Company Law Personal - Partly Edited 2

These are my personal notes. If there is any mistake, I made it for myself. I didn’t make it for anybody.
Plx
Company Law
Table of Contents
1 Differences Between Act 179 & Act 992 ............................................................................................... 4

1.1 Creation of the Office of Registrar General .................................................................................. 4
1.2 Introduction of the Constitution ................................................................................................... 5
1.3 Suffices .......................................................................................................................................... 5
1.4 Depletion of the Ultra Vires Rule .................................................................................................. 5
1.5 Pre-Incorporation Contracts ......................................................................................................... 7
1.6 Derivative Actions ......................................................................................................................... 8
1.7 Regulation of Secretaries .............................................................................................................. 8
1.8 Enhanced Regulation of Directors ................................................................................................ 8
1.9 Rotation of Auditors...................................................................................................................... 9
1.10 Beneficial Ownership .................................................................................................................. 10
1.11 Unclaimed Dividend .................................................................................................................... 10
1.12 Accounts & Audit ........................................................................................................................ 10
1.13 Major Transactions ..................................................................................................................... 11
1.14 Oppression .................................................................................................................................. 11
1.15 Insolvency ................................................................................................................................... 12
1.16 The Companies Bulletin .............................................................................................................. 12
1.17 Integration of Electronic Processes ............................................................................................ 13
2 Introduction To Companies ................................................................................................................ 15
3 Mechanics Of Incorporating Companies............................................................................................. 16
3.1 Introduction ................................................................................................................................ 16
3.2 Key Persons In the Incorporation Process .................................................................................. 16
3.2.1 The Registrar of Companies ................................................................................................ 16
3.2.2 Promoters ........................................................................................................................... 17
3.2.3 Subscribers .......................................................................................................................... 19
3.3 The Constitution.......................................................................................................................... 19
3.4 The Process of Incorporation ...................................................................................................... 22
3.5 Types of Companies .................................................................................................................... 26
Sometimes people call me Breezy

These are my personal notes. If there is any mistake, I made it for myself. I didn’t make it for anybody. Plx
3.5.1 Public & Private Companies ................................................................................................ 26

3.5.2 Company Limited by Shares ................................................................................................ 28
3.5.3 Unlimited Company or Company Unlimited By Shares ...................................................... 29
3.5.4 Company Limited by Guarantee ......................................................................................... 30
3.5.5 External Companies ............................................................................................................ 31
3.6 Incorporation Q&A...................................................................................................................... 32
4 Corporate Governance........................................................................................................................ 36
4.1 Introduction ................................................................................................................................ 36
4.1.1 Rules of Attribution ............................................................................................................. 37
4.1.2 Stakeholders........................................................................................................................ 39
4.1.3 Corporate Governance & State Agencies ........................................................................... 40
4.2 Directors...................................................................................................................................... 51
4.2.1 Qualification & Appointment of Directors .......................................................................... 52
4.2.2 Types of Directors ............................................................................................................... 60
4.2.3 Duties of Directors .............................................................................................................. 66
4.2.4 Remuneration of Directors ................................................................................................. 69
4.2.5 Meetings of the Board of Directors .................................................................................... 70
4.2.6 Cessation of Directorship .................................................................................................... 70
4.3 Members ..................................................................................................................................... 73
4.3.1 The Limited Power of Members to Administer the Business ............................................. 73
4.3.2 Becoming a Member of a Company.................................................................................... 74
4.3.3 Rights & Responsibilities of Members ................................................................................ 76
4.3.4 Termination of Membership ............................................................................................... 78
4.3.5 General Meetings ................................................................................................................ 79
4.3.6 The Power of Members to Act outside General Meetings ................................................. 90
4.4 Auditors ....................................................................................................................................... 95
4.5 Company Secretarial Practice ..................................................................................................... 95
5 Remedies For Corporate Impropriety ................................................................................................. 97
5.1 The Rule in Foss v Harbottle (The Internal Management Rule) .................................................. 98
5.1.1 Common Law Exceptions to the Rule in Foss v Harbottle .................................................. 99
5.1.2 Applicability of the Rule in Ghana ....................................................................................... 99
5.1.3 Statutory Exceptions to Rule in Ghana ............................................................................. 100
5.2 Lifting The Veil of Incorporation ............................................................................................... 104

