Financial Institutions Act

Section Application of Act Section This Act applies to a financial institution defined in section 2 . This Act shall not apply to a cooperative society registered under the Cooperative Societies Act, except a cooperative society established for the purpose of accepting deposits from the public. This Act does not apply to a microfinance deposit taking institution .

Section Interpretation Section In this Act, unless the context otherwise requires, a reference to loans or credit, lending, extension or provision of credit, credit accommodation or such similar terms, or to any instrument in that respect, collectively referred to as “credit provision”, shall be interpreted to apply to— any finance arrangement which satisfies the following conditions— any finance arrangement not included in subsection (2)(a) and satisfies the following conditions— In this Act, unless the context otherwise requires, a reference to guarantees or similar terms or a reference to any instrument in respect of guarantees or similar terms, in the Act referred to collectively as a “guarantee provision”, shall be interpreted to apply to any arrangement which satisfies the following conditions— In this Act, unless the context otherwise requires— “ acceptance house ” means a company licensed to conduct the financial institution business in Uganda which is specified in Schedule 2 to this Act as its principal business and which consists mainly in the granting of acceptance facilities and economically equivalent Islamic financial business subject to any restrictions specified by...

Section Factors to be considered in making decision to grant licence Section The Bank of Uganda shall, in considering an application for a licence under section 9 , require to be satisfied as to— the financial condition and history of the applicant; the nature of the business of the applicant including the range of services and products proposed; the competence and integrity of the proposed management; the adequacy of the applicant’s capital structure, earning prospects, business plans and financial plans; the convenience and needs of the community to be served; the geographical locations and branch distribution network of the proposed business; whether the directors and officers of the applicant are fit and proper persons for the purpose of transacting business as a financial institution , according to the criteria set out in Schedule 3 to this Act and such other criteria as the Bank of Uganda may determine; the structure and shareholding of the group of companies of which the applicant forms a part or intends to form a part; whether the applicant is or will be able to apply or maintain adequate, effective and proper internal control systems when conducting financial institution b...

Section Processing, granting and refusal of licence Section The Bank of Uganda shall within fourteen days after the period referred to in subsection (1) , consider the application and the report, and shall— A licence granted under this Act shall clearly indicate— The Bank of Uganda shall, within six months after receipt of an application, or of the additional information or clarification referred to in section 9(7) , investigate and prepare a detailed report in respect of each application. grant the licence if it is satisfied that the application is in accordance with this Act; grant the applicant a conditional licence with such conditions as it may deem necessary; grant the applicant a limited licence covering only the part of financial institution business for which it is satisfied that the applicant meets the requirements of this Act; or refuse to grant the licence for reasons that shall be stated in the letter of refusal. The Bank of Uganda shall, within seven days after its decision under subsection (2) , inform the applicant of its decision in writing. the name and address of the financial institution ; the nature or classification of the financial institution ; the type of f...

Section Licence fee Section The applicant shall, upon being granted a licence under this Act, pay a fee prescribed by the Bank of Uganda by notice and the holder of the licence shall after that pay an annual fee prescribed by the Bank of Uganda on or before the 31 st day of January of each year. If a financial institution fails to pay the prescribed annual licence fees before or on the date specified in subsection (1) , the financial institution shall pay to the Bank of Uganda a late payment civil penalty at a rate of fifty percent of the licence fee. The unpaid annual licence fee and any civil penalty payable under subsection (2) shall be a debt due to the Bank of Uganda by the financial institution.

Section Duration and display of licence Section A licence granted under section 11 shall remain in force until revoked. A licence granted under section 11 shall be kept displayed in its original form in a conspicuous place in the premises in which the financial institution carries on its lawful business, and copies of it shall be similarly displayed in each of its branch offices.

Section Amendment and restriction of licence Section Subject to the provisions of this section, the Bank of Uganda may at any time amend or restrict a financial institution ’s licence or any term or condition of its licence — to correct any error; if the institution requests the amendment; if the Bank of Uganda considers the amendment necessary to reflect the true nature of the business which the institution is conducting; if it is desirable for the protection of that institution’s depositors or potential depositors; or if for any other reason the Bank of Uganda considers the amendment necessary or desirable in the public interest. Before amending a financial institution ’s licence in accordance with subsection (1) , other than at the institution’s request, the Bank of Uganda shall notify the institution, in writing, of the nature of the amendment it proposes to make and its reasons for making the amendment and shall give the institution an opportunity to make representations in that matter. If the Bank of Uganda refuses to make an amendment in accordance with subsection (1)(b) , it shall, within a reasonable time after reaching its decision notify the institution, in writing, of i...

