CTM Uganda Limited & 2 Others v Alimuss Properties Uganda Limited & 3 Others [2024] UGSC 6

Supreme Court · 2024 Appeal Dismissed ✦ AI-generated summary ↓ Download

Jurisdiction

Uganda

Case Type

Second appeal from the Court of Appeal arising from an application to set aside a consent judgment

Decision

Appeal dismissed; the consent judgment stands and was not set aside

The full judgment

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Holding

The Court held that the word 'may' in section 40(1) of the Companies Act 2012 governs only a company's decision whether to change its name, not whether it must follow the prescribed procedure; a name change effected by board resolution rather than a members' special resolution is invalid and illegal, being a statutory issue and not an indoor management matter. However, the failure did not vitiate the consent judgment, because the consent judgment was not the instrument that changed the name and the obligation to change the name and cease using the 'CTM' mark arose independently under the settlement agreement. The appeal was dismissed with costs.

Facts

CTM (U) Ltd, a tile distributor since 2002, entered a joint venture with Italtile Ceramics (Pty) Ltd of South Africa, creating Alimuss Properties (Uganda) Ltd, owned 55% by Italtile and 45% by CTM. Italtile held the intellectual property rights in the 'CTM' name. CTM took loans from Italtile entities and allegedly defaulted, leading to High Court suits. Gregory Magezi, the Managing Director of CTM (though not a shareholder), negotiated and signed a consent judgment compromising the suits, under which CTM would change its name, cease using the Italtile group's intellectual property and pay USD 1,650,000. The name change to Deco Tiles Limited was effected by a board resolution rather than a special resolution of shareholders, yet the Registrar of Companies accepted it and it was gazetted. The appellants contended that the consent judgment was entered without shareholder authority and was illegal for non-compliance with the statutory name-change procedure.

Issues

Whether failure to strictly follow the procedure prescribed by the Companies Act 2012 for a change of company name renders the action invalid or illegal.
Whether the word 'may' in section 40(1) of the Companies Act 2012 is mandatory or merely permissive.
Whether a change of name effected by a board resolution rather than a special resolution of shareholders is protected by the indoor management rule.
Whether any illegality in the change of name vitiated the consent judgment so as to entitle the appellants to have it set aside.

Orders

Appeal dismissed.
Costs awarded to the 1st, 2nd, 3rd and 4th respondents.
The office of the Registrar of Companies to be served with a copy of the decision to reform the handling of such matters.

Key headnotes

Company Law — Change of Name — Mandatory Statutory Procedure under s.40 Companies Act 2012

The word 'may' in section 40(1) of the Companies Act 2012 relates only to a company's decision whether to change its name; once that decision is taken, the company must pass a special resolution and obtain the Registrar's written approval, and the prescribed procedure is mandatory.

Company Law — Special Resolution — Definition and Requirements (s.148)

A resolution is a special resolution only where it is passed by a majority of not less than three-fourths of members entitled to vote, in person or by proxy, at a general meeting of which notice specifying the intention to propose it as a special resolution has been duly given.

Company Law — Indoor Management Rule — Inapplicability to Statutory Illegality

A change of company name effected without the special resolution required by statute is a statutory illegality and not an internal indoor management matter; the indoor management rule cannot validate non-compliance with a mandatory provision of the Companies Act.

Statutory Interpretation — Codification — Express Statutory Procedure over Common Law

Where a statute expressly codifies a procedure, that procedure cannot be treated as a mere suggestion that may or may not be complied with, and common law arguments will not be allowed to displace express statutory provisions.

Civil Procedure — Consent Judgments — Grounds for Setting Aside

A consent judgment will not be set aside on the ground of an illegality where that illegality did not arise from, and was a transaction separate from, the consent judgment itself.

Legislation cited (7)

Companies Act 2012 s.21
Companies Act 2012 s.40
Companies Act 2012 s.40(1)
Companies Act 2012 s.52
Companies Act 2012 s.53
Companies Act 2012 s.148
Companies Act 2012 s.149

Cases cited (15)

Kifamunte Henry v Uganda (Criminal Appeal No. 10 of 1997)
Pandya v R [1957] EA 336
Okeno v Republic [1972] EA 32
Charles Bitwire v Uganda (Criminal Appeal No. 23 of 1985)
Kairu v Uganda [1978] HCB 123
Royal British Bank v Turquand (1856) 6 E&B 327
Clear Channel Independent (U) Ltd v Public Procurement & Disposal of Public Assets Authority (PPDA) (Miscellaneous Cause No. 156 of 2008)
Macfoy v United Africa Co. Ltd [1961] 3 All E.R 1169
Attorney General and Another v James Mark Kamoga & Another (Civil Appeal No. 8 of 2004)
Sinba (K) Ltd & 4 Others v Uganda Broadcasting Corporation (Civil Appeal No. 3 of 2014)
Foundation for Human Rights Initiative v Attorney General (Constitutional Appeal No. 03 of 2009)
Massy v Council of the Municipality of Yass (1922) 22 SR (NSW) 499
Johnson's Tyne Foundry Pty Ltd v Shire of Maffra [1949] ALR 89
Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705
Mahony v East Holyford Mining Co (1875) LR 7 HL 869

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