6 Raising Capital ................................................................................................................................... 104

7 Pointers From Keziah’s Notes ........................................................................................................... 105

1 DIFFERENCES BETWEEN ACT 179 & ACT 992
1.1 CREATION OF THE OFFICE OF REGISTRAR GENERAL

The Companies Act, 2019 establishes “the Office of the Registrar of Companies” which is an
autonomous governmental body with perpetual succession. The Registrar of Companies is
appointed by the President of Ghana and is separate from the Registrar General. The Office is to
be run by a governing board with full financial autonomy and full control over the use of internally
generated funds (IGFs).
The governing board comprises

a. a Chairperson nominated by the President
b. the Registrar of Companies
c. one representative from the Office of the Attorney General not below the rank of
Principal State Attorney
d. one representative of the Ministry of Trade and Industry not below the rank of
Director
e. one representative of the Private Enterprises Foundation (PEF)
f. one lawyer with at least ten (10) years experience and nominated by the Ghana Bar
Association
g. one person from business academia
h. one person from the Ghana Association of Restructuring and Insolvency Advisors
(GARIA)
i. one person from the Institute of Chartered Accountant (ICAG)
Members of the Board (except for the Registrar of Companies) cannot hold office for more than
ten (10) years. Also, the members of the Board may not be appointed for more than two (2) terms.
The primary function of the Office of the Registrar is the registration and regulation of companies
in Ghana. To this end, the Office of the Registrar carries out the functions below:
j. Register and regulate of all types of businesses;
k. Registration of business names, companies and partnerships;
l. Appointment and regulation of company inspectors;
m. Act as the Official Liquidator of Companies; and
n. Manage the finances and fixed assets of the Office of the Registrar.

1.2 INTRODUCTION OF THE CONSTITUTION

Under Act 179, you had to file Regulations prior to the acquisition of the certificate of
incorporation. Unlike Companies Act, 1963 (Act 179), the Companies Act 2019 grants companies
the option to file a registered constitution upon registration with the Registrar of Companies.
If they elect to file one, it will have to be signed by
a. one or more subscribers to the Constitution (if they are filing as part of the incorporation
process) or;
b. one or more members or the Company Secretary (if they are filing post incorporation)
and delivered to the Registrar.
The Constitution contains the specific objects and regulations of the company as well as matters
specific to the company and its operations. If a company fails to file a constitution with the
Registrar of Companies, the standard constitution contained in the Schedule to the Bill will be
applied to that company.
For Companies formed for special purposes or those that operate in highly regulated industries
such as telecommunications, oil and gas and financial services and banking, there is an obligation
to file written copies of their constitution with the Registrar of Companies which would restrict
their objects to the compliance requirements for the specific industries in which they operate.
1.3 SUFFICES
To ensure easy identification of the actual legal form of a registered company, companies will be
required to add the following suffixes as identifiers;
a. Private Company limited by shares shall be “Limited Company “or “LTD”

b. Public Company limited by shares shall be “Public Limited Company” of “PLC”
c. Company Limited by Guarantee shall be “Limited by Guarantee” or “LBG”
d. Public Company Unlimited by Shares shall be Public Unlimited Company or “PUC”
e. Private Unlimited Company shall be “PRUC”
1.4 DEPLETION OF THE ULTRA VIRES RULE

