Insolvency is one of the most misunderstood phases of the business cycle. In Uganda—where entrepreneurs are celebrated for their resilience and ingenuity—it is also one of the most stigmatised. But few people understand the anatomy of financial distress, turnaround, and business rescue as deeply as Kabiito Karamagi, Managing Partner at Ligomarc Advocates, one of Uganda’s leading insolvency and corporate restructuring practices.
In an extensive interview with CEO East Africa Magazine, drawing on his more than two decades of restructuring companies, rescuing distressed enterprises, and advising banks, boards and business owners, Kabiito offered a rare, practical, brutally honest look into what really drives businesses into insolvency, how they can avoid it, and how they can survive and rebuild when crisis hits.
This feature distils those lessons—using his own words—to help entrepreneurs, CEOs, boards, lenders, and policymakers understand what it takes not just to stay afloat, but to recover when the storms come.
1. The First Truth: Financial Distress Is Normal
If there is one myth Kabiito wants business owners to discard immediately, it is the idea that financial trouble is unusual or shameful. As he told CEO East Africa Magazine, “Financial distress is a normal occurrence. Ugandans tend to scandalise and stigmatise people facing financial challenges. But answer me honestly: Have you always been financially afloat? Do you know anyone who hasn’t faced some sort of financial hardship?”
He argues that this cultural stigma is dangerous because it prevents entrepreneurs from acting early or engaging openly with creditors—two things that are critical in rescuing a distressed business.
Using global examples, he adds: “Don’t you think the owners of Blackberry, Kodak, or folks like Zzimwe probably felt as secure at some point?”
In other words, no company is immune from distress—not even giants.
2. Engage Early, Honestly, and Humble Yourself
According to Kabiito, the worst mistake Ugandan entrepreneurs make is running away, keeping quiet or pretending things are fine when the business is sliding.
His first advice is simple but transformative: “Have a frank discussion with your creditors about your situation. It doesn’t help when you run away or decide to keep silent. Engage the creditors and be honest about your situation – please don’t lie.”
And while at it, “it would also be helpful to adjust your lifestyle to reflect your prevailing situation”.
He urges business owners to abandon pride, sell the illusion of success, and adjust their lifestyles when trouble hits:
“It doesn’t help when you buy a new four-wheel fuel guzzler as your creditors’ grass/suffer.”
Instead, he recommends mapping creditors, identifying the most pressing obligations, and building a communication plan that reassures them: “What the creditors need to know is how or when they will be paid… give assurances that a solution is in the offing. Do what it takes to calm those nerves.”
In practice, this often means personal meetings: “Invite these people to a cup of tea – sorry, I am a Mutooro, I only take tea – somewhere quiet.”
The key is sincerity. Creditors can forgive debt, restructure terms, or give time—but they do not tolerate dishonesty.
3. Build Goodwill When Times Are Good
One of Kabiito’s most powerful insights—rarely discussed in turnaround literature—is the role of goodwill in determining whether creditors will help save a distressed business.
As he puts it: “The quality of support you will get during this storm will depend on the goodwill you have built during the sunny weather.”
This goodwill, he explains, is not something a business can summon in a moment of crisis—it is earned quietly, consistently, and long before trouble appears. It is built through the small, disciplined behaviours that define a company’s character in stable times:
- Delivering products and services whose quality customers never have to doubt.
- Treating employees with dignity, fairness and opportunities to grow, so they become ambassadors rather than critics.
- Honouring obligations to suppliers promptly, signalling reliability and respect in every transaction.
- Cultivating an emotional connection with customers, the kind rooted in trust, authenticity, and shared values.
These everyday actions accumulate into a reservoir of goodwill that businesses can draw from when they hit turbulence. It is this reservoir—built over years, not days—that often determines whether creditors cooperate, whether customers remain loyal, and whether a company gets the breathing space it needs to recover.
He gives the example of CJ’s restaurant, which survived a damaging rumour because of years of goodwill: “Instead, the sales of CJ’s milkshake went up… That’s because of the emotional connection the owner has built with us through the values he set for himself and his business.”
Such goodwill can be the difference between creditors cooperating or abandoning you.
4. Work With Professionals—And Don’t Wait Until It’s Too Late
Kabiito insists that early, skilled professional intervention can save a business long before creditors close in: “Seek professional advice from qualified professionals, that’s lawyers and accountants… Your accountant could help you derisk your tax obligation… your lawyer could help you negotiate better contract terms and buy you time.”
Then he adds a metaphor every entrepreneur should pin to their wall: “Don’t wait for the rains to come to buy an umbrella. Make friends with a lawyer when you can.”
However, he stresses the importance of choosing skilled professionals: “Not every professional understands these things… Turn-around processes require a steeliness with flexibility and open-mindedness to sound creativity and a measure of risk.”
