Company annual returns
When a company is formed, it has obligations imposed on it among which includes updating its file at the company registry (URSB), with the changes that have taken place in the company during the year. This statutory obligation is what is known as Filing of company annual returns. Annual return means the return or a yearly statement required to be filed to the Registrar of companies which highlights the information about the company’s various aspects pertaining to its composition, activities, and financial position.
According to section 132 of the Companies Act 2012 (‘the Act’), company which has a share capital must file annual returns with the registrar, at least once in every year stating information such as, the registered office of the company; members and debenture holders; shares and debentures; indebtedness of the company; past and present members; directors and secretary; if the register of members or debenture holders is kept elsewhere than the registered office of the company, the address of the place where it is kept.
Section 133 of the Act requires a company which has no share capital to file annual returns with registrar, at least once in every calendar year, stating information such as; the registered office of the company; if the register of members, or of debenture holders, or any duplicate of any such register, is kept elsewhere than the registered office of the company, the address of where it is kept; particulars of the directors and the secretary; and to what extent the company has complied with the principles of corporate governance.
Annual returns must be completed within 42 days after the annual general meeting for the year.
Non compliance of a company with the above requirements attracts a penalty of UGX500, 000 on both the company and every officer in default.
Only a dormant company may be exempted from filing annual returns for a grace period of 12 months. However, the directors must have notified the registrar within 15 working days from the date of the resolution for dormancy.
Striking-off a company from the register
This is a form of enforcement mechanism used by the Registrar of Companies to compel entities to comply with statutory obligations. If the company is carrying on business for five years without updating its file as discussed above, the registrar is entitled to assume that the company does not exist. However, beyond this assumption, the law prescribes that the registrar notifies the company to file a statement of solvency and notice to show cause why the company should be maintained on the register. Under Section 134(5) and (6), if the company does not respond to the notice or show cause why it should not be struck off the register, the registrar is brought to the conclusion that the company merely exists on paper but is not in operation and therefore issues a notice of striking the company off the register in the gazette and newspaper of wide circulation.
What next for a company struck off the register for non-compliance?
Striking off a company in effect places a temporary hold on a company to transact until certain conditions are met or until an inconsistency is resolved. Striking off a company as distinguished from dissolution merely puts a company on a suspense register for a specified period of time in order to enable it comply. If a company that has been struck off has a running license, the license also ceases to exist.
Whereas there is a bit of a grey area regarding legal provision on the procedure of restoration of a company that has been struck off the register, the Registrar of companies has powers to amend the register.
Therefore, a company that has been struck off for non compliance may be restored after complying with filing annual returns. A company or creditors of the company may apply to have the company restored or reinstated on the register. The application has to be made within a reasonable time, generally within 6 months from the date of striking off.
If the company still fails to comply within 12 months upon being struck off, it is exposed to de-registration.
The process of striking off a company for non compliance with filing annual returns serves as a critical mechanism to uphold the integrity of the corporate landscape. The enforcement of timely and accurate submission of annual returns is not merely a formality; rather, it safeguards transparency, accountability and economic stability. The repercussions of non compliance extend beyond the confines of the company itself. Stakeholders and creditors rely on up-to-date information to make informed decisions about the company.