Section Failure to commence operations Section The licence of a financial institution which fails to commence operations within twelve months from the date of issue of the licence shall be revoked.

Section Revocation of licence Section The Bank of Uganda may revoke a licence of a financial institution if it is satisfied that the financial institution at any time— has ceased to carry on business; is significantly under-capitalised as defined in section 87(4) or is unable to pay its liabilities as they mature; has gone into liquidation; has been wound up; has been dissolved; is, in the opinion of the Bank of Uganda, conducting business in a manner detrimental to the interests of depositors; has, in the view of the Bank of Uganda, contravened this Act or any other financial law in a manner which is serious or persistent; has engaged in serious deception of the Bank of Uganda or the general public in respect of its financial condition, ownership, management, operations or other facts material to its business; has, without the consent of the Bank of Uganda, amalgamated with another financial institution or sold or otherwise transferred its assets and liabilities to another financial institution ; has failed to comply with any condition stipulated by the Bank of Uganda under section 11(2) ; has failed to comply with any instruction or direction given by the Bank of Uganda under Par...

Section Prohibitions against transacting financial institution business Section A financial institution shall not— For purposes of this section, “deposit” means a sum of money paid on terms— For the purposes of subsection (6)(b) , money is paid on terms which are referable to the provision of property or services or to the giving of security only if— For the purposes of this section, “deposit” does not include— For the purposes of this section, a business is a deposit-taking business if— A person shall not transact any deposit-taking or other financial institution business in Uganda without a valid licence granted for that purpose under this Act. No person shall be granted a licence to transact business as a financial institution unless it is a company within the meaning of this Act. A person licensed to carry out financial institution business may carry out the licensed business through an agent . The Bank of Uganda shall, in consultation with the Minister , make regulations in respect of agents and agent banking . transact or hold itself out as conducting any financial institution business not specified in its licence ; effect any major changes or additions to its licensed busine...

Section Deposit advertisements Section Any person who issues any advertisement, brochure, circular or other document inviting or intended to induce another person to make a deposit, which— falsely represents that other person as authorised to accept deposits or is otherwise licensed under this Act; or is contrary to the regulations issued by the Bank of Uganda under this section, The Bank of Uganda may at any time direct in writing any person to withdraw, amend, or refrain from issuing any advertisement, brochure, circular or other document relating to deposits which, in its sole discretion, it considers to be misleading. Any person who, without lawful excuse, fails or refuses to comply with a direction under subsection (2) commits an offence and is liable, on conviction, to a fine not exceeding fifty currency points or to imprisonment for a term not exceeding one year, or both.

Section Corporate powers outside Uganda Section After establishing the subsidiary, branch or representative office outside Uganda, the financial institution concerned shall, in writing, notify the Bank of Uganda of— A financial institution shall not open or set up a subsidiary, branch or representative office or transact financial institution business outside Uganda or acquire an interest in any undertaking conducting business outside Uganda, except with the consent of the Bank of Uganda. Before granting any approval under this section, the Bank of Uganda may require to be satisfied as to the financial institution ’s capital adequacy and proposed business plans and may require such additional information as shall be specified by the Bank of Uganda in regulations made under this Act. In the case of an acquisition referred to in subsection (1) , the Bank of Uganda shall, in accordance with regulations made under this Act, appoint a firm of accountants to examine and report on the financial position of the undertaking to be acquired, to ensure that the acquisition is not detrimental to the interests of the depositors of the acquiring financial institution. any change of address of the...

