The International Journal
of Not-for-Profit Law
Volume 12, Issue 2, February 2010
I. PROVISION OF THE GENERAL LAWS
Uganda’s legal system is based on English Common Law and African Customary Law. Customary law governs to the extent it does not contradict with the statutory laws, although the 1995 Constitution is the supreme law of the land. The laws applicable in Uganda include common law, statutory law, doctrines of equity and customary law.
Uganda does not have a federal system, but instead is a unitary state.
The laws of Uganda are generally accessible via government printers, government agencies (Uganda Law Reform commission) and internet.
Relevant laws include the following:
- Constitution of the Republic of Uganda, 1995
- Constitutional Amendment Act, 2006
- Nongovernmental Organizations Registration Act, Chapter 113 (1989)
- NGO Registration Amendment Act 2006
- The Non Governmental Organisations Registration Regulations, 2009.
- The Companies Act, Chapter 110 (1961)
- The Trustees Incorporation Act, Chapter 165 (1939)
- Income Tax Act, Chapter 340 (1997)
- The Value Added Tax (Amendment) Act (2005)
- East African Community Customs Management (EACC) Act (2004)
General Constitutional Framework:
The Constitution of the Republic of Uganda, 1995, provides under Article 29 (e), the right to ‘freedom of association which shall include the freedom to form and join associations or unions, including trade unions and political and other civic organizations’. Under Principle2 II (vi) (democratic principles of state policy) it is provided that Civic Organizations shall retain their autonomy in pursuit of their declared objectives.
Article 29 (a) of the Constitution provides for freedom of speech and expression where it stipulates that ‘every person shall have the right to freedom of speech and expression, which shall include freedom of the press and other media.
Article 29 (d) of the Constitution also provides for freedom of assembly stating that, ‘every person shall have the right to freedom to assemble and demonstrate together with others peacefully and unarmed and to petition.
In Article 29 (e), the Constitution states that every person shall have the right to freedom of association and that this right shall include ‘the freedom to form and join associations or unions, including trade unions and political and other civic organizations’.
Directive principle V (ii) states that “The state shall guarantee and respect the independence of nongovernmental organizations which protect and promote human rights.”
Although the directive principle is limited to human rights organizations, when read together with Article 29 (e) and objective V (i) which provides that ‘the state shall guarantee and respect institutions which are charged by the state with responsibility for protecting and promoting human rights by providing them with adequate resources to function effectively’, it can be argued that it encompasses all nongovernmental organisations ejus dem generic. This is indeed a major positive step towards promotion and independence of NGOs.
More generally, the Constitution provides for both the people and civic associations to be involved not merely in executing development plans and policies but also in helping to formulate policy, suggesting that the role of NGOs needs explicitly to embrace and acknowledge involvement in policy debate. This is stipulated in Article 38 (2): ‘every Ugandan has a right to participate in peaceful activities to influence policies of government through civic organizations’. And in Article 50 (2), it is provided that any person can bring an action against the violation of another person’s or groups human rights.
The Constitution provides for the general limitations on the fundamental and other human rights and freedoms.
Article 43 (1) states that ‘in the enjoyment of the rights and freedoms prescribed in this Chapter, no person shall prejudice the fundamental or other human rights and freedoms of others or the public interest’.
Article 43 (2) defines ‘public interest not to permit: political persecution, detention without trial and any limitation of the enjoyment of the rights and freedoms beyond what is acceptable and demonstrably justifiable in a free and democratic society, or what is provided in the Constitution’.
Nonetheless, the Constitution provides for equity and freedom from discrimination; Article 21 (1) states that, ‘all persons are equal before and under the law in all spheres of political, economic, social and cultural life and in every other respect and shall enjoy equal protection of the law’. In addition, Article 21 (2) defines grounds for non-discrimination to include; sex, race, color, ethnic origin, tribe, birth, creed or religion, or social or economic standing, political opinion or disability.
Types of Organizations:
Ugandan law makes provision for the establishment of a variety of civil society organizations. The CSOs that can be formed include:
- Nongovernmental Organisations (NGOs)
NGOs are governed by the NGO Registration Act of 1989 which was amended by the NGO Registration Amendment Act 20063. The NGO Registration Act 1989 defines an “organization” as “a nongovernmental organization established to provide voluntary services, including religious, education, literary, scientific, social or charitable services, to the community or any part of it.” (NGO Registration Act, section 1(d)). Examples of NGOs include umbrella NGOs, Intermediary organizations, Specialist organizations, and local, national and international NGOs.
