The Investment Code Act, 2019; An outline of the major changes to the Legal Regime
"Investment Code Act"
A new Investment Code Act
(the “Act”) was passed by Parliament on 20th February, 2019 to
replace the Investment Code Act, Cap 92. The Act commenced on 29th
March, 2019 and applies to both current and future investors. All existing
investment licences remain in force subject to necessary modification. Below is
an outline on the major changes in the Law;
Definition of the term Investor: The term “Investor” has now been split
into two categories i.e. foreign and domestic Investors. Domestic Investors
include Ugandans. This is a major shift from the previous limitation of Investors
to only include foreigners. It is equally a positive development as it enables
Ugandan citizen with investments to enjoy the incentives that were formerly
accorded to only foreigners.
Licensing conditions: The old provisions that allowed investor to negotiate
the conditions of their licences with the Authority were repealed. This means
that the conditions governing investment licenses will be determined by the
Authority in its discretion. However, a dissatisfied investor is not prevented
from engaging the Authority for purposes of determining/reviewing these licensing
Commencement date of business: Every Investor who seeks to obtain an
Investment license must ensure that their affairs are in order and that they
are ready to commence business on the date named in the licence. This is
because the provision allowing Investors to apply for extention of time within
which to commence investment operations has since been removed.
Data storage: In addition to other obligations, the Act requires
Investors to keep all data relating to their operations for a period of seven
years. In the absence of a specific legal provision stipulating the length of
time for which data, whether personal or not may be kept, this provision offers
guidance to data collectors in this regard.
Areas of Investment; Just like the past regime, the Act sets out priority
areas of investment. The difference is that the Act makes it mandatory for an
Investor to invest in at least one of these areas. The failure to do this would
have the effect of disqualifying the Investor from obtaining incentives.
Under the new law, an
Investor who meets all the qualifications of obtaining incentives (such as
investing in at least one priority area) will get the incentives irrespective
of their other additional areas of trade. This is a move away from the old
regime which prohibited Investors from benefiting from incentives in the event
that they invested in certain areas of trade such as whole-sale and retailer
commerce, postal services and professional services.
The new law has done away
with market access restrictions by permitting an investor to invest in any area
of business of their choice. This is a major shift from the past position which
prohibited foreigners from investing in certain areas of trade such as crop and
animal production. Even though by this change Ugandan investors have lost the
protection they previously enjoyed, this loss is compensated by the fact that
they can now apply for investment licences as domestic investors.
Incentives regime: The new regime, unlike the previous one, does not
specify the nature and type of incentives that an Investor is entitled to. An
Investor who applies and qualifies for incentives will be given a certificate
of incentives which shall stipulate the detailed particulars of the incentives
given. This therefore suggests that the incentives to be given to each investor
will be discretionary putting into account a number of aspects such as the
governing law of that area of trade and any incentives permitted thereunder and
the nature of business.
Compliance and Penalty provisions: The Act also comes with harsher and
more stringent sanctions for all investors who fail to comply with its
provisions. An investor who among others fails to give or gives false or
misleading information is liable to a fine of not more than Uganda Shillings
Five Million (Ug. Shs. 5,000,000) and/or imprisonment not exceeding five (5)
years. The punishment previously was a fine of Uganda Shillings Three Million
(Ug. Shs.3,000,000) and/or imprisonment not exceeding two (2) years.