Financial Institutions Act, 2004, 2004

Short title: 

Financial Institutions Act, 2004

Date of promulgation: 

21 March 2004

Date of commencement: 

26 March 2004

Download Original File: 

THE FINANCIAL INSTITUTIONS ACT, 2004.
___________
ARRANGEMENT OF SECTIONS.
PART I—PRELIMINARY.
Sections.
1. Short title.
2. Application of Act.
3. Interpretation.
PART II—LICENSING.
4. Prohibitions against transacting financial institution business.
5. Deposit advertisements.
6. Corporate powers outside Uganda.
7. Prohibitions against use of the word ‘bank’ or its derivatives.
8. Search and seizure.
9. Repayment of moneys by unauthorized persons.
10. Application for a licence.
11. Factors to be considered in making a decision to grant a licence.
12. Processing, granting and refusal of licence.
13. Licence fee.
14. Duration and display of licence.
15. Amendment and restriction of licence.
16. Failure to commence operations.
17. Revocation of licence.
PART III—SHAREHOLDING IN FINANCIAL INSTITUTIONS.
18. Prohibitions on share holding in financial institutions.
19. Persons who are not fit and proper not to become substantial shareholders.
Section.
20. Prohibition on allotment, issue or registration of transfer of shares.
21. Registration of shares in the names of nominees.
22. Registration of shares contrary to this Act.
23. Shareholders register and disclosure of interests in shares.
24 Restriction of right to control financial institutions.
25. Penalties for violating provisions on share holding.
PART IV—CAPITAL REQUIREMENTS.
26. Minimum capital requirements for financial institutions.
27. Minimum on going capital requirements.
28. Minimum holding and computation of liquid assets.
PART V—PROHIBITIONS AND RESTRICTIONS.
29. Bar on lending where liquid assets are insufficient.
30. Restrictions on lending against own shares and debt instruments.
31. Restrictions on credit concentration.
32. Restrictions relating to reduction of capital.
33. Restrictions on inter institutional placements and loans.
34. Prohibitions on insider transactions.
35. Restriction on purchase of certain loans.
36. Restriction on externalization of assets.
37. Engaging in trade, commerce, industry.
38. Investments in immovable property.
39. Restrictions on engaging in securities activities.
40. Foreign exchange holdings.
41. Core capital requirements for conducting foreign exchange business.
42. Net open position in foreign currencies.
43. Suspension of foreign exchange business.
44. Stored value cards.
45. Restrictions on a mortgage bank.
Section.
PART VI—ACCOUNTS AND FINANCIAL STATEMENTS.
46. Financial ledgers and other financial records.
47. Entries in financial ledgers.
48. Submission of audited annual financial statements.
49. Disclosures to the Central Bank.
50. Publication of annual and quarterly financial statements.
51. Rectification of audited annual financial statements.
PART VII—CORPORATE GOVERNANCE.
52. Appointment of board of directors.
53. Disqualification of director.
54. Conflict of interest.
55. Responsibilities of the board.
56. Duties of directors.
57. Removal and suspension of directors.
58. Board Meetings.
59. Audit Committee of the board.
60. Asset and Liability Management Committee.
61. Internal Auditor.
62. External Auditors.
63. Approval of External Auditor.
64. Disqualification of External Auditor.
65. No change of External Auditor.
66. Insurance cover by External Auditor.
67. Time limit for External Auditor.
68. Duties of External Auditor to financial institution.
69. Duties of External Auditor to Central Bank.
70. External Auditors right to access financial records.
71. Information by External Auditors to Central Bank.
72. Audit report.
73. Qualified audit report.
74. Rejection of audit report.
75. Requirements on provisions.
76. Special and further investigations by External Auditors.
77. Control over management.
78. Credit Reference Bureau.
Section.
PART VIII—SUPERVISION.
79. Inspection of financial institutions.
80. Information to be provided by financial institutions.
81. Information for consolidated supervision.
PART IX— CORRECTIVE ACTIONS.
82. Intervention.
83. Modification, cancellation and upholding of orders.
84. Prompt mandatory corrective actions.
85. Adequately capitalised financial institutions suffering large losses.
86. Undercapitalised financial institutions.
87. Significantly undercapitalised financial institutions.
88. Management take-over.
89. Powers of Central Bank on taking over management of financial institution.
90. Duties of a statutory manager.
91. Prohibition on legal proceedings against a financial institution under management
of Central Bank.
92. Management by Central Bank not relief from contractual obligations.
93. Costs of management.
PART X—RECEIVERSHIP.
94. Placing of financial institution under receivership.
95. Options available to the receiver.
96. Prohibitions on proceedings against a financial institution in receivership.
PART XI—LIQUIDATION.
97. Bar on liquidation or winding up proceedings.
98. Voluntary liquidation.
99. Liquidation by the Central Bank.
Section.
100. Powers of liquidator.
101. Stay of proceedings.
102. Invitation of claims from creditors.
103. Report on assets and liabilities by liquidator.
104. Creditors and contributories meeting.
105. Payment to Creditors and ranking of claims.
106. Financial ledgers and financial records of liquidator.
107. Release of liquidator.
PART XII—THE DEPOSIT PROTECTION FUND.
108. Establishment of Deposit Protection Fund.
109. Contributions to the Fund.
110. Protection of deposits and payments out of the Fund.
111. Annual Report of the Deposit Protection Fund.
PART XIII—AMALGAMATIONS, ARRANGEMENTS,
AND AFFECTED TRANSACTIONS.
112. Amalgamations and arrangements.
113. Reconstruction within group of companies.
114. Alteration of memorandum and articles.
115. Alteration of memorandum and articles of association in accordance with
directions of Central Bank.
PART XIV—MISCELLANEOUS.
116. Branches.
117. Representative offices for foreign banks.
118. Freezing of accounts.
119. Unclaimed balances.
120. Disqualification of officers.
121. Officers deemed public officers.
122. Fines and penalties.
Section.
123. Obligations under Companies Act.
124. Protection of Central Bank.
125. Bank holidays.
126. Offences etc.
127. Powers to summon officers, directors and shareholders.
128. Recovery of civil penalties.
129. Control of money laundering.
130. Action against money laundering.
131. Regulations.
132 Amendment of Schedules.
133. Precedence of Act.
134. Repeal and saving.
SCHEDULES.
FIRST SCHEDULE—Currency Point.
SECOND SCHEDULE—Types of financial institutions.
THIRD SCHEDULE—Criteria for determining whether a person is a fit and proper person
to manage, control, become a director or substantial shareholder in a
financial institution.
THE FINANCIAL INSTITUTIONS ACT, 2004.
An Act to revise and consolidate the law relating to financial institutions; to
provide for the regulation, control and discipline of financial institutions by the
Central Bank; to repeal the Financial Institutions Act, Cap. 54 and to provide
for other related matters.
DATE OF ASSENT: 21st March, 2004.
Date of commencement: 26th March, 2004.
BE IT ENACTED by Parliament as follows—
PART I—PRELIMINARY.
1. Short title
This Act may be cited as the Financial Institutions Act, 2004.
2. Application of Act
(1) This Act applies to a financial institution defined in section 3 of this Act.
(2) This Act shall not apply to a co-operative society registered under the
Co-operative Societies Act, except a co-operative society established for the purpose
of accepting deposits from the public.
(3) This Act does not apply to a micro finance deposit-taking institution.
3. Interpretation
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 the Second
Schedule to this Act as its principal business and which consists
mainly in the granting of acceptance facilities;
“affiliate” in respect of any financial institution means any entity, corporate
or unincorporated where five per cent 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;
“associate” means—
(a) in relation to a natural person—
(i) where the relationship is through marriage, includes wife,
husband, mother 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;
(iv) any person who is an employee or partner of that person;
(b) in relation to a company, any company which enjoys common
share holding or common shareholders with another company
directly or indirectly;
(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 the Second Schedule
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 Central Bank means the board of directors of the
Central Bank 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;
“Central Bank” means the Bank of Uganda existing under the Bank of
Uganda 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 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;
“company” means a company incorporated or registered under the
Companies Act and includes—
(a) the Uganda Development Bank established by the Uganda
Development Bank Act;
(b) a building society duly incorporated under the Building Societies
Act; and
(c) 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 decisionmaking
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, 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 the Second
Schedule to this Act as its principal business, and any other body
specified by the Central Bank 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 specified in the First Schedule 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 credit
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, repurchase agreements or similar instruments;
“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 orconduct the
financial institution business in Uganda which is specified in the
Second Schedule 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 shortterm
financial instruments;
“draft” means a bankers’ 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 organization;
“exposure” shall include loans, advances, overdrafts, 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;
“finance house” means a company licensed to conduct financial institution
business in Uganda which is specified in the Second Schedule to this
Act as its principal business and which consists mainly in acceptance
of time deposits, hire-purchase financing, operational and finance
leasing, and factoring and provision of short and medium term loans;
“financial institution” means a company licensed to carryon or conduct
financial institutions 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 or any institution which by regulations is classified as a
financial institution by the Central Bank;
“financial institution business” means the business of—
(a) acceptance of deposits;
(b) issue of deposit substitutes;
(c) lending or extending credit, including—
(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;
(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;
(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;
(o) dealing in securities business as an exempt dealer within the
meaning of section 48 of the Capital Markets Authority Act;
(p) transacting such other business as may be prescribed by the Central
Bank.
“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 the Third Schedule 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” meansa 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 by
means of cash, cheque, draft, transfer or any other instrument
denominated in a foreign currency;
“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;
“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 12 of this Act;
“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;
“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 the 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
services advisory services, provision of foreign exchange facilities;
engaging in bond issues and other securities, buying and selling of
shares, investment portfolio management, investment advisory
services; arranging finance, lending or participation in syndicated
loans and acting as guarantors and financing or lending in the
institutional money markets;
“merchant banking” means the business of a merchant bank;
“micro finance 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 to small micro enterprises and low income
households, usually characterised by the use of collateral substitutes,
such as group guarantees;
“Minister” means the Minister responsible for finance;
“money laundering” has the meaning assigned to it by section 130(2) of this
Act;
“mortgage bank” means a company licensed to carry on financial
institutions business in Uganda and whose business consists mainly in
the granting of loans for the acquisition, construction, enlargement,
repair, improvement and 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;
“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 Central Bank as a non-bank
financial institution;
“non-resident” means any person other than a resident;
“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 Central Bank;
“off balance sheet activities” includes activities which relate to off balance
sheet items;
“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;
“prudential standard” means formal rules, bench marks and regulations set
by the Central Bank;
“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 person” or “group of related persons” means—
(a) in relation to natural persons—
(i) an associate or close relative of the person;
(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;
(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) 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
(b) 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 firstmentioned
in this paragraph; and
(ii) includes any trust controlled or administered by that person;
“related interest” means interests of affiliates, associates and their related
persons and the business interests of any of them;
“representative office” means premises in Uganda from which any person
conducts business or holds himself out as ready to conduct business as
a representative of a foreign bank”;
“repurchase 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;
“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 Central Bank;
“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 Central Bank.
“resident” mean—
(a) an individual who is ordinarily resident in Uganda for one year or
more;
(b) the Government of Uganda and its diplomatic representations
located outside of 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 of
Uganda;
except that “resident” does not include a foreign diplomatic representation
or an accredited official of that representation located within Uganda,
office of an organization 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 a
“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 a
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; or
(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;
“significantly undercapitalised” has the meaning assigned to it in section
87(4) of this Act;
“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;
“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 the shares of a financial institution;
“supplementary capital” means general provisions which are held against
future and current unidentified losses that are freely available to meet
losses which subsequently materialize, 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 from time to time by the Central Bank;
“time deposits” means deposits repayable after a fixed period or after notice
and includes saving deposits;
“time liabilities” means deposit liabilities 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 Central Bank is satisfied that there is no established market
value, on the basis of a valuation approved by the Central Bank;
“value date”of a transaction means the date on which it is to be executed.
PART II—LICENSING.
4. Prohibitions against transacting financial institution business
(1) A person shall not transact any deposit-taking or other financial institution
business in Uganda without a valid licence granted for that purpose under this Act.
(2) No person shall be granted a licence to transact business as a financial
institution unless it is a company within the meaning of this Act.
(3) A financial institution shall not—
(a) transact any financial institution business not specified in its licence;
(b) effect any major changes or additions to its licensed business or
principal activities without the approval of the Central Bank.
(4) For purposes of this section “deposit” means a sum of money paid on
terms—
(a) under which it will be repaid, with or without interest or a premium, and
either on demand or at a time or in circumstances agreed by or on
behalf of the person making the payment and the person receiving it;
and
(b) which are not referable to the provision of property or services or the
giving of security.
(5) For the purposes of paragraph (b) of subsection (4), money is paid on
terms which are referable to the provision of property or services or to the giving of
security only if—
(a) it is paid by way of advance or part payment under a contract for the
sale, hire or other provisions of property or services, and is repayable
only where the property or services is not or are not in fact sold, hired
or otherwise provided;
(b) it is paid by way of security for the performance of a contract or by way
of security in respect of loss which may result from the nonperformance
of a contract; or
(c) without prejudice to paragraph (b), it is paid by way of security for the
delivery up or return of any property whether in a particular state of
repair or otherwise.
(6) For the purposes of this section, “deposit” does not include—
(a) a sum paid by the Central Bank or the sums paid to a co-operative
society; or
(b) a sum which is paid by a person to an associate of that person.
(7) For the purposes of this section, a business is a deposit-taking business
if—
(a) in the course of the business money received by way of deposit is lent to
others; or
(b) any other activity of the business is financed, wholly or to any material
extent, and out of the capital of or the interest on money received by
way of deposit.
(8) Notwithstanding that paragraph (a) or (b) of subsection (7) applies to a
business, it is not a deposit-taking business for the purposes of this section if—
(a) the person carrying it on does not hold himself or herself out as
accepting deposits on a day-to-day basis; and
(b) any deposits, which are accepted, are accepted only on particular
occasions, whether or not involving the issue of debentures or other
securities.
(9) For the purposes of subsection (7), all the activities, which a person
carries on by way of business, shall be regarded as a single business carried on by
him or her.
(10) In determining, for the purposes of paragraph (b) of subsection (8),
whether deposits are accepted only on particular occasions, regard shall be had to
the frequency of those occasions and to any characteristics distinguishing them from
each other.
(11) Any person who contravenes subsection (1) commits an offence and is
liable on conviction to a fine not exceeding three hundred and fifty currency points
or imprisonment not exceeding two years or both.
(12) A person convicted of an offence under subsection (11) of this section
shall be disqualified from acquiring a licence under this Act and under any other law
authorizing the taking of deposits.
5. Deposit advertisements
(1) Any person who issues any advertisement, brochure, circular, or other
document inviting or intended to induce any person to make a deposit which—
(a) falsely represents that he or she is authorised to accept deposits or is
otherwise licensed under this Act;
(b) is contrary to the regulations issued by the Central Bank under this
section,
commits an offence under this Act and is liable on conviction to a fine not exceeding
three hundred and fifty currency points or imprisonment not exceeding two years or
both.
(2) The Central Bank may at any time direct in writing any person to
withdraw, amend, or refrain from issuing any advertisement, brochure, circular or
other document relating to deposits which, in its sole discretion, it considers to be
misleading.
(3) Any person who, without lawful excuse, fails or refuses to comply with
a direction under subsection (2) commits an offence and is liable on conviction to a
fine not exceeding fifty currency points or imprisonment not exceeding one year or
both.
6. Corporate powers outside Uganda
(1) A financial institution shall not open or set up a subsidiary, branch or
representative office or transact financial institution business outside Uganda or
acquire an interest in any undertaking conducting business outside Uganda, except
with the consent of the Central Bank.
(2) Before granting any approval under this section, the Central Bank may
require to be satisfied as to the financial institution’s capital adequacy and proposed
business plans and may require such additional information as shall be specified by
the Central Bank in regulations made under this Act.
(3) In the case of an acquisition referred to in subsection (1), the Central
Bank shall, in accordance with regulations made under this Act, appoint a firm of
accountants to examine and report on the financial position of the undertaking to be
acquired, to ensure that the acquisition is not detrimental to the interests of the
depositors of the acquiring financial institution.
(4) After establishing the subsidiary, branch or representative office outside
Uganda, the financial institution concerned shall, in writing, notify the Central Bank
of—
(a) any change of address of the subsidiary, branch or representative office
in question; or
(b) the closing of the subsidiary, branch or representative office;
as soon as it occurs.
(5) The provisions of subsections (1), (2) and (4) in so far as they are
relevant, shall, with the necessary modifications, apply in respect of any controlling
company.
7. Prohibitions against use of the word ‘bank’ or its derivatives
(1) No person other than a person licensed as a commercial bank, merchant
bank, mortgage bank, or post office bank under this Act, shall except with the
consent of the Central Bank—
(a) use the word “bank” or any other expression, name, title or symbol
indicating or likely to create the impression that the person is
conducting or is authorised to conduct business as a commercial
bank, merchant bank, or post office savings bank under this Act;
(b) make or continue to make any representation indicating the transaction
of the business specified in paragraph (a) of this subsection in any
bill head, letter-paper, notice, advertising or in any other manner.
(2) A financial institution may not be licensed under this Act with a name—
(a) that is prohibited by an Act of Parliament;
(b) that is in the opinion of the Central Bank, deceptively misdescriptive;
(c) that is the same as or, in the opinion of the Central Bank, similar to, any
existing trade-mark or trade name, or corporate name of a body
corporate, except where the trade name or trade mark is being
changed or the body corporate is being dissolved or is changing its
corporate name and the consent to the use of the trade mark or trade
name, or corporate name is signified to the Central Bank in such
manner as the Central Bank may require;
(d) that is the same as, or in the opinion of the Central Bank, substantially
the same as or confusingly similar to, the known name under or by
which any entity carries on business or is identified.
(3) No company shall carry on business as a commercial bank, merchant
bank, mortgage bank or post office savings bank unless it uses as part of its name
the word “bank” or one of its derivatives.
(4) A person who contravenes sub-section (1) or (3) of this section,
commits an offence and is liable on conviction, to a fine not exceeding five currency
points for every day during which the offence continues.
8. Search and seizure
(1) The Central Bank may, at any time and without prior notice, if it has reason
to believe that a person is transacting or carrying on business as a financial
institution or taking deposits in contravention of section 4, in writing, authorize an
officer of the Central Bank to—
(a) enter any premises which the Central Bank has reason to believe are
occupied or used by any person for the purpose of or in connection
with the contravention of section 4;
(b) search for any book, record statement, document or other item used, or
which is believed to be used, in connection with the contravention of
section 4;
(c) seize or make a copy of any book, record, statement, documents or other
item referred to in paragraph (b), or seize any money found on the
premises;
(d) question any person who is present on the premises referred to in
paragraph (a), or the auditors, directors, members or partners of any
person conducting business on the premises, in connection with the
conducting of the business on the premises;
(e) direct that the premises referred to in paragraph (a) or any part of it or
anything on the premises, should be left undisturbed for as long as it
is necessary to search the premises for any book, record, statement,
document or item under paragraph (b);
(f) by notice in writing addressed and delivered to any person who has
control over or custody of any book, record, statement, document or
other item referred to in paragraph (b), require the person to produce
the book, record, statement, document or other item to the officer of
the Central Bank issuing the notice, at the place, on the date and at
the time specified in the notice;
(g) examine any book, record, statement, document or other item referred to
in paragraph (b) and may require from any person referred to in
paragraph (d) an explanation regarding any entry in the book, record,
statement, document or other item;
(h) by notice in writing delivered to a financial institution, instruct the
financial institution to freeze summarily any bank account or
accounts of any person referred to in this subsection with the
financial institution and to retain all moneys in that bank account or
those accounts, pending the further instructions of the Central Bank;
(i) by notice in writing delivered to any person referred to in this section,
direct that the business of that person be summarily suspended,
pending the investigation by the Central Bank under this section;
(j) if any person has been convicted of an offence under subsection (11) of
section 4, close down the business of that person.