- Trusts and Foundations
Trusts are covered by the Trustees Act, Cap. 164, 1954 and the Trustees Incorporation Act. Cap. 165, 1939. Foundations can be registered either under the Trustee’s Incorporation Act or as companies limited by guarantee under the Companies Act, Cap. 110, 1961. Trusts and Foundations are established to provide grants and in some cases loan financing at a more affordable rate to NGOs, CBOs and private organizations in support of their goals and objectives.
- Community Based Organizations (CBOs)
CBOs are predominantly self-help oriented, with the principle aim of improving individual or household welfare, although a few groups take a wider, community development role. They are defined by their relatively small size (usually involving 10-20 households) and limited geographic area, and are generally formed along communal work lines, e.g. forming groups to work collectively on members’ farms or to support funeral ceremony preparations. CBOs with larger, community development roles are supported and sometimes initiated by organizations outside the community. CBOs are registered through notification of area Local Councils (LC 1 and LC 3) for official recognition or with the District administration (section 7 (e) (2) of the NGO Registration Amendment Act.
Companies are regulated and registered under the Companies Act, Cap. 110, 1961. Although many companies are considered part of the private sector/market sector, some have been established with both a humanitarian support motive mainly company limited by guarantee (providing access to more affordable credit for those normally excluded from the formal banking system) and a profit motive (ensuring sustainability of the bank without external funding support).
II. ESTABLISHMENT, REGISTRATION
Generally CSOs can be established for both public benefit and the benefit of the organization’s members. The NGO Registration Act of 1989 defines an “organization” as “a nongovernmental organization established to provide voluntary services, including religious, education, literary, scientific, social or charitable services, to the community or any part of it.” The NGO Registration Amendment Act 2006 (section 7) defines a community based organization as a nongovernmental organization operating at a sub-county level and below, whose objective is to promote and advance the well-being of its members.
The law has restrictions on purposes or activities of CSOs. Regulation 13 of NGO Registration Regulation, 2009 provides that an organization must in carrying out its operations comply with the following:
- Shall not make any direct contact with the people in its area of operation in Uganda unless it has given seven days’ notice in writing of its intention to the local councils and Resident District Commissioners of the area5;
- Cooperate with the local councils and the relevant district committees in the area; [article 26 (j) of the Local Government Act, Cap. 243, 1997];
- Should not ‘engage in any act which is prejudicial to the national interest of
- Uganda’. The law further prohibits the registration of the organization whose objectives are in contravention of the law;
- An organization must also restrict its operations to the area of Uganda in respect of which it is registered to carry out its operations;
- Hold itself responsible for all acts of its members and employees and;
- Obtain the approval of the Board for any goods for which it seeks exemptions.
Regulation 15 of the NGO Registration Regulations, 2009 prohibits an organization or member or employee from using the name of the organization directly or indirectly to engage in any gainful activities for the economic interest of the organization or of its members or employees.
Registration as Voluntary vs. Mandatory Requirement:
The law does not permit individuals to act collectively through unregistered groups or organizations (Section 2 (1) of the NGO Registration Act 1989, Section 4 of the NGO Registration Amendment Act 2006, Regulation 3 of the NGO Registration Regulations 2009).
Regulation 18 of NGO Registration Regulations, 2009 specifies that CBOs are not mandatorily required to be incorporated under the Act but are required to register with the district local government of the area where they operate. This requirement is mandatory and upon registration of a CBO, the district local government is supposed to issue a certificate of registration authorizing the CBO to operate.
There are penalties for carrying out activities through unregistered organizations (section 4 of the NGO Registration Act 1989, Section 4 (b) of the NGO Registration Amendment Act 2006, Regulation 8 (3) of the NGO Registration Regulations 2009).
