Company Law I
PRESBYTARIAN UNIVERSITY COLLEGE
FACULTY OF LAW
BACHELOR OF LAWS (LLB)
COMPANY LAW
STUDY GUIDE
First & Second Semesters (2020/2021 Academic Year)
COURSE FACILITATORS
DR. ERNEST OWUSU-DAPAA & MR. KWADWO AGYEI BIO
Course Description
This course deals with essential principles of company law in Ghana. The course will seek to introduce students to the legal basis, workings, advantages and disadvantages of company as a legal structure for doing business. It is hoped that at the end of the course, students will garner an appreciative understanding of company law in Ghana and familiarize themselves with current trends and development in company law.
Again, it focuses on corporate governance, capital and winding up of companies. By corporate governance, the course will examine the relationship between board of directors, management, shareholders and other stakeholders of the company. Simply put, the course identifies the differences between and the attributes of ownership and control of companies. Essentially, the course will analyse the rights and/or duties of directors, shareholders, auditors, secretaries, debentureholders and other stakeholders of the company. Corporate responsibility, corporate ethics and best practices are discussed in this course. Related to the discussion on capital, the course focuses on the issuance of and dealings in shares, as well as capital maintenance of the company. The course will further examine winding up and dissolution of companies and end with an exploration of the necessity for repeal of the Companies Act 2019, Act 992.
This course will involve a study of the relevant Statute(s) on company law, readings of reports, opinions and related materials on the respective topics, as well as discussion of case law. All students are expected to read the assigned materials and be prepared to discuss them in class.
Learning Outcomes
By the end of this course, students will be able to:
- Students are expected to have mastery over the requisite regulatory regime needed for the formation of a company in Ghana.
- At the end of the course it also expected that students will be equip with practical skills needed for the formation of corporations in Ghana.
- With the changing trends of businesses amidst globalization, it is expected that by the end of the study of this course students will be equipped enough to proffer the requisite solution to challenges in modern corporate governance structure of companies in modern times.
Instruction mode
The mode of interaction is going to be a blend of both teacher and student centered methods of instruction. The lectures are going to highly interactive thus students are therefore encouraged to read all mandatory materials ahead of each class. The lecturers may provide summary of the notes after each class as a supplementary for student.
Course assessment
Students would be assessed on a four-tier level: attendance and participation, Quizzes and assignments, mid-semester examinations and a final 3-hour end of semester examination. There will also be tutorial sessions to help assist students in solving practical Company law questions.
The basis of grading is as follows:
- Attendance and participation…. …………………………5%
- Quizzes and assignments ………………………………...15%
- Mid-semester examinations……………………………....20%
- End of Semester Examination…………………………..…60%
Total ………………………………………………………………..100%
Required Statute
- Companies Act, 2019 (Act 992)
Reference Materials
- Report of the Commission of Enquiry into the Working and Administration of Company Law in Ghana (1961) (Gower’s Report)
- Kusi-Minkah, etal , Company Law & Governance of other Corporate Bodies in Ghana, Sunyani Inktouch (2019)
- Bondzi-Simpson, Company Law in Ghana
- Paul L. Davies, Gower and Davies’ Principles of Modern Company Law (8th Edition)
- Pennington’s Company Law (8th Edition)
- Sealy and Worthington, Cases and Materials in Company Law (8th Edition)
- A. K. Majumador and Dr. G.K. Kapoor, Company Law and Practice (12th Edition)
- J.H. Farrar & B.M. Hannigan, Farrar’s Company Law (4th Edition)
TOPICS TO BE TREATED
|
Semester |
Topics |
|
1 |
1. History of Company Law |
|
1 |
2. Sources of Company Law |
|
1 |
3. Meaning and Nature of a Company |
|
1 |
4. Lifting the Veil |
|
1 |
5. Types of Companies |
|
1 |
6. Other Forms of Business Organisation |
|
1 |
7. Formation of a Company |
|
1 |
8. Pre-Incorporation Contracts |
|
1 |
9. Mechanics of incorporation |
|
1 |
10. Name of a company |
|
1 |
11. Commencement of Business |
|
1 |
12. Function and Status of the Regulations |
|
1 |
13. Shareholders’ Agreements |
|
1 |
14. Membership of Companies |
|
1 |
15. General meetings |
|
|
END OF SEMESTER ONE |
|
2 |
1. Corporate Governance |
|
2 |
2. Directors |
|
2 |
3. Auditors |
|
2 |
4. Secretaries |
|
2 |
5. Remedies for Maladministration of a Company |
|
2 |
6. Shares |
|
2 |
7. Borrowing, Debentures And Charges |
|
2 |
8. Raising Capital |
|
2 |
9. Liquidation |
|
2 |
10. Mergers and Acquisition |
SEMESTER ONE
LECTURE ONE
A. History of Company Law
- Gower, Chapters 2 & 3
- Gower’s Report, pgs 1- 14
- J.E.A Mills, Ghana Courts and the Companies Code [1987-88] Vol. XVI RGL 123-147
B. Sources of Company Law
a. Companies Act, Act 179, Section 3(1)
b. Common Law & Equity, Sections 7 and 216 of Act 179
c. Gower’s Report
- Interpretation Act 2009 ( Act 792), Sections 10 and 42
- Gower’s Report, Section 2 of the Draft Bill
- Dupaul Wood Treatment v Asare [2005-06] SCGLR 667 at 691
- In Re West Coast Dyeing Industry Limited; Adams v. Tanoh [1984-86] 2 GLR 561
- Okudzeto v. Irani Brothers [1975] 1 GLR 96
- Politis and Another v. Plastico Ltd [1967] GLR
LECTURE TWO
MEANING AND NATURE OF A COMPANY
a. Meaning of a company, See First Schedule of the Companies Act.
