Section 2: Interpretation

(1) In this Act, unless the context otherwise requires- "acceptance house" means a company licensed to conduct the financial institution business in Uganda which is specified in Schedule 2 to this Act as its principal business and which consists mainly in the granting of acceptance facilities and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "affiliate" in respect of any financial institution means any entity, corporate or unincorporated where five percent or more of any class of its voting shares or other voting participation is directly or indirectly owned or controlled by that financial institution or is held by it with power to vote; "agent" means a person contracted by a financial institution to provide financial institution business on behalf of the financial institution in accordance with this Act; "agent banking" means the conduct by a person of financial institution business on behalf of a financial institution as may be approved by the Bank of Uganda; "associate" means- (a) in relation to a natural person- (i) where the relationship is through marriage, includes wife, husband, mother in law or father in law, wife or husband's sister, wife or husband's brother; (ii) where the relationship is through consanguinity, includes father, mother, sister, brother, son, daughter, niece, nephew, grandson or granddaughter, maternal or paternal uncle or aunt or cousin german; (iii) any company of which that person is a director or a substantial shareholder; or (iv) any person who is an employee or partner of that person; (b) in relation to a company, any company which enjoys common shareholding or common shareholders with another company directly or indirectly; and (c) in relation to trusts, the trustees of any settlement in which that person is a beneficiary; "bank" means any company licensed to carry on financial institution business as its principal business, as specified in Schedule 2 to this Act and includes all branches and offices of that company in Uganda; "Bank of Uganda securities" includes bills and bonds issued by the Bank of Uganda; "board" in relation to the Bank of Uganda means the board of directors of the Bank of Uganda and in relation to a financial institution, means the board of directors of the financial institution; "branch" means a place of business which forms a legally dependent part of a financial institution, and which conducts directly all or some of the operations inherent in the business of the financial institution; "building society" means a society formed for the purpose of raising by subscriptions of members a stock or fund from which to make advances to members and registered in accordance with the Building Societies Act; "commercial bank" means a company licensed to carry on financial institution business in Uganda and whose principal business consists mainly in the acceptance of call, demand, savings and time deposits withdrawable by cheque or otherwise, in the capacity of a bank, provision of overdrafts and short-term to medium-term loans, provision of foreign exchange, participation in inter-bank clearing systems and the provision and assumption of guarantees, bonds and other warranties on behalf of others and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "company" means a company incorporated or registered under the Companies Act and includes- (a) a building society duly incorporated under the Building Societies Act; and (b) any institution classified as a financial institution under this Act; "control" means the relationship between the parent undertaking and a subsidiary undertaking or similar relations between an individual and an undertaking or the power to determine the financial and operational policy of a financial institution pursuant to its charter or to an agreement, or direct or indirect influence by a person over decision making and the management of a financial institution; "core capital" means permanent shareholders' equity in the form of issued and fully paid-up shares plus all disclosed reserves, less goodwill or any intangible assets; "credit accommodation" includes contractual commitments to lend or otherwise extend credit, letters of credit and guarantees issued on behalf of any persons; "credit institution" means any company licensed to carry on financial institution business in Uganda which is specified in Schedule 2 to this Act as its principal business, and any other body specified by the Bank of Uganda to be a credit institution for the purposes of this Act; and includes all branches and offices of that company or body in Uganda; "currency point" has the value assigned to it in Schedule 1 to this Act; "demand deposits" means deposits which are repayable on demand and are withdrawable by cheque, draft, order or by other means; "demand liabilities" means the total deposit liabilities of a bank or non-bank institution which are denominated in any currency and payable upon demand; "deposit advertisement" means any advertisement containing an invitation to make a deposit or information, which is intended or might reasonably be presumed to be intended to lead directly or indirectly to the making of a deposit; "deposit substitutes" means funds received from the public through the issue, endorsement or acceptance of debt instruments of any kind other than deposits, or through the issue of participations, certificates of assignment, re-purchase agreements or similar instruments including Islamic contracts specified for that purpose by the Bank of Uganda by regulations; "director" means a natural person occupying the position of a director, by whatever name called, of a body corporate, and "board of directors" or "directors" refers to the directors of a body corporate as a body; "disclosed reserves" includes all reserves created or increased through