High Court at Kabale Confirms Limited Remedies for Members of Companies Limited by Guarantee and Highlights Jurisdictional Challenges in Cross-Border NGO Collaborations

Introduction

This judgment deals with the removal of a minority member from a company limited by guarantee and underscores the importance of carefully reviewing incorporation and governance documents before entering into corporate partnerships.

The Court referenced Christopher Sales & Another v Attorney General, Civil Suit 91 of 2011, highlighting that enforcement of foreign judgments requires careful evaluation of the foreign legal system.

The Court upheld the removal of Lift Up Jesus Global Ministries from Hope for Uganda Ministries Ltd., illustrating the limited remedies available to minority members in non-share companies when majority decisions are made in accordance with constitutional and procedural requirements.

Statement of Facts and Procedural History

In 2014, Lift Up Jesus Global Ministries (“Plaintiff”), a church-funded NGO incorporated in Uganda, acquired land in Kisoro District to establish a church and launch the Batwa Transformation Program, a social initiative aimed at improving the lives of the indigenous Batwa community.

The Plaintiff, led by Bishop Aloysius Kiiza, partnered with Asociatia Misiunea (“1st Defendant”), a Romanian NGO, to organize church services, establish a missionary base, implement educational programs, and support vulnerable populations, including persons with disabilities.

The parties formalized their partnership through an MOU and agreed to establish a branch of the 1st Defendant in Uganda, named the Hope for Uganda Initiative. Under the MOU, the 2nd Defendant was appointed as a social worker, and the collaboration ultimately culminated in the creation of the 7th Defendant, a Ugandan NGO and company limited by guarantee.

The management of the 7th Defendant included directors from the 1st Defendant, and the parties jointly oversaw land acquisition and the construction of a church building at Rubuguri.

Procedural History

In 2014, LUJGM acquired land in Rubuguri, Kisoro district, establishing a church and launching the "Batwa Transformation Program" to assist the indigenous Batwa people. The plaintiff's founder, Bishop Aloysius Kiiza, partnered with the 1st defendant's leadership to organize church services, establish a missionary base, and improve conditions for the Batwa community.

The parties agreed to establish the "Hope for Uganda initiative" (the 7th defendant) to manage joint projects. The governance structure comprised:

Two corporate members: the Plaintiff and the 1st Defendant
Nine-member Executive Board: 5 representing the 1st Defendant, 4 representing the Plaintiff
Built-in deadlock-breaking provision giving the 1st Defendant an extra member

The Dispute

After years of collaboration, the relationship deteriorated. The plaintiff alleged the defendants:

Blocked plaintiff's representatives from participating in partnership activities
Excluded plaintiff from project involvement
Operated outside the terms of governing MOUs
Attempted to apply for land titles without authorization
Dissolved the partnership unilaterally
On May 18, 2019, voted out the plaintiff's four board representatives (Bishop Aloysius Kiiza, Baguma Nelson, Beth Byaruhanga, and Margaret Kiiza) in alleged contravention of the 7th defendant's constitution

ISSUES

The court framed two main issues for determination:

Whether the plaintiff was properly removed as a member of the 7th Defendant
What remedies are available to the parties

Preliminary Objections (Decided Against Defendants)

The defendants raised three preliminary objections, all of which failed:

The suit was not competently before the court
The plaintiff lacked locus standi to institute the suit
The plaintiff had no cause of action against the defendants

SUBMISSIONS

Plaintiff's Position

The plaintiff sought declarations and orders including:

Declaration that the May 18, 2019 resolution removing plaintiff's leadership was illegal and breached the 7th defendant's constitution
Order to rectify the register of members by reinstating plaintiff's four nominees
Permanent injunction restraining defendants from excluding plaintiff's nominees
General damages and costs

The plaintiff argued the removal violated natural justice and the constitutional procedures of the 7th defendant.