b. Legal Requirement, Section 3 of Act 992. See also Section 6
c. Characteristic features of a Company
i. Legal Personality, Section 18; Section 200
-Salomon v. Salomon & Co. [1897] AC 22 @ 51/ [1895-9] All E.R. Rep 33
- Quartson v Quartson [2012] 2SCGLR 1077
- Soonboon Seo v Gateway Worship Centre [2009] SCGLR 281
-Republic v High Court Accra, Ex parte Appiah and Others [1999/2000] 2GLR 420,SC
- Amartey v Social Security Bank Ltd; Social Security Bank Ltd v Robertson (Consolidated), [1987-88] 1GLR 497
-Owusu v. R. N. Thorne Ltd. [1966] GLR 90
-Bank of West Africa v. Appenteng [1972] GLR 153
-Barclays Bank v. Lartey [1978] GLR 282
-Lee v. Lee’s Air Farming Ltd. [1960] 3 All E.R. 420
- Foss v Harbottle (1843) 2 Hare 461
ii. Limited Liability, Section 7(1)(a) and (b)
iii. Property
- Madjoub & Co Ltd v. W Bartholomew & Co Ltd. [1962] 1 GLR 122
- B.F. Guzdar v. CIT [1955] 25 Comp. Cas. 1 (SC) where the Supreme Court held that shareholder is not the part owner of the company or its property, he is only given certain rights by law, for example, to vote or attend meetings , or to receive dividends.
- R v. Arnaud (1846) 9 QB 115
- Gramophone & Typewriter Ltd v. Stanley [1908-10] All E.R. 833 (CA)”…the property of the company is not the property of the shareholders; it is the property of the company”
- Macaura v Northern Assurance Co. ltd [1925] AC 619; [1925] All E.R. Rep. 51
- Short v. Treasury Commissioners [1948] KB 116
- Wandlyn Motels v. Commerce General Insurance (1970) 12 DLR (3d) 605, the court held that the company has no insurable interest in the assets of its principal shareholder. Also Macaura case
1. Legal Action
-Bank of West Africa v. Appenteng & anor (supra)
- Dolphyne v. Speedline & Co. Ltd & anor [1992-93] GBR 353
- Foss v. Harbottle (1843) 2 Hare 461
iv. Perpetual existence/ succession
v. Transferability of interest, Section 22
vi. Tax considerations
-Internal Revenue Act, 2000 (Act 592), Sections 44, 45, 83
Inequitable Results?
- Madjoub & Co. Ltd v Bartholomew, (supra)
- Fiadjoe Albert, “Companies and Creditor-Rights: Salomon v Salomon-the Ghanaian Experience” [1973] Vol V, No. 3 RGL 187-196
- Kahn-Freund, “Reflections of Company law Reform” (1944) 7 MLR 5
LECTURE THREE
LIFTING THE VEIL
The inroads made by the Companies Act, Act 992 in the lifting of the veil will be thoroughly discussed in class. The veil can generally be lifted based on statute and judicial pronouncements by the courts.
a. Ceasing to have members, Section 41
b. Misdescription, Section 125(4)
-Cowries Finance v Pako Bay [1999-2000] 1 GLR 514@ 520
- Atkin v. Wardle (1889) 61 LT 23
c. Company having less than two directors for more than four weeks, Sections 171
d. Mere Façade
- Akoto v Akoto, [2011] SCGLR 533 (wherein the Court cited Worldwide)
- Worldwide Shipping & Agencies (GH) Ltd v Darko [2001-2002] 2GLR 488, CA
- Morkor v. Kuma [1998-99] SCGLR 620
- Amartey v. Social Security Bank Ltd [1987-88] 1 GLR 497
- Tafa & Co (Ghana) ltd. v. Tafa & Co. Ltd [1977] 1 GLR 422
- Ord v. Belhaven [1998] 2 BCLC 500
- Dallas v. Dallas [1979] All ER 801
- Re Darby; Ex Parte Brougham [1911] KB 95
- Jones v Lipman [1962] 1 WLR 832
- In re Polly Peck International plc (in administration) 2 All ER 433
e. Fraud / Fraudulent Trading
- Handelmij N. V. v. Jebeille Brothers, High Court, Accra, 24 April 1967; digested (1967) C.C. 93
- Chellaram & Sons (Ghana) Ltd. v. Halabi, [1963] 1 G.L.R. 214, S.C.