share premiums, retained profits, after deducting all expenses, provisions, taxation, and dividends and general reserves if the disclosed reserves are permanent and unencumbered and thus able to absorb losses; "discount house" means a company licensed to carry on or conduct the financial institution business in Uganda which is specified in Schedule 2 to this Act as its principal business and which consists mainly in the acceptance of deposits from banks and other financial institutions, discounting of bills of exchange, bankers' acceptances and trade in money market making in a variety of short-term financial instruments and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "draft" means a banker's draft payable on demand drawn by or on behalf of a bank upon itself whether payable at the head office or some other office of the bank; "entity" means a body corporate, trust, partnership, fund or organisation; "exposure" includes loans, advances, overdrafts, other extensions of credit and holding of papers as well as off balance sheet commitments such as acceptances, guarantees, underwriting, endorsements, placements, documentary credits, performance bonds and other contingent liabilities including Islamic contracts specified for that purpose by the Bank of Uganda by regulations; "finance house" means a company licensed to conduct financial institution business in Uganda which is specified in Schedule 2 to this Act as its principal business and which consists mainly in acceptance of time deposits, hire-purchase financing, operational and finance leasing, factoring, provision of short and medium term loans and any economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "financial institution" means a company licensed to carry on or conduct financial institution business in Uganda and includes a commercial bank, merchant bank, mortgage bank, post office savings bank, credit institution, a building society, an acceptance house, a discount house, a finance house, an Islamic financial institution or any institution which by regulations is classified as a financial institution by the Bank of Uganda; "financial institution business" means the business of- (a) acceptance of deposits; (b) issue of deposit substitutes; (c) lending or extending money held on deposit or any part of that money including by way of- (i) consumer and mortgage credit; (ii) factoring with or without recourse; (iii) the financing of commercial transactions; (iv) the recovery by foreclosure or other means of amounts so lent, advanced or extended; (v) forfeiting, namely, the medium-term discounting without recourse of bills, notes and other documents evidencing an exporter's claims on the person to whom the exports are sent; (vi) acceptance credits; (d) engaging in foreign exchange business, in particular buying and selling foreign currencies, including forward and option type contracts for the future sale of foreign currencies as a financial institution; (e) issuing and administering means of payment, including credit cards, travellers' cheques and banker's drafts; (f) providing money transmission services; (g) trading for own account or for account of customers in- (i) money market instruments, including bills of exchange and certificates of deposit; (ii) debt securities and other transferable securities; and (iii) futures, options and other financial derivatives relating to debt securities or interest rates; (h) safe custody and administration of securities; (i) soliciting of or advertising for deposits; (j) money broking; (k) financial leasing if conducted by a financial institution; (l) merchant banking; (m) mortgage banking; (n) creating and administration of electronic units of payment in computer networks as a financial institution; (o) Islamic financial business; (p) transacting such other business as may be prescribed by the Bank of Uganda; "financial statements" includes the balance sheet, profit and loss accounts, statements of funds flow and notes to the financial statements; "fit and proper person" means fit and proper person as determined according to the criteria specified in Schedule 3 to this Act; "foreign bank" means a body corporate, or entity incorporated or formed under the laws of a country other than Uganda that- (a) is a bank according to the laws of any foreign country where it carries on business; (b) carries on a business in a country other than Uganda that if carried out in Uganda, would be wholly or to a significant extent, financial institution business; (c) employs, to identify or describe its business, a name that includes the word "bank", "banque", "banking" or "bancaire", either alone or in combination with other words or any word or words in any language other than English or French corresponding generally to any such word; "foreign company" means a company not being a local company; "foreign currency" means a currency other than legal tender of Uganda; "foreign exchange business" means any facility offered, business undertaken or transaction executed with any person involving a foreign currency inclusive of any account facility, credit extension, lending, issue of guarantee, counter-guarantee, purchase or sale of any money, instrument or asset by means of cash, cheque, draft, transfer or any other instrument denominated in a foreign currency including Islamic contracts specified for that purpose by the Bank of Uganda by regulations; "forward transaction" or "forward purchase" or "forward buy" or "forward sale" means a transaction that is to be executed after more than two working days from the date the transaction is contracted or agreed; "government securities" includes treasury bills and government bonds issued by the Government of Uganda; "home country regulator" means the supervisory authority of the home country where the head office