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WHAT IS A COMPANY?
A company is a special legal vehicle created to do business in the society. It can be constituted
by an association, a group of associations, an individual or a group of individuals or a
combination of associations or individuals.
Section 383 of Act 992 provides that “company” means a body formed and registered under this
Act; “company limited by shares” and “company limited by guarantee” have the meanings
assigned to them in section 7.
Primarily companies exist to make business and make profits although some companies may find
the idea of profit to be nebulous. Eg. IDEG, Center for Democratic Development. The company
as an institution is also flexible to accommodate the needs of almost any type of business.
SOURCES OF COMPANY LAW
1. Statutory provisions: at the time of independence the statute in force was the 1907 Gold
coast Company’s ordinance. After independence, there was a commission chaired by
Professor Gower, whose recommendations led to the Company’s Act of 1963. Now, the
companies are governed by Companies Act, 2019 (Act 992); Partnership Act (Act 152).
2. Case law
3. Theoretical frameworks and principles

SOME LEGAL STRUCTURES FOR DOING BUSINESS

SOLE PROPRIETORSHIP

This is the simplest form of organizing and doing business. This is a one-man business. There is
no formal requirement for registration. It is unincorporated form of doing business. They are
often called “Enterprise”. Generally, because of the fact that there is no requirement for
registration, you may not be able to reserve a name for your sole proprietorship. There is
however the Business Name Registrations Act, 1962, Act 151 and so you can go ahead and
register a name. Again, the Protection against Unfair Competition Act, 2000 (Act 589) also
entitles a party to bring an action against another for unfair competition although you have not
registered. Often times, the funds for the sole proprietorship are provided by the individual. The
decision making in the sole proprietorship is very easy. Because of that also financial institutions
are quite weary when dealing with them. Because most of them are not registered, they take
decisions to benefit their own, for instance not attending to work. By virtue of the fact that the
individual and the enterprise for the purposes of the law are all the same, in terms of liability
there is no separation between the business and the individual. So, if you contract in the name of
the enterprise, it is almost the same as contracting in the name of the business.
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>there is no separate legal entity.

>owner is the same as manager.
>it is a business owned and controlled by a single or sole person.
>Under Ghanaian law, no legal status or personality is conferred on a sole proprietorship that is
distinct from the status of the proprietor, who is the owner of the business.
>the proprietorship cannot sue and be sued in its name.
>it cannot enter into legal relationship in its name.
>it cannot acquire and own property in its name
>its legal existence is linked to the existence of its owner.
>the owner may choose to register the business name under the Registration of Business Names
Act, 1962 (Act 151).
>There is no perpetual succession.
>Liability: any debt incurred in relation to the business is the personal liability of the proprietor.
<Registered sole proprietorship business name does not create distinct legal personality from the
owner, if the business is registered under the Registration of Business Names Act, 1962 (Act
151)>
Barclays Bank of Ghana Ltd. v Lartey & Ors [1978] GLR: on whether registration of
business name creates distinct legal personality?
Facts: L., during his lifetime, registered the name of his business under the Registration of
Business Names Act, 1962 (Act 151), as “Scarts.” For the purposes of his business, he took a
loan from the plaintiffs to whom he mortgaged, inter alia, his landed property with buildings
thereon as security for the loan. On the death of L., his administrators, the defendants herein,
floated a limited liability company called “Scarts Ltd.” to take over the assets and liabilities of
the business. The plaintiffs wrote to the defendants demanding repayment of the loan. When they
failed to repay, the plaintiffs caused to be issued against them an originating summons for an
order for judicial sale of the mortgaged property. Counsel for the defendants raised a preliminary
objection on the ground that the action against the defendants was misconceived. He argued that
L.’s business registered as Scarts became on registration an artificial legal entity with perpetual
succession and a distinct personality from that of L. and that it was wrong for the plaintiffs to
hold the defendants, who were only liable for the personal debts of L., liable for the indebtedness
of Scarts.
Held: a business name registered under the Registration of Business Names Act, 1962 (Act 151),
did not by the act of registration acquire any legal personality distinct from the person registering
it. A registration of business name merely protected the exclusive use and the right of the person
registering the name. Consequently, the registered name Scarts did not acquire any legal
personality distinct from L. who carried on business under that name. It followed that L. was the
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mortgagor of the mortgaged property in question and the defendants being the administrators of
L.’s estate were the proper persons to be sued.
In S.A. Turqui v Dahabieh [1987-88] GLR: under Order 48A, r 1 of the High Court (Civil
Procedure) Rules, 1954 (L.N. 140A) and the Incorporated Private Partnerships Act, 1962 (Act
152) a partnership of two or more persons carrying on business within the jurisdiction could sue
or be sued in the name of their firm. However, a business name being a mere trade name used
by one person could not commence an action because it was a mere expression and not a legal
personality.
See also Baidoo v Sam

PARTNERSHIPS

In Ghana, doing business as partnership is governed by the Partnerships Act 1962, Act 152.
Section 1(1) of Act 152 defines partnership as the association of two or more individuals
carrying on business jointly for the purpose of making profits. Partnerships can be created by an
oral agreement or can be implied based on the conduct of the members of the business entity or
through a formal written agreement. Partnership has a minimum of two (2) membership and the
maximum number is 20, as under sections 1 and 2 of Act 152.
Baidoo v Sam (1987-88) GLR: according to section 1 of Act 152, A partnership generally
meant the coming together of at least two but not more than twenty individuals with no body
corporate as a member in an association constituted and statutorily registered under the Act for
carrying on business jointly for the purpose of making profit.
In Mensah & Ors v. Adu & Ors (1965) GLR: The definition of a partnership in section 1 of
the Partnership Act, 1890 of England (53 & 54 Vict.,c.39), as “the relation which subsists
between persons carrying on a business in common with a view of profit” is applicable in Ghana,
though the Partnership Act, 1890, was passed after 1874. This is because the Act is merely
declaratory of the common law. This definition does not mean that a combination of persons
doing business together for profit cannot be a partnership in law unless they share the profits of
their individual benefit. <Note that the definition of partnership by Ollenu in Mensah v Adu
is no longer a good law having passed sections I, 2 and 3 of Act 152, as said in Baidoo v
Sam>
>>A body corporate cannot form a partnership with a person. Section 2(2) of Act 152 provides
that a partnership consisting of more than twenty persons or of which a body corporate is a
member shall not be registered under this Act.
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In partnerships, all assets of the business are owned directly by the partners. A partnership which
does not specifically exclude the partnership Act would be governed by it. In line with the
partnership Act, each partner is entitled to participate in the management of the partnership and
entitled to the equal share of the profit, be indemnified in respect of liabilities incurred by other
partners and entitled not to be fired or sacked by the other partners.
Registration of Partnership:
Section 3 of Act 152 provides the requirements and registration method of partnership, which
includes name of the partnership, general nature of doing business, address of the partnership,
place and date of commencement.
Section 4 of Act 152 provides as follows: (1) on registration the Registrar shall certify under seal
that the firm has been registered and is incorporated and the certificate shall state the names of
the partners and that their liability is not limited. (2) The Registrar shall insert a notice in the
Gazette stating the issue of the certificate and the terms of the certificate. (3) The certificate, or a
copy of the certificate certified as correct and signed personally by the Registrar, or the Gazette
containing the notice referred to in subsection (2), is conclusive evidence that the firm has been
duly incorporated under this Act.
Legal status of partnership
Section 10(1) From the date of registration mentioned in the certificate of registration issued in
accordance with section 4, the firm is a body corporate under the firm name, distinct from the
partners of whom it is composed, and capable of exercising the powers of a natural person of full
capacity in so far as those powers can be exercised by a body corporate. Subsection 3 provides
that although the firm is a body corporate, each partner in the firm is liable, without limitation,
for the debts and obligations of the firm in the manner referred to in section 14, but is entitled to
an indemnity from the firm and to contribution from the co-partners in accordance with the rights
of that partner under the partnership agreement.
Baidoo v Sam (1987-88) GLR: Registration under Act 152 prerequisite for operation of
partnership.
Facts: In 1975 the plaintiff registered a business name “Unity Salt Industries” (U.S.I.) in
accordance with the Registration of Business Name Act, 1962 (Act 151). Under that name he
and one A. a policeman, produced salt from a plot of land that had already been acquired from
Edina Traditional Council (E.T.C.). In 1980 A. with the consent of E.T.C. assigned the plot of
land to the defendant. In acknowledgement of the sale A. executed a transfer certificate (exhibit
2) in favour of the defendant. Subsequently the plaintiff claiming that he was A.’s partner
brought action against the defendant for, inter alia, a declaration that he and A jointly acquired
the plot of land from E.T.C. and registered and operated U.S.I. as partners and so A. alone could
not sell U.S.I. to the defendant.
Held: by the law governing corporate and unincorporated associations or companies “Unity Salt
Industry” was only the name under which the registered proprietor, a single individual, the
plaintiff. Sections 1 and 4 (1) of the Incorporated Private Partnership Act, 1962 (Act 152)
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prohibited the carrying on of a partnership business after 1 April 1963 unless the partnership
had been registered under the Act. A partnership generally meant the coming together of at least
two but not more than twenty individuals with no body corporate as a member in an association
constituted and statutorily registered under the Act for carrying on business jointly for the
purpose of making profit. On the evidence, however, the plaintiff was not a partner but rather a
“front man” or an agent of the co-defendant who was his undisclosed principal. Accordingly,
their business relationship was not unlawful. <<it is important to note that all the names and
addresses of the partners in partnership must be registered. Where two are in agreement and one
party’s name is only registered for business for profit, it cannot be said that the two are in
partnership but sole proprietorship.> >
Levandowsky v Attorney-General (1971) GLR: Registration under Act 152 prerequisite for
operation of partnership. Whether foreign partnership not registered and not doing
business in Ghana can sue.
Facts: The plaintiffs were a firm of partnership that did not have any physical or visible assets in
Ghana, nor were the partners resident in Ghana. In the substantive action the plaintiffs
successfully sued the government with respect to a debt which arose out of an agreement dated
13 March 1962. When the plaintiffs asked for leave to go into execution the defendant raised a
preliminary objection, submitting that since the plaintiffs were not registered as a firm of
partnership under Act 152 then they were prevented from instituting any legal proceedings
having been caught by section 9 (1) (b) of Act 152. It was also submitted that because the
plaintiffs instituted this action in the High Court of Ghana and obtained judgment, then with
reference to Order 48A, r. 1, they must be taken to have carried on business in Ghana. In reply it
was submitted that the plaintiffs were a foreign firm who never carried on business in Ghana as
all of the work relevant to the agreement was done abroad and therefore section 9 (1) (b) of Act
152 was inapplicable.
Held: A foreign partnership firm will have “carried on business” in Ghana if it has possessed
within Ghana a place of business which was held in the name of the firm and which was the
location of the firm’s business transactions carried out by persons in the employment of the firm.
The plaintiffs had never “carried on business” in Ghana within the meaning of section 4 of Act
152 and it was therefore not necessary for them to have had their partnership firm registered
before instituting legal proceedings.

>>Agency relationship of Partnership: A partnership by law is governed by the principle of

agency and a partner is an agent of the partnership. Section 12(1) of Act 152 provides that a
partner is an agent of the firm for the purposes of the business of the firm.
Sec 12(2) provides that the acts of a partner binds the firm if, (a) the acts were authorised,
expressly or impliedly, by the other partners or were subsequently ratified by them; (b) the acts
were done for carrying on in the usual way business of the kind carried on by the firm, unless the
partner so acting does not in fact have the authority to act for the firm in the particular matter and
the person with whom that partner is dealing knows that the partner does not have the authority.
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The point is that the retrospective act of a partner, authorized by the partnership, can be ratified.
< See Section 12 of Act 152 wholly>
Binding Acts on Behalf of the Firm: Section 13(1) of Act 152 provides that an act or
instrument relating to the business of a firm and done or executed in the firm name, or in any
other manner showing an intention to bind the firm by a person so authorised, whether a partner
or not, is binding on the firm. (2) Subsection (1) does not affect a general rule of law relating to
the execution of deeds or negotiable instruments.
Nature of liability(s) of firm and partners (outgoing and incoming partners): Section 14 of
Act 152 provides that a partner in a firm is jointly and severally liable with the firm and the other
partners for the debts and obligations of the firm incurred while that partner remains a partner.
Under section 15 –
(1) A person who is admitted as a partner into an existing firm is not liable to the creditors of the
firm for anything done before that person became a partner.
(2) A partner who retires from a firm shall not cease to be liable for the debts or obligations of
the firm incurred before the retirement.
(3) A retiring partner may be discharged from an existing liability by an agreement to that effect
between the retiring partner and the firm and the creditor, and this agreement may be expressed
or inferred as a fact from the course of dealing between the creditor and the firm as newly
constituted.
(4) Where a person deals with a firm after the retirement of a partner whom that person knew to
be a partner in the firm, that person is entitled to treat the retired partner as still being a partner
until that person has notice of the retirement and the retired partner is liable accordingly.
(5) A person who had dealings with the firm prior to the retirement shall not be deemed to have
notice of the retirement, unless that person has actual knowledge of the retirement.
(6) An advertisement in a daily newspaper circulating in the district in which is situated the
principal place of business of the firm is notice to persons who have not had dealings with the
firm prior to the retirement.
(7) The estate of a partner who dies or has an insolvency order made against that partner under
the Insolvency Act, 1962 (Act 153) or, subject as provided by subsections (4) and (5) of this
section, a partner who retires, is not liable for the debts or obligations of the firm contracted or
incurred after the date of the death, insolvency order, or retirement respectively.

The Concept of Holding-Out in Partnership:

The concept of holding-out is merely an application of the ‘Principle of Estoppel’. That is, a
person is prevented or estopped from denying a statement he made or existence of facts that he
makes another person believe. Holding-Out refers to a course of action or omission which leads
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others to believe that the person possesses an authority which in fact he does not. In simple
terms, if a person represents or knowingly permits others that he is a partner of a particular firm,
and some other person carried on some transaction believing him to be a partner of the firm, then
he is estopped from denying his representation later on.
The concept of holding-out has been provided under section 16 of Act 152. It provides that (1) A
person who by words spoken or written or by conduct personally represents, or who knowingly
allows that person to be represented, as a partner in a particular firm is liable as a partner to any
other person who has, on the faith of that representation, allowed the firm to incur debts or
obligations to that person whether the representation has or has not been made or communicated
to that other person by or with the knowledge of the apparent partner making the representation
or suffering it to be made. (2) Where after the partner’s death or retirement the firm continues to
do business in the same firm name, the continued use of that name or of the former partner’s
name as part of the name, shall not of itself make the deceased partner or the estate of that
deceased partner liable for the debts or obligations of the firm contracted or incurred after the
death or retirement.
>> One area that the partners of a partnership cannot look over is the issue of limited liability.
Under the partnership Act, each partner is jointly and severally liable for the debts of the
partnership. If a partnership grows and they exceed 20 in Ghana, by law you have to convert into
a Company but that is not to say that one person cannot form a company. As opposed to sole
proprietorship, in a partnership, decision making can be very difficult. The financial institutions
are quite at ease when it comes to dealing with the partnerships. If one person is hiding you may
find another one.
Mensah & Ors v Adu & Ors (1965) GLR: on whether association is a partnership
Facts: The Nkwanta State Council upon being advised that it had no authority to enter the timber
business, decided to encourage any well-organised body that could engage in such business on
its behalf. Subsequently, the Council formed a partnership Nkwanta Industrial Corporation
which entered the timber business. The plaintiffs discovered that the defendants had registered
their names under the Registration of Business Names Ordinance as sole proprietors of the
business. The plaintiffs therefore brought the present action for a dissolution of the partnership,
an account, the appointment of a receiver and manager of the business pending its final winding
up and an injunction restraining persons other than the receiver and manager to be appointed
from interfering in the business.
Held: The definition of a partnership in section 1 of the Partnership Act, 1890 of England (53 &
54 Vict.,c.39), as “the relation which subsists between persons carrying on a business in common
with a view of profit” is applicable in Ghana, though the Partnership Act, 1890, was passed after
1874. This is because the Act is merely declaratory of the common law. This definition does not
mean that a combination of persons doing business together for profit cannot be a partnership in
law unless they share the profits of their individual benefit. The original association between the
first two plaintiffs, the defendants and Kwaku Banin as well as the subsisting association
between the plaintiffs and the defendants were therefore partnerships in law, in spite of the fact
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that the persons involved had agreed to employ for the welfare of the Nkwanta State the profit
from their doing business together.
Nature of interests of partners
Section 35 - The interests of the partners in the firm constitute a personal estate and are not in
the nature of real or immovable property.[that is the interests of the partners are like movable
interest]
Termination and Cessation of Partnership
Section 37 -
(1) A partner ceases to be a partner in the firm in the event of
(a) the death of the partner,
(b) the partner becoming an alien enemy during a time of war,
(c) an insolvency order being made against the partner under the Insolvency Act, 1962 (Act 153).
(2) If the other partners so elect in writing, a partner shall cease to be a partner in the firm if that
partner suffers the interest of that partner in the partnership to be charged under section 20 for a
separate debt.
(3) A partnership agreement may validly provide that on the occurrence of any of the events in
the agreement a partner shall cease to be a partner automatically or at the option of the other
partners.
(4) On application by a partner, the High Court may order that a partner shall cease to be a
partner in the firm
(a) when the partner is shown to the satisfaction of the Court to have become permanently of
unsound mind;
(b) when the partner is shown to the satisfaction of the Court to have become in any other way
permanently incapable of performing the requisite part of the partnership agreement;
(c) when the partner is found guilty of a conduct that, in the opinion of the Court, considering
the nature of the firm’s business, is calculated prejudicially to affect the carrying on of the
business;
(d) when the partner willfully or persistently commits a breach of the partnership agreement, or
the conduct of the partner in matters relating to the firm’s business is not reasonably practicable
for the other partners to carry on the business in partnership with that partner; or
(e) where circumstances have arisen which, in the opinion of the Court, render it just and
equitable that the partner should cease to be a partner in the firm.
>>Partnership seizes to exist on the death of one partner or the resignation of one partner.
In Mensah & Ors v. Adu & Ors (1965) GLR, it was held that Death of one partner brings a
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partnership to an end, and subject to agreement between the partners, the personal representative
of the deceased partner cannot join the survivors to keep the partnership alive. But upon such
dissolution the surviving partners are entitled either by themselves, or together with other
persons to form a new partnership and call it by the same name as the former. The original
partnership including Kwaku Banin was brought to an end by his death.
In S.A. Turqui v Dahabieh [1987-88] GLR: under Order 48A, r 1 of the High Court (Civil
Procedure) Rules, 1954 (L.N. 140A) and the Incorporated Private Partnerships Act, 1962 (Act
152) a partnership of two or more persons carrying on business within the jurisdiction could
sue or be sued in the name of their firm. However a business name being a mere trade name
used by one person could not commence an action because it was a mere expression and not a
legal personality.
Modes of Winding Up of Partnership
 By insolvency proceedings under the Insolvency Act
 By an order of the High Court
 By voluntary liquidation by the partners

COMPANY

Ferdinand (2021) defines a company as an entity incorporated, registered or continued in

existence under the Companies Act, 2019 (Act 992).
Act 992 defines company as a body formed and registered under this Act. Whilst every company
is a body corporate, not all bodies corporate are companies. A company is just one type of body
corporate.
>The company requires resources for its operation, and these resources are referred to as capital
of the company. The capital of the company is the resources of the company and not resources
of the owners. The capital is either provided by the owners, shareholders or members, or raised
by the company.
Management is separated from the ownership and it is the officers of the company that are
responsible for the management of the company.
Section 3 of Act 992 (Prohibition of association exceeding twenty members). It provides that a
company, or an association consisting of more than twenty persons shall not be formed for the
purpose of carrying on a business that has for the object of the company or association, the
acquisition of gain by the company or association or by the individual members of the company
or association, unless the company or association is registered as a company under this Act or is
formed in pursuance of any other enactment.
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This provision sets out the legal framework of the formation of company in Ghana.
Case: The Director: Mineral Dev Gauteng Region, Sasol Mining Ltd v SAVE.
Facts: The first respondent (‘Save’) is an unincorporated association. Its members are concerned
people who own property and live along the Vaal River. Its object, according to its written
constitution, is to assist its members to protect and maintain the environmental integrity of the
Vaal River and its environs for current and future generations with specific focus on the area
between the Letaba Weir and the Barrage - i.e. precisely the area in the immediate vicinity of the
proposed open- cast mine. It is that Save, which has more than 20 members and is not registered
as a company, is an illegal association. The SAVE sued the appellant for causing environmental
pollution.
Held: that on the facts before us it cannot be said that Save was trading or carrying on a business
with the object of the acquisition of gain. Consequently, the objection cannot be upheld. Thus, it
was held that SAVE is an illegal association.
Principle: An unincorporated association or a company with more than 20 members with the
object of not acquiring gain by the association or company is not illegal and must not be
prohibited.
Application to equitable principles and common law:
Section 5 of Act 992 provides that the rules of equity and of common law applicable to
companies shall continue in force unless they are inconsistent with a provision of this Act.
Right to form a company:
Section 6 of Act 992 provides that one or more persons may form an incorporated company
under this Act. <However, there are a number of qualifications on the person who may form a
company in terms of the number, capacity and nationality of the person.> unlike partnership, a
minimum number for the formation of a company in Ghana is one person.
So, in Salomon v Salomon, Lord Macnaghten observed that “provided the formalities of the
Act are complied with, a company will be validly incorporated even if it is only a “one person”
company and the court will be reluctant to treat a shareholder as personally liable for the debts of
the company.
 However, on the minimum number, section 7(5) of Act 992 provides that the
membership of a private company, together with debenture holders, should not exceed
fifty persons.
The use of the word “persons” in section 6 of Act 992 without restriction means that either
natural persons or artificial persons can form a company. The understanding is that a company
can, therefore, form another company and be a member or shareholder of that company. More
so, the “person” used is not restricted to only Ghanaian nationals. Therefore, a foreigner or
foreign corporation can form a company in Ghana.
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 Section 46 of the Interpretation Act 2009 of Ghana (Act 792) defines a “person’ for all
legal purposes to include an unincorporated body, trade union, corporations of persons as
well as an individual.
 NEW PATRIOTIC PARTY v ATTORNEY-GENERAL [1997-98] GLR: It was held
that ‘person’ in Article 2(1) includes body corporate. A “person” was defined in section
32 of CA 4 to include a body corporate. Moreover, the word “person” had been defined
in Article 297 of the Constitution, 1992 to include a natural as well as a legal person or a
corporate person such as the plaintiff.
Section 12 of Act 992 provides that subject to this Act, a person of the age of eighteen years and
above may apply for the incorporation of a company under this Act. [Person under section 12
means Natural Person]
Accordingly, the qualification and capacity to form a company in Ghana is 18 yrs and above.
That is, the lawful age for incorporation of a company in Ghana is 18 years and above. A natural
person who is a foreigner and is of 18 yrs and above can form a company in Ghana if he is a
resident.
So, in Salomon v Salomon, Lord Macnagten held that the company was formed by Mr
Salomon and the family who were not unnaturally.
 Under section 14 of Act 992, the Registrar of companies can refuse to register a company
if the person applying of the registration of company is less than 18 yrs.
Types of Company:
Section 7(1) provides that an incorporated company may be
(a) a company limited by shares; < this includes the Private and the public>
(b) a company limited by guarantee; <this includes the private company by guarantee and public
company by guarantee>
(c) an unlimited company; <this includes the private unlimited company and public unlimited
company> section 7(2)(c) provides that an unlimited company is a company which does not
have a limit on the liability of its members. That is, the liability of the members for the debts
and liabilities of the company is not limited to the amount paid or payable for the shares but
extends to the whole of the debts of the company. The liability of the shareholders is for full debt
of the company.
(d) an external company: is a body corporate formed outside the country which has an
established place of business <External company is a company that has its mother company
incorporated or established in a different jurisdiction apart from Gh, and doing business in
Ghana.>
Company limited by shares: section 7(2)(a) of Act 992 provides that a company limited by
shares is a company which has the liability of its members limited to the amount unpaid on the
shares respectively held by them.
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Company limited by Guarantee: section 7(2)(b) of Act 992 provides that a company limited
by guarantee is a company which has the liability of its members limited to an amount that the
members may respectively undertake to contribute to the assets of the company in the event of its
being wound up.
A guarantee company not for profit making: Section 8(1) of Act 992 provided that a
company limited by guarantee shall not be incorporated with the object of carrying on business
for the purpose of making profits other than making profits for the furtherance of its objects.
-Features of company limited by guarantee are: (1) non-profit in nature, (2) they have members’
pledges how much they are willing to pay in the event of a winding up.
<Under the guarantee company, the company is not supposed to make profits from its activities
per se>
NB: in Ghana, in legal sense, a church is a company limited by guarantee, because its members
are guaranteed or undertaken to contribute to the company’s assets in case of winding up.
In Ben Adjei v David Soon Boon (2009) SCGLR: Church is a guarantee company: it was
held that, as is clear from the record, the 2nd Respondent is a company limited by guarantee and
incorporated under the Companies Act, 1963 (Act 179)(as revised). As a result, pursuant to
Section 24 of the Companies Act, it has all the powers of a natural person of full capacity. As
such, it is a fully-fledged legal entity, with a personality separate from the natural persons
forming it, and with capacity to sue and be sued in its own name. In law, the members of a
company have no direct proprietary rights over its assets, the company being the sole owner of
its assets.
Chapel Hill Sch v AG (2009) SCGLR: Indeed, the company limited by guarantee, which was
introduced into Ghanaian law by the Companies Act 1963, can be said to be functionally
equivalent to a trust. It is functionally a trust in corporate form. By this we are not asserting that
the technical equitable rules on trusts apply to it…This connotes that the members of the
company, like a trustee, cannot benefit from the revenue from the trust, which should be
exclusively for the purposes of the company limited by guarantee. Thus, any excess revenue
remaining after all the expenditures of the company in any year has to be retained and applied in
the future to the company’s purposes’.
From a company limited by guarantee into a company limited by shares: in Chapel Hill
Sch v AG, it was held that, unfortunately, the appellant’s case is destroyed, in part, by its
conversion in form from a company limited by guarantee into a company limited by shares. By
this conversion, whether or not profits are actually distributed, the members of the company are
entitled to profit from the business run by the company. The potential for there to be benefit to
private individuals implies that, from 2001 onwards, the appellant school was no longer of a
public character… Section 10 of the Companies Act, 1963 (Act 179) provides that a company
limited by guarantee shall not be incorporated with the object of carrying on business for the
purpose of making profits. It spells out a sanction for officers and members of a company limited
by guarantee who breach this prohibition against making profit. Accordingly, for as long as the
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appellant was a company limited by guarantee, there was a legal assurance that its business was
not conferring any private benefit on individual… Indeed, the company limited by guarantee,
which was introduced into Ghanaian law by the Companies Act 1963, can be said to be
functionally equivalent to a trust. It is functionally a trust in corporate form. By this we are not
asserting that the technical equitable rules on trusts apply to it. However, we do say that the
function of the two institutions is identical in this context. This connotes that the members of the
company, like a trustee, cannot benefit from the revenue from the trust, which should be used
exclusively for the purposes of the guarantee company. Thus any excess revenue remaining after
all the expenditures of the company in any year has to be retained and applied in the future to
the company’s purposes. This assurance was removed by appellant’s conversion into a limited
liability company. We therefore consider that from the date of the conversion of the appellant
from a company limited by guarantee into a company limited by shares, it ceased to be of a
public character. (Per Date-Bah JSC).

Conversion of Companies under Act 992.