Registration or Incorporation Requirements:
NGOs: Every citizen of Uganda has a right to form an NGO (Article 29 (e) of the 1995 Constitution of Uganda). At the time of registration, no minimum number of founders, or minimum capital or assets is required. Regulation 4 of the NGO Registration Regulations 2009 requires NGOs to register with the NGO Board with an application in Form A as specified in the Schedule of the Regulations. Applications must be accompanied by specification of the area of intended operation, organizational chart, two copies of the organization’s constitution, valid reservation of its name by the Registrar of Companies, a work plan and budget for one year, recommendations by two sureties and the Chairperson of the Local Government Executive committee of the sub-county council and the Resident District Commissioner (Regulation 5 of the NGO Registration Regulations 2009). And in case of a foreign organization, a recommendation is required from the diplomatic mission in Uganda of the country from which the organization originates.
NGOs are required to pay registration fees; UShs.20, 000 for Ugandan organization, USD 100 for a foreign organization (Regulation 10 (1) of the NGO Registration Regulations 2009). NGOs are also required to pay the same fee upon application for a permit or for renewal of a permit (Regulation 10 (2) of the NGO Registration Regulations 2009). There is no fixed time period within which the NGO Board must review and decide upon registration.
A certificate of registration and incorporation shall be issued by the Board in Form B in the Schedule of the NGO Registration Regulations 2009 (Regulation 6 of 2009 Regulations). In addition to the issuing a certificate of registration and incorporation, the Board shall issue a permit to the organization in Form C in the Schedule of NGO Registration Regulation 2009. The permit shall be issued in the 1st instance for a period of 12 months from the date of issue of the permit (Regulation 7 of the NGO Registration Regulations 2009).
The NGO Board can deny registration of an organization by notifying its decision to the organization in Form F as specified in the Schedule to the NGO Regulations 2009, within 21 days (Regulation 9 (1) of the NGO Regulations 2009). However, the law does not provide for categorical reasons on which an application can be denied, thus it is upon the discretion of the Board to accept or reject an application made by an organization. NGOs may appeal within one month of date of notification to the Minister. Also under article 42 of the 1995 Constitution, an aggrieved organization may appeal to High Court if not satisfied with the decision of the Minister.
The NGO Board has a registry for all CSOs and it is generally considered up to date since they are supposed to append any CSO which has fulfilled the requirements of registration. Currently the NGO Board’s website is not functional, thus the registry is not accessible on the Internet by the public. However, the public can access the registry from the offices of the NGO Board located within the Ministry of Internal Affairs.
CBOs: In practice, CBOs are formed by community members or organizations outside the community with a minimum number of 10 initial members. Regulation 18 of the NGO Registration Regulations 2009 requires CBOs to register with the district local government with an application Form A as specified in the Schedule of the Regulations. At the time of registration, CBOs are required to pay registration fees of UShs. 20,000 (Regulation 18 (4) of the NGO Registration Regulations 2009). Upon registration, the district local government shall issue a certificate of registration specifying the area of operation of the organization and the activities the organization is authorized to operate (Regulation 18 (3) of the NGO Registration Regulations 2009).
There is no fixed time period within which the district local government must review the application made by the CBO and decide upon registration. The district local government may deny registration of a CBO if it does not satisfy the requirements for registration. However, the law does not provide reasons for the denial of registration for CBOs.
The NGO Registration Regulations, 2009, Regulation 2 states that a foreign NGO is one which is not a local organization. This includes an affiliate of a foreign or International Organization with offices in Uganda. Regulation 10 of the NGO Registration Regulations 2009 set outs prescribed registration fees for a foreign organization of 100$ (one hundred United States dollars) or its equivalent is payable. The same fee is payable upon application for a permit or for renewal of a permit.
Generally all legislation, including the NGO Registration Act 1989, the NGO Registration Amendment Act 2006 and the NGO Registration Regulations 2009, are silent on procedures and requirements for registration or incorporation of foreign CSOs in Uganda.
III. SUPERVISION AND ENFORCEMENT
- National Board of NGOs – key agency which has regulatory authority over NGOs in Uganda (Section 2 and 2 (3) of the NGO Registration Act, Cap. 113, 1989).
- District local governments – regulate and register the Community Based Organizations (CBOs).
- Ministry of Internal Affairs – has regulatory authority over Trusts under Trustees Incorporation Act, Cap 165, 1939.
