High Court Says It May Order the Convening of a Company Meeting Where It Is Impracticable to Hold One Under the Articles or the Companies Act

Facts

Sedawa Limited was incorporated in 1978 by the late Dr. Samson Babi Mululu Kisekka and others. Over the decades, the company fell into a state of "corporate paralysis" due to the following:

1. All original directors and members had passed away, except for one surviving member who declined to participate in company affairs.

2. The Company’s Articles of Association required a mandatory quorum of at least four (4) members for a general meeting, a threshold impossible to meet legally.

3. The company had never filed annual returns since 1978. The Uganda Registration Services Bureau (URSB) recently reinstated the company on the strict condition that it updates its data within seven days, failing which it faced deregistration and loss of assets (specifically land in Mityana).

4. The children and personal representatives of the founding member applied to the court to convene a meeting to appoint new directors and regularize the company’s status.

Issues for Determination

The Court framed the following issues:

1. Whether the Applicants were entitled to an order to convene a company meeting under Section 138(1) of the Companies Act;

2. What remedies were available to the parties.

   
   

Submissions

The Applicants submitted that:

It was impracticable and legally impossible to convene a meeting in accordance with the Articles of Association;

They possessed locus standi as personal representatives and beneficiaries of the founding member;

Judicial intervention was necessary to prevent corporate paralysis, non-compliance with the law, and potential asset dissipation.

The application was ex parte, grounded on statutory provisions, constitutional jurisdiction, and the inherent powers of court.

Legal Representation

1. Applicants: Represented by Mr. Luwagga Altan

2. Respondent: None (ex parte application)

Court’s Findings

(a) Jurisdiction under Section 138 of the Companies Act

The Court held that Section 138 of the Companies Act empowers the court to intervene where it is impracticable to convene or conduct a company meeting in accordance with the Act or the Articles.

Justice Acellam observed:

“This provision gives Court jurisdiction to make orders or directions to overcome difficulties faced by a company in holding a meeting, so that its affairs can be conducted where they might otherwise be stymied.”

Relying on In Re Eastern Province Bus Company (1966) EA 492, the Court emphasized that:

“The court’s jurisdiction is properly exercised not when holding a meeting is merely inconvenient, but when it is impossible to call or conduct the meeting according to the letter of the law or the Articles of Association.”

The Court found that the inability to meet quorum requirements due to the death of members constituted practical impossibility, thereby satisfying the statutory threshold.

(b) Meaning of “Impracticable”

The Court clarified that “impracticable” refers to situations where compliance is practically impossible, not merely difficult:

“The meaning of ‘impracticable’ in this context refers to situations where it is practically impossible to comply with the Articles or the Act.”

(c) Locus Standi of the Applicants

The Court affirmed that the Applicants had standing under both the Companies Act and the Articles of Association:

“Section 138 grants standing to any member of the company who would be entitled to vote. Under Article 56(b) of the Articles of Association, a personal representative of a deceased member is expressly entitled to be notified, attend, and vote at company meetings.”

(d) Inherent and Equitable Jurisdiction

The Court invoked its constitutional and inherent jurisdiction, stating:

“This Court’s jurisdiction flows from its constitutional mandate and inherent equitable powers.”

Citing Karoli Mubiru & 20 Others v Edith Namirimu & Another, the Court reiterated that inherent powers may be exercised to prevent injustice or abuse of process.

(e) Risk to Corporate Existence and Assets

The Court underscored the urgency of intervention:

“Given the imminent risk that SEDAWA Limited has no directors, faces potential deregistration, and holds valuable land… the Court has a duty as a fountain of justice to intervene.”

Holding

The High Court found that the Applicants had fully satisfied the requirements under Section 138(1) of the Companies Act and exercised its equitable discretion in their favour.

The application was granted in its entirety.

Orders

The Court ordered that:

1. The Applicants are authorized to convene an Extraordinary General Meeting of SEDAWA Limited;

2. Notice of the meeting shall be advertised in a newspaper of wide circulation at least 27 days prior to the meeting;

3. The meeting shall transact business including:

   1. Appointment of new directors;

   2. Regularization of the Company’s affairs;

   3. Filing of outstanding annual returns;

4. Costs of the application shall be borne by the Company.

Key Takeaways

1. Impracticability Standard: Courts will intervene under Section 138 of the Companies Act when it is practically impossible, not merely inconvenient, to convene a company meeting according to the Articles or the Act. Death of members rendering quorum unattainable constitutes impracticability.

2. Standing of Personal Representatives: Personal representatives and heirs of deceased members have locus standi to apply for court orders to convene meetings, particularly where the company's Articles expressly grant them voting rights.

3. Reasonable Notification Efforts: Applicants must demonstrate reasonable efforts to trace and notify potential stakeholders. Publication in newspapers of wide circulation satisfies this requirement.

4. Court's Protective Jurisdiction: The High Court will exercise its inherent equitable powers to protect company assets and prevent corporate collapse, particularly where there is risk of deregistration or asset stripping.

5. Extended Notice Period: Courts may order extended notice periods (21 days or more) for Extraordinary General Meetings to ensure maximum participation by unknown or hard-to-trace stakeholders.

6. Corporate Compliance Urgency: Non-compliance with statutory filing requirements (such as Annual Returns) can create urgency justifying judicial intervention to enable companies to regularize their affairs.

7. Company Bears Costs: In ex parte applications for corporate rescue, costs are appropriately borne by the company rather than individual applicants, recognizing that the intervention benefits the corporate entity.

8. Appointment of Directors: Courts can authorize meetings specifically to appoint new directors under Section 141 of the Companies Act to enable proper management of dormant or director-less companies.

Conclusion

This decision guides dormant or legacy companies facing governance deadlock due to deceased membership. It reaffirms the High Court’s role as a custodian of corporate continuity and equitable justice.

Read the full decision below

In the matter of Sedawa Limited 2025 UGHCCD 170 (8 October 2025).pdf

Download PDF • 1.57MB