Politics, law collide over UTL audit

The fight over whether or not to audit Uganda Telecom (UTL) will have no winner unless a creditor petitions court to authorise examination of the company’s books of accounts, according to legal experts and our analysis of the law.

Section 174(1)(C) of the Insolvency Act provides that a creditor would be the person listed as competent to apply to court to remove an administrator from office.

Regulation 78 of Insolvency Regulations S.1 No. 36 of 2013 provides that the official receiver, Registrar General Twebaze Bemanya in the case of UTL, may at any time during the course of the voluntary arrangement or within three months after its completion require the supervisor (his assignee overseeing day-to-day activities of the telecom firm) to produce for inspection the records and accounts in respect of the arrangement.

Section 78(2) of the law also empowers Mr Bemanya as the official receiver to cause any accounts and records produced to him or her under this regulation to be audited.
And this has been the centre point of controversy between Mr Bemanya and State Investment and Privatisation Minister Evelyn Anite, who appointed him UTL administrator in 2017.

Ms Anite, who fought bitterly to move the national optic fibre infrastructure project from NITA-U to UTL, and with it all of government agencies’ expenditure on voice calls and data, demanded an audit into the now more liquid telecom.

Mr Bemanya, a lawyer, said no to the planned audit. Both Attorney General Willy Byaruhanga and his deputy Mwesigwa Rukutana noted in back-to-back letters to the Finance ministry that the audit cannot under the law happen unless authorised by court.

“The Minister of Finance… has no locus to apply to court to remove the administrator and any such application is bound to fail. However, given the fact that among UTL’s creditors are different government parastatals, the minister may choose to request them to pursue this option only if there is evidence that the administrator is not complying with his duties under the Administration Deed, the Insolvency Act or any other orders or directions of court,” the AG wrote.

This was after minister Anite reached out to President Museveni, who had been personally involved in frantic efforts to revive UTL that faced liquidation following the abrupt exit of Libyan majority shareholders, and he ordered an audit.
The President on July 16 instructed Ms Anite to order the audit to confirm or dispute allegations he heard that there was wrongdoing at the telecom.

Investigations by this newspaper show that the Internal Auditor General in the Finance ministry, Dr Fixon Okony, began examining UTL’s books of accounts on July 25 and the audit is ongoing in spite of the objections raised by government most senior legal brains. Describing the ongoing squabbles at UTL as “sensitive”, the Uganda Law Society (ULS) president, Mr Simon Peter Kinobe, said:

“Any audit can only be done by sanction of a court order and not by written directives by shareholders. The aggrieved shareholder can file an application stating the reasons as to why audit should be done. In absence of this (court order), such audit should not happen.”
In an interview with this newspaper, Mr Kinobe said that for an audit to take place, a creditor has to file a notice of motion arising from the main suit by which the liquidator was appointed.

“When a company is put under receivership, the cardinal interest is for the creditors and not shareholders and receivers’ obligation to ensure that the debts and liabilities of the company are paid off before the same reverts to shareholders,” he argued.

Another lawyer, Mr Muzamiru Kibeedi, said the AG has to advise the President to recall his directive.
“It is the President to take remedial action...,” he said.

Both Finance minister Matia Kasaija and Ms Anite were unavailable to comment on the progress of the reported ongoing audit.

BACKGROUND

In May 2017, UTL went under Administration Deed and the government appointed Registrar General Bemanya as the provisional administrator. At the time, UTL’s debt portfolio stood at more than Shs700b. The Libyans, who held 69 per cent shares, had bolted out. Whereas one of Mr Bemanya’s responsibility was to scout for a suitable investor in UTL within six months, a buyer has been hard in coming after the Nigerian firm, Taleology Holdings GIB Ltd, which snapped up the company on first offer, failed to fulfil financial obligations for the acquisition.

[email protected]