Investment Club Registration In Uganda
An investment club is a group of individuals who meet for the purpose of pooling money and investing, members typically meet on a periodic basis to make investment decisions as a group through a voting process and recording of minutes, or gather information and perform investment transactions outside the group.
Traditional investment clubs buy and sell investments stocks, mutual funds, real estate investment trusts, and so on as a group. Members of clubs that invest in a single portfolio often form a legal partnership or a limited liability company (LLC) or partnership (LLP).
Investment clubs represent groups of people who come together and pool resources for investment. Many such clubs in Uganda lack legal personality. As such, their ability to expand activities including accessing additional funds in the form of credit using their savings as seed capital is restrained. It is for this reason that this article encourages investment clubs in Uganda to formalize their legal status.
Requirements Investment Club Registration In Uganda
Opening cash deposit of Ugx.50,000.
Copy of Investment Club bye laws and minutes with a resolution to open the account.
Copy of the Investment Club registration certificate.
Copy of valid Identity documents for Account signatories.
Certified copy of club registration certificate.
Starting An Investment Club Registration In Uganda
Step 1: Find Potential Members for Your Stock Investment Club.
Step 2: Hold Meetings With Potential Members to Organize.
Step 3: Form a Legal Entity and Create a Partnership Agreement.
Step 4: Establish Club Operating Procedures.
Step 5: Open a Brokerage Account for Investing in the Stock Market.
Steps For An Investment Club Registration In Uganda
Choice of legal form
An investment club can have separate legal personality from its members insulating them from the liabilities and obligations of the club.
The club can also exist without legal personality in which case its activities would be carried out through its members. In such instances, the club members usually designate a select few to act on their behalf including opening up bank accounts as well as holding club property. These members are jointly and severally liable in respect of the obligations of the club activities.
Self-help groups
The law in Uganda recognizes the existence of investment clubs though it refers to them as self-help groups.
Under the Tier 4 Microfinance Institutions and Money Lenders Act 2016, these groups can be started for purposes of mobilizing and managing own savings, providing interest-bearing loans to its members, offering a limited form of insurance to its members and sharing out member equity at least once a year in proportion to the savings.
Though the law requires these groups to be registered with the respective local governments, this rarely happens. Registration is intended to facilitate supervision of these clubs hence mitigating the mismanagement and misappropriation of funds. Registration may also facilitate the transition of the group to a formal entity. Although a step in the right direction, this registration by the clubs/groups does not confer legal personality.
Company
An investment club can be established as a company. A company has separate legal personality thus shielding the owners from its liabilities and obligations. There are several advantages running an investment club as a company though there are also additional regulatory compliance burdens.
Partnerships
An investment club can also be structured as a partnership. The formation and registration of partnerships in Uganda is governed by the Partnerships Act of 2010. There are two types of partnerships namely general partnerships and limited liability partnerships.
General partnerships can have up to 50 partners for professional partnerships and 20 for non-professional partnerships. All partners have unlimited liability and are jointly and severally liable in respect of the debts and obligations for partnership activities.
Limited liability partnerships (LLPs) consist of not more than 20 persons but have one or more persons called general partners. The general partners are those responsible for the day-to-day management of the limited partnership and are liable for the company’s financial obligations, including debts and litigation.
An LLP must additionally have two or more persons called limited liability partners who must contribute a stated amount of capital to the firm and are not liable for the debts or obligations of the firm beyond the amount of the capital contributed.
Cooperatives
Investment clubs can take the form of Cooperatives. These are governed by the Cooperative Societies Act Cap 112 which defines a cooperative union as a registered society under the Act, the membership of which is restricted to primary societies.
Primary societies refer to smaller groups of individuals who have attained 18 years, resident within the area the intended cooperative is to operate and have registered with the registrar of cooperative societies.
Therefore, members belonging to an investment club and fit the above criteria can choose to register a primary society and subsequently formulate a cooperative society with other like-minded primary societies. The management of such entity is governed by bylaws as signed by the members. Cooperative societies have been prominent among farming societies where they enable small holder farmers to market their produce collectively. A Cooperative society has legal personality.
Savings and Credit Cooperatives (SACCOs)
Investment clubs can be organized as SACCOs. Previously regulated under the Cooperative Societies Act, SACCOs are now under the Tier 4 Microfinance Institutions and Money Lenders Act of 2016 which provides for the procedures for their formation, registration and management. In order to conduct financial services business, a SACCO is required to be licensed by Uganda Microfinance Regulatory Authority.
The Authority has since issued regulations to govern the management and licensing of SACCOs.
SACCOs involve members coming together for the object of promoting their economic and social interests in accordance with cooperative principles.
They rely on their members contributions in form of savings and shares as the main source of capital. They then use this capital to lend to their members usually at low interest rates. People who join SACCOs are often motivated by two objectives, to earn a dividend as return on their savings with the SACCO and also to access affordable loans leveraging on their accumulated savings. It is notable that SACCOs are exempted from paying income tax on their commercial returns and also have legal personality.
Purpose For An Investment Club Registration In Uganda
An investment club refers to a group of people who pool their money to make investments. Usually, investment clubs are organized as partnerships after the members study different investments, the group decides to buy or sell based on a majority vote of the members.
Office Location For Investment Club Registration In Uganda
Uganda Business Facilitation Centre
Plot 1, Baskerville Avenue, Kololo
Floors 1,6 and 7
info@ugandainvest.go.ug
P.O. Box 7418 Kampala, Uganda
Phone Contact – 0414 301 000