The Ultra Vires rule requiring companies to comply strictly with their stated object or authorized
business has been modified. The new Companies Act does not require Companies to file an
objects/business clause with the Registrar of Companies limiting the objects of the Company or
the various activities the Company can engage. Companies which decide against filing an

objects/business clause can now engage in any activity that they wish to and unlike the previous
regime.
Where, however, the Company sets out the nature of its business or objects in its registered
Constitution, it is deemed to be a restriction on the business/objects the company may engage
in, unless the Constitution expressly provides otherwise. So despite the provision of a stated
object/business, the Company’s Constitution may contain an omnibus clause to the effect that
despite any enumeration, any or all other lawful businesses.
But even without an omnibus clause, the restriction created by the stated business/object does
not mean that the company has no capacity to engage in the unauthorized (read: prohibited)
activities. On the contrary, the company can very well engage in said activities, and any contract
or transaction entered into that forms a part of an unauthorized business or object would not be
invalid simply because it is not authorized by the company’s Constitution. What could happen is
that the Court could, if it considers it equitable, grant an injunction to a member or a holder of a
debenture secured by a floating charge to prohibit the prohibited act, under Sections 18 & 19 of
Act 992
Section 19(1) 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.
Section 19(2) Where the registered constitution of a company provides for any restriction on the
business or activities in which the company may engage
a. the capacity and powers of the company shall not be affected by that restriction; and
b. an act of the company, a contract or other obligation entered into by the company and a
transfer of property to, or by, the company shall not be invalid by reason only of the fact
that it was done in contravention of that restriction.
Section 19(5) On the application of
a. a member of the company, or

b. the holder of a debenture secured by a floating charge over all or any of the property of
the company or by the trustee for the holders of those debentures,
the Court may prohibit, by injunction, the doing of an act or the conveyance or transfer of a
property in breach of subsection (1).

Section 19(6) Where the transactions sought to be prohibited in proceedings under subsection
(5) are being, or are to be, performed or made in accordance with a contract to which the company
is a party, the Court may,
a. if the Court considers it equitable and if all the parties to the contract are parties to the
proceedings, set aside and prohibit the performance of the contract, and
b. allow for the payment of compensation to the company or to the other parties to the
contract for the loss or damage sustained by the company or the other parties by reason
of the setting aside or prohibition of the performance of the contract, but not
compensation for loss of anticipated profits to be derived from the performance of the
contract.
Section 19(7) The capacity of the company to do an act shall not be affected by the fact that the
act is not, or would not be, in the best interests of a company.
If the transaction being pursued is illegal, a member may apply to have it voided or injuncted
under Section 218 of Act 992, subject to Section 19. The option also exists for a creditor or member
or even the Attorney General may seek an order of liquidation, pursuant to Section 4 of the Bodies
Corporate Official Liquidation Act 1963, (Act 180).
Given the nuances, it is clearly inaccurate to make a blanket statement that the ultra vires rule has
been totally done away with. At common law, the application of the ultra vires rule is strict,
mollified only, at times, by the Indoor Management Rule.
Under Act 992, the application of the rule is admittedly extremely lax, but the Court’s power to
order compensation, injunct, set aside a transaction based on the fact that it was done illegally or
in contravention of the company’s self-imposed restriction has to be based on something. And
that something is the ultra vires rule, albeit a more depleted version of it.
Further, the expression “ultra vires” means an act done outside the powers granted. The ultra vires
rule thus persists in Act 992 as it did in Act 179 where a director acts outside the powers granted
him by the Company. The application of this version of the ultra vires rule is also mollified by the
presumption of regularity. However, a member of the company or the company itself may initiate
an action against the director in question seeking damages, rescission, an injunction or account.
1.5 PRE-INCORPORATION CONTRACTS

Under Section 11, pre-incorporation contracts may now be ratified within 18 months after the
incorporation of the company. Until the company ratifies, the contract is binding on and
enforceable by or against the person who entered into the contract on behalf of the company.