Section Prohibitions against use of word “bank” or its derivatives Section A person other than a person licensed as a commercial bank , merchant bank , mortgage bank , or post office savings bank under this Act, shall not, except with the consent of the Bank of Uganda— A financial institution may not be licensed under this Act with a name— use the word “ bank ” or any other expression, name, title or symbol indicating or likely to create the impression that the person is conducting or is authorised to conduct business as a commercial bank , merchant bank , mortgage bank or post office savings bank under this Act; or make or continue to make any representation indicating the transaction of the business specified in paragraph (a) in any bill head, letter-paper, notice, advertising or in any other manner. that is prohibited by an Act of Parliament; that is in the opinion of the Bank of Uganda, deceptively misdescriptive; that is the same as or, in the opinion of the Bank of Uganda, similar to, any existing trademark or trade name, or corporate name of a body corporate, except where the trade name or trademark is being changed or the body corporate is being dissolved or is changing its...

Section Search and seizure Section The Bank of Uganda may, at any time and without prior notice, if it has reason to believe that a person is transacting or carrying on business as a financial institution or taking deposits in contravention of section 3 , in writing, authorise an officer of the Bank of Uganda to— No person shall— enter any premises which the Bank of Uganda has reason to believe are occupied or used by any person for the purpose of or in connection with the contravention of section 3 ; search any book, record, statement, document or other item used, or which is believed to be used, in connection with the contravention of section 3 ; seize or make a copy of any book, record, statement, documents or other item referred to in paragraph (b) or seize any money found on the premises; question any person who is present on the premises referred to in paragraph (a) , or the auditors, directors, members or partners of any person conducting business on the premises, in connection with the conducting of the business on the premises; direct that the premises referred to in paragraph (a) or any part of it or anything on the premises, should be left undisturbed for as long as it i...

Section Repayment of money by unauthorised persons Section If the Bank of Uganda is satisfied that a person has obtained any money in contravention of section 3 , the Bank of Uganda shall, in writing, direct the person to repay all the money obtained by the person and all profits accruing to that person as a result of the illegally obtained money or deposits, including any interest or other amounts which may be owing by that person in respect of the money— to the respective persons from whom the money was obtained; in the manner and in accordance with the direction of the Bank of Uganda; and within the period of time imposed by the Bank of Uganda and specified in the direction. A person referred to in subsection (1) who refuses or fails to comply with a direction under that subsection, shall, for the purposes of section 2 of the Insolvency Act , be deemed unable to pay the debts, or for the purposes of the Insolvency Act , be deemed to have committed an act of bankruptcy, as the case may be, and the Bank of Uganda may apply to the High Court for the winding up, or for the sequestration of the estate of that person, as the case may be. Subsections (1) and (2) shall be in addition to...

Section Application for licence Section An application for a licence under this section shall contain the following information— the name and address of— The following classes of licences shall expressly be included in the provisions of this law as the permitted main financial services provided or businesses conducted, particulars of which are more elaborately specified in Schedule 2 to this Act as— An application under subsection (1) shall be accompanied by— A company proposing to transact or carry on business as a financial institution shall apply, in writing, to the Bank of Uganda for a licence under this Act. the proposed financial institution ; the directors; the shareholders; the nationality of the directors; the nationality and shareholding of each shareholder; the proposed location where the financial institution is going to operate from; the estimated number of persons to be employed; the qualifications, experience, nationality and other relevant particulars of the proposed management and staff; the capital structure and earning prospects of the financial institution ; the applicant’s business, financial plans and earnings forecasts namely, balance sheet, income statement...

Section Prohibitions on shareholding in financial institutions Section Unless this Act expressly provides otherwise— Permission under subsection (2) for the acquisition of shares in a financial institution shall not be granted unless the Bank of Uganda is satisfied that the proposed acquisition of shares— If, through on-site inspection, the Bank of Uganda discovers that the retention of a certain amount of shareholding in a financial institution by a person will be to the detriment of the financial institution or the depositors concerned, the Bank of Uganda may— a person ; a body corporate controlled by one person ; a group of related persons; or a body corporate owned or controlled directly or indirectly by a group of related persons, Notwithstanding the provisions of the Companies Act , no financial institution shall, except with the permission of the Bank of Uganda, allot or issue, or register the transfer of five percent or more of any of its shares to one person or group of related persons. Permission under subsection (2) may be obtained from the Bank of Uganda on application in writing. will not be contrary to the public interest; will not be contrary to the interests of the...