of the parent financial institution is based; "insider" means a director or person who has executive authority or a shareholder of a financial institution and includes any related person and any related interest of such person; "Islamic bank" means an Islamic financial institution which is a bank; "Islamic contract" means a contract which complies with the Shari'ah and satisfies any conditions specified by the Bank of Uganda for that purpose; "Islamic financial business" means financial institution business which conforms to the Shari'ah and includes- (a) the business of receiving property into profit sharing investment accounts or of managing such accounts; (b) any other business of a financial institution which involves or is intended to involve the entry into one or more contracts under Shari'ah or otherwise carried out or purported to be carried out in accordance with the Shari'ah including- (i) equity or partnership financing, including Musharakah, Musharakah mutanaqisah and mudarabah', (ii) lease based financing, including al-ijarah, al-ijarah muntahia bi al-tamlik and al- ijarah thumma al-bai; (iii) sale based financing, including istisnabai' bithaman ajil, bai' salam, murabahah and musawamah; (iv) currency exchange contracts; (v) fee based activity, including wakalah; (c) the purchase of bills of exchange, certificates of Islamic deposit or other negotiable instruments; (d) the acceptance or guarantee of any liability, obligation or duty of any person; and (e) the business of providing finance by all means including through the acquisition, disposal or leasing of assets or through the provision of services which have similar economic effect and are economically equivalent to any other financial institution business; "Islamic financial institution" means a company licensed to carry on financial institution business in Uganda whose entire business comprises Islamic financial business and which has declared to the Bank of Uganda that its entire operations are and will be conducted in accordance with the Shari'ah; "large exposure" means an exposure, which is equal to or exceeds ten percent of a financial institution's core capital; "licence" means a licence issued under section 11; "licensed" means licensed under this Act; "local company" means a company registered or incorporated under the Companies Act in which the majority shares and actual controlling interest are held by citizens of Uganda; "long position" or "long open position" or "overbought position" of a financial institution in a foreign currency means the holding by the financial institution of that foreign currency for its own account in excess of all its contractual spot, same day value and forward transaction commitments in that foreign currency or economically equivalent positions or holdings in respect of Islamic contracts; "management letter" means a letter written by the external auditor to the management of the financial institution pointing out apparent weaknesses in the internal controls which require management action to correct; "manager" means an officer of a financial institution empowered to control, direct, and influence decision making of a financial institution; "merchant bank" means a company licensed to carry on financial institution business in Uganda and whose business consists mainly in the acceptance of call and time deposits from corporate, institutional and international clients, withdrawable by cheque or otherwise and engaging in the financing of international trade, provision of corporate finance services, advisory services, provision of foreign exchange facilities, arranging finance, lending or otherwise extending credit or participation in syndicated loans or other financings, acting as guarantors and financing or lending in the institutional money markets and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "merchant banking" means the business of a merchant bank; "microfinance deposit-taking institution" means a company licensed to carry on, conduct, engage in or transact microfinance business in Uganda; "microfinance business" means the business of accepting deposits from and providing short-term loans or other credit to small micro enterprises and low income households, usually characterised by the use of collateral substitutes, such as group guarantees and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "Minister" means the Minister responsible for finance; "money laundering" has the meaning assigned to it by section 140(2); "mortgage bank" means a company licensed to carry on financial institution business in Uganda and whose business consists mainly in the granting of loans for the acquisition, construction, enlargement, repair, improvement or maintenance of urban or rural real estate and for the substitution of mortgages taken out for that same purpose; acceptance of deposits of participation in mortgage loans and in special accounts; provision of guarantees, bonds or other forms of collateral connected with the operations in which they may take part and acting as an intermediary in loans extended in local and foreign currency, and economically equivalent Islamic financial business subject to any restrictions specified by the Bank of Uganda by regulations; "mortgage banking" means the business of a mortgage bank; "net open position" of a financial institution in a foreign currency, means the sum of all its assets and liabilities inclusive of all its spot, same day value and forward transactions and its off balance sheet items in that foreign currency; "non-bank financial institution" includes a credit institution, a building society, an acceptance house, a discount house and a finance house and any other institution classified by the Bank of Uganda as a non-bank financial institution; "non-resident" means any person other