Rukikaire v INCAFEX Limited (Civil Appeal 3 of 2015)

Supreme Court · [2017] UGSC 88 · 2017 Appeal Partly Allowed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second appeal to the Supreme Court from a Court of Appeal decision in a company oppression and winding-up petition originally brought in the High Court under section 211 of the repealed Companies Act Cap 110

Decision

Appeal allowed in part; Court of Appeal judgment set aside and trial judge's orders for a special audit reinstated, with the matter to return to the High Court for consequential orders after the audit

The full judgment

Read the complete, verbatim text of this judgment.

Cited — treatment unverified cited in 1 (treatment unverified) Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

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Holding

The Supreme Court held that a person allotted shares becomes a member once allotment is followed by registration, and that the company, not the shareholder, bears the statutory duty to enter members on the register; membership may be proved by other evidence such as the annual return, and non-payment for allotted shares does not defeat membership. On that basis the appellant was a member who had been oppressed by being excluded from meetings and management. The appeal succeeded on four of five grounds. While the evidence justified winding up, the Court declined to order it as premature and unfairly prejudicial, instead reinstating the trial judge's order for a special audit of the company's accounts.

Facts

The appellant filed a petition in the High Court against the respondent company under section 211 of the repealed Companies Act Cap 110, complaining that the company's affairs were being conducted oppressively. He was allotted 450 ordinary shares, recorded in the company's return of allotment, but never paid for them in cash; the company contended he was therefore not a member or shareholder. The appellant alleged he was excluded from company meetings, that annual general meetings were not convened, that extraordinary meetings were held without notice to him, and that a resolution removed him as a signatory to the company's bank account into which large government compensation for the company's ranches was to be paid. No register of members was produced. The High Court held he was a shareholder and oppressed member but declined to wind up the company, instead ordering an audit. The Court of Appeal reversed, holding he had not proved subscription to the shares and so was neither a member nor oppressed.

Issues

Whether the appellant was a member and shareholder of the respondent company.
Whether registration on the register of members, or payment for allotted shares, is necessary to establish membership of a company.
Whether the Court of Appeal contradicted itself in finding that the foreign shareholders had been compensated while holding that the appellant had not paid for his shares.
Whether the affairs of the respondent company were conducted in a manner oppressive to the appellant as a member.
Whether there was sufficient evidence to justify a winding-up order against the respondent company.

Orders

Appeal allowed in part with costs to the appellant in this Court and in the courts below.
The judgment and orders of the Court of Appeal set aside.
The orders of the trial judge reinstated, including the order for a special audit of the company's books of account.
The appellant declared a member and shareholder of the respondent company.
The appellant found to have been oppressed by other directors/shareholders of the respondent company.
Following the audit, the parties to report back to the High Court for consequential orders.

Key headnotes

Company Law — Membership — Allotment of Shares Followed by Registration

A person allotted shares after a company's formation becomes a member where the allotment is followed by registration; allotment alone confers only a contractual right to be registered, while entry on the register completes legal title to the shares.

Company Law — Register of Members — Duty to Register Lies with the Company

The statutory duty to enter each member on the register of members lies with the company, acting through its company secretary, and a company's failure to maintain or produce the register cannot be visited on the shareholder to defeat his membership.

Company Law — Proof of Membership — Register Not the Exclusive Mode

Entry on the register of members is only prima facie, and not the exclusive or conclusive, evidence of membership; membership may be proved by other evidence, including appearance on the company's annual return or return of allotment.

Company Law — Membership — Effect of Non-payment for Allotted Shares

Non-payment for allotted shares does not affect a person's membership of a company limited by shares; the obligation to pay arises only on a call by the company or on winding up, when liability is limited to the unpaid amount.

Company Law — Oppression of Minority — Exclusion from Meetings and Management

Depriving a member of his right to participate in company affairs — by failing to convene an annual general meeting, holding extraordinary meetings without notice to him, and by-passing his authority over the company's bank account — amounts to oppression of that member under section 211 of the Companies Act.

Company Law — Winding Up — Just and Equitable Ground and Discretion to Withhold

Even where oppression and evidence justifying winding up on the just and equitable ground are established, a court may decline to order winding up where it would unfairly prejudice other members and the matters complained of can be resolved by a less drastic remedy such as an audit of the company's accounts.

Legislation cited (13)

Companies Act Cap 110 s.211
Companies Act Cap 110 s.27
Companies Act Cap 110 s.28
Companies Act Cap 110 s.54
Companies Act Cap 110 s.112
Companies Act Cap 110 s.115
Companies Act Cap 110 s.120
Companies Act Cap 110 s.131
Companies Act Cap 110 s.132
Companies Act Cap 110 s.134
Companies Act Cap 110 s.170(2)
Companies Act 2012 s.138(8)
Land Acquisition Act

Cases cited (11)

Re Florence Land and Public Works Company (1885) LR 29 Ch D 421
Sri Gopal Jalan and Company v Calcutta Stock Exchange Association Ltd 1964 AIR 250, 1964 SCR (3) 698
National Westminster Bank Plc v IRC [1995] AC 111
Re Ambrose Lake Tin and Copper Co (1878) 8 Ch D 635
Mawogola Farmers & Growers Ltd v Kayanja [1971] EA 272
Lutaaya v Gandesha [1986] HCB 46
Re Nakivubo Chemists (U) Ltd [1977] HCB 312
Loch v John Blackwood Ltd [1924] AC 783
Re Empire Building Ltd [1973] 1 NZLR 214
Re Bright Pine Mills Pty Ltd [1969] VR 1002
Re Five Minute Car Wash Service Ltd [1966] 1 WLR 745

Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.