Upon, and subsequent to, ratification, the contract is binding on the company, from the date of
the contract coming into existence, not the date of ratification. Be
1.6 DERIVATIVE ACTIONS

Act 992 enables members to enforce the rights of the Company through representative and
derivative actions, but derivative actions are new and represent a statutory exception to the rule
in Foss v Harbottle. A derivative action enforces the company’s rights as separate from the rights
of the shareholders and is a useful tool for minority members to prevent the directors from
abusing their fiduciary responsibilities to the Company in favour of one or more majority
shareholders.
Shareholders may apply to the Court for leave to bring an action in the name and on behalf of
the Company to enforce the rights or recover assets belonging to the Company. This strengthens
the capacity of shareholders to hold directors accountable for their actions. It provides a remedy
to shareholders who wish to hold the directors of the company to account but may otherwise be
unable to bring proceedings because the directors or the majority members of the company
refuse to bring or maintain such proceedings on behalf of the company.
Per Section 201, where a Court is satisfied that the company does not intend to take or continue
with legal action to protect its own rights, or that the circumstances are such that it would not be
in the best interest of the company to allow the conduct of proceedings to be left to directors or
the members as a whole, it may grant leave to a member or director of the company to either
a. bring proceedings in the name, and on behalf of the company or

b. intervene in proceedings to which the company is already a party for the purposes of
defending, continuing or discontinuing the proceedings.
Such a member or director must apply to the Court, on notice to the company, for leave
commence or intervene in proceedings, and on the day when the application is heard, the
company must come to Court to inform the Court whether or not it intends to do by itself, what
the member or director is trying to do.
1.7 REGULATION OF SECRETARIES

Click to skip to the discussion on Company Secretarial Practice below
1.8 ENHANCED REGULATION OF DIRECTORS

Before a person is appointed as a director, that person must go through some pre-appointment
formalities. First, the person has to make a statutory declaration (what many people erroneously

refer to as an affidavit). In the statutory declaration, the person to be appointed must make a
number of declarations. These declarations include
a. a statement to the effect that he or she during the last five (5) years before the
incorporation of the company, has not:
i. been charged or convicted of an offence involving dishonesty or fraud;
ii. charged or convicted of a criminal offence relating to the promotion, incorporation
of management of a company; or
iii. been a director or a manager of a company that has become insolvent or if the
person has been, the date of the insolvency and the particular company.
Under Act 179, the burden was on the company to ensure that none of these things were true in
relation to the proposed director. Now, the burden is on the proposed director to declare that
none of these things are true in relation to him. If it is later found out that these things are true in
relation to the director, then criminal sanctions will apply. A copy of the statutory declaration must
be first placed with the company and subsequently with the Registrar of Companies.
Per Section 178, a person, who, while serving as director of a company, is subsequently disqualified
from acting as a director is mandated to disclose his disqualification to the Board and the
Company Secretary in writing or may be liable on summary conviction to a fine between 500
penalty units (GHS 6000) and 1000 penalty units (GHS 12,000) or a term of imprisonment of not
less than two (2) years.
The duty of directors to declare the nature and extent of all interests they may have in contracts
involving the company at a meeting of directors and to be neither present nor vote in a matter in
which the director is interested was provided for under the old regime. Now, companies are under
a further obligation to maintain an “Interests Register” which must contain all directors’ interests
in the company and in contracts involving the company. The Interests Register is to be available
for inspection at least two (2) hours each day and also during company meetings. Failure of a
director to declare and register their interests in the affairs of a company would amount to a
criminal offence punishable upon summary conviction to a fine between 250 penalty units (GHS
3000) and 500 hundred penalty units (GHS 6000).
1.9 ROTATION OF AUDITORS

There is a requirement for mandatory rotation of auditors of companies under Act 992. Auditors
of public companies shall be compulsorily rotated after a seven (7) year term with a cooling-off
period of three (3) years while auditors of private companies shall be compulsorily rotated after a
ten (10) year term with a cooling-off period of five (5) years after which they may be re-appointed.

