In a decisive ruling delivered on July 25, 2025, the Commercial Division of the High Court of Uganda upheld the legality of a $10 million (approx. shs 38 billion) loan facility that led to the foreclosure and sale of properties owned by Simbamanyo Estates Ltd.
Justice Harriet Grace Magala dismissed all claims of fraud, illegality, and misconduct brought against Equity Bank Uganda, Equity Bank Kenya, and Bank One Ltd of Mauritius, affirming that the transactions were lawful and the securities enforceable.
The dispute stemmed from a series of loans dating back to 2012, including an initial $6 million syndicated facility jointly provided by Equity Bank Uganda and Equity Bank Kenya.
Later, in 2017, Simbamanyo acquired a $10 million bridge loan from Bank One to refinance earlier facilities and complete a hotel project. When the borrower defaulted, Bank One invoked a standby letter of credit issued by Equity Bank Kenya. This triggered a post-import finance loan of the same value from Equity Bank Uganda, which ultimately led to the foreclosure and sale of Simbamanyo’s mortgaged assets.
Simbamanyo challenged the entire financing arrangement, alleging that the foreign banks were conducting unlicensed financial institution business in Uganda, in violation of the Financial Institutions Act. However, the court found that foreign lending to Ugandan entities is not prohibited, provided the lender is not taking deposits within Uganda. Citing both the law and a 2020 statement from the Bank of Uganda, the court confirmed that the transactions were outside the regulatory scope requiring Bank of Uganda licensing.
Justice Magala explained that the arrangements constituted syndicated lending, a legal and internationally recognized structure where multiple banks co-finance a loan. She noted that Equity Bank Uganda acted as the lead arranger and that the syndication was necessary due to lending limits imposed on local banks. As such, the facilities were validly structured and lawfully executed.
The judge also addressed procedural issues raised by Simbamanyo, including the absence of a utilization request before the post-import loan was activated and the lack of a formal lender designation. The court held that these steps were not mandatory under the terms of the loan agreements, and that the 1st Defendant, Equity Bank Uganda, was well within its rights to reimburse Equity Bank Kenya upon the triggering of the standby letter of credit.
Justice Magala further ruled that Simbamanyo could not benefit from the financing and later disown the obligations, invoking the principle against approbation and reprobation. She found no evidence of coercion, fraud, or unethical conduct by the defendants.
In conclusion, the court upheld the UGX 38 billion loan arrangement, declared the securities and sale of Simbamanyo’s properties valid and lawful, and dismissed the suit with costs. The ruling sets a significant precedent in Uganda’s banking sector, especially regarding the legality and enforceability of foreign syndicated lending agreements.
