LEGAL ADVISORY ON THE IMPACT OF COVID-19 ON SECURITIES LITIGATION

IN UGANDA.

With the ever growing threat of COVID-19 globally, there is no doubt that markets will feel the
pressure for some time to come. Securities Exchange Markets are no exception to this new
emerging threat, and as such public listed companies are on the spot in as far as responding to
this crisis is concerned. Best on my legal knowledge and experience in securities exchange
markets, i feel that it is wise to share a few legal advisory notes on how best the company can
protect or improve on its corporate shield in respect of securities exchange markets.

1. Its prudent practice within developed securities markets, that public listed companies
conduct regular or periodic internal investigations to ascertain the cause or reason for the
drop or increase in stock value. The rationale for this is that it not only builds
shareholders confidence in the public listed company but it also arms the company with
data or information that can protect it against unpredictable securities litigation such as
stock drop cases in the event that the stocks are affected by an event beyond the
company’s control. Whereas this duty is imposed on the Capital Markets Authority under
section 19 of the Capital Markets Authority Act Cap 84, corporate self-driven
investigations improve on the corporate governance practice of the listed company.
Important to note here is that this best practice introduces standards in as far as handling
shareholders disputes in respect of stock price fluctuations.

2. Because of the negative impact of COVID-19 on the market, public listed companies are
required to issue detailed comprehensive public statements in respect of the impact of
COVID- 19 on company’s earnings and business metrics. Kindly note with emphasis that
“such material disclosure is critical in informing investment decisions.” On the other
hand, in case such hidden material information comes to light, the non-disclosure of such
information could imply that the company had concealed particular material facts about
the true impact of COVID -19 on company’s earnings and business metrics. It is not
enough for a company to merely state that “the company remains liquid and well
capitalized with sufficient buffers well above the regulatory requirements.” Non
comprehensive statements are an ingredient for securities litigation incase shareholders
lose money in a near future.

3. Please note, The Capital Markets Corporate Governance Guidelines, do provide that
shareholders have a right to access relevant information on the performance of the
company. (Guideline 41) Whereas this best practice appears to require annual financial
reports to be fulfilled, this should be carried out at least regularly for shareholders
especially during economic distress times.

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 4. Financial projections issued by a public listed company prior to COVID-19 should be
adjusted “Why?” Financial projections that where given prior to COVID-19 by a listed
company ignore the unforeseen alterations caused by the pandemic on the company’s
earning. Incase relied upon by a potential investor, the listed company can easily be held
culpable for material misrepresentation as seen under section 84 and 85 of Capital
Markets Authority Act Cap 84 as amended. It is therefore important for public listed
companies to alter such projections to reflect the changing economic times.
________________________
WAHOLI ALLAN SCOTT
ADVOCATE
0778680766/0701927368
altishaln@gmail.com

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