(2) If the officer of the Central Bank referred to in subsection (1) of this
section performs a function under this section in the presence of any person affected
by the performance of the function, the officer shall, at the request of the person
affected, exhibit to the person the written authorization referred to in that subsection.
(3) No person shall—
(a) hinder or obstruct an officer of the Central Bank authorized under
subsection (1) in the performance of his or her functions;
(b) refuse or fail to comply with any request made by an officer under
subsection (1) in the performance of the officer’s functions;
(c) refuse or fail to answer any question which an officer under subsection
(1) lawfully directs at that person in the performance of that officer’s
functions;
(d) wilfully furnish false or misleading information to an officer under
subsection (1); or
(e) falsely give himself or herself out as an officer under subsection (1).
(4) For the purposes of this section, “premises” includes any building or
structure, or part of a building or structure, whether above or below the surface of
the land or water, or any vehicle, vessel or aircraft.
(5) Any person who contravenes any of the provisions of subsection (3) of
this section commits an offence and is liable on conviction to a fine not exceeding
one hundred currency points or imprisonment not exceeding one year or both.
9. Repayment of moneys by unauthorized persons
(1) If the Central Bank is satisfied that a person has obtained any moneys in
contravention of section 4, the Central Bank shall, in writing, direct the person to
repay all the moneys obtained by him or her and all profits accruing to that person as
a result of the illegally obtained monies or deposits, including any interest or other
amounts which may be owing by that person in respect of those moneys—
(a) to the respective persons from whom he or she has obtained the moneys;
(b) in the manner and in accordance with the direction; and
(c) within the period of time imposed by the Central Bank and specified in
the direction.
(2) Any person referred to in subsection (1) who refuses or fails to comply
with a direction under that subsection, shall, for the purposes of section 223 of the
Companies Act, be deemed to be unable to pay its debts, or for the purposes of the
Bankruptcy Act be deemed to have committed an act of bankruptcy, as the case may
be, and the Central Bank may apply to the High Court for the winding-up, or for the
sequestration of the estate, of that person, as the case may be.
(3) Subsections (1) and (2) shall be in addition to, and not derogate from,
any criminal liability under this Act or any other law, of a person referred to in those
subsections.
10. Application for a licence
(1) A company proposing to transact or carry on business as a financial
institution shall apply, in writing, to the Central Bank for a licence under this Act.
(2) An application for a licence under this section shall contain the
following information—
(a) the name and address of—
(i) the proposed financial institution;
(ii) the directors;
(iii) the shareholders;
(b) the nationality of directors;
(c) the nationality and shareholding of each shareholder;
(d) the proposed location where the financial institution is going to operate
from;
(e) the estimated number of persons to be employed;
(f) the qualifications, experience, nationality and other relevant particulars
of the proposed management and staff;
(g) the capital structure and earning prospects of the financial institution;
(h) the applicant’s business, financial plans and earnings forecasts namely,
balance sheet, income statement and cash flow, for at least three
years and sufficient detail to describe the operating plan, demand for
financial products and services and existing competition in the
proposed market;
(i) a summary of the applicant’s board risk management policies and
management operating procedures and systems that will ensure the
integrity of its financial controls;
(j) a description of the applicant’s proposed organisational and management
structure, reporting lines and responsibilities of its Board;
(k) any other information relating to the viability of the financial institution
or other matters as the applicant considers relevant to its application.
(3) The following classes of licences shall expressly be included in the
provisions of this law, the permitted main financial services provided or businesses
conducted, particulars of which are more elaborately specified in the Second
Schedule to this Act as—
(a) the business of a commercial bank( Class 1);
(b) the business of a post-office savings bank( Class 2);
(c) the business of a merchant bank( Class 3);
(d) the business of a mortgage bank( Class 4);
(e) the business of a credit institution( Class 5);
(f) the business of an acceptance house ( Class 6);
(g) the business of a discount house( Class 7);
(h) the business of a finance house( Class 8).
(4) The list of classes of licences specified in subsection (3) does not
preclude the issue by the Central Bank of other classes of licence which by reason of
the provision of other financial services fall within the scope of this Act.
(5) Subject to subsections (3) and (4) of this section, the applicant shall
state the class of licence in which it seeks to be licensed.
(6) An application under subsection (1) of this section shall be accompanied
by—
(a) the applicant’s memorandum and articles of association or other
instrument under which the company is incorporated and its
certificate of incorporation;
(b) a certified copy of the resolution of the board of the applicant
authorizing the preparation and submission of the application;
(c) a sworn declaration for all individuals proposing to become directors,
shareholders, controllers or managers, issued in a form specified by
the Central Bank in regulations made under this Act.
(7) Where an application under subsection (1) of this section does not
provide all the relevant information or if clarification is necessary, the applicant may
be called upon to provide that information or clarification to complete the
application.
(8) Any person who, in relation to an application for a licence under this
Act, knowingly or recklessly provides the Central Bank or any other person with
information which is false or misleading in a material particular, shall for purposes
of this Act, cease to be a fit and proper person, without prejudice to that person
being prosecuted under this Act.
11. Factors to be considered in making a decision to grant a licence
The Central Bank shall, in considering an application for a licence under section
10 of this Act, require to be satisfied as to—
(a) the financial condition and history of the applicant;
(b) the nature of the business of the applicant including the range of
services and products proposed;
(c) the competence and integrity of the proposed management;
(d) the adequacy of the applicant's capital structure, earning prospects,
business plans, financial plans;
(e) the convenience and needs of the community to be served;
(f) geographical locations and branch distribution network of the proposed
business;
(g) whether the directors and officers of the applicant are fit and proper
persons for the purpose of transacting business as a financial
institution, according to the criteria set out in the Third Schedule to
this Act and such other criteria as the Central Bank may determine;
(h) the structure and shareholding of the group of companies of which the
applicant forms a part or intends to form a part;
(i) whether the applicant is or will be able to apply or maintain adequate,
effective and proper internal control systems when conducting
financial institution business under the licence;
(j) whether public or economic interest will be served by the granting of the
licence;
(k) whether the promoters, controllers, and substantial shareholders are fit
and proper persons;
(l) whether the institution's business is or is required to be directed by at
least two individuals;
(m) the existence of a moratorium in force against the licensing of new
financial institutions;
(n) any other matter which the Central Bank may regard as relevant to the
application or to the applicant.
12. Processing, granting and refusal of licence
(1) The Central Bank shall, within six months after receipt of an application, or
of the additional information or clarification referred to in subsection (7) of section
10 of this Act, investigate and prepare a detailed report in respect of each
application.
(2) The Central Bank shall within fourteen days after the period referred to
in subsection (1) of this section consider the application and the report, and shall—
(a) grant the licence if it is satisfied that the application is in accordance
with this Act; or
(b) grant the applicant a conditional licence with such conditions as it may
deem necessary; or
(c) grant the applicant a limited licence covering only the part of financial
institution business for which it is satisfied that the applicant meets
the requirements of this Act; or
(d) refuse to grant the licence for reasons that shall be stated in the letter of
refusal.
(3) The Central Bank shall, within seven days after its decision under
subsection (2), inform the applicant of its decision in writing.
(4) A licence granted under this Act shall clearly indicate—
(a) the name and address of the financial institution;
(b) the nature or classification of the financial institution;
(c) the type of financial institution business and financial services it is
licensed to conduct;
(d) the place or places at which the licensee is authorised to conduct the
business.
(5) A financial institution shall not engage in any business other than the
business specified in its licence.
(6) A financial institution which contravenes subsection (5) shall pay to the
Central bank a fine of three hundred currency points per day on which the violation
continues.
(7) Any financial institution which, at the commencement of this Act was a
licensed financial institution within the meaning of this Act, is deemed to have been
licensed under this Act; except that that financial institution shall, within ninety days
after the coming into force of this Act, submit its existing licence to the Central
Bank for classification in accordance with the requirements of subsection (3) of
section 10 and the Second Schedule to this Act.
(8) Sub-section (7) shall not be construed as preventing the Central Bank
from amending the licence under section 15 of this Act to prohibit the financial
institution from engaging in any activity under the licence.
(9) Any person aggrieved by a decision of the Central Bank under this
section may appeal to the High Court against the decision of the Central Bank within
thirty days after being notified of the decision and the High Court may confirm or
set aside the decision.
(10) Where the High Court sets aside a decision of the Central Bank under
subsection (9), the High Court shall direct the Central Bank to reconsider its
decision and refund the financial institution the fines so far paid.
(11) On an appeal under subsection (9), the question for determination of
the High Court shall be whether, for the reasons stated by the appellant, the decision
appealed against was unlawful or not justified by the evidence on which it was
based.
13. Licence fee
(1) The applicant shall, upon being granted a licence under this Act, pay a fee
prescribed by the Central Bank by notice and the holder of the licence shall after that
pay an annual fee prescribed by the Central Bank on or before the 31st day of
January of each year.
(2) If a financial institution fails to pay the prescribed annual licence fees
before or on the date specified in subsection (1) of this section—
(a) the financial institution shall pay to the Central Bank a late payment
civil penalty at a rate of fifty percent of the licence fee.
(b) the unpaid annual licence fee and any civil penalty payable under
paragraph (a) of this subsection shall be a debt due to the Central
Bank by the financial institution.
14. Duration and display of licence
(1) A licence granted under section 12 of this Act shall remain in force until
revoked.
(2) A licence granted under section 12 of this Act shall be kept displayed in
its original form in a conspicuous place in the premises in which the financial
institution carries on its lawful business, and copies of it shall be similarly displayed
in each of its branch offices.
15. Amendment and restriction of licence
(1) Subject to this section, the Central Bank may at any time amend or restrict a
financial institution’s licence or any term or condition of its licence—
(a) to correct any error;
(b) if the institution requests the amendment;
(c) if the Central Bank considers the amendment necessary to reflect the
true nature of the business which the institution is conducting;
(d) if it is desirable for the protection of that institution’s depositors or
potential depositors; or
(e) if for any other reason the Central Bank considers the amendment
necessary or desirable in the public interest.
(2) Before amending a financial institution’s licence in accordance with
sub-section (1), other than at the institutions’ request, the Central Bank shall notify
the institution, in writing, of the nature of the amendment it proposes to make and of
its reasons for making the amendment and shall give the institution an opportunity to
make representations in that matter.
(3) If the Central Bank refuses to make an amendment in accordance with
paragraph (b) of subsection (1) of this section, it shall, within a reasonable time after
reaching its decision notify the institution, in writing, of its decision and the reasons
for it.
16. Failure to commence operations
The licence of a financial institution which fails to commence operations within
twelve months from the date of issue of the licence shall be revoked.
17. Revocation of licence
The Central Bank may, at any time, revoke a licence of a financial institution if
it is satisfied that the financial institution at any time—
(a) has ceased to carry on business;
(b) is significantly undercapitalised as defined in subsection (4) of section
87 of this Act or is unable to pay its liabilities as they mature;
(c) has gone into liquidation;
(d) has been wound up;
(e) has been dissolved;
(f) is in the opinion of the Central Bank conducting business in a manner
detrimental to the interests of depositors;
(g) has in the view of the Central Bank contravened this Act or any other
financial law in a manner which is serious or persistent;
(h) has engaged in serious deception of the Central Bank or the general
public in respect of its financial condition, ownership, management,
operations or other facts material to its business;
(i) has without the consent of the Central Bank arnalgamated with another
financial institution or sold or otherwise transferred its assets and
liabilities to another financial institution;
(j) has failed to comply with any condition stipulated by the Central Bank
under subsection (2) of section 12 of this Act;
(k) has failed to comply with any instruction or direction given by the
Central Bank under Part IX of this Act to remedy managerial or
financial deficiencies.
(l) does not or may not fulfil or has not or may not have fulfilled any of the
licensing conditions specified in section 11 of this Act.
PART III—SHAREHOLDING IN FINANCIAL INSTITUTIONS.
18. Prohibitions on share holding in financial institutions
(1) Except as expressly provided in this Act, no—
(a) individual; or
(b) body corporate controlled by one individual;
shall own or acquire more than forty nine per cent of the shares of a financial
institution.
(2) Notwithstanding the provisions of the Companies Act, no financial
institution shall, except with the permission of the Central Bank, allot or issue, or
register the transfer of five per cent or more of any of its shares to one person.
(3) Permission under subsection (2) may be obtained from the Central Bank
on application in writing.
(4) Permission under subsection (2) for the acquisition of shares in a
financial institution shall not be granted unless the Central Bank is satisfied that the
proposed acquisition of shares—
(a) will not be contrary to the public interest;
(b) will not be contrary to the interests of the financial institution concerned
or its depositors; and
(c) will not be detrimental to the financial services industry in general.
(5) If through on site inspection the Central Bank discovers that the
retention of a certain amount of shareholding in a financial institution by a person
will be to the detriment of the financial institution or the depositors concerned, the
Central Bank may—
(a) order that person to reduce, within a period not exceeding three years,
that person’s shareholding in the financial institution to such
percentage of the total nominal value of all the issued shares of that
financial institution as the Central Bank shall determine as sufficient
to achieve the objective in subsection (5); and the person so ordered
shall within ninety days after the order is given present to the Central
Bank the plan of action regarding the reduction of their share
holding;
(b) consider the plan of action submitted under paragraph (a) of this
subsection and make further orders on it;
(c) limit, with immediate effect, the voting rights that may be exercised by
that shareholder by virtue of that person’s shareholding to such
percentage of the voting rights attached to all the issued shares of the
financial institution as the Central Bank may by notice determine.
(6) If, at the commencement of this Act any individual or body corporate
controlled by one individual holds more than forty nine percent of the shares in a
financial institution or controlling company, that individual or body corporate
controlled by one individual shall—
(a) within a period not exceeding seven years, reduce their shareholding in
the financial institution or controlling company to the percentage
prescribed in subsection (1) of this section;
(b) within six months after the commencement of this Act, present to the
Central Bank a credible plan of action regarding the reduction of the
share holding.
(7) If any person fails to submit a plan of action as required by paragraph
(b) of subsection (6) of this section, the Central Bank shall limit, with immediate
effect, the voting rights that may be exercised by that person by virtue of their
shareholding to such percentage of the voting rights attached to all the issued shares
of the financial institution as the Central Bank may by notice determine until such a
time as a credible plan is submitted.
(8) The Central Bank shall, within forty five days after receipt of the plan of
action submitted under paragraph (b) of subsection (6) consider the plan of action
and either approve it, or make further orders on it, or reject the plan in writing with
reasons.
(9) Where any plan is rejected the person concerned shall within thirty days
of notification submit another plan.
(10) Where the Central Bank has not received a plan or is not satisfied with
the plan of action submitted to it, and the person has failed, refused or neglected to
provide an acceptable plan which satisfies the requirements of the Central Bank,
then the Central Bank shall draw up a plan of action which shall be followed by that
person.
(11) Any person who fails to comply with—
(a) a plan of action instituted by the Central Bank under subsection(10) of
this section; or
(b) an order of the Central Bank issued under paragraph (a) of subsection
(6) of this section;
shall cease to be a fit and proper person for the purposes of this Act and shall not
remain a substantial shareholder in a financial institution.
(12) Subsections (1), (2) and (6) of this section shall, subject to the Central
Bank’s approval, not apply to the holding or acquisition of shares in a financial
institution by a reputable financial institution or in exceptional cases, a reputable
public company.
19. Persons who are not fit and proper not to become substantial
shareholders
(1) A person or group of related persons who do not satisfy the criteria for the fit
and proper test relating to substantial shareholders as determined by the Central
Bank in accordance with the Third Schedule to this Act shall not acquire more than
five per cent of the shares of a financial institution.
(2) No person or group of related persons shall acquire more than five per
cent of the shares of a financial institution unless the Central Bank has—
(a) received from them a written notice of their intention to become
substantial shareholders; and
(b) given them a written notice of no objection.
(3) The Central Bank shall not issue a notice of no objection unless it is
satisfied that—
(a) the person or the whole group of related persons are fit and proper
persons to become substantial shareholders of a financial institution;
(b) the interests of depositors would not be in any manner threatened by
that person’s or group of related persons’ becoming substantial
shareholders.
(4) Where the Central Bank receives a notice under paragraph (a) of
subsection (2) it may seek such further information and documents from any person
including the applicants.
20. Prohibition on allotment, issue or registration of transfer of shares
(1) No financial institution shall allot or issue or register a transfer of shares
exceeding five percent of the shares of a financial institution to any person or group
of related persons, if that person or group of related persons has not obtained a
notice of no objection from the Central Bank.
(2) The registrar of companies shall not register any transfer of shares of a
financial institution referred to in subsection (1) without receiving a notice of no
objection from the Central Bank.
21. Registration of shares in the names of nominees
(1) Notwithstanding the provisions of the Companies Act, no financial
institution or controlling company shall without the written approval of the Central
Bank—
(a) allot or issue any of its shares to, or register any of its shares in the name
of any person other than the intended beneficial shareholder;
(b) transfer any of its shares in the name of a person other than the
beneficial shareholder, or
(c) allow any of its shares to remain registered in the name of a person other
than the beneficial shareholder at any time after thirty days after the
commencement of this Act.
(2) Subsection (1) shall not affect the allotment or issue, or the registration
of the transfer of shares in a financial institution—
(a) in the name of any executor, administrator, trustee, curator, guardian or
liquidator under the Companies Act;
(b) for a period of not more than six months, in the name of a stockbroker
or a company established by him or her for the purposes of the
Capital Markets Authority Act; except that the Central Bank shall
require to be satisfied that the shares are allotted, issued or registered
in such a manner in order to facilitate delivery of the shares to the
purchaser of the shares.
(3) The financial institution shall on issue or allotment, transfer or
registration of any shares under subsection (2) provide the Central Bank in writing
with the full particulars of the transaction relating to the allotment, issue,
registration, or transfer of the shares under that subsection.
(4) The voting rights attached to the shares registered under subsection (2)
shall, unless otherwise determined by the Central Bank, not be more than twenty
percent of the aggregate of the voting rights attached to all the issued shares of the
financial institution concerned.
(5) Any person who contravenes subsection (1) of this section commits an
offence and is liable on conviction to a fine equal to twice the nominal value of the
shares registered or transferred in contravention of subsection (1) for each day on
which the shares remain so registered.
22. Registration of shares contrary to this Act
(1) No person shall—
(a) either personally or by proxy granted to any other person, cast a vote
attached to; or
(b) receive a dividend payable on,
any share in a financial institution allotted or issued to him or her or registered in his
or her name in contravention of this Act.
(2) The validity of any resolution adopted by a financial institution shall not
be affected by a vote being cast in contravention of paragraph (a) of subsection (1),
if that resolution was adopted by the requisite majority of votes which were validly
cast.
(3) A dividend referred to in paragraph (b) of subsection (1) shall accrue to
the financial institution concerned.
23. Shareholders register and disclosure of interests in shares
(1) A financial institution shall maintain a register of the current beneficial
holders of all shares in the financial institution in such form and manner as the
Central Bank may approve.
(2) A financial institution shall every six months provide the Central Bank
with the most up to-date returns of the register referred to in subsection (1).
(3) No transfer of shares of a financial institution shall be valid unless the
transfer is recorded in the register.
(4) Any person or group of related persons who acquire a substantial
interest in shares comprised in the financial institution’s share capital or ceases to be
interested in shares so comprised, whether or not retaining an interest in other shares
so comprised, shall within twenty one days after the acquisition or ceasure of
holding that interest, notify the financial institution of the interest so acquired or
ceasing to be held.
24. Restriction of right to control financial institutions
(1) No person other than a reputable financial institution or in exceptional cases
a reputable public company, may exercise control over a financial institution.