- Bodies Corporate (Official Liquidation) Act, 1963 (Act 180), Section 26
- Re Patrick & Lyon Ltd [1933] Ch. 786
f. Trading by Guarantee Company, Sections 8
- Re A Company, (1985) 11 BCC 99/ 1985 BCLC 333
- Adams v. Cape industries [1990] Ch 433
- Daimler Co. Ltd v. Continental Co. [1916] 2 AC 307
- Briggs V James Hardie & Co. [1989] 16 NSWLR 549 @ 567
Case Study: Prest v Petrodel [2013] UKSC 34 and In Re The Owner of the Station – Montie Fm, Salifu Maase @ Mugabe, Alistair Nelson and Godwin Ako Gunn; Abu Ramadan and another vrs Electoral Commission and Another (Unreported) 2016
WHAT IS YOUR TAKE ON THE DECISION IN MONTIE THREE?
LECTURE FOUR
TYPES OF COMPANIES
a. Company Limited by Shares: Sections 7
b. Company Limited by Guarantee: Sections 8
-Conversion of Company Limited by Shares into a Guarantee Company: Sections 9
c. Unlimited Company: Section 7(1)(c) & (2) (c)
d. Public and Private companies, Section 7(4) & (5)
e. External Company: Sections 7(1)(d) , 329, 330, 331, 332, 333, 334,335
f. Non-Ghanaian company: Section 343
g. Holding & Subsidiary Companies
h. Kuni v. State gold mining Corporation and anor [1978] GLR 205
i. Associated Company
Other Forms of Business Organisation
a. Sole proprietorship
-Registration of Business Names, Act, 1962 (Act 151), Section 1(1) (a)
- Barclays Bank v. Lartey [197] GLR 22
- Baidoo v. Sam [1987-88] 2GLR 666
b. Partnership
-Incorporated Private Partnerships Act, 1962 (Act152)
- Page 6-7 of Gower’s Report on Incorporated Private Partnerships
c. Voluntary Associations
-Trustees (Incorporation) Act, 1962 (Act 106) Section 1
- Act 592, Sections 10 and 105
d. Statutory Corporations
-Statutory Corporations Act, 1964, (Act 232) Sections 1 and 3
- Article 190 (4) of the 1992 Constitution of Ghana
- Statutory Corporations (Conversion to Companies) Act, 1993 (Act 461)
- Quist CC, “Problems of Law and Practice Governing Statutory Corporations” [1967] Vol IV UGLJ No. 2 82-89
-Turkson Richard B, “Applicability of the Companies Code, 1963 (Act 179) To Public Corporations [1973] Vol X No 1 UGLJ 65-73
e. Co-operative Societies
-Co-operative Societies Decree, 1968 (NLCD 252) Section 2
f. Building Societies
-Building Societies Ordinance, 1955 (No. 30) Section 2
Act 592, Section 10
g. Joint Venture
h. Franchise Agreements
-Act 478, Sections 33 and 40
Technology Transfer Regulations, 1992, (LI 1547)
i. Unit Trusts
- Security Industry Law, 1993 (PNDCL 333), Sections 33 and 142
LECTURE FIVE
FORMATION OF A COMPANY
a. Promotion
-Promoters; Definition Section 10
- Jubilee Cotton v. Lewis [1942] AC 958
- Twycross v. Grant (1877) 2 CPD 469 @ 541, per Cockburn CJ
-Re Great Wheal (1883) 53 LJ Ch
b. Duties of Promoters ; Section 10
i. Fiduciary Relationship
-Erlanger v New Sombrero Phosphate (1878) 3 App. Cas. 1218
- Cook v. Deeks [1916] 1 AC 554
Re Leeds and Hanley Theatre [1902] 2 ChD 918
ii. Utmost Good Faith:
-Gluckstein v. Barnes [1900] AC 240
iii. Duty of Skill, Care and Diligence
iv. Use of insider Information
v. Validity of disclosure
-Re Lady Forrest [1901] 1 Ch 582
- Gluckstein v. Barnes (supra)
c. Remedies for breach of duty
i.Account:
- AG v. Reid [1994] 1 All E.R. 1
ii. Compensation:
-Jacobus Marler Estates Ltd. v . Marler (1913) 85 LJPC 167n
iii. Rescission of Contract
-Lagunas Nitrate Co. v. Lagunas Syndicate [1899] 2 Ch 809
Pre-Incorporation Contracts
a. Definition: Section 11
b. Common law Position
-Kelner v. Baxter (1866) LR 2 CP 174
-Newborne v Sensolid [1954] 1 QB 45
- Panagiotopoulos v. Plastico Ltd. [1965] 1 GLR 176
- Hollman v Pulin (1884) Cab & El 254.
