Uganda’s capital markets are facing one of their most significant corporate governance tests in recent years after the Capital Markets Authority (CMA) opened separate inquiries involving two of the country’s largest listed companies ; MTN Uganda and Stanbic Uganda Holdings.
The investigations, which remain ongoing and have not resulted in any findings of wrongdoing, nevertheless raise broader questions about corporate transparency, board accountability, disclosure obligations and the protection of minority investors in Uganda’s growing capital market.
The CMA is examining issues surrounding MTN Uganda’s disclosure of its UGX 110.9 billion transfer-pricing tax settlement with the Uganda Revenue Authority (URA).
Separately, the regulator is investigating governance concerns at Stanbic Uganda Holdings, including matters relating to board oversight and related-party transactions.
Both companies have maintained that they are cooperating fully with the regulator while emphasising that the inquiries are ongoing and that no conclusions have been reached.
The twin investigations come at a time when regulators across Africa are demanding higher standards of corporate governance as stock exchanges seek to attract more local and foreign investment.
Corporate governance experts argue that the significance of the CMA investigations extends far beyond the companies involved.
“Capital markets thrive on trust,” said Mervyn King, the South African corporate governance pioneer and chairman emeritus of the King Committee on Corporate Governance. “Good governance is about effective leadership, transparency and accountability. Investors must be able to trust that boards are acting in the interests of all shareholders.”
King’s King IV Report on Corporate Governance, widely regarded as one of the world’s leading governance frameworks, emphasises that listed companies must disclose material information promptly and ensure boards exercise independent oversight over significant corporate decisions.
Similarly, OECD Secretary-General Mathias Cormann has repeatedly argued that effective corporate governance is “essential for market integrity, sustainable economic growth and investor confidence,” noting that transparency reduces the cost of capital and strengthens financial markets.
Those principles are particularly relevant in Uganda, where the CMA has spent years strengthening disclosure requirements and corporate governance standards to deepen the country’s relatively young capital market.
Why Transfer Pricing Matters
Transfer pricing—the pricing of transactions between companies within the same multinational group—is a common feature of global business operations. However, tax authorities increasingly scrutinise such arrangements to ensure companies do not shift profits across borders in ways that reduce taxable income.
The Organisation for Economic Co-operation and Development (OECD) estimates that governments lose billions of dollars annually through aggressive profit-shifting arrangements, prompting many countries to tighten transfer-pricing regulations.
Importantly, a transfer-pricing dispute does not necessarily imply wrongdoing. Multinational companies frequently negotiate settlements with tax authorities after disagreements over how transactions should be valued.
For listed companies, however, governance specialists say the key issue often shifts from the tax dispute itself to whether investors received timely and sufficient disclosure of information that could materially influence investment decisions.
“The market is less concerned that companies have tax disputes than whether investors are informed appropriately,” said Professor John Coffee, corporate governance scholar at Columbia Law School. “Disclosure is the foundation of investor protection.”
Lessons from Global Markets
Around the world, regulators have increasingly imposed substantial penalties on listed companies for governance failures linked to disclosure rather than the underlying commercial transactions.
In Australia, Crown Resorts faced intense regulatory scrutiny over governance failures that ultimately led to sweeping board changes despite the company’s continued operations.
In South Africa, the collapse of Steinhoff International became one of Africa’s largest corporate scandals after accounting irregularities wiped out billions of dollars in shareholder value, prompting regulators to tighten governance expectations.
Germany’s Wirecard scandal similarly exposed weaknesses in board oversight and financial reporting, leading to major reforms in auditing and financial market supervision.
Closer to East Africa, the collapse of Imperial Bank Kenya highlighted the consequences of weak governance, inadequate board oversight and failures in internal controls.
While the circumstances surrounding these cases differ significantly from the ongoing CMA investigations in Uganda, they demonstrate a common lesson that investor confidence depends not only on corporate performance but also on transparency, independent oversight and timely disclosure.
Minority Shareholders in Focus
One issue likely to receive close attention is the protection of minority shareholders.
Unlike controlling shareholders, minority investors depend almost entirely on accurate and timely market disclosures when making investment decisions.
The International Finance Corporation (IFC) notes that strong governance frameworks should ensure “equitable treatment of all shareholders,” particularly where related-party transactions or conflicts of interest may arise.
Related-party transactions are not prohibited under international corporate governance standards. However, they typically require enhanced disclosure, independent board review and, in some cases, shareholder approval to ensure they are conducted on arm’s-length terms.
Grounds warranting investigation
Under the Capital Markets Authority Act, the CMA has broad investigative powers to safeguard the integrity of Uganda’s capital markets and protect investors.
The Authority may initiate an investigation where it has reasonable grounds to believe that there has been a breach of the Capital Markets Authority Act, its regulations, licence conditions or directives issued under the law.
It may also investigate where it suspects that circumstances warrant the prohibition of trading in securities under Section 88 of the Act, or where there is reason to believe that a person has contravened the Companies Act, 2012 in relation to the securities of a publicly held company.
The Authority is further empowered to investigate where it believes that a corporate entity, its officers or any other person may have breached capital markets legislation or applicable listing rules, or where an approved or key person may no longer satisfy the “fit and proper” requirements necessary to continue holding such a position.
Beyond specific breaches, the CMA may undertake investigations where doing so is necessary to protect the interests of current or prospective investors dealing with a licensed entity, to maintain or enhance the integrity and confidence of Uganda’s capital markets, or to provide regulatory assistance to a foreign supervisory authority in matters involving cross-border securities regulation.