How To Start A Business in Uganda
This piece highlights issues for consideration when starting a foreign business in Uganda in four areas: 1) foreign business start-up, 2) access to industrial land, 3) foreign ownership issues across sectors, and 4) commercial dispute arbitration.
Foreign Business Start-Up
It takes 21 procedures and 39 days to establish a foreign-owned limited liability company (LLC) in Kampala, Uganda. This is faster than both the IAB regional average for Sub-Saharan Africa and the IAB global average. In addition to the procedures required of domestic companies, a foreign-owned LLC must submit a project proposal through a local counsel to obtain an investment approval from the Uganda Investment Authority (UIA). This approval usually takes 7 days. An appeal can be made to the Minister of State for Finance if said approval is not granted. An appeal is rarely necessary, however, as the foreign investor is usually asked to provide additional information or clarifications if need be. In addition, the company, if it wants to engage in international trade, must obtain a trade license from the Ministry of Tourism, Trade, and Industry. The business registration process is not yet available online. Foreign companies are free to open and maintain foreign currency bank accounts. There is a minimum capital requirement of UGX 200,000,000 (~$100,000) to obtain an investment license from the UIA.
Access to Industrial Land
Foreign companies seeking to access land in Uganda may lease privately or publicly held land. The Land Act in Uganda prohibits the ownership of land by foreign companies. Private land available for lease may include customary and communally owned land, which cannot be leased without community consultations. The procedures for leasing both private and public land are similar, but one must negotiate with the relevant public authority for the lease of public land. Land may be leased for a maximum duration of 99 years. There is no restriction on the amount of land that may be leased. Lease contracts offer the lessee the right to sublease, subdivide, and/ or mortgage the leased land, subject to the terms of the contract. Not all land rights require registration. A thorough due diligence process is, therefore, required before leasing land. Most land-related information can be found in the land registry.
Foreign Ownership Issues across Sectors
Of the 33 sectors covered by the report, 32 are fully open to foreign equity ownership in Uganda. In the banking sector, Ugandan Financial Institutions Act (2004) specifies that a single shareholder, foreign or domestic, cannot hold more than 49% of the shares of a local bank. If a foreign bank is held and controlled by more than a single shareholder, there is no restriction on its equity participation in a local bank. While electricity generation and distribution are open to foreign companies, foreign investment is not allowed in the electricity transmission sector.
Commercial Dispute Arbitration
The Arbitration and Conciliation Act (2000) applies to both domestic and international arbitrations and is not based on the UNCITRAL Model Law. Unlike in many countries in Sub-Saharan Africa, arbitration agreements cannot be concluded electronically. Although the law allows parties to use the language of their choice, with the default language being English, in practice, arbitration proceedings always take place in English. Foreign lawyers cannot represent parties in arbitration proceedings, unless they appear jointly with qualified Ugandan lawyers. Arbitration awards are enforced in the Commercial Division of the High Court in Uganda, and appeals can be made to the Court of Appeal. The courts usually enforce domestic and international arbitration awards. On average, it takes around 26 weeks to enforce an arbitration award rendered in Uganda, from filing an application to a writ of execution attaching assets (assuming there is no appeal). It takes roughly 52 weeks to enforce a foreign award. If an appeal is made during this process, enforcement proceedings become extremely lengthy. Mediation is used frequently in Uganda to resolve disputes, and a special section has been added to the Arbitration and Conciliation Act (2000) to provide specifically for conciliation.
Source: Investment Across Borders Report by The World Bank. The World Bank authorizes the use of this material subject to the terms and conditions on its website, http://www.worldbank.org/terms.”