Wakilii

Olive Kigongo v Mosa Courts Apartment Ltd (Company Cause No. 01 of 2015)

High Court · [2016] UGHC 10 · 2016 Petition Granted AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Petition under Companies Act s.248 for relief on grounds of unfair prejudice to minority shareholder
Decision
The court ordered the company to buy out the petitioner's 15% shareholding at the pre-prejudice value, pay her proportionate profits from the period of exclusion, and meet her costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that a minority shareholder who is a subscriber to the memorandum of association has locus standi to petition under s.248 of Companies Act 2012 for relief based on unfair prejudice. Unfair prejudice arises where a shareholder with a legitimate expectation of participation in management is excluded from the company's affairs without justification. Where a company remains solvent and the petitioner seeks to exit, the appropriate remedy is an order for the company to purchase the minority shares at their value at the time the prejudice began, plus a proportionate share of profits accrued during the period of exclusion.

Outcome

The court ordered the company to buy out the petitioner's 15% shareholding at the pre-prejudice value, pay her proportionate profits from the period of exclusion, and meet her costs

Facts

Mosa Courts Apartment Ltd was incorporated in 1997 as a two-member company held by husband and wife. Hajji Moses Kigongo held 85% and Olive Kigongo held 15%. Both were directors and involved in management. In 2011, the majority shareholder unilaterally removed the petitioner from management by taking away cheque books, books of accounts, and records, employing staff who reported exclusively to him, and denying her access to company property. Since her removal, the petitioner was not invited to board or general meetings. The majority shareholder held meetings alone, appointed a company secretary, opened dollar accounts, and made himself sole signatory. The petitioner received no dividends since incorporation. She brought this petition seeking winding up of the company on grounds of oppression and unfair prejudice.

Issues

  1. Whether the petitioner is a member of the company with locus standi to file the petition
  2. Whether the affairs of the company are being conducted in a manner oppressive and prejudicial to the petitioner
  3. What are the available remedies to the parties under the circumstances
  4. Whether the petitioner's affidavit in rejoinder is admissible

Orders

  • Petition allowed with costs to the petitioner.
  • The respondent company shall purchase the petitioner's 15 shares at UGX 1,000,000 per share (the value at the time the prejudice began).
  • The capital of the company shall be reduced accordingly.
  • The respondent company shall pay the petitioner 15% of the profits made from 1 January 2011 to 9 February 2016.
  • A report of the implementation of these orders shall be communicated to this court within two months.
  • Costs of the petition to be paid by the respondent company to the petitioner.

Rules and key headnotes

Company Law — Membership — Definition of Member — Subscriber to Memorandum of Association
A subscriber to a company's memorandum of association automatically becomes a member upon registration of the company and entry on the register of members is not a condition precedent to membership for subscribers.
Company Law — Unfair Prejudice — Elements Required under s.248 Companies Act 2012
To succeed in a petition under s.248 of the Companies Act 2012, two elements must be present: the conduct complained of must be prejudicial to the relevant interests of members or some part of the members, and the prejudice must be unfair, judged objectively by what a reasonable bystander would regard as unfair in the context of the commercial relationship and the Articles of Association.
Company Law — Unfair Prejudice — Exclusion from Management — Legitimate Expectation
The exclusion of a minority shareholder from management in circumstances where there is a legitimate expectation of participation, derived from the Articles of Association and the original arrangements between the parties, constitutes unfairly prejudicial conduct under s.248 of the Companies Act 2012.
Company Law — Remedies under s.250 Companies Act 2012 — Buyout of Minority Shares
Where a minority shareholder succeeds in establishing unfair prejudice and the company is solvent and profitable, the appropriate remedy under s.250(2)(d) of the Companies Act 2012 is an order requiring the company to purchase the petitioner's shares at their value at the time the prejudice commenced, with capital reduction, plus payment of the petitioner's proportionate share of profits earned during the period of exclusion.
Company Law — Winding Up — Just and Equitable Ground — Unavailability under Companies Act 2012
The ground of winding up on the basis that it is just and equitable, which existed under s.222(f) of the repealed Companies Act Cap 110, was not re-enacted in the Companies Act 2012. Consequently, winding up on just and equitable grounds is no longer available under the new Act.
Civil Procedure — Procedural Rules — Effect of Repeal of Enabling Act on Subsidiary Legislation
Where an Act under which statutory instruments were made is repealed and the repealing Act does not expressly save the subsidiary legislation, and the provisions underpinning the rules are not re-enacted in the new Act, the statutory instruments are deprived of their statutory base and cease to have force of law, unless saved by s.12 of the Interpretation Act.
Civil Procedure — Affidavit in Rejoinder — Time Limits — Application of Civil Procedure Rules
Where the Companies (Winding Up) Rules have ceased to have force of law following repeal of the enabling Act without re-enactment of the winding-up procedural provisions, the Civil Procedure Rules apply to fill the procedural vacuum in company petitions, including time limits for filing affidavits in rejoinder.

Legislation cited (15)

Cases cited (6)

  • Stop and See Uganda Limited v Tropical Bank (Miscellaneous Application No. 333 of 2010)
  • Evans Case [1867] L.R.2 Ch App 424
  • Bytrust Holding Limited Vs I.R.C [1971] 1 W.L.R 1333
  • Luqan's case [1902] 1 Ch 707
  • Mawoqola Farmers and Growers Ltd Vs Kayanja & others (No.l) [1971] 1 EA 108 (CA Uganda)
  • Ismail Dabule and 2 Others v Attorney General and Another (Constitutional Appeal No. 3 of 2007)

Full judgment

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Olive Kigongo v Mosa Courts Apartment Ltd (Company Cause No. 01 of 2015) [2016] UGHC 10 (9 February 2016)
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.