(2) For the purposes of this section a person shall be deemed to exercise
control over a financial institution if, where that person is a company, the financial
institution is a subsidiary of that company, or, whether or not that person is a
company, if that person by himself or herself or together with his or her associates,
related persons or group of related persons—
(a) is entitled or has the power to determine the appointment of the majority
of the directors of that financial institution, including—
(i) the power to appoint or remove, without the concurrence of any
other person, all or the majority of such directors; or
(ii) the power to prevent any person from being appointed a director
without his or her consent, and if a person’s appointment as a
director of the financial institution follows necessarily from his
or her appointment as a director of the person first-mentioned
in this subsection, the first-mentioned appointment shall for the
purposes of this subsection be deemed to be an appointment by
virtue of a power of a person first-mentioned;
(b) exercises directly or indirectly a controlling influence over the financial
institution, its major policies or strategies singly or in concert with a
related person or group of related persons.
25. Penalties for violating provisions on share holding
(1) The Central Bank may, in writing, if it is satisfied that a financial institution
or any other person has contravened any of the provisions of sections 18, 19, 20, 23
or 24 as the case may be , make a preliminary order imposing one or more of the
restrictions specified in subsection (2) on the person or on the financial institution as
the case may be, as the Central Bank may consider appropriate.
(2) A preliminary order by the Central Bank under subsection (1) may, in
respect of any of the shares forming the subject of, or related to, the contravention
referred to in that subsection, prohibit—
(a) the transfer of, or the due performance in terms of any agreement to
transfer, the shares; or
(b) in the case of unissued shares, the transfer of, or the right to be issued
with, the unissued shares;
(c) the exercise of any voting rights in respect of the shares;
(d) the issue of any further shares in accordance with any offer made to the
holder of the shares; or
(e) except in the case of liquidation, the payment of any amount due by the
financial institution in respect of the shares.
(3) A preliminary order made by the Central Bank under subsection (1)
shall—
(a) be in the prescribed form and shall be signed by a person appointed by
the Central Bank;
(b) be addressed to the financial institution or the person concerned;
(c) specify and contain full particulars of the order made by the Central
Bank; and
(d) during normal hours of business be delivered by a person appointed in
writing by the Central Bank for the purpose, upon the principal
officer of the financial institution or upon the other person referred to
in subsection (1), as the case may be, to whom the preliminary order
is directed or, in the case of a financial institution, if the principal
officer is not available, upon any person above the age of 18 years
employed by the financial institution.
(4) The person to whom the preliminary order is delivered under subsection
(3) (d), shall—
(a) in writing, acknowledge receipt of the order, specifying—
(i) the full names and designation of the person who received the
order; and
(ii) the date and time of the receipt; and
(b) sign the acknowledgement of receipt referred to in paragraph (a).
(5) The Central Bank may, at its discretion and in addition to the delivery of
the preliminary order under paragraph (d) of subsection (3) to the financial
institution or upon the other person concerned, publish the preliminary order in one
or more of the newspapers in the manner and form as the Central Bank may specify.
(6) A preliminary order delivered upon a financial institution or other
person referred to under subsection 3 (d) shall, from the date of the delivery, be
binding upon the financial institution or the other person, as the case may be, to
whom the order is directed and to whom it is delivered under that subsection.
(7) A person holding shares in a financial institution and to whom a
preliminary order has been delivered under paragraph (d) of subsection (3) shall,
within seven days after the date of service, or within such longer period as the
Central Bank may allow, surrender the share certificate concerned to the Central
Bank, together with such other documents relating to the shares as the Central Bank
may specify in the order.
(8) Any person to whom a preliminary order has been delivered under
paragraph (d) of subsection (3) or any other person prejudiced by the order, may
within fourteen days after the date of service of the order, or after the date upon
which he or she became aware of the order, as the case may be, make written
representations to the Central Bank applying for—
(a) the cancellation of the order on the grounds that the person had not
contravened any provision of this Act as specified in the order; or
(b) an amendment of the order on the grounds specified in the application.
(9) The Central Bank may, after consideration of the representations made
to it under subsection (8)—
(a) confirm the preliminary order;
(b) cancel the preliminary order; or
(c) confirm the preliminary order subject to such amendments as the
Central Bank may consider appropriate.
(10) If the Central Bank confirms a preliminary order under subsection (9),
it may dispose of the shares surrendered to it under subsection (7), at a fair valuation
determined by the Central Bank in such manner as it may consider appropriate, to a
person qualified to hold such shares under this Act.
(11) The proceeds of a sale of shares under subsection (10) shall, subject to
subsection (12), be paid by the Central Bank to the person entitled to the proceeds.
(12) If the Central Bank—
(a) in writing for any reason declines to pay the proceeds referred to in
subsection (11) to any person claiming to be entitled to it;
(b) does not receive a claim under subsection (11) within a period of two
years after the date of sale of the shares referred to in subsection(11),
then the proceeds shall be kept in an account with the Central Bank and the Central
Bank may apply to the High Court for directions as to the disposal of the proceeds.
(13) The Central Bank may, in writing, give such instructions or directions
to the directors or officers of a financial institution referred to in subsection (1) as
the Central Bank may consider necessary to give effect to an order made by the
Central Bank under this section.
(14) Any transaction, including any agreement or arrangement, in relation
to any shares or security, or to any interest in any shares or security, which
contravenes—
(a) any order made under this section; or
(b) any instruction or direction given under subsection (13), by the Central
Bank,
shall be null and void.
(15) The Central Bank may, irrespective of whether a person referred to in
subsection (1) has been prosecuted in respect of the contravention of a provision of
this Act referred to in that subsection, make a preliminary order or take such other
steps as the Central Bank may consider appropriate.
(16) Any person who contravenes subsection (4) of this section commits an
offence and is liable on conviction to a fine not exceeding one hundred currency
points or imprisonment not exceeding one year or both.
PART IV—CAPITAL REQUIREMENTS.
26. Minimum capital requirements for financial institutions
(1) A person proposing to transact financial institution business in the capacity
of a bank in Uganda shall have a minimum paid-up cash capital of not less than two
hundred thousand currency points invested initially in such liquid assets in Uganda
as the Central Bank may approve.
(2) The minimum capital funds unimpaired by losses of a bank shall at any
time not be less than two hundred thousand currency points.
(3) A person proposing to transact business as a non- bank financial
institution shall have a minimum paid up cash capital of not less than fifty thousand
currency points invested in such liquid assets in Uganda as the Central Bank may
approve.
(4) The minimum capital funds unimpaired by losses of a non-bank
financial institution shall at any time not be less than fifty thousand currency points.
(5) The Minister, on the advice of the Central Bank, may from time to time
revise the minimum capital requirements of financial institutions by a statutory
instrument, which shall immediately be laid before Parliament
27. Minimum on going capital requirements
(1) A financial institution shall at all times maintain—
(a) a core capital of not less than eight percent of total risk adjusted assets
plus risk adjusted off balance sheet items as may be determined by
the Central Bank by statutory instrument;
(b) a total capital of not less than twelve percent of its total risk adjusted
assets plus risk adjusted off balance sheet items as may be
determined by the Central Bank by statutory instrument.
(2) The Central Bank may prescribe higher on-going capital requirements
for a specific financial institution if the supervisory review process reveals existing
risks in the financial institution warranting the increase.
28. Minimum holding and computation of liquid assets
(1) A financial institution shall maintain a minimum holding of liquid assets, as
determined by the Central Bank in accordance with subsection (2) of this section.
(2) Subject to subsections (1) and (2) of section 26, the minimum holding of
liquid assets under this section shall be expressed as a proportion of the demand and
time liabilities of a financial institution and shall not exceed thirty percent of such
demand and time liabilities, except that—
(a) different proportions may be determined for demand liabilities and time
liabilities and for different types of financial institutions;
(b) demand or time liabilities due by a financial institution to its head office
or to any bank situated outside Uganda may, at the discretion of the
Central Bank, be included wholly or in part.
(3) The Central bank shall prescribe the minimum amount of liquid assets
to be held by a financial institution, including the off-setting of general or specified
liquid assets against demand and time liabilities; except that in so doing the Central
Bank may distinguish between requirements for deposit liabilities denominated in
foreign currency and those denominated in Uganda shillings.
(4) In computing the minimum amount of liquid assets to be held by a
financial institution operating in Uganda and elsewhere, all offices or branches of
that financial institution in Uganda shall be deemed to constitute one institution.
(5) A financial institution which contravenes this section is liable to pay, to
the Central Bank, a civil penalty of one-tenth of one percent of the amount of the
deficiency for every day on which the deficiency continues.
(6) For the purposes of this section “liquid assets” means all or any of the
following—
(a) notes and coins which are legal tender in Uganda and any other
currency prescribed by the Central Bank;
(b) balances held at the Central Bank as may be approved by the Central
Bank;
(c) moneys at call and balances at banks in Uganda other than the Central
Bank after deducting balances owed to those banks;
(d) Uganda Treasury Bills maturing within a period not exceeding ninety
one days;
(e) marketable Government securities that are held by financial institutions
for trading purposes ;
(f) uncommitted balances at banks outside Uganda withdrawable on
demand and money at call outside Uganda after deducting therefrom
balances owed to banks outside Uganda, if the balances and money at
call are in currencies which are freely negotiable and transferable in
international exchange markets consistent with the articles of
agreement of the International Monetary Fund;
(g) commercial bills and promissory notes which are eligible for discount
by commercial banks or by the Central Bank under the Bank of
Uganda Act;
(h) any other asset that the Central Bank may by statutory instrument
approve.
(7) The Central Bank shall allow reasonable time after a minimum holding
is prescribed or increased under subsection (1) of this section to enable the financial
institution comply with the requirement.
PART V—PROHIBITIONS AND RESTRICTIONS.
29. Bar on lending where liquid assets are insufficient
Where a financial institution fails to maintain the minimum amount of liquid
assets it shall not grant any new or additional loan or credit accommodation to any
person without the prior written approval of the Central Bank
30. Restrictions on lending against own shares and debt instruments
A financial institution shall not grant any advance or credit facility or
accommodation against—
(a) security of its own shares or those of a company affiliated to it;
(b) any instruments which may qualify as capital of the financial institution.
31. Restrictions on credit concentration
(1) A financial institution shall not grant or promise to grant to a single person,
or to a group of related persons any advance or credit accommodation which is more
than twenty five percent of its total capital.
(2) Notwithstanding subsection (1), a financial institution may grant an
advance or credit facility in excess of twenty five percent but not more than fifty
percent of its total capital if the facility is self-liquidating, and its maturity or expiry
does not exceed three years and is adequately secured by—
(a) Uganda Government securities to be pledged to the financial institution;
(b) fixed deposits held by the financial institution and secured by a lien;
(c) other qualifying securities as the Central Bank may by statutory
instrument prescribe.
(3) The Central Bank shall aggregate as a single advance or credit facility
all loans and credit accommodations made by a financial institution to one or more
persons with a common interest.
(4) A common interest shall be deemed to exist between persons for the
purposes of this section if—
(a) the exposure to those persons constitutes a single exposure because of
the fact that one of them directly or indirectly exercises control over
others;
(b) although the persons to whom the financial institution is exposed are
different entities, they are so interconnected that if one of them
experiences financial difficulties, another one or all of them are likely
to experience lack of liquidity;
(c) the persons are affiliates within the meaning of this Act;
(d) those persons are related persons within the meaning of this Act;
(e) those persons have common control;
(f) those persons are associates within the meaning of this Act.
(5) In addition to but without derogation from subsections (1), (2) and (3) of
this section, a financial institution shall not have large exposures which in the
aggregate exceed eight hundred percent of its total capital.
(6) Notwithstanding subsections (1) and (2) of this section, a financial
institution may grant to another financial institution an advance or credit facility
which is more than twenty five percent of its total capital except that the advance or
credit facility—
(a) shall not exceed fifty percent of its total capital;
(b) shall not have a maturity exceeding one year; and
(c) shall immediately be reported to the Central Bank.
(7) Where the advance or credit facility by a financial institution to another
financial institution exceeds one year, it shall be secured in accordance with
subsection (2) of this section.
(8) A financial institution which at the commencement of this Act has
outstanding credit facilities which contravene the provisions of this section shall
comply with those provisions within a period of three years from the date of
commencement.
32. Restrictions relating to reduction of capital
(1) A financial institution shall not at any time—
(a) pay or declare any dividend;
(b) make any transfer from profits or capital; or
(c) make any other distributions,
other than to a reserve account, if the dividend, payment, or distribution is likely to
result in the financial institution not meeting its capital requirements.
(2) Subsection (1) of this section shall apply with the necessary
modifications to any financial institution that does not meet the capital requirements
prior to the payment or distribution.
(3) The Central Bank shall direct any institution which contravenes this
section to—
(a) recall all the dividends, payments or distributions made or make good
their full value and in addition;
(b) pay a civil penalty equivalent to twice the value of dividends or
distributions payments made.
33. Restrictions on inter institutional placements and loans
(1) A financial institution whose core capital is less than forty percent of the core
capital prescribed in this Act shall not take any placement or receive any loan from
any financial institution in Uganda.
(2) Placements between affiliated financial institutions shall be considered
as insider transactions and shall be subject to all the provisions of section 34 of this
Act;
(3) Where the Central Bank finds that any person has contravened any of
the provisions of this section it shall—
(a) where the person is a financial institution—
(i) order the immediate repayment by the taking financial institution
of the excess by which the placement exceeded the limits
prescribed in this section and impose a civil penalty on the
offending financial institution of two hundred and fifty
currency points for each day on which the contravention
continues;
(ii) impose one or more of the foregoing penalties as it, in its own
discretion, deems fit.
(b) where the person is an individual, impose civil penalty of fifty currency
points per day on which the contravention continues, which fine shall
be paid personally by every officer, or director who authorised the
contravention.
(4) A civil penalty imposed under subsection (3) of this section shall be a
debt due from that person to the Central Bank and shall—
(a) in case of officers and directors if not paid within sixty days after
demand of the civil penalty be recoverable by personal action against
them; or
(b) in case of the financial institution be recoverable by debit to their
account with the Central Bank.
34. Prohibitions on insider transactions
(1) A financial institution shall not grant or permit to be outstanding a loan or
credit accommodation to any of its affiliates and associates, directors, persons with
executive authority, substantial shareholders or to any of their related persons or
their related interests except on terms which are non-preferential in all respects
including creditworthiness, term, interest rate and the value of the collateral.
(2) For the purpose of subsection (1) “non-preferential” means upon terms
no more favourable than those which would be offered under prevailing conditions
to persons other than those referred to under sub-section (1).
(3) A financial institution shall not grant or permit to be outstanding loans
or credit accommodations to its affiliates and associates, directors, persons with
executive authority, substantial shareholders or to any of their related persons or
group of related persons or their related interests which, in the aggregate, exceed
twenty percent of its core capital.
(4) Every loan or credit accommodation by a financial institution to any of
its affiliates and associates, directors, persons with executive authority, substantial
shareholders or to any of their related persons or group of related persons or their
related interests shall be secured at all times by collateral having a market value of at
least one hundred and twenty percent of the outstanding amount of the loan
throughout its term.
(5) Any collateral required by subsection (4) shall be assigned to the
financial institution and shall at all times be an enforceable or realisable security.
(6) A financial institution shall not grant or permit to be outstanding
aggregate loans and credit accommodations to any one of its employees, including
executive directors, in excess of two years’ salary of the officer or executive
director.
(7) Subsection (6) shall not apply to any residential mortgage loan which is
governed by subsection (9) of this section.
(8) A financial institution shall not grant or permit to be outstanding loans
or credit accommodations to any one of its non-executive directors and his or her
related interests, in excess of 2.5 percent of core capital of the financial institution.
(9) Notwithstanding subsection (6), a financial institution may grant to an
employee a secured loan or credit accommodation which aggregate up to three times
one year’s salary of the employee for the purpose of purchasing or constructing a
primary residence for the employee.
(10) A loan or credit accommodation shall not be granted to any officer
including an executive director under subsection (6) and (9) while any other loan to
that person is non-performing.
(11) “Non-performing” shall have the same meaning as that assigned to it in
subsection (2) of section 35 of this Act.
(12) A director of a financial institution who contravenes this section, shall
immediately cease to be a ‘fit and proper’ person for the purposes of this Act and
shall cease to be a member of the board of directors of the financial institution and in
addition, shall not be permitted to be re-appointed to the board of directors of that
financial institution or appointed to any board of directors of a financial institution
in Uganda without the prior written permission of the Central Bank.
(13) A person who grants or receives a loan or credit accommodation which
contravenes any of the provisions of this section commits an offence and is liable on
conviction to a fine of fifty percent of the amount in excess of the limit or
imprisonment not exceeding one year or both.
(14) Notwithstanding subsection (13) of this section, the Central Bank may
order for—
(a) repayment by the offending officer and director of any amount which
exceeds the legal lending limits prescribed in this section;
(b) the execution of proper security documentation where applicable;
(c) delivery of adequate collateral;
(d) regularization of any preferential terms or conditions of a loan as the
case may be;
(e) dismissal from the financial institution of the offending officer;
(f) bar the offending officer from any future employment at any financial
institution for a specified or indefinite period.
(15) Where a financial institution enters into a transaction that it is
prohibited from entering into by this section, the institution shall deduct the
outstanding amount of the loan or sum granted or extended to the insider when
computing the on-going capital requirements of the institution.
35. Restriction on purchase of certain loans
A financial institution shall not purchase a non-performing or low quality asset
from any of its affiliates and associates, directors, persons with executive authority,
substantial shareholders or from any of their related persons or group of related
persons or their related interests.
(2) For the purpose of this section a “non-performing asset” means a loan,
credit accommodation or asset whose principal or interest has been due and unpaid
for ninety days or more, or where its principal or interest payments, overdue by
ninety days or more have been capitalized, restructured or renewed.
36. Restriction on externalization of assets
(1) A financial institution shall not transfer any part of its assets out of Uganda
where the aggregate of assets to be transferred exceeds twenty five percent of its
total capital, without the prior notice to the Central Bank unless the transfer is done
in the normal course of business of the institution.
(2) A financial institution which contravenes subsection (1) of this section
commits an offence and is liable on conviction to a fine not exceeding one hundred
currency points per day on which the contravention continues.
37. Engaging in trade, commerce, industry
A financial institution shall not—
(a) engage directly or indirectly for its own account, alone or with others in
trade, commerce, industry, insurance or agriculture, except in the
course of the satisfaction of debts due to it in which case all such
activities and interests shall be disposed of at the earliest reasonable
opportunity;
(b) acquire or hold, directly or indirectly, in the aggregate, any part of share
capital of, or make any capital investment or otherwise have any
interest in enterprises engaged in trade, commerce, industry or
agriculture in excess of twenty five percent of its core capital, except
in the course of the satisfaction of debts due to it; but in such a case
all shares and interests shall be disposed of at the earliest reasonable
opportunity.
38. Investments in immovable property
(1) A financial institution shall not purchase or acquire any immovable property
or any right in it except as may be reasonably necessary for the purpose of
conducting its business or of housing or providing amenities for its staff, in which
case the cost of the property, in aggregate, shall not exceed one hundred percent of
the financial institution’s core capital.
(2) A financial institution which on the date of commencement of this Act,
holds directly or indirectly, in the aggregate immovable property, the cost of which
exceeds one hundred percent of its core capital, shall within five years from that
date—
(a) dispose of the property in order to comply with this Act; or
(b) add new capital as shall be directed by the Central Bank in order to
comply with this Act.
(3) The provisions of this section shall not be construed so as to prevent a
financial institution from securing a debt on any immovable property and in case of
default of payment of the debt, from holding the immovable property for realization
at the earliest reasonable opportunity to the financial institution.
(4) A financial institution which contravenes subsection (1) of this section
shall pay to the Central Bank a civil penalty of five currency points for each day on
which the contravention continues.
39. Restrictions on engaging in securities activities
(1) No financial institution which is licensed to accept deposits shall on its own
account or at its own risk engage in—
(a) any underwriting of shares; or
(b) any securities brokerage or dealing activities.
