Mbabali & Another v Pope Paul VI Social Club Limited (Petition Cause 17370 of 2023) [2024] UGRSB 3 (8 February 2024)

Full Case Text

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## THE REPUBLIC OF UGANDA

# IN THE MATTER OF THE COMPANIES ACT NO.1 OF 2012 AS

## **AMENDED**

## AND

## IN THE MATTER OF POPE PAUL (VI) SOCIAL CLUB LIMITED

## PETITION CAUSE NO.17370 0F 2023

## **REGISTRATION NO. 80010000108506**

### 1. MBABALI JUDE

2. SEREMBA OWEN ::::::::::::::::::::::::::::::::::::

#### **VERSUS**

POPE PAUL VI SOCIAL CLUB LTD::::::::::::::::::::::::::::::::::::

## **RULING**

## BEFORE: MULIISA SOLOMON, REGISTRAR OF COMPANIES

## A. Introduction

1. The facts of this petition as far as they can be discerned from the pleadings are that, Petition Cause No. 17370 came as a result of the postponement of the Respondent Company's Annual General Meeting

through the Company Assistant Secretary, Mr. Peter Jemba Kaggwa from the $31^{st}$ day of March 2023 to the 16th day of April 2023, in a notice that was issued on the 27th day of March 2023. The Petitioners allege that this amounted to oppression and mismanagement of the Company by the Directors and further amounted to an illegality because it was contrary to the Company Laws of Uganda and the Memorandum and Articles of Association of the Company. These actions are what prompted the petitioners to file Petition Cause No. 17370 to seek redress.

- B. Background - 2. On the $3rd$ day of March 2023, the Respondent Company through the Hon. Club Secretary Nsanja Patrick Kayongo issued a notice stating that the company's Annual General Meeting will take place on the 31st day of March 2023. However, on the 27th day of March 2023, the Executive of the Respondent Company through the Assistant Company Secretary Peter Jemba Kaggwa issued another notice postponing the date of the Annual General Meeting from the earlier date of $31$ st March 2023 to $16$ th April 2023. - 3. On the $29^{th}$ day of March 2023, the 1st Petitioner wrote to the Directors of the company requesting them to rescind the said notice postponing the Annual General Meeting stating that it was illegal and contrary to the company's Articles of Association. This letter was ignored by the directors and subsequently, on the 30th day of March 2023, the 1st

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Petitioner applied to the Registrar of Companies for an order directing the respondent company to hold its Annual General Meeting on the $31$ st day of March 2023.

- 4. On the 30th day of March 2023, the Registrar of Companies Margaret Kibuuka, issued a "directive" to the effect that the Respondent Company should hold the Annual General Meeting on the date stated in the Company's Articles of Association (31st March 2023), and then an adjournment can be made in that meeting. The Petitioners held the Annual General Meeting on the 31st day of March 2023, however, it was adjourned to the 7th day of April 2023 for lack of quorum. On the 7th day of April 2023, the Annual General Meeting was held and various resolutions were passed to the effect that the 1st Petitioner was elected as the Chairman of the Board and new members were elected to the Company Executive. - 5. On the 16th day of April 2023, the Respondent Company held the rescheduled Annual General Meeting which was attended by approximately 80 per cent of the eligible paid up members of the Company. During this meeting, various resolutions were passed including the Appointment of a new Company Executive.

- C. During scheduling, the following issues were raised; - 1. Whether there was oppression and mismanagement in the running of *the company by its Directors?* - 2. Whether the registrar of companies ever directed or ordered the club to hold its AGM on the 31st day of March 2023. - 3. Whether the Meeting held on the $31^{st}$ day of March 2023 was lawful? - 4. Whether the AGM held on the $7th$ day of April 2023 was lawful? - 5. Whether the AGM held on the $16^{th}$ day of April 2023 was lawful? - 6. What remedies are available to the parties?

## Arguments for the Petitioners

6. While handling issue 1: The Petitioners stated that they brought the petition under Section 247 of the Companies Act, 2012 (As Amended) which provides that "a member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of *the members including himself or herself or in a case falling within may make a complaint to the registrar by petition.*" They further relied on the cases of Kigongo v. Mosa Courts-Apartments Ltd Company Cause No. 01 of 2015 and Alfred Byaruhanga Muhumuza & Another Vs. Uni Oil (U) Ltd: High Court Company Cause No. 14 to define Oppression as "to constitute unfair prejudice, the value of the quality of the *shareholder's interest that is his/her shares in the company limited by shares must be adversely affected".* The Petitioners in a quest to prove

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their case, went ahead and stated the different forms of mismanagement and oppression wherein they cited; abuse of power, conflict of interest and intimidation, shorter AGM Notice, illegal postponement of the AGM of 31st March 2023, adamantly ignoring members' written requisitions and requests, contempt by blocking the Registrar's directive and locking the company premises to block the AGM, failure to display/send audited accounts to members within the stipulated time, failure to keep proper books of accounts, recruitment of the company Auditor by the directors during the AGM, denying paid up members of the year 2022 to attend the AGM of 2022, consistent failure to hold Annual General Meetings and to file annual returns, allowing a suspended member back into the company without due process, fraud and mismanagement of the electoral process of directors and making voluntary fundraising mandatory to victimize members. They prayed that this issue be answered in the affirmative.

