LAW PRACTICE – Page 4

A CORPORATE GOVERNANCE MASTERCLASS FOR ENTREPRENEURS FROM THE HUMPHREY NZEYI v BoU CASE.

While shareholders own the company, they DO NOT own the assets of the company. The assets they own are the shares allotted to them. The company owns its assets. Conversely, the shareholders are not the managers of the company. They must first become directors in law for them to exercise managerial roles.

The directors(the Managers) owe a fiduciary duty to the company as ‘a whole’. This fiduciary duty requires directors to act in good faith and in the long-term interests of the entity, balancing the interests of both shareholders and creditors.

This is because the total assets of a company are composed of shareholder equity+liabilities (i.e. creditor interests). For the section of my readership without an accounting background, in law this is the starting point of the accounting equation. The company as a legal entity is therefore subject to these two competing legal(or equitable) claims.

The directors’ duty to act in the company’s best interests logically includes the obligation to weigh and balance these interests at all times.

When a company enters financial distress, the law demands that the board begin to prioritize the interests of creditors alongside those of shareholders and certain transactions are outright void at law in extreme circumstances where this principle is breached.

Good Corporate governance and Board composition matters. A competent, diverse board is better equipped to navigate financial stress and generally, the intricate market and regulatory dynamics in which the company operates. Ensure you have a blend of directors with expertise in risk, tax, legal, and operations as opposed to just investors, friends or family members.

AI’s Disruption of Professional Services: The Rise of Niche Expertise.

The market now favors firms and individuals who deeply understand specific domains or sectors rather than generalists trying to do everything. A “niche within a niche” allows consultants to become irreplaceable for a defined audience or challenge set.

AI may also have provided the easy answer to the all important career decision question for senior consultants and executives in larger legacy firms; Which is whether to choose boutique independence over the politics, processes, and layers of bureaucracy that come with being part of a large firm

Investing in Uganda; Tax Planning and Why Tax Should Lead Your Market Entry Strategy

The decision on corporate structure, i.e, whether to register a subsidiary vs. branch, Financing questions, i.e debt vs. equity, tax residence/domicile/location of holding entities are all strategy questions which are informed by tax considerations.

Choosing the wrong structure can expose the investor to; Transfer pricing risk, Withholding tax inefficiencies, Loss of treaty benefits, Double taxation and generally, tax inefficiency and a higher tax burden across different tax heads.

But what happens when the company is set up in a way that causes preventable tax leakages or unnecessary friction with the tax authorities?

For any foreign investor entering the Ugandan market, undertaking corporate legal structuring advice without any input from a tax practitioner is a grave mistake.

While the structure may be viable on paper, it might ignore certain critical elements of transfer pricing regulation, international tax treaty benefits and domestic tax compliance aspects that might later work against the investor and require a costly restructuring process.