Children or persons under the age of 18 (minors, according to the Constitution of Uganda) are not allowed to participate in affairs of a company such as attending meetings, inspecting books of accounts, etc, according to a new ruling delivered on Monday, 21st October, by the Registrar of Companies under the Uganda Registration Services Bureau (URSB).
The Ruling, however, says minors can share company dividends as and when the same is declared because minors can still own property, including shares in a company and dividends from there.
“… While a minor can technically hold shares or interests in a company, they may not be able to exercise control or make decisions regarding those shares without the intervention of a guardian or court-appointed representative. This appointment must be either general, dealing with all proprietary interests of the minor (s) or specific, granting the guardian particular powers. In the circumstances of this case, the guardian was only appointed to receive dividends.” Ruled Mr. Solomon Mullisa, Assistant Registrar of Companies in the case of Achom Ashley Methia and Others v. Mother Majeri Limited.
The Ruling suggests that the only circumstances a minor will participate in the affairs of a company beyond sharing in dividends declared by a company is through a court order vesting the minor’s guardian or legal representative such powers.
In the case under review, the petitioners, all minor children of the respondent company’s founder sought; a declaration that the affairs of the company were being run in an oppressive manner ie failure or refusal to hold company meetings, etc; an order to audit the books of account of the company, a direction to convene a company meeting and a direction to pay the petitioners their due dividends.
Although the Registrar found that the minors could legitimately own shares and dividends in the respondent company, he found that they were not entitled to the orders sought since as minors they could not participate in the company affairs such as meetings, auditing of books of accounts, etc.
Their guardianship order was only limited to owning shares and receiving dividends on those shares and for them to participate in company affairs beyond that, a guardianship order extending the authority of their guardian in company matters was needed.
Secondly, the Registrar found that it is not up to him to order the company to pay dividends if the same were not declared by the company holding that “the Registrar of Companies cannot direct payment of dividends where none have been declared.”
“It is therefore not appropriate that the Registrar of Companies interferes with the affairs of the Company to direct a company to distribute dividends or pay any entitled party dividends. Doing so would be an unjustified intrusion into the internal affairs of the company. The decision to pay dividends or not is a preserve of the organs of the company – which include the board of directors and the current shareholders in accordance with the articles of association of the company and out of existing profits. Where however such dividends are declared in accordance with the articles of association of the company and the company refuses to pay an entitled party, such party may bring a claim including a claim for minority oppression or prejudicial conduct. Until such a time, the Registrar of Companies cannot direct payment of dividends where none have been declared.” The Registrar of Companies ruled.
Benjamin Ahikiiriza is a legal writer and publisher of the Legal Reports Digital Media.