The Ministry of Finance, Planning and Economic Development has proposed to make amendments to The Foreign Exchange (Amendment) Act 2023, which would see the capital requirement for one to establish a foreign exchange bureau increased from the current Shs50M to Shs200M.
Currently, Bank of Uganda requires forex bureaus to have a minimum capital of 50 million Ugandan shillings (about $14,000) and this capital should be in the form of cash or bank guarantees, but if the proposal is passed into law, this will shoot up to Shs200M.
The proposal is targeting section 5 of principal Act reading; Section 5 of the principal Act is amended to read; “(3) “The minimum paid up share capital to carry out foreign exchange business shall be two thousand five hundred currency points. With a currency point being equivalent to Shs20,000 this translates to Shs200M.
Government is also seeking to increase the minimum paid up share capital to carry out money remittance business to ten thousand currency points, equivalent to Shs50M.
The Ministry is also seeking Parliamentary approval to give the Governor of Bank of Uganda, the entity supervising forex bureaus, statutory instrument made in consultation with the Minister, to revise the minimum capital requirements for foreign exchange business and money remittance business without first seeking Parliamentary approval as is the practice.
The Ministry is also seeking to insert a new clause in Section 5 of the Principal Act to provide for modalities upon which Bank of Uganda can handle any Foreign Exchange Bureau that becomes undercapitalized including demanding the shareholders to raise capital within 6 months or face closure.
The Bill proposes in Clause 5 (2) “Where a foreign exchange business or money remittance business is undercapitalised, the Bank of Uganda shall immediately take the following action- (a) require the directors to submit a written explanation detailing the causes of the undercapitalisation and the measures being taken by the foreign exchange business or money remittance business to rectify the undercapitalization.”
The Bill added, (b) where the foreign exchange business or money remittance business remains undercapitalised for two consecutive quarters, the Bank of Uganda shall order the shareholders or directors of the foreign exchange business or money remittance business to recapitalise the foreign exchange business or money remittance business within a period not exceeding one hundred and eighty calendar days from the date on which the order is received by the foreign exchange bureau or money remittance business.
The Ministry of Finance further proposed, “Where the shareholders or directors fail to recapitalise the foreign exchange business or money remittance business within the time prescribed under paragraph (b), the Bank of Uganda shall revoke the licence of the foreign exchange business or money remittance business.”
Government has also proposed to amend Section 17 of the Principal Act by increasing fines where; Any person who engages in the business of dealing in foreign exchange without a licence, fails to provide information required under section commits an offence and is liable, on conviction, to a fine not exceeding 1000 currency points (Shs20 Million) up from Shs2 Million or imprisonment not exceeding two years or both such fine and imprisonment.