7. The Petitioners handled Issues 3 and 4 concurrently wherein they stated that the meeting held on the 31st day of March 2023, was lawful since it stemmed from a directive issued by the Registrar of Companies on the 30th day of March 2023. Further, the Petitioners stated that the meeting complied with Article 21.3 of the company's constitution. However, this meeting was adjourned for lack of quorum and rescheduled to the 7th of April, 2023 as per Article 23.2 of the **constitution.** On the 7th day of April 2023, the petitioners held the

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Annual General Meeting and during this meeting, various resolutions were passed to the effect that the $1^{st}$ Petitioner was elected as the new chairman of the board and other executive members were elected. The Petitioners made a prayed consequently that, Issues 3 and 4 should be answered in the affirmative.

- 8. While handling Issue 5 the Petitioners argued that the Annual General Meeting that was to be held on the 16th day of April was illegal. The petitioners cited the case of Fang Min v Uganda HuiNeng Mining Ltd & 5 others, Civil Suit No. 318 of 2016, where it was held that when a meeting is called at a shorter notice than that provided in the Articles of Association of the Company it is null and void. They further cited Articles 13 and 14(1) Table C of the Companies Act 2012 (As **Amended)** to explain the position that once a Notice for the Annual General Meeting is issued by the Company, it cannot be cancelled or postponed. - 9. The Petitioners strongly relied on the case of Smith v Paringa Mines Ltd, $(1906)2$ , ch.193 to argue that "in the absence of express authority in the articles the directors of a company have no power to postpone a general *meeting properly convened."* - 10. On the interpretation of the word **ordinarily**, the Petitioners argued that under Article 21.3 of the company's constitution, the word **ordinarily** is intended to emphasize that the Annual General Meeting of the company, as a rule, must not be held beyond the 31st day of

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March each year. They conclusively stated that no provision in the company laws of Uganda gives the directors the power to postpone a meeting that is already fixed in an issued notice to members, instead the law stipulates that the meeting must be held and adjourned with the agreement of members. They prayed that this issue be answered in the negative.

11. As regards Issue: 6 the Petitioners prayed that their reliefs be granted to wit; the purported Annual General Meeting of the Company held on the $16th$ day of April 2023 be declared illegal, the actions of the former directors of the company to hold a meeting in defiance of the Registrar's directive be declared as contempt, the Annual General Meeting held on the 31st day of March 2023 and adjourned to the 7th day of April, 2023 as per the articles be declared valid. An injunction be issued against Mr. Nsanja Patrick to stop acting as chairman of the company and costs be awarded as per Section 289 of the Companies Act, 2012 (As Amended).

#### Arguments for Respondent

12. While handling issue 1; Counsel for the Respondents argued that the Petitioners failed to prove any instances of oppression and mismanagement of the affairs of the company as required of them under Sections 101 & 103 of the Evidence Act Cap 6. Counsel further stated that the Petitioners departed from their pleadings and strayed

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to other allegations that were not the subject of the dispute. They prayed that this issue be answered in the negative since the Petitioners. failed to prove the allegations of oppression and mismanagement of the affairs of the company.

- 13. While resolving issue 2; the Counsel for the Respondents argued that there was no order or directive issued to the Company since the Respondent Company was never copied in the purported order. Furthermore, counsel for the respondent contended that the Respondent Company was never afforded a fair hearing because it was never given the opportunity to defend itself before the order was issued. - 14. While resolving Issue 3; Counsel for the Respondents argued that the meeting of 31st March 2023, had been called off by a notice issued on the 27th day of March 2023, by the Assistant Secretary of the Company. They argued that the powers to convene the Annual General Meeting are vested in the Executive of the Club according to Article 21.4 of the constitution. Therefore, for good reason, the Executive through the Secretary decided to postpone it to the 16th day of April 2023. Counsel further argued that the Petitioner's submissions are self-defeating given the fact they went on to convene a meeting on the 31st day of March 2023, which they allege to have been illegal. The respondent prayed that this issue be resolved in the negative because the

Petitioners' actions and conduct were criminal since they assembled unlawfully to usurp the authority of the Company.