1. Company with shares can be converted into Guarantee Compnay
2. Guarantee Company cannot be converted into Company with shares
3. Limited Company can be converted into Unlimited Company
4. Unlimited Company cannot be converted into Limited Company.
The distinction between a Private Limited Company (Ltd) and a Public Limited Company (Plc)
is that a private limited company must have a minimum of one shareholder and can have a
maximum of fifty shareholders. A private limited company has to ‘go public’ or ‘float’, if it
requires extra capital that can be sourced from the public. A public limited company is quoted
on the stock exchange, allowing members of the public to purchase shares and become
shareholders in that company. The advantage of trading as a public limited company is that one
can raise money and there is also limited liability whilst also having an enhanced credit rating.
Subsidiary Company:
Section 383 of Act 992 defines a subsidiary company as a body corporate that is the subsidiary
of another and that other is its holding company if, that other body corporate by the exercise of a
power directly or indirectly vested in it, whether by virtue of the beneficial ownership of shares
or otherwise, can appoint or remove or procure the appointment or removal of all or not less than
half of its directors for the time being or can prevent the appointment or removal of all or not less
than half of its directors…
With regard to control power of a subsidiary company, the ownership is attributable to the parent
company's having an interest in the subsidiary company and is attributable to the acquisition of
the shares of the subsidiary. As such, parental objectives have a dominant influence on a
subsidiary’s operations, its decision-making processes and plans prevail over the subsidiary
P.K.A.O

companies. Moreover, the parent company has a control power over the subsidiary. That is, the
interest of the subsidiary company is controlled by the holding company.
Once a subsidiary company is incorporated, it attains legal personality. That is, it becomes an
artificial person with the power to sue and to be sued. The subsidiary company can be sued and
sue in both civil matters and criminal matters. Therefore, the seminal case of Salomon v
Salomon is the most authoritative case on the principle of separate legal personality. In the
Salomon case supra, Per Lord Macnaghten: “The Company is at law a different person altogether
from the subscribers to the memorandum; and, though it may be that after incorporation the
business is precisely the same as it was before, and the same persons are manager, and the same
hands receive the profits, the company is not in law the agent of the subscribers or a trustee for
them nor are the subscribers as members liable in any shape or form, except to the extent and in
the manner provided by the Act.
The subsidiary company is a separate, distinct, and independent legal person from that of the
parent company and its owners. The crux of the argument is that the parent company cannot sue
on behalf of a subsidiary company incorporated in the host country. That is, both the parent
company and the subsidiary company are two separate legal entities.
Adams v Cape Industries plc
Facts: the defendant was an English company and head of a group engaged in mining asbestos in
South Africa. A wholly owned English subsidiary was the worldwide marketing body, which
protested the jurisdiction of the United States Federal District Court in Texas in a suit by victims
of asbestos. The defendant took no part in the United States proceedings and default judgments
were entered. Actions on the judgment in England failed.
Held: The court declined to pierce the veil of incorporation. It was a legitimate use of the
corporate form to use a subsidiary to insulate the remainder of the group from tort liability. There
was no evidence to justify a finding of agency or facade. Slade LJ said: ‘Our law, for better or
worse, recognises the creation of subsidiary companies, which though in one sense the creatures
of their parent companies, will nevertheless under the general law fall to be treated as separate
legal entities with all the rights and liabilities which would normally attach to separate legal
entities.’

Smith, Stone and Knight Limited v Birmingham: Implied agency b/n parent and
subsidiary
Facts: An application was made to set aside a preliminary determination by an arbitrator. The
parties disputed the compensation payable by the respondent for the acquisition of land owned
by Smith Stone and held by Birmingham Waste as its tenant on a yearly tenancy. Birmingham
Waste was a wholly owned subsidiary of Smith Stone and was said in the Smith Stone claim to
carry on business as a separate department and agent for Smith Stone. As a yearly tenant,
Birmingham Waste, however, had no status to claim compensation. The question was whether,
as a matter of law, the parent company could claim compensation for disturbance to the business
P.K.A.O

carried on at the acquired premises. The arbitrator’s award answered this in the negative. Smith
Stone applied to set the award aside on the ground of technical misconduct.
Held: The parent company was entitled to compensation in respect of a business carried on by a
subsidiary on the basis that the subsidiary was in reality carrying it on behalf of the parent
company. [An implied agency existed between the parent and subsidiary companies so that the
parent was considered to own the business carried on by the subsidiary and could claim
compensation for disturbance caused to the subsidiary’s business by the local council. In
determining whether a subsidiary was an implied agent of the parent, Atkinson J examined
whether, on the facts as found by the arbitrator and after rejecting certain conclusions of fact
which were unsupported by evidence, Smith Stone was in fact the real owner of the business and
was therefore entitled to compensation for its disturbance.]
Atkinson J formulated six relevant criteria, namely:
(a) Were the profits treated as profits of the parent?
(b) Were the persons conducting the business appointed by the parent?
(c) Was the parent the head and brain of the trading venture?
(d) Did the parent govern the venture, decide what should be done and what capital should be
embarked on the venture?
(e) Did the parent make the profits by its skill and direction?
(f) Was the parent in effectual and constant control?
>an entity registered under the Companies Act, 2019 is given a legal status that is separate,
distinct and independent of the status of the persons forming the company.
In Re West Coast Dyeing Industries Limited: Adams v. Tanoh [1984-86] 2 GLR: the words
of section 218 of the Companies Code, 1963 (Act 179) were precise and unambiguous. In their
ordinary and natural sense the legislature intended to give remedy to only members and
debentureholders and not to an outsider who was not the Registrar of Companies. It was
therefore quite plain that a director or an officer of the company who was also not a shareholder
as well, and consequently did not qualify to be a member of the company concerned, was not
entitled to seek any remedy under the section. In the instant case, the appellant initiated the
action solely on the basis that he was a member of the company and therefore had to bring
himself within the membership of the company by cogent evidence.
NEW PATRIOTIC PARTY v ATTORNEY-GENERAL [1997-98] GLR: It was held that
‘person’ in Article 2(1) includes body corporate. A “person” was defined in section 32 of CA 4
to include a body corporate. Moreover, the word “person” had been defined in Article 297 of the
Constitution, 1992 to include a natural as well as a legal person or a corporate person such as the
plaintiff.
Per Kpegah JSC: The Constitution, 1992 granted rights and freedoms to both natural and legal
persons and under articles 3(4)(a) and 41(b) of the Constitution, it was the duty of every citizen
P.K.A.O

both natural and legal to defend and uphold the Constitution through the enforcement procedure
under article 2(1). Thus, article 12 required that certain specified persons including “natural and
legal persons in Ghana” should respect and uphold the fundamental human rights and freedoms
enshrined in chapter 5 of the Constitution, 1992. In the result, proceedings could be taken in
court against all such persons for the enforcement of the fundamental rights and freedoms.
<the understanding is that company is a person and can enjoy human rights like natural human
has in the chapter 5 of the 1992 Constitutions of Ghana. >
SALOMON v SALOMON (1897):
Facts: Mr. Salomon converted his sole proprietorship business into a limited liability company.
The company had seven members: Mr. And Mrs. Salomon and their five children. Mr. Salomon
had 20,001 shares, and Mrs. Salomon and the children had one share each. Mr. Salomon had sold
his business to the company at the inflated price of 38,782 pounds. The company purported to
pay for Mr. Salomon’s interest by the allotting to him 20,000 shares at one pound each, making
payment of 20,000 pounds. The company also issued him with debentures of 10,000 pounds. The
company then paid Mr. Salomon the balance of 8,782 pounds in cash. Thus the company owed
him 10,000 pounds since he was a debenture holder secured by a charge on the company’s assets
in his favour. Mr. Salomon and two of his sons were appointed directors. Mr. Salomon was also
the managing director of the company. Later on, however the company faced difficulties and the
company had to be wound up a year later. The value of the company’s assets as realized was
6,000 pounds; but the company owed 7,733 pounds to unsecured creditors and 10,000 to Mr.
Salomon whose debt was secured as a debenture holder. If Salomon was paid off for his
debentures, the unsecured creditors would receive nothing, since the company’s debts
exceeded its assets. The creditors, quite naturally, sought to impugn Salomon’s apparent
right to receive payment. They argued that although incorporated, the company was a
mere sham; it never had an independent existence and was in fact Mr. Salomon under a
different name. They also argued that the business still remained Mr. Salomon’s and that the
company merely carried on business as Mr. Salomon’s agent and consequently, Mr. Salomon as
principal, owed the company as agent, the duty to indemnify it (the company) against the
liabilities incurred by it in the course of the agency. The case went before a trial judge and later
on to the Court of appeal and the House of Lords.
Held: that shareholder had acquired a separate legal personality from its shareholders and could
sue and be sued. <It was also held that Debentureholders have better rights than members> <It
was also held that a company is not in law the agent of the subscribers or trustee for them.>
Lord Halsbury stated thus “I must pause here to point out that the statute enacts nothing as to
the extent or degree of interest which may be held by each of the seven or as to the proportion of
influence possessed by one or the majority of the shareholders over the others. One share is
enough. “Still less is it possible to contend that the motive of becoming shareholder or of making
them shareholders is a field of inquiry which the statute itself recognizes as legitimate. If they are
shareholders, they are shareholders for all purposes; and even if the statute was silent as to the
recognition of trusts, is should be prepared to hold that if six of them were the cestuis que trust
P.K.A.O

for the seventh, whatever might be their rights inter se, the statute would have made them
shareholders to all intents and purposes with their respective rights and liabilities, and dealing
with them in their relation to the company, the only relation which I believe the law would
sanction would be that they were corporators of the body corporate.”
“Either the company was a legal entity or it was not. If it was, the business belonged to it and not
Mr. Salomon. If it was not, there was no person and nothing to be agent at all.”
Per Lord Macnaghten “The Company is at law a different person altogether from the
subscribers to the memorandum; and, though it may be that after incorporation the business is
precisely the same as it was before, and the same persons are manager, and the same hands
receive the profits, the company is not in law the agent of the subscribers or a trustee for them
nor are the subscribers as members liable in any shape or form, except to the extent and in the
manner provided by the Act.”
Per Lord Macnaghten: A company, too, can raise money on debentures, which an ordinary
trader cannot do. Any member of a company, acting in good faith, is as much entitled to take and
hold the company's debentures as any outside creditor. Every creditor is entitled to get and to
hold the best security the law allows him to take.
MOKOR v KUMA (1999-2000) SCGLR: held that the law is clear that shareholders of a
limited liability company are not the employers of the staff; rather the employer is the company
as distinct from the shareholders. In the dictum of Sophia Akuffo CJ (then JSC) “a company,
after its registration, has all the powers of a natural person of full capacity to pursue its
authorized business. In this capacity, a company is a corporate being, which, within the bounds
of the companies Act, and the regulations of the company, may do everything that a natural
person might do. In its own name, it can sue and be sued and it can owe and be owed legal
liabilities. A company is, thus, a legal entity with a capacity separate, independent and distinct
from the persons constitute it or employed by it.
BANK OF WEST AFRICA LTD. v. APPENTENG (1972) GLR: on Proper person to sue: as
a general rule, a shareholder cannot sue for a wrong done to a company or to recover money as
damages to it, unless the action is taken by the company itself. The second respondent could
therefore not bring an action of negligence against the appellants for the alleged negligent advice
given to the company. In any case she was estopped from bringing this action as a similar
unsuccessful suit had been brought against the appellants by other shareholders of the same
company in respect of the same subject-matter of which the second respondent was aware but
did nothing. That action had not been appealed against. <Principle: where a company had
entered into contract, an action cannot be brought by a shareholder for a wrong or damages,
unless the action is brought by the company itself>
Owusu v. R.N. Thorne Ltd [1966] GLR: Whether company has separate existence from its
directors and members? Whether action against limited liability company action against
directors and members personally
P.K.A.O

Facts: The plaintiff sued the defendants, R. N. Thorne Ltd. and J.K. Anane. The plaintiff, by an
ex parte motion, obtained an absconding warrant against Mr. R. N. Thorne, one of the directors
of the first defendant company. It was argued on behalf of the first defendant that the plaintiff
sued R. N. Thorne Ltd. as the first defendant as distinct from R. N. Thorne personally. Counsel
submitted that as the first defendant is a limited liability company with a separate personality
from the directors, and as Mr. Thorne has not personally contributed to or personally caused the
injury, he cannot be held personally liable for the torts of the limited liability company.
Held: the company existed apart from the directors and members. Mr R.N.T was not sued
personally and he was therefore not a defendant within the meaning of Order 35, r. 2 for the
court to go into the question of security.
Politis & Anor v Plastico Ltd (1967) GLR: Rights of persons to whom shares pass by
operation of Law; Right to institute actions.
Facts: The late Dr. Dimitra Politis was, before her death, the majority shareholder in, and one of
the two directors of Plastico Ltd. Following her death, her personal representatives obtained a
court order that they should be put on the company’s register of members. The order was not
complied with, on the ground that although counsel for the company was present in court when
the order was given the order was not drawn up and served on the company. The personal
representatives brought an application under section 217 of the Companies Code, 1963 (Act
179), for an order declaring certain acts of the company or of the director surviving Dr. Dimitra
Politis null and void. A preliminary objection was raised by counsel for the company on the
ground that since the personal representatives of Dr. Dimitra Politis had not been registered as
members of the company, they had no locus standi to bring the present application.
Held: The applicants had locus standi since by section 99 (3) of Act 179 a person upon whom
the ownership of a share devolved by reason of his being a legal personal representative was
prior to registration of himself or a transferee, entitled not only to the same dividends, interest
and other advantages as if he were the registered holder, but also to the same rights and remedies
as if he were a member of the company. The only exception to this almost total assimilation was
that the personal representative would not, before being registered as a member in respect of the
share, be entitled to attend and vote at meetings of the company. <<The court considered
doctrine of equity>>
In Dupaul Wood Treatment Ltd v Asare: the Supreme Court accepted the above formulation
or definition of oppression as one that was “burdensome, harsh and wrongful”. The Supreme
Court has to consider whether the following cumulative developments or events constituted
oppression the purported replacement of the original Regulations as filed and registered for
incorporation with another set;(2) the purported reductions of the plaintiff-respondent’s
shareholding from 50% to 10%;(3) the removal of the plaintiff-respondent as a director of the
company when he travelled abroad for acouse; (4) the removal of the plaintiff-respondent from
the management of the affairs of the company; (5) the failure of the company to declare dividend
for no apparent reason; and (6) the role of the wife of one of the parties in the affairs of the
company. The Supreme Court held the purported Regulations to be void and of no effect
P.K.A.O

and that the plaintiff’s shareholding remained at 50%. It also held that the plaintiff could
be removed as an executive director and that was not automatically oppressive; and that no
adverse findings had been made by the court below about the unwarranted interventions in
the affairs of the company by the wife of one of the parties. A company was also not bound to
declare dividend: moneys that could otherwise be paid out as dividends could also be reinvested
in the company to for operational or expansion purposes and to increase shareholder value. In the
result, oppression was not found in the instant case. Notwithstanding the disposition of the court
given the fact in Dupaul, the point of law that still remains valid is that members have the right to
apply for relief under section 218 of the Act. The Registrar may also apply for a section 218
remedy in two situations (1) when he has conducted an investigation into the affairs of the
company and makes a preliminary determination of impropriety of such gravity as to call for a
section 218 remedy; or (2) when he has received a report of an inspector that he appointed to
investigate the affairs of the company and the Registrar is of the opinion that such remedy ought
to be sought from the court (section 225).
Okudjeto & Ors v Irani Brothers & Ors: Remedy against oppression of members
Facts: the appellants are 41% shareholders of the total share capital in the respondent company
limited by shares, which engage in flour milling. The appellants sued the company together with
three directors, for reliefs which includes removal of the three resident directors of the company
regarding alleged loss or theft. The three respondent directors also made certain allegations
which affected them qua directors and not as members or debentureholders of the company. At
the first instance court, the trial judge made an order that the appellants’ shares in the company
should be purchased by the company at a valuation. The appellant appealed. Issue: Whether
company qua company entitled to bring an application under Act 179, s. 218 (1)?
Held: Section 218 of Act 179 was intended to meet the case of the oppression of the members of
the company in their character as such and not in their character as directors or secretary or
manager, as in the instant case, where the allegations made affected the respondents qua directors
and not as members, or shareholders, or debentureholders. The company herein is not
competent to institute an application under section 218 (1) of the Code, since only a member
or debentureholder of the company are entitled to such remedy. <<A shareholder has
ownership interest in a company whilst a debentureholder is a creditor of a company>> The
court also interpreted “may” and “shall”.
See section 219 of Companies Act (Act 992)
Eley v Positive Gov: do the articles constitute a contract b/n an outsider on one side and the
company or the members on the other side?
Facts: the plf was a member of the company and was also employed as a company’s solicitor.
Article 118 of the company’s constitution stated “Mr Wiliam Eley of 27 New Broad Street, City
of London, shall be the solicitor to the company…and he could not be removed from this post
except on the ground of misconduct”. When the company ceased employing him as a solicitor,
Eley brought an action claiming that the company constitution had been infringed.
P.K.A.O

Held: that there was no infringement as Eley was not suing as a member. Eley had not been
employed as a member and the termination of work as a solicitor did not affect Eley’s status as a
member of the company.
Principle: no outsider can enforce articles against a company, even if, such articles purport to
confer certain rights on him.
Macaura v Northern Assurance Co Ltd: the House of Lords held that the sole owner and
controller of a company did not even have an insurable interest in property of the company,
although economically he was liable to suffer by its destruction.
Majdoub v. W. Bartholomew: a Ghanaian court held following the Salomon principle held that
a limited liability company is an artificially created body, which the law must recognise. {It was
also held that company has the authority to acquire property in its name and the property does
not belong to the shareholders}

INCORPORATION OF COMPANIES

It is important to know that incorporation of company is different from registration of company.

Incorporation is in reference to the jurisdiction where the company was legally formed for the
first time whiles registration of a company means that the company is incorporated or formed in
another jurisdiction company seeks to register to do business in the jurisdiction it has found
itself.
Section 12 of Act 992 provides that subject to this Act, a person of the age of eighteen years and
above may apply for the incorporation of a company under this Act.
Section 13 of Act 992 provides for application for incorporation:
(1) An application for incorporation shall be made in the prescribed form and delivered to the
Registrar.
(2) The application shall include
(a) the name of the company as required by section 21;
(b) an indication of the type of proposed company;
(c) the nature of the proposed business in the case of a company registered with an object;
P.K.A.O

(d) the address of the proposed registered office and principal place of business of the company
in the Republic, the telephone number and the post office box, private mail bag or digital address
of the registered office of the company;
(e) the electronic mail address and website of the company, if available;
(f) the following particulars of each subscriber:
(i) the date and place of birth;
(ii) the present full name and any former name;
(iii) the residential, occupational, postal and electronic mail addresses and telephone contact; and
(iv) the nationality;
(g) the following particulars of each proposed director of the proposed company:
(i) the present full name and any former name;
(ii) the particulars of any business occupation and other directorships held by the director as
provided by section 215; and
(iii) the residential, occupational, postal and electronic mail addresses and telephone contact;
(h) a statutory declaration by each proposed director of the proposed company indicating that
within the preceding five years, that proposed director has not been
(i) charged with or convicted of a criminal offence involving fraud or dishonesty;
(ii) charged with or convicted of a criminal offence relating to the promotion, incorporation or
management of a company; or
(iii) declared insolvent or if that proposed director has been insolvent, the date of the insolvency
and the particulars of that company;
(i) the consent of each proposed director;
(j) the following particulars of the proposed Company Secretary of the proposed company:
(i) the present full name and any former name;
(ii) the usual postal, occupational and electronic mail address;
(iii) the residential address in the case of an individual; and
(iv) the business occupation as provided by section 215;
Section 13 (5) of Act 992 provides that application for incorporation is effected by delivering to
the Registrar a completed application, or completed application with the proposed constitution.
P.K.A.O

>Other requirement for incorporation for the company to have a Tax Identification Number
(TIN), that is for the company. This is done so in accordance with the Revenue Administration
Act, 2016, (Act 915).
Section 14 of Act 992 provides that where the Registrar is satisfied with the application for
incorporation, the register shall incorporate the company. Furtherly, it is under section 14 that
from the date of incorporation, the company becomes a body corporate, capable of
performing its functions. The Registrar shall issue a certificate to the company and commence
operations (section 15 of Act 992).
In Dupaul Wood Treatment v Asare: in the dictum of Sophia Akuffo JSC, “by virtue of
section 14 of the code, a company comes into existence when its regulations are delivered to the
Registrar of Companies and he enters the same into his register. It is the act of registration that
incorporates the company, such incorporation being evidenced by the Registrar’s certificate of
incorporation”.
In Salomon v Salomon: Lord Macnaghten held that the company attains maturity on its birth.
There is no period of minority - no interval of incapacity. I cannot understand how a body
corporate thus made "capable" by statute can lose its individuality by issuing the bulk of its
capital to one person, whether he be a subscriber to the memorandum or not. The company is at
law a different person altogether from the subscribers to the memorandum.
At common law, prostitute cannot form a company with object of prostitution. In the case
of R v. Registrar of Companies, ex parte Her Majesty’s Attorney General[1991] BCLC 476,
it was held that a prostitute should not be allowed to register a company where the purpose stated
in the memorandum of association is ‘to carry on the business of prostitution’, because the
business was contrary to public policy. Thus the Registrar rejected the names “Prostitute Ltd”
and “Hookers Ltd”.
Grant v Tikobo Ltd, where Tikobo Ltd. were indebted to the plaintiff, but sold their business to
another company. In the action against the company they sought security for cost from the
director who was leaving the jurisdiction. It was held on the application of Salomon that the
director could not be held liable.
Note: a company cannot issue a share as a gift for free. <> Also, under the Ghanaian law, only
natural persons can be Directors of a company.
Re Harmer Ltd: Shareholders who receive their shares as a gift but afterwards work in the
business may become entitled to enforce equitable restraints upon the conduct of the majority
shareholder. To succeed the applicant must show some detriment in their capacity as a member
of the company, and not as a director, though a wrongful exclusion of a member from
participation in the management of the company may amount to such. A majority shareholder
has no obligation to choose as a representative director the most suitable person for the position.
A majority shareholder may appoint his friend or a person whom he might reasonably expect
usually to vote in a certain way. The mere subordination of the wishes of the minority by the
exercise of the voting power of the majority is not of itself oppressive.
P.K.A.O

<<A Memorandum of a company limited by share must contain the following clauses:
Name Clause (ii) Registered Office Clause (iii) Objects Clause (iv) Liability Clause (v) Capital
Clause and (vi) Association clause.>>
>>Memorandum of Association cannot contain anything contrary to the provisions of
Companies Act and if it does, then it would not have any legal effect.
Name of the Company
Section 21 of Act 992 provides that the last words of the name of a
 private company limited by shares shall be “Limited Company” or the abbreviation
“LTD”;
 public company limited by shares shall be “Public Limited Company” or the abbreviation
“PLC”;
 company limited by guarantee shall be “Limited by Guarantee” or the abbreviation
“LBG”; and
 private company unlimited by shares shall be “Private Unlimited Company” or the
abbreviation ‘PRUC’
 public company unlimited by shares shall be “Public Unlimited Company” or the
abbreviation “PUC”.
Section 21(2) of Act 992 provides that a company shall not be registered by a name which, in
the opinion of the Registrar, is misleading or undesirable.
In R v Registrar of companies ex p. Bowen [1914] 3 KB 1161 the court held that the Registrar
could only refuse to register a proposed company under the Dentists Act 1878 if the use of the
proposed name was an offence under the Act, and since it was not the court would make an order
compelling the registration of the proposed company under the proposed name. However, the
Registrar may refuse to register a company where its objects are unlawful according to the law of
the country.
In Exxon Corporation v Exxon Insurance Consultants Ltd, where an action was commenced
by the plf against def on the grounds that the use of Exxon as part of its company name will lead
to passing off. The court granted an order restraining the def company who were in no way
related to the plf company from maintaining Exxon as part of its company name. The court
granted the order because of the unfair completion and passing off by the defendant.
The refusal to register a company and grant a certificate of incorporation is subject to judicial
review. In R v Registrar of Joint Stock Companies (ex p. Moore): the Court of Appeal held
that selling lottery tickets through the intended company would have been an offence under the
law in force at the time in question and therefore the decision of the Registrar of Companies to
refuse registration of the company was correct. The company was not being formed for a lawful
purpose and the refusal to register it was valid.
P.K.A.O

Section 21(3)-A company shall not be registered with a name of a company that has been
dissolved within the preceding five years of the intended registration.
Section 21(4)-A company may in writing change its name by special resolution and with the
written approval of the Registrar.
The Registrar has the mandatory power to change the name of the company where it is
misleading or undesirable and where the company defaults with the directions – section 21(9)
Protection against Unfair Competition Act (Act 589):
 Causing Confusion: Section 1 of Act 589 provides that any act or practice, in the course
of industrial or commercial activities, that causes, or is likely to cause, confusion with
respect to another person's enterprise or its activities, in particular, the products or
services offered by that enterprise, constitutes an act of unfair competition.
 Damaging Person’s Goodwill or Reputation: section 2 of Act 589 provides that any
act or practice in the course of industrial or commercial activities, that damages or is
likely to damage the goodwill or reputation of another person's enterprise or its activities
constitutes an act of unfair competition, whether or not the act or practice causes
confusion.
 Unfair Competition/Misleading the public: Section 3(1) of Act 589 provides that any
act or practice in the course of industrial or commercial activities, that misleads or is
likely to mislead the public, with respect to an enterprise or its activities, in particular, the
products or services offered by that enterprise, constitutes an act of unfair competition.
Reservation of name
Section 22 (1) of Act 992 provides that an application for reservation of the name of a company
may be sent or delivered to the Registrar, and shall be in a form approved by the Registrar.
(2) The Registrar may, after receipt of the application and on payment of the prescribed fee,
reserve a name pending registration of a company or a change of name by a company.
(3) A reservation under subsection (2) shall not exceed two months and may be renewed for a
further period of two months.
(4) A company shall not be registered under a reserved name or under any other name which in
the opinion of the Registrar is similar to the reserved name.
Section 125(1)(a) of Act 992 provides that A company shall, paint or affix, and keep painted or
affixed, the name of the company on the outside of the registered office and of every office or
place in which the business of the company is carried on, in a conspicuous position in letters that
are easily legible.

Minimum Capital Requirement

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One of the requirement to be satisfied by the company limited by shares before commencement
of business and incur liability is the minimum capital requirement. The act 992 does not
statutorily set minimum requirement. However, there are certain minimum requirement provided
by the Ghana Investment Promotion Center Act (Act 865) and others.
Section 13(3) of Act 992 provides that the application shall be signed by the subscriber or each
subscriber if more than one, for shares of the company by writing opposite the name of the
subscriber, the number of shares the subscriber takes and the cash price payable for the shares
and the subscriber shall take at least one share.
Under GIPC Act (Act 865):
 Joint Venture with Ghanaian and a foreigner: $10,000 on the foreigner and not less than
10% by the Ghanaian
 For a wholly owned company, the minimum capital requirement is $500,000 by the
foreigner
 For a trading enterprise owned by a foreigner, the minimum capital to be contributed by a
foreigner is $1,000,000.
On minimum capital, in Salomon v Salomon, Lord Davey held that I think that this result
follows from the absence of any provision fixing a minimum nominal amount of a share - the
provision in s. 8 that no subscriber shall take less than one share. The Act has not prescribed any
minimum amount of a share.

Certificate of Incorporation
Section 15 of Act 992 provides that the certificate of incorporation, or a copy of that certificate,
certified as correct by the Registrar, is conclusive evidence that the company that been duly
incorporated under this Act and proceedings shall not be brought in a Court to cancel or annul
the incorporation.
This means that even where a mistake is made by the Registrar in the registration process or the
information provided on the application is incomplete, the Registrar cannot, on the ground, seek
to cancel or annul the registration of the company.
Peel v London & North Western Railway: But the certificate of incorporation is not merely a
prima facie answer, but a conclusive answer to such objection…when once the certificate of
incorporation is given, nothing is to be inquired into as to the regularity of the prior proceedings.
Section 9(7) of Act 992 provides that until a new certificate of incorporation is issued under
subsection (2), neither the surrender of the shares of the company nor the agreement to contribute
to the assets of the company in the event of the company being wound up shall take effect.
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STATUTORY CORPORATIONS

These are corporations created by statutes of the state.

