Directors' duties and liabilities in Uganda
In brief
The Companies Act, Cap. 106 codifies directors' duties in s.194: to act in a manner that promotes the success of the company's business; to exercise the skill and care a reasonable person would in looking after their own business; and to act in good faith in the interests of the company as a whole — which includes treating shareholders equally, avoiding and declaring conflicts of interest, not making personal profits at the company's expense, and not accepting compromising benefits — and to comply with the Act and other law. A director who fails in key statutory duties can be disqualified for three years (s.195).
1. Governing law
Section 194 of the Companies Act, Cap. 106 sets out directors' duties: to act in a manner that promotes the success of the business of the company; to exercise a degree of skill and care as a reasonable person would looking after their own business; to act in good faith in the interests of the company as a whole — including treating all shareholders equally, avoiding conflicts of interest, declaring any conflicts, not making personal profits at the company's expense, and not accepting benefits from third parties that would compromise the director; and to ensure compliance with the Act and any other law. These duties are owed to the company. The Act backs them with disqualification: a person is disqualified from acting as a director for three years if they fail to keep proper accounting records, fail to prepare and file accounts, fail to send returns to the registrar, fail to file tax returns and pay tax, or allow a company to trade while insolvent (s.195). Directors also face the duties and liabilities that attend specific transactions elsewhere in the Act (for example on insolvency and winding up). Statutory text verified against the consolidated Laws of Uganda as at 31 December 2023. Sourced from the Uganda Legal Information Institute (ulii.org).
2. Key statutes & rules
- Companies Act, Cap. 106 — s.194 (duties of directors: promote the success of the business; skill and care; good faith in the interests of the company, incl. equal treatment of shareholders, avoiding and declaring conflicts, no personal profit at the company's expense, no compromising benefits; compliance with the Act and other law); s.195 (disqualification for three years for failure to keep records, file accounts, send returns, file/pay tax, or trading while insolvent).
3. Practical guidance
Act for the company's success and in its interests as a whole, not for any one shareholder or yourself (s.194).
Apply real skill and care — the standard is that of a reasonable person looking after their own business (s.194).
Identify, declare and avoid conflicts of interest, and never make a personal profit at the company's expense (s.194).
Keep proper accounting records, prepare and file accounts and returns, and file and pay tax — failure risks a three-year disqualification (s.195).
Do not let the company trade while insolvent (s.195); take advice early if solvency is in doubt.
This note is a practitioner orientation, not legal advice, and does not create an advocate–client relationship. Ugandan law changes and chapter and section numbers were revised in the 2023 Laws of Uganda. Verify every statute, rule and authority against the current primary source — and the specific facts of your matter — before filing or relying on it.