A Shareholder who owns 90% of the shares is legally entitled to management control, absent illegality or fraud. High Court Rules

High Court Orders Handover of Company Management to Majority Shareholder

FACTS

The applicant, Crooze FM SMC Limited, the 1st respondent, Bakashaba Christopher, and the 2nd respondent, Atuhaire Carolyne, are shareholders in Radio 5 FM Limited. Before September 2024, the shareholding structure consisted of Bakashaba Christopher holding 97 shares and Atuhaire Carolyne holding 3 shares.

On 19 September 2024, the applicant entered into a sale and transfer of shares agreement with the respondents, pursuant to which the applicant purchased 90 shares from Bakashaba Christopher.

Following this transaction, the shareholding structure changed to Crooze FM SMC Limited – 90 shares (90%), Bakashaba Christopher – 7 shares (7%), Atuhaire Carolyne – 3 shares (3%), Clause 2.2 of the sale and transfer agreement expressly provided that the applicant, as the majority shareholder, would have control of the company and management of all its affairs. Clauses 2.4.15 and 2.4.18 further stipulated that the applicant would exercise the majority share principle and that the respondents would have no say in the day-to-day running of the business.

The respondents initially refused to transfer the shares. The applicant was compelled to file Miscellaneous Cause No. 7 of 2025 for enforcement of the agreement. On 31 March 2025, Hon. Justice Emmanuel Baguma ordered the Registrar of Companies to effect the transfer of 90 shares to the applicant.

Despite the change in shareholding structure, the respondents refused to hand over management and control of Radio 5 FM Limited to the applicant as required by both the agreement and applicable law. The applicant therefore filed the present application seeking orders compelling the respondents to Hand over management of Radio 5 FM Limited, and Account for income earned from 20 September 2024 to date.

ISSUES FOR DETERMINATION

The Court identified two main issues for determination:

1. Whether the applicant is entitled to an order against the respondents to hand over management of Radio 5 FM Limited.

2. Whether the applicant is entitled to an order against the respondents to account for income earned by Radio 5 FM Limited from 20 September 2024 to date.

PARTIES' SUBMISSIONS

Applicant's Position

The applicant, represented by Mr. Ogomba Issa, submitted that it was entitled to management control by virtue of the express contractual provisions in the sale and transfer agreement (Clauses 2.2, 2.4.15, and 2.4.18); and

The shareholder majority principle under company law, as the holder of 90% of the shares.

Respondents' Position

The respondents, represented by Mr. Bainomugisha Charles, denied any wrongdoing and raised eight preliminary objections, including, Lack of jurisdiction; Non-joinder of Radio 5 FM Limited as a necessary party; The application being a disguised execution application; Defects in the notice of motion; and The matter involving contentious issues of fraud and forgery unsuitable for determination by affidavit evidence.

On the merits, the respondents alleged that the applicant had temporarily taken over management for three months and misappropriated UGX 104,507,000, leading to the company's collapse. They provided management accounts for the period 2 October 2024 to 6 January 2025 in support of their allegations.

LEGAL REPRESENTATION

1. For the Applicant: Mr. Ogomba Issa

2. For the Respondents: Mr. Bainomugisha Charles

COURT'S FINDINGS AND REASONING

Preliminary Objections

The Court overruled all eight preliminary objections raised by the respondents. Justice Namanya held that under Section 14(1) of the Judicature Act (Cap. 16), the High Court has unlimited original jurisdiction in all matters. The pleadings relate to contractual obligations in the sale and transfer of shares agreement, a matter properly within the Court's jurisdiction. Under Section 37 of the Judicature Act, the High Court is vested with power to grant remedies to completely and finally determine matters in controversy and avoid multiplicity of proceedings. The Court is charged with addressing the substance of disputes, not dwelling on technicalities, per Article 126(2)(e) of the Constitution. The preliminary objections did not go to the root of the dispute.

"This court is charged with addressing the substance of disputes brought before it and not to dwell so much on technicalities."

Issue 1: Right to Management Control

The Court decided this issue in favor of the applicant, based on two independent grounds:

1. Contractual Entitlement

The Court held that Clause 2.2 of the sale and transfer agreement expressly binds the respondents to hand over management to the applicant. Clauses 2.4.15 and 2.4.18 further provide that the applicant shall take over management, exercise the majority share principle, and that the respondents shall have no say in day-to-day operations.

2. The Shareholder Majority Principle

The Court reaffirmed the established principle of company law that decisions are taken by a majority of members in a general meeting, and courts will not usually intervene. This principle, known as the rule in Foss v. Harbottle (1843) 2 Hare 461, 67 ER 189, has been adopted in Uganda.