1.10 BENEFICIAL OWNERSHIP

Act 992 has improved beneficial ownership requirements. The Act requires the identification of
members and beneficial owners of companies who are politically exposed persons and the
registration of these relationships in the Central Register kept by the Registrar of Companies. The
Central Register is a database maintained in both Electronic and Manual formats by the Registrar
of Companies.
The Central Register is available for general viewing of the public persons. Politically exposed
persons include persons entrusted with prominent public functions in Ghana, a foreign country or
an international organization.
Particulars to be filed in respect of beneficial ownership of a company include the full name,
address and contact details of the beneficial owner, place of work and position held, the nature
of the interest including the details of the legal, financial, security, debenture or informal
arrangement giving rise to the beneficial ownership; and Confirmation as to whether the beneficial
owner is a politically exposed person and basically, any other information as may be determined
by the Registrar
1.11 UNCLAIMED DIVIDEND

Section 73 & 74 require companies to open unclaimed dividend account if dividend is unclaimed
for 3 months. The company has to credit the dividend account with the unclaimed dividends.
Aft1er 12 months of crediting the account, if the dividend remains unclaimed, you pay it to the
Registrar together with the interest. The shareholder or his estate will have to be notified to collect
the dividend + interest from the Registrar. Every year, the Registrar will publish annually in the
companies’ bulletin of shareholders, the details of shareholders with unclaimed dividend.
After 5 years, the Registrar must transfer 50% of the unclaimed dividend to the Consolidated Fund
and donate the remainder for the purposes of investor education, research, entrepreneurial
development or advancement of company law.
1.12 ACCOUNTS & AUDIT

Keeping accounting records and preparing financial statements is now a requirement under the
Act. Section 127(1) states that a company shall keep proper accounting records with respect to its
financial position. The financial statements are required to be prepared in compliance with the
International Financial Reporting Standards. The report of the directors must now consist of
a. Details of the state of affairs of the company

b. Particulars of entries in the interest register during the financial year

c. How much money has been spent on CSR

d. How much has been spent on audit fees
e. Details of steps taking to build the capacity of directors to discharge their duties
1.13 MAJOR TRANSACTIONS

Act 992 does not allow a Company to enter into a major transaction unless the transaction is
approved by special resolution. Major transactions include;
a. The acquisition of, or an agreement to purchase, assets the value of which is more than
seventy-five (75) per cent of the value of the company’s assets before the transaction,
except that such a transaction which involves raising capital from an existing shareholder
shall not count as a major transaction
b. The disposal of, or an agreement to dispose of, assets of the Company valued at more
than seventy-five (75) per cent of the value of the company’s assets before disposal;
c. A transaction likely to have the effect of the company acquiring rights or interests valued
at seventy-five (75) per cent of the company’s assets before the transaction, except that
such a transaction which involves raising capital from an existing shareholder shall not
count as a major transaction
d. A transaction likely to incur liabilities including contingent liabilities the value of which is
seventy-five (75) per cent of the company’s assets before the transaction.
1.14 OPPRESSION
Act 992 includes a “Buy-out” remedy for dissenting minority shareholders. This is a remedy against
minority oppression.
So by Section 220, if a dissenting minority shareholder is outvoted on a matter involving
a. the amendment of the Constitution

b. the amendment or dispensation of the registered objects or business activities of the
company
c. the approval of a major transactions
d. the variation of class rights or
e. the approval of an arrangement, merger or both
that member may require the company to purchase his shares.