Section Persons who are not fit and proper not to become substantial shareholders Section No person or group of related persons shall acquire more than five percent of the shares of a financial institution unless the Bank of Uganda has— The Bank of Uganda shall not issue a notice of no objection unless it is satisfied that— A person or group of related persons who do not satisfy the criteria for the fit and proper test relating to substantial shareholders as determined by the Bank of Uganda in accordance with Schedule 3 to this Act shall not acquire more than five percent of the shares of a financial institution . received from them a written notice of their intention to become substantial shareholders; and given them a written notice of no objection. the person or the whole group of related persons are fit and proper persons to become substantial shareholders of a financial institution ; and the interests of depositors would not be in any manner threatened by that person or group of related persons becoming substantial shareholders. Where the Bank of Uganda receives a notice under subsection (2)(a) , it may seek such further information and documents from any person including the...

Section Registrar not to register transfer of shares without permission of Bank of Uganda Section The Registrar of Companies shall not register any transfer or allotment of shares of a financial institution referred to in section 17(2) without the written consent of the Bank of Uganda.

Section Registration of shares in names of nominees Section Notwithstanding the provisions of the Companies Act , no financial institution or controlling company shall, without the written approval of the Bank of Uganda— Subsection (1) shall not affect the allotment, issue or registration of the transfer, of shares in a financial institution— allot or issue any of its shares to, or register any of its shares in the name of any person other than the intended beneficial shareholder; transfer any of its shares in the name of a person other than the beneficial shareholder; or allow any of its shares to remain registered in the name of a person other than the beneficial shareholder at any time after thirty days after the commencement of this Act. in the name of any executor, administrator, trustee, curator, guardian or liquidator under the Companies Act ; or for a period of not more than six months, in the name of a stockbroker or a company established by him or her for the purposes of the Capital Markets Authority Act; except that the Bank of Uganda shall require to be satisfied that the shares are allotted, issued or registered in such a manner as to facilitate delivery of the shares...

Section Registration of shares contrary to this Act Section No person shall— either personally or by proxy granted to any other person , cast a vote attached to; or receive a dividend payable on, any share in a financial institution allotted or issued to that person or registered in the name of that person in contravention of this Act. The validity of any resolution adopted by a financial institution shall not be affected by a vote being cast in contravention of subsection (1) (a) , if that resolution was adopted by the requisite majority of votes which were validly cast. A dividend referred to in subsection (1)(b) shall accrue to the financial institution concerned.

Section Shareholders register and disclosure of interests in shares Section A financial institution shall maintain a register of the current beneficial holders of all shares in the financial institution in such form and manner as the Bank of Uganda may approve. A financial institution shall every six months provide the Bank of Uganda with the most up-to-date returns of the register referred to in subsection (1) . No transfer of shares of a financial institution shall be valid unless the transfer is recorded in the register. A person or group of related persons who acquire a substantial interest in shares comprised in the financial institution ’s share capital or ceases to be interested in shares so comprised, whether or not retaining an interest in other shares so comprised, shall within twenty-one days after the acquisition or ceasing to hold that interest, notify the financial institution of the interest so acquired or ceasing to be held.

Section Restriction of right to control financial institutions Section For the purposes of this section, a person shall be deemed to exercise control over a financial institution if, where that person is a company , the financial institution is a subsidiary of that company or whether or not that person is a company , if that person by himself or herself or together with his or her associates, related persons or group of related persons— is entitled or has the power to determine the appointment of the majority of the directors of that financial institution , including— No person other than a reputable financial institution or in exceptional cases a reputable public company , may exercise control over a financial institution . the power to appoint or remove, without the concurrence of any other person , all or the majority of such directors; or the power to prevent any person from being appointed a director without his or her consent, and if a person ’s appointment as a director of the financial institution follows necessarily from his or her appointment as a director of the person first-mentioned in this subsection, the first-mentioned appointment shall for the purposes of this subs...

Section Penalties for violating provisions on shareholding Section A preliminary order by the Bank of Uganda under subsection (1) may, in respect of any of the shares forming the subject of, or related to, the contravention referred to in that subsection, prohibit— A preliminary order made by the Bank of Uganda under subsection (1) shall— The person to whom the preliminary order is delivered under subsection (3)(d) , shall— in writing, acknowledge receipt of the order , specifying— A person to whom a preliminary order has been delivered under subsection (3)(d) or any other person prejudiced by the order, may within fourteen days after the date of service of the order or after the date upon which he or she became aware of the order, as the case may be, make written representations to the Bank of Uganda applying for— The Bank of Uganda may, after consideration of the representations made to it under subsection (8) — If the Bank of Uganda— Any transaction, including any agreement or arrangement, in relation to any shares or security or to any interest in any shares or security, which contravenes— The Bank of Uganda may, in writing, if it is satisfied that a financial institution or an...

