Uganda Airlines ‘Hits Turbulence’ Before Takeoff

A Uganda Airlines plane before it was recommended for liquidation in 2001. The government has begun the process of reviving the airline. File | NMG

August 12, 2018//-In its efforts to revive the national carrier, Uganda will revert to a company that never took off since it was registered nearly 20 years ago.

However, the manner in which the Cabinet, parliament and bureaucrats asserted that Uganda Airlines had been privately registered betrays a government in confusion.

Our investigations reveal that all along, the government has been in possession of a trading name that it registered in 1999 as Uganda Airlines Ltd, before the defunct national carrier that went into liquidation in 2001 trading as Uganda Airlines Holdings Ltd (UAHL).

“Uganda Airlines Ltd never took off, so it is available to government for use,” Mustapher Ntale, the liquidation manager of UAHL told The EastAfrican.

In an interview, Mr Ntale revealed that he wrote a brief to this effect and submitted it to the Ministry of Works and Transport but this did not stop its top officials publicly stating that the name of the national carrier was not available.

Last year, Junior Minister for Transport Aggrey Bagiire told a committee of parliament that the name Uganda Airlines had been taken by “somebody… Smarter than us in government” who reserved it as his own trading name, throwing the revival of the national carrier into confusion.

“Uganda Airlines was liquidated. When it was liquidated, somebody, a Ugandan was smarter than us because maybe government should have booked that name. But the name, it was given out,” said Mr Bagiire.

The government in January this year rushed to register two companies — Uganda National Airlines Co Ltd and Uganda National Airlines Ltd — the former as a public entity and the latter a private company, as its Plan B and C to step up and operate the national carrier, according to information from Uganda Registration Services Bureau (URSB).

Naming legal hurdle

Sources reveal that the government was thrown into confusion last year when it was told that the name Uganda Airlines had legal encumbrances, and was the registered trade name of a private owner who applied for it after the liquidation of the national carrier 17 years ago.

However, officials were told that the private owner had not operated the airline business as per the terms of registration, leaving government in a position to reclaim and use the name, but there remained a legal conundrum that would require the courts of law to determine before the airline could take to the skies using its former name.

The legal hurdle was that the trading name Uganda Airlines would revert to the government subject to completing the liquidation process, prompting the Cabinet to seek a status update of the liquidation on the airline.

Legal documents and advice of the Registrar of Companies obtained by The EastAfrican reveal that the government could not regain use of the defunct national carrier name as the process to liquidate Uganda Airlines in 2001 had remained incomplete, in part due to some missing assets.

In an internal memo dated January 27, 2017, the Registrar of Companies said the Ministry of Justice and Constitutional Affairs is one of the entities that stripped the former national carrier of some of its assets when it borrowed Ush3.35 billion ($912,658) from the liquidation account.

The memo addressed to liquidation manager Mustapher Ntale adds that this debt was unpaid.

“This is the major pending issue in the liquidation of the company,” Registrar General Bemanya Twebaze says in the status update on Uganda Airlines.

Three options

But even if the government gets the debt out of the way, there are other legal hurdles before the name Uganda Airlines could revert to the national carrier.

According to the Registrar General, Uganda had three options to negotiate these legal hurdles in order to revive the national carrier.

“The first option is to operationalise Uganda Airlines Ltd with some amendments to the memorandum and articles of association. The company is still available to undertake the activities set out in the memorandum of association,” he says.

The next option is to finalise the liquidation of Uganda Airlines Holdings Ltd and register a new company with the same name, but our sources reveal that this option has hit a dead end as the $912,658 cannot be found or repaid from the Justice Ministry’s 2018/19 budget.

The last option is another legal minefield, one that requires courts to interpret and determine the matter, a process that could take between one and three years, experts said.

This is informed by the Insolvency Act, which is silent on whether the liquidation process once commenced can be reversed or suspended before it is concluded. Sections 60 and 97 of the Insolvency Act tend to suggest that the corporate status of the company is not affected by the fact of commencement of liquidation.

“However, I feel that this option may require court approval,” the Registrar of Companies argues in the internal memo, stating that Sections 84 and 117 of the Act give the right to apply to court to have questions arising in the liquidation of a company to be determined and the court may give directions accordingly.

“This can be done by the liquidator or any contributory or creditor,” he advises.

In all this, the government was doing it the hard way in trying to revive the national carrier, as indeed our investigations reveal that no private company has been registered trading as Uganda Airlines.

On February 20, 2007, the government started efforts to revive the national carrier, and the company name Uganda Airlines and Cargo Services Ltd was duly reserved, as the successor for the liquidated national carrier which was trading as Uganda Airlines Holdings Limited, incorporated in 2000.

The revival of the defunct Uganda Airlines has long been in the works, first mooted when the privately-owned de facto national carrier Air Uganda was grounded in 2014 in what critics and aviation experts read as a campaign to get the company out of the way.

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