than a resident; "off balance sheet activities" includes activities which relate to off balance sheet items; "off balance sheet items" includes all items not shown on the balance sheet but which constitute credit risk and such other risks as in guarantees, acceptances, performance bonds, letters of credit, and other off balance sheet items deemed to constitute risk as such by the Bank of Uganda; "officer" includes a person who carries out or is empowered to carry out functions relating to the direction of a financial institution; "order" when used in conjunction with the word "cheque" or "draft", means an unconditional order in writing constituting a bill of exchange as defined in the Bills of Exchange Act; "person" means any individual, a personal representative, company, partnership, trust, fund, foundation or enterprise wherever located or incorporated; "personal representative" means a person who stands in a place of and represents another person and without limiting the generality of the foregoing, includes, as the circumstances require, a trustee, an executor, an administrator, a guardian, a tutor, a curator, an assignee, a receiver, an agent, or an attorney of any person; "place of business" means any premises including a branch, an agent or mobile unit, or such other premises as may be prescribed by the Bank of Uganda by regulations, at which a financial institution transacts financial institution business in Uganda, and which is open to the public; "profit sharing investment accounts" means an account managed by a financial institution- (a) in relation to property of any kind including currency specified by the Bank of Uganda by regulations, held for or within the account; (b) as part of its Islamic financial business; and (c) under the terms of an agreement where- (i) the account holder agrees to share any profit with the financial institution as manager of the account in accordance with a determined specified percentage or ratio; and (ii) the account holder agrees that he or she will bear any losses in the absence of negligence or breach of contract on the part of the financial institution; "prudential standard" means formal rules, benchmarks and regulations set by the Bank of Uganda; "public company", for the purposes of this Act, means a company which is owned by at least fifty people and whose articles of association do not restrict the right to transfer its shares; "related interest" means interests of affiliates, associates and their related persons and the business interests of any of them; "related person" or "group of related persons"- (a) in relation to natural persons, means- (i) an associate or close relative of the person; and (ii) any person who has entered into an agreement or arrangement with the first mentioned person, relating to the acquisition, holding or disposal of, or the exercising of voting rights in respect of shares in the financial institution in question; (b) in relation to a company, means any- (i) subsidiary or holding company of that company, any other subsidiary of that holding company and any other company of which that holding company is a subsidiary; and (ii) associate of the company; (c) in relation to a non-natural person which is not a company, means another non-natural person which would have been a subsidiary of the first-mentioned non-natural person- (i) had the first mentioned non-natural person been a company; or (ii) where that other non-natural person, is not a company, had both the first mentioned non-natural person and that other non-natural person been a company; (d) means any person in accordance with whose direct or indirect directions or instructions the board of directors, or where the non-natural person is not a company, the governing body of that non-natural person, is accustomed to act; and (e) in relation to any person- (i) means any non-natural person of which the board of directors or, where that non- natural person is not a company, of which the governing body is accustomed to act in accordance with directions or instructions of the person first mentioned in this paragraph; and (ii) includes any trust controlled or administered by that person; "representative office" means premises in Uganda from which any person conducts business or holds himself or herself out as ready to conduct business as a representative of a foreign bank; "re-purchase agreement" means an agreement between a seller and a buyer of securities, by which the seller agrees to repurchase the securities at an agreed upon price or interest rate or both, and usually at a stated price, and an Islamic contract specified for that purpose by the Bank of Uganda by regulations; "reputable financial institution" means a financial institution licensed to conduct banking or other financial institution business under the laws of any state, country or territory and which meets such other criteria as may be prescribed by the Bank of Uganda; "reputable publicly held company" means a company that is financially strong, whose ownership is not concentrated in a few hands, and which is of good public standing and meets such other criteria as may be prescribed by the Bank of Uganda; "resident" means- (a) an individual who is ordinarily resident in Uganda for one year or a longer period; (b) the Government of Uganda and its diplomatic representations located outside Uganda; (c) a company, firm or enterprise whose principal place of business or centre of control and management is located in Uganda; (d) a corporation, firm or enterprise incorporated or formed under the laws of Uganda; (e) a branch located within Uganda of a company, firm or other enterprise whose principal place of business is located outside Uganda, except that "resident" does not include a foreign diplomatic representation or an accredited official of that