- 15. Counsel for the Respondent submitted under Issue 4, that the illegalities of the meeting of 31st March 2023, spilled over and infected the one unlawfully convened on the 7th day of April 2023. Therefore, all the outcomes of the illegally convened meetings of 31st March 2023, and the one when adjourned on the $7th$ day of April 2023, are null and void. The respondent prayed that the outcomes of the meeting held on the 7th day of April 2023, be declared a nullity as they don't reflect the true position of the Company. - 16. While handling issue 5, Counsel for the Respondent referred to the affidavit of Hon. Patrick Nsanja, for the justification of the postponement of the Annual General Meeting. They relied on Article **12.5 of the club constitution** which allows the Executive Committee to make such a decision if it is in the best interest of the company. Counsel for the Respondent argued that the Executive Committee exercised its powers in the best interest of the company and its members when it fixed the Annual General Meeting on the 16th day of April 2023, because this allowed the Club members more time to pay the subscription. Counsel further argued that the overwhelming number of members who assembled on the $16th$ day of April 2023 for the Annual General Meeting (66 Members out of the 81 paid-up members as of the $16^{th}$ day of April 2023) portrays that indeed the meeting was lawful and it is the reason the club responded positively to all changes to ensure their full participation.

- 17. Counsel further argued that the word **Ordinarily** under **Article 21.3** of the Company's constitution suggests that "when all other factors are *favorable.*" Counsel for the Respondent prayed that while applying the provisions of the ordinarily clause under Article 12.3 this issue be answered in the affirmative. - 18. On issue 6 as regards the remedies, Counsel for the Respondent prayed for remedies to wit; that the Petition be dismissed and costs awarded to the Respondent as per Section 289 of the Companies Act, 2012; that the company documents, returns and resolutions following the Annual General Meeting held on the 16th day of April 2023, attended by 66 members be accepted for registration with the Registrar of Companies as reflecting the true and correct position of the Company; that the documents by the Petitioners following their meetings of 31st March 2023 and 7th April 2023 be rejected and should never be on the records of the Company for being fraudulently orchestrated and a misrepresentation of the status of the company.

## Arguments for the Petitioners in Rejoinder

19. In rejoinder, the Petitioners reiterated their submission that in the Companies Act and the Company's constitution, no law gives powers to the directors to postpone an already fixed meeting. They further

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relied on the case of Smith v Parenga Mines Ltd (1906) 2, Ch. 193 where it was held that "*directors have no power to postpone a meeting that*" *was already fixed by notice"*

- 20. Counsel for the Petitioners also argued that Article 12.5 of the constitution only gives powers to the Directors of the club to manage the club and not to postpone an already fixed Annual General Meeting. - 21. The Petitioners further answered issue 2 in rejoinder: wherein they stated that Article 28 referred to by the Respondents that necessitates a fair hearing only talks of courts of law and tribunals. They stated that the Registrar while passing the order wasn't acting as a tribunal but was rather doing her ordinary work as per Section 138(4) of the Companies Act, 2012 (As Amended) and Rule 3(a) and (c) of the **Companies (Power of Registrar) Regulations.** Counsel further relied on the case of Ndangwa Richard Vs Attorney General (Miscellaneous **Cause No. 244 of 2017)** wherein the court stated that "Article 28 is not applicable to public bodies and public officers taking decisions in the course of executing their duties" they stated that this decision defeated the argument of counsel for the Respondent and therefore the assertion that the Respondent was not accorded a fair hearing should be rejected.

D. Determination by the Registrar

22. While determining the matter at hand, I shall resolve issues 1 and 2. first, then I will handle Issues 3, 4 and 5 concurrently and then proceed to issue 6.

## Issue 1: Whether there was oppression and mismanagement in the running of the company by its Directors?

- 23. The petitioners brought this petition under Section 247 (1) of the **Companies Act 2012 (As Amended)** which stipulates that "*a member of* a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members including himself or herself may make a complaint to the registrar by petition for an order under this section." - 24. The Petitioners in their submissions pointed out the various different ways in which they allege the respondent company conducted their affairs in a manner that was oppressive to wit; the abuse of power, conflict of interest and intimidation, the issuance of a shorter Annual General Meeting Notice, illegal postponement of the Annual General Meeting of 31st March, 2023, adamantly ignoring members' written requisitions and requests, contempt by blocking the Registrar's directive and locking the company premises to block the Annual General Meeting, failure to display and send the audited accounts to members within the stipulated time, failure to keep proper books of

accounts, the recruiting of the company Auditor by the Directors, denying paid up members of the year 2022 to attend the Annual General Meeting of 2022, consistent failure to hold Annual General Meetings and to file annual returns, allowing a suspended member the back into company without due process, fraud and mismanagement of electoral process of directors and making voluntary fundraising mandatory to victimize members. To prove these allegations, they relied on the statutory declaration of the $2nd$ Petitioner Mr. Sseremba Owen.

