Basics: Before you formalise your business

Tuesday October 22 2019

A man fills in a form to register a company.

A man fills in a form to register a company. The application must be accompanied by; Identification for each director (two passport photographs), National ID and Company form 20 among others. PHOTO BY EDGAR R. BATTE 

By Isaac N. Mpanga

Starting a new business does not have to be a tedious process. But you must be aware of the legal requirements and process that will make it easy to manage a successful business in a convenient manner. What do you need to do at each step of the way?

When you think of starting a new venture or looking to grow your business, you may consider starting a company. There are a few steps that are required for one to have a company up and running. These include reserving the company name (have three choices of the name in the order of their priority to widen your options), drafting Memorandum and Articles of association of the company and finally fill and register the following forms: -F.18 (address of the company), F.20 (Director and Company Secretary), S. 18 (registration), Form and A1 (showing share capital).

Trade licence
However, for business to lawfully start, you will also have to obtain a trade licence. Formal application is then made to Kampala Capital City Authority (KCCA) /any authorised authorities to acquire this licence. The application must be accompanied by; Identification for each Director (two passport photographs), National ID, Company form 20 and form 9 rent receipt (for new business).

Upon payment of the required fees (depending on the type of business in the different grading areas) a receipt is given and presented at the Division offices where a trading licence certificate is issued. With a trade licence a company can then proceed with operating the business.

The corporate form of business is however, a more flexible instrument for large scale business. This is mainly because the corporation itself has legal standing. This safeguards its owners, reliving them of individual legal responsibilities when they act as agents of the business.

Secondly, the owners of the shares have limited liability that is, they are not responsible for corporate debt. And thirdly the shares are transferable –meaning that business does not have to end or get interrupted by the death or disinterest of an individual.


Raise capital
It is not uncommon for many businesses to collapse as a result of lack of capital. But once a business has been registered as a company, it has several options available for raising this necessary capital which include but are not limited to; borrowing money from lending institutions, reinvesting profit in the business and issuing bonds that mature at a future date.

Company can also decide to go public, (sell its shares to the public). This will require the company to amend its memorandum and articles of association, increasing the share capital of the company. They can then ahead to re-register the same. Once the public company has been registered, the company can float its shares on the stock market. Floating shares on the stock market helps investors to understand and know the total shares available for trading.

In summary, it is recommended that a business of sizeable turnover should be incorporated. This will aid in easier debt and equity management and spur growth through legal and other regulatory forms of compliance.

The writer is the legal officer, litigation at dfcu bank.