Statutory corporations are public in nature. Article 192 of the 1992 Constitution provides that a
public corporation shall not be established except by Act of Parliament.
Article 292 of the Constitution defines Public Corporation as a corporation or any other body of
persons established by an Act of Parliament or set up out of funds provided by Parliament or
other public fund.
Statutes: Act 232, Act 461 and L.I 1648

CONSTITUTION OF THE COMPANY

Constitution of a company is a governing document that creates certain structures, and stipulates
powers to certain people.
Section 23 of Act 992 provides that:
(1) A company has the option to have a registered constitution.
(2) Where a company opts to have a registered constitution, the document that represents the
constitution shall be (a) signed by one or more subscribers or the Company Secretary, and (b)
delivered to the Registrar by the subscriber or an authorized representative before incorporation;
or (c) delivered to the Registrar by the Company Secretary, director or an authorised
representative after incorporation.
>where the company chooses the option of delivering a registered constitution to the Registrar in
accordance with section 23 of Act 992, section 24 provides for the effect of the registered
constitution.
>the effect of the registered constitution delivered to the registrar is to govern the rights, powers,
duties, and obligations of the company, the Board, each director, and each shareholder of the
company.
>Section 24 – on effect of Act on company that has lodged registered constitution.
>section 25 – on the Effect of Act on company without a registered constitution.
>section 26 – on the Contents of registered constitution.
> A registered constitution shall not be subject to a stamp duty – section 29(5)
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> The registered constitution of a company shall be void to the extent that it contravenes or is
inconsistent with the Act 992.

Dupaul Wood Treatment v Asare: the regulations of a company incorporated in Ghana, must
have certain prescribed form and contents as well as recommended provisions and may be
changed in a certain prescribed manner. There are three significant characteristics…these are the
names of the first directors of the company, the signature and names of the subscribers to the
regulations…duly attested by at least one witness.
Adehyeman Gardens Ltd v. Assibey (2003-2005) GLR: under section 30 of the Companies
Code, 1963 (Act 179) there were two kinds of members of a company: those who became
members at the inception of the company by subscribing to its regulations; and those who after
the company came into existence, agreed to become members. The membership of a subscriber
was by legal prescription and in the absence of a valid forfeiture, was not predicated on full or
partial payment of the consideration for the shares taken. Consequently, since the respondent was
a subscriber to the regulations of the company, he pursuant to section 30(1) of Act 179 became a
member of the company right from the date of its incorporation, holding 200,000 shares as
indicated against his name in the regulations. Section 21 of Act 179 shows that the regulations of
a company is no mean document. It is the registration of the regulations that brings the company
into existence as a body corporate: see section 14 (d) of Act 179. Once registered, the
regulations have, inter alia, the effect of a contract under seal between:
(i) the company and its members;
(ii) the company and its officers;
(iii) the members and the officers of the company;
(iv) the members of the company inter se; and
(v) the officers of the company inter se.
As a subscriber, therefore, the respondent’s shareholding, as well as the consideration payable
by him therefor, is contractual. He does not need to be issued with a certificate for his
membership to take legal effect.
Adoption, alteration, amendment and revocation of constitution
Section 30(1)(a) of Act 992 provides that the shareholders or members of a company may, by
special resolution adopt a registered constitution where a company does not have a registered
constitution.
Special Resolution goes to alter the constitution or touch the constitution.
> Where there has been numerous amendment to the registered constitution, the registrar may
recommend that all the amendments should be consolidated in a single document. – section 31
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> The ‘objects clause’ of a company is the term used to express the company’s intentions and
the purpose of its existence. The objects clause is available for members of the public to view,
and it can be found within the company’s Memorandum of Association.
The objects of the company must not be illegal, immoral or opposed to public policy or in
contravention of the Companies Act, 2019 (Act 992). Thus if the objects clause permits the
company to purchase its own shares, it will be ultra vires and void.
The objects clause must be carefully drafted but it must be in a clear and unambiguous language.
This clause enables the shareholders and the creditors to know the purpose for which the funds of
the company are going to be used.
Ashbury Carriage Co v. Riche: “no object shall be pursued by the company, or attempted to be
attained by the company in practice, except an object which is mentioned in the memorandum of
association”.
Wamanlal v. Scindia Steam Navigation Co: it was held that the objects clause sets out the
statement to the shareholders, creditors and all such others dealing with the company about the
nature of use of the funds in the company. It sets out the statement to the shareholders, creditors
and all such others dealing with the company about the nature of use of the funds in the
company.

> Bell Houses Clause: A ‘Bell Houses clause’-so called after a case of that name- gives the
company the capacity to pursue any business which the directors believe would be advantageous
to the company.
In Bell Houses Ltd v City Wall Properties Ltd; the principal set out in the company’s
memorandum was the development of housing estates. However, the objects clause contained a
clause which empowered the directors to pursue any business they considered advantageous to
the company.

PRE-INCORPORATION CONTRACTS

Pre-incorporation contract is a contract entered into before the company came into being or
before the company is incorporated/formed.
Pure Common Law provides that company is not liable with respect to pre-incorporation
contracts. This is because at the pre-incorporation stage the company has not attain its
personality yet and not privy to contract. Therefore the promoter or person on behalf of it takes
the liability.
Section 11(1) of Act 992 provides a contract or any other transaction purporting to be entered
into by a company before the formation of the company, or by a person on behalf of the
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company before its formation, may be ratified by the company within eighteen months after the
formation of the company.

Section 11(2) - On ratification under subsection (1), the company shall become bound by, and
entitled to the benefit of, that contract or that transaction as if the company has been in existence
at the date of that contract or other transaction and had been a party to the contract or other
transaction.
Section 11(3) - Before ratification by a company, the person who purported to act in the name or
on behalf of the company is, in the absence of express agreement to the contrary, personally
bound by the contract or other transaction and is entitled to the benefit of the contract or other
transaction.
Section 11of Act 992 permits a company to ratify a pre-incorporation contract thereby binding
the company to the contract from the date of the contract. Ratification of pre-incorporation
contracts must be done by a resolution of the company. It must be done by the recognized
organs.
Since pre-incorporation contracts are mostly entered into by promoters, the provisions of section
10, particularly section (5) of the Act is applicable to the contracts. Therefore, in the event the
pre-incorporation contract is entered into between the promoter and the company, the ratification
is only binding where there is full disclosure of material facts known to the promoter. The
ratification must be done by the board of directors of the company provided all the directors are
independent of the promoter.
Section 10(5) of Act 992 provides that A transaction between a promoter and the company may
be rescinded by the company unless, after full disclosure of the material facts known to the
promoter, the transaction has been entered into or ratified on behalf of the company, (a) by the
board of directors of the company, if all the directors of the company are independent of the
promoter; (b) by all the members of the company; or (c) by the company at a general meeting at
which neither the promoter nor the holders of the shares in which the promoter is beneficially
interested have voted on the resolution to enter into or ratify that transaction.
In pure common law sense, Pre-incorporation contract does not bind the company.
Note: section 10 of Act 992 on promoters must be read together with section 11.
Jadbranska v. Oysa Ltd. (1979) GLR: There should be a clear and unequivocal act on the
part of the company if ratification was to be inferred.
Facts: J.S.P., a limited liability company registered under the law of Yugoslavia agreed with
H.T., the European representative of the O. Ltd., to charter their vessel to O. Ltd., a Ghanaian
business venture not then incorporated. The agreement was signed in Germany by brokers
authorised by H.T. on behalf of the charterers and charterparty provided for arbitral clause.
Subsequently, O. Ltd was incorporated and H.T was appointed as chairman of the board of
directors with authority to negotiate for loans or overdrafts…since O. Ltd. was not in existence at
the time the charterparty was signed and since H.T. had no authority to bind them, O. Ltd. were
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not liable. Counsel for J.S.P. argued contra that the law applicable was Ghana law, that by the
Companies Code, 1963 (Act 179), s. 13 ratification was possible, and that a letter sent to J.S.P.
by the managing director of O. Ltd. asking for a statement of account amounted to such
ratification.
The respondents however contend that at the time the charterparty was signed the company was
not in existence, and they have attached photostat copies of the certificate of incorporation and
the certificate to commence business issued on 31 October 1975 and 4 November 1975,
respectively. They have also exhibited the minutes of a meeting of the board of directors held on
14 November 1975. It would appear from these minutes that Tessendorf, who was appointed
chairman, was authorised to negotiate for loans or overdrafts or both for the company.
Held: in dismissing the application, it was held that the evidence offered by the claimants to
show that the respondents ratified the charterparty entered into on their behalf on 29 August
1975, is the Itetel dated 28 January 1976. It seems to me that although section 13 was enacted to
obviate the hardship and inconvenience which sometimes arises by a strict application of the
English rules, the burden which lies on a claimant to prove ratification is a very heavy one. In
this case it has not been suggested that the respondents have either at a meeting of the board of
directors or in general meeting agreed to ratify the charterparty entered into on their behalf on
29 August 1975. The letter signed by the respondents, managing director merely called for a
statement of account, and although it is reasonable to infer that the account related to the
charterparty, the letter did not bind the company to pay whatever sum the claimants alleged to
be due.
Principle: the act on the part of the company for ratification of contract must be clear and
unequivocal. A mere letter by the managing director would be insufficient to amount to
ratification unless there was evidence that he was communicating a decision to ratify taken by
the company in general meeting or by the board of directors which had been confirmed by the
company in general meeting.
Panagiotopoulos v Plastico Ltd (1965) GLR: A company is not bound by contracts
purporting to be entered into on its behalf by its promoters or other persons before its
incorporation, unless the company after incorporation enters into a new contract to the
effect of the previous agreement.
Facts: At the beginning of 1963, the plaintiff agreed with P. and M. to establish a company to be
called Plastico Ltd. to manufacture plastics. In consequence of this agreement, they acquired a
plot of land at Tema on which they built a factory and installed machinery in it. The plaintiff met
the pre-incorporation expenses and paid for the machinery which was purchased for the
company. On 1 March 1963, prior to the incorporation of the company, the plaintiff purported to
sell his interest in the venture to the company. The company were incorporated on 29 May 1963,
and they entered into possession of the land and factory which were the subject-matter of the
sale. On 5 December 1964, the company’s solicitors wrote to the plaintiff’s solicitors stating that
the company were beneficiaries of the agreement entered into by the promoters of the company.
The plaintiff moved the court ex parte for the appointment of a receiver to take charge of the
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factory pending the hearing and determination of the action. The company denied that the
contract of sale was binding on them on the ground that it was concluded before the company
came into existence. They in turn brought a cross action against the plaintiff for defamation
alleging inter alia that the appointment of receiver imputed insolvency to the company and the
latter was damnified by it.
Held: a company is not bound by a contract purporting to be entered on their behalf by the
promoters or other persons before incorporation unless the company after incorporation enter
into a new contract to the effect of the previous agreement. Such a contract may be inferred from
the acts of the company. In this case there was no evidence that the company had since
incorporation entered into a new express contract with the plaintiff to the effect of the contract of
sale. Although the actions of the company, i.e. in taking possession of the factory and making the
instalment payments of the purchase price would seem to infer that there was a contract entered
into between the company and the plaintiff on the same terms as the contract of sale those acts of
the company were done in the mistaken belief that the pre-incorporation contract of sale was
binding on the company. Consequently, no such contract could be inferred from those acts of the
company.
Principle: A company is not bound by contracts purporting to be entered into on its behalf by its
promoters or other persons before its incorporation. The company cannot, after incorporation,
ratify or adopt any such contract because there is in such cases no agency and the contract is that
of the parties making it, unless the company after incorporation enter into a new contract to the
effect of the previous agreement.
Brown v La Trinidad
Facts: the company sought to remove the plf from his post after incorporation, whereas the pre-
incorporation agreement prohibited the same.
Held: that a pre-incorporation contract entered into by the company would not bind the
company, subsequent to the incorporation of the company if the conditions of the pre-
incorporation agreement have not been fulfilled by other party and the company was held to be
free to remove the plf.
Phonogram Ltd v Lane
Facts: A collateral contract was entered into with a company which had not then been
incorporated under which an advance by Phonogram to support an intended new pop group was
repayable by the company if a recording contract was not entered into within one month. The
collateral contract was signed ‘for and on behalf of’ the company by Mr. Lane. Both parties
knew, at the time of the collateral contract, that the company had not yet been incorporated.
Held: Lane’s appeal failed. The Court expressly rejected the argument that section 9(2) should
be construed solely by reference to the Directive. Per lord Denning: “If he signs it as ‘agent for
‘X’ company’ – or ‘for and on behalf of ‘X’ company’ – and there is no such body as ‘X’
company, then he himself can be sued upon it. On the other hand, if he signs it as ‘X’ company
per pro himself the managing director, then the position may be different: because he is not
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contracting personally as an agent. It is the company which is contracting. The person who
purports to contract for the company is personally liable.
Kelner v Baxter
Facts: where the promoter on behalf of unformed company accepted an offer of Mr. Kelner to
sell wine, subsequently the company failed to pay Mr. Kelner, and he brought the action against
promoters.
Held: Erle CJ found that the principal-agent relationship cannot be in existence before
incorporation, and if the company was not in existence, the principal of an agent cannot be in
existence. He further explain that the company cannot take the liability of pre-incorporation
contract through adoption or ratification; because a stranger cannot ratify or adopt the contract
and company was a stranger because it was not in existence at the time of formation of contract.
He further held that the promoters are personally liable for the pre-incorporation contract
because they are the consenting party to the contract.
Newborne v Sensolid (Great Britain) Ltd
Facts: A written contract purported to sell goods by a company described as Leopold Newborne
(London) Ltd. The document was subscribed by the name of the company with Mr Leopold
Newborne’s signature under it. At that time, it had not yet been incorporated. Mr Newborne
attempted to enforce the contract as one to which he was party.
Held: This was inconsistent with the description of the party in the contract. Lord Goddard CJ:
‘In my opinion, unfortunate though it may be, as the company was not in existence when the
contract was signed there never was a contract, and Mr Newborne cannot come forward and say:
‘Well, it was my contract.’ The fact is, he made a contract for a company which did not exist.’
The contract purported to be a contract with the company and it was not relevant that, as was the
case, it was a matter of indifference to the purchasers whether they contracted with the company,
or with Mr Newborne personally. <held that both the company and the promoter cannot bring
an action because they were not parties to the contract>

LEGAL DOCTRINES IN CORPORATE AFFAIRS

1. Presumption of Regularity or Internal Management Rule: presumption of regularity
provides that a person dealing with a company is entitled to presume that the internal
rules of the company or the constitution have been complied with. In other words, the
person is not under obligation to investigate the capacity of the company or whether the
company complies with its constitution in entering into transactions with the company.
Presumption of regularity is a principle applied in evidentiary evaluation that transactions
made in the normal course of business are assumed to have been conducted in the usual
manner unless there is evidence to prove otherwise.
Statutes: see Sections 147, 149, and 150 of Act 992
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Section 150 (1)(a) of Act 992 provides that a person having dealings with a company or with
any other person who derives title under the company is entitled to assume that, the company has
been duly incorporated under this Act.
(b) a person described in the particulars filed with the Registrar pursuant to sections 13 and 216
as a director, managing director or Company Secretary of the company, or represented by the
company, acting through the members in general meeting, board of directors, or managing
director, as an officer or agent of the company, has been duly appointed and has authority to
exercise the powers and perform the duties customarily exercised or performed by a director,
managing director, or Company Secretary of a company carrying on business of the type carried
on by the company or customarily exercised or performed by an officer or agent of the type
concerned. <See section 150 of Act 992 entirely>
Section 150 therefore entitles a person who deals with a company or deals with a person who is
the director, managing director or the company secretary, to assume that the company is duly
incorporated and such person is duly appointed and can duly exercise powers and perform
functions customarily exercised or performed in that position. Upon the assumption of the due
incorporation of the company, a person is therefore entitled to engage in any transaction with the
incorporated company as permitted by Act 992.
Under the rule in Royal British Bank v. Turquand (1856), persons who entered into a contract
with a company and dealt in good faith with that company, had the right to assume that acts
within the constitution and powers of that company had been duly and properly performed. Such
persons were under no duty to inquire whether acts of internal preliminaries and management
had been regularly performed.
Actual Knowledge: Section 150(2) of Act 992 provides that a person is not entitled to make any
of those assumptions if that person had actual knowledge to the contrary. In Commodore v
Fruit Supply Ghana Ltd (1977) GLR: “On the facts, the appellant as an outsider, had no
knowledge of any irregularity within the meaning and intent of sections 139 and 140 of the
Companies Code, 1963 (Act 179), so as to preclude her from relying on the rule in Royal British
Bank v. Turquand... These statutory provisions are intended, I think, to modify the rule... Their
combined effect is that if the outsider to the transaction knows or ought to know that the person
held out as director by the company is acting, irregularly, the company will not be civilly liable.
The Turquand rule only protects outsiders to the company.”
Bousiako Co Ltd. v Ghana Cocoa Marketing Board (1982-83) GLR: Thus on the facts of the
instant case, E, as the chairman of the CTB and also a member of the IMC, had the fullest
authority to announce the awards. Thus on the principle that E was one of the officers
representing the other two directing minds of the CMB, his act would fully be the act of the
CMB. Therefore the question of absence of authority in E to write the letter of award did not
arise. Even if it did, the onus was on the defendants to prove that the plaintiffs had actual
knowledge that E had no authority to write, or that having regard to their position with, or
relationship to the company, they ought to have known of such absence of authority.
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The common law doctrine of presumption of regularity is to defeat the doctrine of constructive
notice which imputes knowledge of the company’s constitution to the general public. Section
149 of Act 992 provides that except as provided in section 121, regarding particulars in the
register of particulars of charges, a person shall not be deemed to have knowledge of any
particulars, documents, or the contents of documents by reason only that those particulars or
documents are registered by the Registrar or referred to in any particulars or documents so
registered.
Boohene Foods v. NSCB [1992] 1GLR: It was a well-established presumption in the common
law that an outsider dealing with a company was entitled to presume that its internal regulations
had been complied with. That presumption had been given a statutory backing in the Companies
Code, 1963 (Act 179), s.142 (b). The presumption was rebutted by proof of the giving of express
or constructive notice by the company. In the instant case, since there was no express or
constructive notice of the extent of the authority of the accountant to commit the bank, the
customer was entitled to assume that all was in order and that the guarantee was proper.
Barclays Bank v. Perseverance Transport [1961] GLR:
Facts: In 1953, the defendant-company, a limited liability company, sought a loan from the
plaintiff-bank. The bank asked it to produce its authority to borrow. Accordingly one of its
officers produced to the bank what purports to be a resolution of its directors at a meeting held
on the 15th December, 1953. It purports to have been signed by the chairman of the board of
directors and the secretary. It had the seal of the company affixed to it. Relying on this document
the bank advanced to the company various sums of money. In 1954, the bank asked for security
for the repayment of the various sums of money lent. The company executed in favour of the
bank a memorandum whereby it created an equitable charge over certain of its properties.
Held: by the rule in Royal British Bank v. Turquand (1856) 6 EL. & BL. 327, the bank was
entitled to assume that the resolution produced to it was a resolution of the general meeting of
the company empowering it to borrow. The bank did not have to go behind that resolution to
investigate the internal workings of the company and to check up whether a general meeting was
held or not.
<Note that today, a bank granting a loan to a company can inquire from the Companies Registrar
whether the mortgaged property of the company is registered or not.>
Transvaal Lands Co v New Belgium (Transvaal) Land & Development Co
Facts: S and H were directors of Transvaal Lands. Both were shareholders in New Belgium
where S was one of the directors. S persuaded the board of Transvaal Lands to purchase certain
shares of New Belgium. When Transvaal Lands discovered that S and H were interested parties
in the transaction, the company sought to set aside the contract.
Held: The court agreed that as both S and H clearly had conflicting interest in the contract. Thus,
they had breached their fiduciary duty by not disclosing the matter to the board. <<The effect is
that S and H had actual knowledge as in section 150(2) of Act 992>>
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Cowries Finance v. Pako Bay Ltd: on the facts, it was held that the plaintiff was in a position
to know that there was no meeting of the board of directors of the company at which the
managing director was empowered to sell the company’s goods to her; therefore since she had
notice of an irregularity in the internal management of the company in connection with her
dealings with it, she could not shelter behind the rule in Royal British Bank v. Turquand.

2. Capacity of a Company and Ultra Vires Doctrine: section 14(2) of Act 992 provides
that upon incorporation of a company, the company becomes a body corporate capable of
performing functions of an incorporated company. Section 18 further provides that
subject to this Act and to any other enactment, a company shall have (a) full capacity to
carry on or undertake any business or activity, do any act, or enter into any transaction;
and (b) full rights, powers and privileges for the purposes of paragraph (a).
Section 19(1) of Act 992 provides that where the registered constitution of a company sets out
the nature of business or objects of the company, there is deemed to be a restriction in the
registered constitution on the business or activities in which the company may engage, unless the
registered constitution expressly provides otherwise
Doctrine of Ultra Vires is a Latin phrase that means beyond the lawful authority or power of a
person. Ultra vires doctrine is a corporate law concept that generally refers to acts beyond the
powers or authority conferred by law on the corporate entity or contrary to the constitution of the
body corporate. This may relate to where the company engages in a business not authorized by
its constitution or engage in an authorized business in a manner contrary to the applicable law or
its constitution. Ultra vires will cover three situations:
 An act by the company that is contrary to Act 992 or any other applicable enactment to
the company. That is, the company engages in an unlawful act;
 In the event of the company has a registered constitution which states the authorized
business or object of the company, the undertaking of any business or activity outside the
scope of the authorized business or object of the company.
 In the event the company has a registered constitution that provides for rules that restrict
the capacity and powers of the company, the breach of such restriction by the company.
Generally, ultra vires covers both acts that are lawful but beyond the powers or authority of a
company as provided in its constitution and unlawful acts which are acts contrary to Act 992 or
any other enactment.
>Ultra Vires is to protect investors.
Ashbury Carriage Co v. Riche: A company created under the Act is not created a corporation
with inherent common law rights. The memorandum was the company’s charter which could not
be departed from save so far as permitted by s12. A contract made by the directors upon a matter
not provided for in the memorandum of association is ultra vires and is not binding upon the
company, and could not be made binding on the company even if assented to by a general
meeting of the shareholders. It was, in its inception, void.
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Re Jon Beauforte (London) Ltd.: In this case, the company’s main objective was to carry on
business as costumiers and gown makers, but also manufactured veneer panels, an element that
was not stated in the company’s objects clause. Re Jon Beauforte Ltd decided to build a factory
to manufacture veneer panels. Neither the builders nor any of the suppliers of goods and
materials for the factory knew that the building of the factory was ultra vires. Nevertheless, the
court held that none of them could prove for their debts in the company’s liquidation, as they
had acquired no contractual rights under their ultra vires contracts.
Bousiako Co Ltd. v. Ghana Cocoa Marketing Board: The effect of the provisions of sections
139 and 140 of the Companies Code, 1963 (Act 179), was to protect third parties against the
unfair operation of the ultra vires doctrine. Thus on the facts of the instant case, E, as the
chairman of the CTB and also a member of the IMC, had the fullest authority to announce the
awards. Thus on the principle that E was one of the officers representing the other two directing
minds of the CMB, his act would fully be the act of the CMB. Therefore the question of absence
of authority in E to write the letter of award did not arise. Even if it did, the onus was on the
defendants to prove that the plaintiffs had actual knowledge that E had no authority to write, or
that having regard to their position with, or relationship to the company, they ought to have
known of such absence of authority.
Politis v. Plastico (No. 2) [1967] GLR:
Facts: On 17 October, Michaelides, the surviving shareholder director, purporting to hold a
meeting of the company with the secretary in attendance appointed Mr. A. C. Kuma as a director
of the company and allocated to him one of his, Michaelides’ shares. No notices were issued for
the meeting and there was no quorum at the meeting as required by the company’s regulations.
Between October and December 1966, Michaelides unilaterally increased the company’s shares
and had his own holding increased from 2,150 to 5,999. He also allotted 741 shares to A. C.
Kuma. The plaintiff brought an application for a declaration that the appointment of A. C. Kuma
as director and the transfer of shares to him was null and void.
Held: In the absence of evidence as to the manner of their acquisition, the court could not
declare the issue of the new shares to Kuma ultra vires. By sections 56(1) (c) and 57(1) (a) of Act
179, a company could increase the number of its shares only by altering its regulations, but there
was no evidence that the regulations of the company had been altered in this respect. Further by
section 204 of the Code directors of the company were not only to act within their powers, but
must exercise them for a proper purpose. The power to issue shares was designed to enable the
company raise further capital if it needed it, but if this power was exercised by the directors
merely to maintain their control even though they believed that to be in the company’s interest it
was improper…

Ultra Vires of the Company Secretary:

> The Company Secretary’s status in the company has often been described as merely ministerial
and administrative.
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In Lugeterah v Northern Engineering [1978] GLR: the court considered the role of the
Company Secretary, in a matter where the secretary had issued a notice of a meeting without
board authorization. The court held as follows: in this particular case the meeting was convened
by the secretary apparently on his own without any directive from the directors. The secretary
acted ultra vires.
In George Whitechurch Ltd. v. Cavanagh [1902] A.C.p. 124: Lord Machaghten described the
duties of company secretary as "of a limited and of a somewhat humble character."
Barnett, Hoares, & Co. v South London Tramways Co: Lord Esher spelt out the status of a
company secretary. He said at p. 817: A secretary is a mere servant; his position is that he is to
do what he is told, and no person can assume that he has any authority to represent anything at
all; nor can anyone assume that statements made by him are necessarily to be accepted as
trustworthy without further inquiry...
> Where an act is supposed to be done both by a director and secretary, one person acting in both
capacities cannot do it.

3. Corporate Veil: From the juristic point of view, a company is a legal person distinct
from its members. A direct outcome of the separate legal personality is the concept of
limitation of liability where the liability of the company is that of the company and no
one else. That is, Salomon v Salomon, has been well established that a company has a
separate personality to that of its members, and that such members cannot be liable for
the debts of a company beyond their initial financial contribution to it. However, there
have been circumstances in which the courts have been prepared to “pierce the veil” of
corporate personality to find the members of the company liable for company actions in
certain circumstances.
Adams v Cape Industries plc
Facts: The defendant was an English company and head of a group engaged in mining asbestos
in South Africa. A wholly owned English subsidiary was the worldwide marketing body, which
protested the jurisdiction of the United States Federal District Court in Texas in a suit by victims
of asbestos. The defendant took no part in the United States proceedings and default judgments
were entered. Actions on the judgment in England failed.
Held: The court declined to pierce the veil of incorporation. It was a legitimate use of the
corporate form to use a subsidiary to insulate the remainder of the group from tort liability. There
was no evidence to justify a finding of agency or facade.