- 25. The legal authority of Re Nakivubo Chemists (U) Ltd [1977] HCB $311(HC)$ ably laid down the law regarding the principle underlying minority oppression. *Manyindo J*, (As he then was) held inter alia that: For the petitioner to succeed under Section 211 of the Companies Act, (Currently Section 247 of the Companies Act 2012 as amended), he must show not only that there has been oppression of the minority shareholders of a company but also that it has been the affairs of the company which have been conducted in an oppressive manner. The oppression must be to a person in his capacity as a shareholder and not in any other capacity. - 26. Therefore, this demonstrates that two aspects must be proven before the court can declare that there has been minority oppression. These include; - *a) That there has been oppression of the minority shareholders of the company*

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- *b)* It is the affairs of the company which have been conducted in an oppressive manner. - 27. I am inclined to agree with Counsel for the Respondent that the evidence on record doesn't show how the affairs of the company were conducted in an oppressive manner to the detriment of the Petitioners. The Petitioners have failed to prove this allegation as required of them under Section 101(1) of the Evidence Act Cap 6 which stipulates that "Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he or she asserts must prove that *those facts exist.*" The Petitioners allege that the illegal postponement of the Annual General Meeting of 31st March 2023, amounted to the oppression of the minority members of the Company. The Petitioners have not provided any evidence to show how this postponement amounted to oppression or how any of the members was affected by those actions. - 28. The Company Executive carried out its mandate under Article 21.4 wherein it decided to postpone the meeting because many members hadn't yet paid the annual subscription. The postponement doesn't in any way amount to any form of oppression of the Petitioners as the notice was issued to all members of the company. The sole reason for the Postponement was to award more members time to pay the subscription, so that they could attend the Annual General Meeting. From the evidence on record, it can be seen that whatever was done by

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the Respondent Company herein was well within their duty as directors of the company and it was done without any oppression to the Petitioners but rather to promote the progress of the company.

- 29. The Petitioners in their submissions further state that there was abuse of power, conflict of interest and intimidation. They relied on **Article** 6.3 of the Company's constitution which states that; "if any member *shall fail to pay the annual subscription by the* $1$ st *day of March such a person* shall cease to be a member of the Club. However the Executive Committee shall have the right to reinstate such a person upon receipt of a written appeal giving time, and upon payment in full of the subscription in arrears and any **FINE** *which the Executive Committee may impose for late payment.*" - 30. The petitioners have alleged that a conflict of interest existed herein because Mr. Nsanja Patrick, who had expressed interest in standing for the position of Board of Directors of the Company is the same person that released a notice that the Board of Directors acting as per Article 6.3 of the company's constitution had resolved to give a 10 day's blanket grace period to all members who hadn't paid subscription fees by the $1^{st}$ day of March 2023. - 31. The Black's Law Dictionary, 8th edition, defines conflict of interest as "A real or seeming incompatibility between one's private interests and *one's public or fiduciary duties."* Furthermore, In the case of *Uganda* vs Patricia Ojangole Criminal Case No. 1/2014 Justice Gidudu held that; Conflict of interest has also has also been generally defined as any

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situation in which an individual or corporation is in a position to exploit a professional or official capacity in some way for their personal or corporate benefit.

- 32. With reference, to the facts, the Petitioners have not adduced any incriminating evidence to indicate that the imposition of the 10-day blanket period in any way benefited the Secretary Mr. Nsanja Patrick or even swayed the election in his favour to the detriment of the $1st$ Petitioner. However, I assert that the Executive provided a wellcalculated beneficial solution to the Members of the Company so that they would have more time to pay the subscription in order for a reasonable number of members to take part in the Annual General Meeting. - 33. Be it as it may, Section 198 (a) and (b) of the Companies Act, 2012 As **Amended** states that Directors shall (*a*) act in a manner that promotes the success of the business of the company; (b) exercise a degree of skill and care as a reasonable person would do looking after their own business. - 34. Article 21.1 of the company's constitution stipulates that "no member shall be eligible to attend any General Meeting unless helshe has paid in full the subscription." The Directors therefore acted in a manner that promotes the success of the social club by providing a blanket period for members of the company to pay for the subscription so as they can take part in the Annual General Meeting. There is no evidence on record to suggest that the members who paid the subscription fee

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during the blanket period did so specifically to vote for the Mr. Nsanja Patrick.

35. I am therefore inclined to resolve this issue in the negative. The Petitioners have failed to adduce any evidence to prove that the affairs of the company were being conducted in an oppressive manner.

Issue 2: Whether the registrar of companies ever directed or ordered the club to hold its AGM on the 31st day of March 2023.

