So the Board has resolved that expansion is the best way forward for the company;  in addition to buying the new plant machinery, the company will need to set up new plants countrywide to increase outreach and production. Now only one question remains; FINANCING!  You may be considering your options right now;should you apply for a bank loan?  But the repayment period is quite short. How about that micro finance institution just next door? The interest rates are quite high. So how about capital markets? What about them? You may ask. This brochure presents the various options of raising finance through capital markets, both short term and long term.

But first, What are capital markets?

Capital markets are markets that deal in the trade of long term financial products issued by Governments, private and public companies.  These products in Uganda include shares, bonds, commercial paper and collective investment schemes. These products are generally referred to as securities and can be traded on a market called a stock/ securities exchange.  In Uganda, the market where these securities are traded is called the Uganda Securities Exchange. 

Are capital markets regulated?

Yes. The market is regulated by the Capital Markets Authority, a parastatal set up in 1996 to regulate and promote the development of capital markets industry in Uganda. In fulfilling this mandate, CMA;

  1. Approves the securities exchange
  2. Licenses various market players such as broker/dealers, investment advisers, and collective investment scheme manages
  3. Approves all offers of securities to the public

There are two avenues through which a company can raise finance in the capital markets;

  1. Equity financing
  2. Debt financing 
  1. Equity financing

With this type of financing, the company raises finance by issuing shares to the general public.  Those who buy the shares of the company then become part owners of the company/shareholders. However, a company must first seek approval from CMA to offer shares to the public.

Advantages of equity financing

  • If your company closes, shareholder’s equity contributions will not be paid back until all the company�s creditors have been paid.
  • Your business assets do not have to be pledged as collateral in order to obtain equity investments/  sell shares to the public
  • The business/company does not have to make debt and interest payments to the shareholders


  • The company owners have to relinquish ownership and a share of the business profits to other equity investors/ shareholders
  • Owners will have to be accountable to all shareholders, who also naturally expect a return even if the company is not performing well.

Application Requirements

In approving applications to offer shares to the public, Capital Markets Authority reviews all prospectuses with the objective of ensuring full disclosure of information regarding the proposed issue and the issuers. A prospectus is a legal document containing information about the company that wishes to offer shares to the public. Below are broad guidelines on the essential process to be fulfilled when proposing to offer securities to the public;

  • All resolutions by the shareholders converting the company from private to public are duly made and filed with the registrar of companies
  • All Board resolutions authorising the sale of securities to the public and/ or the increase in authorized capital are duly made and filed.
  • A prospectus has been complied in accordance with the provisions of the Companies Act (Cap 85) (where applicable), the Capital Markets Authority Statute 1996 and all the rules and regulations under the statute.
  • The prospectus includes all amendments, clarifications or additional information as may be prescribed by CMA.
  • The prospectus and the timing of the issue have been approved by CMA.
  • The prospectus has been filed and registered with the Registrar of Companies  (where applicable )  before the commencement of any publicity campaigns

Main Contents of a Prospectus

  1. A caution  note on the first page to the effect that;
  2. Permission has been granted by CMA to the issuer to offer securities which are the subject of the prospectus, to the public.
  3. The permission should not be considered as an indication of the merits of the issuer or issue
  4. CMA assumes no responsibility for the correctness of any of the statements or opinions in the Prospectus

ii).     The purpose of the issue, the use of the proceeds as well as the adequacy of the proceeds

iii).   Statement on legal affairs and affairs of issuer

iv).    Rights of shareholders as regards dividends, interest, rights to subscribe o newshares, voting rights and so on.

v).     Company structure; the issuer shall give details of the Directors, such as their qualifications,business experience, principal occupation and other directorships. Information also must be given on the number and class of shares held by Directors and any intentions by the Directors to sell any shares within a period of one year. Details of any contracts or agreements between the Directors and the Issuer must also be revealed.

vi).    Financial Statements; the issuer must supply audited financial statements showing the financial performance of the issuer and its subsidiaries during the preceding 3or 5 years (as the case may be). However, in both cases, the audited accounts of the issuer should be prepared for a period not older than six months preceding the date of the prospectus. Where the audited accounts are older than six months, the issuer shall supply unaudited accounts reviewed by an accountant and signed by its directors for a period not older than 90 days before the date of the prospectus.

v).     Accountants report covering all the financial statements

vi).    Loan/debt profile

vii).   Information on bankers

viii).  Company policy on dividends and future developments ; the issuer shall clearly state the dividend policy and any future expectations. The issuer shall also state the business strategy to be followed and any future developments. This could include management decisions on main business activities, product development,new lines of operation, markets or customers, summary of research and development costs, raw materials, resources and manpower training policies

ix).    Professional advisor details

x).     Risk factors; the issuer must state in clear terms any risks related to its business ventures such as construction risks, licencing risks and taxation risks.

