In a shareholder suit, remedies are sought on behalf of the company because the company itself is unwilling or unable to take action.
Such proceedings are however subject to the following cardinal rules of corporate law, to wit;
That the company being a distinct entity from its members, it has the right to sue on its own and that,
Court’s will not normally interfere into the internal management affairs of a company
Leveraging your business to pay taxes through loans might create a situation where you trade one liability for another with more adverse commercial implications, bearing in mind that whereas tax due attracts interest at minimal rates(2%), commercial banks lend at much higher rates(above 15%).
“Trading through companies is much more technical and with recent increased enforcement from the regulators, this means entities can no-longer get away with non-compliance as has been the case, and yet tiny businesses can’t absorb the steep compliance costs (both with URA and URSB).
I have in the past advised owners of tiny enterprises to stick to sole proprietorship or partnerships as business vehicles until it becomes absolutely necessary to incorporate, in which case those businesses can be sold to corporations in consideration for equity.”
With Uganda’s compliance systems undergoing significant changes, SMEs must adapt their management teams in a manner that ensures they keep abrest of these changes. This article highlights the critical importance of governance and taxation non-compliance risk due diligence in mergers and acquisitions but more importantly, it provides for SMEs a key lesson to draw; which is that bad tax compliance practices and inadequacies in governance will almost without a doubt always end up shackling the business with substantial tax liabilities which can easily kill off the business.