His restructuring practice has rescued companies by creating turnaround plans, negotiating with creditors, managing receiverships, and rebuilding business operations.
Ligomarc’s approach is to work collaboratively with debtors and lenders: “How about we sell this together? Maybe you need some more time, but show me what you are going to do to turn the situation around.”
This collaborative, trust-based model has delivered an 84% success rate in completing workouts without litigation.
5. Integrity: The Number One Predictor of Whether a Business Will Survive Restructuring
When asked what separates companies that emerge from crisis from those that collapse, Kabiito answered without hesitation: “Integrity. Where this is lacking, it’s unlikely that any restructuring can even start.”
Integrity, Kabiito, says, plays out through transparent financial reporting, honest disclosure, respect for agreements, and consistent leadership behaviour.
Without integrity, creditors will never cooperate, professionals will struggle, and restructuring efforts will fail.
6. The Other Critical Factors: Relationships, Leadership, and the Right Team
Beyond integrity, Kabiito highlighted three essential drivers of a successful turnaround:
a) Relationships — “The second is the quality of relationships the distressed company has developed with its key stakeholders.”
Strong relationships make creditors more willing to negotiate.
b) Leadership— “Where the leadership allows a level of vulnerability and is readily available and accountable to the turnaround process, you will have a better chance of recovery.”
Turnaround requires humility, availability, and emotional resilience.
c) The Professionals You Involve — “Where the professionals lack… flexibility and open-mindedness to sound creativity… the restructure is likely to fail.”
Turnaround is a technical, numbers-heavy, emotionally volatile process. It needs the right people.
7. For Creditors: Cooperation, Not Mob Justice
In Uganda, creditors often panic, rush to execute security, or run for whatever assets they can grab. This behaviour, Kabiito warns, harms everyone.
As he told us: “The natural and primitive instinct is for everyone to grab what they can from the dying and run. That’s creditor mob justice if you like, that fouls the business ecosystem. It’s a race to the grave because the distressed entity naturally dies in the end.”
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But he argues that lender cooperation can revive companies—and preserve long-term value.
“What if all the creditors cooperated and worked together to ensure the resuscitation of the distressed company?”
In his practice, they have attempted multi-creditor rescue arrangements—even though not all succeed.
He laments failures like Uchumi and Nakumatt, which could have survived if creditors had aligned.
8. Early Warning Signs: Decline Always Begins Quietly
Kabiito describes insolvency as a slow-moving storm that entrepreneurs often ignore: “Insolvency situations rarely come out of the blue. The situation slowly creeps up on you over time.”
He lists several early-warning indicators that entrepreneurs should never ignore, including declining sales and margins, loss of star employees, rising customer complaints, competitors gaining ground, delayed supplier payments, increasing debt, and overstretched credit terms.
When these signs appear, most businesses still procrastinate: “Managers simply plough in as the rot deepens.”
By the time URA issues agency notices or a bank recalls a loan, the company has entered what he calls the “crisis stage”—and survival becomes harder.
9. Treat the Disease, Not the Symptoms
Many businesses, he observes, respond to distress by trying to fix only the immediate crisis — taking new loans, firing staff, offering panic discounts, borrowing from moneylenders, or selling off key assets.
But these do not address the underlying causes.
As he explains: “Many a time, the prescriptions made to address the problem are designed to mitigate the crisis, leaving the root problem unaddressed. In effect, they treat the symptoms but leave the diseases to fester.”
Real restructuring requires addressing operational inefficiencies, governance gaps, poor leadership culture, lack of innovation, and broken internal systems.
These deeper issues determine whether a company can recover.
10. Corporate Governance: The Foundation for Avoiding Insolvency
In the main interview, Kabiito makes a strong case that weak governance structures are a major cause of business failure in Uganda.
“Governance is key for businesses to exist and thrive. People, for instance, fail to understand that paying your taxes improves your business since it requires systems for compliance, and systems are good for your business,” he emphasises.
He highlights examples where strong governance transformed institutions:
- Uganda Development Bank, where restructuring unearthed a UGX 50 billion discrepancy but ultimately led to institutional rebirth
- Electricity Regulatory Authority, where bold board action restored compliance, improved sector performance, and led to innovations like Yaka
These examples show that governance failures do not just cause insolvency—they can also prevent recovery.
11. Why Uganda Needs a Cultural Shift Around Insolvency
Uganda has one of the most progressive insolvency laws in Africa, yet very few businesses use it to restructure.
Why?
Because insolvency is treated as shameful, not productive.
As he explains: “The mindset of productive insolvency is to give a company a chance, and yet this hasn’t been the case.”