Lifting or Piercing of the Corporate Veil:

Lifting of the corporate veil means disregarding the corporate personality and looking behind the
real person who are in the control of the company. In other words, where a fraudulent and
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dishonest use is made of the legal entity, the individuals concerned will not be allowed to take
shelter behind the corporate personality. In this regards, the court will break through the
corporate shell and apply the principle of what is known as “lifting or piercing through the
corporate veil.”
In a number of circumstances, the Court will pierce the corporate veil or will ignore the
corporate veil to reach the person behind the veil or to reveal the true form and character of the
concerned company. The rationale behind this is probably that the law will not allow the
corporate form to be misused or abused. In those circumstances in which the Court feels that the
corporate form is being misused it will rip through the corporate veil and expose its true
character and nature disregarding the Salomon principal as laid down by the House of Lords.
Mokor v Kuma: It was held that appellant (she) as the chief executive, main shareholder and a
director of the company, would be a proper party to the suit only if a specific personal liability
were established against her or the veil of incorporation could be lifted to make her acts
synonymous with those of the first defendant, or vice versa.
United States v Milwaukee Refrigerator Co., the position was summed up as follows: “A
corporation will be looked upon as a legal entity as a general rule……but when the notion of
legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the
law will regard the corporation as an association of persons.”
Grounds for Lifting the Veil:
1. Fraud or Improper conduct; Gilford Motor Co. v. Horne. Mr. Horne was an ex-
employee of The Gilford motor company and his employment contract provided that he
could not solicit the customers of the company. In order to defeat this, he incorporated a
limited company in his wife’s name and solicited the customers of the company. The
company brought an action against him. The Court of appeal was of the view that “the
company was formed as a device, a stratagem, in order to mask the effective carrying on
of business of Mr. Horne” in this case it was clear that the main purpose of
incorporating the new company was to perpetrate fraud. Thus the Court of appeal
regarded it as a mere sham to cloak his wrongdoings.
Jones v. Lipman, a man contracted to sell his land and thereafter changed his mind in order to
avoid an order of specific performance he transferred his property to a company. Russel judge
specifically referred to the judgments in Gilford v. Horne and held that the company here was “a
mask which (Mr. Lipman) holds before his face in an attempt to avoid recognition by the eye of
equity” .Therefore, he awarded specific performance both against Mr. Lipman and the company.
2. For Benefit of Revenue: The Court has the power to disregard corporate entity if it is
used for tax evasion or to circumvent tax obligations.
3. Where the Company Is a Sham: The Courts also will lift the veil where a company is a
mere cloak or sham (hoax).
Prest v. Petrodel Resources Ltd: the divorcing couple, Mr and Mrs Prest, were wealthy. They
owned a substantial matrimonial home in the UK and a second home in Nevis. Mrs Prest
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contended that her husband’s wealth vastly exceeded this and argued that properties held by
several companies of which Mr Prest “wholly owned and controlled” were in reality owned by
him. Lord Sumption held that the doctrine of veil piercing required some dishonesty on the
part of the company member and was not simply a device that could be employed to ensure
justice in a particular case. He further said that that the dishonesty must involve company law
being used as a sham or façade to disguise the true ownership of property. Lord Sumption
asserted however that the terms sham or façade should be replaced with ‘evasion’ and
‘concealment’. Where there has been concealment of liability, he argued, there will be no need
to pierce the corporate veil because…
The judgement in Prest therefore clarified that piercing the corporate veil would only be possible
when company law had been used to evade liability.
4. Company Avoiding Legal Obligations: Where the use of an incorporated company is
being made to avoid legal obligations, the Court may disregard the legal personality of
the company and proceed on the assumption as if no company existed.
5. Single Economic Entity: Sometimes in the case of group of enterprises the Salomon
principle may not be adhered to and the Court may lift the veil in order to look at the
economic realities of the group itself. In the case of D.H.N food products Ltd. v. Tower
Hamlets, it has been said that the Courts may disregard Salomon’s case whenever it is
just and equitable to do so. In the above-mentioned case the Court of appeal thought that
the present case was one which was suitable for lifting the corporate veil. Here the three
subsidiary companies were treated as a part of the same economic entity or group and
were entitled to compensation.
6. Agency or Trust: Where a company is acting as agent for its shareholder, the
shareholders will be liable for the acts of the company. It is a question of fact in each case
whether the company is acting as an agent for its shareholders. There may be an Express
agreement to this effect or an agreement may be implied from the circumstances of each
particular case. In the case of F.G. Films ltd, An American Company financed the
production of a film in India in the name of a British company. The president of the
American company held 90 per cent of the capital of the British company. The Board of
trade of Great Britain refused to register the film as a British film. Held, the decision was
valid in view of the fact that British company acted merely as he nominee of the
American Company.
7. Public Interest: The Courts may lift the veil to protect public policy and prevent
transactions contrary to public policy. The Courts will rely on this ground when lifting
the veil is the most ‘just’ result, but there are no specific grounds for lifting the veil.
Thus, where there is a conflict with public policy, the Courts ignore the form and take
into account the substance.
Statutory Provisions for lifting Corporate Veil.
Section 8(1) of Act 992 provides that a company limited by guarantee shall not be incorporated
with the object of carrying on business for the purpose of making profits other than making
P.K.A.O

profits for the furtherance of its objects.

Sec 8(3) - The total liability of the members of a company limited by guarantee to contribute to
the assets of the company in the event of the company being wound up shall not at any time be
less than the amount of money specified in the application required for incorporation.
Sec 8(4) - Where in breach of subsection (3), the total liability of the members of a company
limited by guarantee is at any time, less than the amount specified in the application required for
incorporation, every director and member of the company who is cognisant of the breach is liable
to pay to the Registrar an administrative penalty of five hundred penalty units.
Sec 41 - If at any time a company ceases to have a member and it carries on business without at
least one member, every person who is a director of the company during the time that it so
carries on business is jointly and severally liable for the payment of all the debts and liabilities of
the company incurred during that period.
Sec 84 - A contract with a company to take up and pay for any debenture of the company may be
enforced by an order for specific performance.
Sec 71 – The retained earnings of a company with shares is the reserves, as defined in section 70,
less the amounts of money attributable to (a) an unrealised appreciation in the value of an asset
of the company, other than an appreciation in the value of an asset as would, under normal
accounting principles, be credited to the income statement, unless the amount of the appreciation
has been transferred to stated capital; and (b) a balance standing to the credit of the share deals
account immediately before the ascertainment of the retained earnings.
Sec 125(1) – A company shall, (a) paint or affix, and keep painted or affixed, the name of the
company on the outside of the registered office and of every office or place in which the business
of the company is carried on, in a conspicuous position in letters that are easily legible; (b) where
the company has a common seal, have the name of the company engraved in legible characters
on the seal; and (c) have the name of the company accurately mentioned in legible characters at
the head of the business letter, invoices, receipts, notices, or any other publication of the
company and in the negotiable instruments or orders for money, goods or services purporting to
be signed or endorsed by or on behalf of the company.
*Article 181(5) of the 1992 Constitution provides that (5) this article shall, with the necessary
modifications by Parliament, apply to an international business or economic transaction to which
the Government is a party as it applies to a loan.
P.K.A.O

SECOND SEMESTER

MEMBERSHIP OF COMPANIES
A company is an artificial legal entity. It must be established by the efforts of others, called
promoters. And it must also have members.
Section 33(1) provides that the subscribers to the documents for the incorporation of a company
are members of the company and upon incorporation shall be entered as members in the register
of members referred to in section 35.
Section 33(2) of Act 992 provides that any other person who agrees with the company to
become a member of the company and whose name is entered in the register of members is a
member of the company.
Section 33(3) of Act 992 provides that a member has the rights, duties and liabilities that are by
this Act and where applicable, by the registered constitution of the company conferred and
imposed on the members.
Section 33(4) - In the case of a company with shares, each member is a shareholder of the
company and shall hold at least one share.
Section 33(5) - A holder of a share is a member of the company.
How membership in a company is acquired
1. Subscription – section 33(1) of Act 992
2. Agreement – section 33(2) of Act 992
3. Transfer of Share – section 98(1) of Act 992
4. Transmission of shares by operation of law – section 102 of Act 992 provides in the case
of the death of a shareholder or debenture holder, (a) the survivor or survivors, where the
deceased was a joint holder, and (b) the legal personal representatives of the deceased,
where the deceased was a sole holder or last survivor of joint holders, shall be the only
persons recognised by the company as shareholders or debenture holders.

Section 98(1) of Act 992 provides except as expressly provided in the registered constitution of
a company, shares are transferable without restriction by a written transfer in common form.
Section 144(1) of Act 992 provides that a company shall act through the members of the
company in general meeting or the board of directors or through officers or agents, appointed by,
or under authority derived from the members in general meeting or the board of directors.

Adehyman Gardens v. Assibey: It was held that even though the non-shareholder had not been
appointed a director of the company, he had been held out as a director of the company and
P.K.A.O

further, his acts were binding on the company, unless the persons he dealt with knew or should
have known of the irregularity.
West Coast Dyeing Industries Ltd; Adams v Tandoh [1984-86] 2 GLR
Facts: The plaintiff –applicant had sought relief against what he considered was oppression
against him by the defendant. He sued as a member but his suit was dismissed on several
grounds including his lack of locus standi on the ground that he was not a member of the
company. The Court of Appeal (coram: Abban, Osei-Hwere and Mensa-Boison JJA) held that it
was not enough to contend that one was a member of a company especially when the alleged
membership was challenged. The plaintiff had to adduce cogent evidence to establish his
membership which, in the instant case, he failed to do.
Held: The court ruled that he was not a subscriber to the Regulations and so he could not bring
himself under section 30(1) of the Act. He also had no share certificate as prima facie evidence
of his membership in terms of section 54(1) to support his alleged membership nor did his name
appear in the register of the company.
The death of a shareholder terminates the shareholding of the shareholder in a company. Section
33(6) of Act 992 provides that membership of a company with shares continues until
(a) a valid transfer of the shares held by the member is registered by the company;
(b) the shares are transmitted by operation of law to another person, or forfeited for non-payment
of calls; or
(c) the member of the company dies.

Rights of Members of a Company

A. Right to attend General Meetings: section 34(1) of Act 992 provides that Subject to
subsection (2), and section 52, a member has the right to attend a general meeting of the
company and to speak and vote on a resolution before the meeting. Subsection 2 states
that Despite subsection (1), a registered constitution of a company may provide that a
member is not entitled to attend and vote at a general meeting unless the calls or any
other sums of money presently payable by that member in respect of shares in the
company have been paid.
Section 52(1) provides that despite section 34, the right of holders of preference shares to
attend and vote at a general meeting of the company may be suspended on conditions.
B. Right to share in the profit of companies with shares:
C. Right to share in the distribution of the net of the company
D. Right to have particulars entered in the register of members – sections 35 and 36 of Act
992.
E. Right to take action for wrong against the company – section 144(5) of Act 992, section
218 and 219 of act 992.
P.K.A.O

GENERAL MEETINGS COMPANIES

The meetings are the means by which the company communicates with its owners.
The following persons can attend general meetings:
 The director of company
 The Secretary of the company
 Members of the company
 Shareholders of the company (for company limited by shares)
 The Auditors of the company
Section 147(1) of Act 992 - An act of the members in general meeting, of the board of directors,
or of a managing director while carrying on in the usual way the business of the company, is the
act of the company; and accordingly, the company is criminally and civilly liable for that act to
the same extent as if the company were a natural person.
Section 34(1) - Subject to subsection (2), and section 52, a member has the right to attend a
general meeting of the company and to speak and vote on a resolution before the meeting.
Section 34(2) - Despite subsection (1), a registered constitution of a company may provide that a
member is not entitled to attend and vote at a general meeting unless the calls or any other sums
of money presently payable by that member in respect of shares in the company have been paid.
Proceedings at Meetings
Section 169 of Act 992 - Except as otherwise provided by the constitution of a company, the
provisions specified in the Eight Schedule shall govern the proceedings at meetings of a
company except to the extent that, the registered constitution of the company makes provision
for the matters that are expressed in that Schedule to be subject to the registered constitution of
the company.
Luguterah v Northern Engineering Co. Ltd
Facts: By an originating motion on notice brought under section 217 of the Companies Code,
1963 (Act 179), the applicant sought an order, inter alia, for perpetual injunction restraining the
respondents from proceeding to convene an extraordinary general meeting of the Northern
Engineering Co., Ltd. (hereafter called the company) during which a resolution was to be passed
removing all the present directors of the company and appointing new directors. Even though all
the respondents were aware of the pending proceedings and had, before the proposed meeting,
been served with the motion paper and the supporting affidavits, they, nevertheless, acting on the
advice of their solicitor (who was present at the meeting) and in the teeth of strong objection by
the applicant, a director of the company, went ahead with the meeting and passed the resolution.
Held:
Re West Canadian Collieries Ltd: accidental omission to give notice
P.K.A.O

Facts: A company failed to give notice of a meeting to some of its members because plates were
inadvertently left out of a machine used for addressing envelopes.
Held: this was held to be an accidental omission, so the proceedings of the meeting were not
invalidated.
Types of General Meetings
1. Annual General Meetings – this is mandatory
2. Extraordinary General Meetings – not mandatory
Annual General Meetings
The Act permits the members and auditors to dispense with holding an annual general meeting in
a particular year by written resolution signed by the auditors of the company and all members of
the company entitled to attend the annual general meeting.
Section 157(1) - Except as provided in subsection (4), a company shall (a) in each year hold a
general meeting as the annual general meeting of the company in addition to any other meetings
in that year, and (b) specify the meeting as the annual general meeting in the notice calling the
meeting.
Section 157(2) - Not more than fifteen months shall elapse between the date of one annual
general meeting and the next.
Section 157(3) - If a company holds the first annual general meeting within eighteen months of
incorporation, the company is not required to hold the annual general meeting in the year of
incorporation or in the following year.
A company can hold a general meeting in December of a particular year and hold the next annual
general meeting in January of the next year, which is a month apart. The requirement is the
consecutive annual general meetings must not be fifteen months apart.
Asafu-Adjaye v. Agyekum: it was held that it is the mandatory requirement to call an annual
general meeting and the power to call general meetings was a fiduciary discretion vested in
directors of a company or in any member who requisitioned it.
In Eshun v Poku, the financial statements and reports of directors and auditors were not
submitted prior to the purported annual general meeting at which new executives were elected.
The court held that the meeting was not invalidated as an annual general meeting.
>From section 157(1) of Act 992, the person responsible for holding annual general meeting is
the company. However, the directors of the company have the duty to hold an annual general
meeting on behalf of the company.

Procedure for Convening and Conducting General Meetings

P.K.A.O

Paragraph 2(a) of Eight Schedule - The notice of a meeting shall specify (i) the place, date and
hour of the meeting, (ii) the general nature of the business to be transacted at the meeting in
sufficient detail to enable those to whom the notice is given to decide whether to attend or not;
and (iii) where the meeting is to consider a special resolution, shall set out the terms of the
resolution.
The Registrar may convey the meetings
Section 157(6) - If the annual general meeting is not held in accordance with subsection (5), the
Registrar may, on a motion by the Registrar or on the application of an officer or a member of
the company, call, or direct the calling of, an annual general meeting of the company, and may
give the ancillary or consequential directions that the Registrar thinks fit, including directions
modifying or supplementing, in relation to the venue, calling, holding and conducting of that
meeting…
Power of Court to order meeting
Section 162(1) - If for a good reason it is impracticable to call a meeting of a company in a
manner in which meetings of that company may be called, or to conduct the meeting of the
company in the manner prescribed by the constitution of the company, the Court may on the
application of a director, a member of the company or the Registrar order a meeting of the
company to be called, held and conducted in the manner that the Court considers fit.

Place of meetings
Section 159 of Act 992 - Unless the constitution of a company otherwise provides, the general
meetings shall be held in the Republic.
Luguterah v Northern Engineering Co. Ltd: it was held that the secretary calling for the
meeting on his own and without the authority of the board in violation of the provisions of
section 271 of Act 179 is misconceived.
Asafu-Adjaye v. Agyekum
Facts: On 30 November 1983 a notice was circulated calling for a shareholders' meeting on 6
January 1984. An item on the agenda was to pass a resolution removing K. as a director.
Whereupon K. brought a motion under sections 217 and 218 of the Companies Code, 1963 (Act
179) for an order of injunction restraining the directors and A.E.C. Ltd. from holding the meeting
and an order declaring that the affairs of A.E.C. Ltd. were being conducted in a manner
oppressive to him. In his supporting affidavit K. deposed, inter alia, that: (i) G. without a proper
resolution of the board unilaterally increased his (G.'s) holdings to 11,000 contrary to their
original verbal agreement that shareholdings should be equal between the founding shareholders.
Held: There was nothing irregular or unlawful about the notice convening the meeting of 6
January 1984. It complied with section 185 (2) of the Code as to the requisite notice of 35 days.
Apart from the mandatory requirement to call an annual general meeting, the power to call
general meetings was a fiduciary discretion vested in directors of a company or in any member
P.K.A.O

who requisitioned it. {it was also held that A director stood in a fiduciary relationship towards
the company and required him to observe the utmost good faith towards the company in any
transaction with it or on its behalf. He was to act in the best interests of the company to further
its business and promote the purpose for which it was formed.}
In Asafu-Adjaye v. Agyekum: “Counsel for the respondent could not point at any illegality or
irregularity of the proposed meeting except that the meeting was to be held at the chairman’s
house at Achimota and not on the company’s premises. The venue of the general meeting of a
company at a place other than the company’s premises can in no way strike at the essential
validity of the meeting because section 151 of Act 179 simply says that all general meetings
must be held in Ghana, unless the company’s regulations otherwise provide.”
Byng v London Life Association: Change of venue due to small space
Facts: The venue selected for a meeting of the members of a company was too small to
accommodate all the members who attended, and so the chairman adjourned the meeting to an
alternative venue.
Held: The decision by the chairman was set aside on the ground that, although acting good faith,
he had failed to take into account relevant factors in the exercise of a discretion as chairman. The
initial assembly of members was a meeting for the purposes of the Companies Act and the
company’s articles of association, even though no business could be transacted because the
members could not be adequately accommodated. The chairman had adjourned the meeting to a
larger venue later in the day, without the consent or direction of those present. He had a residual
common law power of adjournment, arising out of his duty to regulate proceedings so as to
enable those attending to be heard and to vote. That power was not removed or restricted by the
provision of the company’s articles, in circumstances where it was not possible to discover
whether the meeting would agree to an adjournment and an urgent decision was needed.

Auditors report must be disclosed at the AGM

Eshun v. Poku [1989-90] GLR: Members of association resolving to hold elections at
annual general meeting though reports and accounts not available for consideration.
Facts: The plaintiffs were members of the Ghana Hoteliers Association and members of the
former national executive committee of the association. At an annual general meeting held in
May 1987 a resolution was passed to hold elections to national offices. Even though certain
documents listed under section 124 (1) of the Companies Code, 1963 (Act 179) including reports
and accounts were not available for consideration, the meeting unanimously voted to carry on
with the elections at which a new national executive committee was declared elected unopposed
without the holding of a secret ballot of the members present and voting as required by article 9
(d) of the constitution of the association. Dissatisfied with the results of the elections the
plaintiffs brought the instant action claiming, inter alia, (i) a declaration that the annual general
meeting and the elections were ultra vires as being in violation of section 149 (2) of the
Companies Code, and (ii) an injunction to restrain the defendants from holding themselves out as
P.K.A.O

national officers of the association. Counsel for the plaintiffs therefore contended that the
procedure adopted for the elections was unlawful and that a secret ballot ought to have been held
even where a candidate had been returned unopposed in compliance with the literal meaning of
article 9 (d) of the association's constitution.
Held: even though none of the directors documents, i.e. accounts and reports specified in section
124 (1) of the Companies Code, 1963 (Act 179) were laid before the annual general meeting
(A.G.M.) and therefore not considered as required by section 149 (2), there was nothing in the
Code showing that consideration of the accounts and directors' reports was a condition precedent
to the holding of an A.G.M. or to the holding of elections. If it were the intention of the law-
makers that any A.G.M. held without the consideration of the accounts should be negated they
would have expressly said so. They would not have vested members with the power to apply to
the courts to order a meeting to make up for what was lacking as provided in section 162 (1) of
the Code. That section and section 150, which empowered directors to call for extraordinary
general meeting, all showed that the A.G.M. itself was not invalidated because all relevant
documents were not laid before it. Consequently, the resolutions and elections held in spite of the
fact that the accounts had not been considered was not null and void. <The court held that the
meeting was not invalidated as an annual general meeting>

Extraordinary General Meetings

Section 158(1) - An extraordinary general meeting may be convened by the directors whenever
the directors think fit.
(2) If at any time there are not within the Republic sufficient directors capable of acting to form a
quorum, a director may convene a meeting.
(3) An extraordinary general meeting of a private company may be requisitioned in accordance
with section 299 and an extraordinary general meeting of a public company may be requisitioned
in accordance with section 324.
Requisitioning extraordinary general meetings of a private company
Section 299(1) of Act 992 provides that the directors of a private company, despite a provision
in the constitution of that private company, shall duly convene an extraordinary general meeting
of the company on the requisition of:
(a) two or more members of the company or a single member holding not less than one-tenth of
the shares of the company; or
(b) in the case of a company limited by guarantee, one-tenth of the total voting rights of the
members of the company.
(2) The requisition shall state the nature of the business to be transacted at the meeting and shall
be signed by the requisitionists and sent to or delivered at the registered office of the company.
P.K.A.O

(3) If the directors do not, within seven days from the date of receipt of the requisition at the
registered office of the company, proceed duly to convene a meeting for a date not later than
twenty-eight days after the receipt of the requisition, the requisitionists or any of them may
themselves convene a meeting, but a meeting so convened shall be held within four months from
that date.
(4) The reasonable expenses incurred by the requisitionists by reason of the failure of the
directors to duly convene a meeting shall be repaid to the requisitionists by the company and the
sum of money so repaid shall be retained by the company out of the fees or other remuneration
of the directors who were in default.
(5) For the purposes of this section, the directors have not proceeded duly to convene a meeting
if they do not, within seven days after the receipt of the requisition at the registered office, cause
notices of the meeting, to transact the business specified in the requisition, to be given in
accordance with paragraphs 1 to 3 of the Eighth Schedule.

>>It should be noted that the extraordinary general meetings need not be held only after the
holding of an AGM.
Luguterah v Northern Engineering Co. Ltd
Facts: a contention that the extraordinary general meeting of 7 September 1978 [of the N.E.C.]
was invalid, its decisions invalid and resolutions passed thereon and thereat are invalid and all
appointments made thereat are null and void and of no effect. Apparently, the meeting of 6 and 7
September 1978 was attended by Mr. Cletus Amoah, the solicitor for the respondents. On the
first date of the meeting the applicant raised objection to the presence of the said Mr. Amoah at
the meeting, his objection was upheld and the said Mr. Amoah left the meeting.
Held: In view of the third proviso to section 160 above, it is clear that Mr. Cletus Amoah’s
presence was in accordance with the provisions of the Companies Code and it was therefore
unexceptionable.
Re Sticky Fingers Restaurant Ltd: Wyman and Mitchell held shares in a restaurant. Disputes
arose and Mitchell brought a s.459 petition on the basis that the conduct of the company was
unfairly prejudicing his interest. It was then agreed that Wyman would buy Mitchell's shares.
Mitchell refused to attend any meetings, but the quorum set by the articles was two, so the
company could not carry out any formal business. Wyman applied to the court for an order
calling a general meeting at which he could appoint two additional directors. The court granted
the order, subject to certain conditions.

Quorum of Meetings
>For Annual General Meeting (AGM), if the meeting is not conveyed, then it is said to be
adjourned. Any adjournment which is less than 30 days does not require notice.
P.K.A.O

>For Extraordinary Meeting, it is dissolved or dissolution, if no quorum.

Paragraph 8(a) of Eight Schedule - Subject to subparagraph (b), a business shall not be
transacted at a general meeting unless a quorum of members is present at the time when the
meeting commences, but where a quorum is present, the meeting may validly proceed with that
business despite that a quorum is not present throughout.
Para 8(c) - Unless otherwise provided in the constitution of a company, quorum is constituted, (i)
if the company has only one member, by that member being present in person or, where proxies
are allowed, by proxy.
Re Sticky Fingers Restaurant Ltd: Shareholder not attending a meeting or quorum
Facts: Wyman and Mitchell held shares in a restaurant. Disputes arose and Mitchell brought a
s.459 petition on the basis that the conduct of the company was unfairly prejudicing his interest.
It was then agreed that Wyman would buy Mitchell's shares. Mitchell refused to attend any
meetings, but the quorum set by the articles was two, so the company could not carry out any
formal business. Wyman applied to the court for an order calling a general meeting at which he
could appoint two additional directors.
Held: The court granted the order, subject to certain conditions.
Voting:
Each member is entitled to one vote. And there two types of voting at the General Meeting of
company by members:
1. Voting by hands
2. Voting by poll
NB: the chairman of the general meeting has no vote if he is not neither the director nor a
shareholder of the company.

Notice on proxy:
Section 160(1) of Act 992 provides that in every case in which a member is entitled to appoint a
proxy to attend and vote pursuant to paragraph 9 of the Eighth Schedule to this Act, instead of
that member, the notice shall contain with reasonable prominence, a statement that the member
has the right to appoint a proxy to attend and vote instead of that member and that, the proxy
need not be a member of the company.
Section 161(1) of Act 992 - A person shall comply with the proxy arrangements for voting and
attendance of meetings in accordance with paragraph 9 of the Eighth Schedule.
Paragraph 9(a) of the Eight Schedule - A member of a company entitled to attend and vote at a
meeting of the company is entitled to appoint another person, whether a member of the company
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or not, as a proxy to attend and vote on behalf of that member, and the proxy shall have the same
rights as the member to speak at the meeting.
(b) Unless the registered constitution of the company otherwise provides, subparagraph (a) shall
not apply in the case of a company limited by guarantee.
(c) The instrument appointing the proxy shall be in writing signed personally by the appointor or
the agent of the appointor duly authorised in writing or, if the appointor is a body corporate,
under the seal of the body corporate or signed personally by an officer or agent duly authorized.
(e) Unless the registered constitution of the company otherwise provides, the instrument
appointing a proxy and the power of attorney or other authority under which the instrument is
signed or a notarised copy of that power or authority, shall be deposited with the designated
receiving officer:
(i) by electronic mail;
(ii) Personally at the registered office of the company, or at any other place within the Republic
as specified in the notice convening the meeting; or
(iii) by any other means approved by the company, not less than forty-eight hours before the time
for holding the meeting or adjourned meeting, or not later than twenty-one days before the
meeting or in the case of a poll, not less than twenty-four hours before the time appointed for the
taking of the poll and in default, the instrument of proxy shall not be treated as valid.
Paragraph 10(a) of the Eight Schedule - The vote of a proxy shall not be rejected at a meeting
on the ground that the appointment of a proxy was obtained by misrepresentation.

Harman v BML Group Ltd [1994] 2 BCLC

Facts: The Company in question had a share capital consisting of 290,000 A shares and 210,000
B shares. There were four A shareholders but only one B shareholder, a Mr Blumenthal. A
shareholders’ agreement provided that Mr Blumenthal should be entitled to remain in office as
director so long as he, or any family company of his, should be the owner of the B shares, and
that a general meeting should be inquorate unless the B shareholder, or his proxy or
representative, attended.
Held: that the provision requiring the B shareholder to be present was essential to entrench Mr
Blumenthal’s right to remain a director and was a special provision to secure his directorship.
‘Class rights have to be respected and I regard the right of Mr Blumenthal, as the holder of the B
shares, to be present in the quorum as a class right for his protection which is not to be
overridden by this [the sec 371] machinery.’
Union Music v. Watson: on not attending meeting for vote
Facts: Company with two shareholders (51 are held by Union and 49 by Mr Watson). Claimant,
the majority shareholder, and Defendant, the minority shareholder, fell out. A prior shareholder
agreement between Claimant and Defendant provided that the shareholders should exercise their
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voting rights so that the company could not hold any meeting or pass any resolutions unless all
the shareholders were present. Defendant threatened not to attend any meetings, and Claimant
applied for court order a meeting limited to appointment of new director by Claimant (in order to
provide valid quorum).
Held: the shareholdings were not equal. The Agreement was not designed to ensure that power
should be shared equally. The deadlock happens to have been caused by Mrs Watson ceasing to
be a director. Union, as the majority shareholder, could be expected to be able to remove or
appoint a director. What the parties had contracted for, I accept, was that if Mr Watson chose not
to attend or be represented at a general meeting, then there could be no general meeting. There is
no doubt that if, as one would expect, Union exercises its voting rights at a meeting not attended
by Mr Watson or his proxy, and it would be doing so in contravention of clause 6.1.18.