To qualify for this relief, the member must have disapproved of this transaction and voted wholly
against the resolution. This is when the member will be entitled to have their shares bought by
other members or by the company itself subject to restrictions on the company purchasing its
shares as stated in the Act. (see Prohibited Transactions in Shares)
The Act further sets out the procedure for the determination of a fair and reasonable price for the
disposal of that member's shares. It also allows the company to apply to the Court for an
exemption to the requirement to purchase the shares in this instance, if the Board resolves that
the purchase of its shares by the company may result in the company becoming insolvent; and
the Company has made reasonable attempts to have the shares purchased by another person but
has failed to do so.
1.15 INSOLVENCY
Act 992 does not only cover companies which have been rendered insolvent as a result of financial
difficulties and so may be liquidated by means of official liquidation via The Corporate Bodies
(Official Liquidation) Act (Act 180), but also companies that may be financially viable but facing
temporary hardships or merely wish to close up their affairs.
The Administration provisions in the Act, which very much resemble the United States Chapter 11
Bankruptcy provisions, offer companies legislative protection to enable them to resolve financial
hardships through restructuring or administration rather than forcing them to be liquidated when
they are still viable. Private liquidations may be undertaken by companies that are solvent but opt
to be liquidated.
Insolvency and Restructuring provisions may be found in the Corporate Restructuring and
Insolvency Bill which is currently before parliament and would repeal the Bodies Corporate
(Official Liquidation) Act (Act 180).
1.16 THE COMPANIES BULLETIN

The New Act introduces a publication to be known as the Companies Bulletin. The Companies
Bulletin is a publication made by the Registrar of Companies similar to the Gazette, but solely
managed and published by the Registrar of Companies. The Report would be maintained as a
secured electronic database and made accessible in hard and electronic copies.
The Bulletin would contain notifications in respect of companies such as:
a. Publication of fees for the processes at the Office of the Registrar of Companies
b. Changes in Company names
c. Court orders in respect of stay of proceedings concerning insolvency proceedings

d. Notices striking company names off the register of companies

e. Notice of appointment or removal of liquidators
f. Notice of official liquidation proceedings in respect of companies
g. Notice of conversion of a private company to a public company
h. Particulars of documents to be filed with the Registrar by external companies including
the name, nature of the business, details of share capital, address of foreign principal
office/branch, address of the local branch, name and address of local manager etc
i. Notice of winding up of external companies
j. Resolutions of companies in respect of private liquidations
k. Court orders in respect of persons disqualified from acting as company secretaries,
directors or in senior management roles
l. Details of unclaimed dividends of companies transferred to the Registrar of Companies for
safekeeping
m. Notices in respect of companies that have filed annual returns
1.17 INTEGRATION OF ELECTRONIC PROCESSES

Act 992 gives the Registrar of Companies the power to authorize the following transactions
electronically or digitally, through an electronic system approved by the Registrar:
a. the incorporation or registration of a company

b. the reservation of a company name
c. the filing of particulars
d. the conversion of a company
e. the filing of annual returns and financial statements
f. the keeping and maintenance of a register
g. arrangements, mergers, amalgamations and sale of undertakings
h. the removal of a company’s name from the register upon cessation, dissolution and
liquidation
i. reports on statistical data on companies
j. the inspection of a register
k. the registration of debentures
l. the transfer of debentures
m. the registration of a contract or agreement for the allotment of shares
n. the registration of charges
o. keeping of books of accounts
p. the service of a notice of the document
q. the dissolution of a company
r. searches on a company register
s. an offer to be made to the public or an invitation to make an offer to the public

t. payment of fees
u. the filing of notice or document
v. the performance of any act or thing required to be done concerning all the services above
listed