He also notes that even the judiciary must evolve: “Some judges will punish insolvency lawyers for being creative… for trying something new and outside the box.”
Changing this culture would save many businesses—and jobs.
12. When All Else Fails: Patient Capital Can Save Viable Companies
Kabiito reveals that many distressed businesses fail simply because they cannot access capital during a turnaround: “These distressed businesses… often need financing. I see this as an investment opportunity for money lenders, especially if they formalise themselves.”
His firm’s initiative, Rekindle Capital, was created for this purpose—to bring patient capital to viable but distressed companies.
This kind of funding is the missing link in Uganda’s corporate rescue ecosystem.
13. Practical Lessons for Every Business Owner — A Deeper Look
For Kabiito Karamagi, the pathway to business survival is neither mysterious nor reserved for elite corporations. It is a collection of disciplines, habits, and mindsets that any business—large or small—can cultivate long before insolvency becomes a threat. While every crisis has its unique features, the principles that prevent collapse or enable recovery are surprisingly universal.
a) Build structures, not shortcuts: Ugandan businesses frequently operate on improvisation, personality, and relationships rather than systems. Kabiito’s insights reveal that this informality becomes a silent killer when times turn tough. Establishing clear governance frameworks, documented procedures, financial controls, and compliance routines creates institutional stability—the kind that withstands shocks. As he has repeatedly stressed, systems are not bureaucratic burdens; they are the spine of a resilient enterprise.
b) Listen to the whispers before they become screams: Decline rarely arrives dramatically. It begins with small, almost unnoticeable shifts—slower month-end collections, a dissatisfied long-term client, a product that stops moving as fast as it used to. Businesses that survive are those whose leaders are attuned to these faint signals and intervene while the situation is still reversible. This means cultivating a culture of transparency, encouraging staff to surface problems early, and building dashboards that highlight changes in volumes, margins, and customer behaviour.
c) Move decisively when the ground starts to shake: Procrastination is one of the most dangerous—but also one of the most widespread—entrepreneurial habits. Leaders who wait for the “right moment” to address early signs of distress often find themselves cornered by banks, tax authorities, or lawsuits. Successful turnarounds are driven by people who act before the business enters crisis mode. This includes calling creditors early, reorganising teams, trimming non-essential spending, or revisiting the business model before conditions deteriorate further.
d) Invest in relationships long before you need them: The lesson is simple but profound: the way you treat people during stability determines how they treat you in times of distress. Employees, suppliers, customers, and even regulators become part of a business owner’s “informal safety net.” Reliable partners extend credit terms, vouch for your character, advocate on your behalf, or give you time to reorganise. Goodwill cannot be manufactured during a crisis—it must be accumulated over years through fairness, consistency, and integrity.
e) Embrace humility and radical transparency during difficult times: Survival in a turnaround hinges on a leader’s willingness to be accountable, vulnerable, and open. This is especially difficult in Uganda’s entrepreneurial culture, where success is expected to be constantly achieved. Yet the leaders who pull their companies out of crisis are those who can say, “We are not okay, and here’s what we’re doing about it.” This honesty disarms creditors, reassures employees, and invites collaboration rather than confrontation.
f) Bring in experts—because guesswork is expensive: Restructuring is multidisciplinary: it requires legal interpretation, financial modelling, operational re-engineering, tax planning, and sometimes emotional intelligence. No single entrepreneur can master all these areas. Businesses that survive are those that recognise their limitations early and bring in people who have navigated distress before. The cost of expertise is always lower than the cost of a failed turnaround.
g) Replace the ‘every-man-for-himself’ instinct with cooperation: In a distressed environment, panic often drives suppliers, lenders, and partners to act defensively. But this instinct is self-defeating. When key stakeholders refuse to align, they accelerate the downfall of the very business that supports their own revenue streams. Kabiito’s work demonstrates that coordination, not chaos, gives companies the breathing room needed to restructure. Owners must learn the skill of convening stakeholders and building consensus around survival.
h) Make integrity your greatest asset: Finally—and most critically—integrity remains the non-negotiable pillar of any successful recovery. A leader’s reputation determines whether creditors trust their projections, whether staff stay committed, and whether professionals are willing to fight on their behalf. In turnaround situations, credibility is more valuable than capital. Without it, even the most technically sound rescue effort collapses under mistrust.
Insolvency Is Not the End — It Is a Turning Point
Kabiito’s insights challenge Uganda’s business community to rethink insolvency not as failure, but as part of the natural rhythm of enterprise.
He summarises it best in his philosophy on restructuring: “Company restructuring is simply part of the human experience.”
Businesses, like people, stumble. Businesses, like people, can heal. With integrity, governance, professional guidance, and timely intervention, even a distressed company can rise again—stronger, wiser, and more sustainable.