(2) A financial institution which contravenes this section shall pay to the
Central Bank a civil penalty of five currency points for each day on which the
contravention continues.
(3) For the purposes of this section—
(a) securities brokerage means any activity engaged in by a person whether
as principal or agent, who acts as an intermediary between a buyer
and a seller of securities;
(b) securities dealing means any activities engaged in by a person, whether
as a principal or an agent who buys and sells securities or otherwise
deals in securities on his or her own account.
(4) Subsection (1) of this section does not apply to government securities
and Bank of Uganda securities.
40. Foreign exchange holdings
(1) The Central Bank may, by notice, prescribe rules applicable to financial
institutions for the conduct of foreign exchange business.
(2) The Central Bank may, by notice, impose restrictions on the foreign
exchange business of a financial institution.
(3) Any person who—
(a) contravenes a rule prescribed under subsection (1) of this section; or
(b) fails to comply with a restriction imposed under subsection (2) of this
section,
commits an offence and is liable on conviction to a fine not exceeding two hundred
and fifty currency points or imprisonment not exceeding two years or both.
41. Core capital requirements for conducting foreign exchange business
(1) A financial institution shall not conduct any new foreign exchange business
if it is significantly under capitalised as defined in subsection (4) of section 87 of
this Act.
(2) Any financial institution which contravenes subsection (1) commits an
offence.
(3) Where a financial institution commits an offence under subsection (2),
the financial institution shall be liable to a fine not exceeding two hundred and fifty
currency points for each day on which the offence continues.
42. Net open position in foreign currencies
(1) The Central Bank may fix or prescribe a manner of determination of—
(a) the net open position of the financial institution in foreign currencies
generally or in any specified foreign currency;
(b) the maximum limit for the net open position in foreign currencies
generally or in any specified foreign currency that the financial
institution may create which shall not exceed twenty five per cent of
the core capital of the financial institution.
(2) The Central Bank may prescribe, by notice, the manner of correcting the
net open position of a financial institution that exceeds the maximum limit.
(3) A financial institution whose net open position in foreign currencies
generally or in any specified foreign currency exceeds the limit prescribed under
paragraph (b) of subsection (1) shall pay to the Central Bank a civil penalty of one
percent of the excess net open position per day on which the contravention
continues.
(4) All financial institutions shall in such format as shall be prescribed by
the Central Bank, provide to the Central Bank daily or weekly or monthly returns for
their net open position in foreign currencies.
(5) Any financial institution that fails to comply with subsection (4) or
submits inaccurate returns shall pay to the Central Bank a civil penalty of fifty
currency points for each day on which the contravention continues.
(6) A financial institution which provides false information in the returns to
the Central Bank under subsection (4) commits an offence and is liable on
conviction to a fine not exceeding two hundred and fifty currency points for each
day on which the return remains uncorrected.
43. Suspension of foreign exchange business
The Central Bank may suspend any financial institution from conducting foreign
exchange business if the financial institution is under any criminal investigation
concerning its dealings in foreign exchange.
44. Stored value cards
(1) No person shall, in Uganda, issue any stored value card except—
(a) a financial institution which has obtained the approval of the Central
Bank; or
(b) a person, for payment only of goods or services or both goods and
services provided directly by that person.
(2) The Central Bank may impose terms and conditions under which a
stored value card may be issued by a financial institution.
(3) Where a financial institution which has obtained the approval of the
Central Bank issues a stored value card, the proceeds arising from the issue by the
financial institution of the stored value card shall be subject to such reserve and
liquidity requirements as the Central Bank may by notice in accordance with this
section prescribe.
(4) Any person who—
(a) issues a stored value card otherwise than in accordance with this
section; or
(b) fails to comply with such requirements as the Central Bank may impose
under this section,
commits an offence and is liable on conviction to a fine not exceeding five hundred
currency points or imprisonment not exceeding three years or both.
(5) For the purpose of this Act, the holder of a store value card shall be
considered as a depositor and the issuer of a store value card shall, until his or her
claim is settled by the financial institution, be considered as a creditor of the
financial institution.
(6) In this section “stored value card” means a card for which a person pays
in advance a sum of money to the issuer in exchange for an undertaking by the
issuer that on production of the card to the issuer or a third party (whether or not
some other action is required), the issuer or the third party, as the case may be, will
supply goods or services or both goods and services; and for the purpose of this
section “card” includes any token, coupon, stamp, form, booklet, other document or
thing.
45. Restrictions on a mortgage bank
No mortgage bank shall advance more than twenty five percent of all its loans
for a purpose other than the acquisition, construction, enlargement, repair,
improvement and maintenance of urban or real estate or the substitution of
mortgages taken out for that same purpose.
PART VI—ACCOUNTS AND FINANCIAL STATEMENTS.
46. Financial ledgers and other financial records
(1) A financial institution shall at all times keep financial ledgers and other
financial records which—
(a) show a complete, true and fair state of its affairs; and
(b) explain its transactions and financial position to enable the Central Bank
to determine whether the financial institution has complied and
continues to comply with this Act.
(2) The financial year of every financial institution shall be the period of
twelve months ending on the 31st December in each calendar year.
(3) Where the financial year of a financial institution is different from that
prescribed in subsection (2), the financial institution shall, within twelve months
from the commencement of this Act, change its financial year to comply with
subsection (2).
(4) The financial ledgers and other financial records to which this section
applies shall be kept in Uganda and shall comply with the requirements of—
(a) the Companies Act,
(b) International Accounting Standards, and
(c) such other requirements as the Central Bank may in writing prescribe.
(5) All accounting entries in financial ledgers and all financial records to be
kept by a financial institution shall be kept and recorded in the English language
using the system of numerals employed in Government accounts.
(6) A financial institution shall preserve the financial ledgers and other
financial records referred to in this section for a period of not less than ten years.
(7) For the purposes of this section, ‘financial records’ include any book,
computer record, report, statement or document relating to the business affairs,
transactions, and property of a financial institution.
(8) Without derogation from subsections (1) and (4) of this section, every
financial institution shall maintain within Uganda such non-financial records as are
necessary—
(a) to reveal clearly and correctly the state of its business affairs and
financial condition; and
(b) to explain its transactions so as to enable the Central Bank to determine
whether the institution has complied with this Act.
(9) An institution and its agents shall take reasonable precaution to—
(a) prevent loss or destruction of;
(b) prevent the falsification of the entries in;
(c) facilitate the detection and correction of inaccuracies in; and
(d) ensure that unauthorized persons do not have access to or use of
information in,
the registers and records required or authorised by this Act to be prepared and
maintained.
47. Entries in financial ledgers
(1) No person shall with intent to deceive or mislead in any financial ledger,
record, report, statement or other document relating to the business affairs,
transactions, property, assets, liabilities or accounts of a financial institution—
(a) make a false entry knowing the entry to be false, or cause such an entry
to be made; or
(b) omit an entry or cause an entry to be omitted; or
(c) alter, abstract, conceal, remove or destroy an entry, or cause an entry to
be altered, abstracted, concealed, removed or destroyed.
(2) A financial institution shall indicate in its profit and loss account any
civil penalty levied against it under this Act.
(3) A person who contravenes subsection (1) or (2) of this section commits
an offence and is liable on conviction to a fine not exceeding one hundred currency
points or imprisonment not exceeding five years or both.
48. Submission of audited annual financial statements
(1) A financial institution shall within a period of three months after the end of
its financial year, submit to the Central Bank its audited annual financial statements
approved by its board of directors together with the auditors’ report and the
management letter.
(2) The form and contents of the audited annual financial statements
required under this section shall comply with the requirements in the regulations
made by the Central Bank under section 131 of this Act.
(3) A financial institution which fails to submit the audited annual financial
statements within the period prescribed in subsection (1) of this section shall pay to
the Central Bank a civil penalty of twenty currency points for every day on which
the default continues.
49. Disclosures to the Central Bank
(1) The audited annual financial statements shall at least disclose the
following—
(a) the name of any person or group of related persons who hold five per
cent or more of the total voting rights in the financial institution;
(b) the number of borrowers and the aggregate amount of advances or credit
facilities exceeding twenty five per cent of core capital lent to a
single person or group of related persons.
(c) the names and amount of any lending to directors, shareholders and
companies in which the directors and shareholders directly or
indirectly have an interest; and
(d) the range of interest rates and performance status of such insider loans
during the reporting period.
(2) In this section, ‘reporting period’ means the period to which the
financial statements referred to in subsection (1) relate.
50. Publication of annual and quarterly financial statements
(1) A financial institution shall within four months after the end of its financial
year, publish its audited annual financial statements together with the auditors
report, in a newspaper circulating in the whole of Uganda in the format prescribed in
the regulations or in such other format as may be prescribed by notice to the
financial institution issued by the Central Bank.
(2) A financial institution shall exhibit on a half yearly basis, in the banking
hall of each of its offices and branches a copy of its un-audited financial statement
stating the fact that they are not audited.
(3) A financial institution shall exhibit throughout the year in a conspicuous
place in the banking hall of each of its offices and branches a copy of its audited
annual financial statements together with the auditor’s report.
(4) A financial institution which fails to publish the audited annual financial
statements within the period prescribed in subsection (1) of this section shall pay to
the Central Bank a civil penalty of twenty currency points for each day on which the
default continues.
51. Rectification of audited annual financial statements
Where the Central Bank is satisfied that the audited annual financial statements
of a financial institution do not comply with the requirements of this Act or contain
information that may be misleading in any way, or are not published in the form and
with the contents specified by this Act, the Central Bank may require the financial
institution to—
(a) amend or correct the audited annual financial statements to comply with
this Act or any other additional requirements;
(b) correct the misleading information;
(c) re-publish the amended or corrected audited annual financial statements;
(d) submit to the Central Bank any further documents or information or
explanations relating to any document or information.
PART VII—CORPORATE GOVERNANCE.
52. Appointment of board of directors
(1) Every financial institution shall have a board of directors of not less than five
directors.
(2) The board of directors shall be headed by a Chairperson who shall be a
non-executive director.
(3) Notwithstanding anything to the contrary in any other written law, or
any agreement, not more than fifty percent of the directors of the financial institution
shall be employees of the financial institution or any of its subsidiaries or affiliates
except in such cases where the Central Bank is satisfied that all those directors who
are employees have been deemed fit and proper to be directors of a financial
institution by the home country regulator of the financial institution.
(4) No person who is not a fit and proper person in accordance with the fit
and proper test specified in the Third Schedule shall become or remain a director of
a financial institution, and for the purposes of this subsection, the Central Bank shall
vet all persons proposed as directors of a financial institution within six months and
notify the financial institution accordingly.
(5) Notwithstanding the provisions of the Companies Act, no appointment
of a director of a financial institution shall have legal effect for the purposes of this
Act or any other law unless that person has complied with the requirements of
subsection (4).
(6) Subject to subsection (1) no person who on the date of commencement
of this Act is a director of a financial institution shall, on the expiry of his or her
current term of office be eligible for re-appointment as a director unless or until he
or she qualifies for appointment under subsection (4).
(7) No person who on the date of commencement of this Act is a director of
a financial institution shall six months after the commencement of this Act remain a
director unless or until he or she qualifies for such appointment under subsection (4).
53. Disqualification of director
(1) No person shall become a director in a financial institution unless—
(a) he or she is above eighteen years of age;
(b) he or she is of sound mind and has not been declared to be of unsound
mind by any court of law in Uganda or elsewhere;
(c) he or she is not an undischarged bankrupt;
(d) he or she is a natural person;
(e) the financial institution has served a written notice on the Central Bank
of its nomination of that person to become a director; and
(f) the Central Bank has given a written approval of his or her compliance
with the fit and proper test.
(2) The Central Bank may, on receipt of the notice referred to in subsection
(1) of this section, seek further information and documents from the applicant or
from other sources.
(3) After due consideration has been given to the written notice, the Central
Bank may—
(a) give its approval of the applicant to become a director; or
(b) withhold its approval on the ground that the person concerned is not a fit
and proper person to become a director.
(4) Any person who under subsection (1) or subsection (2) of this section
knowingly or recklessly provides information to the Central Bank which is false or
misleading in a material particular commits an offence and is liable on conviction to
a fine not exceeding two hundred and fifty currency points or imprisonment not
exceeding two years or both.
(5) At least fifty percent of the directors of a financial institution licensed
under this Act must, during the tenure of their office, be resident in Uganda.
54. Conflict of interest
(1) No director or officer of a financial institution shall take part in the
discussion of or taking a decision on any matter in which that person or any of his or
her related interest has an interest.
(2) In any meeting where subsection (1) of this section applies, every
officer or director referred to in subsection (1) shall inform the meeting of his or her
interest or that of any of the parties mentioned in subsection (1) and to the extent
that the discussion or decision concerns any matter in which he or she has an
interest, shall exclude himself or herself from further attendance at that meeting.
55. Responsibilities of the board
(1) The board of directors of a financial institution shall be responsible for—
(a) good corporate governance and business performance of the financial
institution;
(b) ensuring that the board is in full control of the affairs and business
operations of the financial institution;
(c) ensuring that the business of the financial institution is carried on in
compliance with all applicable laws and regulations and is conducive
to safe and sound banking practices;
(d) ensuring and reporting to the shareholders at the annual general meeting
of the financial institution, that the internal controls and systems, and
management information systems of the financial institution—
(i) are designed to provide reasonable assurance as to the integrity
and reliability of the financial statements of the financial
institution and to adequately safeguard, verify and maintain
accountability of its assets;
(ii) are based on established and written policies and procedures, and
are implemented by trained and skilled officers with an
appropriate segregation of duties; and
(iii) are continuously monitored, reviewed and updated by the board
of directors to ensure that no material breakdown occurs in the
functioning of such controls, procedures and systems.
(e) for the purposes of this Act, ‘corporate governance’ shall cover the
overall environment in which the financial institution operates
comprising a system of checks and balances which promotes a
healthy balancing of risk and return.
(2) The directors of a financial institution shall appoint from among their
number two executive directors who must—
(a) be ordinarily resident in Uganda;
(b) have knowledge of the manner in which the institution’s longer term
strategy is pursued in practice and an ability to influence its policies;
and
(c) effectively direct the business of the financial institution.
56. Duties of directors
(1) A director shall in relation to the financial institution in which he or she
serves, stand in a fiduciary relationship and shall in addition and without derogation
owe the financial institution and its shareholders the following duties—
(a) a duty to act honestly and in good faith;
(b) a duty to act in the best interest and for the benefit of the financial
institution;
(c) a duty to act independently, free from undue influence of any other
person; and
(d) a duty to access necessary information to enable him or her to discharge
his or her responsibilities.
(2) The board of directors as an organ and each director individually shall
immediately report in writing to the Central Bank if they have reason to believe
that—
(a) the financial institution may not be able to properly conduct its business
as a going concern;
(b) the financial institution appears to be or is likely in the near future to be
unable to meet all, or any of its obligations;
(c) the financial institution has suspended or is about to suspend any
payment of any kind;
(d) the financial institution does not, or may not be able to meet its capital
requirements as prescribed in this Act.
(3) Any individual director who acts in accordance with this section shall
make his or her intention known to the board in writing prior to reporting to the
Central Bank.
(4) Where the board of directors or a director fails, omits or neglects to
report to the Central Bank any matter required to be reported under subsection (2) of
this section, the Central Bank may—
(a) withdraw its approval of the board of directors as an organ, or
(b) withdraw its approval of any of the directors.
57. Removal and suspension of directors
(1) The Central Bank may, for sufficient cause—
(a) remove a director of a financial institution;
(b) remove or suspend the whole board of directors of a financial
institution; or
(c) exclude any member of the board from qualifying to serve on a board of
any financial institution in Uganda for a period of not less than ten
years.
(2) For the purposes of subsection (1), ‘sufficient cause’ means—
(a) in relation to a director or directors’, ceasing to comply with the fit and
proper test specified in the Third schedule;
(b) in relation to the board of directors—
(i) failure, omission or neglect of their responsibilities in section 55;
(ii) failure, omission or neglect to report to the Central Bank as
required by subsection (2) of section 56;
(iii) failure or omission or neglect of duties as prescribed by
subsection (1) of section 56;
(iv) failure to attend without a lawful excuse, two consecutive
meetings of the board or being absent from three board
meetings for a consecutive period of six months.
(3) No director serving on the board of a financial institution shall
simultaneously serve as a board member, or in any executive capacity, with any
other financial institution or a subsidiary or affiliate of the financial institution in
Uganda.
(4) Where the Central Bank—
(a) removes or suspends the whole board of directors; or
(b) removes any directors from the board and as a result of the removal the
number of board members falls below the minimum prescribed in this
Act,
the Central Bank shall immediately assume the powers of the board of directors and
shall within fourteen days summon a meeting of the shareholders for the purpose of
electing a new board of directors, which shall be required to satisfy the provisions of
this Act relating to the appointment of directors.
58. Board Meetings
(1) The Central Bank may, by notice, order any financial institution to provide
the Central Bank within a period specified in the notice, a copy of the board minutes
and resolutions duly certified as a true record by the Secretary and Chairperson of
the board.
(2) Notwithstanding anything in this Act and the memorandum and articles
of association of a financial institution, or the Companies Act, the Central Bank
may, in the interest of the financial institution or the safety of depositors—
(a) order the board of directors of a financial institution to meet within three
days and at such place in Uganda as the order shall specify;
(b) order the board of directors of a financial institution to consider on the
agenda of the convened meeting such items relating to the financial
institution as the Central Bank may deem necessary for purposes of
the safety of the financial institution and its depositors;
(c) appoint an observer to any board meeting of a financial institution.
(3) Where a meeting of the board is convened under paragraph (a) of
subsection (2) of this section, the quorum for the meeting shall be three directors or
one third of the total directors present, whichever is greater, and decisions shall be
taken by a simple majority.
(4) Any decision taken under subsection (3) shall be binding on the
financial institution.
(5) Where no director turns up, the Central Bank shall take appropriate
action as it deems fit.
59. Audit Committee of the board
(1) The board of directors shall constitute from among its members, a committee
on audit, consisting of not less than two persons to perform such functions as the
board of directors shall specify.
(2) Notwithstanding subsection (1), all directors employed by the financial
institution in any other position except that of director, shall be disqualified from
serving on the committee on audit.
(3) The committee on audit shall be headed by a Chairperson who shall be
appointed by the board of directors.
(4) The Chairperson shall have such functions as are prescribed by the
board.
(5) The committee on audit shall meet once in every quarter of the financial
year of the financial institution.
(6) The following shall be required to attend all meetings of the committee
on audit—
(a) the board members of the committee on audit;
(b) the officer responsible for internal audit in the financial institution; and
(c) the officers in charge of the financial and treasury functions of the
financial institution.
(7) The committee on audit shall have the following duties—
(a) to review the internal audit report and programs of the financial
institution;
(b) to review the internal controls, operating procedures and systems and
management information systems of the financial institution;
(c) to ensure that the audit function of the financial institution is adequately
staffed;
(d) to ascertain the nature of the external audit, co-ordinate the internal and
external audits and consider rectification and implementation of
issues raised by the external auditor;
(e) to review the financial statements of the financial institution and make
recommendations on them;
(f) to review such investments and transactions that could affect the well
being of the financial institution as the auditor or auditors or any
officer of the financial institution may bring to the attention of the
committee;
(g) to review the practices of a financial institution to ensure that any
insider transactions of the institution that have a material effect on the
stability or solvency of the institution are identified and dealt with.
60. Asset and Liability Management Committee
(1) The board of directors shall constitute an Asset and Liability Management
Committee consisting of not less than two persons to perform such functions as the
board of directors shall specify in relation to establishing the broad guidelines on the
financial institution’s tolerance for risk and expectations from investment.