2 INTRODUCTION TO COMPANIES
Companies are legal entities created by law and given legal personality. In Ghana, a company is
an entity that is registered and incorporated under the Companies Act 2019, Act 992. Once a
company is incorporated it becomes a legal entity. That legal entity is separate from the owner(s),
the promoter(s) who took the steps to incorporate it and the officers who work in the interest of
the company.
This was summed up by Sophia Akuffo JSC in Morkor v Kuma thus “Save as otherwise restricted
by its [Constitution], a company, after its [incorporation], has all the powers of a natural person of
full capacity to pursue its authorised business. In this capacity a company is a corporate being,
which, within the bounds of the [Companies Act] and the [Constitution] 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 constituting it or employed by it. From the time the
House of Lords clarified this cardinal principle, more than a century ago, in the celebrated case of
Salomon v Salomon & Co [1897] AC 22, HL it has, subject to certain exceptions, remained the
same in all common law countries and is the foundation on which our Act 179 is grounded.”
The corporate barrier between a company and the persons who own, constitute or run it may be
breached only under certain circumstances. These circumstances may be generally characterised
as those situations where, in the light of the evidence available, the dictates of justice, public policy
or Act 179 itself require that it be breached.
Once a company is incorporated, it must be run and managed. It is managed according to a

system of rules and best practices that optimize decision making and balance competing interests
within the company, with the ultimate aim of protecting the company’s best interests. This is
known as corporate governance.
It also requires resources, these resources are referred to as the capital of the company. The capital
may be raised by the company itself or it may be provided by its owners. For this reason, there
exists also a system of rules and best practices which regulate how the company raises and
maintains its capital.
This forms the bulk of the practice and procedure of company law.

3 MECHANICS OF INCORPORATING COMPANIES
3.1 INTRODUCTION
Section 3 says that
a. a company, or
b. an association consisting of more than 20
shall not be formed for the purpose of carrying on business that has for its object the acquisition
of gain for either the company itself or the association or the members, unless that company has
been registered under this Act or under some other enactment.
This section is relevant for two reasons
a. It prohibits people from forming a business that represents itself or carries on business as
a company when it hasn’t been incorporated by under the Companies Act.
b. It prohibits an association of more than 20 from carrying on business for the purposes of
making profit, unless they have been incorporated under the Companies Act.
3.2 KEY PERSONS IN THE INCORPORATION PROCESS

Two persons are critical for the formation of a company
3.2.1 The Registrar of Companies

The first is the Registrar of Companies. She is the one who reviews the documents, and gives her
assent for the company to be incorporated. Without the issuance of the Certificate of
Incorporation, there can be no company.
Ferdinand makes an interesting devil’s-advocate argument that is worth looking into. He argues
that the general power of the Registrar to refuse to register the Company under stated grounds
has been omitted from Act 992, even though it existed under Act 179. This is significant, if you’ve
paid any attention as to how statutes are interpreted, especially when subsequent versions of
statutes omit provisions that existed in previous versions.
Now, under Act 179 the Registrar could reject the application on certain grounds, including

a. non-compliance with the Act,

b. the fact that the stated business is unlawful (See: Dupaul Wood Treatment v Asare)
c. the fact that any of the subscribers to the regulation is a minor
d. the fact that a director named in the regulation is incompetent to be appointed as a
director. “Incompetent to be a director” among others included directors not being up to
the stated age or directors being artificial persons. Remember, artificial persons cannot be
made directors, because directors should be capable of thinking and directing the affairs
of the company.
So now that the power has been omitted, if a Company is set up to pursue prostitution, under
what power would the Registrar refuse to register? We have the CoPA which deals with crime, but
the Registrar isn’t concerned with punishing or preventing crime. What if a foreigner wants to
engage in hairdressing? Can the Registrar refuse to register under Act 992, as they could under
179? Per our laws, an ordinary person can do anything unless the law prohibits it. But in
Constitutional and Administrative law, public officials cannot do anything unless a law gives them
the power to. So where will the Registrar get the power to refuse to register?
Personally, I think that power can be implied in Section 14, which states that the Registrar shall
certify that the company is incorporated if (inter alia) she is satisfied that the application
complies with the Act. So until she is satisfied, she can refuse to incorporate.
3.2.2 Promoters
The second is the Promoter of the Company. Section 10 of the Act defines the promoter of a
company as a person who is interested in or has been engaged in the formation of a company.
Two things determine whether a person is engaged in the formation of a company
a. Legal Considerations: Who is taking steps to fulfil the legal requirements? i.e. Who is
naming the company? Who is filling out the requisite essentials of the companies’ form?
b. Business Considerations: What is the business of the company? Who is drawing up the
business plan? Who is making the decision as to where the company will be located?
In Twycross v Grant, the court had to consider whether Twycross was the promoter of a company
he had formed. It held that “a promoter is one who undertakes to form a company with reference
to a given project and to set it going, and who takes the necessary steps to accomplish that
purpose"
For a person to cease to be a promoter of a company, the company must either have
a. finished raising its working capital

