Case Brief: An Application By Igara Growers Tea Factory to Extend AGM

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Date of Judgement: 7th June, 2024

Court: High Court (Civil Division)

Case Number: (Miscellaneous Cause 82 of 2024) [2024]

Judge: Justice Emmanuel Baguma

Main Topic (s): Extending period in which to hold a Company Annual General Meeting (AGM)

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Summary of Facts of the Case

This was an application by Igara Growers Tea Factory Limited (the Company) for an order of the Court to defer or extend the mandatory convening of the Annual General Meeting (AGM) of the company for the financial year ending December 31, 2022, as provided for under Section 138(1) and (8) of the Companies Act.

The Applicant, Muhereza Karumira Samuel, Chairman, Director, and Member of the Company (popularly called “Igara Tea Factory”) moved Court for the order on grounds that the company is facing financial constraints owing to falling tea prices which has affected the company’s income, and that therefore it is impractical under the terms of Section 142(1) and (3) for the Company to hold its AGM in the usual manner within the mandatory period required by law which was due 31st December 2024.

The court heard that the company, a public entity, with around 7,561 members, predominantly tea farmers from rural South-Western Uganda, has reported losses of UGX 4,435,965,456 in 2023 and so far this year UGX 1,150,913,615 (from January to March 2024).

The AGM would cost the company UGX 250,000,000/= and failure to hold it without the court’s permission would result in fines against the company and its directors.

And therefore the company needs grace period to mobilize finances to conduct its activities.

Legal Issues Before the Court

  • Whether or not to grant the order?

Justice Emmanuel Baguma
Justice Emmanuel Baguma/Judiciary Photo

Decision of the Court

The court presided over by Justice Emmanuel Baguma granted the application, allowing Igara Growers Tea Factory Limited to defer the AGM beyond the statutory period.

The decision was based on the obvious financial impracticality for the company to hold the AGM within the prescribed period amid financial turmoil.

In doing so, the court exercised its power under Section 142 of the Companies Act 2012, which permits the court’s intervention when it is impractical for a company to call or conduct a meeting in the usual manner for whatever reason.

Key Quote: “In the instant case, there is evidence that [the] applicant, a chairperson, member, and director has demonstrated that the company is financially constrained as a result of the fall in the prices of tea. He has convinced the court that the company has so far made losses for the last one year. The costs of conducting an AGM are quite high which the company cannot afford at the moment which amounts to sufficient ground to grant leave to conduct the AGM beyond the statutory period. I have examined the evidence adduced in the present application and find that this is a befitting case for this Honourable court to exercise its power under section 142 of the Company Act and extend the time within which to hold an AGM.” – Justice Emmanuel Baguma.

Counsel on Record

  • Applicant’s Counsel: Mr. Sewaya Haruna

Law Applied by the Court

  • Section 138(1) & (8) of the Companies Act 2012: Mandates the holding of an AGM every financial year and stipulates penalties for non-compliance.
  • Section 142(1) & (3) of the Companies Act 2012: Provides the court with the authority to order a meeting to be held in a manner it deems fit when it is impractical to call or conduct the meeting as per the Articles of Association or the Act.

Conclusion

The Judgment sets a precedent for future cases where companies facing similar financial difficulties or other difficult circumstances preventing them from holding mandatory Annual General Meetings can apply to the Court for its intervention to obtain some relief from the rigidity of the company law.



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