- 36. The letter by the Registrar is a very contentious issue in this matter and therefore I shall pronounce a ruling on this matter. - 37. On the 30th day of March 2023, the 1st Petitioner made an application to the Registrar of Companies to issue a directive to the Directors of the Respondent Company that the Annual General Meeting should be held on the 31st day of March 2023. Subsequently, in a letter dated 30th March 2023, the Registrar issued what was interpreted as a "directive" by the petitioners that "the Annual General Meeting must be held on the date stated in the Company's Articles of Association (which is the 31st of *March 2023), and then an adjournment can be made in that meeting".* - 38. Counsel for the Respondent submitted on page 7 of the respondent's submissions to aver that if the directive order was to direct the company to hold its Annual General Meeting before having them heard was the clearest violation of the right to a fair hearing and a gross abuse of the principle of natural justice.

- 39. The Petitioners stated that Article 28 referred to by the Respondents necessitates a fair hearing only in courts of law and tribunals. They further stated that the Registrar while passing the order wasn't acting as a tribunal but was rather doing her ordinary work as per section 138(4) of the Companies Act, 2012 (As Amended) and Rule 3(a) and (c) of the Companies (Power of Registrar) Regulations. - 40. Article 28(1) of the Constitution of the Republic of Uganda 1995 (As **Amended)** states that "*in the determination of civil rights and obligations* or any criminal charge, a person shall be entitled to a fair, speedy and public hearing before an independent and impartial court or tribunal established by law." - 41. Article 44(c) of the Constitution further makes the right to be heard non-derogable. It states that "Notwithstanding anything in this Constitution, there shall be no derogation from the enjoyment of the right to a fair hearing." - 42. The facts at hand envisage the fact that the Respondent Company was never summoned by the Registrar and that the directive was issued without giving the Respondent Company an opportunity to be heard which is a clear violation of the right to a fair hearing. (Emphasis mine) - 43. On the right to a fair hearing, In Rev. Bakaluba Peter Mukasa Vs Betty Nambooze Bakileke (SCCA No.4 of 2009), Katureebe JSC in his lead judgment after quoting the provision of Article 28 (1) of the Constitution and emphasizing that Article 44 makes the right non-

![](0__page_17_Picture_5.jpeg) degorable stated as follows: "The Constitution only gives the salient features of what constitutes fair trial, i.e. that it must be before "an independent and impartial court or tribunal established by law "it does not define fair trial but because of its importance, allegations of denial of the right of fair hearing or trial are very serious indeed and should not be made lightly or merely in passing. They impact on the core of our trial system."

- 44. Fair and impartial trial is defined under Black's Law Dictionary 8th Edition as;" A hearing by an impartial and disinterested tribunal; a proceeding which hears before it condemns, which proceeds upon inquiry, and tenders judgment only after trial consideration of evidence and facts as a whole." The Registrar's directive cannot be said to have been fair and impartial because the Respondent Company was never summoned to present its defence. During the cross-examination of Jude Mbabali he admitted that the letter from the registrar was addressed to the Law firm Jude Mbabali & Co Advocates and never copied to the Respondent Company. - 45. In Mpunga and Sons Transporters Ltd Vs Attorney General & Anor (SCCA No.17 of 2001) Katureebe JSC held that the Audi Alteram rule which is the same as the right to a fair hearing and quoted with approval the authority of Russell Vs Norfolk (1949) 1 ALLER 109 wherein it was stated thus: "The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules

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under which the tribunal is acting, and the subject matter that is being dealt with."

46. With reference to the facts, I respectfully agree with Counsel for the Respondent that the Registrar Ms. Margaret Kibuuka issued an order directing the Respondent Company to hold its Annual General Meeting without giving the Respondent Company a fair hearing. Thus, in light of the above, the purported directive that was made by the Registrar in the Letter RG/11 dated 30th March, 2023 was a mere opinion and response to the letter dated 30th March 2023, but carries no legal implications because it was not a directive to the respondent company as misinterpreted by the petitioners.

I will now handle Issues: 3, and 4 concurrently;

Issue 3 : Whether the Meeting held on the 31st day of March 2023 was lawful?

Issue 4: Whether the AGM held on the 7th day of April 2023 was lawful?

- 47. With reference, to the proceedings of the Annual General Meeting of Pope VI Social Club Ltd held on Friday 31/03/2023, in Pope Paul Hotel Gardens it is stated under paragraph 10 that "All members after seeing the said registrar's letter agreed that the meeting was lawful and agreed to hold the AGM....." - 48. Mr. Seremba Owen states in paragraph 15 of his Statutory Declaration that in compliance with the directive by the Registrar of Companies

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and in compliance with Article 23.3 of the company's constitution, on the 31st day of March 2023, the Annual General Meeting was held.