The applicant also must comply with detailed disclosure requirements in Appendix 1 and2 of the USE listing rules, which can be found on the USE website ; www.use.or.ug

  1. Debt Financing

A company also can raise finance by borrowing from the public and institutions,through capital markets. The examples of debt instruments include corporate bonds (a debt instrument that enables a company to borrow money for a long period of time) and commercial paper (a debt instrument that enables a company to borrow money for a short period of time).


  • The company does not have to give up any ownership of the company
  • The lender has no control over how to run the company whose bond s/he has purchased. All that the lender requires of the company is that the loan and interest should be paid back.
  • The company isn�t required to pay the lender dividends when it makes a profit, as is the case with shareholders.


  • The company is required to pay back the principal and interest regardless of its financial position
  • The company must have sufficient cash flow to repay the loan and interest
  • The riskier the loan is considered to be, the higher the expected interest rate.
  • Too much debt may impair your credit ratings and your ability to raise money in the future.

Summary of the guidelines for issue of Corporate Bonds and Commercial Paper

(Capital Markets Corporate Bond Guidelines, 2003 and Commercial Paper Guidelines, 2003). These are requirements of CMA; if the issuer wishes to have the bond or commercial paper listed on the USE, the issuer should meet the requirements of the USE listing rules which can be found on the USE website; www.use.or.ug

Offer documentThe issuer should submit to CMA a prospectus or information memorandum which complies with all the requirements for issue of securities under the Capital Markets (Prospectus Requirements) Regulations 1996 as amended , and on approval, publish the said  a prospectus or information memorandum
Minimum paid up share capital and reservesUgx 1 Billion ( it shall be maintained at that level during the period the commercial paper remains outstanding )  
ProfitabilityProfits in 2 of the last 3 years
Total indebtedness including new issueMinimum 400% of net worth or gearing ratio of 4:1
Weighted average of funds from operations to total debt40% for the three accounting periods preceding the issue
Minimum size of issueUgx 500 million
Minimum size of lotsUgx 100,000
Accountants report (Covering the last 3 financial years)Disclose the following: – Earnings before interest and taxes ( EBIT) interest cover  – Funds from operations to total debt (%) – Free cash flow to total debt (%) – Total free cash flow to short term obligations – Net profit margin – Post tax return (before financing) on capital employed – Long term debt to capital employed ratio – Total debt to equity ratio – Any other information that CMA may deem necessary
Cash flow projectionFor the next 12 months
Continuous disclosure– Issuer should disclose to CMA any information that affects its credit worth – Half yearly unaudited and annual audited financial statements during the period of the bond to be submitted to CMA and published in a local daily newspaper with national circulation
Guaranteed bondsGuarantor should submit to CMA – a no objection from Bank of Uganda where guarantor is a financial institution – A no objection from the Uganda Insurance Commission where guarantor is an insurance company – Financial capability statement certified by the issuer�s auditors – Financial capability report from a credible credit rating agency where guarantor is a foreign company
Public announcementIssuer to make a public announcement in electronic and print media with nationwide circulation at least one week before the issue opens
Appointment of advisorsIssuer should appoint – Advisers for the issue – Placing agents – Receiving bank – Payment and settlement agents – Approved registrar – Trustee
Fees0.1% of the issue (fee prescribed in the CMA (prospectus Requirements) Regulations 1996 as amended.


  1. Main difference between corporate bonds and commercial paper is tenure; while commercial paper is a debt instrument with maturity of less than one year, maturity of corporate bonds is a year or more.
  2. The financial requirements above should be maintained throughout the period the commercial paper/corporate bond remains outstanding
  3. Cases for guarantee
    1. In case a prospective issuer of corporate bonds cannot meet CMA�s requirements regarding paid up capital and reserves, the issuer should obtain a financial guarantee from a bank or other institution recognised by CMA.
    1. Where the issuer of commercial paper is not a company listed on the stock exchange, the issue must be guaranteed.

For further information and guidance, please contact us at the address below;

Capital Markets Authority

Floor 8Jubilee Insurance Center

14 Parliament Avenue

P. O. Box 24565


Tel :  +256414 342788, 312 264950

Fax : +256 414 342803

E-mail: info@cmauganda.co.ug

Website: www.cmauganda.co.ug