Defendants' Position

The defendants denied all allegations and contended:

The plaintiff was not a subscriber to the memorandum and articles of association, therefore not a proper member

The 7th defendant was an independent legal entity with no legal relation to plaintiff

The 1st defendant funded all projects and land purchases

The plaintiff converted land at Kitumba for its own benefit

The May 18, 2019 meeting was convened legally and all resolutions passed in accordance with the constitution

The plaintiff was removed after hindering the 7th defendant's objectives with unjustified claims

The plaintiff triggered the removal by attempting to fire the 2nd defendant in May 2019

The defendants cited Foss v Harbottle (1843) to argue that individual shareholders cannot sue for wrongs done to the company.

LEGAL REPRESENTATION

For Plaintiff:

M/S Mwesigwa and Rukutana Advocates (original counsel)
M/S Kongai & Co. Advocates (from November 27, 2025)
Ms. Katushabe Edrine (at judgment delivery)

For Defendants:

M/S Ortus Advocates
M/S Mark Mwesigye & Co. Advocates
Mr. Mark Mwesigye and Mr. Saddam Solomon (at judgment delivery)

COURT'S FINDINGS AND ANALYSIS

On Preliminary Objections

1. Whether Plaintiff Had Locus Standi

The court examined the Articles of Association and found:

"In Paragraph 2 of the Articles of Association, at page 127 of the plaintiff's trial bundle the members of the company are listed as: 1. Asociata Misiunea Speranta based in Cluj-Napoca City, Romania. 2. Lift Me Up Jesus."

The court concluded:

"Absent an amendment to the Articles of the Association, there are 2 members of the 7th defendant... The plaintiff absent any other objection is properly suited to commence the action. Accordingly, this preliminary objection fails."

The court distinguished between corporate members (plaintiff and 1st defendant) and board directors representing those members.

2. Whether Plaintiff Had a Cause of Action

Citing Auto Garage v Motokov [1971] EA 515, the court found:

"The 1st defendant is one of the 2 members of the 7th defendant company. 2nd-6th defendants are executive members of the board of the company... The right of the plaintiff to participate in the affairs of the defendant company has allegedly been controverted or suppressed by the actions of the defendants."

The preliminary objection failed, allowing the matter to proceed on merits.

On the Main Issues

Issue 1: Whether the Plaintiff Was Properly Removed

The court applied the principle of judicial restraint in corporate internal affairs:

"The general rule is that courts will refrain from inquiring into the internal affairs of the company, this allows companies to conduct their affairs without undue judicial interference. Courts will interfere where an internal stalemate exists or if a company or its members were not given an opportunity to be heard."

On the procedural validity of the removal, the court found:

"I further find that the full slate of authorised representatives of the two members of the company participated in the meeting. There was a duly convened meeting of the company where the 2 members were represented by the 9 members of the Executive Board. I find that the meeting of the company had a quorum to make the decisions affecting its membership. Both members were present."

Regarding the opportunity to be heard requirement in Section 2.8.5 of the Articles:

"If the directors representing the plaintiff had been excluded from the meeting, the court's finding would be different. I find no reason to impeach the removal of the plaintiff as a member of the 7th defendant company."

The court held that because the plaintiff's representatives attended the meeting, the opportunity to be heard requirement was satisfied, even though they were outvoted 5-4.

Issue 2: Available Remedies

The court noted limited statutory remedies under the Companies Act:

"Remedies under the Companies Act, are provided by Section 169(1)(b) of the Companies Act. This allows the registrar to appoint one or more competent inspectors to investigate the affairs of the company... This application requires a showing of good cause under Section 169(2) of the Companies Act."

The court observed potential alternative remedies not pleaded:

"Before taking leave of this case, I may add, there may be equitable remedies for the plaintiff. In a break-up, the correct cause of action may be account to compensate the plaintiff for the time and resources invested in the venture. However, this is a decision that plaintiff and counsel should have been made at the time of drafting the plaint and filing it in court."

HOLDING

The suit was dismissed.

The court found that the removal of the plaintiff as a member of the 7th defendant complied with the constitutional procedures outlined in the Articles of Association. The May 18, 2019 resolution was valid and enforceable.

Costs

Each party to bear its own costs, in the interest of promoting reconciliation between the parties pursuant to Section 27 of the Civil Procedure Act, Cap 282.