Resolutions
There are two main types of resolution of a company:
 Ordinary Resolution
 Special Resolution
>Ordinary Resolution requires simple majority of the members or votes. Ordinary resolution is
used for anything except where the constitution or Act requires special resolution.
>Special Resolution requires a 75% of the votes or members.
There are Written Resolutions.
Section 163 - (1) Except as provided in subsection (5), a resolution in writing signed by all the
members for the time being entitled to attend and vote on the resolution at a general meeting, or
being bodies corporate by the duly authorised representatives of the bodies corporate, is as valid
and effective, for the purposes of this Act as if the resolution had been passed at the general
meeting of the company duly convened and held.
Registration of copies of certain resolutions: section 165(1) of Act 992 - A certified true copy
of a special resolution of a general meeting or of a class of members and of a resolution.
(a) to which a specified proportion of a class of members have consented in writing, and
(b) which would not have been effective for the purpose, unless the written consent had been
given, without the passing of a special resolution, shall be forwarded to the Registrar for
registration within twenty-eight days after the passing of the resolution or the making of the
copy.
>>It is to note that among the three types of resolutions, two (Ordinary and special resolutions)
are passed at the general meeting; whiles the written resolution is not passed at a general
meeting.
>>if written resolution is special, it needs to be registered at the registrar of companies.
P.K.A.O

 A written resolution is a resolution passed by all members entitled to attend and

vote on that resolution without the members having a general meeting.
 The resolution is passed on the date the last member entitled to attend and vote on
the resolution signed the resolution.
 The requirement is not for all the members of the company to sign the resolution
or unanimously approve the resolution. The requirement is for all the members
entitled to attend and vote on that particular resolution to do so.
Unanimous Agreement by Shareholders: Section 301(10(a) of Act 992 provides that where all
shareholders of a private company agree to or concur in any action which has been taken or is to
be taken by the company (a) the taking of that action is deemed to be validly authorized by the
company despite any provision in the registered constitution of the company.

Minutes of General Meetings:

The secretary of the company is required to take minutes of the meetings.
Section 212(c) of Act 992 provides that the duties of a Company Secretary include ensuring that
the minutes of the meetings of the shareholders and the directors are properly recorded in the
form required by this Act.
Section 166(1) of Act 992 - A company shall cause minutes of the proceedings of general
meetings and meetings of a class of members to be entered in a book or books kept for the
purpose.
(2) A minute under subsection (1), if purporting to be signed by the chairperson of the meeting at
which the proceedings took place or of the next succeeding meeting, is sufficient evidence of the
proceedings.
Conte v. Kpeglo [1964] GLR:
Facts: The difficulty arose since the only admissible evidence as to the contributories was the
minutes book, all other documents having been lost or cancelled.
Held: that the minute book that contains the allotted shares at the general meeting is conclusive
evidence as the binding contract to acquire shares.

DIRECTORS OF COMPANIES
Director: section 170(1) of Act 992 provides that “directors” means those persons, by whatever
name called, who are appointed to direct and administer the business of the company.
According to the first schedule to the Companies Act, 2019 (Act 992) “director” in relation to a
company, has the meaning assigned to it by section 170 and in relation to any other body
corporate means a person whose position in relation to that body corporate is one that that person
would be a director of the body corporate if that body corporate were a company.
P.K.A.O

Section 144(3) provides that except as otherwise provided in the constitution of a company, the
business of the company shall be managed by the board of directors who may exercise the
powers of the company that are not by this Act or the constitution required to be exercised by the
members in general meeting.
At Common Law:
In Bolton (H.L.) (Engineering) Co., Ltd. v. T.J. Graham & Sons Ltd: “A company may in
many ways be likened to a human body. It has a brain and nerve centre which controls what it
does. It also has hands which hold the tools and act in accordance with directions from the
centre. Some of the people in the company are mere servants and agents who are nothing more
than hands to do the work and cannot be said to represent the mind or will. Others are directors
and managers who represent the directing mind and will of the company, and control what
it does. The state of mind of these managers is the state of mind of the company and is treated by
the law as such.”
In Okudzeto v Irani Brothers: the court acknowledged that “the conduct of a company’s
business is the responsibility of the directors.”

Number of Directors:
In Ghana, every incorporated company must have a minimum number of two directors, and one
of such being ordinarily resident in Ghana.
Section 171(1) of Act 992 provides that a company incorporated after the commencement of this
Act shall have at least two directors, one of these directors being ordinarily resident in Ghana.
Section 171(4) of Act 992 provides that subject to this section, the number of directors may be
fixed by, or in accordance with, the constitution of the company.
Express Maritime Services v Ackah (2003-2005) GLR
Facts: The plaintiff, a member of the first defendant company, brought an action at the High
Court against the company and all the four directors of the company, as defendants, for
breaching certain provisions of the Companies Code, 1963 (Act 179) in the management of the
company. He subsequently brought an interlocutory injunction under Order 50 Rule 7 of the
High Court (Civil Procedure) Rules, 1954 (LN140A) for an order of injunction against the
defendants to restrain all the directors from holding themselves out as directors of the company,
and for the court to appoint a receiver and manager for the company. The trial court granted the
injunction and appointed the registrar of the court as receiver and manager of the company
pending the determination of the suit.
Held: the court held that section 180 of the Companies Code, 1963 (Act 179) prescribed a
minimum of two directors to operate the business of a company. Since the order of injunction of
the High Court suspending all the four directors of the company was inconsistent with that
provision, it could not be saved as an equitable order under section of the Companies Code, 1963
(Act 179) which had made the rules of equity and the common law applicable to companies.
P.K.A.O

Appointment of Directors v. De Facto Directors

Section 13(2)(h) - a statutory declaration by each proposed director of the proposed company
indicating that within the preceding five years, that proposed director has not been
(i) charged with or convicted of a criminal offence involving fraud or dishonesty;
(ii) charged with or convicted of a criminal offence relating to the promotion, incorporation or
management of a company; or
(iii) declared insolvent or if that proposed director has been insolvent, the date of the insolvency
and the particulars of that company.
Section 172(2) of Act 992 provides that person shall not be appointed as a director of a company
unless the person has, before the appointment…the person has not within the preceding five
years of the application for incorporation been:
(i) charged with or convicted of a criminal offence involving fraud or dishonesty;
(ii) charged with or convicted of a criminal offence relating to the promotion, incorporation or
management of a company
(iii) a director or senior manager of a company that has become insolvent or if the person has
been, the date of the insolvency and the particular company
Section 172(2)(b) of Act 992 provides that person shall not be appointed as a director of a
company unless the person has, before the appointment consented in writing to be a director and
filed the consent within twenty-eight days.

Thus according to the Companies Act, before a person can be appointed a director he should
have made the statutory declaration and consented in writing to be appointed as such. This is to
prevent a situation in which a person’s name is put down as a director without his knowledge or
consent. Failing to obtain the consent or make the statutory declarations in writing invalidates the
appointment and if the person were to act as a director, he would be a de facto director.

Politis v. Plastico Ltd (No. 2) [1967] GLR: Power of sole director to appoint another
director to fill casual vacancy.
Facts: Dr. Dimitra Politis was the managing director of the company. The other 2,150 shares
were held by Michaelides. In October 1966 Dr. Politis died in Greece. On 17 October,
Michaelides, the surviving shareholder director, purporting to hold a meeting of the company
with the secretary in attendance appointed Mr. A. C. Kuma as a director of the company and
allocated to him one of his, Michaelides’ shares. No notices were issued for the meeting and
there was no quorum at the meeting as required by the company’s regulations. Between October
and December 1966, Michaelides unilaterally increased the company’s shares and had his own
holding increased from 2,150 to 5,999. He also allotted 741 shares to A. C. Kuma. In late
November or December of 1966, the applicants obtained letters of administration to administer
P.K.A.O

the estate of Dr. Dimitra Politis. On 23 December 1966 following an application by the
applicants, the court ordered the company to register the administrators as members of the
Company.
Held: Section 181(5) of the Companies Code, 1963 (Act 179), gave a sole surviving director
power to appoint another to fill a causal vacancy, and a casual vacancy was any vacancy not
occurring by effluxion of time, i.e. any vacancy occurring by death, resignation or bankruptcy.
Thus upon the death of Dr. Politis, the sole surviving director had the power to appoint a director
to fill the casual vacancy created. For this purpose a meeting of the company was not necessary
since the Code empowered the surviving director to make the appointment. There be a consent
between the appointor and appointee to the post of directorship.
In Politis v. Plastico Ltd: Thus, appointment of A. C. Kuma would have been valid but for the
fact that there was no evidence that prior to his appointment, he consented in writing as required
by section 181 (1) of Act 179. In the absence of this consent in writing, his appointment as
director was ultra vires and renders the appointment void.
In Quarcoopome v Sanyo Electric Trading Company Ltd: the Supreme Court further held
that the plaintiff’s name did not appear in the regulations of the second defendant company as a
director, neither was there any ordinarily resolution passed to appoint him. In any case, section
179(3) of Act 179 made it an offence punishable by a fine for a person who had not been duly
appointed as a director of a company, to hold himself out or for the company to allow him to
hold himself out as a director of the company.
Adams v. Tandoh (1984-86) GLR: On Disqualifying Director on the ground of Criminal
Offence; invoked the provisions of section 186 of the Code and made a disqualification order
against the Appellant, restraining him from having anything to do with the management of any
company incorporated in Ghana, for four years, except with the leave of the court. The court
took the opportunity to explain that the object of section 186 is to safeguard the interests of
persons who invest in or give credit to companies, and to ensure that the assets and investments
were managed only by honest persons as directors and not by frauds or persons with criminal
propensity. The court further established that section 186 (1)(c) does not require conclusive
proof of a criminal offence, and the person concerned need not be convicted of the offence. All
that is required is that it should appear to the court that the conduct of the person or the matters
complained of amounted to a criminal offence and like the breach of duty or fraud, the crime
should have been committed in relation to a body corporate.
Modes of Appointment of Directors
1) Becoming a Director by Appointment by the General Meeting: A person becomes a
director of a company through appointment and not any other means. A director is
appointed by the general meeting through an ordinary resolution. Section 172(3) of Act
992 provides that subject to this section and to sections 173 and 174, the appointment of
directors shall be regulated…
P.K.A.O

2) Becoming a Director by Appointment by Directors: Casual Vacancy: The directors of

a company may also appoint directors of the company. Section 172(4) of Act 992
provides that despite a provision to the contrary in the constitution of a company, a casual
vacancy in the number of directors may be filled by (a) the continuing directors or
director although the number of directors may have been reduced below that fixed as the
necessary quorum of directors; or (b) an ordinary resolution of the company in general
meeting. See Politis v Plastic (No.2) [1967] GLR.

3) Becoming a Director by Recruitment by Promoters: Section 172(1) of Act 992

provides that the first directors of a company shall be named in an application for
incorporation. See Republic v High Court; Ex parte Brenya and Another [2001-2002]
GLR.

4) Becoming a Director by Holding Out: There are situations in which a person may, in
fact not having been duly appointed a director but will, in law be treated as a director.
Section 170(2)(a) of Act 992 provides that a person, not being a duly appointed director
of a company, who holds out as a director or knowingly allows to be held out as a
director of that company is subject to the same duties and liabilities as if that person were
a duly appointed director of the company. Thus, under Section 170(2)(a) of Act 992, a
person who holds himself out or allows himself to be held out as a director of the
company is deemed to be a de facto director.

Types of Directors
1. De Jure Directors: these are directors who are actually appointed to direct and
administer the business of the company.

2. De Facto Directors: these are directors who are not duly appointed, who hold
themselves out and knowingly act as directors.
Section 170(2)(a) of Act 992 provides that a person, not being a duly appointed director
of a company, who holds out as a director or knowingly allows to be held out as a
director of that company is subject to the same duties and liabilities as if that person were
a duly appointed director of the company.

3. Shadow Directors: those not appointed nor openly hold themselves out as directors and
yet whose directions or instructions the duly appointed directors are accustomed to act.
Section 170(2)(b) of Act 992 provides that a person, not being a duly appointed director
of a company, on whose directions or instructions the duly appointed directors are
accustomed to act, is subject to the same duties and liabilities as if that person were a
duly appointed director of the company.
P.K.A.O

In Re Hydrodam (Corby) Limited: De Jure Directors, De Facto D’tors and Shadow

Directors
Facts: ET plc wholly owned MCP Ltd which wholly owned Landsaver MCP Limited, which
wholly owned Hydrodam (Corby) Limited (‘HCL’). The only de jure directors of HCL were two
Channel Island companies. HCL went into compulsory liquidation and its liquidator brought
claims under section 214 of the 1986 Act for wrongful trading against 14 defendants, including
ET, one of its subsidiaries and all its directors. Two of those directors were Mr Thomas and Dr
Hardwick, who applied for the proceedings against them to be struck out.
Held: Directors may be of three kinds: ‘de jure directors, that is to say those who have been
validly appointed to the office; de facto directors, that is to say, directors who assume to act as
directors without having been appointed validly or at all; and shadow directors who are persons
falling within the definition I have read [‘a person in accordance with whose directions or
instructions the directors of the company are accustomed to act’]’…difference between a shadow
and a de facto director, saying that the latter ‘is one who claims to act and purports to act as a
director, although not validly appointed as such.’ A shadow director does not so claim or purport.
NB: In Ghana, Act 992 exclusively impose liabilities upon directors of one or other of the three
kinds.
Commodore v Fruit Supply Ghana Ltd [1977] GLR: On De Facto Director or director by
holding out; the facts were that a non-shareholder of a company who had not been appointed a
director of the company had functioned together with the Managing Director of a company, and
had had his name allowed to be printed on the company’s letter head as director, and transacted
business on behalf of the company; it was held that even though the non-shareholder had not
been appointed a director of the company, the trial judge ought to have held that on the facts, he
had been held out as a director of the company and the company thereby estopped from denying
that he was a director of the company.
In Australian Securities Commission v AS Nominees Ltd: on shadow director: “The
reference in the section to a person in accordance with whose directions or instructions the
directors are ‘accustomed to act’ does not in my opinion require that there be directions or
instructions embracing all matters involving the board. Rather it only requires that, as and when
the directors are directed or instructed, they are accustomed to act as the section requires. The
idea of the section … that the third party calls the tune and the directors’ dance in their capacity
as directors.”
In Kwapong v Ghana Cocoa Marketing Board [1984-86] GLR: an Inter Management
Committee was recognised by the court as a de facto board of directors.
In Re Richborough Furniture Ltd [1995]; Mr Lloyd QC decided that a business consultant
providing computer and other management services to a furniture-making company was not a de
facto director, despite having undertaken extensive negotiations with creditors and performed
some of the functions of a finance director. The court at page 524 held that: “it seems to me that
for someone to be made liable to disqualification as a de facto director, the court would
P.K.A.O

have to have clear evidence that he had been either the sole person directing the affairs of
the company (or acting with others all equally lacking in a valid appointment) or, if there
were others who were true directors, that he was acting on an equal footing with the others
in directing the affairs of the company. It also seems to me that, if it is unclear whether acts
of the person in question are referable to an assumed directorship, or to some other
capacity such as a shareholder or, as here, consultant, the person in question must be
entitled to the benefit of the doubt.”
Shaw & Sons Ltd v Shaw
Facts: the defendants, three brothers, were directors and shareholders of the plaintiff company.
The defendants’ owed debts to the company. So they made a settlement. According to the terms
of the settlement, the defendants became the company’s ordinary directors. The plaintiff
company’s articles of association were altered. The purpose was to hand over all control of the
financial affairs of the company and the management of its business to three independent persons
known as ‘permanent directors’. The defendants declined to execute the agreement. Under this
agreement the permanent directors resolved to institute proceedings in the company’s name
against the defendants to recover debts. As a result, it was decided that the action should be
brought against the defendants. The defendants appealed.
Held: The Court of Appeal declared that the resolution of the company directed against three
defendants was be invalid. The court held that when the general management of the company
belongs to the directors, the shareholders have no power by ordinary resolution to give directions
to the Board or overrule their decisions.

Qualification of Directors
Section 173(1) of Act 992 - The following persons are not qualified to be appointed or to act as
directors of a company:
(a) an infant;
(b) a person adjudged to be of unsound mind;
(c) a body corporate;
(d) a person who is prohibited from being a director or promoter of, or being concerned or taking
part in the management of a company as a result of an order made under section 177 so long as
the order remains in force unless leave to act as director has been granted by the Court in
accordance with that section; and
(e) an undischarged bankrupt, unless that bankrupt has been granted leave to act as director by
the Court by which that person was adjudged bankrupt.
Section 177(1) - Where,
(a) a person is convicted, whether in the Republic or elsewhere, of
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(i) an offence involving fraud or dishonesty,

(ii) an offence in connection with the promotion, formation or management of a body corporate,
(iii) an offence involving insider dealing, or
(iv) any other criminal offence which is not a misdemeanour;
(b) a person is adjudged bankrupt whether in the Republic or elsewhere;
(c) a person has been culpable of a criminal offence, whether convicted or not, in relation to a
body corporate or of fraud or breach of duty in relation to a body corporate;
(d) it appears that a person is debarred by the competent authority from being a member of a
recognised professional body as the result of a disciplinary inquiry;
the Court, on its own motion or on the application of a person referred to in subsection (6), may
order that that person shall not, without the leave of the Court, be a director of, or in any way,
whether directly or indirectly, be concerned or take part in the management of a company or act
as auditor, receiver or liquidator of a company for the period specified in the order.
Section 174(1) - Except as otherwise provided in the constitution of a company, a director is not
required to be a member of the company or hold a share in the company.
Section 174(4) - Where a company amends the constitution so as to introduce or increase the
requirement of a share qualification, every director holding office at the date of the amendment
shall have two months within which to obtain the qualification and shall not vacate office under
this section unless that director fails to do so.
NB: Internal Auditor can be a Director.

Classification/Types of Directors
1. Managing Directors: Managing Director is simply a director who has been appointed by
other directors to perform a specific task. It is important to note that the Companies’ Act
does not detail or spell out the obligations of the Managing Director. Rather, the directors
of the company in appointing one of their own as the Managing Director entrusts that
person with a wide range of powers; even though the directors may also have systems in
place to limit the powers of the Managing Director.
According to the first schedule to the Companies Act, 2019 (Act 992) “managing director”
means a director to whom has been delegated the powers of the board of directors, to direct and
administer the business of the company.
Section 184(a) - Except as otherwise provided in the constitution of a company, the directors
may from time to time appoint one or more of their body to the office of managing director and
section 183 shall apply to that appointment. See Section 184 of Act 992 entirely.
P.K.A.O

>>The managing director has the power to undertake commercial transactions on behalf of the
directors and/or the company. However, the managing director does not have the right to institute
legal action on behalf of the company, unless same is conferred on him by the Constitution of the
company or by the board or members in a general meeting.
>>It must be noted that every managing director is as executive director, but not every director is
a managing director. An acting managing director has all the powers of a substantive managing
director.
Pinamang v Abrokwa
Facts: All the parties were directors and shareholders of A.F.C. Ltd. The appellant was however
the majority shareholder and managing director of the company. The respondents in their
capacities as shareholders, claiming that the appellant was conducting the affairs of the company
in a manner oppressive of them and in disregard of their interests, sought by originating
summons pursuant to Section 218 of the Companies Code, 1963 (Act 179) for, inter alia, orders
that the appellant be made to pay all moneys found due from him to the company after proper
account had been taken of the affairs of the company. Furthermore, the appellant should be
removed from the board of directors of the company.
Held: The complaint that the appellant personally benefited from the operations of the company
only showed that he obtained and gained collateral advantages from the company. But
complaints of those specie and nature would not support complaints of oppressive conduct and
were therefore not remediable under section 218 of Act 179. The further complaint by the first
respondent that the appellant demoted him without authority was also not a mischief that would
be remedied by resort to section 218 of Act 179.
Promexport International (Ghana) Ltd v. First Ghana Building Society
Facts: The plaintiffs sued in the High Court, Accra for recovery of possession and mesne profit
of premises being occupied by the defendants. The plaintiffs based their claim on a purchase of
the premises in August 1980 from Kuottam Enterprises Ltd, the original owners. It was their
claim that since purchasing the premises the defendants who were in occupation as tenants of the
original owners had remained in occupation without acknowledging the title of the plaintiffs and
had refused to pay rent. In their Statement of Defence, the defendants said they would rely on an
agreement between one Raymond Okudjeto, described as managing director of the defendant
company, and Kuottam Enterprises Ltd, the original owners, on 11 May 1980 by which the latter
had agreed to sell the premises in dispute to the former. The defendants also sought to impeach
the sale to the plaintiffs on the ground that they were affected by constructive notice in that they
were sitting tenants at the time of the transaction and could, by proper inquiry, have discovered
the defendants’ prior equitable interest in the premises. The trial High Court judge, in a motion
brought by the plaintiffs to strike out the whole statement of defence as constituting no defence
at all, held that the defence as it stood did not disclose any reasonable answer to the plaintiffs’
claim and therefore struck it out and entered judgment for the plaintiffs. In the instant appeal by
the defendants from the decision of the trial judge.
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Held: the description of Raymond Okudjeto as the managing director of the defendant company
did not ipso facto make him an agent for and on behalf of the defendant company. Furthermore,
the Companies Code, 1963 (Act 179) made adequate and specific provisions touching upon the
mode of acquisition of property by limited liability companies. It could not as a matter of law be
submitted that Raymond Okudjeto entered into the said contract for and on behalf of the
defendant company. If the defence to the action was in jus tertii, i.e. that Raymond Okudjeto was
the owner of the premises, the defendant company should have sought an order to join Raymond
Okudjeto as a codefendant.
Holdsworth (Harold) & Co (Wakefield) Ltd v Caddies: Lord Reid noted that as ‘The law
does not prescribe the duties of a managing director, the parties are left to define his duties, and I
can see nothing inconsistent in an agreement that a person shall be a managing director of a
company but shall devote his attention to managing subsidiary companies.’
In West Africa Express (Ghana) Ltd v Craig [1963] GLR, C was an employee of WA, a
travel and tour agency based in Kumasi. C was the one running the office. Under the terms of
engagement, she was supposed to get 50 per cent of all commission earnings WA makes – after
deduction of expenses. But the business was not thriving. C, therefore, threatened to leave the
company if she was not given a new contract. Now here is the thing. At the time of her
protestation, the Managing Director of the company was away. So the Acting Managing Director
engaged C and entered into a new contract with C. The question before the court was whether the
acting Managing Director had the authority to bind the company. The Supreme Court thought so.
In the words of the court, “The General Manager acting for the time being as the managing
director had the authority to enter into the agreement. As a pro tem acting managing director, he
had a general authority to act in the best interest of the company to prevent part of the company’s
business from being closed down.” In this case, therefore, the actions of the Acting Managing
Director bound the company.
Amartey v Social Security Bank; Social Security Bank v Robertson (Consolidated) [1987-
88] GLR: CA a demand notice addressed and served on the managing director of a company
indebted to the bank was considered as proper notice to the company (in spite of vigorous
protestation by the Managing Director that he was not the company). The Court of Appeal said
that even though the company was a separate legal entity, the court could not turn a blind eye to
the fact that the managing director was the main person running the company.
Owusu-Afriyie v State Hotel Corporation [1976] GLR: the High Court cast doubt on the
power of a managing director to dismiss an employee or exercise disciplinary powers over an
employee in the absence of a specific provision or mandate allowing him to do so. In the view of
the court, “the purported dismissal of the plaintiff by the managing director of the defendant
corporation was ultra vires to his powers and therefore wrongful, for where an employee was
dismissed by some organ of a corporation which was not empowered by the instrument setting
up the corporation, or by some statute or other delegated legislation governing the structure and
functions of the corporation to do so, the dismissal was wrongful.”
2. Executive Directors
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Section 183(a) - Except as otherwise provided in the constitution of a company, a director may
hold any other office or place of profit under the company, other than the office of an auditor, in
conjunction with the office of director.
According to Corporate Governance Directive (2018): “Executive Director” means a director
who has defined management responsibilities in addition to their function as director.
Serbeh-Yiadom v Stambic Bank [2003-2005] GLR: On Executive Director
Facts: the plaintiff and four others incorporated Union Mortgage Bank (UMB) with 10 million
shares valued at ¢10 million each. Following differences between the plaintiff and other
members of the board, an extraordinary meeting of the board was scheduled to pass a resolution
for the removal of the plaintiff as a director of the bank. Notice of the meeting was duly served
on the plaintiff who was then in Lagos. However, when the plaintiff came down for the meeting
he learnt that the meeting had already been held. He also found from the annual returns of UMB
that only 10,000 shares had been recorded against his name. He therefore, brought an action
against the company for, inter alia, a declaration that he owned 160,000 paid up shares in the
company, his purported removal as executive director of the company was wrongful and the
meeting held authorizing the increase of the shares was fraudulent. The company in its defence
however claimed that the plaintiff had not paid any consideration for the additional 10,000 shares
and he had never been appointed an executive director of the company, and also due notice of the
change of the date of the meeting had been sent to the plaintiff and thus the meeting had been
properly conducted.
Held: that section 192(b) of the Companies Code, 1963 (Act 179) and the Regulations of the
company empowered the directors of the company to appoint any other office or place of profit
under the terms agreed with the director and also revoke the appointment under the stated terms.
Accordingly, the board had the power under section 192(b) of the Companies Code, 1963 (Act
179) to revoke the appointment of the plaintiff, even if they had appointed him to the office of
executive director. However, on the evidence, the board had not appointed him to any such
office. Significantly, the letter written to the plaintiff neither sought to terminate nor revoke any
appointment he held. The letter merely asked him to cease forthwith from holding himself as the
executive director of the bank. Accordingly, the plaintiff had never been appointed an executive
director of the company.
3. Alternate Directors
Section 181(1) - Except as otherwise provided in the constitution of a company, a director may,
appoint another director or any other person approved by a resolution of the board of directors,
as an alternate director to act as a director in respect of a period not exceeding six months in
which that director is absent from the Republic or unable for a reason to act as a director.
Alternate director does not receive any remunerations as MD and Executive Directors do –
section 181(4)
Alternate Directors shall not be required to hold a share qualification – Sec 182(2)(b)
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In Okudjeto v Irani Bros, where per the Regulations, each of the 3 classes of shareholders was
entitled to appoint 2 directors each as alternate directors, one class sought to appoint the
applicant, solicitor, as an alternate director, but the board of directors rejected this candidate. The
applicant solicitor sued the company alleging among other things, oppression. The court held
that Since the applicants' attorney was not a director and there was no resolution of the board
approving him then the refusal of the directors to accept him as an alternate director was
permissible under section 188 (1) of Act 179.
4. Substitute Directors
They are appointed by the company and as deputy for another named director. They do not vote
at the directors meetings or committee of directors.
Section 180(1) - Except as otherwise provided in the constitution of a company, a company may
appoint substitute directors in accordance with this section.
(2) A substitute director is one who is appointed to act as a deputy for another named director
and as the substitute in the absence of that director.

Liabilities of Directors
Section 170(2) of Act 992 provides that a person, not being a duly appointed director of a
company, (a) who holds out as a director or knowingly allows to be held out as a director of that
company, or (b) on whose directions or instructions the duly appointed directors are accustomed
to act, is subject to the same duties and liabilities as if that person were a duly appointed director
of the company.
Section 171(3) of Act 992 provides that every director and every member of the company who is
cognisant of the fact that the company is carrying on business with fewer than two directors are
jointly and severally liable for the debts and liabilities of the company incurred during that time.
Regal (Hastings) Ltd v. Gulliver: Directors Liability for Actions outside the Company
Facts: Regal negotiated for the purchase of two cinemas in Hastings. There were five directors
on the board, including Mr Gulliver, the chairman. Regal incorporated a subsidiary, Hastings
Amalgamated Cinemas Ltd, with a share capital of 5,000 pounds. There were six directors on its
board, who included the five directors of Regal. Regal was only prepared to subscribe 2,000
pounds. It was agreed that each of the directors of Amalgamated would themselves subscribe for
500 shares each, with the exception of Mr Gulliver. He said that he would find investors. He did
so, and as a result 200 shares in Amalgamated were allotted to a Swiss company called Seguliva;
200 to a company called South Downs Land Co Ltd and 100 to a Miss Geering. Mr Gulliver
himself held 85 out of 500 shares in Seguliva and 100 out of 1,000 shares in South Downs Land
Co. He was a director of Seguliva and the managing director of South Downs Land Co, and
signed the subscription cheques on their behalf. Miss Geering was a friend of his. The shares in
Amalgamated were subsequently sold at a profit; and the court was asked whether the directors
were liable to account to Regal for their profit.
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Held: Directors are liable to account for activities outside the company if (i) what the directors
did was so related to the affairs of the company that it can properly be said to have been done in
the course of their management and in utilization of their opportunities and special knowledge as
directors and (ii) what they did resulted in profit for themselves.