- Companies Registry – regulates and registers Companies under the Companies Act, Cap. 110, 1961.
Regulation 14 of the NGO Registration Regulations 2009 provides that an organization shall comply with certain staffing regulations. Thus it is a requirement for every organization to submit to the NGO Board a chart showing its structure and staffing, particularly specifying: foreign workforce requirements; requirements of the Ugandan counterparts of foreign employees; planned period to replace foreign employees with qualified Ugandans and must comply with the labor laws of Uganda.
There are no express legal requirements for governing bodies and officers. The law also does not impose constraints relating to self-governance of CSOs.
Regulation 16 of the NGO Registration Regulations 2009 requires NGOs to submit to the NGO Board each year returns in Form C as specified in the Schedule to the NGO Regulation, furnish to the district development committee of each area and submit to the Board or any other authority information the Board may from time to time consider to be in public interest. However in practice most organizations rarely comply with this regulation and the Board currently has few staff to follow up on this requirement.6 As a practice most CSOs produce annual reports which they disseminate to partners, members and the general public.
Section 390 of the Companies Act Cap 110 also require companies every year to make and file with the registrar of companies a statement in the form set out in the 9th Schedule of the said Act.
State Enforcement and Sanctions:
There are sanctions available for violations particular to CSOs. Where an organization contravenes any provision of the NGO Registration Amendment Act 2006, operates contrary to the conditions or directions specified in its permit, or carries out any activity without a valid permit or certificate of incorporation, the organization commits an offence and is liable on conviction to a fine not exceeding twenty five currency points (Section 4 (e) of the said Act).
Regulation 8 (3) of the NGO Registration Regulations 2009 states that, an organization which fails to submit its application within the period specified in sub regulation (1) shall be required to pay a fine of one currency point for every month of default.
Section 390 (4) of the Companies Act Cap.110 provides that if default is made in complying with section 390 of the said Act, the company and every officer of the company who is in default are liable to a default fine.
Dissolution, Winding Up and Liquidation of Assets:
Voluntary dissolution process can ordinarily be initiated by the CSO itself. Upon application for registration, NGOs are required under the law to submit a prescribed form accompanied by an authenticated constitution by the subscribers of the organization. Every constitution must have a dissolution clause. Thus the manner in which an organization is voluntarily dissolved is laid out in its constitution. It is general practice however, for voluntary dissolution to be carried out by a resolution at the annual general meeting through a ¾ majority vote by the members of the organization. The members must be given written notice 30 days in advance specifying the proposal to dissolve.
Involuntary dissolution may occur where an organization’s certificate is revoked by the NGO Board due to any of the following:
- The organization fails to operate in accordance with its constitution;
- The organization contravenes any of the conditions or directions inserted in its certificate or;
- If in the opinion of the board it is in public interest to do so (Section 10 of the NGO Registration Act 1989).
In addition, Regulation 17 (3) of the NGO Registration Regulations 2009 provides that, an organization may also be dissolved by order of the Board if:
- the Board has reason to believe that a registered organization has not commenced its activities within twelve months from the time of its registration;
- it is proved to be defrauding the public or its members or both;
- it has violated the terms and conditions attached to its permit;
- it has operated in contravention of the provisions of the Act;
- for any other reason the Board considers necessary in the public interest.
Once the certificate of incorporation is revoked, the Board issues a notice of revocation in Form G as specified in the Schedule of the NGO Registration Regulations 2009 to the organization concerned (Regulations 11 and 17 (7) of the said Regulations). And before a decision is made by the Board to dissolve an organization, Regulation 17 (4) of the NGO Registration Regulations 2009 requires the Board to give a thirty days notice to the organization to appear before it and show cause why it should not be dissolved. Where an organization fails to satisfy the Board in its defence as to the need for its continued existence or fails to appear, the Board shall proceed to dissolve it.
Regulation 17 (7) (b) of the NGO Registration Regulations 2009 provides that; upon dissolution of an organization by the Board, the Board shall cause the assets and liabilities of the organization to be dealt with in accordance with the relevant provisions of its constitution.