- 49. However, before the meeting commenced the 2nd Petitioner, Mr. Seremba Owen who was the chairman of the meeting noticed that there was no quorum and as per Article 23.2 of the company's **constitution** he adjourned the AGM to the 7th day of April 2023. On the 7th day of April 2023, the Annual General Meeting was held and an ordinary resolution was passed to the effect that the 1st Petitioner was elected as the club chairman. - 50. The holding of the Annual General Meeting on the 31st day of March and subsequently on the 7th day of April all stemmed from the purported directive of the Registrar. As already resolved, the response letter from the Registrar was a mere opinion and not a directive given the fact that the Respondent Company was never given a fair hearing. In the case of Makula International vs. Cardinal Emmanuel Nsubuga & Anor [1982] HCB 11 (CA) it was held that; "Once an illegality has been brought to the attention of the court it cannot be ignored.... a court of law cannot sanction what is illegal and illegality once brought to the attention of the Court, overrides all questions of pleadings,... - 51. In light of the above binding authority, I find that the meetings that were held on the 31st day of March 2023, and the 7th day of April 2023,

were unlawful given the fact that they stem out of an illegal directive. Therefore, I will answer issues 3 and 4 in the negative.

## Issue 5 : Whether the AGM held on the 16th day of April 2023 was lawful?

- 52. On the 16th day of April 2023, the Respondent Company held the rescheduled Annual General Meeting. It was attended by a total of 66 members out of the 81 paid members and this was approximately 80 per cent of the eligible members. During this meeting, various resolutions were passed including the Appointment of a New Chairperson and New Company Executive. - 53. Article 4(1) Table C of the Companies Act, 2012 (As Amended) stipulates that "the company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it." - 54. An Annual General Meeting is a key medium used by companies for information disclosure to the members. Disclosure of material information such as receiving and passing accounts company are discussed during such meetings. This therefore gives members a chance to get more "credible" information so that they are aware of the company's affairs. - 55. Article 21.3 of the company's constitution stipulates that "An Annual General Meeting of the Club shall ordinarily be held not later than 31st day of March for the purposes of receiving and passing the accounts for the preceding

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year, and/or electing the Executive Committee, when elections are due, and for the transaction of such other business as may be specified in the notice or of which due notice shall have been given." This rule clearly states that the Company should always hold an annual general meeting.

- 56. The main point of contention herein is the *ordinarily clause*. Under Paragraph 10(a) of the $1^{st}$ Petitioner's statutory declaration, he avers that the word ordinarily that appears in Article 21.3 of the company's constitution is intended to emphasize that the Annual General Meeting of the company, as a rule, must not be held beyond the 31st day of March. The Petitioner attached the definition of the word by Merrian-Webster dictionary which defined it as "as in usually; according to the usual course of things". Under Paragraph 6 of Hon. Nsanja Patrick's Affidavit In opposition to Petition, he stated that the word ordinarily in the clause meant "when all factors are favorable". - 57. The English dictionary **ordinarily** means "usually". Oxford Furthermore, the same Oxford dictionary defines the word Usually to mean "under normal conditions; generally" Therefore it I am inclined to agree with the Counsel for the Respondent that the ordinarily clause didn't make it mandatory for the Company to hold the Annual General Meeting on the 31st March of each year but meant that the Company shall under normal conditions hold the Annual General Meeting on the 31st of March each year. Where the conditions weren't

favorable, the Executive of the company had the option of postponing the Annual General Meeting to a favorable date.

- 58. Article 12.5 of the company's constitution stipulates "that the Executive Committee shall exercise all such powers and all such things as may be exercised or done for the benefit of the Club, save such acts, omissions and commissions as may be prohibited by these Rules or by any statute for the time being in force. The Club in a General Meeting shall invalidate any prior act of the Executive Committee which would have been valid if such regulation had not been made and vice versa." - 59. Article 12.5 thus, allows the Executive Committee to make such decisions if it is in the best interest of the Company. Therefore, it is clear to me that allowing the members more time to pay their annual subscription after 28th February 2023 was in the best interest of the Company. This decision was made to ensure most of the members attend the Annual General Meeting. Furthermore, the postponement of the Annual General Meeting from the 31st day of March 2023 to the 16th day of April 2023 was within the powers of the Executive Committee and upon request by the majority of the Members. This was in accordance with Article 12.5 of the company's constitution of the respondent Company and was done in good faith. - 60. The Petitioners submit that the meeting that was held on the 16th day of April 2023, was unlawful because it was arising out of an illegal shorter notice and therefore, should be declared null. The Petitioners

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relied on the case of Smith v. Parunga Mines Ltd. (1906) Ch.193 where it was held that "in the absence of express authority in the articles the directors of a company have no power to postpone a general meeting properly convened."