KEY TAKEAWAYS

1. Scrutinize Incorporation Documents Carefully

The court emphasized:

"This decision highlights the limited remedies oppressed minorities in non-stock companies have to challenge majority decisions. Subscribing members should scrutinize carefully the 'standard' incorporation documents to prevent the scenario here."

Members entering corporate partnerships must carefully review and negotiate Articles of Association, particularly voting structures, deadlock provisions, and removal procedures before incorporation.

2. Deadlock-Breaking Provisions Are Enforceable

The built-in provision giving the 1st defendant an extra board seat (5 vs. 4) proved decisive. Such structural advantages, once agreed to in constitutional documents, will be enforced by courts.

Minority members should negotiate protective provisions (e.g., supermajority requirements for key decisions, veto rights, or buy-out clauses) before incorporation.

3. Limited Judicial Intervention in Internal Company Affairs

Courts will only interfere in corporate governance on grounds of:

Illegality
Procedural impropriety
Denial of natural justice

The court applied the principle of restraint, refusing to examine the merits of intra-company allegations or the substantive fairness of the decision.

Courts will not rescue minority members from unfavorable governance structures they voluntarily accepted.

4. "Opportunity to Be Heard" May Not Mean "Effective Voice"

The court found the opportunity to be heard requirement satisfied because plaintiff's representatives attended the meeting, even though they were structurally outvoted. Mere presence at the meeting constituted sufficient procedural fairness.

Draft removal provisions to require specific procedural safeguards beyond mere attendance (e.g., independent review, notice periods, right to respond in writing, or neutral arbitration).

5. Plead All Relevant Causes of Action

The court noted the plaintiff could have sought an accounting for contributions made to the venture but failed to plead this relief:

"The rules of civil procedure require a relief sought to be spelled out in the plaint, and the basis to entitlement thereto established."

When relationships break down, consider all potential causes of action including breach of contract, unjust enrichment, accounting, partnership dissolution, and oppression remedies.

6. Limited Statutory Remedies for Non-Share Companies

Unlike shareholders in companies limited by shares, members of companies limited by guarantee have fewer statutory protections against oppression. The primary remedy is an application to the Registrar for inspection under Section 169 of the Companies Act.

Consider whether a company limited by guarantee is the appropriate vehicle, or whether a different structure (partnership, joint venture, or share company with minority protections) better protects interests.

7. Corporate Representatives Must Be Duly Authorized

The court confirmed that where a corporation is a member of another company, it must authorize representatives by resolution of its directors or governing body (Section 142, Companies Act).

Ensure proper corporate authorization for representatives and maintain records of such authorizations.

8. Classic Indicators of Minority Oppression

The court identified textbook signs of minority oppression:

Breakdown of trust between members
Exclusion from management
Majority entrenchment

However, these factors alone do not provide a remedy if the majority acts within constitutional bounds.

9. Long-Arm Jurisdiction Challenges

The court noted enforcement challenges with foreign defendants:

"This is a real legal issue of enforcement of remedies over non-domiciled persons; as Uganda does not have a long arm jurisdiction law."

When entering partnerships with foreign entities, consider jurisdiction clauses, arbitration agreements, and security for performance.

10. Alternative Dispute Resolution Should Be Considered

The court's cost order reflected a desire for reconciliation. Early mediation or arbitration might have preserved the relationship and investment.

Include robust dispute resolution clauses (mediation, arbitration) in partnership agreements and constitutional documents.

CONCLUSION

This judgment emphasises that once constitutional procedures are validly established, courts will enforce them even if the outcome appears harsh to the minority. The decision clarifies that corporate governance protections must be negotiated and embedded in constitutional documents at inception, as courts will not rewrite unfavorable bargains or intervene in internal company affairs absent illegality or procedural unfairness.

Organizations entering joint ventures should invest significant time and legal resources in drafting comprehensive governance documents that anticipate potential disputes and provide meaningful protections for all parties, including exit mechanisms, valuation procedures, and dispute resolution provisions.

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