- Black v Smallwood [1966] ALR 744
-Summergreene v Parker (1950) 80 CLR 304
- Phonogram Ltd v Lane [1982] QB 938; [1981] 3 All ER182 (Court of Appeal)
- Natal Land Co & Colonization Ltd v Pauline Colliery and Development Syndicate Ltd [1904] AC 120 (Privy Council)
c. Ghanaian Position
-Section 11
- Jadbranska v. Oysa Ltd [1979] GLR 129
- Dei Anang, “ Pre-incorporation Contracts and Section 13 of the Companies Code [1969] Vol. VI No. 1 UGLJ 1-17
LECTURE SIX
- Mechanics of incorporation
- Section 6
- Section 7(3)
- Section 12-15
- Section 16-18
- Section 26-28**
- R v Registrar of Joint Stock Companies, ex parte Moore [1931] 2 KB 197
- R v Registrar of Companies, ex parte AG [1991] BCLC 476
- Name of a company
- Sections 21 and 125
- Section 1 of Act 151
- Cowries Finance v. Pako Bay [1999-2000] 1 GLR 1025
- Atkin v Wardle (1889) 61 LT 23
- Hendon v Adelman & others (1973) SJ 631
- Exxon Corporation v Exxon Insurance Consultants Int. Ltd [1981] 2 All ER
- R v Registrar of Companies, ex parte AG [1991] BCLC 476
- 495
- Commencement of Business
- Sections 12-25
- Dupaul Wood Treatment (Ghana) Co. Ltd. & Daffour v. Asare [2005/6] SCGLR 667
- Union Mortgage Bank v. Serbeh-Yiadom [1997-1998] 1 GLR 1025
LECTURE SEVEN
1. Function and Status of the Regulations
- Sections 26 and 29 : Effects of Regulation/ The legal relationship between a company and its members
- Dupaul v Asare (supra)
- Beattie v. Beattie [1938] Ch. 708 ***overruled*
- Eley v. Positive Life Assurance [1876] 1 Ex. D. 88
- Hickman v. Kent [1915] Ch. 708
2. Shareholders’ Agreements
- Dhalomal v. Pupulampu [1984-86] 1 GLR 341
- Asafu-Adjaye v. Agyekum [1984-86] 1 GLR 382
- Zastava v. Bonsu & Another [1980] GLR 370; 1981 GLR 256
- Harman v. BML Group [1994] 2 BCLC 674 @678
- Parker and cooper Ltd. v. Reading [1926] Ch 975
- Re Pearce Duff & Co Ltd [1960] 2 All ER 222
3. Ultra Vires Doctrine- Under the current Act 992, the business of company is unrestricted unless provided for by its registered constitution.
See Section 19
- Membership of Companies
a. Definition: Section 33
i. The Subscribers
- Adehyeman Gardens v. Assibey [2003-2004] 2 SCGLR 1016
- Luguterah v Northern Engineering Co. Ltd [1979 GLR 477
- Nicol’s Case (1885) 29 ChD 421
- Evan’s Case (1867) LR 2 Ch 427,
ii. Other Members
- Sections 101 and 102
- Adams v. Tandoh (supra)
- Conte v. Kpeglo and another [1964] GLR 311
b. How Membership Ceases
i. Companies Registered with Shares: Section 33 (4)& (5)
- Operation of law
- forfeiture of non-payment of calls; Adehyeman Gardens v. Assibey
- divestiture; Section 98
- Devolution; Section 101
ii. Guarantee Company; Section 33(7)
- Death
ü Republic v High Court Accra, Ex parte Appiah and Others [1999/2000] 2GLR 420,SC
- Valid retirement
- Exclusion from membership in accordance with Regulations
c. Rights of members: Sections 34 and 200
LECTURE EIGHT
MEETINGS
a. Annual General Meetings; Section 157
b. Extraordinary General Meeting; Sections 158, 162, 299, 324
- Politis and another v. Plastico Ltd (No. 2) [1967] GLR 24
- In The Matter Of Northern Engineering Co., Ltd And In The Matter Of The Companies Code, 1963 (Act 179), Section 217 And Luguterah V. Northern Engineering Co., Ltd. And Others [1978] GLR 477-509
- Harman v BML Group (supra)
- Union Music v. Watson [2003] 1 BCLC 453
- Re Sticky Fingers Restaurant Ltd [1992] BCLC 84
c. i. Agenda: See The Eight Schedule
-Eshun v. Poku [1989-90] 2 GLR 572
d. ii. Attendance: Sections 34, 142(4) and The Eight Schedule
e. Notice: See The Eight Schedule
- Dan Ofori v. GCB (2006, High Court, unreported)
- Boohene v. ors v Ghana Union Assurance (2006, High Court, unreported)
- Baillie v. Oriental Telephone [1915] 1 Ch 503
- Re West Canada Colleries Ltd [1962] Ch 370
f. Quorum: 8th sch para 8, 164, 299 and 326;
Politis and another v. Plastico (No. 2) (supra)
g. Proxies: : 8th sch para 9
h. Conduct: : 8th sch para 12
- Resolutions: : 8th sch para 14
- Ordinary Resolution: Section 69(2), 76, and 139&140,176
- Special Resolution : Sections 9, 30 and 20(1)
- Written Resolution: Sections 163, 141, and 176
i. Voting: : 8th sch para 16
j. Minutes: Sections 166 and 167
SEMESTER TWO
LECTURE ONE
CORPORATE GOVERNANCE
- Definition of the concept “corporate governance”
- Nature of corporate governance
- Differences between management and governance
- Objectives of corporate governance
DIRECTORS
a. Who are Directors?
