or agreement in place, and this agreement or practice has an adverse effect on competition, then the competition authorities will have the authority to take suitable corrective action.

The Act also provides for the supervision and regulation of mergers, acquisitions, and joint ventures in Uganda by introducing a requirement to notify the relevant competition authorities of certain contemplated mergers, acquisitions, or joint ventures to be determined by reference to thresholds that will be prescribed by subsequent statutory instruments. In reality, this is not a notification requirement but an approval requirement since, upon notification, the competition authorities will have the right to approve or refuse the merger, acquisition, or joint venture. Any such merger, acquisition, or joint venture concluded without “notifying” the competition authorities will be void.

Finally, in order to create an impetus for compliance, the Act has introduced steep penalties to punish non-compliance with the provisions of the Act. As an example, the fine for failing to notify the competition authorities of a notifiable merger, acquisition or joint venture is a maximum of 10% of the annual turnover of the defaulting enterprise.

Upon the publication of the Competition Act 2023 in the Gazette and establishment of the relevant administrative institutions under the Act, it shall be incumbent on all industry players, chief among them, those with dominant market position, to acquaint themselves with their obligations under the Act and to ensure that they comply.

Banking 

The High Court of Uganda at first instance held among other considerations that the facilities extended by Diamond Trust Bank Kenya Limited (a foreign bank) to Ham Kiggundu (a Ugandan) were illegal because the Bank did not have a licence from the Bank of Uganda (Central Bank) to conduct financial institution business in Uganda and that it was illegal for a bank to lend money in Uganda without a licence.

The Supreme Court on further appeal from the Court of Appeal held that there is no law in Uganda that forbids syndicated loans or the creation of a security trustee as a result of the syndicated agent relationship. The Supreme Court further held that there is no law in Uganda that forbids foreign financial institutions from extending credit facilities to any financial institution or person in Uganda.