MTK Uganda, once regarded as one of Uganda’s biggest agro and animal health companies, has suffered another major legal setback after the High Court ordered it to pay more than Shs 640m to French animal health giant Ceva Sante Animale over unpaid veterinary drugs.
The ruling adds to the growing evidence of the financial troubles that have hit MTK Uganda since the death of its founder, businessman Xavier Kitaka, in 2020.
Before his death, Kitaka had built MTK into what many considered one of Uganda’s largest agrochemical and animal health businesses.
The company dealt in crop protection chemicals, public health products, human medicine, and veterinary drugs. For years, MTK was a dominant player in Uganda’s agricultural and animal health sector.
However, after Kitaka’s death, the company began facing serious financial challenges. Some of its properties have since reportedly been taken over because of unpaid debts, including several vehicles and buildings.
MTK’s struggles are a lesson to many Ugandan entrepreneurs whose businesses collapse after the death of their founders, often because they leave no strong succession structures.
We have seen this in the case of Andrew Kasagga (Zzimwe) and Apollo Nyegamahe (Aponye), whose businesses have not survived their deaths.
MTK’s latest legal troubles arose from a commercial relationship it entered with Ceva Sante Animale, a French multinational company operating in the animal health sector.
The two companies had worked together for years under a distributorship arrangement where MTK had distributed Ceva’s veterinary products in Uganda since 2008.
The original distributorship agreement reportedly expired in 2014, and attempts were later made to renew it, including discussions around a draft agreement prepared in May 2017, but the parties never formally signed a new contract.
Despite the absence of a fresh written agreement, business between the two companies continued.
In November 2018, Ceva and MTK entered a verbal agreement under which Ceva would supply veterinary drugs and related products to MTK on credit.
The arrangement worked in a straightforward way.
MTK would place orders for animal drugs, and Ceva would then supply the products and issue invoices showing when payment was due.
Ceva supplied the products as agreed, and the products were shipped to Uganda using bills of lading and invoices that were later presented in court as evidence.
Justice Stephen Mubiru, who heard the case, explained that even without a single signed contract document, commercial agreements can still be legally valid if the conduct and paperwork clearly show that both sides intended to do business.
“Regardless of how disorganised the paperwork might be, all related documents, for example, purchase orders, invoices, delivery notes, and email chains, are read together as a single instrument to understand the whole agreement,” he said.
Trouble started after MTK imported the veterinary products for a government trypanosomiasis control project.
MTK argued that the products had specifically been brought into the country for supply to the government with Ceva’s authorisation.
However, MTK said things later changed after Ceva allegedly created another local company called Veribrand Uganda Limited to directly handle the business operations.
According to MTK, that decision led to the revocation of MTK’s manufacturer authorisation, making it impossible for the company to supply the products to the government as originally planned.
MTK claimed that after losing the government contract, it tried to reduce losses by selling some of the products on the open market.
The company managed to sell products worth Shs 233 million and sent that money to Ceva.
But MTK said many of the remaining products expired before they could be sold.
The company argued that Ceva should therefore bear responsibility for the losses because it changed the business structure in Uganda.
Justice Mubiru rejected this argument, saying that once MTK ordered the products and Ceva delivered them, MTK became legally responsible for payment regardless of later business difficulties.
“The distributor assumes the risk of resale and is generally liable for payment to the manufacturer regardless of subsequent events,” he said.
Justice Mubiru also noted that MTK failed to properly defend itself during the hearing because its lawyers from Muwema & Company Advocates said they had “lost contact with their client and could not present witnesses or evidence.”
He described that explanation from MTK’s lawyers as unsatisfactory and closed MTK’s defence case.
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Ceva, which was represented by MMAKS Advocates, then proceeded to present its evidence unchallenged.
The court heard that Ceva supplied goods worth more than Shs 1.004 billion through invoices issued between November 2018 and April 2019.
MTK paid part of the debt, including a payment of Shs 390 million made on September 13, 2019.
However, an outstanding balance of Shs 640 million remained unpaid.
The court also relied on email exchanges in which MTK officials reportedly acknowledged the debt and promised payment plans.
Justice Mubiru concluded that Ceva had successfully proved its claim.
“There being no credible evidence proving that the amount claimed was paid, this Court finds that the defendant owes the plaintiff the sum of Shs 640 million claimed, and it is accordingly awarded,” he ruled.
He ordered that the debt attract interest at a rate of 10.11% per year from August 27, 2021, until full payment.
The ruling now adds another chapter to the difficult post-Kitaka period for MTK Uganda.
For many Ugandan entrepreneurs, MTK’s story remains one of the clearest examples of how quickly even major family-founded businesses can struggle after the death of a dominant founder.