(2) The guidelines shall include but may not be limited to the following
areas—
(a) limits on loan to deposit ratio;
(b) limits on loan to capital ratio;
(c) limits on exposure to single or related customers;
(d) flexible limits on the percentage reliance on a particular deposit liability
category;
(e) maximum dependence on inter-bank and other volatile funding
instruments;
(f) limits on maximum and minimum maturities for newly acquired
categories of assets and liabilities;
(g) limits on maximum and minimum maturities for existing categories of
assets and liabilities;
(h) limits on the sensitivity of the net interest margin on changes in market
interest rates;
(i) maximum percentage imbalance between rates sensitive assets and
liabilities;
(j) limits on minimum spread acceptable between costs and yields of
liabilities and assets;
(k) limits on minimum liquidity provision to be maintained to sustain
operations while longer term adjustments are made;
(l) primary sources of meeting funds should be quantified.
(3) The Central Bank may from time to time issue notices to financial
institutions concerning matters to be considered by the Asset and Liability
Management Committee.
61. Internal Auditor.
(1) Every financial institution shall appoint an internal auditor suitably qualified
and experienced in banking who shall report to the committee on audit of the board
of directors.
(2) The duties of the internal auditor shall be—
(a) to evaluate the reliability of the information produced by accounting and
computer systems;
(b) to provide an independent appraisal function;
(c) to evaluate the effectiveness, efficiency and economy of operations;
(e) to evaluate compliance with laws, policies and operating instructions;
(e) to provide investigative services to line management; and
(f) to certify returns submitted to the Central Bank by the financial
institution.
62. External Auditors
(1) Subject to subsection (5) of this section, every financial institution shall
nominate for appointment annually, from a pre-qualified list to be published by the
Central Bank a firm of qualified auditors whose duty shall be to perform an audit of
the financial statements of the financial institution and to give an opinion in
accordance with this Act, the Companies Act, and International Standards on
Auditing as adopted in Uganda on the following—
(a) annual balance sheet, profit and loss account and other financial
statements required to be submitted by the financial institution to the
Central Bank under this Act;
(b) compliance of the financial institution with the requirements of this Act;
(c) compliance of the financial institution with the requirements of the
Companies Act.
(2) A financial institution shall, within thirty days after the nomination for
appointment of an external auditor, apply in writing to the Central Bank for the
approval of the appointment.
(3) On receipt of an application under subsection (2), the Central Bank may
in writing—
(a) approve the appointment;
(b) approve the appointment subject to such conditions as shall be specified
in the approval;
(c) decline to approve the appointment.
(4) Where the Central Bank declines to approve the appointment of an
external auditor under subsection (3) or withdraws an approval under subsection (7),
the financial institution shall nominate another firm as external auditors and
subsection (2) shall apply with the necessary modifications in respect of that
nomination.
(5) Where a financial institution fails to nominate or obtain approval of an
external auditor within two months after the lapse of the term of its previous external
auditor, or fails to fill a vacancy for an external auditor, the Central Bank may
appoint a qualified firm of auditors whose remuneration shall be paid by the
financial institution.
(6) A person appointed as an external auditor under subsection (5) shall—
(a) for the purposes of the Companies Act be deemed to have been
appointed as an external auditor at the immediately preceding annual
general meeting of the financial institution;
(b) be deemed to be an external auditor appointed by the financial
institution under subsection (1) of this section and approved by the
Central Bank as required by subsection (3).
(7) The Central Bank may for sufficient cause withdraw its approval of the
appointment of an external auditor previously granted, and upon the withdrawal, the
external auditor concerned shall vacate office.
(8) For the purposes of subsection (7), “sufficient cause” shall relate to any
of the following—
(a) failure to comply with the requirements of this Act;
(b) breach of duty as imposed by this Act;
(c) inability to perform to the prescribed standard or at all;
(d) any other reason that the Central Bank may, in its discretion consider
applicable.
63. Approval of External Auditor
Notwithstanding the provisions of the Companies Act, no person shall hold
office as an external auditor of a financial institution unless his or her appointment
has been approved by the Central Bank under section 62.
64. Disqualification of External Auditor
A person shall not qualify to be appointed or to act as an external auditor of a
financial institution if—
(a) that person, and in case of a firm, every partner in the firm, is not
registered as a member of the Institute of Certified Public
Accountants established under the Accountants Act;
(b) that person, either directly or indirectly has a material interest in the
financial institution or its affiliates;
(c) in the opinion of the Central Bank, circumstances exist which may
impair the independence or impartiality of that person in the
performance of his or her duties as an external auditor of the financial
institution;
(d) that person is an officer or servant of the financial institution;
(e) that person is a partner, or associate of a director or substantial
shareholder of the financial institution;
(f) that person by himself or herself, together with his or her partners or
employees, performs the duties of secretary or book-keeper for the
financial institution.
65. No change of External Auditor
(1) No financial institution shall, before the expiry of the term of the current
external auditor remove or change its auditor except with the prior written approval
of the Central Bank.
(2) Any person who is an external auditor of a financial institution shall
give adequate written notice to the financial institution and the Central Bank of—
(a) his or her decision to resign from office and the reasons for the
resignation;
(b) his or her decision not to seek to be re-appointed and the reasons for
doing so.
66. Insurance cover by External Auditor
Each firm of external auditors approved for appointment by the Central Bank
under this Act shall have in force, before the commencement of the audit, a valid
professional indemnity insurance cover for negligence in the performance of its
duties under this Act.
67. Time limit for External Auditor
No audit firm or individual auditor shall serve the same financial institution as
external auditors for a continuous period exceeding four years.
68. Duties of External Auditor to financial institution
An external auditor appointed under this Act shall have a primary duty to audit,
which shall include the following—
(a) a duty to warn the board of directors of a financial institution of—
(i) the financial institution’s ability or inability to meet the capital
requirements;
(ii) the financial institution’s ability or inability to meet the reserve
and liquidity requirements;
(iii) the financial institution’s credit, foreign exchange and operations
risks;
(iv) any other matter which the auditor becomes aware of in the
performance of his or her functions as an auditor which may—
(aa) prejudice the ability of the financial institution to continue
conducting business as a going concern;
(ab) be detrimental to the interests of the depositors; or
(ac) violate the principles of sound financial management or
the maintenance of adequate internal controls and
systems by the financial institution.
(b) a duty to obtain sufficient, relevant and reliable evidence to satisfy
themselves of the various matters necessary to form their opinion;
(c) a duty to carefully plan, supervise and review all their work including
work performed by subordinate staff;
(d) a duty to ascertain, evaluate and test internal controls before placing
audit reliance on them;
(e) a duty to exercise reasonable care and skill in accordance with the
current professional standards and practices, and to perform the audit
in accordance with international auditing standards and such other
regulations, directives, policies and guidelines as the Central Bank
may issue;
(f) a duty to assess, and in writing comment on, the report of the board of
directors before the report is tabled at the annual general meeting.
69. Duties of External Auditor to Central Bank
(1) An external auditor appointed under this Act shall inform the Central Bank if
there are reasonable grounds to believe that—
(a) the financial institution is insolvent, or there is a significant risk that the
financial institution will become insolvent; or
(b) the financial institution has contravened a—
(i) a prudential standard,
(ii) a requirement in this Act, regulation, notice or directive issued
under this Act; or
(iii) a condition imposed on its license.
(2) The external auditor shall verify all quarterly returns and other reports
of the financial institution which the Central Bank may from time to time require to
be verified.
(3) The external auditor shall submit to the Central Bank a management
letter in which they shall disclose all shortcomings or any contravention of the law
which may not be sufficiently fundamental to lead to qualification of the accounts.
(4) The external auditor shall perform any other functions as the Central
Bank may by notice assign the auditor.
70. External Auditors right to access financial records
(1) The external auditor appointed under this Act shall have a right of access at
all times to such books, accounts, computer systems, vouchers, financial records and
securities of the financial institution and shall be entitled to receive from the officers
and staff of the financial institution all information and explanations as he or she
may require in the performance of his or her duties.
(2) Any person who—
(a) obstructs an external auditor in the performance of his or her duties
under this Act;
(b) fails, refuses or neglects to provide an external auditor with such books,
accounts, computer systems, vouchers, financial records and
securities as requested by the external auditor, commits an offence
and is liable on conviction to a fine not exceeding one hundred
currency points or imprisonment not exceeding one year or both.
71. Information by External Auditors to Central Bank
(1) The Central Bank may, by notice in writing, require a person who is, or who
has been an external auditor of—
(a) a financial institution; or
(b) a subsidiary or affiliate of a financial institution;
to provide such information about the financial institution, subsidiary or affiliate, if
the Central Bank considers that the information will assist it in performing its
functions.
(2) Where a person to whom a request to provide information has been
made under subsection (1), fails, refuses or neglects to provide the information, or
provides information which is false or misleading, that person commits an offence
under this Act and is liable on conviction to a fine not exceeding two hundred and
fifty currency points or imprisonment not exceeding two years or both.
72. Audit report
(1) The external auditor shall, after performing the audit, submit to the financial
institution an audit report.
(2) A financial institution shall ensure that a report made under subsection
(1) of this section is submitted to the Central Bank within three months after the
close of its financial year.
(3) A financial institution which contravenes subsection (2) of this section
commits an offence and is liable on conviction to a fine of twenty currency points
for each day exceeding the period prescribed in subsection (2) until submission of
the report.
(4) A financial institution shall provide the external auditor with a letter of
assurance from management stating that they have disclosed all financial and other
related transactions both off and on balance sheet including contingent liabilities and
a copy of the letter shall be submitted to the Central Bank with the audit report.
73. Qualified audit report
The auditor shall, in every report on the financial institutions’ audited annual
financial statements which include a qualification, identify and quantify the matters
for qualification where possible.
74. Rejection of audit report
(1) The Central Bank may, if dissatisfied with the standard or quality or both, of
the audit, reject the audit report and call for a fresh audit at the expense of the
financial institution concerned, the external auditor or both.
(2) Where the Central Bank rejects an audit report, it may appoint an
auditor for the financial institution and shall fix the remuneration to be paid to the
auditor by that financial institution.
75. Requirements on provisions
The Central Bank shall, before annual accounts of a financial institution are
finalized, dividends paid, and the capital requirements in sections 26 and 27 are met,
require to be satisfied by the financial institution in respect of—
(a) sufficiency of provisions for bad debts;
(b) existence and enforcement of a proper policy of non-accrual of interest
on non- performing loans;
(c) amortization of preliminary expenses , goodwill and similar expenses.
76. Special and further investigations by External Auditors
(1) The Central Bank may require an external auditor to—
(a) submit such additional information in relation to the audit as the Central
Bank shall deem necessary;
(b) to carry out any other special investigation;
(c) carry out any further investigation;
(d) to submit a report on any of the matters referred to in paragraphs (a),
(b), and (c);
and the financial institution concerned shall remunerate the auditor in respect of the
discharge by him or her of all or any of such additional duties.
(2) The Central Bank shall, at least once in every financial year arrange
meetings between the Central Bank, a financial institution and its external auditor to
discuss matters relevant to the Central Bank’s supervisory responsibilities which
have arisen in the course of the statutory audit of that financial institution, including
relevant aspects of the business of the financial institution, its accounting and
internal control systems, and its annual balance sheet, profit and loss accounts, and
management letter.
(3) The Central Bank may, if it considers it necessary, arrange from time to
time meetings with the external auditors of the financial institution.
(4) If an external auditor, acting in good faith and not negligently or with
wrongful intent, furnishes to the Central Bank any information or opinion on a
matter to which this Act applies and which is relevant to the supervisory function of
the Central Bank whether or not in response to a request by it, such actions by the
external auditor shall not—
(a) constitute a breach of any duty which the external auditor may owe to
any person, or
(b) constitute a contravention of any code of professional conduct to which
the external auditor may be subject.
(5) Subsection (4) shall apply to any matter of which the external auditor
becomes aware in his or her capacity as an external auditor or in discharge of his or
her duties under this Act and which relates to the business or affairs of the institution
or its subsidiary or affiliate.
77. Control over management
(1) The Central Bank may, by order in writing, remove from office a
chairperson, director or the chief executive of a financial institution if satisfied that
in the public interest or for preventing the affairs of the financial institution being
conducted in a manner detrimental to the interests of the depositors or for securing
the proper management of the financial institution, it is necessary to do so.
(2) The removal under subsection (1) shall take effect from such date as
may be prescribed by the Central Bank.
(3) Any person aggrieved by the decision of the Central Bank may, within
fourteen days after making the order, make representations to the Central Bank and
the Central Bank may modify, cancel or uphold its decision to remove that person or
impose any conditions on the modification or cancellation.
(4) Where an order under subsection (1) has been made, the Central Bank
may appoint any suitable person in place of the chairperson, director or chief
executive who has been removed from office to hold that office for such period as
the letter of appointment may specify.
(5) Notwithstanding anything in any law or in any contract, or
memorandum and articles of association, a person removed by the Central Bank
under this Act is entitled to compensation for loss or termination of employment of
not more than three months’ salary.
(6) A person who has been convicted of an offence involving financial
impropriety, fraud, or financial loss shall not become or continue in the management
of a financial institution.
78. Credit Reference Bureau
(1) The Central Bank or its appointed agent or any other person authorised by
the Central Bank shall establish a Credit Reference Bureau for the purpose of
disseminating credit information among financial institutions for their business.
(2) All financial institutions shall promptly report to the Credit Reference
Bureau—
(a) all the details of non-performing loans classified as doubtful or loss in
their portfolio, where the amount owed is not in dispute and the
customer has not made any satisfactory proposals for repayment of
the debt following formal demand, and the customer has been given
at least twenty-eight days’ notice of the intention to disclose that
information to the Credit Reference Bureau;
(b) information on customers involved in financial malpractices including
bouncing of cheques due to lack of funds and fraud.
(3) No information other than that referred to in subsection (2) shall be
divulged by any financial institution to the Credit Reference Bureau without the
customers’ consent.
(4) Where—
(a) a Credit Reference Bureau formed under this Act or its officer,
(b) a financial institution or its officer;
discloses to a financial institution or its officer, the Credit Reference Bureau or its
officer, the information referred to in subsection (2), in good faith, in the
performance of their duties, no right of action shall accrue to or against that person
for breach of the duty of confidentiality.
(5) Any customer of a financial institution has a right to know what
information is held on him or her by the Credit Reference Bureau.
PART VIII—SUPERVISION.
79. Inspection of financial institutions
(1) The Central Bank may, periodically or at any time at its discretion, cause an
inspection to be made, by an officer of the Central Bank or other person appointed
by the Central Bank, of any financial institution and of its financial records and
books of accounts on the premises of the financial institution and shall provide to
that financial institution a copy of the report on inspection.
(2) The financial institution shall furnish to the officer making an inspection
under subsection (1) of this section, all such books of accounts and financial records
and other documents as well as assets including cash, notes and securities held by
the financial institution in its custody or power and furnish the officer with such
statements or information relating to the affairs of the financial institution as the
officer may require of it within such reasonable time as the officer may specify.
(3) Any officer of a financial institution who fails to furnish any document
in his or her custody or power as required under subsection (2) of this section
commits an offence and is liable on conviction to a fine not exceeding fifty currency
points or imprisonment not exceeding six months or both.
(4) An officer of the Central Bank or any person appointed by the Central
Bank under subsection (1) shall after inspection prepare and submit a report which
shall draw attention to any breach or contravention of this Act, regulations, notices
or directions issued under this Act, any weaknesses in systems control and
procedures or in the manner of conduct of the business of the financial institution
inspected, any mismanagement, and such other matter relating to the business of the
financial institution not consistent with sound banking practice.
80. Information to be provided by financial institutions.
(1) A financial institution shall furnish to the Central Bank at such times and in
such form as the Central Bank may prescribe, all information and data of its
operations in Uganda including periodic returns called for by the Central Bank and
the audited balance sheet and profit and loss account and those of any company
which is a subsidiary, affiliate, associate or holding company to that financial
institution which the Central Bank may require for the proper discharge of its
functions under this Act.
(2) A financial institution shall report to the Central Bank all loans granted
or extended to its insiders at least once every month.
(3) Any financial institution which, without reasonable cause, fails to
comply with subsection (1) or (2) of this section, or submits inaccurate returns, shall
pay to the Central Bank a civil penalty of fifty currency points per day of default.
(4) The Central Bank may impose restrictions on the operations of a
financial institution which fails to provide information required under this section or
which provides false information.
(5) The Central Bank may, upon request made to it by any monetary or
financial regulatory authority in the ordinary course of its business, disclose any of
the information provided under this section to that monetary or financial regulatory
authority within or outside Uganda; except that the Central Bank shall, before
disclosing any information under this section, first satisfy itself that the information
is required for the proper discharge of the functions of the requesting monetary
authority or financial regulatory authority.
81. Information for consolidated supervision
(1) The Central Bank shall, if it deems necessary for the safety and soundness of
the financial institution, or for the safety of the depositors or to determine whether
the provisions of this Act are being duly complied with, require in writing any
affiliates, associates, holding or subsidiary companies or any person who controls a
financial institution to provide the Central Bank or its appointed agent such
information or documents as may be necessary including the financial statements
and other financial records of that affiliate, associate, holding or subsidiary company
or controller within the period specified in the notice.
(2) The Central Bank may appoint a competent person to carry out an
examination of the operations and affairs of the affiliate, associate, holding or
subsidiary company of a financial institution; or of any person who exercises control
over a financial institution in order to satisfy itself that the operations and affairs of
the affiliate, associate or holding or subsidiary company or of the person who
exercises control over a financial institution are not detrimental to the safety and
soundness of the financial institution concerned.
(3) Any person who fails, refuses, omits or neglects to provide information
requested under subsection (1) and/or (2) commits an offence and is liable on
conviction to a fine not exceeding two hundred and fifty currency points or
imprisonment not exceeding two years or both; and an additional fine not exceeding
fifty currency points for each day on which the offence continues.
(4) Any substantial shareholder or director of a financial institution who—
(a) being a natural person fails, refuses, omits or neglects to provide
information requested for under subsection (1) or (2) of this section
or is a party to such failure, refusal, omission or neglect; or
(b) being a company fails, refuses, omits or neglects to provide information
requested under subsections (1) or (2) of this section or is a party to
such failure, refusal, omission or neglect,
shall cease to be a fit and proper person and shall not remain a substantial
shareholder or director in a financial institution.
PART IX—CORRECTIVE ACTIONS.
82. Intervention
(1) If the Central Bank has reason to believe or finds that the affairs of the
financial institution are conducted in a manner detrimental to the interests of the
depositors or prejudicial to the interests of the financial institution or in
contravention of this Act, or any other written law or that the financial institution
has refused to submit to inspection, or has provided false information, the Central
Bank may, without prejudice to any other course of action—
(a) order in writing that the financial institution takes remedial action to
comply with this Act or regulations, notices, or orders issued under
this Act;
(b) issue directions regarding measures to be taken to improve the
management, financial soundness or business methods of the
financial institution;
(c) require the directors or management of the financial institution to
execute an agreement concerning their implementation of orders or
directions issued under paragraphs (a) and (b) of this subsection; or
(d) perform or appoint an agent to perform a special examination of the
financial institution to determine the financial condition of the
institution and evaluate resolution options, at the cost of the financial
institution.
(2) Where a financial institution fails, refuses or neglects to comply with an
order, direction, or agreement issued or made under subsection (1) then the Central
Bank may do any or all of the following—
(a) initiate a legally binding cease and desist order, of either temporary or
indefinite duration requiring the financial institution and its
management to—
(i) stop the improper or unacceptable practice;
(ii) put a limit to lending; or
(iii) stop any declaration of dividends.