Justice Namanya cited the Supreme Court decision in Salim Jamal & 2 others v. Uganda Oxygen Limited & Anor, Uganda Supreme Court Civil Appeal No. 64 of 1995, and noted that while exceptions exist to protect minority shareholders from abuse (such as in cases of ultra vires acts or fraud), these exceptions were not applicable in the present case.

The Court observed that the Companies Act Cap. 106 recognizes the shareholder majority principle in several provisions such as Section 136(4)(b): A meeting may be called by a majority in number of members; Section 144(1): A special resolution requires a three-fourths majority; Section 230(2): Compromises require agreement by three-fourths in value.

"Having regard to the rule in Foss v. Harbottle (supra), the applicant who holds 90% of the shareholding of Radio 5 FM Limited is entitled to control the management of the company."

Issue 2: Accounting for Income

The Court decided this issue against the applicant. The respondents had alleged misappropriation of UGX 104,507,000 and provided management accounts. The applicant denied the allegations and challenged the respondents to file a suit for misappropriation if they had a case.

Justice Namanya held that where there is a contentious dispute between parties involving allegations of fraud and misappropriation, the claimant should commence an ordinary suit to allow the Court to conduct a full investigation through oral and documentary evidence. The Court cannot properly investigate such serious matters through affidavit evidence alone.

The Court cited Enock Onzoma v. Premotors Limited (Miscellaneous Cause No. 76 of 2025) [2025] UGCommC 385 for the principle that affidavit evidence is not suitable for investigating matters of fraud and forgery.

"Case law is to the effect that where there is a contentious dispute between the parties, the claimant should commence an ordinary suit so that the court can conduct a full investigation of the dispute (by considering oral and documentary evidence) before arriving at a final decision. Affidavit evidence is not suitable in investigating matters of fraud and forgery."

HOLDING

The Court partially allowed the application and made the following orders:

1. The respondents (Bakashaba Christopher and Atuhaire Carolyne) shall hand over management of Radio 5 FM Limited to the applicant (Crooze FM SMC Limited).

2. Each party shall bear its own costs.

The Court denied the applicant's request for an order compelling the respondents to account for income earned from 20 September 2024 to date, holding that such contentious allegations of misappropriation should be properly determined through an ordinary suit with full oral and documentary evidence.

Read the full case

Crooze FM SMC Limited v Bakashaba Christopher and Another 2026 UGHCCD 29 (6 February 2026).

Download • 1.08MB

KEY TAKEAWAYS

1. The Shareholder Majority Principle Prevails

A shareholder holding 90% of a company's shares is entitled to exercise management control by virtue of the majority principle, unless exceptions apply (such as ultra vires acts or fraud on the minority).

2. Contractual Provisions in Share Transfer Agreements Are Enforceable

When parties enter into a share sale and transfer agreement that expressly provides for management control to vest in the purchaser, courts will enforce those contractual terms. Clauses specifying management rights and restricting minority shareholders from day-to-day involvement are valid and binding.

3. Substance Over Technicalities

The High Court confirmed its constitutional mandate under Article 126(2)(e) to address the substance of disputes rather than being detained by procedural technicalities. Preliminary objections that do not go to the root of the dispute will be overruled. This approach ensures access to justice and prevents parties from using technicalities to frustrate legitimate claims.

4. High Court's Broad Jurisdiction in Commercial Disputes

The High Court has unlimited original jurisdiction in all matters under Section 14(1) of the Judicature Act. Disputes arising from share transfer agreements and contractual obligations between shareholders fall squarely within this jurisdiction. Section 37 of the Judicature Act empowers the Court to grant comprehensive remedies to finally determine all matters in controversy and avoid multiplicity of proceedings.

5. Fraud and Misappropriation Require Ordinary Suits

Contentious allegations involving fraud, forgery, or misappropriation of funds cannot be adequately determined through miscellaneous applications based solely on affidavit evidence. Such matters require full investigation through ordinary suits where the court can consider oral testimony and cross-examination alongside documentary evidence. This ensures procedural fairness and proper fact-finding in serious allegations.

6. Companies Act Statutory Framework

The judgment reinforces that the Companies Act Cap. 106 codifies the majority principle through various provisions requiring different majority thresholds for different corporate actions. This statutory framework, combined with common law principles from Foss v. Harbottle, provides a robust legal foundation for majority shareholder rights in Uganda.

Drafted by

Yvette Catrina

LLB 4

President, IUIU Law Society

DISCLAIMER

This legal alert is provided for informational purposes only and does not constitute legal advice. Readers should consult with qualified legal counsel for advice on specific legal matters. The analysis presented herein is based on the judgment as delivered and may be subject to appeal or further interpretation.