Section Minimum capital requirements for financial institutions Section A person proposing to transact financial institution business in the capacity of a bank in Uganda shall have a minimum paid-up cash capital of not less than two hundred thousand currency points invested initially in such liquid assets in Uganda as the Bank of Uganda may approve. The minimum capital funds unimpaired by losses of a bank shall at any time not be less than two hundred thousand currency points. A person proposing to transact business as a non-bank financial institution shall have a minimum paid-up cash capital of not less than fifty thousand currency points invested in such liquid assets in Uganda as the Bank of Uganda may approve. The minimum capital funds unimpaired by losses of a non-bank financial institution shall at any time not be less than fifty thousand currency points. The Minister , on the advice of the Bank of Uganda, may revise the minimum capital requirements of financial institutions by a statutory instrument, which shall immediately be laid before Parliament.

Section Minimum ongoing capital requirements Section A financial institution shall at all times maintain— a core capital of not less than eight percent of total risk adjusted assets plus risk adjusted off balance sheet items as may be determined by the Bank of Uganda by statutory instrument; and a total capital of not less than twelve percent of its total risk adjusted assets plus risk adjusted off balance sheet items as may be determined by the Bank of Uganda by statutory instrument. The Bank of Uganda may prescribe higher ongoing capital requirements for a specific financial institution if the supervisory review process reveals existing risks in the financial institution warranting the increase. The Bank of Uganda may, by statutory instrument, in consultation with the Minister , revise the minimum ongoing capital requirements of a financial institution . The Bank of Uganda may, in addition to the minimum ongoing capital requirements specified in subsection (1) , by statutory instrument, in consultation with the Minister, require financial institutions to maintain capital buffers.

Section Minimum holding and computation of liquid assets Section Subject to section 25(1) and (2) , the minimum holding of liquid assets under this section shall be expressed as a proportion of the demand and time liabilities of a financial institution and shall not exceed thirty percent of such demand and time liabilities, except that— For the purposes of this section, “liquid assets” means all or any of the following— A financial institution shall maintain a minimum holding of liquid assets, as determined by the Bank of Uganda in accordance with subsection (2) . different proportions may be determined for demand and time liabilities and for different types of financial institutions; and demand or time liabilities due by a financial institution to its head office or to any bank situated outside Uganda may, at the discretion of the Bank of Uganda, be included wholly or in part. The Bank of Uganda shall prescribe the minimum amount of liquid assets to be held by a financial institution , including the off setting of general or specified liquid assets against demand and time liabilities ; except that in so doing the Bank of Uganda may distinguish between requirements for deposit liab...

Section Intervention Section Where the Bank of Uganda has reason to believe or finds that the affairs of the financial institution are conducted in a manner detrimental to the interests of the depositors or prejudicial to the interests of the financial institution or in contravention of this Act, or any other written law or that the financial institution has refused to submit to inspection, or has provided false information, the Bank of Uganda may, without prejudice to any other course of action— Where a financial institution fails, refuses or neglects to comply with an order , direction or agreement issued or made under subsection (1) , the Bank of Uganda may do any or all of the following— initiate a legally binding cease and desist order , of either temporary or indefinite duration requiring the financial institution and its management to— order in writing that the financial institution takes remedial action to comply with this Act or regulations, notices or orders issued under this Act; issue directions regarding measures to be taken to improve the management, financial soundness or business methods of the financial institution ; require the directors or management of the finan...

Section Modification, cancellation and upholding of orders Section The Bank of Uganda may, upon representation made to it or on its own motion, modify or cancel or uphold any order issued under section 82 , and upon such modification or cancellation, impose such conditions as are necessary subject to which the modification or cancellation shall have effect.

Section Prompt mandatory corrective actions Section The prompt, mandatory corrective actions prescribed in sections 85 , 86 and 87 , shall take precedence over any discretionary corrective actions available to the Bank of Uganda under this Act or any other law.

