Lessons learned on business compliance

Our focus on business compliance this past month has provided business owners with a roadmap to become and remain fully compliant. While compliance is often seen as meaning businesses see greater tax, registration and administrative obligations, the benefits from otherwise unavailable funding, partnership, and growth opportunities make these obligations worthwhile. Compliant businesses are more likely to access credit and investment capital, develop their operations more quickly, and benefit from partnerships with larger companies looking for downstream suppliers. To wrap up our series, we’ve rounded up the key lessons from interviews with experts and practitioners that discussed the ins and outs of business compliance. 

Business Registration 

Business registration is the process of formalizing your business – it starts with the Uganda Registration Services Bureau (URSB) and is the first step in business compliance. Business owners must decide whether they will register as a sole proprietorship – a business consisting of a single person – or as a company – a business with multiple members that may protect owners from the company’s legal liabilities. A sole proprietorship typically requires submission of an online form as well as payment of a one-time 24,000 UGX registration fee. Companies require greater administrative paperwork and must pay an incorporation fee based on the starting capital used for the business. They must also submit annual returns forms.  

Tax Compliance 

Tax compliance refers to the fulfillment of a business’ tax obligations as outlined by the Uganda Revenue Authority (URA). Tax-compliant businesses need to register for a free, ten-digit Taxpayer Identification Number (TIN) that allows them to fulfill their tax obligations. The TIN also allows businesses to obtain operating licenses necessary to work in a given industry. After obtaining their TIN, businesses file annual tax returns and pay any owed taxes.  Business owners can opt to pay their tax obligations annually, bi-annually, quarterly, or even monthly. While businesses can seek advice from a tax consultant, there are many URA resources available to businesses that can help guide them through their tax compliance journey. 

Human Resource Compliance 

Human Resource (HR) compliance specifically addresses the health and safety of a business’ staff while mitigating risks and hazards to health in the workplace. Businesses not prioritizing HR compliance may face serious consequences from officials such as closures or imprisonment if a staff member is harmed in the course of their job. To ensure compliance, businesses are encouraged to research requirements for their particular industry and designate someone within their organization to monitor compliance practices. Usually, these compliance guidelines can be obtained from regulatory bodies such as the Federation of Uganda Employers (FUE) or local licensing bodies such as the Kampala Capital City Authority (KCCA). 

Third-Party Compliance 

Third-party compliance deals with agreements in third-party contracts to ensure that the parties involved adhere to its rules, or in the event that they do not, are held liable. To start, businesses should be formally registered to ensure that all parties are governed by the rules and regulations applicable within their particular industry. Businesses entering into a third-party contract should be on the lookout for potential risks such as inflexibility in contracts, which may not take into account unexpected business interruptions, or unsuitable contract conditions transposed from other contexts such as copying western-styled contracts which do not account for the nuances of the Ugandan business environment. To limit risk in third-party contracts, businesses should carefully review contract terms of reference, payment structures, timelines, and arbitration methods. 

Investment Compliance 

Investment compliance addresses businesses’ need for investment to grow and expand operations. Larger companies and partners looking to invest in smaller businesses generally seek companies brandishing a risk-mitigation strategy. This usually begins with basic business compliance steps such as registering their business, obtaining a TIN, and having the appropriate licenses to operate within their industry sector. To help businesses better understand investment compliance obligations, the Uganda Investment Authority (UIA) provides resources such as their One-Stop Center which places all the regulatory agencies and authorities under a single roof.  

In closing, businesses seeking new growth, investment, and partnership opportunities should determine what compliance areas need attention and address those needs. For a better understanding of the individual compliance areas, readers should visit our corresponding articles for an in-depth read. Stay tuned for our next series to help navigate Uganda’s intricate business environment. 

Trouble attracting investment to grow your business? Eria Kaweireku from the Uganda Investment Authority offers some key insights on how business compliance can unlock the door to new investments

Business compliance brings a host of potential new benefits for small- and medium-sized enterprises (SMEs). The ability to take on more staff, access government resources, and engage in new corporate partnerships are among the lesser-known benefits brought about by business compliance. Another key opportunity is securing investment.

To help explain the importance of business compliance when it comes to investment opportunities, we sat down with Eria Kaweireku – a senior investment executive in the SME Division at the Uganda Investment Authority. The UIA is a statutory agency mandated to initiate and support measures that enhance investment in Uganda and advise the government on appropriate policies to promote investment and growth.

According to Eria, roughly 87% of the Ugandan economy is run informally. Eria explains that this informality stems from business owners’ desire to keep outsiders out of their operations, which are typically family-owned businesses operating out of their homes. In doing so, however, what business owners overlook is that this also keeps them from accessing important investment to further grow their businesses. Businesses are much more likely to attract investment – both local and foreign – when they have fulfilled local requirements. Large investors, especially foreign direct investors, are keen to mitigate compliance risks and specifically seek out new partnership opportunities with businesses that have a a risk mitigation strategy in place – much of it starting with the integral component of ensuring a business is registered and has taken the appropriate steps to operate legally and safely in a specific sector.

While it is a corporate government requirement that may take a bit of time to complete, it is a much smoother process than many business owners may think. Eria outlines a 3-step process that starts with business owners registering their businesses with the Ugandan Registration Services Bureau (Click here for our interview with the URSB). Next, they receive a TIN certificate from the Ugandan Revenue Authority. Lastly, businesses receive the necessary permits allowing them to operate within a particular sector.