61. Be it as it may, in the much more recent case of Johny Chandy $v$ Catholic Syrian Bank Ltd [1995] 5 SCL 247:[1995], the articles of association of the company did not expressly authorize the board to cancel or postpone a general meeting after it had been convened, (as per the facts at hand) nonetheless, the board postponed an extraordinary general meeting before the date of the meeting. P. K. Balasubramanyan, J. (As he then was) held that the Board had an implied, incidental or ancillary power to postpone the annual general meeting and the Board could do so when the circumstances so warranted. He further distinguished the principle laid down in Smith v Parenga Mines Ltd (supra) and observed: "Going strictly by the principles enunciated in Smith v Parenga Mines Ltd (Supra) the position in the present case would be that once the Board has called the annual general meeting, their powers under Articles have become exhausted and they can no longer postpone the annual general meeting or fix another day for the purpose. In several recent cases, the courts have held that it would be an undue restriction on the power of the Board if it were to be held that the Board would not have implied or the ancillary power to postpone an annual general meeting for which they have issued notice. Times have changed, and a strict view as in Smith's case would

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cause considerable practical difficulties in the working of a company. Once it is found that the circumstances warranted, the Board of Directors could postpone an annual general meeting already called for, for a future date or *could fix another day for the purpose, before the meeting commences."*

- 62. Thus the court in *Johny Chandy v Catholic Syrian Bank(supra)* approached the issue with a pragmatic view having due regard to the practical realities given the fact that it may well happen in reality that circumstances warrant the postponement of a meeting, which has been notified before it is held. In the instant case there are various reasons that warranted the Postponement of the Annual General Meeting from the $31$ st day of March 2023 to the 16th day of April 2023. - 63. Under paragraph 10 of Nsanja Patrick's affidavit opposing petition he stipulates that the company's Executive Committee exercised its powers in the best interest of the company and fixed the Annual General Meeting on the 16th day of April 2023 so as to allow the members more time to pay the subscription and attend the Annual General Meeting. All was done lawfully and in good faith. - 64. The main purpose of an Annual General Meeting is to comply with legal requirements including the presentation and approval of the audited accounts, election of directors, and appointment of auditors for the new accounting term and this requires participation of all members of the Company. Had the Annual General meeting been held on the 31st day of March, 2023, it wouldn't have served its purpose

given the fact that majority of the members hadn't paid the subscription as required of them under Article 21.1 of the company's constitution.

- 65. These circumstances warranted, the Board of Directors to postpone the Annual General Meeting from the 31st day of March, 2023 to the 16th day of April, 2023, so that majority of the Members get an opportunity to participate in the Annual General Meeting as it is in the best interests of the company. Therefore, I will answer this issue in the affirmative. - 66. In rejoinder, the Petitioners raised a preliminary objection to the effect that Counsel for the Respondent Mr. Katabalwa Francis Xavier was practicing the law without a valid practicing certificate. They presented evidence of a letter from the Chief Registrar Ref. A/267 which was issued on the $4^{th}$ day of October, 2023, where she stated that "Mr. Katabalwa Francis Xavier does not have a practicing certificate for the year 2023" - 67. The Petitioners relied on Sections 15 (1) &18 of the Advocates Act Cap **267** (As Amended); to submit that it is trite law that an advocate who practices without a valid practicing certificate after February in any year commits an offence and is liable to both criminal and disciplinary proceedings. They further relied on the case of **Prof Syed Huq v The** Islamic University in Uganda Civil Appeal No. 47 of 1995, wherein they submitted that the court held that documents prepared or filed by such an advocate whose practice is illegal, are invalid and of no legal effect on the principle that courts do not condone or perpetuate illegalities.

- 68. The Petitioners made a prayer that the said documents and proceedings by Mr. Katabalwa Francis Xavier be declared null and void since they are of no legal consequence and therefore cannot be sustained. - 69. This assertion by the Petitioners raises, the question as to whether pleadings signed by advocates who are professionally qualified, who have been admitted to the practice of law and have not been struck off the Roll of Advocates or suspended by the Disciplinary Committee of The Law Council but have only delayed to take out the annual practicing certificates are illegal and of no legal consequence. - 70. Section 15(1) of the Advocates Act Cap 267 (As Amended) stipulates that "Any advocate not in possession of a valid practicing certificate or whose practicing certificate has been suspended or cancelled who practices as an advocate commits an offence; but no prosecution shall be commenced under this subsection before the first day of March next following the expiry of the validity of an advocate's practicing certificate if the reason the advocate is not in possession of a valid certificate is only because he or she has neglected to renew the certificate which expired on the thirty-first day of December *previous to that first day of March."* - 71. The decisions of court are not uniform as to whether these defects are of substance or of procedure. For instance, in the case of Standard