Section Adequately capitalised financial institutions suffering large losses Section Where a financial institution which complies with the capital requirements prescribed in sections 25 and 26 has incurred or is likely to incur large losses within any financial year, the Bank of Uganda shall take the following actions against that financial institution— prohibit the financial institution from declaring and distributing any dividends which are, in the opinion of the Bank of Uganda, likely to cause the financial institution not to comply with the capital requirements prescribed in sections 25 and 26 ; undertake more frequent inspection of that financial institution ; and prohibit the financial institution from making any other distributions, bonuses or increments in the salary, emoluments and other benefits of all directors and staff of the financial institution . In addition to the actions prescribed in subsection (1) , the Bank of Uganda may require the directors or management of the financial institution to provide a written explanation detailing the causes of those losses and the measures to be taken by the financial institution to rectify the position and avert future losses. Fo...

Section Under-capitalised financial institutions Section Where a financial institution is under-capitalised, the Bank of Uganda shall take the following actions against that financial institution — Where a financial institution has been ordered by the Bank of Uganda to submit a capital restoration plan or to add more capital, and the financial institution fails, refuses or neglects to comply with the order , or to implement the capital restoration plan, the Bank of Uganda shall— in addition to the actions prescribed in subsection (2) , the Bank of Uganda may— An “under-capitalised financial institution ” is one which does not comply fully with any or all of the capital requirements prescribed in sections 25 and 26 . all of the actions prescribed in section 85(1) ; order the financial institution to submit to the Bank of Uganda within forty-five days after the making of the order , a capital restoration plan to restore the financial institution to capital adequacy as prescribed in sections 25 and 26 within one hundred eighty days of making that order. In addition to the actions prescribed in subsection (2) , the Bank of Uganda may appoint a person, suitably qualified and competent i...

Section Significantly under-capitalised financial institutions Section Where a financial institution is significantly under-capitalised , the Bank of Uganda shall immediately take any or all of the following actions against the financial institution — In addition to the actions prescribed in subsection (1) , the Bank of Uganda may take any or all of the following actions— Where at any time— For the purposes of this Act, a “ significantly under-capitalised ” financial institution is one which does not comply with any of the following— take any or all of the actions prescribed in section 86 and this section; enter into an agreement with the board of directors of the financial institution requiring the financial institution to rectify its significant under-capitalisation within ninety days, and to restore capital adequacy within one hundred eighty days, or within such shorter periods as the Bank of Uganda shall order . restrict the financial institution from engaging in new foreign exchange business ; prohibit the financial institution from engaging in new off-balance sheet transactions. after the period specified in subsection (1)(b), the financial institution has failed to raise its...

Section Management takeover Section The Bank of Uganda may take over the management of a financial institution if— Where the Bank of Uganda takes over the management of a financial institution under this section or closes the financial institution under any provision of this Act, the following shall apply— it is conducting its business in a manner contrary to this Act; the continuation of its activities is detrimental to the interests of depositors; it refuses to submit itself to inspection by the Bank of Uganda as required by this Act; its licence has been revoked under section 16 ; or it is engaged in or is knowingly facilitating criminal activities. any term whether statutory, contractual or otherwise on the expiration of which a claim of right of the financial institution would expire or be extinguished, shall be extended six months from the date of taking over management; any attachment or lien existing six months prior to the takeover by the Bank of Uganda of the management of the financial institution shall be vacated and no attachment or lien except a lien created by the Bank of Uganda, shall attach to any property or asset of the financial institution as long as the Bank o...

Section Powers of Bank of Uganda on taking over management of financial institution Section The powers referred to in subsection (1) shall include power to— Notwithstanding subsection (6) , where the Bank of Uganda is of the opinion that— The Bank of Uganda shall, on taking over management of a financial institution under section 88 , have exclusive powers of management and control of the affairs of the financial institution. continue or discontinue any of its operations as a financial institution notwithstanding the revocation of its licence ; stop or limit the payment of its obligations; employ any necessary staff; execute any instrument in the name of the financial institution ; initiate, defend and conduct in its name any action or proceeding to which the financial institution may be a party; re-organise or liquidate the financial institution in accordance with this Act; appoint a person to be known as a statutory manager to manage, control and direct the affairs of the financial institution ; assume or reject any executory contracts; cancel any leases or tenancy agreements entered into by the financial institution as lessee or tenant; appoint an advisory board of directors; cl...