Sections 170, 200
b. Nature of Office
ü Promexport International (Ghana) Ltd v First Ghana Building Society, [198990] 1GLR 395, CA
ü Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
ü Aberdeen Rly v Blackie (1854) 1 Macq HL 461
ü Dikyi & Others v Ameen Sangari Industries Ltd [1992] 1 GLR 61 per Kpegah J(as he then was)
ü Automatic self Cleansing Filter Syndicte Co Ltd v Cuninghame [1906] 2 Ch 34 (Court of Appeal)
c. Types and Classification of Directors
De Facto and Shadow Directors : Section 170(2)(a) and (b)
ü Quarcoopome v Sanyo Electrical Trading Co. Ltd [2009] SCGLR 213
ü Quality Grain Case
ü Commodore v Fruit Supply (Ghana) Ltd [1977] 1 GLR 241
ü Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180
ü Dorchester Finance v Stebbing
• Substitute Director: Section 180
• Alternate Director : Section 181
Okudzeto v Irani Brothers, supra
• Subsequent Directors: Section 300
ü Dolphyne v Speedline & Co. Ltd [1992-93]GBR 35
ü Politis v Plastico (No.2) [1967] GLR 24
• Managing Director : Section 184
ü Montero v Redco [1984-86] 1 GLR 710
ü Nunoofio v Farmers Services Co. Ltd, [2007/2008] SCGLR 926
• Executive Director: Section 192
ü Holdsworth v Caddies (1955) 1 All ER 725
d. Appointment of Directors: Sections 172
- Quarcoopome v Sanyo Electrical (supra): a person must consent in writing before he is appointed a director of a company.
• Casual Vacancy: Section 172
ü Politis v Plastico (No. 2) supra
• Competence: Sections 173. Also Sections 38 & 40 of the Banking Act 2004 (Act 673); GSE Listing Rules (2006), Rule 11
ü R V High Court, Accra; ex parte Ploetner [1984-86] 2 GLR 107, SC (on disqualification of directors)
ü Lugeterah v Northern Engineering, [1978] GLR 477-509 Share Qualification : Section 174
e. Remuneration: Sections 185, 215
- Quarcoopome v Sanyo Electric Trading Co Ltd (supra)
f. Meetings: Sections 188
g. Vacation of office, Removal : Sections 176, 185, 300
ü Adehyeman Gardens Ltd V Assibey, [2003-2004] SCGLR 1016
ü Re West Coast Dyeing Industry Limited, Adams v Tandoh [1984-86] 2GLR 561
ü Pinamang v Abrokwa, supra.
h. Powers and limitation on powers of Directors : Sections 144,
189, 191
ü Barclays Bank v Perseverance Transport Service Ltd [1961] GLR 665 Rolled Steel Products v British Steel Corporation [1986] 1 Ch 246
i. Duties of Directors: Sections 197
ü PS Investment Ltd v Central regional Development Corporation [2012] SCGLR 611
ü Aberdeen v Blaikie, supra
ü Politis v Plastico (No. 2), supra
ü Quality Grains Case, supra
ü Cudjoe v Conte [1964] GLR 28
ü Regal (Hastings) Ltd v Gulliver, supra
• Duty to Shareholders
• Duty to creditors
j. Conflict of Duty and Interest: Sections 192-194
ü Bhullar v Bhullar [2003] 2 BCLC 241
ü Aberdeen Rail Co v Blaikie Brothers, supra
ü Commodore v Fruit Supply, supra
ü Asafu Adjaye v Agyekum, supra
ü Industrial Dev’t v Cooley [1972] 2 All ER 162
ü Simtel Communicaitons v Rebak [2006] 2 BCLC 571
ü Sheperds Investments Ltd v Walters [2007] 2 BCLC 202
k. Remedies for breach of duties of Directors: Sections 199-200
ü Foss V Harbottle, supra
ü Shaw v Shaw [1935] 2 KB 133
ü AG v Reid [1994] 1 All ER 1
l. The Board Chairman and the CEO
m. Relationship between chairman of board and the CEO
n. Separation of positions of Board Chairman and the CEO
See Also:
ü Quarcooopome v Sanyo Electric Trading Co. Ltd [2009] SCGLR 215
ü Pinamang v Abrokwa, [1991] 2GLR 384, CA
ü West African Express (Ghana) Ltd v Craig, [1963] 2 GLR 231, SC (on power of acting managing director to bind company)
ü Union Mortgage Bank v. Serbeh-Yiadom [1997-1998] 1 GLR 1025
LECTURE TWO
AUDITORS
• Appointment: Section 138,139&140
• Reasons for Audit
ü The State v Andoh [1967] GLR 355
ü Caparo v Dickman
• Independence of Auditors
• Eligibility of auditors
• Role and Status
• Powers and Duties: Section 142
• Removal : Section 141
SECRETARIES
Functions of Secretaries: Section 211
Lugeterah v Northern Engineering, [1978] GLR 477-509
LECTURE THREE
REMEDIES FOR MALADMINISTRATION OF THE COMPANY
• Majority Rule (The Rule in Foss v Harbottle)
• Minority Protection/ Exceptions to the Rule
• Illegal acts: Section 218
ü Asafu Adjaye v Agyekum, supra
ü Lugeterah v Northern Engineering, [1978] GLR 477-509
• Remedy against oppressive conduct: Section 218
ü Dupaul Wood Treatment(Ghana) v Duffour & Asare, [2005-2006] SCGLR 667
