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BATU gets court’s nod for reduced share capital from Shs8b to Shs80m
A currency adjustment in 1987 saw BATU share price fall from Shs8b to Shs80m. Photo / File
What you need to know:
- The Currency Reform Statute of 1987, which required the removal of "two zeroes" from all monetary values, saw BATU’s share capital reduce from Shs8b to Shs80m
British American Tobacco Uganda (BATU) has obtained a High Court approval to move forward with its corporate filings after proving that its prior mandatory share capital reduction from Shs8b to Shs80m did not negatively impact shareholders and creditors.
BATU had to fulfil the requirement in order to open an online business registration account to comply with the Uganda Registration Services Bureau (URSB) requirements.
BATU had applied to fulfil the online enrollment process, but it was discovered that the Currency Reform Statute of 1987, which required the removal of "two zeroes" from all monetary values, had seen BATU’s share capital get be adjusted in 1987 from Shs8b to Shs80m.
Records show that the procedure was carried out using the Currency Reform Statute 1987's special-case operation - the impact of which was not quantified - rather than the conventional share reduction provisions of the Companies Ordinance 1951 Revision.
This is what compelled URSB to ask BATU for court approval to ensure that the alteration of capital did not distort the interest of shareholders and creditors.
“This is because rights of creditors are affected if there is a diminution of liability for unpaid share capital and repayment to shareholders of paid-up share capital,” court records show.
The currency reform, which overhauled the shilling and removed two zeroes in 1987, sought to remove excess money in the economy and restore the shilling’s strength at the time, but impacted the valuation of many company’s assets and altered their share capital.
Businesses that adopted this policy in its entirety without following the correct protocol have since been forced to seek redress to address issues such as whether shareholders received equal treatment, the proposed reduction in share capital was disclosed, and that the interests of creditors were protected.
“This court agrees with the submission of [BATU’s] that following the overhaul and devaluation of the shilling in 1987, BATU’s share capital was, by domino effect, automatically reduced,” court presided over by Justice Musa Ssekaana, ruled in an August 30 judgement.
BATU’s share capital has marginally reduced from Shs80m to Shs61.4m in 2023, while earnings per share have also reduced.
The 800 shareholders of BATU as of September 2023, as reported by the Uganda Securities Exchange, have recently seen their dividends reduce from Shs10.3b in 2022 to Shs8.9b in 2023.
In addition, shareholder capital gains have essentially remained unrealized with the company's stock price remaining stagnant since 2022 due to its high share price of Shs15,000 and a low dividend yield of just 1.2 percent, placing it above New Vision Printing and Publishing Company Limited and Uganda Clays, both of which have consistently posted losses and have not distributed dividends in the last two years.
The combination of these aforementioned to have prompted them to do a high sell-off and invest in securities with better returns, financial markets experts observe.