**Chartered Bank v. Mechanical Engineering Plant Ltd & Others [2009]** EA 404, it was held that a practicing certificate cannot have a retrospective effect and therefore the memorandum of appeal filed by an advocate without a practicing certificate at the time of signing it, was incompetent as the advocate was unqualified. Similarly, in Delphis Bank Ltd v. Behal and others [2003] 2 EA 412, it was held that it is public policy that courts should not aid in the perpetuation of illegalities. Court held that "Invalidating documents drawn by such advocates will come to the conclusion that will discourage excuses being given for justifying the illegality. A failure to invalidate the act by an unqualified *advocate is likely to provide an incentive to repeat the illegal Act.*"

72. On the other hand, in cases like that of Attorney General and Hon. Nyombi Peter v. Uganda Law Society, Misc. Cause No. 321 of 2013, it was held that though the advocate may be unqualified to practice, the legality of the pleadings signed and filed by such an advocate while so disqualified is not affected because of the provisions of section 14A of The Advocates (Amendment) Act, 2002. Before this, it had been decided in Prof Syed Huq v. the Islamic University of Uganda, Civil Appeal No. 47 of 1995, that deeming such pleadings or documents to be illegal would amount to a denial of justice to an innocent litigant who innocently engaged the services of such an advocate. According to Tsekooko JSC, "the intention of the legislature appears to be aimed at punishing the errant advocate by denying him remuneration or having him

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prosecuted. I find nothing in the Provisions I have referred to which penalize an innocent litigant. That is why the Court would deny audience to an Advocate without a practicing certificate but should allow a litigant the *opportunity to conduct his case or engage another Advocate.''*

- 73. Furthermore, in the case of Maji Real Estates (U) Limited and The Registered Trustees of Arua Diocese vs. Aulogo Cooperative Savings and Credit Society Limited, Adjumani Miscellaneous Civil Application No. 0028 OF 2017; *Hon. Justice Stephen Mubiru* while resolving a similar issue, stated that; "I take the view that non-compliance *with any procedural requirement relating to a pleading or application for relief* should not entail automatic nullification or rejection, unless the relevant statute or rule so mandates. Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. *Rules of procedure, as handmaidens to justice, should never be made a tool to deny justice or perpetuate injustice, by any oppressive or punitive use."* - 74. Therefore, despite the line of authorities to the effect that pleadings filed by persons who at the time of signing were incompetent or unqualified as advocates are void, the dominant view in the existing jurisprudence is that an irregularity in the signatures on a pleading is a mere defect of procedure and does not affect the jurisdiction of the Court. It is thus now well settled that any defect in signing a pleading or any defect in the authority of the person signing the pleading will

not invalidate the pleading, such omission or defect being one relatable to procedure, can subsequently be corrected.

75. Thus, in spite of the fact that Mr. Katabalwa Francis Xavier had not renewed his practicing certificate at the time of signing the pleadings, the legality of the pleadings he signed will not be affected. This is firstly because it is a mere defect of procedure that can be corrected and secondly deeming such pleadings or documents to be illegal would amount to a denial of justice to an innocent litigant, in this case, the Respondent who innocently engaged the services of such an advocate.

## Issue 6: What remedies are available to the parties?

76. The Companies (Power of Registrar) Regulations, 2016 mandate the Registrar to rectify the Register. Under **Regulation 3(i)** it is provided that; "*In the exercise of the functions under the Act or any Regulations made*" under the Act, the registrar—; (i) may correct or amend the register; And

77.**Regulation 8** provides as follows:

"8. Rectification of register. (1) The registrar may rectify and update the *register to ensure that the register is accurate.*

(2) For the purposes of this regulation, the registrar may expunge from the register, any information or document included in the register, which—

(a) is misleading; (b) is inaccurate; (c) is issued in error; (d) contains an entry or endorsement made in error; (e) contains an illegal endorsement; (f) is illegally or wrongfully obtained; or (g) which a court has ordered the registrar to expunge from the register."

I have already determined that the meetings held on 31st March 2023 and 7th April 2023 are null and void together with the special resolution purportedly passed from the meeting of 7th April 2023, which was not supposed to take place, and all the resultant and further documents passed in reliance on that meeting.

- 78. Therefore, pursuant to Regulation 32 of the Companies (Powers of **Registrar) Regulations, 2016, I make the following orders;** - a) The Annual General meeting which was held by the respondent company on the 16th day of April 2023 is valid together with the resultant resolutions. - b) The purported Annual General meetings held by the petitioners on 31st day of March 2023 and the 7th day of April 2023, are null and void. - c) All resolutions passed on the $31st$ day of March 2023 and the $7th$ day of April 2023, are null and void. - d) Each party to bear its own costs.

79. Right of appeal explained.

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Muliisa Solomon

Registrar

08/02/2024

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