DEFINITION OF COMPANY:
The Companies Act Cap 110 definition section states that “company” means a company formed and registered under the Act or an existing company.
The companies Act does not sufficiently define what a company is but authors have developed a definition of a company. Professor David Bakibinga in his book company law in Uganda at page 2 defines a company as an artificial legal entity separate and distinct from its members or shareholders.
This legal person is distinguishable from natural personality. Natural persons are born by natural people/persons and their lives end at death, artificial persons (corporations) are created by law and their existence is ended by the law.
The possession of a legal personality implies that a company is capable of enjoying rights and being subject to duties, separately from its members. As an artificial legal person, a company is capable of the following;- *
It has an existence separate from that of the members and as such;- *
It has its own name by which it is recognised.
It can own its own property ie assets like buildings, land, bank accounts. etc *
It can sue or be sued in its own name.
Even if a member or all the members die, the company will still remain in existence, in other words it has perpetual succession. *
It can borrow money in its own name and use its assets as security and it will be responsible for paying back such debts.. *
It can employ its own employees, including its members or shareholders. i) This principle of legal personality was first distinctly articulated in the British House of Lords Judgment in the case of Salomon Vs. Salmon & Company Limited (1897) AC 22 At the court of first instance and appeal court, it was held That therefore the company was a legal entity capable of a separate existence and liable to pay its own debts, and Salomon was not personally liable to pay the debts of the company.
ii) That a company is at law a different person altogether from the subscribers although it may be that after incorporation, the business is exactly the same as was before, the same persons are the managers, and the same hands receive the profits. TYPES OF COMPANIES.
Under the Companies Act, provision is made for two major types of registered Companies, which can be lawfully formed in Uganda. Principally these can be further divided into 2 broad categories. 1. Private company.
2. Public company.
The Companies Act defines a private company as
* A Company, which by its articles restricts the rights to transfer shares of the company. * Secondly, it limits the number of its members to 50 including past and present employees of the company who are shareholders. * Thirdly, a private company prohibits any invitations to the public to subscribe for any shares or debentures of the company (investments in the company). * Here the required minimum number of members is 2 people. This position was laid down in the case of LUTAYA Vs. GANDESHA (1987) HCB 49 in which a man and his wife formed a private company and of the 1500 shares of the company, the wife held only 2 shares. This position was also stated in the case of Salomon Vs. Salomon & Co (1897) AC 22. The second person needed may not be an independent person. He could be the nominee of the first person. Where a private Company does not comply with these requirements, it loses exemptions and privileges conferred on a private company. This failure can only be remedied upon showing court that it was caused by accident or inadvertence or some other sufficient cause. Under the Companies Act, Companies in Uganda can also be further divided into:
* Limited by shares
* Limited by guarantee
* Unlimited companies
(a) A company limited by shares.
This is a company where the members enjoy limited liability.
This means that in case of winding up of the company if the company's assets are...
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