Directors’ Meetings
Section 188(1) of Act 992 - The directors of a company shall meet at least once every six
months in each year to consider financial and operational affairs of the company.
(2) Subject to a contrary provision in the constitution of a company,
(a) the directors may
(i) meet together in the country or elsewhere for the despatch of business,
(ii) Adjourn and otherwise regulate the meetings of the directors as the directors think fit, and
(iii) delegate any of the powers of the directors to committees consisting of the member or
members of their body that the directors think fit; but a committee so formed shall in the exercise
of the powers so delegated conform to the regulations that may be imposed on the committee by
the directors;
(b) a director may, and the Company Secretary on the requisition of a director shall, at any time
summon a meeting of directors, and a director being a member of a committee may, and the
Company Secretary on the requisition of that director shall, at any time summon a meeting of the
committee.
Publication of Names of Directors
Section 186 of Act 992 provides a company incorporated in the country shall state in legible
characters in the trade circulars and business letters of the company on or in which the name of
the company appears:
(a) the present forenames and surname; and
(b) any former forenames or surname of every director, including substitute directors appointed
in accordance with section 180 but excluding alternate directors appointed in accordance with
section 18.

Remuneration and other Benefits of Directors

A director may not necessarily be an employee of the company. Fees and other benefits
accruing to the Directors for services rendered must not be fixed in advance in the Constitution
of the company. The Power to fix remuneration lies with Shareholders or Members of the
Company. Remuneration is usually agreed and fixed at the Annual General Meeting by passing
an ordinary resolution by a simple majority vote.
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According to Paragraph 14(a) of the Eighth Schedule to the Companies Act, 2019 (Act 992), a
resolution is an ordinary resolution when it is passed by a simple majority of votes cast by the
members of the company who, being entitled so to do, vote in person or, where proxies are
allowed, by proxy at a general meeting.
>>The Board of Directors does not therefore have power to fix Directors’ remuneration. It must
be noted that in the case of non-executive directors, their remuneration has to be authorised by an
ordinary resolution of the members of the company in general meeting, while in the case of
executive and managing directors, their remuneration is determined by the Board of Directors.

Section 185(1) - Subject to this section, the fees and any other remuneration including salary
payable to the directors in whatever capacity, shall be determined from time to time by ordinary
resolution of the company, and not by a provision in an agreement.
(2) The fees payable to the directors as directors shall be determined from time to time by
ordinary resolution of the company and not in any other way…
In Quarcoopome v Sanyo Electric Trading Company Ltd: the Supreme Court held that under
section 194(1) and (2) of the Companies Code 1963, (Act 179), the fees and other remuneration
payable to the directors of a company were to be determined by ordinary resolution of the
company, and not by any provision in the Regulations or in any agreement, any such provision
would be null and void. There being no evidence that such a resolution was ever passed by the
company, the trial judge erred in deciding to remunerate the plaintiff for services rendered to the
second defendant company in his capacity as a director. It offended against the clear provisions
in section 194(1) and (2) of the Companies Code 1963, (Act 179) and the award amounted to
usurping the functions of members of the second defendant company.
Disability Rule
Section 182(3) - The rights of the company concerned under or arising out of a contract made
during the time that a director of the company is not resident in the Republic are not enforceable
by action or any other legal proceedings.
Section 182(4)(a) - For the purposes of subsection (3), the company may apply to the Court for
relief against the disability imposed by subsection (3) and the Court, on being satisfied that it is
just and equitable to grant relief, may grant the relief generally or as regards a particular contract
and on the conditions that the Court may impose.

Terms and Conditions of the Directors.

Meetings of the Directors of a Company
The directors of a company have the discretion to meet outside. The directors have to meet every
six months.
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Section 188(1) - The directors of a company shall meet at least once every six months in each
year to consider financial and operational affairs of the company.
Section 188(2)(a)(i) - Subject to a contrary provision in the constitution of a company, the
directors may meet together in the country or elsewhere for the despatch of business.
Section 188(3) - A company shall cause minutes of the proceedings of meetings of the directors
and a committee of directors to be entered in a book or books kept for the purpose.
Signing of the meetings of the directors are not conclusive evidence and can be challenged.
Section 188(4) - A minute kept under subsection (1), if purporting to be signed by the
chairperson of the meeting at which the proceedings took place or of the next succeeding
meeting, is prima facie evidence of the proceedings.

Limitations of the Powers of the Directors

Section 189(1)(a)(i) of Act 992 - Subject to this Act, the directors of a company with shares
shall not, without the approval of issue any new or unissued shares, other than treasury shares, in
the company unless the shares have first been offered on the same terms and conditions to all the
existing shareholders or to all the holders of the shares of the class or classes being issued in
proportion as nearly as may be to their existing holdings;
(ii) make voluntary contributions to a charitable or any other fund, other than pension funds for
the benefit of employees of the company or an associated company, of the amounts the aggregate
of which will, in a financial year of the company, not exceed two per cent of the retained
earnings of the company at the end of the preceding financial year
Major Transaction:
Section 145(1) - A company shall not enter into a major transaction unless the transaction is (a)
approved by special resolution; or (b) contingent on approval by special resolution.
(2) For the purposes of this section,
(a) ‘assets’ include property of any kind whether tangible or intangible;
(b) ‘major transaction’ means
(i) the acquisition of, or an agreement to acquire, whether contingent or otherwise, assets, the
value of which is more than seventy-five percent of the value of the assets of the company before
the acquisition; or
(ii) the disposition of , or an agreement to dispose of, whether contingent or otherwise, assets of
the company the value of which is more than seventy five percent of the value of the assets of the
company before the disposition; or
P.K.A.O

(iii) a transaction that has or is likely to have the effect of the company acquiring rights or
interests or incurring obligations or liabilities, including contingent liabilities, the value of which
is seventy-five percent of the value of the assets of the company before the transaction; and
(c) the assets of the company as regards major transactions under paragraph (b), include the
assets of the company and that of the subsidiaries.

Section 189 provides the limitation to the major transaction. Section 189(9) of Act 992 provides
that except as otherwise provided in the constitution of a company, the directors of a company
with shares shall not, without the approval of an ordinary resolution of the company, exercise the
powers of the company to borrow money or to charge any of the assets of the company where the
moneys to be borrowed or secured, together with the amount remaining undercharged of moneys
already borrowed or secured, apart from temporary loans obtained from the bankers of the
company in the ordinary course of business, will exceed the stated capital for the time being of
the company.

Subsection 10 imposes presumption of regularity on the banks or persons dealing with the
company on major transactions.
Subsection 10 provides that a person dealing with the company in good faith or registering a
disposition of, or title to, property shall not be concerned to see whether the conditions of this
section have been fulfilled, and sections 147 to 151 shall apply to a transaction of the type
referred to in this section although the conditions have not been fulfilled.

Duties of Directors
1. Fiduciary Duty: Section 190(1) of Act 992 provides that a director of a company stands
in a fiduciary relationship towards the company and shall observe the utmost good faith
towards the company in a transaction with or on behalf of the company.

Asafu-Adjaye v Agyekum: it was also held that a director stood in a fiduciary

relationship towards the company and required him to observe the utmost good faith
towards the company in any transaction with it or on its behalf. He was to act in the best
interests of the company to further its business and promote the purpose for which it was
formed. Read also in PS Investment v Central Regional Development Corporation
(CEREDEC CASE) (2012) 1 SCGLR 611

2. Duty to act in the best interest of the company: section 190(2) provides that a director
shall always act in what the director believes is the best interest of the company as a
whole so as to preserve the assets, further the business, and promote the purposes for
which the company was formed, in the manner that a faithful, diligent, careful and
ordinarily skillful director…
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3. Duty to act in accordance with the constitution of the company: section 190(3) and
section 191 provides that the directors shall not, without the approval of an ordinary
resolution of the company, exceed the powers conferred on the directors by this Act, and
the constitution of the company, or exercise those powers for a purpose different from
that for which those powers were conferred, although the directors may believe the
exercise of those powers is in the best interests of the company.

4. Duty to exercise independent judgment: section 190(5)

Contracting-Out: section 190(6) provides that a provision, whether contained in the constitution
of a company, or in a contract, or in a resolution of a company shall not relieve a director from
the duty to act in accordance with this section or relieve the director from a liability incurred as a
result of a breach of a provision of this section.
5. Duty to avoid Conflict of Duty and Interest
Section 192(1) provides that despite a provision in the constitution of a company to the contrary,
a director shall not, without the consent of the company in accordance with section 193, place
that director in a position in which the duties of the director to the company conflicts or may
conflict with the personal interests or the duties to other persons, and in particular, without that
consent…
In Aberdeen v. Blaikie: the chairman of a railway company was also the managing partner of a
firm. There was a contractual arrangement between the company and the firm while he was still
serving in both. The court held that the company was entitled to set aside a contract for the
purchase of equipment entered into between the company and a partnership on the basis that the
managing partner of the partnership firm was also the chairman of the board of directors of the
company.
To Whom are the Duties Owed:
a. The Company
b. Individual Shareholders
c. Creditors
d. Employees – section 190(4) of Act 992

Consent of Company
Section 193(1) of Act 992 provides that for the purposes of section 192, the company does not
consent unless, after full disclosure of the material facts, including the nature and extent of the
interests of the directors, the transaction concerned has been specifically authorised by an
ordinary resolution of the company which has been agreed to by the members of the company
entitled to attend and vote at a general meeting or has been passed at a general meeting at which
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neither the director concerned nor the holders of the shares in which the director is beneficially
interested, directly or indirectly, have voted as members on the resolution.
>Section 193 is in reference to the AGM.
Fifteen Months Rule: Section 193(3) of Act 992 provides that a resolution of the company
ratifying a transaction or a series of related transactions which has or have already taken place
shall not be effective for the purposes of subsection (2) unless the resolution was passed not later
than fifteen months after the date when the transaction or the first of those transactions took
place.

Disclosure of Interest by Directors

Section 195(1) of Act 992 provides that a director of a company who has an interest that is likely
to create a conflict of interest between that director and the company shall:
(a) cause to be entered that interest in the Interests Register established under section 196; and
(b) disclose that interest to the Board of the company at a meeting or by written notice given to
the directors immediately after becoming aware of the fact of that interest.
(2) The director shall disclose the nature and extent of the interest.
(3) A director who fails to comply with a provision of this section commits an offence and is
liable on summary conviction to a fine of not less than two hundred and fifty penalty units and
not more than five hundred penalty units.

Directors to Act Professionally

Section 197 of Act 992 provides that except as otherwise provided in the constitution of a
company, a director may, despite section 192, act personally or by the firm of that director in a
professional capacity for the company, except as auditor, and the director or the firm of the
director is entitled to proper remuneration for professional services as if the director were not a
director, provided that disclosure is made under subsection (6) of section 194.

Civil Liabilities for Breach of Duty

Section 199 of Act 992 provides that where a director commits a breach of duty under sections
190 to 192.
(a) the director and any other person who knowingly participated in the breach are liable to
compensate the company for the loss the company suffers as a result of the breach.
(b) the director shall account to the company for a profit made by the director as a result of the
breach.
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CMS Dolphin Ltd v Simonet: “In my judgment the underlying basis of the liability of a director
who exploits after his resignation a maturing business opportunity of the company is that the
opportunity is to be treated as if it were property of the company in relation to which the director
had fiduciary duties. By seeking to exploit the opportunity after resignation he is appropriating
for himself that property. He is just as accountable as a trustee who retires without properly
accounting for trust property. In the case of the director he becomes a constructive trustee of the
fruits of his abuse of the company's property, which he has acquired in circumstances where he
knowingly had a conflict of interest, and exploited it by resigning from the company.’’

Rescission of Contract:
Section 199(c) of Act 992 provides that a contract or any other transaction entered into between
the director and the company in breach of that duty may be rescinded by the company.
In Hogg v Cramphorn Ltd: shares issued in breach of the fiduciary duties of the directors was
set aside by the court.
Injunction to restrain a threatened breach
Section 200(1) of Act 992 provides that proceedings may be instituted by the company or by a
member of the company to:
(a) enforce the liabilities referred to in section 199;
(b) restrain a threatened breach of a duty under sections 190 to 192; or
(c) recover from a director of the company a property of the company.

Derivative Actions
Section 201(1) of Act 992 - Subject to subsection (3), the Court may, on the application of a
member or director of a company, grant leave to that member or director to:
(a) bring proceedings in the name and on behalf of the company or a subsidiary of the company;
or
(b) intervene in proceedings to which the company or any related company is a party for the
purpose of continuing, defending, or discontinuing the proceedings on behalf of the company or
a subsidiary of the company, as the case may be.
>Derivative action refers to an action brought by a member pursuant to a leave granted by the
court upon application by the member to pursue an action in the name and on behalf of the
company.

Representative Actions
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Section 205 of Act provides that where, under a section of this Act, it is provided that if legal
proceedings are instituted by a person, that person shall sue in a representative capacity on behalf
of the person and any other member of a class:
(a) that person may commence proceedings in that representative capacity without obtaining the
consent and approval of any other member of the class represented and, subject to paragraph (b)
of this section, that person shall have the sole conduct of the action and any other member of the
class shall not be regarded as a party to the proceedings or liable for the costs of the proceedings;
(b) a member of the class represented may at any time before final judgement apply to the Court
for leave to be made a party to the proceedings whether as co-plaintiff or otherwise and the Court
may grant leave on the terms regarding the conduct of the action or otherwise that it considers
fit; and if the leave is granted the applicant shall become a party to the proceedings and liable
accordingly to have an order for costs made against that applicant.
>Representative Actions refer to where a member takes action for a wrong that affects the
member as a group in his own name and on behalf of others affected members against the
wrongdoer.
In Foss v Harbottle: the court held that the proper plaintiff to bring an action for a wrong
committed against the company is the company. However, as shown above, there are a number
of exceptions created in the proper plaintiff rule under Act 992.
Remedy against Oppression
Section 219(1) of Act 992 provides that a member or debenture holder of a company or, in a
case falling within section 234, the Registrar may apply to the Court for an order under this
section on the ground that:
(a) the affairs of the company are being conducted or the powers of the directors are being
exercised in a manner oppressive to one or more of the members or debenture holders or
in disregard of the proper interests of those members, shareholders, officers, or debenture
holders of the company.
(b) an act of the company has been done or is threatened or that a resolution of the members,
debenture holders or a class of them has been passed or is proposed which unfairly
discriminates against, or is otherwise unfairly prejudicial to, one or more of the members
or debenture holders.

Vacation and Removal of offices of Directors

Vacation:
Section 175(1) of Act 992 provides that the office of director shall be vacated if the director:
(a) becomes incompetent to act as a director by virtue of section 173,
(b) ceases to hold office by virtue of section 174, or
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(c) resigns from office by notice in writing to the company.

(2) The constitution of a company may provide for the termination or vacation of office in
circumstances additional to those specified in subsection (1).
Removal:
Section 176 of Act 992 provides that:
(1) Subject to section 327 and to this section, a company may by ordinary resolution at a general
meeting remove from office all or any of the directors despite anything in the constitution of that
company or in an agreement with the director.
(2) A resolution to remove a director shall not be moved at a general meeting unless notice of the
intention to move the resolution has been given to the company not less than thirty-five days
before the meeting at which the resolution is to be moved.
(3) If after notice of the intention to move the resolution is given to the company, a meeting is
called for a date thirty-five days or less after the notice has been given, the notice is properly
given for the purposes of subsection (2).
(4) The company shall give the members notice of the resolution at the same time and in the
same manner as the company gives notice of meeting or, if that is not practicable, shall give the
members notice of the resolution in the same manner as notices of meetings are required to be
given not less than twenty-one days before the meeting.
(5) On receipt of notice of an intended resolution to remove a director under this section, the
company shall immediately send a copy of the notice to the director concerned and that director,
whether or not is a member of the company, is entitled,
(a) to be heard on the resolution at the meeting; and
(b) to send to the company a written statement, copies of which the company shall send with
each notice of the general meeting or, if the statement is received too late, shall immediately
circulate to each person entitled under subparagraph (f) of paragraph 1 of the Eighth Schedule, to
notice of the meeting in the same manner as notices of meetings are required to be given.
>>Members of a company have a statutory right to remove any director at any time without
assigning any reason. This can be done by an ordinary resolution at any time. This right is
absolute and it cannot be restricted by any provision in the Companies Act or the company’s
constitution.

In York Tramways Co. Ltd. v. Willows; C.A. Lord Coleridge C.J said: “Any casual vacancy'
means any vacancy not occurring by effluxion of time, that is, any vacancy occurring by death,
resignation, or bankruptcy.”
Munster v. Cammel Co: "casual vacancy" was taken also to exclude a vacancy occurring
through the retirement of a director by rotation.
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In Politis v Plastic (No.2) [1967] GLR: The High Court held that Section 181 (5) of the
Companies Code, 1963 (Act 179), gave a sole surviving director power to appoint another to fill
a causal vacancy, and a casual vacancy was any vacancy not occurring by effluxion of time, i.e.
any vacancy occurring by death, resignation or bankruptcy. Thus appointment of A. C. Kuma
would have been valid but for the fact that there was no evidence that prior to his appointment,
he consented in writing as required by section 181 (1) of Act 179. In the absence of this consent
in writing, his appointment as director was void.

THE COMPANY SECRETARY

Section 211 of Act 992 provides that:
(1) A company shall have a Company Secretary who shall possess the qualification specified in
subsection (3).
(2) The Company Secretary may be a body corporate except that the body corporate must have
as one of its promoters, subscribers, directors or operating officers, a person who is qualified to
be a Company Secretary.

Qualification of the Company Secretary

Section 211(3) of Act 992 provides that the directors shall not appoint a person as a Company
Secretary unless that person:
(a) has obtained a professional qualification or a tertiary level qualification that enables that
person to have the requisite knowledge and experience to perform the functions of a Company
Secretary,
(b) has held office, before the appointment, as a Company Secretary trainee or has been articled
under the supervision of a qualified Company Secretary for a period of at least three years,
(c) is a member in good standing of
(i) the Institute of Chartered Secretaries and Administrators, or
(ii) the Institute of Chartered Accountants, Ghana,
(d) having been enrolled to practice, is in good standing as a barrister or solicitor in the Republic,
or
(e) by virtue of an academic qualification, or as a member of a professional body, appears to the
directors as capable of performing the functions of secretary of the company.
Subsection (4) - for the purpose of paragraph (a) of subsection (3), a professional or tertiary
level qualification is a discipline with an offering in company law practice and administration.
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Appointment of Company Secretary

Section 211(5) of Act 992 provides that unless the constitution of a company otherwise
provides, the Company Secretary shall be appointed by the directors for the term, at the
remuneration and on the conditions that the directors consider fit, and may be removed by them,
subject to the right of the Company Secretary to claim damages from the company if removed in
breach of contract.

Duties of a Company Secretary

Section 212 of Act 992 - The duties of a Company Secretary include:
(a) assisting the Board to comply with the constitution of the company and with any relevant
enactment;
(b) keeping the books and records of the company;
(c) ensuring that the minutes of the meetings of the shareholders and the directors are properly
recorded in the form required by this Act;
(d) preparing and issuing out notices in the name of the company;
(e) ensuring that the annual financial statements of the company are despatched to every person
entitled to the statements as required by this Act;
(f) ensuring that all statutory forms and returns are duly filed with the Registrar;
(g) maintaining the statutory registers of the company;
(h) providing the Board with guidance as to the duties, responsibilities and powers of the Board
and on the changes and development in the laws affecting the operation of companies;
(i) informing the Board of legislation relevant to or affecting meetings of shareholders and
directors and their failure to comply with the legislation and reporting accordingly at any
meeting; and
(j) advising the directors on their responsibilities as directors.

Conte v. Kpeglo [1964] GLR:

Facts: The difficulty arose since the only admissible evidence as to the contributories was the
minutes book, all other documents having been lost or cancelled.
Held: that the minute book that contains the allotted shares at the general meeting is conclusive
evidence as the binding contract to acquire shares.
George Whitechurch Ltd. v. Cavanagh [1902] A.C.p. 124: Lord Machaghten described the
duties of company secretary as "of a limited and of a somewhat humble character."
P.K.A.O

Barnett, Hoares, & Co. v South London Tramways Co: Lord Esher spelt out the status of a
company secretary. He said at p. 817: A secretary is a mere servant; his position is that he is to
do what he is told, and no person can assume that he has any authority to represent anything at
all; nor can anyone assume that statements made by him are necessarily to be accepted as
trustworthy without further inquiry...
Luguterah v Northern Engineering Co. Ltd: it was held that the secretary calling for the
meeting on his own and without the authority of the board in violation of the provisions of
section 271 of Act 179 is misconceived.
Avoidance of acts in dual capacity as director and Company Secretary
Section 213 of Act 992 - Where a person acts as both director and Company Secretary of a
company, a provision requiring or authorising an act to be done by or to a director and a
Company Secretary shall not be considered as done if the act is done by or to that person acting
in both capacities.
General saving of existing law relating to officers
Section 217 - The rights, duties and liabilities of officers and agents of companies shall continue
to be governed by the rules of the common law and equity relating to principal and agent, and
master and servant except in so far as those rules are not inconsistent with the express provisions
of this Act.

AUDITORS OF A COMPANY
Section 127 of Act 992
Note: A Director of a company cannot be an Auditor of the company.
Qualification of an auditor
Section 138(1) - A person is qualified for appointment as an auditor of a private or public
company, if that person is,
(a) qualified and licensed in accordance with the Chartered Accountants Act, 1963 (Act 170);
and
(b) not disqualified under subsection (2).
(2) A person is disqualified for appointment as an auditor, if that person is
(a) an officer of the company or of an associated company;
(b) a partner of, or in the employment of, an officer of the company or of an associated company;
(c) an infant;
(d) found by a court of competent jurisdiction to be a person of unsound mind;
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(e) a body corporate, except that a member of an incorporated partnership may be appointed in
the manner provided by subsection (2) of section 139;
(f) one in respect of whom an order has been made under section 177 so long as the order
remains in force unless leave to act as an auditor of the company concerned has been granted by
the Court in accordance with that section;
(g) an undischarged bankrupt, unless that person has been granted leave to act as an auditor of
the company concerned by the Court by which the adjudication as bankrupt was made; or
(h) for the time being disqualified from acting as an auditor of a company by order of the
Registrar under subsection (4).
Appointment of an Auditor
Section 139(1) of Act 992 - A person shall not be appointed as an auditor of a company unless,
that person
(a) has, before the appointment, consented in writing to be appointed; and
(b) is duly qualified in accordance with section 138.
(2) A partnership firm may be appointed, in the name of the firm, as an auditor of a company,
but, whether or not that firm is a body corporate, the appointment shall be deemed to be an
appointment of the partners of the firm who, at the time of the appointment, are duly qualified.
(3) Despite a contrary provision in the constitution of a company, an auditor shall be appointed
by ordinary resolution of the company and not otherwise.
(4) For the purposes of subsection (3),
(a) the directors may appoint the first auditors of a company and may fill a casual vacancy in the
office of auditor; or
(b) if a company does not have an auditor for a continuous period of three months the Registrar
may appoint an auditor for that company.
(5) An existing auditor shall continue in office until,
(a) that auditor ceases to be qualified for appointment;
(b) that auditor resigns from office by notice in writing to the company;
(c) an ordinary resolution is duly passed at an annual general meeting in accordance with section
141 removing that auditor from office or appointing any other person in place of that auditor as
from the conclusion of the annual general meeting; or
(d) the tenure of that auditor ends; and when a casual vacancy occurs in the office of the auditor,
the surviving or continuing auditor may act.
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(6) Within fourteen days after the occurrence of a change in the auditors of a company, the
company shall give notice of the change in the prescribed form to the Registrar for registration.

Period of Appointment: Section 139(11) of Act 992 provides that an auditor shall hold office
for a term of not more than six years and is eligible for appointment after a cooling-off period
of not less than six years.