(b) remove or suspend any person from the management of the affairs of
the financial institution;
(c) impose penalties on the offending member of the management to be met
personally;
(d) appoint a person who, in the opinion of the Central Bank is, suitably
qualified and competent to advise and assist the institution generally
or for the purposes of implementing the orders, directions or
agreements under paragraph (a), (b) or (c) of this subsection and the
advice of a person so appointed shall have the same force and effect
as a direction made under paragraph (a), (b), or (c) and shall be
deemed to be a direction of the Central Bank under this section;
(e) appoint a person, suitably qualified and competent in the opinion of the
Central Bank, to manage the affairs of the financial institution for
such period as shall be necessary to rectify the problem;
(f) require the financial institution to reconstitute its board of directors
within such period as shall be specified;
(g) withhold approvals on establishment of new branches;
(h) withdraw the foreign exchange dealers’ licence;
(i) require the financial institution to add such capital as may be specified;
or
(j) impose any other sanctions as the Central Bank may deem appropriate in
the circumstances.
83. Modification, cancellation and upholding of orders
The Central Bank may, upon representation made to it or on its own motion,
modify or cancel or uphold any order issued under section 82, and upon such
modification or cancellation, impose such conditions as are necessary subject to
which the modification or cancellation shall have effect.
84. Prompt mandatory corrective actions
The prompt, mandatory corrective actions prescribed in sections 85 to 87 of this
Act, shall take precedence over any discretionary corrective actions available to the
Central Bank under this Act or any other law.
85. Adequately capitalised financial institutions suffering large losses
(1) Where a financial institution which complies with the capital requirements
prescribed in sections 26 and 27 of this Act has incurred or is likely to incur large
losses within any financial year, the Central Bank shall take the following actions
against that financial institution—
(a) prohibit the financial institution from declaring and distributing any
dividends which are, in the opinion of the Central Bank, likely to
cause the financial institution not to comply with the capital
requirements prescribed in sections 26 and 27 of this Act;
(b) undertake more frequent inspection of that financial institution.
(2) In addition to the actions prescribed in subsection (1) of this section, the
Central Bank may require the directors or management of the financial institution to
provide a written explanation detailing the causes of those losses and the measures
to be taken by the financial institution to rectify the position and avert future losses.
86. Undercapitalised financial institutions
(1) An “undercapitalised financial institution” is one which does not comply
fully with any or all of the capital requirements prescribed in sections 26 and 27 of
this Act.
(2) Where a financial institution is undercapitalised, the Central Bank shall
take the following actions against that financial institution—
(a) all of the actions prescribed in subsection (1) of section 85;
(b) order the financial institution to submit to the Central Bank within forty
five days after the making of the order, a capital restoration plan to
restore the financial institution to capital adequacy as prescribed in
sections 26 and 27 of this Act within one hundred and eighty days of
making that order; and
(c) prohibit the financial institution from awarding any bonuses, or
increments in the salary, emoluments and other benefits of all
directors and officers of the financial institution.
(3) In addition to the actions prescribed in paragraphs (a), (b) and (c) of
subsection (2) of this section, the Central Bank may appoint a person, suitably
qualified and competent in the opinion of the Central Bank, to advise and assist the
financial institution in designing and implementing the capital restoration plan, and
the person appointed shall regularly report to the Central Bank on the progress of the
capital restoration plan.
(4) Where a financial institution has been ordered by the Central Bank to
submit a capital restoration plan or to add more capital, and the financial institution
fails, refuses or neglects to comply with the order, or to implement the capital
restoration plan, the Central Bank shall—
(a) prohibit the financial institution from opening new branches;
(b) impose restrictions on growth of assets or liabilities of the financial
institution as it shall deem fit;
(c) restrict the rate of interest on savings and time deposits payable by the
financial institution to such rates as the Central Bank shall determine;
(d) in addition to the actions prescribed in subsection (2) the Central Bank
may—
(i) remove officers of the financial institution responsible for the
financial institution’s non-compliance with the orders;
(ii) order the financial institution to do any or such other things that
the Central Bank may deem necessary to rectify the capital
deficiency of the financial institution.
87. Significantly undercapitalised financial institutions
(1) Where a financial institution is significantly undercapitalized, the Central
Bank shall immediately take any or all of the following actions against the financial
institution—
(a) take any or all of the actions prescribed in section 86 and this section;
(b) enter into an agreement with the board of directors of the financial
institution requiring the financial institution to rectify its significant
undercapitalisation within ninety days, and to restore capital
adequacy within one hundred and eighty days, or within such shorter
periods as the Central Bank shall order.
(2) In addition to the actions prescribed in subsection (1) of this section, the
Central Bank may take any or all of the following actions—
(a) restrict the financial institution from engaging in new foreign exchange
business;
(b) prohibit the financial institution from engaging in new off-balance sheet
transactions.
(3) If at any time—
(a) after the period specified in paragraph (b) of subsection (1), the
financial institution has failed to raise its capital to the levels
necessary to rectify its significant undercapitalisation; or
(b) before the end of the period specified in paragraph (b) of subsection (1),
the financial position of the institution continues to deteriorate,
the Central Bank shall without having to wait for the expiry of that period, close the
financial institution and place it under receivership, or where the closure of the
financial institution would pose a systemic risk to the stability of the financial
system, the Central Bank shall take the financial institution into statutory
management in accordance with section 88 of this Act; except that subsection (6) of
section 89 of this Act shall not apply to a statutory management under this section.
(4) For the purposes of this Act, a “significantly undercapitalized” financial
institution is one which does not comply with any of the following—
(a) hold the minimum capital funds, unimpaired by losses, of at least fifty
percent of the requirement prescribed in section 26 of this Act;
(b) hold core capital of at least fifty percent of the requirement prescribed in
section 27 of this Act;
(c) hold total capital of at least fifty percent of the requirement prescribed in
section 27 of this Act.
(5) This section shall not be construed so as to preclude the Central Bank
from closing any financial institution under any other provision of this Act.
88. Management take-over
(1) The Central Bank may take over management of a financial institution if—
(a) it is conducting its business in a manner contrary to this Act;
(b) the continuation of its activities is detrimental to the interests of
depositors;
(c) it refuses to submit itself to inspection by the Central Bank as required
by this Act;
(d) its licence has been revoked under section 17 of this Act; or
(e) it is engaged in or is knowingly facilitating criminal activities.
(2) Where the Central Bank takes over the management of a financial
institution under this section or closes the financial institution under any provision of
this Act, the following shall apply—
(a) any term whether statutory, contractual or other-wise on the expiration
of which a claim of right of the financial institution would expire or
be extinguished, shall be extended six months from the date of taking
over management;
(b) any attachment or lien existing six months prior to the take over by the
Central Bank of the management of the financial institution shall be
vacated and no attachment or lien except a lien created by the Central
Bank, shall attach to any property or asset of the financial institution
as long as the Central Bank continues to manage the financial
institution;
(c) any transfer of any asset of the financial institution made six months
before the take over by the Central Bank of the management, with
intent to effect a preference or at less than the appraised book value is
void;
(d) any gratuitous transfer of any asset of the financial institution made
within one year before the take over by the Central Bank of the
management shall stand revoked and all such assets shall be
surrendered to the Central Bank;
(e) any lending to any officer, director or any related person of an officer or
director on preferential terms or without adequate security made
within six months prior to the take over by the Central Bank of the
management of the financial institution shall be rescinded; and that
officer, director or related person to the officer or director shall
immediately refund the moneys advanced and the interest accrued at
the going rate in the bank.
89. Powers of Central Bank on taking over management of financial
institution
(1) The Central Bank shall, on taking over management of a financial institution
under section 88 of this Act, have exclusive powers of management and control of
the affairs of the financial institution.
(2) The powers referred to in subsection (1) of this section shall include
power to—
(a) continue or discontinue any of its operations as a financial institution
notwithstanding the revocation of its licence;
(b) stop or limit the payment of its obligations;
(c) employ any necessary staff;
(d) execute any instrument in the name of the financial institution;
(e) initiate, defend and conduct in its name any action or proceeding to
which the financial institution may be a party;
(f) reorganize or liquidate the financial institution in accordance with this
Act;
(g) appoint a person to be known as a statutory manager to manage, control
and direct the affairs of the financial institution;
(h) assume or reject any executory contracts;
(i) cancel any leases or tenancy agreements entered into by the financial
institution as lessee or tenant;
(j) appoint an advisory board of directors;
(k) close the financial institution;
(l) sell the financial institution; or
(m) do any other act which is necessary to enable the Central Bank to carry
out its obligations under this section.
(3) The Central Bank shall as soon as possible after taking over
management of a financial institution, appoint an auditor at the cost of the financial
institution to make an inventory of the assets and liabilities of the financial
institution and submit a report to the Central Bank.
(4) The Central Bank shall upon taking over management of a financial
institution immediately inform the public.
(5) The Central Bank shall exercise statutory management over a financial
institution for the minimum time necessary to bring the financial institution into
compliance with prudential standards.
(6) Where the financial institution does not comply with prudential
standards within six months after its being placed under statutory management, the
Central Bank shall close the financial institution and place it under receivership.
(7) Notwithstanding subsection (6), where the Central Bank is of the
opinion that—
(a) the financial institution is not likely to comply with prudential standards
within the period specified in subsection (6) of this section;
(b) the financial institution is not likely to be able to meet the demands of
its depositors or pay its current obligations as and when they fall due;
(c) the continued operation of the financial institution would not be in the
best interests of the depositors, the public, or the financial sector;
the Central Bank may at any time after taking over statutory management, close the
financial institution.
(8) Upon appointment of a statutory manager, the board of directors shall
stand suspended.
(9) A statutory manager appointed under paragraph (g) of subsection (2) of
this section shall have the functions of the members of the board of directors
collectively and individually, including the board’s powers of delegation and use of
the seal until such a time as the Central Bank shall appoint an advisory board.
(10) A statutory manager shall, upon assuming the management, control
and conduct of the affairs and business of an institution, discharge his or her duties
with diligence and in accordance with sound banking and financial principles and, in
particular, with due regard to the interests of the institution, its depositors and other
creditors.
90. Duties of a statutory manager
(1) Where a financial institution complies with the prudential standards within
the period specified in this part, the Central Bank shall request the shareholders of
the financial institution, subject to sections 52 and 53, to appoint an interim board of
directors, charged with the management and control of the financial institution.
(2) The interim board of directors appointed under this section shall hold
office on such terms and conditions as may be prescribed in the instrument of
appointment, and in any case, at the cost of the financial institution.
(3) Where, within six months of its appointment, the Central Bank is of the
opinion that the interim board of directors is managing the financial institution in
accordance with prudential standards, the Central Bank shall request the
shareholders of the financial institution, subject to section 52, to confirm the
appointment of each eligible individual director.
(4) The duties of a statutory manager shall include—
(a) tracing and preserving all the property and assets of the institution;
(b) recovering debts and other sums of money due and owing to the
institution;
(c) evaluating the capital structure and management of the institution and
recommending to the Central Bank any restructuring or reorganization
which he or she considers necessary and which, subject
to the provisions of any other written law, may be implemented by
him or her on behalf of the institution;
(d) entering into contracts in the ordinary course of the business of the
institution, including raising of funds by borrowing on such terms as
he or she may consider reasonable;
(e) obtaining from any officers or employees of the institution any
documents, records, accounts, statements or information relating to
its business;
(f) issuing a new balance sheet and profit and loss accounts; and
(g) any other duties that may be assigned to him or her by the Central Bank.
(5) For the purposes of discharging his or her functions under this section,
the statutory manager may declare a moratorium on the payment by the institution of
its liabilities to depositors and other creditors.
(6) The declaration of a moratorium shall—
(a) be applied equally and without discrimination to all classes of creditors;
(b) limit the maximum rate of interest which shall accrue on deposits and
other debts payable by the institution during the period of the
moratorium to the minimum rate as may be prescribed by the Central
Bank by notice for the purposes of this section except that this
paragraph shall not be construed so to impose an obligation on the
institution to pay interest or interest at a higher rate to any depositor
or creditor than would otherwise have been the case;
(c) suspend the running of time for the purposes of any law of limitation in
respect of any claim by any depositor or creditor of the institution; or
(d) cease to apply upon the termination of the manager’s appointment in
which case the rights and obligations of the institution, its depositors
and creditors shall, except to the extent provided in paragraphs (b)
and (c), be the same as if there had been no declaration under this
subsection.
(7) A statutory manager may for the purposes of exercising his duties under
this Act require any person who has at any time been an officer or director of the
financial institution to provide the statutory manager with information relating to
business of the financial institution.
(8) Any person who wilfully fails, refuses or neglects to provide any
information requested under subsection (4) of this section commits an offence and is
liable on conviction to a fine not exceeding two hundred and fifty currency points or
imprisonment not exceeding two years or both.
91. Prohibition on legal proceedings against a financial institution under
management of Central Bank
(1) A person shall not except—
(a) with leave of court, on ground that he or she would be caused
exceptional hardship if leave were not granted; or
(b) with the prior written consent of the Central Bank,
commence or continue with any legal proceeding in any court against a financial
institution while the financial institution is under management of the Central Bank.
(2) An application for leave under subsection (1) shall not be filed unless
the Central Bank receives thirty days notice of the intention to apply.
(3) The Central Bank may apply to the court to be joined as a party to the
proceedings for leave.
92. Management by Central Bank not relief from contractual obligations
A party to a contract with a financial institution shall not be relieved of his or her
obligations on the ground that the financial institution is under management of the
Central Bank.
93. Costs of management
All costs of management by the Central Bank shall be payable by the financial
institution and shall be a debt due from the financial institution to the Central Bank.
PART X—RECEIVERSHIP.
94. Placing of financial institution under receivership
(1) Subject to this section, the Central Bank may close a financial institution and
place it under receivership.
(2) A financial institution may be placed under receivership—
(a) if the Central Bank determines that there is a likelihood that the
financial institution will not be able to meet the demands of its
depositors or pay its obligations in the normal course of business;
(b) if the Central Bank determines that the financial institution has incurred
or is likely to incur losses that will deplete all or substantially all of
its capital;
(c) if it is significantly under capitalised.
(3) If a financial institution is placed under receivership, the Central Bank
shall become the receiver of the closed financial institution.
95. Options available to the receiver
(1) The Central Bank shall, within twelve months from the date of taking over as
a receiver, consider and implement any or all of the following options either singly
or in combination—
(a) arrange a merger with another financial institution
(b) arrange for the purchase of assets and assumption of all or some of the
liabilities by other financial institutions;
(c) arrange to sell the financial institution;
(d) liquidate the assets of the financial institution.
(2) The Central Bank shall take the action described in subsection (1) which
in the opinion of the Central Bank—
(a) is most likely to result in marshalling the greatest amount of the
financial institution’s assets; or
(b) protects the interests of depositors including their interest in the
unprotected deposit amounts; or
(c) minimises costs to the Deposit Protection Fund and losses to other
creditors; or
(d) ensures stability of the financial sector.
(3) In determining the amount of assets that is likely to be realized from the
financial institution’s assets, the receiver shall—
(a) evaluate the alternatives on a present value basis, using a realistic
discount rate; or
(b) document the evaluation and the assumptions on which the evaluation is
based, including any assumptions with regard to interest rates, asset
recovery rates, inflation, asset holding and other costs.
96. Prohibitions on proceedings against a financial institution in
receivership
Where a financial institution is placed under receivership—
(i) no steps may be taken by any person to enforce any security over the
property of the financial institution;
(ii) no other proceedings and no execution or other legal process may be
commenced or continued against the financial institution or its
property.
PART XI—LIQUIDATION.
97. Bar on liquidation or winding up proceedings
(1) Notwithstanding any other law to the contrary, no proceedings for the
winding up or liquidation of a financial institution shall be commenced or continued
except—
(a) where the proceedings are commenced by the Central Bank or its
authorized agent; or
(b) where the proceedings are commenced by a financial institution under
section 98.
(2) A financial institution shall obtain the approval of the Central Bank
before commencing any proceedings under this section.
98. Voluntary liquidation
(1) A financial institution may, with the prior approval of the Central Bank,
apply to the High Court for voluntary liquidation of its operations.
(2) Subject to subsection (1) of this section, a financial institution under
voluntary liquidation shall immediately cease all activities except those which are
incidental to the orderly realization, conservation and preservation of its assets and
the settlement of its obligations.
(3) In case of a liquidation under this section—
(a) the liability of the shareholders for uncalled subscriptions to the capital
stock of the financial institution shall continue until the end of the
liquidation process;
(b) notwithstanding the provisions of the Companies Act, where a financial
institution is in voluntary liquidation, the ranking of claims shall be in
accordance with section 105 of this Act ; except that the provisions
relating to preferential payments in section 315 of the Companies
Act shall not be applicable to a voluntary liquidation of a financial
institution;
(c) the board of directors of the financial institution, shall, before paying
creditors holding direct claims and with the approval of the Central
Bank, make necessary arrangements to ensure a pro rata distribution
among holders of claims that are likely to be reduced to judgement in
a court.
(4) Where the Central Bank is satisfied that the assets of a financial
institution which has applied for voluntary liquidation of its operations under this
section are not sufficient to discharge its obligations or that the completion of the
liquidation of its operation is unduly delayed, the Central Bank may, if it deems fit,
place the financial institution in compulsory liquidation in accordance with section
99 of this Act.
99. Liquidation by the Central Bank
(1) The Central Bank shall, on determination that the financial institution should
be liquidated, make an order for the winding up of the affairs of the financial
institution.
(2) The order referred to in subsection (1) shall be published in a local
newspaper of general circulation in Uganda.
(3) Notwithstanding anything in the Companies Act, where any proceeding
for the liquidation of a financial institution is commenced under this section, the
Central Bank or any other person appointed by the Central Bank shall be the
liquidator of the financial institution.
(4) The remuneration of the liquidator appointed under this section, the cost
and expenses of his or her establishment and the costs and expenses of the
liquidation shall be met out of the assets of the financial institution under
liquidation.
100. Powers of liquidator
(1) The liquidator may, with the approval of the Central Bank—
(a) bring or defend any action or other legal proceedings in the name and on
behalf of the financial institution;
(b) carry on the business of the financial institution so far as may be
necessary for the beneficial winding up of the financial institution;
(c) retain advocates, notaries, accountants, appraisers and other professional
advisers as may be approved by the Central Bank.
(d) make any compromise or arrangement with creditors, or persons
claiming to be creditors, or having or alleging themselves to have any
claim, present or future, certain or contingent, ascertained or
sounding only in damages against the financial institution or by
which the company may be rendered liable;
(e) compromise all calls and liabilities to calls, debts and liabilities capable
of resulting in debts, and all claims, present or future, certain or
contingent, ascertained or sounding only in damages, subsisting or
supposed to subsist between the financial institution and a
contributory or alleged contributory or other debtor or person
apprehending liability to the financial institution and all questions in
any way relating to or affecting the assets or the liquidation of the
financial institution on such terms as may be agreed, and take any
security for the discharge of any such call, debt, liability or claim and
give a complete discharge in respect of it.
(2) The liquidator may—
(a) sell the movable and immovable property and things in action of the
company by public auction or private contract, with power to transfer
the whole of it to any person or company or to sell the same in
parcels;
(b) do all acts and execute in the name and on behalf of the financial
institution, all deeds, receipts and other documents, and for that
purpose to use, when necessary, the seal;
(c) prove, rank and claim in the bankruptcy, insolvency or sequestration of
any contributory for any balance against his or her estate, and receive
dividends in the bankruptcy, insolvency or sequestration in respect of
that balance, as a separate debt due from the bankrupt or insolvent,
and rateably with the other separate creditors;
(d) draw, accept, make and endorse any bill of exchange or promissory note
in the name and on behalf of the financial institution with the same
effect, with respect to the liability of the financial institution as if the
bill or note had been drawn, accepted, made or endorsed by or on
behalf of the financial institution in the course of its business;
(e) raise on the security of the assets of the financial institution any money
required;
(f) take out in his or her official name letters of administration to any
deceased contributory, and do in his or her official name any other
act necessary for obtaining payment of any money due from a
contributory or his or her estate which cannot be conveniently done
in the name of the company, and in all such cases the money due
shall, for the purpose of enabling the liquidator to take out the letters
of administration or recover the money, be deemed to be due to the
liquidator; but nothing in this paragraph shall be deemed to affect the
rights, duties and privileges of the Administrator General;
(g) appoint an agent to do any business which the liquidator is unable to do
himself or herself;
(h) enforce the individual liability of the shareholders and directors of the
financial institution;
(i) eliminate the interests of shareholders;
(j) where liquidation proceedings have been commenced in respect of the
financial institution in one country or more, make such payments to a
liquidator of the financial institution as may be necessary;
(k) generally realise the assets of the insolvent financial institution;
(l) arrange, negotiate and conclude in the interest of the depositors of the
financial institution an agreement to the benefit of the depositors and
for the purposes of—
(i) releasing the liquidator from its obligations in respect of the
depositors’ claims for payment of their deposits out of the
liquidation proceeds;
(ii) imposing those obligations on any third party as shall be agreed.