ü Pinamang v Abrokwa, supra
ü In re West Coasty Dyeing Industry Ltd: Adams v Tandoh, [1984-86] 2 GLR 561, CA
ü Asafu Adjaye v Agyekum [1984-86] 1GLR 382, CA
ü Re Five Minute Car Wash Service Ltd. [1966] 1 All E.R. 242
• Unfair Prejudice: Section 219
Re A Company (1986) BCLC 376
• Capacity and interest affected
ü Aboagye v Tettevi [1976] 1GLR 217
ü Okudzeto v Irani Brothers, [1975] 1 GLR 96, CA
Remedies
ü Vambaris v Altuna [1973] 2 GLR 41
ü Billy v Kuwor [1991] 1 GLR 522
ü Shamsallah holdings Pty Limited v CBD Refrigeration and AirConditioning Services Pty Limited (2001) 19 ACLC 571—on non declaration of dividend while there is a review of directors salary
DIVISION OF POWER BETWEEN MEMBERS AND DIRECTORS
• Members” powers vis-à-vis Directors’ powers
• Organs of the Company
• Difference between governance and management
LECTURE FOUR
SHARES
• No Par Value: Section 43
• Issue of Shares: Section 44
• Payment for Shares: Sections 45
• Classes of Shares: Section 49
• Variation of Class Rights: Sections 50
• Transfer of Shares: Sections 98-105, 322
ü PS Investment Ltd v Central regional Development Corporation, supra
ü Asafu Adjaye v Agyekum [1984-86] 1GLR 382, CA
ü Okudzeto v Irani Brothers, supra
ü Ethelburga (W.A.) Ltd. v Lutterodt [1962] 1GLR 23
ü Politis v Plastico Ltd (No.2) [1967] GLR 24
LECTURE FIVE
i. RAISING OF CAPITAL
• Methods: invitation to the public, placement, rights issue, capitalization, conversion issue
ii. CAPITAL MAINTENANCE
• What is capital maintenance
• Stated capital: Section 68-69
• Payments, Distributions to shareholders: Section 78(1)(c)
• Disguised Distribtuions
• Sanctions for unlawful payments
• Capital Reduction: Sections 69
• Prohibited Transaction in Shares
iii. CAPITAL AND DIVIDEND
LECTURE SIX
BORROWING, DEBENTURES AND CHARGES
• What are Debentures: Section 83
• Kinds: Sections 86-89
• Fixed charges
• Floating charges
• Receivers and managers: Sections 91, 261-273
Natar v Boye (The Receiver) and Fyne Ltd [1992] 2GLR 145
• Registration of Particulars of Charges: Section 107-118
ü George Cohen (W.A)Ltd v Comet Construction Co. Ltd; Ghana Commercial Bank (Claimants) [1966] GLR 777
ü Re Ghana Timber Marketing Board’s Appliction; Ghana Timber Board v Ashanti Curl & Lumber Products Ltd, [1968] GLR 931
LECTURE SEVEN
LIQUIDATION: Section 274
• Official Liquidation Private Liquidation
• Dissolution
• Liabilities of members during winding up. Section 40
• Who is a liquidator: Section 278
• Duties of a liquidator: Sections 286; Sections 101-107 Corporate Insolvency and Restructuring Act, 2020 Act 1015
Adomako v Enterprise Insurance Co. Ltd & Consortium House Ltd [2011] SCGLR 247
• Powers of a liquidator
• Remuneration : Section 279
• Powers of the Court
ü Petition to the court
ü The “just and equitable” principle
ü Billy v Kuwor [1991] 1GLR 522
ü In re Timber and Transport Kumasi-Krusevac Co. Ltd; Zastava v Bonsu [1981] 1GLR 256, CA
ü Conte v Kpeglo [1964] GLR 311, SC
ü Union Maritime et Commerciale v Rabensteiner [1968] GLR 504
ü Bodies Corporate (Official Liquidations) Act, 1963 (Act 180)
ü Banking Act 2004( Act 673)
LECTURE - EIGHT
MERGERS AND ACQUISITIONS – SECTIONS 238-260
Ø Assets Acquisitions
Ø Takeovers
Ø Mergers
Ø Reasons for Mergers and Acquisitions
Ø Information as to Arrangements or Mergers
Ø Rights of Minority on Acquisitions
Ø Duties of Directors in Mergers and Acquisitions
Ø Tax Implications in Mergers and Acquisition
TUTORIAL QUESTIONS
1. In Certain circumstances the law disregards the corporate entity of a company in favour of economic reality of the case. Discuss.
2. Mr. Abronye is a Chartered Accountant. In 2018, he contracted to sell a piece of land to UNILEVER LTD. For the sum of GH 200,000 of which he took part-payment of GH 150,000. For the same year he formed BIOMATIC CO. LTD and sold the same land to it for GH 800,000 in breach of the sale to UNILEVER. He returned to UNILEVER the previous payment of GH 150,000 and the latter refused. In 2020, BIOMATIC CO. LTD of which Mr. Abronye is the only member bought goods worth GH 500,000 from AQUATIC CO. LTD, and has not paid BIOMATIC CO. LTD. Mr. Abronye neither has floating nor fixed assets of its own, but Mr. Abronye has three buildings at East Legon, a yatch at kind, and three fishing trawlers at Tema. Advise UNILEVER and AQUATIC CO. LTD.
