Lower courts lack jurisdiction over company disputes — Judge

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High Court judge Stephen Mubiru has ruled that Magistrates' Courts lack jurisdiction over company shareholding disputes.

The ruling stems from an order issued by the Magistrate Grade One at Mengo, which had directed changes in the company's shareholding, directorship and bank account access in a case Vertical Wireless Consultants Ltd filed against David Lubega (one of the company's signatories) and Centenary Rural Development Bank.

In a ruling dated May 6, 2025, the judge held that the magistrate had acted with material irregularity and without jurisdiction, as disputes relating to shareholding, company directorship and internal corporate governance fall under the High Court’s jurisdiction under the Companies Act and Section 98 of the Civil Procedure Act.

Subsequently, the judge set aside the lower court’s orders, reaffirming that magistrates are not vested with the power to determine or alter a company’s structure or affairs.

“For the purpose of the pecuniary jurisdiction of a court, the bank balance of an account on the date of initiation of such an application would ordinarily be treated as a movable asset. Using such a parameter, cases involving company disputes with bank balances exceeding the specified pecuniary limit would need to be filed in the High Court,” he noted.

Mubiru, therefore, directed the bank to restore or reopen Vertical Wireless Consultants’ shillings account No. 3100059028 and dollar account No. 3100059029.

He also ordered the bank to restore Jude Mbabaali and Yonna Mafuko Massa as joint signatories to the company's accounts, in accordance with the mandate of the company given to the bank as per the applicant’s board resolution of March 18, 2024.

The judge further directed the bank to restore to the company's shillings account No. 3100059028 with the sum of shillings 355.8 million withdrawn from that account in reliance on the order that has been set aside, within fourteen days from the date of the ruling.

Mubiru noted that disputes relating to a company's ability to open, maintain, or close bank accounts, as well as the rights and obligations of the company in relation to its bank accounts, or those involving the actions of directors or officers regarding bank accounts, such as unauthorised opening of bank accounts, withdrawals, or misuse of funds, and other corporate governance disputes, are matters intended to be under the exclusive jurisdiction of the Registrar of Companies and the High Court, leaving no room for Magistrates' Courts to hear them.

“The magistrate, in presiding over a dispute related to the management and access to corporate funds in corporate bank accounts, exercised a jurisdiction not vested in him by law,” the judge stated.