In the past, it took businesses a long time to fulfill all of the requirements, but the introduction of the One-Stop Center has helped address that bottleneck. The One-Stop Center, based in Kampala, places all the regulatory agencies and authorities under a single roof. It streamlines the registration process by placing all registration services together so business can access “registration at the registration services bureau, TIN at the revenue authority, investment license at Uganda Investment Authority, [and] work permits [with] the director of immigration” at the same place.

To further simplify the process, in addition to the One-Stop Center, UIA has also launched the Tax Registration Expansion Program (TREP). The TREP is being championed by the Uganda Registration Services Bureau, Uganda Revenue Authority and local governments to make tax benefits simpler and easier to access. Eria reiterated the importance of business compliance to attracting investment, and he highlighted that the UIA is here to help. For more information, please contact info@ugandainvest.go.ug  or +256-393-202-077 / +256-393-202-076

Interested in registering your business but unsure of where to start? Provia Nangobi of the Uganda Registration Services Bureaus explains the business registration process 

Continuing our focus on the importance of business compliance, the COVID-19 Business Info Hub sat down with Provia Nangobi, Head of Public Relations and Corporate Affairs at Uganda Registration Services Bureau (URSB), to understand the first step in keeping your business compliant – business registration. We asked Provia to walk us through the process for different types of businesses operating in the country and shed some light on where business owners can go for support.

Provia explained that the URSB is the government agency responsible for registering businesses and intellectual property rights such as trademarks, copyrights, and patents. In Uganda, a business can be registered either as a sole proprietorship under a business name, a company limited with shares or a company by guarantee akin to a not-for-profit organization. The difference is based mainly on the structure and the number of members of a business. Provia explained more about each of these options.

Sole proprietorships consist of a single person who wants to do business under a legal entity. These businesses are typically smaller in nature and consist of individuals seeking to trade and operate alone while expanding their businesses through credit, investment, and partnership opportunities that formalization affords them. To register a sole proprietorship with the URSB and receive a business certificate, business owners must submit an online form and pay a one-time registration fee of 24,000 UGX. Once those compliance requirements have been fulfilled, businesses are free to begin trading as officially recognized entities.

Registering a company – a process called ‘incorporation’ – is slightly more complex than registering as a sole proprietorship. Compared to sole proprietorships, companies have many more types, structures, and responsibilities, but they stand as distinct legal entities separate from their owners, which protects owners from the company’s legal liabilities. While companies are typically structured to involve multiple people, they can also be structured as ‘single-member” companies for people working independently. The most common companies registered by URSB, according to Provia, are private companies with shares distributed amongst multiple owners. Business owners can also register either a public company that sells stock and part of their shares to the public, unlimited companies, foreign companies or a not-for-profit company limited by guarantee.

Regardless of what type of company business owners register, there are more obligations to ensure full compliance when compared to registering as a sole proprietor. For instance, companies must indicate the total amount of starting capital, which is then used to determine the company’s incorporation fees. Fixed costs associated with incorporation include a 20,000 UGX name reservation and 40,000 UGX to submit two forms. Variable costs include the registration fee – totaling 1% of share capital – and the stamp duty – which has a cost of 0.5% of share capital, as well as a 135,000 UGX fixed fee. Once the incorporation fees are paid, a certificate of incorporation is issued as part of the initial filing process. At this point, companies must submit forms listing the names of their directors and secretary and their business location and provide a memorandum and article of associations outlining the company’s interests. After the registration is finalized and a certificate of incorporation is issued, the company goes into business.

For a company limited with shares, annual returns must be submitted every year to declare the status of operations along with a 50,000 UGX fee (30,000 UGX for companies limited by guarantee). Any changes to the company’s structure or directors must be declared on the form to keep the business registration up to date.

There are enormous benefits of formalizing businesses ranging from: 

  1. Enabling investors to invest in your business through official channels
  2. Supporting your participation in the bidding process for the provision of goods and services
  3. Better access to financial services (i.e., bank loans that are essential for business expansion)
  4. Enabling the company to enter into business partnerships and joint ventures more easily or to carry out mergers and takeovers
  5. Supporting business reputation, which leads to broader clientele and greater opportunities

URSB’s services don’t end at business registration – they also provide services for businesses in need of support. On the occasion that a business enters an insolvency and receivership function – which happens when a company is unable to meet its financial obligations and potentially enters a court-mandated process allowing creditors to recover funds from a business while allowing them to avoid bankruptcy.  The URSB provides services to help businesses strengthen their operations and attempt to revive the company. Suppose a company is unable to recover from its financial woes. In that case, the URSB also provides statutory procedures to shut down the business and the necessary steps to wind up its operations.

When asked why some businesses shy away from formal compliance, Provia suggested that misinformation stops people from registering. People are often confused about the costs, processes, or obligations required to fulfil standard compliance requirements. Some may think that it takes a long time, but it takes just 2 to 3 days for a certificate to be issued once all documents are submitted. Provia highlighted that consulting with business professionals such as business lawyers can help clarify any misconceptions while helping business owners build and develop their operations. More importantly, business owners can query the URSB directly by either a toll-free phone number (0 800 100 006), the official website (www.ursb.go.ug), or through the official WhatsApp number (0712 448448).