representation located within Uganda, an office of an organisation established by international treaty located within Uganda, or a branch located outside Uganda of a company, firm, or enterprise whose principal place of business is located in Uganda; "same day transaction" or "same day purchase" or "same day buy" or "same day sale" means a transaction having a same day value; "same day value" means the transaction to which it is referred is to be executed on the very day it is contracted or agreed; "securities" includes- (a) debentures, stocks or bonds issued by or proposed to be issued by Government; (b) debentures, stocks, bonds or notes issued or proposed to be issued by a body corporate; (c) any right, warrant, option or futures in respect of any debenture, stocks, shares, bonds, notes or in respect of commodities; (d) any instrument commonly known as securities, but does not include bills of exchange, promissory notes or certificates of deposit issued by a financial institution; and (e) any instrument which satisfies conditions prescribed for this purpose by the Bank of Uganda by regulations; "short position" or "short open position" or "oversold position" of a financial institution in a foreign currency means that the holding by the financial institution of that foreign currency for its own account is less than all its contractual spot, same day value and forward transaction commitments in that foreign currency and an economically equivalent position or holding in respect of Islamic contract; "significantly under-capitalised" has the meaning assigned to it in section 87(4); "spot transaction" or "spot purchase" or "spot buy" or "spot sale" means a transaction having a spot value; "spot value" means the transaction to which it is referred is to be executed two working days from the date it is contracted or agreed; "substantial shareholder" means any person who holds more than five percent of shares in the company; "supplementary capital" means general provisions which are held against future and current unidentified losses that are freely available to meet losses which subsequently materialise, and revaluation reserves on financial institution premises which arise periodically from independent valuation of those premises, and any other form of capital as may be determined by the Bank of Uganda; "time deposits" means deposits repayable after a fixed period or after notice and includes savings deposits; "time liabilities" means deposit liabilities and other liabilities specified by the Bank of Uganda by regulations, other than demand liabilities of a financial institution which are denominated in any currency and are subject to payment after a fixed period of time or after notice; "total capital" means the sum of core capital and supplementary capital; "unsecured advances or unsecured credit facilities" means advances or credit facilities made without security or, in respect of any advance or credit facility made with security or any part of it which at any time exceeds the market value of the assets constituting that security, or where the Bank of Uganda is satisfied that there is no established market value, on the basis of a valuation approved by the Bank of Uganda; "value date of a transaction" means the date on which it is to be executed. (2) In this Act, unless the context otherwise requires, a reference to loans or credit, lending, extension or provision of credit, credit accommodation or such similar terms, or to any instrument in that respect, collectively referred to as "credit provision", shall be interpreted to apply to- (a) any finance arrangement which satisfies the following conditions- (i) the arrangement provides for a person, in this section referred to as "the financier" to pay a sum of money, in this section referred to as "the capital" to another person, in this section referred to as "the customer"; (ii) the arrangement identifies assets, or a class of assets, which the customer acquires; (iii) the arrangement specifies a period at the end of which it ceases to have effect, in this section referred to as "the finance term"; (iv) the customer undertakes under the arrangement to make a payment in respect of the capital referred to as "the capital payment" to the financier during or at the end of the finance term, whether in instalments or not and to pay to the financier other payments on one or more occasions during or at the end of the finance term, in this section referred to as "additional payments"; and (v) the arrangement satisfies such other conditions as may be specified by the Bank of Uganda in regulations; and (b) any finance arrangement not included in subsection (2)(a) and satisfies the following conditions- (i) the arrangement provides for a customer to pay capital to the financier to purchase, lease, hire or otherwise acquire or use assets which are identified or of one or more classes which are identified; (ii) the financier agrees to sell, lease, hire or otherwise dispose of or allow the use of such assets or classes of assets to the customer or to pay a sum of money to another person to do so; and (iii) meets conditions (a)(iii), (iv) and (v); (c) any other provision of finance including through the acquisition, disposal or leasing of assets that is economically equivalent to credit provision. (3) In this Act, unless the context otherwise requires, a reference to guarantees or similar terms or a reference to any instrument in respect of guarantees or similar terms, in the Act referred to collectively as a "guarantee provision", shall be interpreted to apply to any arrangement which satisfies the following conditions- (a) the arrangement is economically equivalent to a guaranteed provision; and (b) the arrangement satisfies such other conditions as may be specified by the Bank of Uganda in regulations.