There is no administrative provision for appeal in the general law regulating NGOs however; an aggrieved person may invoke through the provision of article 42 of the 1995 Constitution which guarantees the right to be treated fairly and justly and the right to apply to a court of law in respect of any administrative decision taken against a person. Also Article 28 provides for the right to fair and speedy hearing before an impartial and independent court or tribunal. Thus one can apply to court to appeal the decision of the Board.
IV. CSO ACTIVITIES
Generally CSOs are not forbidden from exercising general rights and powers of juridical entities. However, regulation 13 of NGO Registration Regulations limits the nature of activities an NGO can engage in, as stated earlier.
Expressive / Advocacy / Public Policy Activities:
CSOs in Uganda are not prohibited to criticize the government and advocate for human rights and democracy. Article 29 of the 1995 Constitution of Uganda guarantees every person the right to freedom of speech and expression which is relied on by CSOs that wish to involve themselves in the legislative process or government affairs. Even though there are no express legal restrictions on CSOs’ engagement in advocacy activities, the government usually intimidates CSOs that seek to promote human rights and democracy.
CSOs in Uganda are allowed to participate in peaceful activities to influence the policies of government (Article 38 (2) of the 1995 Constitution of Uganda). And although there are no set rules governing the engagement of CSOs in legislative making, CSOs as a practice do engage in legislative activities. For instance, once a bill is tabled in Parliament the views of various stakeholders are sought including CSOs through, consultative meetings, workshops and invitations of representatives of different factions of society likely to be affected by the legislation.
However CSOs under the law are not allowed to engage in political activities or belong to any political group because they are generally non partisan. As such they cannot directly or indirectly support a political candidate into office. But since they are regarded as partners with government in promoting good governance and democracy in the country, they can actively participate in the election process through; monitoring, observing and documenting flaws in elections, sensitizing masses on the qualities of would be leaders and urge them to vote wisely, and proposing ways of improving the electoral process.
Communication and Cooperation:
Under the law CSOs are allowed to contact and cooperate with colleagues in civil society, business and government sectors, both within and outside the country (article 29 of the 1995 Constitution of Uganda). However Regulation 13 (a) of the NGO Registration Regulations 2009 provides that an organisation shall not make any direct contact with the people in any part of the rural area of Uganda unless it has given seven days’ notice in writing of its intention to the local council committee and the Resident District Commissioner of the area.
The law or government does not impose restrictions on participating in networks or accessing the Internet or World Wide Web.
There are no legal provisions requiring advance notice of international cooperation, or prohibiting conferences or restricting travel. Article 29 (2) of the 1995 of Constitution of Uganda guarantees every person the right to free movement in and outside Uganda.
Seeking / Securing Funding:
- Foreign Funds: Generally there is a requirement for all organizations receiving monies in convertible currency to open and operate an external bank account with the Bank of Uganda (government-controlled bank) in which the currency is deposited and through which transactions are conducted (Regulation 15 (3) of the NGO Registration Regulation, 2009).7 There are no legal provisions that require CSOs to seek permission of a ministry before receiving foreign funds.
- Economic Activities: Regulation 15 (1) of the NGO Registration Regulation 2009 does not permit NGOs or members or employees to use the organization to engage directly or indirectly in any gainful activity for economic interest of the organization or of any of its members of employees.That said, Regulation 15 (4) of the NGO Registration Regulation 2009 permits NGOs to engage in economic activities for fundraising purposes by selling any goods or services to the public or to any other organization as long as the prices of the goods and services are in conformity with prices prescribed by the government or open market prices obtaining in Uganda. And any income received from the sale of any goods or services sold in excess of the administrative costs incurred in the sale shall be re-invested in the project or as directed by the organization (Regulation 15 (5) of the NGO Registration Regulation 2009). Therefore, with the application of the Regulations 15 (4) and (5) of the NGO Registration Regulations 2009, NGOs may directly conduct economic activities.
- Government Funding: As an implementation practice, CSOs do not receive funds from government, and as such they do not compete for government funds.
- Other Constraints: There are no other constraints imposed by law or implementation practice on the ability of CSOs to seek and secure funding.