3. Compare and contrast the various types of companies that can be formed under the Companies Act 2019, Act 992.
4. Discuss some of the new features that has introduced into the new Companies Act 2019, Act 992 that were not in the Companies Act, Act 179.
5. Three friends Aboagye Sarkodie, Godlove and Kofi Asare who are mates at PUC have decided to form a limited Liability Company to engage in the manufacture of soft drinks. What are the practical steps should they take to do this?
6. Is a promoter an Agent of a Company he has set up? If not, why?
7. Face-shields were sold to Biomatic Ltd. The contract was, ‘we this day sold to you…’ by Abronye Ltd. The market for face-shields fell and Biomtice Ltd had not been incorporated at the time of the contract. Discuss the implications.
8. Folitse and Kwarteng decided to form a company to engage in the manufacture of nose-masks. The name to the proposed company AQUATIC. In January 2015 it was incorporated as AQUATIC CO. LTD. Prior to incorporation, Folitse entered into two contracts on behalf of the proposed Company namely:
i. A Contract Nana Baffour Amankwatia, Chief of Bantama for the grant of a 99 year lease of the land on which the factory was situated. Folitse signed the indenture under his name on behalf of the proposed company.
ii. A contract with Geomax Ltd for the supply of plane sheets to be delivered after the company was formed. This contract was signed by Folitse by writing the proposed Company’s name and authenticating with his own signature. These two agreements were ratified by the three directors of AQUATIC CO. LTD; Folitse, Kwarteng and Sannaise-Mensah.
The Chief of Bantama has not been paid the sum of GH 100,000 as his rent, Geomax has not also been paid for its first delivery of plane sheets since 5th September, 2015, worth GH 150,000. It is now being rumoured that AQUATIC CO. LTD may enter into compulsory liquidation. Advise the Parties.
9. What restrictions have been placed upon the choice of a company’s name under the Companies Act, ACT 992?
10. What is the nature and the character of a Company’s Constitution when registered?
11. Mr. Asamoah is a member and shareholder of Adonko Pharmaceuticals Ltd(APL). The constitution of APL provides under section 10 that “ No Member, Director and their agents, servants and family shall engage in the sale of Hand Sanitizers which will have the effect of competing, either directly or indirectly with the objects of the Company”. Mr. Asamoah and his wife, Mrs. Asamoah, have now opened a supermarket at Nkinkenso and dealing in the sale of hand sanitizers, nose-masks and face-shields. One other Shareholder Nkinkenso, Law Lord has decided to sue Mr. Asamoah for breach of the Company’s Constitution.
Advise Him.
12. Is the Doctrine of Ultra Vires still applicable under the New Companies Act 2019, Act 992? Discuss
13. It will be stretching credibility too far to assert that the ultra vires rule is still applicable in Ghana in view of the various modifications to it by the Companies Act 2019, Act 992? Do you agree?
14. ABC LTD is a private company limited by Shares. Nana Osei and Ceci are the only shareholders and directors. Without delivering to the Registrar for declaration verifying the fulfilment of the minimum capital requirements, the Company engages in the following transactions.
§ ABC CO. LTD obtains a loan of GH 100,000 Consolidated Bank Ghana Ltd.
§ ABC CO. Ltd receives on credit goods worth GH 500,000 from Kwame, who is also yet to pay ABC LTD for the goods supplied him on a previous occasion.
§ Kwesi agrees to subscribe for GH 200,000 worth of share in ABC CO. LTD, but he now regrets and wishes to come out of the agreement.
Advise Consolidated Bank Ghana Ltd, Kwame and Kwesi on their respective legal rights and liabilities.
12. DIASA LTD is a public company engaged in gold mining and prospecting. The Board of Directors have decided to seek for more funds from the public to expand their operations. What practical steps can they take to do this?
13. The LAGATA CO. LTD. is a public company which has just been incorporated. It has filed with the Registrar a statement in lieu of prospectus. At a recent meeting of directors it was resolved that the company should take the following steps to raise more funds for its operations:
§ Make an offer to the Company’s employees and shareholders for the acquisition of the Company’s Securities.
§ Circulate application forms among persons who might be interested in purchasing the Company’s securities.
§ Make a radio announcement inviting prospective investors to “acquire” the Company’s securities.
The company would however want to know from you the legal implications for each of the proposed actions and what conditions, if any, it would have to satisfy before it takes any one of the proposed steps. Give reasons for your answers.
14. When can agreement for the subscription of a company shares be void or voidable?
15. Midland Ltd, a firm of Auditors recently prepared a balance sheet for ABRONYE LTD a gold mining company. The statement gave a favourable picture about the Company’s profitability.
Mr. Worgbleho, a buyer of shares from ABRONYE LTD acted upon this statement. Recently ABRONYE LTD went into liquidation and Mr. Worgbleho lost GH 1,000,000. Advise him.
16. What is Capitalization Issue? How is such an issue made and in what ways does it differ from a dividend?
17. Under what circumstances can a company alter the number of its shares or the amount remaining payable on them?
18. Can a company acquire by way of purchase any of its issued shares?
19. PLUS TWO LTD is a company in the production of beer and soft drinks. PLUS TWO LTD has given debenture to the following Companies:
§ It has acknowledged that it owes ABSA Bank and this is secured with its factory buildings
§ That it owes Water & Sewage Corporation the sum of GH 10,000 in water consumed.