(m) by notice in writing require any person who is or has been a director,
managing director, secretary, principal officer, manager, officer or
employee, agent, accountant or auditor of the financial institution or
any person who has custody of any funds or other assets of the
institution being liquidated, to—
(i) give to the liquidator all reasonable assistance in connection with
the liquidation;
(ii) appear before the liquidator for examination concerning matters
relevant to the liquidation;
(iii) produce any books or documents that relate to the affairs of the
institution being liquidated.
(3) The exercise by a liquidator of the powers conferred by this section
shall be subject to the control of the Central Bank; and any creditor or contributory
may apply to the High Court for review with respect to any exercise or proposed
exercise of any of those powers.
(4) In exercise of its powers as a liquidator, the Central Bank or its
appointed agent shall make a forensic investigation to determine the causes of
failure of the financial institution and report on among other things, significant
related party transactions, violations of the law and the institutions governing
policies and regulations, and unsound business and lending practices.
(5) A person who—
(a) refuses or fails to comply with a requirement of the liquidator which is
applicable to him or her, to the extent to which he or she is able to
comply with it;
(b) obstructs or hinders a liquidator in the exercise of the powers conferred
under this Act;
(c) furnishes information or makes a statement which he or she knows to be
false or misleading in any material particular; or
(d) when appearing before a liquidator for examination in accordance with
such requirement, makes a statement which he or she knows to be
misleading in any material particular;
commits an offence and is liable on conviction to a fine not exceeding two hundred
and fifty currency points, or imprisonment not exceeding three years, or both.
(6) Any person who, following the forensic investigation, is found to have
contravened this Act and the institution’s policies and regulations or significantly
contributed to the failure of the institution shall cease to be a fit and proper person
for the purposes of this Act.
101. Stay of proceedings
(1) Notwithstanding anything to the contrary in any other law, a court shall not
entertain any application for stay of proceedings in relation to the liquidation or
winding up of a financial institution under this Act.
(2) Subsection (1) does not apply to an application filed by the Central
Bank.
102. Invitation of claims from creditors
The Central Bank or its appointed liquidator shall, within a period not exceeding
forty five days from the date of publication of the intention to liquidate a financial
institution, for the purpose of making an estimate of the debts and liabilities of the
financial institution, publish in a local newspaper of national circulation a notice
calling upon all creditors, secured and unsecured, including depositors, to submit to
the Central Bank or the liquidator within one month from the date of publication, a
statement of the amount claimed and the particulars of the claim.
103. Report on assets and liabilities by liquidator
(1) The liquidator shall within a period not exceeding five months from the date
of his or her appointment, submit to the Central Bank a report detailing the assets of
the financial institution in his or her custody or control and their value, and as far as
can be established the liabilities of the financial institution to its depositors and other
creditors.
(2) Where a notice is issued under section 102, any statement of claim
which is not received by the liquidator before the expiry of thirty days from the date
of publication, shall not be treated as a claim eligible for payment under liquidation
but shall be treated as an ordinary debt due from the financial institution.
(3) Any person who fails to file a claim with the liquidator in the period
prescribed in subsection (1) shall not be entitled to be paid in priority to other debts
but shall be treated as an ordinary debt due from the financial institution.
(4) Where a financial institution is under liquidation, every depositor of the
financial institution shall be deemed to have filed his or her claim for the amount
shown in the books of the financial institution as standing to his or her credit.
(5) The liquidator shall be entitled to deduct from the amount referred to in
subsection (4)—
(a) any amount paid to the depositor from the Deposit Protection Fund;
(b) such other amounts as may be due from the depositor to the financial
institution.
(6) The liquidator shall in the administration of the assets of the financial
institution and in the distribution of those assets among its creditors, comply with
the directions of the Central Bank.
104. Creditors and contributories meeting
The Central Bank or the liquidator may summon a meeting of creditors or
contributories, except that where the Central Bank or the liquidator considers that no
object will be achieved by the meeting, sufficient to justify the delay and expense,
the meeting may be dispensed with.
105. Payment to Creditors and ranking of claims
(1) The liquidator shall, within two months after submission of a report of the
assets and liabilities of the financial institution commence the payment to depositors
and creditors of the financial institution except that—
(a) payment shall be made first to the Deposit Protection Fund;
(b) second to the liquidator for all expenses incurred in the process of
liquidating the financial institution;
(c) third to employees for all wages and salaries due net of any liabilities to
the financial institution;
(d) fourth to secured creditors in pari passu;
(e) fifth to depositors for deposits which are in excess of the protected
deposit amount;
(f) then to other creditors to rank in pari passu.
(2) Section 315 of the Companies Act shall not apply to a liquidation of a
financial institution.
(3) Where any assets remain after the payment by the liquidator of all
claims against the financial institution, the remaining assets shall be distributed
among the shareholders in accordance with their respective rights and interests.
106. Financial ledgers and financial records of liquidator
(1) A liquidator shall keep proper financial ledgers and financial records in a
manner prescribed by the Central Bank in which shall be recorded all financial
transactions relating to the liquidation.
(2) When the liquidator has realized all the property of the financial
institution, or so much of it as can, in his opinion, be realized without needlessly
protracting the liquidation, and has made distribution to all depositors and creditors,
he or she shall cause audited financial statements to be submitted to the Central
Bank.
107. Release of liquidator
(1) Where the Central Bank is satisfied that the audited financial statements
present a correct state of affairs of the liquidation, and is satisfied with the
performance of the liquidator, the Central Bank may release the liquidator and
discharge him or her from all liability in respect of any act done or default made by
him or her in the administration of the affairs of the financial institution; except that
such order may be revoked on proof that it was obtained by fraud or by suppression
or concealment of any material fact.
(2) The release of the liquidator shall operate as his or her removal from
office.
PART XII—THE DEPOSIT PROTECTION FUND.
108. Establishment of Deposit Protection Fund
(1) The Fund in the Central Bank known immediately before the commencement
of this Act as the Deposit Protection Fund, in this Part referred to as the Fund, shall
continue in existence.
(2) The Fund shall be managed and controlled by the Central Bank
(3) There shall be paid into the Fund all contributions and other payments
required by this Part of this Act to be paid into it and there shall be paid out of the
Fund all monies required by this Part of this Act be paid out of it.
(4) The Minister may, from time to time, by notice in the Gazette, fix the
size of the Fund sufficient to protect the interests of depositors to be made up by the
contributions under section 109 and the Central Bank may borrow any such amount
as it may require for temporary purposes of making up deficiency in the Fund
pending collection of contributions.
(5) The Fund shall consist of—
(a) moneys contributed to the Fund by financial institutions under section
109;
(b) income credited to the Fund under subsection (6) of this section;
(c) money borrowed for purposes of the Fund under subsection (4).
(6) The money constituting the Fund shall be placed in an account with the
Central Bank to be invested in such manner as the Central Bank shall deem
appropriate and any income from the investment shall be credited to the Fund.
(7) There shall be chargeable to the Fund the administrative expenses of the
Central Bank, repayment of money borrowed by the Fund and payments made in
respect of protected deposits.
109. Contributions to the Fund
(1) Every financial institution shall be a contributor to the Fund.
(2) The Central Bank shall serve on a financial institution a notice
specifying the amount and the period, which shall not be later than twenty-one days
after the date of service of the notice, within which the amount shall be paid into the
Fund by the financial institution.
(3) A financial institution which for any reason fails to pay its contribution
to the Fund within the period specified in a notice issued under subsection (2) shall
be liable to pay to the Fund a civil penalty interest charge of one half per cent of the
unpaid amount for every day outside the notice period on which the amount remains
unpaid.
(4) The minimum annual amount of contribution to the Fund under this
section shall not be less than 0.2 per cent of the average weighted deposit liabilities
of the financial institution in its previous financial year; except that the Central Bank
may from time to time issue statutory instruments varying the percentage and
advising on the basis of weighting.
(5) If the Central Bank finds that the affairs of a financial institution are
being conducted in a manner detrimental to the interests of depositors or the
financial institution and it is of the opinion that the continued conduct may cause
loss to the Fund, the Central Bank may, by notice, increase the contributions of that
financial institution beyond the rate set out in subsection (4) of this section.
(6) The increased contributions effected under subsection (5) shall be risk
adjusted contributions based on the quarterly ratings resulting from the Central
Bank’s off-site surveillance reports.
(7) A financial institution whose overall performance shows an
unsatisfactory or marginal rating shall be charged on a quarterly basis as follows—
(a) marginal: additional charge of 0.1 percent of the average weighted
deposit liabilities on top of the contribution in subsection (3);
(b) unsatisfactory: additional charge of 0.2 percent of the average weighted
deposit liabilities on top of the contribution in subsection(3).
(8) The charges prescribed by subsection (7) of this section shall be
averaged out for a year after full scope examination.
110. Protection of deposits and payments out of the Fund
(1) For the purpose of determining a protected deposit under this section, the
amount being the aggregate credit balance of any accounts maintained by a customer
at a financial institution less any liability of the customer to the financial institution,
shall be a protected deposit to the extent determined by the Central Bank, from time
to time, by statutory order.
(2) Subsection (1) of this section shall not be construed so as to impose an
obligation on the liquidator to set off any liability of a depositor in a financial
institution.
(3) A customer of a financial institution may, if the financial institution
becomes closed, lodge a claim with the Central Bank in such form as the Central
Bank may approve for payment to him or her out of the Fund of any protected
deposit which he or she would but for the closure have been paid if he or she had
demanded payment from the financial institution.
(4) The Central Bank shall make payment of the protected deposit to
customers after ninety days of closure of the financial institution.
(5) The Central Bank may, before paying any claim lodged under
subsection (3), require the claimant to furnish it with such documentary proof as
may be proper to show that the person is entitled to payment out of the Fund, and the
Central Bank may decline to make any payment under this section to a person who,
in the opinion of the Central Bank, had any responsibility for or has profited directly
or indirectly from the circumstances leading up to the financial institution being
closed.
(6) The Central Bank or its appointed liquidator may direct the Deposit
Protection Fund to withhold payment of such portion of the protected deposit of any
customer in an insolvent institution as may be required to satisfy, whether fully or in
part, any liability of that customer to the insolvent institution.
(7) Notwithstanding subsections (5) and (6), the Central Bank may carry
out inspections and ascertain the type, number and values of the protected deposits
which, but for the closure would be payable by the financial institution.
(8) Upon payment of a protected deposit the Fund shall be entitled to
receive from the financial institution or liquidator, as the case may be, an amount
equal to the payment made by the Fund on account of its sub-rogation to the claims
of any customer or depositor in accordance with this Act.
(9) For the purposes of this section “customer” includes any person entitled
to a deposit as trustee or a person holding any deposits jointly.
(10) No person or authority shall pay a depositor of a failed or closed
financial institution any money in excess of the protected deposits under the Deposit
Protection Fund.
111. Annual Report of the Deposit Protection Fund
(1) The Central Bank shall, within four months after the close of each financial
year, submit audited financial statements and an annual report of its operation of the
Deposit Protection Fund to the Minister and contributing banks.
(2) The financial year of the Fund shall be the same as the financial year
prescribed for financial institutions in this Act.
(3) The financial statements shall be prepared and audited within four
months after the end of the financial year.
PART XIII—AMALGAMATIONS, ARRANGEMENTS
AND AFFECTED TRANSACTIONS.
112. Amalgamations and arrangements
(1) No amalgamation or arrangement which involves a financial institution as one
of the principal parties to the relevant transaction, and no arrangement for the
transfer of all or any part of the assets and liabilities of a financial institution to
another person, shall have legal force unless the prior consent of the Central Bank to
the transaction in question has been obtained.
(2) The Central Bank shall not grant its consent referred to in subsection (1)
unless—
(a) it is satisfied that the transaction in question will not be detrimental to
the public interest;
(b) in the case of an amalgamation referred to in subsection (1), the
amalgamation is an amalgamation of financial institutions only; or
(c) in the case of an acquisition or a transfer of assets and liabilities referred
to in subsection (1) which involves the transfer by the transferor
financial institution of the whole or any part of its business as a
financial institution, the transfer is effected to another financial
institution approved by the Central Bank for the purpose of that
transfer.
(3) Upon the coming into effect of a transaction effecting the amalgamation
of one financial institution with another financial institution under paragraph (b) of
subsection (2), or effecting the transfer of all or part of the assets and liabilities of
one financial institution to another financial institution under paragraph (c) of
subsection (2)—
(a) all the assets and liabilities of the amalgamating financial institutions or,
in the case of the transfer of assets and liabilities, those assets and
liabilities of the transferor financial institution that are transferred
under the transaction, shall vest in and become binding upon the
amalgamated financial institution or, as the case may be, the financial
institution taking transfer of those assets and liabilities;
(b) the amalgamated financial institution or, in the case of the transfer of
assets and liabilities, the financial institution taking transfer of those
assets and liabilities, shall have the same rights and be subject to the
same obligations as those which the amalgamating financial
institution or, as the case may be, the transferor financial institution is
or to which they or it is subject immediately before the amalgamation
or transfer;
(c) all agreements, appointments, transactions and documents entered into,
made, drawn up or executed with, by or in favour of any of the
amalgamating financial institutions or, as the case may be, the
transferor financial institution, and in force immediately prior to the
amalgamation or transfer, but excluding such agreements,
appointments, transactions and documents that, by virtue of the terms
and conditions of the amalgamation or transfer, are not to be retained
in force, shall remain in force and shall be construed for all purposes
as if they had been entered into, made, drawn up or executed with, by
or in favour of the amalgamated financial institution or, as the case
may be, the financial institution or person taking transfer of the assets
and liabilities in question; and
(d) any bond, pledge, guarantee or instrument to secure future advances,
facilities or services by any of the amalgamating financial institutions
or, as the case may be, by the transferor financial institution, which
was in force immediately prior to the amalgamation or transfer, shall
remain in force and shall be construed as a bond, pledge, guarantee
or instrument given to or in favour of the amalgamated financial
institution or, as the case may be, the financial institution or person
taking transfer of those assets and liabilities, as security for future
advances, facilities or services by that financial institution or person
except where, in the case of the transfer, any obligation to provide
such advances, facilities or services is not included in the transfer.
(4) Any amalgamation or arrangement or any arrangement for the transfer
of assets and liabilities, referred to in subsection (1), excluding a transfer other than
a transfer that is referred to in paragraph (c) of subsection (2), shall be subject—
(a) to confirmation at a general meeting of shareholders of each of the
financial institutions concerned; or
(b) in the case of a transaction effecting the transfer of assets and liabilities
of one financial institution to another financial institution under
paragraph (c) of subsection (2), to confirmation at a general meeting
of shareholders of the transferor financial institution and the financial
institution taking transfer of those assets and liabilities; and the
notice convening the meeting shall contain or have attached to it the
terms and conditions of the relevant agreement or arrangement.
(5) Notice of the passing of the resolution confirming any amalgamation or
arrangement, or any arrangement for the transfer of assets and liabilities, under
subsection (4) together with a copy of the resolution and the terms and conditions of
the relevant agreement or arrangement, duly certified by the chairperson of the
meeting at which the resolution was passed and by the secretary of the financial
institution or person concerned, shall be sent to the Central Bank by each of the
financial institutions involved or, in the case of a transaction effecting the transfer of
assets and liabilities of one financial institution to another financial under paragraph
(c) of subsection (2), by the relevant transferor financial institution and the financial
institution taking transfer of the assets and liabilities, and after having received the
notices from all the parties to the relevant agreement or arrangement, the Central
Bank shall register those notices.
(6) Upon the registration by the Central Bank of the notices referred to in
subsection (5)—
(a) of any amalgamation of two or more financial institutions, the licences
of the individual financial institutions which were parties to the
amalgamation shall be deemed to be cancelled and the Central Bank
shall withdraw those licences and, on payment by the financial
institution created by the amalgamation of the prescribed registration
fee, licence the financial institution subject to the necessary
modifications to the provisions of Part II of this Act, as a financial
institution; or
(b) of any arrangement for the transfer of all the assets and liabilities of a
financial institution, the licence of that financial institution shall be
deemed to be cancelled and shall be withdrawn by the Central Bank.
(7) Upon licensing of a financial institution by the Central Bank under
subsection (6), the Central Bank shall issue a licence to the financial institution.
(8) The Registrar of Companies, Registrar of Titles and every officer or
person in charge of a deeds registry or any other office, if, in his or her office or any
register under his or her control there—
(a) is registered any title to property belonging to, or any bond or other
right in favour of, or any appointment of or by; or
(b) is registered any share, stock, debenture or other marketable security in
favour of; or
(c) has been issued any licence to or in favour of, any financial institution
which has amalgamated with any other financial institution, or any
financial institution which has transferred all or part of its assets and
liabilities to any other financial institution, shall, if satisfied—
(i) that the Central Bank has consented under subsection (1) to the
amalgamation of transfer; and
(ii) that the amalgamation or transfer has been duly effected, and
upon production to him or her of any relevant deed, bond,
share, stock debenture, certificate, letter of appointment,
licence or other document, make such endorsements on the
documents and effect such alterations in the registers as may be
necessary to record the transfer of the relevant property, bond
or other right, share, stock, debenture, marketable security,
letter of appointment or licence and of any rights under it to the
amalgamated financial institution or, as the case may be, to the
financial institution that has taken transfer of the assets and
liabilities.
(9) No transfer duty, stamp duty, registration fees, licence duty or other
charges shall be payable in respect of—
(a) a transfer under subsection (8) taking place in the execution of a
transaction entered into at the instance of the Central Bank in the
interest of the financial institution or its depositors or the
maintenance of a stable financial sector; or
(b) any endorsement or alteration made to record the transfer, upon
submission to the Registrar of Companies, Registrar of Titles or
person referred to in subsection (8), as the case may be.
(10) This section shall not affect the rights of any creditor of a financial
institution which has amalgamated with or transferred all its assets and liabilities to
any other financial institution or taken over all the assets and liabilities of any other
financial institution, except to the extent provided in this section.
(11) In the case of an acquisition to which this section applies, the Central
Bank shall, at the cost of the acquiring financial institution, appoint a firm of
accountants to examine and report on the financial position of the undertaking being
acquired to ensure that the acquisition is not detrimental to the interests of the
depositors of the acquiring financial institution.
113. Reconstruction within group of companies
No reconstruction of companies within a group of which a financial institution or
subsidiary of a financial institution is a member shall be effected without the prior
written approval of the Central Bank.
114. Alteration of memorandum and articles
(1) No—
(a) alteration under the Companies Act, of the memorandum of association
or articles of association of a company registered as a financial
institution; or
(b) change under the Companies Act, of the name of any such company,
shall have legal force for the purposes of this Act or any other law
unless the alteration or change of name has been approved in writing
by the Central Bank prior to the registration of the alteration or
change of name by the Registrar of Companies.
(2) Any application for the Central Bank’s approval under subsection (1)
shall be lodged with the Central Bank before the proposed special resolution
authorizing the alteration or change in question is laid before a general meeting of
the company; and the application shall be accompanied by—
(a) two copies of the proposed special resolution; and
(b) an explanation of the reasons for the resolution.