V. TAX LAWS
Tax Treatment of CSO Income:
Section 2 (bb) of the Income Tax Act defines what amounts to an exempt organization and this could include CSOs. The organizations have to apply for a written exemption from the Commissioner of the Uganda Revenue Authority. As a general rule, a tax-exempt CSO does not pay tax on charitable donations. The VAT Act also exempts specific types of donations from paying VAT. These exempted donations are listed in the third Schedule of the VAT Act Cap. 349. The laws are silent on the taxation of membership fees and grants specifically. However, since all these are part of an organization’s income, it is exempted from tax under Section 21 (1) (f) of the Income Tax Act.
Section 21(1) (f) (ii) of the Income Tax Act exempts business income of an organization (or income from economic activities) from taxation unless that income is derived from an economic activity that is not related to the functions constituting the organization’s existence. The laws are silent on investment income. However the interpretation could be that unless that income falls within that not exempted from tax, it will not be chargeable since the general rule is that all income of an exempt organization is not chargeable to tax. The laws are also silent on foreign funding tax liability.
Although the law gives several exemptions to CSOs, in practice CSOs find themselves in many taxable transactions. This therefore leaves a very thin line between what amounts to taxable income of a CSO and what doesn’t.
The Customs and Exercise Act Cap. 335 is silent on specific exemptions for CSOs. However section 188 of the East African Community Customs Management Act exempts duties on goods and equipment used in aid funded projects.
Individuals and legal entities are eligible for tax deductions for charitable contributions to a tax exempt organization listed in Section 2 (bb) (a) and (b) of the Income Tax Act. An individual may claim as a deduction up to 5% of that individual’s taxable income for the year in which the gift is made.
The law does not provide limitations on administrative expenses or salaries.
The NGO Registration Act 1989 was amended by the NGO Registration Act 2006 which is currently in force. The entire NGO Act 2006 has the following legal issues affecting CSOs:
- The Act is premised on a very narrow definition and understanding of NGOs, and what they do and cannot do (article 1 (e).
- It is also premised on an overbearing intent by the state to control the activities of NGOs and therefore provides for unfettered administrative discretion to the NGO Board and Minister of Internal Affairs to so (article 2).
- It unduly burdens NGO staff over and above what is acceptable in international law and even standard company law in Uganda. (Article 2 (6) and sub section (5).
- It does not recognize the important role, knowledge and expertise NGOs can make to their governance and so does not provide for NGO representation on the NGO Board to defend their interests.8
- It does not make any provisions for remedy if an NGO feels aggrieved. Instead it vests arbitrary power in the office of the Minister of Internal Affairs.
- It does not provide adequate commitment by government to strengthen the capacity of the NGO Board to carry out its functions effectively and efficiently.
NGOs resolved to challenge the NGO Registration Amendment Act 2006 in the Courts of Law. The Human Rights Network-Uganda (HURINET), DENIVA and other organizations representing their affiliate NGOs, including FHRI, filed a petition in the Constitutional Court in May 2009, challenging the constitutionality of several provisions of the NGO Registration Amendment Act 2006 and the NGO Registration Regulations 2009. A scheduling conference between the petitioners and the Attorney General was held in July 2009 and the case has not been cause listed.
This paper is made possible with the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the authors and do not necessarily reflect the views of USAID or the United States Government.
2 A directive principle is non-binding provision whereas an article is constitutionally enforceable.
3 The new NGO Regulations cited as Non-Governmental Organizations Registration Regulations, 2009 were gazetted on 29 March 2009 and are in force. Thus the NGO Registration Regulations SI 113-1, 1990 are null and void (Regulation 20 of the NGO Registration Regulations 2009).
4 This section largely describes for-profit companies that may have social programs. The Companies Act basically regulates for-profit companies, though some of these may have a social program as part of their social corporate responsibility. The majority of CSOs, however, do not fall under this category.
5 The restriction is currently in force and has also been proposed as part of the NGO Registration Regulations 2009 [Regulation13 (a)].
6 Interview with the NGO Board Secretary, Rosemary Nabifo Wamimbi on 17 June 2009.
7 The requirement is not perceived as a problem per se since it is not strictly enforced. In fact the practice is that many NGOs do not even have the said account, and government has not come out to strictly enforce it. Thus it is not practically a barrier.
8 Although NGOs may have problems like deciding which NGO representatives and conflict of interest, the rationale of having NGO representative on the NGO Board is to ensure that issues / policies that negatively affect operations of NGOs are effectively addressed by the Board.