Duties of an Auditor
1. Fiduciary Duty: section 142(1)(a) of Act 992 provides that an auditor of a company
while acting in the performance of functions under this Act, is not an officer or agent of
the company, but stands in a fiduciary relationship to the members of the company as a
whole.
2. Duty of Care: Section 142(1)(b) provides that an Auditor shall act in a manner that a
faithful, diligent, careful, and ordinarily skillful auditor would act in the circumstances.
3. Duty to avoid Conflict of Interests: Section 143(1) provides that an auditor of a
company shall ensure that in carrying out the duties of an auditor under this Part, the
personal judgment of the auditor is not impaired by reason of any relationship with or
interest in the company or any of the subsidiaries of the company.
4. Duty to Act in accordance it with the Constitution of the Company
State v. Andoh [1967] GLR: on whether a company auditor can be prosecuted under Act
29 for a criminal offence in connection with his duty.
Facts: One P. was a professional accountant employed by Nadeco Ltd. to audit its accounts. He
was charged with four counts of falsification of accounts contrary to Act 29, s. 140 in that he
omitted to make full and true entries of the bank balances in the balance sheet thus defrauding
the Commissioner of Income Tax. At his trial, counsel raised a preliminary point that though the
four counts against P. referred to him as an "auditor of Nadeco" and section 2 (3) of Act 29
defined an “officer” to include an auditor and section 140 of the same Act spoke of an "officer,"
section 136 of Act 179 provided that an auditor shall not be regarded as an agent or officer of a
company. Counsel submitted, therefore, that section 2 (3) of Act 29 was inconsistent with
section 136 of Act 179 and as Act 179 was subsequent to Act 29, section 136 of Act 179 must be
deemed to have impliedly repealed section 2 (3) of Act 29.
Held: before the provisions of an earlier Act could be revoked or abrogated either expressly or
by implication or inference, by a subsequent Act, the provisions of the later enactment must be
so inconsistent with or repugnant to the provisions of the earlier one that the two could not stand
together. Section 136 of Act 179 did not desire to fetter the way and manner an auditor did his
auditing; the section rather gave him absolute freedom and he was in the category of an
independent contractor, so to speak; he was in a fiduciary relationship to the directors and the
shareholders of the company whose accounts he was auditing. Section 136 of Act 179 was
therefore not inconsistent with section 2 (3) of Act 29 whose subject-matter was quite distinct
P.K.A.O

from that of Act 179. P. could therefore be prosecuted under Act 29 for any criminal offence
committed in the performance of his duties.
Some of the rights of an Auditor of a Company
1. The auditor of a company is entitled to attend a general meeting of the company –
section 142(4)(a) of Act 992
2. The auditor of a company is entitled to receive the notices of, and other communications
relating to, a general meeting. – section 142(4)(b) of Act 992
3. The auditor of a company is entitled to be heard at a general meeting on any part of the
business of the meeting which concerns the auditor.- section 142(4)(c) of Act 992
Access and Information
Section 142(3) of Act 992 provides that an auditor shall have a right of access at all times to the
accounting records and financial statements and vouchers of the company and is entitled to
require from the officers of the company the information and explanation that the auditor thinks
necessary for the performance of the functions of the auditor. <Auditors have access all the time
to information of the company>
Case: In Re London & General Bank Auditors

Reports of Auditors
Section 137 of Act 992 provides that:
(1) The report by the auditors referred to in paragraph (c) of subsection (1) of section 128, shall
(a) consist of a report, addressed to the members of the company, by an auditor or auditors duly
qualified and appointed as auditors of the company in accordance with sections 138 and 139 on
(i) the accounting records of the company, and
(ii) financial statements of the company as listed in subsection (5) of section 127 and the
consolidated financial statements to be sent to the members and debenture holders of the
company in accordance with sections 128 and 131; and
(b) contain statements as to the matters mentioned in the Seventh Schedule.
(2) Where, in the case of the accounts, any of the particulars required to be shown under sections
132 and 133 are not shown, the report, in addition to stating that the accounts do not give the
information required by this Act, shall contain a statement giving the required particulars so far
as the auditors are reasonably able to do so.
(3) The audit of the financial statements shall, in the case of a public or private company be
carried out in compliance with international standards on auditing adopted by the Institute of
Chartered Accountants, Ghana and it shall be sufficient if the report of the auditor complies with
those standards and accords with terminology approved by the Institute of Chartered
Accountants, Ghana.
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(4) The report shall be open for inspection by a member or debenture holder of the company at
the registered office of the company during usual business hours and shall be read at an annual
general meeting of the company held within three months after the report is sent to members and
debenture holders in accordance with section 128.
Remuneration of an Auditor
Section 140(1) of Act 992 provides that the remuneration of an auditor of a company shall be
fixed where the auditor is appointed:
(a) by the directors for the period expiring at the conclusion of the next annual general meeting
of the company;
(b) by the Registrar; or
(c) at a meeting of the company, by ordinary resolution of the company or in a manner that the
company by ordinary resolution may determine.
Section 140(2) - For purposes of full disclosure, the
(a) company shall clearly state in the financial statements which are accessible and reported to
shareholders of the company the remuneration offered to an auditor of the company for any
service rendered; and
(b) remuneration payable to an auditor of the company shall be subject to confirmation by
members of the company.
(3) For the purposes of this section, “remuneration” includes the sums of money payable by a
company in respect of the expenses of an auditor.
(4) Where a company contravenes a provision of this section, the company and an officer of the
company that is in default are liable each to pay to the Registrar an administrative penalty of two
hundred and fifty penalty units.
Removal of an Auditor
Section 141 of Act 992:
(1) A resolution to remove an auditor or to appoint any other person in the place of that auditor is
not effective unless,
(a) a written notice has been given to the company of the intention to pass the resolution, not less
than thirty-five days before the general meeting at which the resolution is to be moved and on
receipt of the resolution, the company has forthwith sent a copy of the resolution to the auditor
concerned;
(b) the resolution is passed at a general meeting of the company; and
(c) the company has given the members notice of the resolution at the same time and in the same
manner as the company gives notice of meetings or, if that is not practicable, has given the
P.K.A.O

members notice of the resolution in the same manner as notices of meetings are required to be
given not less than twenty-one days before the meeting.
(2) For the purposes of subsection (1),
(a) if, after notice of the intention to move the resolution is given to the company, an annual
general meeting is called for a date thirty-five days or less after the notice has been given to the
company, the notice is properly given; and
(b) in the case of a resolution to remove an auditor appointed by the directors in accordance with
subsection (4) of section 139 or to appoint any other person in place of an auditor so appointed,
subsection (1) shall have effect with the substitution of fourteen days for thirty-five days in
paragraph (a) of subsection (1) and seven days for twenty-one days in paragraph (c) of
subsection (1).
Seventh Schedule in relation to Section 137
Matters to be Expressly Stated in the Report of the Auditors
1. Whether the auditors have obtained the information and explanations which to the best of the
knowledge of the auditors and belief were necessary for the purposes of the audit.
2. Whether, in the opinion of the auditors, proper books of account have been kept by the
company, so far as appears from the examination of those books, and proper returns adequate for
the purposes of the audit have been received from branches not visited by the auditors.
3. Whether the statement of financial position of the company and, unless it is designated as a
consolidated profit and loss account or statement of comprehensive income, profit and loss
account or statement of comprehensive income dealt with by the report, are in agreement with
the accounting records and returns.
4. Whether, in the opinion of the auditors and to the best of their information and according to
the explanations given to the auditors, the accounts give the information required by this Act in
the manner so required and give a true and fair view,
(a) in the case of the statement of financial position, of the state of affairs of the company at the
end of the financial year, and
(b) in the case of the profit and loss account or statement of comprehensive income, of the profit
or loss for the financial year, of the statement of financial position or the profit and loss account
or statement of comprehensive income subject to the non-disclosure of any matters to be
indicated in the report, which by virtue of Part Four of the Sixth Schedule to this Act, are not
required to be disclosed.

RAISING OF CAPITAL FOR COMPANIES

P.K.A.O

Section 7(3) of Act 992 provides that a company limited by shares and an unlimited company
shall for the purposes of incorporation be registered with shares.
Definition of Shares:
First Schedule provides that “shares” mean the interests of members of a body corporate who
are entitled to share in the capital or income of the body corporate.
Borland’s Trustee v. Steel: “A share is the interest of a shareholder in the company measured
by a sum of money for the purpose of liability in the first place, and of interest in the second, but
also consisting of a series of mutual covenants entered into by all the shareholders inter se…A
share is not a sum of money but an interest measured by a sum of money and made up of various
rights contained in the contract including the right to a sum of money of more or less amount”
Prof. Sealy describes a share as follows: “In the first place, it is a fraction of the capital,
denoting the holder’s proportionate financial stake in the company and defining his liability to
contribute to its funding. Secondly, it is a measure of the holder’s interest in the company as an
association and the basis of his right to become a member and to enjoy the rights of voting etc. so
conferred. And thirdly, it is a species of property in its own right, a rather complex form of chose
in action, which the holder can buy, sell, charge etc, and in which there can be both legal and
beneficial interest”.
Capital: connotes the value of asset contributed to the company by those who subscribe to its
shares. What the company receives from investors in exchange for its shares constitute the
capital. See Keller v. Williams [2000] 2 BCLC 390
Legal Nature of Shares
Section 42(1) of Act 992 - The shares of a member in a company are movable property.
(2) The number of shares in a company and the rights and liabilities attaching to the shares are
dependent on the terms of issue.

No par value shares

Section 43 of Act 992 provides that the shares created or issued under this Act are shares of no
par value.
This has to do with pricing of shares. There must be an authorized value of shares of a company.
The authorized shares are registered with the company or at the time of incorporation of a
company. Thus, in Ghana, there is no par value shares for companies.
Ethleburga (WA) Ltd v. Luttererodt [1962] GLR: Whether value of shares was a loan
granted by plaintiff-company.
Facts: The plaintiff-company claimed a declaration that they are owners of 2,000 shares held by
the defendant in the Coconut Palm Ltd. and that the defendant is a trustee holding the shares in
trust for them. They alleged that the defendant, a non-shareholder director in the plaintiff-
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company, suggested to them that the Coconut Palm, a night club established and managed from
the date of its incorporation with their funds, would flourish better if it appeared to be Ghanaian
owned. They therefore made the defendant chairman of the Coconut Palm Ltd. and nominee
shareholder of 2,000 shares. There were three minor shareholders in the company also nominees
of the plaintiff-company, each holding 500 shares. The plaintiff-company paid for all the shares
by a cheque drawn in favour of the Coconut Palm Ltd.
The defendant’s case was that he held the shares in his own right as beneficial owner thereof;
that the amount of £G2,000, the value of the shares, was a loan given by the plaintiff-company to
the defendant which could not create a resulting trust in their favour; that the fact that he did not
sign a blank transfer for the shares showed that he was not a nominee; and that he instructed the
plaintiff-company to debit the value of the shares to his commission account. He alleged that he
appointed the plaintiff-company to manage the Coconut Palm Ltd., but due to their
mismanagement he terminated their appointment in July, 1961.
Held: the evidence established:
(i) that the plaintiff-company paid for the shares five days before the defendant could have
requested them to pay on his own behalf and debit his account with the money.
(ii) that the other nominee shareholders did not sign blank transfers; therefore that omission
could not help the defendant.
(iii) that incidents occurred on the opening night of the club collaborating the plaintiff-
company’s allegation that the defendant was, following his own advice, allotted the majority of
the shares as their nominee.
There is no minimum capital requirement for a companies in Ghana.
- There are two ways in which a company can get capital: Shares and Loans.
- Basically, it is divided into equity and debt.

Issue of Shares
Section 44(1) Subject to the registered constitution of a company, different classes of shares may
be issued in a company at the times and for the consideration that the company shall determine
and shall be paid for, at the times that are agreed between the member and the company.
(2) On the winding up of the company, every past and present shareholder of the company is
liable to contribute to the assets of the company to the extent referred to in section 40.
To issue shares means to give out shares in exchange for payment. It is generally the directors of
a company who have the authority to issue the company’s shares. Generally, shares are raised for
the purpose of raising money for the company to execute its authorised business. As a result, as
and when the need for the company to raise money arises, the company’s directors may issue
shares to raise it. A company can issue shares up to the total number authorised by the
company’s Constitution (authorised shares). This is to be done at times to be determined by the
P.K.A.O

company and for a consideration to be determined by the company. The price shall be paid for at
such times as are agreed upon between the member and the company or as may be specified in
the Constitution of the company.
The transaction between the company and the person to whom it issues shares is a contract. The
relationship between the two parties is therefore contractual. Under the contract, the company
contracts to issue shares to the prospective shareholder in exchange for certain rights to be
enjoyed by the shareholder. Mutual rights and obligations are therefore created between the
parties. On winding up, every past and present shareholder of the company is liable to contribute
to the assets of the company to the extent of his unpaid liability in accordance with section 40 of
Act 992.
By the tenor of section 144(3) of the Companies Act, 2019 (Act 992), the power to issue shares
resides in the directors of the company as part of their general powers to manage the company’s
business and to exercise all of the company’s powers.

Preference and Equity Shares as Types of Shares

Section 51(1) - In this Act, “preference share” means a share, which does not entitle the holder
of the share to a right to participate beyond a specified amount of money in a distribution
whether by way of dividend, on redemption, in a winding up, or otherwise; and any other share
shall be referred to as an “equity share”.
(2) A share that is not a preference share shall be referred to as an “equity share”.
(3) The meaning of “preference share” under subsection (1) shall apply to whatever name a
company may designate in its constitution.
Note: from this provision, there are two types of shares in Ghana: Equity Shares and Preference
Shares. Each may have classifications of shares.
A preference share is the one which the holder normally receives a fixed dividend in distribution
and or a return of capital before (in preference to) any payment to the ordinary shareholder. The
distribution may be in respect of dividend, redemption, winding up or any other unspecified from
of distribution. These categories are said not to be mutually exclusive. Main features are:
o Preference Shares relate to dividend
o Preference Shares relate to winding up
o Preference Shares relate to redemption
Cumulative Preference Shares: A cumulative preference share is one which entitles its holder to
receive his full dividends as declared for that and previous periods before dividends are payable
to other classes of shares. Section 54(b) of Act 992 provides that unless the contrary intention
appears, a fixed preferential dividend payable on a class of shares shall be cumulative; in other
words, a dividend is not payable on any shares ranking subsequent to that class of shares until all
P.K.A.O

the arrears of the fixed dividend have been paid.

Equity shares are shares that their holders to ownership rights. Ownership rights here refer to
their right to attend, speak and vote at meetings of the company. Equity shareholders are not
entitled to a fixed amount of dividend. The amount paid to them depends on the amount of profit
made by the company and declared as dividend. Equity shares, also known as ordinary shares
and they constitute the residuary group of shares, i.e. all shares that are not preference shares are
equity shares.

Classes of Shares
Section 44 of Act 992:
(1) Subject to the registered constitution of a company, different classes of shares may be issued
in a company at the times and for the consideration that the company shall determine and shall
be paid for, at the times that are agreed between the member and the company.
(2) On the winding up of the company, every past and present shareholder of the company is
liable to contribute to the assets of the company to the extent referred to in section 40.
Section 49(1) - The registered constitution of a company may provide for different classes of
shares by attaching to certain of the shares preferred, deferred or any other special rights or
restrictions, whether as regards dividend, voting, repayment or otherwise.
(2) Shares are not of the same class unless they rank at the same rate for all purposes.

Variation of Class Rights:

To vary means to change or alter. Variation of class rights mean the direct alteration of the rights
attached to a class of shares or a class of shareholders.
Distinguish however between variation of class rights and consequential variation of class rights.
Consequential variation of rights of a particular class occurs when the variation in question
results from the direct variation of other classes of shares or as a result of the issue of new shares.
Consequential variation of rights of a particular class of shares or shareholders does not amount
to a variation of class rights. Variation of class rights can erode the benefits to shareholders
which those rights confer.
A number of safeguards are therefore provided to protect class rights of shareholders in the event
a company decides to engage in permissible transactions that have the potential to adversely vary
the class rights of shareholders.
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Section 50(1) of Act 992 provides that where at any time the shares of a company are divided
into different classes, the rights attached to a class shall not be varied unless otherwise expressly
provided for in the constitution of a company.
(2) Where the constitution of a company expressly forbids a variation of the rights of a class, or
contains provisions regarding that variation and expressly forbids an amendment of the
provision, in respect of the variation of rights, the rights shall not be varied and the provision for
variation shall not be amended except with the sanction of the Court under a scheme of
arrangement in accordance with section 239.
(3) Except as provided in subsection (2), a company may, by special resolution, amend its
constitution by inserting in the constitution provisions regarding the variation of the rights of a
class, or by modifying the terms of those provisions.
(4) An amendment under this section requires the prior written consent of the holders of at least
three-fourths of the issued shares of each class or the sanction of a special resolution of the
holders of the shares of each class and shall be deemed, to be a variation of the rights of each
class.
Note: that variation of class rights applies to both preference shares and equity shares. And
special resolution is needed to vary the rights of s class or shares in the company.
R v Mackenzie
In Ghana, the nature and characteristics of shares can be gleaned form a combination of sections
of the Companies Act, 2019 (Act 992). The combination of Sections 40, 42, and 49 of the
Companies Act, 2019 (Act 992) are to the effect that shares are personal properties with interest,
rights and liabilities which are dependent on the terms of issue, the company’s Constitution and
the Act.

On Acquisition of Shares or Equity:

>On LTD
 Right Issue
 Conversion issue
 Capitalization issue
>On PLC
 IPO
 Public Offer
 Rights Issue
 Conversion Issue
 Capitalization Issue
P.K.A.O

On Acquisitions of Debenture (Loans):

 LTD
 Any facility
Okudjeto v. Irani Brothers [1974] GLR: The courts would be slower in appointing
investigators into private companies than into public companies since private companies were
normally family concerns and the public was not interested or represented in that no invitation to
purchase shares was made to it, whereas in public companies the court was to be more concerned
in protecting the interests of the members of the public who had been induced to purchase shares.
Okujeto v Irani Brothers (no. 2) [1974] GLR
Facts: The applicants, whose two applications for the appointment of an investigator into the
affairs of I. Ltd. had been dismissed (supra at p. 374), brought an application by summons for the
review of the ruling submitting, inter alia, that the order for the purchase of their shares by the
respondents at a valuation should have been made as a consequential relief to an application by
the respondents and also that since the respondents did not indicate what order they wanted no
order should have been made in their favour. On the court’s own motion it was considered
whether the present proceedings should have been by way of an appeal rather than a review.
Held: section 218 of Act 179 did not place any limitation upon the powers of the court and it
could order the purchase of any member’s shares or debentures by any other members or by the
company itself. Once members had brought an application complaining of acts of oppression or
discrimination it was also open to the respondents in their answer to complain of acts of
oppression or discrimination on the part of the applicants.
Conte v. Kpeglo [1964] GLR: on either offer by company of shares or acceptance by
company of application for shares.
Facts: The liquidator appointed by the court for winding up J. Conte Ltd. called upon the High
Court to settle the list of contributories as provided by section 103 of the Companies Ordinance.
The difficulty arose since the only admissible evidence as to the contributories was the minutes
book, all other documents having been lost or cancelled. The first respondent claimed that the
majority of the shareholders and directors of J. Conte Ltd. had voted him 10,000 shares valued at
£G1 each, free of charge for services he had rendered to the company. Basing its decision on the
oral evidence of the first respondent and a letter he had received from the appellant, the High
Court declared that the first respondent had been allotted these 10,000 shares, thus giving him
10,001 shares in the final disposition of the contributories of the company. On appeal, it was
submitted inter alia that the trial judge erred in holding that the letter supported a finding that the
10,000 shares had been allotted. This letter could only be evidence of an offer of shares and there
was no evidence of an acceptance. In the alternative, if the letter operated as an issue of shares
then the first respondent should have been called upon to make payment for them in accordance
with section 107 of the Companies Ordinance. In reply, it was submitted that since the letter was
written by a layman then the word “allotted” should be interpreted in its ordinary meaning as
signifying a complete and performed contract.
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Held: an allotment of shares is an appropriation by the directors or the managing body of a

company to a particular person. This may take the form of an offer of shares to the allottee or an
acceptance of an application for shares by the allottee; but an allotment by itself does not
necessarily create the status of membership. The allotment may be subject to conditions.
The wording of the letter could amount to either an offer of shares by the company to the first
respondent or an acceptance by them of an application for shares. With respect to the first
alternative there was no evidence of an acceptance by the first respondent; and with respect to
the second alternative there was no evidence of a payment or completion of conditions by the
first respondent.

Payment of Shares:
Section 45(1) of Act 992 provides that except on a capitalisation issue pursuant to subsection (1)
of section 77, shares shall not be issued otherwise than for valuable consideration paid or payable
to the company and unless otherwise agreed, shares shall be paid for in cash.
Notes: Payment of shares could be either cash or services or kind. That is shares are pay for cash
and non-cash considerations.
Payment could be subsequent and need not at the time of issue.
The law requires that the company must register non-payment shares. This must be registered at
the Company Registry. This must be in incorporation document.
Section 47 - where a company defaults in delivering a document required under section 45 or 46,
the company and every officer of the company who is in default is liable to pay to the Registrar,
an administrative penalty of twenty-five penalty units for each day during which the default
continues.
Therefore, Section 45(1) of Act 992 gives the three general propositions with regards to the issue
and payment for shares. These are:
i. Shares can only be issued for valuable consideration
ii. The valuable consideration has to be paid to the company
iii. The payment has to be in cash, unless otherwise agreed.
It should be noted that it is not actual payment that makes a person a member. One can purport to
pay for shares but not become a shareholder; and one can be a shareholder although he has not
paid for the shares. In Adehyeman Gardens Ltd v Assibey, the Supreme Court held that
membership could arise by subscription to the company’s Regulation or by agreement after the
company came into existence.
Ofori v EcoBank (2016) SCGLR
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Ownership of the shares did not constitute part ownership of the assets of the company:
The position under English company law and that of Ghana is that shareholders hold no legal or
equitable interest over any property owned by the company.
Sanyo Electric Co. Ltd v. Quarcoopome [2001-2002] GLR: on assets of incorporated
company wholly owned by company & Shareholder not part owner of assets of company.
Facts: The defendant company, a foreign company incorporated in Japan, and the Government
of Ghana were the joint owners of the shares in Ghana Sanyo Co Ltd. The plaintiff brought an
application for an interim injunction to restrain the defendant company from liquidating its
shares or interests in Ghana Sanyo Co Ltd pending the final determination of his action. The
defendant entered conditional appearance to the writ and applied for the plaintiff’s action to be
dismissed on the ground that it only owned shares in Ghana Sanyo and since it was neither
registered nor carried on business in Ghana, the writ served on it without leave of the court was
incompetent and therefore the court had no jurisdiction over the case.
Held: in allowing the appeal, although a shareholder owned a cluster of rights in a company
whose shares he had subscribed to, his ownership of the shares did not constitute part ownership
of the assets of the company. The assets of an incorporated company were wholly owned by the
company which is a separate legal entity entirely different and disparate from its shareholders.
Accordingly, in the instant case, the defendant’s rights as a shareholder in Ghana Sanyo Co Ltd
were limited to its right to vote, attend meetings and receive dividends and did not make it part
owner of the assets of Ghana Sanyo Co Ltd. Accordingly, the defendant did not carry on
business in the country through Ghana Sanyo Co Ltd.
Short v. Treasury Commissioners: “Shareholders are not in the eye of the law part owners of
the undertaking. The undertaking is something different from the totality of its shareholdings.”
Macaura v. Northern Assurance Co: “Now, no shareholder has right to any item of property
owned by the company, for he has no legal or equitable interest therein. He is entitled to a share
in the profit while the company continue to carry on business and a share in the distribution of a
share in the companies’ assets when there is wound up.”
R v. High Court, Accra; Ex Parte Brenya (2001-2) GLR
Facts: At the trial, the High Court judge found that the material facts relied on by the parties
were the same as that of the earlier suit, and took the view that since B and the company were
parties in the said suit they were bound by the findings of the circuit court. Consequently, relying
on the circuit court findings, the High Court judge dismissed B and GB’s claims on 12 May 2000
and 19 January 2001, and ordered, inter alia, that (i) D was a director and shareholder owning 25
per cent shares in the company; (ii) D and one A should take over the management of the
company from the receivers and managers and be the signatories to the company’s cheques; and
(iii) ¢20 million each be paid to the three lawyers in the case. Aggrieved by that decision, the
applicant applied for a writ of certiorari to quash the decision of the High Court in the instant
application. The Supreme Court found that the orders given by the High Court went far beyond
the reliefs sought by the parties.
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Held: Section 95 of Act 179 prohibited the transfer of shares without the consent of the
shareholder. Accordingly, the allocation by the High Court of 25 per cent of the shares of GB to
D was illegal.

Other Features of Shares

Shares are Choses in Action:
The property in shares is classified as a chose in action, as opposes to a chose in possession.
Shares are not physical or tangible assets. We cannot see and feel shares but shares of companies
exist. They are incorporeal hereditament.
Return of Capital:
Share has a feature of return of capital for the shareholders in the event of collapse of the
company.
Distribution:
Means that the company is giving dividends to the shareholders.
Security:
Shares have characteristics of securities as in stock exchange.
Interest:
The interest attached to shares (i.e. the shareholders’ interest) are in respect of entitlement to
capital or income. The sharing process is referred to as distribution. Shareholders contribute
equity capital to the company with the expectation that they will be rewarded by way of
dividends, if the company ultimately makes profit. Dividend refers to the income in the form of
cash or additional shares (non-cash dividend) that accrues to shareholders contribution arising
from the profit of the company. Whenever there is profit, the directors may recommend and it
will be declared by the members, then dividends could be distributed

Terms of issue of shares:

These are terms that regard the shares at the time that the company issues out shares. Basically, it
means what regulate the relationship between the shareholders and the company. The Act and
the Constitution of the companies are defaults that regulate the terms of issues.

How Shares are acquired?

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1. Subscription: section 33(4) provides that in the case of a company with shares, each
member is a shareholder of the company and shall hold at least one share. See section 13
as well. Case Adehyeman v Assibey
2. By Agreement: this could be acquisition or transfer.
3. By Transfer: that is acquiring shares from existing shareholder. Section 98(1) provides
that except as expressly provided in the registered constitution of a company, shares are
transferable without restriction by a written transfer in common form. Subsection (2)
provides that subject to section 322, the registered constitution of a company may impose
restrictions on the transferability of shares, including power for the directors to refuse to
register a transfer and provisions for compulsory acquisition or rights of first refusal in
favour of other members or officers of the company. Subsection (3) a restriction shall not
be imposed under subsection (2) on the transferability of any shares after the shares have
been issued unless the holders of the shares consent in writing to the transfer.
Registration of transfers
Section 101(1) provides that subject to sections 35, 102 and 103, a notice of a trust, express,
implied or constructive or of any equitable, contingent, future or partial interest in a share or
debenture or a fractional part of a share or debenture shall not be entered in the register of
members or debenture holders or receivable by the company.
(2) For the purposes of subsection (1), the company is not bound by, or is not compelled in any
way to recognise, any other rights in respect of a share or debenture except an absolute right to
the entirety of the share or debenture in the registered holder; and accordingly until the name of
the transferee is entered in the register in respect of the share or debenture, the transferor
remains, so far as concerns the company, the holder of the share or debenture.
Subsection (6) provides that transfers may be lodged for registration by the transferor or the
transferee.

Transmission of Shares or Debentures by Operation of Law

Section 102(1) of Act 992 provides that in the case of the death of a shareholder or debenture
holder,
(a) the survivor or survivors, where the deceased was a joint holder, and
(b) the legal personal representatives of the deceased, where the deceased was a sole holder or
last survivor of joint holders, shall be the only persons recognised by the company as
shareholders or debenture holders.
(2) A person on whom the ownership of a share or debenture devolves by reason of that person
being the legal personal representative, receiver, or trustee in bankruptcy of the holder, or by
operation of law may, on the evidence being produced that the company may properly require,
be registered personally as the holder of the share or debenture or transfer the same to any other
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person, and the transfer shall be as valid as if that person had been registered as a holder at the
time of execution of the transfer.
(3) The company has the right to decline registration of a transfer under subsection (2) as it
would have had in the case of a transfer by the registered holder but does not have a right to
refuse registration personally of that person.
Case: Ofori v EcoBank (2016) SCGLR

Right of Shareholder:
The precise scope of rights attached to a share is a function of the terms of issue or terms set out
in the Constitution and not a function of any inherent rights associated with the ownership of
shares. The rights of shareholders are set out by the company’s Regulations and the terms of
issue of the share. Normally, the shareholders’ rights will fall under three (3) main heads,
namely:
 Right to dividend, when declared;
 Right to return of capital and participation in surplus assets in winding up (or
authorised return of capital) and;
 Right to attend, speak and vote at general meetings. (i.e. voting on resolutions and
election of directors)

Shares Certificates:
Section 55(1) of Act 992 provides that Subject to the Central Securities Depository Act, 2007
(Act 733), a company shall, within two months after the issue of any of the shares of the
company or after the registration of the transfer of a share, deliver to the registered holder of the
share, a certificate certified by one director and the Company Secretary indicating
(a) the number and class of shares held by that holder and the definitive numbers of the shares,
(b) the amount of money paid on the shares and the amount remaining unpaid, and
(c) the name and address of the registered holder

>>Professor Gower at paragraph 6 of page 66 of his report explains as follows:

The main objection to allowing a company to traffic its own shares are:
a) That this reduces capital
b) That it can be used by directors to enhance their own control, to increase the value of their
own holdings, or to misuse their inside information.
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c) That if indulged in imprudently it may reduce the company to insolvency

Acquisition by company of its own shares

Sections 61 of the companies Act, 2019 (Act 992) provides that:
(1) Despite section 58 a company may,
(a) create and issue preference shares which are, or at the option of the company are liable, to be
redeemed and may convert existing shares, whether issued or not, into those redeemable
preference shares subject to sections 62 to 65;
(b) purchase its own shares subject to sections 63 to 67;
(c) acquire its own shares by a voluntary transfer to the company or to nominees for the company
subject to compliance with sections 62 to 65; and
(d) acquire its own shares pursuant to the buy-out provisions in section 222.
(2) For the purposes of subsection (1), shares shall not be redeemed, purchased or acquired by
the company so long as there is an unpaid liability on those shares.
(3) A company may forfeit the shares issued with an unpaid liability for non-payment of the
sums of money due and payable on those shares.
(4) On redemption, purchase, acquisition or forfeiture, shares shall be available for re-issue by
the company unless a company by amendment of the constitution of the company cancels those
shares.
(5) Shares which are cancelled by virtue of the constitution of the company, shall until re-issued
or cancelled, be referred to as treasury shares.
(6) Except as provided in section 69, a redemption, purchase, an acquisition or a forfeiture by the
company of the shares of the company, or the cancellation of shares so redeemed, purchased,
acquired or forfeited shall not reduce the stated capital of the company.
(7) Voting rights shall not be exercised and dividends shall not be payable on treasury shares,
and except where otherwise stated, treasury shares shall not be treated as issued shares within the
meaning of this Act.

