Barrier to Bridge: Uganda's New Limited Liability Partnership (LLP) Regulations to unlock local domiciliation of private capital vehicles
Ugandan private equity fund managers and their advisors have long struggled to identify the most efficient legal structure for funds raised. This challenge is rooted in the underlying question: How can a group of institutions and individuals create a structure that would bind them as investors for a finite period without creating a duplicity of tax liabilities and complex compliance requirements?
To address this dilemma, the Partnerships Act ("The Act") was amended to reflect Limited Liability Partnerships (LLPs) as a form of partnerships, thus creating two types of partners in a partnership: general partners (GPs) and limited partners (LPs). Yet still, this new structure, though established, remained unimplemented as there were no existing LLP Regulations passed to operationalise it until March 2025.
This article analyses the potential of the new LLP framework to unlock new capital formation and fund administration opportunities locally in comparison with the company structure. By exploring the regulatory features of this new regime, it also illustrates how this framework can position Uganda as a cost-effective and credible domicile for private equity funds.
Contextualising LLPs in Private Equity
LLPs are hybrid legal structures, combining the features of both general partnerships and companies limited by shares. The Act describes them as separate legal persons, with the ability to own property, sue, and be sued. In terms of liability, these legal structures offer limited liability protection to their partners – both GPs and LPs – according to their varied duties, all while preserving the tax transparency and flexibility of obligations that are characteristic of general partnership structures.
Under the Capital Markets Authority(CMA) Act of Uganda, the designated structure for a venture capital or a private equity fund is a company limited by shares according to the Companies Act of Uganda. However, with the enactment of the regulations, it is anticipated that this structure is likely to change given the various features of both vehicles. Where a fund adopts the LLP vehicle, a two-tiered governance model will be implemented: (i) GPs managing the funds with a fiduciary duty to the LPs, and (ii) LPs as passive investors with limited liability.
Relevant Provisions under the LLP Regulations, 2025
Registration and legal recognition
Upon reservation and issuance of a certificate of a registration of business name in accordance with the Business Names Registration Act, Regulation 5 sets out that the recognition of an LLP commences with an application for registration, where few documents are filed to the registrar by the GP of the proposed LLP. This process is more efficient for fund managers since it only requires a partnership agreement and a statement for registration.
On the other hand, the Companies Act requires fund managers to file a memorandum and articles of association to the registrar, with a discretionary period of consideration, whereas the LLP application is capped at 15 days within which refusal or grant of certificate of registration of an LLP is done.
Secondly, the regulations provide for a seamless registration process for Foreign LLPs intending to operate Uganda. To be issued a compliance certificate, Regulation 9 requires a certified copy of registration of an LLP by a relevant foreign authority in the country of registration, the partnership agreement, address and a list of partners, and the address of a person in Uganda authorised to act on their behalf. Compared to the process of registering a foreign company under Section 252 of the Companies Act, the LLP structure is preferable to the company structure, which sets out lengthy requirements such as a statement of subsisting charges–whether floating or fixed, and filing of accounts on an annual basis.
Thirdly, the LLP Regulations have restored the confidence of foreign LLPs investing in Uganda. In the 2021 dispute between Vantage Mezzanine Fund II Partnership and the Uganda Registration Services Bureau, Simba Properties Investment Co. Ltd and three Others (Miscellaneous Cause No. 209 of 2021), one of the questions answered by the court was whether, in its capacity as a foreign LLP, the applicant could sue or be sued. Owing to the lack of an existing framework for the registration of foreign LLPs in Uganda, the court found that Vantage Mezzanine Fund II Partnership could not be recognised since it was not registered and its identity was unknown. These regulations will realign Uganda as a potential hub for fund domiciliation.
Flexibility in Internal governance strategies
The new LLP structure is more flexible than the company structure which requires several filings of board resolutions. Under the Regulations, the primacy of the subsisting LLP agreement is upheld with a broad range of latitude granted to both GPs and LPs to define the rights and duties of each partner, profit sharing ratios, decision-making thresholds, admission and exit procedures, and indemnification from liability and disputes. Under Section 52 of the Partnerships Act, unlike a limited liability partner, a general partner is responsible for the management of the partnership business.
Further, the LLP structure grants agency to GPs. Any letter, contract, and deed instrument required to be executed shall be entered into by the general partner or his agent on behalf of the LLP. This provision therefore supports the interests of potential LPs who are usually institutional investors, family offices, and other types of trusts which have other investment portfolios to attend to and may not necessarily be involved in the direct management of the funds invested and their investee portfolio companies.
Liability is limited to the capital contributions of partners
All partners–GPs or LPs–enjoy limited liability as per these Regulations, except in cases of fraud and misconduct. Section 47 of the Partnerships Act limits liability of both GPs and LPs to their capital contribution. Regulation 11 further provides an intervention holding GPs liable if the assets in the LLP are inadequate to cover the liabilities of the LLP. This structure incentivises fund managers and institutional investors due to the low-risk exposure.
Cessation of business of LLPs as per the partnership agreement
Prior to the enactment of Part VI of the Partnerships Act, dissolution of a normal partnership was premised on factors such as bankruptcy, mental incapacity or death of a GP. Under Regulation 11 of the Partnerships Regulations, a process called “cessation of business,” is provided for, where LLPs, of their own volition, may cease to carry on business as per the terms of the partnership agreement. This may happen where: (i) an event stipulated in the partnership agreement triggers the cessation clause; (ii) upon passing of a resolution of cessation of business of an LLP.
GPs are only required to file a notice of cessation of business with the Registrar and widely publish it in the newspapers. Thus, an LLP-style fund can be dissolved voluntarily, usually at the end of the lifecycle of the fund without undertaking the long winding up process via a company-style fund.
Strategic Advantages of Regulatory Amendments
Pass-through tax treatment: For tax purposes, LLPs are treated as “tax transparent” entities under Ugandan law, and all income, gains, and losses flow directly to partners, who are taxed individually depending on their share of the entity’s income. This structure eliminates the layer of corporate taxation and avoids dividend-level taxes levied on companies limited by shares. Currently, the Income Tax Act provides for a tax waiver on incomes earned by venture capital or private equity funds. However, these amendments applied to the company structure as stipulated under the CMA Act. It is anticipated that there will be new tax amendments considering the operationalisation of the new LLP-style private equity funds.
Customisable GP-LP Mechanics: Since the LLP relationship is contract-based, the mechanics of its governance allows LPs to define how management fees, carried interest, hurdle rates and catch-up provisions operate vis-a-vis the rigid share-based constraints set out in a company limited by shares.
Seamless exit and lifecycle management process: Given the finite lifetime of a fund, the LLP may embed trigger clause for the cessation of its business upon fulfilling the stipulated conditions of the trigger. Also, funds may easily apply for conversion from an LLP to a company or any other ideal structure if necessary for the execution of an investment strategy.
Competitive Cost Structure: In terms of cost, vis-a-vis a company, the LLP has a much lower cost of establishment and maintenance compared to company incorporation costs and annual compliance fees.
Conclusion
Given their strategic advantages, the new LLP regulations are a long-overdue regulatory intervention in positioning Uganda as a domicile for private equity funds as they enable cost-efficient administration of funds. Notable improvements such as the registration of both domestic and foreign LLPs, liability of partners and cessation processes, present it as a more viable alternative to the company structure. However, structural challenges such as the current tax policy need to be addressed to create a vibrant and confident investment destination.