Section Duties of statutory manager Section The duties of a statutory manager shall include— The declaration of a moratorium shall— Where a financial institution complies with the prudential standards within the period specified in this Part, the Bank of Uganda shall request the shareholders of the financial institution , subject to sections 51 and 52 , to appoint an interim board of directors, charged with the management and control of the financial institution. The interim board of directors appointed under this section shall hold office on such terms and conditions as may be prescribed in the instrument of appointment, and in any case, at the cost of the financial institution . Where, within six months of its appointment, the Bank of Uganda is of the opinion that the interim board of directors is managing the financial institution in accordance with prudential standards, the Bank of Uganda shall request the shareholders of the financial institution , subject to section 51 , to confirm the appointment of each eligible individual director. tracing and preserving all the property and assets of the institution; recovering debts and other sums of money due and owing to the institutio...

Section Prohibition on legal proceedings against financial institution under management of Bank of Uganda Section A person shall not, except— with leave of court, on the ground that he or she would be caused exceptional hardship if leave were not granted; or with the prior written consent of the Bank of Uganda, commence or continue with any legal proceeding in any court against a financial institution while the financial institution is under the management of the Bank of Uganda. An application for leave under subsection (1) shall not be filed unless the Bank of Uganda receives thirty days’ notice of the intention to apply. The Bank of Uganda may apply to the court to be joined as a party to the proceedings for leave.

Section Management by Bank of Uganda not relief from contractual obligations Section A party to a contract with a financial institution shall not be relieved of the obligations on the ground that the financial institution is under management of the Bank of Uganda.

Section Costs of management Section All costs of management by the Bank of Uganda shall be payable by the financial institution and shall be a debt due from the financial institution to the Bank of Uganda.

Section Bar on lending where liquid assets are insufficient Section Where a financial institution fails to maintain the minimum amount of liquid assets, it shall not grant any new or additional loan or credit accommodation to any person without the prior written approval of the Bank of Uganda.

Section Restrictions on lending against own shares and debt instruments Section A financial institution shall not grant any advance or credit facility or accommodation against— security of its own shares or those of a company affiliated to it; or any instruments which may qualify as capital of the financial institution .

Section Restrictions on credit concentration Section Notwithstanding subsection (1) , a financial institution may grant an advance or credit facility in excess of twenty-five percent but not more than fifty percent of its total capital if the facility is self-liquidating and its maturity or expiry does not exceed three years and is adequately secured by— A common interest shall be deemed to exist between persons for the purposes of this section if— Notwithstanding subsections (1) and (2) , a financial institution may grant to another financial institution an advance or credit facility which is more than twenty-five percent of its total capital except that the advance or credit facility— A financial institution shall not grant or promise to grant to a single person or to a group of related persons any advance or credit accommodation which is more than twenty-five percent of its total capital . Uganda Government securities to be pledged to the financial institution ; fixed deposits held by the financial institution and secured by a lien; or other qualifying securities as the Bank of Uganda may by statutory instrument prescribe. The Bank of Uganda shall aggregate as a single advance o...

Section Restrictions relating to reduction of capital Section A financial institution shall not at any time— The Bank of Uganda shall direct any institution which contravenes subsections (1) and (2) to— pay or declare any dividend; make any transfer from profits or capital; or make any other distributions, other than to a reserve account, if the dividend, payment, or distribution is likely to result in the financial institution not meeting its capital requirements. Subsection (1) shall apply with the necessary modifications to any financial institution that does not meet the capital requirements prior to the payment or distribution. recall all the dividends, payments or distributions made or make good their full value; and pay a civil penalty equivalent to twice the value of dividends, distributions or payments made.

Section Restrictions on inter institutional placements and loans Section Where the Bank of Uganda finds that any person has contravened any of the provisions of this section it shall— where the person is a financial institution — A civil penalty imposed under subsection (3) shall be a debt due from that person to the Bank of Uganda and shall— A financial institution whose core capital is less than forty percent of the core capital prescribed in this Act shall not take any placement or receive any loan or credit accommodation from any financial institution in Uganda. Placements between affiliated financial institutions shall be considered as insider transactions and shall be subject to all the provisions of section 33 . order the immediate repayment by the taking financial institution of the excess by which the placement exceeded the limits prescribed in this section and impose a civil penalty on the offending financial institution of two hundred fifty currency points for each day on which the contravention continues; or impose one or more of the foregoing penalties as the Bank of Uganda, in its own discretion, deems fit; and where the person is an individual, impose a civil penalty...