(3) The Central Bank shall not approve the alteration or change of name if it
is of the opinion—
(a) that the proposed alteration is inconsistent with any provision of this Act
or is undesirable in so far as it concerns the activities of financial
institutions; or
(b) that the proposed new name is unacceptable on the ground that it is
identical with the name of an existing financial institution, or that it
closely resembles the name of an existing financial institution that
one is likely to be mistaken for the other.
(4) A financial institution shall, within twenty one days after the registration
by the Registrar of Companies of an alteration of its memorandum of association or
articles of association or a change of its name, furnish the Central Bank with a
certified copy of the special resolution which sets out the alteration or change of
name, as the case may be.
(5) Upon receipt under subsection (4) of a copy of a special resolution, and
payment by the concerned financial institution of the prescribed fee, the Central
Bank shall—
(a) in the case of a special resolution relating to an alteration of a
memorandum of association or articles of association, register the
alteration in question and issue to the financial institution a certificate
to the effect that the alteration has been registered by the Central
Bank with effect from a date specified in the certificate; or
(b) in the case of a special resolution relating to a change of name, change
the name of the financial institution in the register of financial
institutions, and issue to the financial institution a certificate of the
change of name.
(6) An alteration referred to in paragraph (a) of subsection (5) shall not take
effect until it has been registered under that subsection.
(7) Subsections (1), (2) and (3) shall not apply with respect to any alteration
of a memorandum of association or articles of association of a financial institution in
accordance with a direction by the Central Bank under this Act.
115. Alteration of memorandum and articles of association in accordance
with directions of Central Bank
(1) The Central Bank may, at any time in writing direct a financial institution to
effect such alteration, not contrary to any provision of this Act, to its memorandum
of association or articles of association as the Central Bank may deem desirable in
order to remove anomalies or undesirable divergences in the activities of different
financial institutions.
(2) An alteration directed by the Central Bank under subsection (1) shall, on
or before the day of the first annual general meeting, referred to in the Companies
Act, after the date of the direction, be submitted for consideration by the
shareholders of the financial institution.
(3) If a financial institution refuses or fails to alter its memorandum of
association or articles of association in accordance with a direction of the Central
Bank under subsection (1), the Central Bank may submit a copy of that direction to
the Registrar of Companies, who shall deal with the proposed alteration in
accordance with the Companies Act, as if it were contained in a special resolution
adopted by the financial institution and submitted to him or her by that financial
institution in accordance with that Act.
PART XIV—MISCELLANEOUS.
116. Branches
(1) A financial institution shall not open a new place of business or change the
location of an existing place of business or change its hours of business without the
approval of the Central Bank.
(2) Before granting any approval under this section in respect of opening a
new place of business or change of location of an existing place of business, the
Central Bank may require to be satisfied by an inspection of the financial institution
or otherwise as to—
(a) the history and financial condition of the financial institution;
(b) whether the proposed management are fit and proper;
(c) adequacy of its capital structure and earning prospects;
(d) the convenience and needs of the community to be served; and
(e) whether the public interest will be served by the opening of a new place
of business or changing of the location of the place or hours of
business.
(3) A financial institution shall not close an existing place of business
unless it has given six months’ notice to the Central Bank, or such shorter period of
notice as the Central Bank may consider reasonable, of its intention to close the
place of business.
(4) A financial institution which contravenes subsection (1) or (3) of this
section commits an offence and is liable on conviction to a fine not exceeding two
hundred and fifty currency points.
117. Representative offices for foreign banks
(1) A foreign bank may, in such form and in such manner as shall be prescribed
by the Central Bank by statutory instrument apply to the Central Bank for
permission to establish a representative office in Uganda to engage in such limited
activities, excluding the taking of deposits as the Central Bank may approve.
(2) An application under subsection (1) shall be accompanied by the
prescribed application fee.
(3) Where a foreign bank is granted permission to establish a representative
office in Uganda, it shall not, without the prior permission of the Central Bank, do
any of the following—
(a) change its name;
(b) change its management;
(c) change its address or location of its registered office in Uganda;
(d) close down the representative office; or
(e) engage in any other activity other than such limited activity as the
Central Bank may authorise the foreign bank to conduct.
(4) Any person who—
(a) establishes a representative office of a foreign bank in Uganda without
the permission of the Central Bank; or
(b) contravenes any of the provisions of subsection (3) of this section,
commits an offence and is liable on conviction to a fine not
exceeding two hundred and fifty currency points or imprisonment not
exceeding two years or both.
(5) The Central Bank may by statutory instrument prescribe the provisions
of this Act which shall apply to representative offices of foreign banks in Uganda.
118. Freezing of accounts
(1) The Central Bank shall if it has reason to believe that any account held in any
financial institution has funds on the account which are the proceeds of crime, direct
in writing the financial institution at which the account is maintained to freeze the
account in accordance with the direction.
(2) A financial institution acting in compliance with a direction under
subsection (1) of this section shall incur no liability solely as a result of that action.
119. Unclaimed balances
(1) Whenever any current or savings account has not been operated for a period of
two years or a time deposit account has not been operated for a period of two years
after the date of maturity of the deposit, no withdrawals shall be allowed on the
account except with the permission of two officers of the financial institution out of
a number of signatories authorized to grant the permission.
(2) An account referred to in subsection (1) of this section shall be
transferred to a separate register of dormant accounts in the books of the financial
institution and a notice in writing of that action shall be given to the depositor at his
or her last known address.
(3) Where any account which is transferable under subsection (2) of this
section is subject to a service charge, the charge may continue to be levied up to the
date on which the account has been transferred to the separate ledger of dormant
accounts; except that no charge shall be levied beyond two years.
(4) Where an account is transferred to a register of dormant accounts and
the account has been on the register for three years, the institution shall advertise in
the print media the fact that it has been on the register for three years.
(5) Any account may be transferred out of the register of dormant accounts
if the depositor or, if the depositor is dead, his or her legal representative, makes
such request.
(6) Unclaimed balances shall after a period of five years from the date of
the advertisement be transferred to the Central Bank and the Central Bank shall
employ them to off set costs of supervising financial institutions or as may be
prescribed.
(7) The Central Bank shall refund any unclaimed balances to the depositor
of those balances with the financial institution or, if the depositor is dead, his or her
legal representative if a request is made after the dormant account has been
transferred to the Central Bank.
120. Disqualification of officers
(1) A person—
(a) who has been a director or officer of, or directly responsible for the
mismanagement of a financial institution leading to its liquidation or
its being placed under receivership or its management being taken
over by the Central Bank; or
(b) who has been convicted of an offence under section 4 of this Act; or
(c) who is a bankrupt or who suspends payment or compounds with his or
her creditors,
shall not, without the express authorization of the Central Bank, act or continue to
act as a director or officer, or be directly or indirectly involved in the management
of a financial institution.
(2) A person who has been convicted of an offence involving dishonesty or
fraud shall not act or continue to act in any way in the management of a financial
institution.
121. Officers deemed public officers
An officer or servant of a financial institution shall be deemed to be a person
employed in the public service for the purposes of sections 87, 89 and 93 of the
Penal Code Act.
122. Fines and penalties
All fines and penalties expressed in monetary terms and recovered by the Central
Bank under the provisions of this law shall be paid to the Consolidated Fund.
123. Obligations under Companies Act
Nothing in this Act shall be deemed to relieve a financial institution from any of
its obligations under the Companies Act or the Building Societies Act.
124. Protection of Central Bank
No suit or other legal proceedings shall lie against the Central Bank or any
officer, employee or agent of the Central Bank for anything which is done or is
intended to be done in good faith under this Act.
125. Bank holidays
(1) The Minister may, at any time, by statutory instrument, declare any day to be a
bank holiday.
(2) A financial institution shall not be open to the public on a bank holiday.
(3) A bank holiday declared under subsection (1) of this section shall not
necessarily be a public holiday and nothing in this section shall be deemed to affect
the provisions of any law in force relating to public holidays.
126. Offences etc
(1) Any person who, being a director, manager or officer of a financial
institution—
(a) fails to take any reasonable steps to secure compliance with the
requirements of this Act,
(b) knowingly or recklessly makes any statement or gives any information
which is false or misleading in any material particular in answer to
any request for information made under any provisions of this Act,
(c) is privy to the furnishing of any false information supplied under this
Act,
commits an offence and is liable on conviction, to a fine not exceeding two hundred
and fifty currency points or imprisonment not exceeding three years or both.
(2) A financial institution which fails to comply with an order issued by the
Central Bank under this Act is liable to pay to the Central Bank a civil penalty of
one hundred currency points per day on which the financial institution fails to
comply with the order.
(3) A financial institution which does any act prohibited by this Act or fails
to do anything required by this Act commits an offence and where no specific
penalty is provided the financial institution is liable on conviction to a fine not
exceeding two hundred and fifty currency points and in the case of a continuing
offence to an additional fine not exceeding fifty currency points for each day on
which the offence continues.
(4) Where a director or officer of a financial institution authorizes a
contravention of, or contravenes any provision of this Act, he or she shall be
personally liable to the penalty specified in relation to the contravention.
(5) Any person who being an officer or director of a financial institution
with intent to defraud causes loss to the financial institution directly or indirectly,
commits an offence and is liable on conviction to a fine not exceeding two hundred
and fifty currency points or imprisonment not exceeding one year or both.
(6) Any person who being a director or officer of a financial institution
receives or possesses or takes for himself or herself or for any related person of the
director or officer any of the property of the financial institution otherwise than in
payment for it of the full value, commits an offence and is liable on conviction to a
fine not exceeding two hundred and fifty currency points or imprisonment not
exceeding two years or both.
127. Powers to summon officers, directors and shareholders
(1) Where the Central Bank is of the opinion that any officer, director or
shareholder, past or present, of a financial institution has any information relating to
the operations of the financial institution which the Central Bank considers
necessary for the performance of its supervisory functions, the Central Bank may on
notice summon that officer, director or shareholder, past or present of a financial
institution for an examination.
(2) Any person who when summoned by the Central Bank under this
section—
(a) fails without reasonable excuse to appear before the Central Bank to
answer the summons;
(b) withholds any information in his or her knowledge;
(c) provides any information which is false in any material particular; or
(d) refuses to answer any question put to him or her;
commits an offence and is liable on conviction to imprisonment not exceeding two
years.
128. Recovery of civil penalties
(1) Before imposing a civil penalty on any financial institution or person under
this Act, the Central Bank shall, except in the case of an emergency, give to the
financial institution or person not less than three days notice in writing requiring the
financial institution or person to show cause why the civil penalty should not be
imposed.
(2) Unless special provision is otherwise expressly made for the purpose in
this Act , where any provision of this Act imposes a civil penalty on any financial
institution the amount of the civil penalty shall constitute a debt due from the
financial institution to the Central Bank, and the Central Bank may—
(a) sue the financial institution or person for the recovery of the civil
penalty;
(b) debit the amount of the civil penalty to the account (if any) of the
financial institution or person with the Central Bank;
(c) direct that any part of the civil penalty which remains unpaid after a
particular period notified to the financial institution and the officials
concerned,
shall constitute a debt payable by the directors and particular officers of the financial
institution specified in the notification; and the Central Bank is entitled to sue those
directors and officers jointly and severally for the amount due.
(3) Any amount recoverable as a debt under this section shall be paid
subject to such interest as is payable in respect of a judgment debt calculated from
the date on which the debt became due.
129. Control of money laundering
(1) A financial institution in Uganda shall—
(a) demand proof of and record the identity of its clients or customers,
whether usual or occasional, when establishing business relations or
conducting transactions, in particular opening of accounts or issuing
of passbooks, entering into fiduciary transactions, renting of safe
deposit boxes, or performing large cash transactions;
(b) together with its directors, officers and employees report promptly to the
national law enforcement agencies any suspected money laundering
activity related to any account held with the financial institution.
(2) Any financial institution or director, officer or employee of a financial
institution which or who contravenes subsection (1) of this section, as applicable,
commits an offence and is liable on conviction to a fine not exceeding two hundred
and fifty currency points.
130. Action against money laundering
(1) A financial institution shall promptly report to the national law enforcement
agencies any suspected money laundering activity related to any account held with
the financial institution.
(2) For purposes of this Act, ‘money laundering’ shall cover all activities
and procedures designed to change the identity of illegally obtained money so that it
appears to have originated from a legitimate source.
(3) Any financial institution which contravenes the provisions of this
section commits an offence and is liable, on conviction, to a fine not exceeding two
hundred and fifty currency points.
131. Regulations
(1) The Central Bank, in consultation with the minister, may make regulations —
(a) prescribing prudential norms on asset quality, including bad debt
provisions and write-offs;
(b) providing for the licensing of financial institutions;
(c) providing for the minimum level of capital for financial institutions;
(d) providing for the computation of on-going capital adequacy
requirements for financial institutions;
(e) providing for lending limits on credits extended to insiders;
(f) providing for the limitations for advances or credit facilities to a single
borrower;
(g) providing for rules and regulations against the use of financial
institutions for money laundering purposes;
(h) classifying institutions as financial institutions for the purposes of the
definition of a financial institution in section 3 of this Act;
(i) providing for reporting requirements by financial institutions to the
Central Bank;
(j) providing for the issue, form and content of advertisements for deposits;
(k) providing for any thing required or authorised by this Act to be provided
for by regulations or by notice;
(l) providing for the allotment or issuance and/or registration of the transfer
of five percent or more of any of the shares of a financial institution
listed on the stock exchange;
(m) generally for giving effect to the provisions of this Act.
(2) Regulations made under this section may in respect of any
contravention of any of the regulations under this section—
(a) prescribe a penalty of a fine not exceeding two hundred and fifty
currency points or imprisonment not exceeding two years or both;
(b) in the case of a continuing contravention prescribe an additional penalty
not exceeding fifty currency points in respect of each day on which
the offence continues;
(c) prescribe a higher penalty in respect of a second or subsequent
contravention;
(d) provide that a court which convicts the offender may forfeit to the State
any document or other matter involved in the commission of the
contravention.
132. Amendment of Schedules
(1) The Minister may, with the approval of Parliament, by statutory instrument
amend the First Schedule to this Act.
(2) The Minister may, by statutory instrument, amend the Second and the
Third Schedule to this Act.
133. Precedence of Act
For the purposes of any matter concerning financial institutions, this Act shall
take precedence over any enactment and in the case of conflict, this Act shall
prevail.
134. Repeal and saving
(1) The Financial Institutions Act is repealed.
(2) Notwithstanding the repeal by subsection (1) of this section all
regulations, instruments, instructions, licences, orders and decisions made under the
repealed Act, shall, in so far as they are consistent with this Act, remain valid and
binding and shall be deemed to have been made under the Act.
(3) Upon the coming into force of this Act, any reference to the repealed
Act in any enactment immediately before the commencement of this Act shall be
construed as a reference to this Act.
__________
SCHEDULES.
FIRST SCHEDULE.
SECTION 3.
CURRENCY POINT.
A currency point is equivalent to twenty thousand shillings.
SECOND SCHEDULE
SECTION 3, 10(3) AND 12(7)
TYPES OF FINANCIAL INSTITUTIONS
TYPE OF INSTITUTION MAIN FINANCIAL SERVICES PROVIDED/
BUSINESSES CONDUCTED
(A) BANKS
(i) Commercial Banks
u Acceptance of call, demand, savings and time deposits withdrawable by
cheque or otherwise;
u Provision of overdrafts and short to medium term loans;
u Provision of foreign exchange facilities;
u Acceptance and discounting of bills of exchange;
u Provision of financial and investment advice;
u Participation in inter-bank clearing systems;
u Give guarantees, bonds or other forms of collateral, and accept and place
third party drafts and promissory notes connected with operations in which
they take part.
(ii) Post-Office Savings
Bank
u Acceptance of savings and fixed deposits ;
u Investment in Government Securities ;
(iii) Merchant Banks
u Acceptance of corporate call and time deposits;
u Provision of foreign exchange facilities;
u Facilitation of trade through the granting of acceptance facilities;
u Provision of corporate finance advisory services through :
(a) share issues;
(b) rights issues;
(c) mergers and acquisitions and corporate reconstruction;
(d) private placement,
excluding underwriting arrangements;
u Issue of bonds, debt obligations and certificates in such loans as they may
grant or any other instrument traded in the domestic market or abroad
according to the regulations the Central Bank may set forth;
u Investment portfolio management, investment advisory services and nominee
services;
u Arranging of finance, lending or participation in syndicated loans and acting
as guarantors;
TYPE OF INSTITUTION MAIN FINANCIAL SERVICES PROVIDED/
BUSINESSES CONDUCTED
u Financing or lending in the institutional markets.
(iv) Mortgage Banks
u Receiving deposits of participation in mortgage loans and in special
accounts;
u Granting of loans for the acquisition, construction, enlargement, repair,
improvement and maintenance of urban or rural real estate, and for the
substitution of mortgages taken out for that purpose;
u Giving of guarantees, bonds or other forms of collateral connected with the
operations in which they may take part;
u Obtaining of foreign loans and acting as intermediary in loans extended in
local and foreign currency, having the previous authorisation of the Central
Bank for such loans exceeding a specified limit as prescribed by the Central
Bank.
(B) NON-BANK FINANCIAL INSTITUTIONS
(i) Credit Institutions
u Acceptance of call and time deposits repayable after a fixed period or after
notice and employment of such deposits wholly and partly by lending or any
other means for the account and at the risk of the person accepting such
deposits.
(ii) Acceptance Houses
u Granting of Acceptance Facilities.
(iii) Discount Houses
u Dealing mainly in short term assets such as treasury bills, bills of exchange
and negotiable certificates of deposit.
(iv) Finance Houses
u Provision of hire-purchase facilities;
u Provision of finance and operating leases/ factoring facilities;
u Provision of short and medium-term loans.
THIRD SCHEDULE
SECTIONS 3, 11, 18, 19, 52, 53& 57
CRITERIA FOR DETERMINING WHETHER A PERSON IS A FIT AND PROPER PERSON TO MANAGE,
CONTROL, BECOME A DIRECTOR OR SUBSTANTIAL SHAREHOLDER IN A FINANCIAL
INSTITUTION
1. In order to determine, for the purposes of this Act, the professional and moral suitability of persons
proposed to manage or control a financial institution, to become a substantial shareholder, or director, the
Central Bank, shall have regard to the following qualities, in so far as they are reasonably determinable, in
respect of the person concerned—
(a) his or her general probity;
(b) his or her competence and soundness of judgement for the fulfilment of the responsibilities of the
office in question;
(c) the diligence with which the person concerned is fulfilling or likely to fulfil those responsibilities;
and
(d) whether the interests of depositors or potential depositors of the institution are, or are likely to be
in any way threatened by his or her holding that position.
2. For the purposes of and without prejudice to the general effect of paragraph (1), the Central Bank may
have regard to the previous conduct and activities of the person concerned in business or financial matters and,
in particular, to any evidence that the person—
(a) has been convicted of the offence of fraud or any other offence of which dishonesty or violence is
an element;
(b) has contravened any law designed for the protection of members of the public against financial
loss due to the dishonesty or incompetence of, or malpractice by, persons engaged in the
provision of banking, insurance, investment or other financial services or the management of
companies or against financial loss due to the conduct of a discharged or undischarged
bankrupt;
(c) was a director of an institution that has been liquidated or is under liquidation or management of
the Central Bank or under receivership;
(d) has taken part in any business practice that in the opinion of the Central Bank, was deceitful or
oppressive, fraudulent, prejudicial or otherwise improper whether unlawful or not, or which
otherwise reflect discredit on his or her method of conducting business;
(e) has engaged or taken part in or been associated with any other business practices or otherwise
conducted himself or herself in such manner as to cause doubt on his or her competence and
soundness of judgement;
(f) has defaulted on a loan or a company in which he or she is a director has defaulted on a loan.
3. The Central Bank may request any person to furnish such additional information as may be necessary
in determining the professional or moral suitability of that person.