Redemption of redeemable preference shares

Sections 62 of the companies Act, 2019 (Act 992) provides that:
(1) Despite a provision in the constitution of the company to the contrary, a company shall not
redeem any of its redeemable preference shares except,
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(a) out of a credit balance on the share deals account referred to in section 65 or out of transfers
to that account in the manner referred to in that section from retained earnings as defined in
section 71; or
(b) out of the proceeds of a fresh issue of shares made for the purposes of the redemption not
more than twelve months before the date of redemption.
(2) Where redeemable preference shares have become redeemable and the funds of the company
are sufficient to entitle the company to redeem the whole of the shares due for redemption, the
holder of those shares may serve notice on the company requiring it to effect the redemption.
(3) Where the company fails to redeem the shares within twenty- eight days of the service of the
notice, the shareholder who has served the notice may apply to the Court on behalf of that
shareholder and the other shareholders whose shares are due for redemption; and the Court, if
satisfied that the conditions of chis subsection are fulfilled, may order the company to redeem the
shares and may require the company and an officer of the company who is in default to bear the
costs of, and incidental to, the application.
(4) Section 205 shall apply to an application to the Court under subsection (3).

Purchase by a company of its own shares

Sections 63 of the companies Act, 2019 (Act 992) provides that despite a provision of the
constitution of the company to the contrary, a company shall not purchase any of the shares of
the company except where
(a) shares are only purchased out of a credit balance on the share deals account referred to in
section 65, or out of transfers to that account in the manner referred to in that section from
retained earnings;
(b) redeemable preference shares are not purchased at a price greater than the lowest price at
which they are then redeem- able or will be redeemable at the next date at which they are due or
liable to be redeemed; or
(c) the purchase is not made in breach of section 64

CAPITAL MAINTAINANCE
Stated Capital:
Section 68 provides that
(1) The stated capital of a company with shares consists of the sum of the following items:
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(a) the total proceeds of every issue of shares for cash, including the amounts paid on calls made
on shares issued with an unpaid liability, less deductions for transactions costs that are direct and
incidental to share issue,
(b) the total value of the consideration, as stated in the agreement, received for every issue of
shares otherwise than for cash, and
(c) the total amount which the company by special resolution resolves to transfer to stated capital
from reserves, as defined in section 70 including the credit balance on the share deals account
referred to in section 65.
Meaning of “reserves”
Section 70 - The reserves of a company with shares is the amount of money by which the assets
of the company, other than unpaid calls and other sums of money payable in respect of the shares
of the company and not including treasury shares, less the liabilities of the company, as shown in
the accounts of the company prepared and audited in accordance with sections 127 to 142,
exceed the stated capital of the company.

Capitalization Issue:
This is payment of the dividend by additional shares.
Section 45(3) of Act 992 provides that the particulars referred to in subsection (2) shall not be
required on a capitalisation issue of shares pursuant to subsection (1) of section 77.
A capitalization issue is when the company chooses to give a shareholder additional shares in
lieu of dividend. If the company fails to comply with this requirement, the company and every
officer who is in default is liable to pay a fine for each day that the default continues. If in the
course of the company being wound up, the liquidator or any creditor may apply to the High
Court to question the true value, and if the court is satisfied that the true value of such
consideration was less than stated, it may, in its discretion direct that the shares shall be treated
as unpaid to such an amount as it shall direct.
Case: Trevor v Whitworth
Facts: In that case, a company bought back almost a quarter of its own shares. During
liquidation of the company, one shareholder applied to the court for the balance of the amount
owed to him after the buyback. The English Court of Appeal held that the shareholder should be
paid.
Held: The House of Lords on the other hand held that the buyback was ultra vires and that a
company could acquire its shares, even though there was an express power to do so in its
memorandum, since this will result in reduction of capital.
A general rule known as the rule in Trevor v Whitworth was developed to prohibit a company
from reducing its share capital because a reduction in capital would prejudice the rights of
creditors.
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Share Capital: The real money or money’s worth which goes to provide the company with
assets and working capital is that which is received as consideration for the issue of shares in the
company.
Legality of dividend Payments
Section 72 - Except in a winding up, a company shall not pay a dividend to the shareholders of
the company or, except in accordance with sections 78 to 82 make a return or distribution of any
of the assets of the company to the shareholders of the company unless, the company has
complied with the distribution test.
First Schedule: “Distribution Test” includes circumstances where (a) a company is able to pay
its debts as they fall due; and (b) the amount or value of any payment, return or distribution made
by the company does not exceed its retained earnings immediately before the making of the
payment, return or distribution.

Declaration of dividends
Section 76(1) - Subject to sections 72 and 75, and in the case of a private company, its registered
constitution where applicable, a company may, by ordinary resolution, declare dividends in
respect of a year or any other specified period, but a dividend shall not exceed the amount
recommended by the directors.
(2) In relation to public companies, subsection (1) shall be supplemented by section 321.
(3) A dividend shall be paid within sixty days after the resolution of the shareholders confirming
payments or after dividends have become payable.
(4) Where a dividend is to be paid in accordance with subsection
(3), the shareholders shall be notified of the amount of dividend recommended by directors for
payment.
(5) A registered constitution of a company may prescribe modes for the payment of dividend
without reference to the resolution of the shareholders.

DEBENTURE AND CHARGES

Debenture:
Besides raising capital through shares, companies may raise long-term capital through the issue
of debenture. Whereas:
a) shares constitute equity (.i.e. that shareholder have some form of ownership interest in the
company),
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b) debenture creates debt (.i.e. the company is indebted to the debentureholders)

Section 83(1) of Act 992, recognises debenture as a part of a company’s loan capital. In effect
debenture holders are lenders who lend money to the company and as such, expect the company
to pay back the amount borrowed by the company and lent by the debenture holders.
Debenture is an acknowledgement of debt issued by a company under its common seal. It also
means that debenture is a proof of loan taken by the company on certain terms and conditions.

>>Whereas the definition of debenture is a creature of common law in other jurisdiction, in

Ghana, it is a creature of statute.
At Common Law: Levy v Abercorris Slate: “In my opinion a debenture means a document
which either creates a debt or acknowledges it, and any document which fulfils either of these
conditions is a debenture. I cannot find any precise legal definition of the term, it is not either in
law or commerce a strictly technical term, or a term of art.”
Statute: According to the First Schedule to the Companies Act, 2019 (Act 992) “debenture”
includes
(a) a written acknowledgment of indebtedness issued by a company in respect of a loan made or
to be made to it or to any other person or money deposited or to be deposited with the company
or any other person or the existing indebtedness of the company or any other person whether
constituting a charge on any of the assets of the company or not;
(b) debenture stock;
(c) convertible debenture;
(d) a bond or an obligation;
(e) loan stock;
(f) an unsecured note; or
(g) any other instrument executed, authenticated, issued or created in consideration of such a
loan or existing indebtedness;
(h) but does not include
a) a bill of exchange;
b) a promissory note;
c) a letter of credit;
d) an acknowledgment of indebtedness issued in the ordinary course of business for goods
or services supplied;
e) a policy of insurance; or
f) a deposit certificate, pass book or other similar document issued in connection with a
deposit or current account at a banking company;
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Debenture and Debenture Stock

The Act uses the word debenture in two senses. Besides the First Schedule to the Companies
Act, 2019 (Act 992), sections 83(4) and (4) acknowledge debenture stock which comes under
the large umbrella of debentures. In effect, the word debenture refers to debenture as already
defined and debenture stock.
Debenture stock is a unit of a block of loan of a prescribed amount. The block loan (i.e. the
single debt) is the debenture. Thus whereas the loan block is acknowledged by a single document
called debenture, each unit of the loan is acknowledged by a debenture stock certificate. A
debenture is created when the company borrows the total amount it requires for the loan
transaction from a single lender, usually a bank.
Debenture stock is created when the company borrows, for each loan transaction, from several,
separate lenders, either because the amount it requires is too large for a single lender to
accommodate the demand or because the borrowers, each wants to assume a smaller risk in
lending to the company.
Debenture stock transaction occurs when a company borrows directly from the public and when
several persons buy the company’s debts instrument. In effect, a debenture is like a bank loan
agreement with the company and a debenture stock is like a public subscription for corporate
bonds.
Debenture Deed
A debenture stock is created by a deed under the common seal of the company. This deed may
take two forms i.e.
a. A deed poll or
b. Indenture created in favour of trustees for debenture stockholders.
Features of Debenture Stock
a. There is a block loan of a prescribed amount to the company
b. The block loan is created by deed
c. The block loan is divided into parts or smaller units
d. The different parts or units may be issued to separate holders
e. The parts are represented by debenture stock certificate
Advantages of Debenture Stock
a. The company can obtain one vast loan of a prescribed amount with many contributors
advancing smaller and more affordable funds
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b. Unlike debenture where transfer can only be in bulk, subscription for and transfer of stock
could be made in any amount, depending on the terms of issue.
Difference between Debenture and Share
1. Unlike shareholder, Debentureholders are creditors and not members and neither have
the right to attend neither meetings nor vote. Section 83(5) of Act 992 provides that a
debenture holder is not a member of the company and, despite a provision in the
debenture or the constitution of the company, is not entitled to attend and vote at a
general meeting of the company.
2. Whereas a company is prohibited from purchasing its own shares, there is no such
prohibition on debentures.
3. Whereas debentures attract interest, shares on the other hand attract dividend.
4. Interest on debenture must be paid at all cost when they fall due. The obligation must be
met either from the company’s capital or profit, whereas dividend can only be paid out
of profit.
5. In preparing a company’s accounts, interest on debentures is charged before determining
the company’s profit. Thus interest on debenture is treated as an expense which is
deducted before profit is determined. Interest on debenture is also paid before all taxes
are deducted, whereas dividend is paid out of corporate profit which would already have
been taxed or liable to corporate taxes.
Types of Debentures
There are various types of debenture such as:
(i) Perpetual or irredeemable debentures
(ii) Redeemable debentures.
(iii) convertible and non-convertible debentures and;
(iv)Secured and unsecured debentures.

Perpetual Debenture:
A perpetual debenture is one which is not redeemable by the company. Section 87 of Act 992
also permits a debenture that may be redeemable only on the happening of an event, however
remote, or expiration of a period, however long. It provides that a condition contained in a
debenture or in a trust deed for securing any debentures, shall not be invalid by reason of the fact
that the debentures are by that condition made irredeemable or redeemable only on the
happening of a contingency, however remote, or on the expiration of a period however long.
Redeemable Debentures:
This refers to the debentures that the company may redeem. Debenture is debt to the company
which creates debt obligations. Pursuant to the terms of issue, a company may have funds to pay
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off the outstanding principal and interest and thereby absolve itself of its debt under the
debenture. When this occurs, the company is said to have redeemed the debenture. Redeemed
debenture may be reissued, unless the company intends to cancel or re-issue is forbidden by the
company’s Constitution or the debenture trust deed or other contracts entered into by the
company.
Section 97(1) of Act 992 provides that where a company redeems a debenture previously issued,
the company may, subject to subsection (5), re-issue that debenture.
Section 97(5) of Act 992 provides that for the purposes of subsection (4), a person lending
money on the security of a re-issued debenture which appears to be duly stamped may give the
debenture in evidence in any proceedings without payment of the stamp duty or a penalty unless
that person had notice, or with due diligence might have discovered that the debenture was not
duly stamped, but the company in either case is liable to pay the proper stamp duty and penalty.
Section 97(6) of the Companies Act, 2019 (Act 992) provides that this section does not entitle a
company to re-issue a redeemed debenture if the company has manifested the intention of the
company that the debenture shall be cancelled or if re-issued, is forbidden by a provision in the
constitution of the company or in the debenture, trust deed or any other contract entered into by
the company.
Convertible Debenture:
A convertible debenture is one that in lieu of redemption or repayment, may at the option of the
holder or the company, be converted into shares in the company upon such terms as are stated in
the debenture. Section 88 of the Companies Act, 2019 (Act 992) provides that subject to the
Central Securities Depository Act, 2007 (Act 733), debentures may be issued on the terms that in
lieu of redemption or repayment the debentures may, at the option of the holder or the company,
be converted into shares in the company on the terms that are stated in the debentures.
Non-Convertible Debenture:
A non-convertible debenture cannot be converted into shares.
Secured Debentures:
According to section 89(1) of the Companies Act, 2019 (Act 992), debentures may either be
secured by a charge over the property of the company or may be unsecured by a charge.
A secured Debenture therefore is a debenture for which a charge is created over a property of the
borrower in favour of the lender. Thus, a debenture is secured if the company that issues it agrees
to use its property to secure the payment of the debt in respect of which the debenture in question
has been issued.
Section 89(1) of the Companies Act, 2019 (Act 992) provides that debentures may be secured by
a fixed charge on some property of the company or a floating charge over the whole or a
specified part of the undertaking and assets of the company, or by both a fixed charge on a
property and a floating charge.
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There are two types of secured debentures.

(i) debentures secured by a fixed charge and;
(ii) a debenture secured by a floating charge.
Unsecured Debentures:
An unsecured (naked) debenture is one which is not secured by any charge over the company’s
property. It therefore creates no charge over the company’s property in securing the loan.
In other words, if no security is provided for the payment of the debt in respect of which the
debenture is issued. A charge is an encumbrance, the collateral or security for the loan secured
by the company.
Under section 91(4) of the Companies Act, 2019 (Act 992), a receiver or manager shall not be
appointed as a means of enforcing debentures not secured by any charge.

Fixed Charge
Otherwise known as ‘specific’ charge, is: a charge created over identifiable property which
restricts the debtor’s power to dispose of or otherwise deal with the property without the
creditor’s consent. In this case, a specific property of the company, such as land, vehicle,
building, plant, machinery or equipment may be used as a security to ensure repayment of the
loan.
It is not necessary that the property should be presently owned by the charger future property
may be the subject of an agreement to charge, provided that it is sufficiently described to be
identified when acquired. The effect of such agreement, if for value consideration, is that a
charge is deemed to come into existence as soon as the property is acquired by the charger.
The case of Holroyd v Marshall considered the issue of assignments of future property and
whether or not items of machinery which were not in existence at the time of the execution of the
deed became the subject of the trust deed at a later point in time. In that case, the debtor gave a
mortgage not only over his existing machinery but also over all the machinery which, during the
continuance of the security, should be placed in his mill. The question arose whether the
equitable title of the chargee in respect of new machinery that had been placed in the mill
prevailed over the rights of a judgment creditor of the chargor/debtor.
Lord Campbell LC had held that the charge could not assert an equitable interest in the new
machinery. The House of Lords reversed the decision, holding that immediately on the new
machinery and effects being fixed or placed in the mill, they became subject to the operation of
the contract, and passed in equity to the mortgagees and in equity it is not disputed that the
moment the property comes into existence, the agreement operates on it.
Floating Charge
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Section 90(1) of Act 992 provides that subject to subsection (2), a floating charge is an equitable
charge over the whole or a specified part of the undertaking and assets of the company both
present and future.
Section 90(2) of Act 992 provides that a floating charge does not preclude the company from
dealing with the assets of the company until,
a) the security becomes enforceable and the holder of the security pursuant to a power in
that behalf in the debenture or the deed securing same, appoints a receiver or manager or
enters into possession of those assets;
b) the Court appoints a receiver or manager of the assets on the application of the holder; or
c) the company goes into liquidation.

The classic definition of a floating charge is the often quoted threefold definition stated by
Romer LJ in Re Yorkshire Woolcombers Association, Romer LJ stated:
‘…I certainly think that if a floating charge has the three characteristics that I am about to
mention it is a floating charge (1) if it is a charge on a class of assets of a company present and
future; (2) if that class is one which, in the ordinary course of the business of the company,
would be changing from time to time; and (3) if you find that by the charge it is contemplated
that, until some future step is taken by or on behalf of those interested in the charge, the company
may carry on its business in the ordinary way as far as concerns the particular class of assets I am
dealing with.’
Romer LJ noted, however, that a charge may be classified as a floating charge even if the charge
does not contain all three of the characteristics.
It is described as an equitable charge because the assets over which the charge has been created
remain under the control and direction of the company and is not subject to the control of the
creditor. A floating charge is normally created over a class of assets, present or future, that
changes from time to time in the ordinary course of a company’s business. The assets normally
used here are routinely used by the company in the ordinary course of its business.
In George Cohen (WA) Ltd v. Comet Construction Co. Ltd; Ghana Commercial Bank
(Claimant) [1966] GLR: by a debenture dated 1 February 1963, exhibit A, the defendants
secured two of their vehicles to the claimants who were bankers. The debenture was not
registered with the Registrar of Companies till 4 October 1965. In the meantime, on 12 August
1963 a receiver and manager was appointed by the claimants in accordance with the terms of the
debenture and notice of the appointment was published in the Commercial and Industrial
Bulletin of 10 January 1964. In June 1964 the plaintiffs recovered judgment in the High Court
against the defendants and in January 1965, not having received payment of the judgment debt,
they issued a writ of fi.fa. against the two vehicles. The claimants interpleaded and at the
hearing, counsel for the plaintiffs submitted that as the debenture was not registered with the
Registrar of Companies at the time of seizure of the vehicles under the writ of fi.fa. it could not
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constitute notice to third parties like the plaintiffs who must therefore take preference to the
claimants.
The court held that the issue of the debenture, exhibit A, securing certain properties of the
judgment debtors to the claimants created a floating charge on the business assets of the
judgment debtors, and on the appointment of a receiver and manager by the claimants, the
judgment debtors could no longer deal with the secured properties without the consent of the
debenture holders. And if the charge was valid, it prevailed over the claim of an execution
creditor.

Powers of the Court : Appointment of Receiver or Manager

In the case of a floating charge the court may appoint a receiver or manager when:
i. The security of the debentureholder has become enforceable; security becomes
enforceable when the loan agreement permits the debentureholder to take steps to realise
the security furnished for the loan. Eg. When the company defaults in repayments when
they fall due. Delayed payments and non-payment of borrowed money will entitle a
security holder to enforce.
ii. The security has not become enforceable but it is in jeopardy. Security is in jeopardy
when events occur which satisfy the court that it is unreasonable in the interest of the
debentureholder that the company should retain the power to dispose of its assets. It does
not necessary matter whether the company is meeting its obligation or not. Eg. The
security will be in jeopardy if it comes to the attention of the creditors that the company
is moving its assets or is being threatened by other creditors with insolvency proceedings
or that there is going to be a takeover. Then despite the company’s faithfulness in
meeting its debt obligations to the debenture holders, their security is nevertheless in
jeopardy.
Section 91 of the Companies Act, 2019 (Act 992) provides that:
(1) Where a fixed or floating charge becomes enforceable, the Court may appoint a receiver and,
in the case of a floating charge, a receiver and manager of the assets subject to the charge.
(2) In the case of a floating charge, the Court may, although the charge has not become
enforceable, appoint a receiver or manager if satisfied that the security of the debenture holder is
in jeopardy
(3) The security of the debenture holder is in jeopardy if the Court is satisfied that events have
occurred or are about to occur which render it unreasonable in the interests of the debenture
holder that the company should retain power to dispose of its assets.
(4) A receiver or manager shall not be appointed as a means of enforcing debentures not secured
by a charge.
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Note: in Ghana, only natural persons can be appointed as a receiver. Infant cannot be appointed
as a receiver.

Priority of Fixed Charges:

When a company creates a fixed charge and a floating charge on the same property, and then
defaults in paying the debt in respect of which the charges are created, the question is which of
the secured creditors is the company to pay first out of the proceeds?
Generally, a fixed charge has priority over a floating charge affecting the same property. Section
90 (5) of Act 992 provides that a fixed charge on a property has priority over a floating charge
affecting that property unless the terms on which the floating charge was granted, prohibited the
company from granting a later charge having priority over the floating charge and the person in
whose favour that later charge was granted had actual notice of that prohibition at the time when
the charge was granted to that person.
The exception is a floating charge will have priority over a fixed charge affecting the same
property if the terms of which the floating charge was granted prohibits the company form
granting any later charge having priority over the floating charge and the person in whose favour
such charge was granted has actual notice of the said prohibition at the time when the charge was
granted to him.
The exception is a floating charge will have priority over a fixed charge affecting the same
property when the following happen:
1. The floating charge was created before the fixed charge.
2. The terms of the debenture by which the floating charge was created specifically
prohibited the company from granting any subsequent charges having priority over the
floating charge.
3. The person in whose favour the fixed charge was granted (charge) has actual notice of the
prohibition at the time of the grant and yet disregarded the notice

Registration of Charges:
The act requires a company which has issued debenture to keep a register of debentureholders at
the same address as the register of members.
Section 99(1) of Act 992 provides that a company which issues or has issued debentures shall
maintain a register of the holders of the debentures.
Section 99(2) provides that subject to sections 106 to 109,
(a) the register of debenture holders shall be kept and maintained at the address at which the
register of members is kept; and
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(b) sections 35 to 39 shall apply as regards the giving of notice to the Registrar of the place
where the register is kept, taking into consideration the details in the register of debentures.
Section 110(1) of the Companies Act, 2019 (Act 992) provides that a charge, other than a charge
specified in subsection (5), created by a company after the commencement of this Act is void so
far as a security on the property of the company, is conferred by that charge, unless the
particulars prescribed in this section together with the original or a certified copy of the
instrument by which the charge is created or evidenced, are delivered in the prescribed form to
the Registrar for registration within forty-five days after the date of the creation of the charge.
Thus under section 110 of the Companies Act, 2019 (Act 992), particulars of every charge
created by a company in respect of its property must be registered within 45 days of the creation
of the charge. The legal effect of registration f charges is that it makes the charge enforceable.
This means when a charge is registered and the company defaults in paying its debts, the
debenture holder is entitled to take steps to have the property sold and the proceeds used to settle
the debts.
Section 110(4) of Act 992 provides that when a charge becomes void under this section, the
money secured by the charge shall immediately become payable despite a provision to the
contrary in the contract.
Thus, non-registration of a charge renders the charge void. This means no legal action can be
taken by the debentureholder to enforce his rights. The debenture would then be treated as a
naked or unsecured debenture. The company however still has the obligation to pay the debt.

Debenture Certificate and Debenture Stock Certificate

Section 85 of Act 992 provides that:
(1) Subject to the Central Securities Depository Act, 2007 (Act 733) a company shall, within two
months after the allotment of any of its debentures, or after the registration of the transfer of any
debentures, deliver to the registered holder of the debentures, the debentures or a certificate of
the debenture stock under the common seal of the company or as certified by two directors and
the Company Secretary of that company.
(2) Where a debenture or debenture stock certificate is defaced, lost or destroyed, the company,
at the request of the registered holder of the debenture, shall issue a certified copy of the
debenture or renew the debenture stock certificate on payment of a fee prescribed by the
company and on the terms, as to evidence and indemnity and the payment of the out-of-pocket
expenses of the company investigating the evidence, that the company may reasonably require.
(3) Where a company defaults in complying with this section, the company and an officer of the
company that is in default is liable to pay to the Registrar, an administrative penalty of two
hundred and fifty penalty units.
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(4) On an application by a person entitled to have the debentures or debenture stock certificate
delivered to that person, the Court may order the company to deliver the debenture stock
certificate and may require the company and that officer to bear the costs of, and incidental to,
the application.
Under section 85, within two months after the allotment of debentures or the registration of the
transfer of debentures, a company must deliver to the registered holder a debenture certificate or
debenture stock certificate under the common seal of the company.
Just like in the allotment of shares, on the authority of Conte v Kpeglo [1964] GLR, allotment
of shares (and mutatis mutandis debentures) involves both of two distinct legal operations. An
agreement, i.e. offer and acceptance and entry of the name on the register. As a result, within two
months after the offer and acceptance or transfer of debentures, and the entry of the names of the
new debenture holders in the register, the company must deliver to the registered holder a
debenture or debenture stock certificate under the common seal of the company.

QUESTION:
“The limits on the powers of the board of directors may only exist in Principle, and not in
Reality.” Discuss two circumstances that make this statement potentially true.
Ans: Company is a special vehicle and operates like human being. It has a brain and nerve centre
which controls what it does. It has hands which holds tools and act in accordance with directions
from the centre. Some of the people in the company are mere servants and agents who are
nothing more than hands to do the work. Others are directors and managers who represent the
directing mind and will of the company and control what it does, as was stressed in Bolton Co
Ltd v T.J. Graham & Sons Ltd. Therefore, section 170(1) of Act 992 provides that “directors”
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means those persons, by whatever name called, who are appointed to direct and administer the
business of the company.
There are several types and classifications of directors of a company. Thus, in Ghana, sections
180 to 184 of Act 992 recognizes or classifies directors as Managing Directors (MD), Executive
Directors, Alternate Directors and Substitute Directors. Moreover, types of directors recognize in
Ghana are de jure directors who persons are dully appointed as directors of a company; de facto
directors who persons not dully appointed as directors but hold out as directors of the companies,
as under section 170(2)(a) and in Commodore v Fruit Supply Ghana; and shadow directors who
are those not appointed nor openly hold themselves out as directors and yet whose directions or
instructions the duly appointed directors are accustomed to act, as under section 170(2)(b) and in
In Re Hydrodam Ltd.
Thus, the Companies Act 2019, Act 992, specifies or provides strict and onerous duties for the
directors of a company. Among the duties provided in section 190 of Act 992 thereof includes:
fiduciary duty, Duty to act in the best interest of the company, Duty to act in accordance with the
constitution of the company, Duty to exercise independent judgment, and Duty to avoid Conflict
of Duty and Interest as provided in Section 192 and in Aberdeen v Blaikie case. These duties are
owed to the company shareholders, members, creditors, employees of the company. In Okudzeto
v Irani Brothers: the court acknowledged that “the conduct of a company’s business is the
responsibility of the directors.”
Concerning the limits of the powers of the Board of Directors of a company, section 189 of Act
992 provides limitations to the board of directors’ duties and powers. It contains subsection 1 to
subsection 10 as description of the limits.
Regarding the circumstances where the limits on the board of directors of a company exit in
principle and reality, in private limited company, section 189(1)(a) provides that without the
approval of an ordinary resolution the company, the board must not issue shares or treasury
shares to third parties or outsider unless the it issued on the same terms and conditions to all
existing shareholders in proportion as nearly as may be to their existing holding. In reality or
practice, the board of directors of the company in a private company can overlook at this
statutory provision and issue shares to the third parties on uneven or unequal terms and
conditions because of the words “proportion as nearly as may” in the section.
Another circumstance exists in the public company. That is, section 189(5) of Act 992 provides
that despite a provision of the Act or a resolution of the company in general meeting, new shares
or treasury shares shall not be issued to a director or past director of a company, unless the shares
have first been offered on the same terms and conditions to all the existing shareholders or
members of the public in the case of public company. However, section 189(6) provides that
public company may disapplied subsection 5 with approval of majority to offer some of the share
equity to the public on stock exchange. That is, the board of directors of the public company may
sell shares to the public with the variation of the terms and conditions to the public of past
directors on uneven terms and condition.
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Another practical circumstance where the limit does not operate or exist is in a political
appointment or emergency situation. That is, the boards of directors of state-owned enterprises
such as NLA and Ghana Gas can get into certain procurements. They may overlook where they
have been told to look at the PPA and later go back to it. In this situation, the PPA will be like a
rubber stamp. For instance, where the board of directors is told to not look at sole sourcing but
rather at public tender. They may overlook it and enter into a sole sourcing transaction for one of
the contractors. This was so in the hikes of the COVID-19 in Ghana, where the Health Minister
was summoned to Parliament for ultra vires or procurement breaches regarding the contract
given to the Frontiers Services at the KIA. He contended that Frontiers was awarded the contract
by the board of directors without accordance with the procurement act due to the exigency of the
COVID-19 situation in Ghana. Though the board may act ultra vires in this situation, the board
can ratify the contract at any time. Another example is where the board of the directors of
cocoboard purchased fertilizers in an urgent situation without following the PPA, under the
administration of Opuni.