Section Prohibitions on insider transactions Section Notwithstanding subsection (13) , the Bank of Uganda may order for— A financial institution shall not grant or permit to be outstanding a loan or credit accommodation to any of its affiliates and associates, directors, persons with executive authority, substantial shareholders or to any of their related persons or their related interests except on terms which are non-preferential in all respects including creditworthiness, term, interest rate and the value of the collateral. For the purpose of subsection (1) , “non-preferential” means upon terms no more favourable than those which would be offered under prevailing conditions to persons other than those referred to under subsection (1) . A financial institution shall not grant or permit to be outstanding loans or credit accommodations to its affiliates and associates, directors, persons with executive authority, substantial shareholders or to any of their related persons or group of related persons or their related interests which, in the aggregate, exceed twenty percent of its core capital . Every loan or credit accommodation by a financial institution to any of its affiliates an...

Section Restriction on purchase of certain loans Section A financial institution shall not purchase a non-performing or low quality asset from any of its affiliates and associates, directors, persons with executive authority, substantial shareholders or from any of their related persons or group of related persons or their related interests. For the purposes of this section, a “non-performing asset” means a loan, credit accommodation or asset in respect of which the principal, interest, rent or other payment has been due and unpaid for ninety days or more, or where its principal or interest payments, overdue by ninety days or more, have been capitalised, restructured or renewed.

Section Restriction on externalisation of assets Section A financial institution shall not transfer any part of its assets out of Uganda where the aggregate of assets to be transferred exceeds twenty-five percent of its total capital , without the prior notice to the Bank of Uganda unless the transfer is done in the normal course of business of the institution. A financial institution which contravenes subsection (1) commits an offence and is liable, on conviction, to a fine not exceeding one hundred currency points per day on which the contravention continues.

Section Engaging in trade, commerce, industry Section Subject to this Act, a financial institution shall not— engage directly or indirectly for its own account, alone or with others in trade, commerce, industry or agriculture, except in the course of the satisfaction of debts due to it in which case all such activities and interests shall be disposed of at the earliest reasonable opportunity; or acquire or hold, directly or indirectly, in the aggregate, any part of share capital of, or make any capital investment or otherwise have any interest in enterprises engaged in trade, commerce, industry or agriculture in excess of twenty-five percent of its core capital , except in the course of the satisfaction of debts due to it; but in such a case all shares and interests shall be disposed of at the earliest reasonable opportunity.

Section Investments in immovable property Section A financial institution which on the date of commencement of this Act, holds directly or indirectly, in the aggregate immovable property, the cost of which exceeds one hundred percent of its core capital , shall within five years from that date— This section shall not be construed so as to prevent a financial institution from— A financial institution shall not purchase or acquire any immovable property or any right in it, except as may be reasonably necessary for the purpose of conducting its business or of housing or providing amenities for its staff, in which case the cost of the property, in aggregate, shall not exceed one hundred percent of the financial institution ’s core capital . dispose of the property in order to comply with this Act; or add new capital as shall be directed by the Bank of Uganda in order to comply with this Act. securing a debt on any immovable property and in case of default of payment of the debt, from holding the immovable property for realisation at the earliest reasonable opportunity to the financial institution ; or purchasing or acquiring movable or immovable property as part of a business involving...

Section Restrictions on engaging in securities activities Section No financial institution which is licensed to accept deposits shall on its own account or at its own risk engage in— any underwriting of shares; or any securities brokerage or dealing activities. A financial institution which contravenes this section shall pay to the Bank of Uganda a civil penalty of five currency points for each day on which the contravention continues. For the purposes of this section— “ securities brokerage” means any activity engaged in by a person whether as principal or agent , who acts as an intermediary between a buyer and a seller of securities ; and “ securities dealing” means any activities engaged in by a person , whether as a principal or an agent , who buys and sells securities or otherwise deals in securities on his or her own account. Subsection (1) does not apply to Government securities and Bank of Uganda securities.