Analysis Of The Law And Practice Of Receivership In Uganda

Abstract

The study was set to analyze of the law and practice of receivership in Uganda, it was guided by the following objectives which included; examine the adequacy of law on receivership in relation to duties of receivers and power of sale, to examine the liabilities of receiver and how such can be avoided, to examine the problems/challenges released to receivership in Uganda and to examine remedies available to the parties in receivership process. The research design used both doctrinal and non-doctrinal research design. Doctrinal research is concerned with legal prepositions and doctrines. The sources of data were legal and appellate court decisions. The study used a selection of literature from different legislations, like the companies Act, Insolvency Act, the Mortgage Act and their respective regulations were consulted. In study it was found out that the public are not aware of law and practice of receivership more so even some of creditors' of business. The study recommended that Recapitalization is a type of corporate reorganization involving substantial change in a company's capital structure. Recapitalization may be motivated by a number of reasons. Usually, the large part of equity is replaced with debt or vice versa was recommended that there was need to increase public awareness on receivership so that public can increase the knowledge they have on receivership in that it was one of options of insolvency and how to deal with company that was under receivership, It was recommended that where there was family interests in business under receivership should be safe guarded or creditors interests should not override them, So do not consider any such arrangement without taking legal advice.

TABLE OF CONTENTS

Contents

DECLARATION ............................................................................................................................. i

APPROVAL ................................................................................................................................... ii

DEDICATION ............................................................................................................................... iii

ACKNOWLEDGEMENT ............................................................................................................. iv

ABSTRACT .................................................................................................................................... v

LIST OF CASES ............................................................................................................................ vi

LIST OF STATUTES AND REGULATIONS ........................................................................... viii

TABLE OF CONTENTS ............................................................................................................... ix

CHAPTER ONE ........................................................................................................................... 1

GENERAL INTRODUCTION .................................................................................................... 1

1.1 Background of the study ........................................................................................................... I

1.2 Statement of the problem .......................................................................................................... 5

1.3 Objectives of the study .............................................................................................................. 7

1.4 Scope of the study ..................................................................................................................... 7

1.5 Research methodology .............................................................................................................. 7

I . 9 Literature Review ...................................................................................................................... 7

1.8 Significance of study ............................................................................................................... I 0

I. 7 Organization layout. ................................................................................................................ 11

CHAPTER TWO ........................................................................................................................ 12

OVERVIEW OF THE INSOL VENCE PRACTICE IN UGANDA ...................................... 12

2.1 Introduction ............................................................................................................................. 12

ix

2.2 Insolvency Law - The Ugandan Experience .......................................................................... 13

2.3 Objectives of the Insolvency Act, 2011 .................................................................................. 26

2.3.1 Features of the Insolvency Law ........................................................................................... 26

2.4 The Importance oflnsolvency in Economic Development .................................................... 27

2.5 Conclusion .............................................................................................................................. 28

CHAPTER THREE .................................................................................................................... 30

DUTIES AND LIABILITIES OF A RECEIVER AND PRE-APPOINTMENT

CONSIDERATIONS .................................................................................................................. 30

3.1 Introduction ............................................................................................................................. 30

3.2 Duties of receivers .................................................................................................................. 33

3.2.1 Duty of care .......................................................................................................................... 34

3 .2.2 Duty to render accounts ....................................................................................................... 3 5

3.2.3 Duty to safe guard the prope1ty for the benefit. ................................................................... 36

3.3 Statutory duties of Receiver .................................................................................................... 38

3.4 Power and duty of sale of a Receiver ...................................................................................... 38

3.5 Liability of Receiver ............................................................................................................... 40

3.5.1 Liability in t01t for conversion ............................................................................................. 41

3.6 Legal Framework of appointment of receiver and pre-appointment considerations .............. 41

3.6.1 Validity of proposed appointment ....................................................................................... 41

3.6.2 Mode of appointment.. ......................................................................................................... 45

3.6.3 Receiver Appointed By Court.. ............................................................................................ 47

3.7 Procedure of appointment ....................................................................................................... 47

3.7.1 Creditors meeting ................................................................................................................. 48

3.7.2 Seeking for guidance and clarification from comt. ............................................................. 49

X

3. 7.3 Remuneration of receiver ..................................................................................................... 49

3.7.4 Effects of appointment of receiver ....................................................................................... 50

3.7.5.1 Effect on directors ............................................................................................................. 50

3.7.5.2 Effect on the charge .......................................................................................................... 52

27.5.3 Effect of receivership on contracts .................................................................................... 52

3.8 Conclusions ............................................................................................................................. 53

CHAPTER FOUR ....................................................................................................................... 55

CHALLENGING RECEIVER ACTION AND REMEDIES ................. 55

4.1 Introduction .......................................................................... 55

4.2 Challenging Receiver Action ............................................. 55

4.3 Remedies available .................................................. 58

4.3.1 Interlocutory injunction .................................. 58

4.3.2 Retaking possession ......................................... 59

4.2.3 Putting the company under administration .......................................................................... 60

4.3.4 Damages ....................................................... 60

4.3.5 Attachment by receiver ................................. 60

4.4 Conclusion ................................................ 61

CHAPTER FIVE ................................................... 63

RECOMMENDATIONS AND CONCLUSION ................ 63

5.1 Findings of Study ......................................................... 63

5.3 Recommendations ............................................ 64

5.3.1 Recapitalization Method of a company in Distress ................ 64

5.3.2 Public awareness on receivership ......................................... 64

5.3.3 Safe guarding of family interests in receivership ................................................................ 65

5.3.4 Priotizing all interest in the Charged Property ..................................................................... 65

5.3.5 Removing Redtapeism ...................................................... 65

5.3.6 Qualification of a Receiver .................................................................................................. 66

5.3.7 Protection of the Directors Interest ........................................ 66

5.4 Conclusion .......................................................................................... 66

BIBLIOGRAPHY ........................................................ 68