§ That it owes Ghana Revenue Authority in tax obligations.
The directors of PLUS TWO LTD have decided that they are going to enter into voluntary liquidation, because of the glut in the beer industry. Advise the above creditors on their rights; and PLUS TWO LTD, what steps to take.
20. PUC Ltd has announced its intention to increase its working capital by the sale its share and securities.
In pursuant of this objective it has taken the following steps:
§ It has contacted one of its bankers, Continental Acceptance to find prospective buyer’s among the bank’s clients;
§ It has invited two of its creditors with a floating charge over the Company’s assets to buy shares to be floated and set off against these loans;
§ It has asked its employees interested in acquiring its shares to buy with their End of Service Holdings.
Discuss the legal implications of these actions, indicating the steps to be taken in order to achieve this.
21. Zenith Bank granted a GH 100,000 loan to BHIM Limited for the purchase of a new bottling plant in January 2015. This loan was secured by a floating charge over the Company’s undertaking. Due to unforeseen circumstances, Zenith Bank failed to register the debenture document with the Registrar-General’s Department. Meanwhile, BHIM Limited in June, 2019 has secured a loan of GH 120,000 from Prudential Bank with the main factory building, in the form of a mortgage loan. This mortgage has duly been registered and stamped. Consider the legal implications, in case BHIM Limited is to enter into Liquidation.
22. ‘An auditor is not bound to be a detective or approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog, not hound’. Lopes LJ
What are the duties and powers of an auditor and to whom does he owe those duties? How can he be appointed, removed or replaced?
23. What is the extent of a Company’s Secretary’s authority to make contracts on behalf of his Company?
24. Distinguish between the functions and the role of a Company’s Auditor and its Secretary.
25. At a recent Board of Directors meeting of KKK Limited, the Company’s auditors, Coopers & Lybrand & Company were dismissed by the Directors through a special resolution. Consider the legal implications of this act.
26. Who are “Directors” and who appoints them?
27. ABL Limited is Public Company Limited by share. Recently, due to a boom in the beer industry, the value of the Company’s shares has been rising. Consequently, the Board of Directors passed a special resolution acquiring the shares that Standard Chartered Bank, the Company’s bankers, had purchased in the company to themselves. By another resolution, they amended the Company’s objects clause that will allow it to also engage in real estate business. It has come to light that two of its director own shares in a building and Construction Company, a subsidiary of ABL Limited. Advise Standard Chartered and the members of ABL Limited.
28. Nana Buabasa is a member of UTC Limited; a Private Company with three Directors, Kwame, Kwadwo and Kwabena. Nana Buabasa has 55% of the company’s equities. On 1st January, 2018, Nana Buabasa convened an extra-ordinary general meeting and sent notices to all the directors for the removal of the Chief Accountant.
None of the directors attended the meeting, out of which he purported to pass a special resolution replacing the Chief Accountant. Consider the validity of the resolution.
29. Company meetings may be called only when the Directors so desire. Do you agree with the statement? Give reasons for your answer.
30. The Annual General Meeting is an important protection to members. Discuss
31. The two Directors of BHIM LTD each holds 25% of the shares of the company and the only other shareholder in the company, Akwaboah holds 50% only. The Constitution of the company does not provide for a quorum for a meeting. A General Meeting has never been held. Akwaboah requisitioned an Extra-Ordinary General Meeting for the purpose of removing the Directors from office. The meeting was duly convened but the Directors absented themselves from the meeting. Advise Mr. Johnson.
32. At the recent AGM of TCL, the members and a proxy walked out of the meeting when it came to the Managing Directors. This reduced the quorum of the meeting to 2/3’s. The remaining members went ahead and fired the Managing Director with a Special Resolution to that effect. One member who did not receive a notice of the AGM has sworn to nullify the resolution at the Accra High Court. Advise him.
33. An individual shareholder or a minority shareholders cannot as a rule sue to redress a wrong done to the company. How far is this statement true?
34. Under what circumstances can a member sue to the Directors for fraudulent or oppressive conduct under the New Companies Act 2019, Act 992.
35. For three consecutive years the KBA Constructions Company limited declared losses due to lack of contract works. Discouraged by the poor financial situation of the company, many of the shareholders sold their shares immediately after the last annual general meeting. The company has now concluded a number of lucrative contracts which will keep the company operating for the next ten years at a handsome profit and thereby ensure good dividend payments to the shareholders. It has come to light that at the time of the last annual general meeting the directors of KAB Construction Company Limited were aware that their company was soon going to conclude these lucrative contracts but failed to make this information available to the unhappy shareholders. They have also acquired for themselves the shares disposed of by these shareholders. These shareholders are now contemplating bringing any legal action against the Directors. Advise the Directors on their liabilities, if any.
36. a. Who is a liquidator?
b. What are the powers and duties of a liquidator?
37. Discuss how a company can wind-up privately under the provisions of the Companies Act 2019, Act 992.
38. Discuss the difference between winding up and dissolution of a company.
39. Total Oil has agreed to absorb Mobil. One of the shareholders of Mobil, Nana Kwame Duabo Abronye I, is unhappy about the merger and wants to sue the Company the merger. Can he succeed?