b. been granted its certificate of incorporation
The promoter need not be a subscriber or member of the company, he need not take up a position
as an officer of the company when it is incorporated. He can be a purely independent promoter.
However, take note of Section 10(2) of the Act which states that if you are acting as a paid
professional in the interest of another person who is engaged in the procurement of or in the
formation of a company, then you are not a promoter.
In a rare exception to the established rules on capacity, the law allows the yet-to-be formed
company to enter into contracts with other persons. These contracts are called pre-incorporation
contracts, and they typically are formed when the promoter enters into an agreement with the
company or when the promoter binds the company into an agreement with a third party. Thus,
Section 11 of Act 992 defines a pre-incorporation contract as a contract or transaction purporting
to have been entered into by a company, or a person on behalf of the company, before its
incorporation.
It is within the context of pre-incorporation contracts that the duties of promoters assume the
most significance. Naturally, the first duty of the promoter is to ensure that the company is
incorporated. However, at common law, whenever a person elects to act in the best interests of
another person, a fiduciary relationship is formed. Fiduciary relationships are characterized by
fiduciary duties. Thus, the promoter is saddled with fiduciary duties which must be observed when
he is entering into a contract with the company or binding the company into a contract before it
is formed.
Accordingly, the promoter has a duty to
a. act in good faith: which basically means that he has to act fairly and honestly in his dealings
with the yet to be formed company
b. disclose all personal interests when he enters into a transaction with the yet to be formed
company.
c. account, to the principal organs of the company, for all profits made in the course of his
acting as a promoter
The duties to disclose and account are activated when the company is incorporated, because until
the company is incorporated, there is no one to disclose or account to. Section 11 allows the
company to ratify the pre-incorporation contract within 18 months. It is only upon ratification that
the contract becomes binding on the company with retrospective effect from the day of
contracting. Before it is ratified, however, the contract is only binding on, and enforceable by, the
person who signed on behalf of the company.

Ratification, if it will be done, must be done by a principal organ of the company i.e. a resolution
of the board or a resolution of the members; see Panagiotopolous v Plastico and Jadbranska v
Oysa. Before ratification is done, the promoter must have disclosed the entirety of his interest
and/or accounted for whatever profit he has made in the transaction. The disclosure must be
made to a principal organ, and if the promoter is a member of the principal organ in question, he
cannot be there or vote on the ratification. The only exception to the duty of disclosure and the
duty to account is where the promoters are the same as the members of the principal organ see:
Lagunas Nitrate v Lagunas Syndicate.
If any one of these rules on duties and ratification is not satisfied, the company can apply to the
Court set aside the contract, or refuse to perform it if ratification is not done.
3.2.3 Subscribers
Even though the Promoter is the one who is engaged in the formation of the company, the person
who actually makes the application in law, under Section 12, is called a subscriber. It is their
signature that appears on the registration form. When the company is limited by shares, they are
the ones that subscribe to the shares. And in all cases, they are the ones that become members
of the company upon its incorporation.
3.3 THE CONSTITUTION

As has been already noted, once incorporated a 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 constituting it or employed by it. This is given backing by Section 18 of the Companies
Act. Accordingly, if there will be any restrictions on the powers of the company, those restrictions
would have to be statutory in nature or they would have to be stated in the Constitution or
provided for by the Company itself in some other way (e.g. Shareholders Agreement).
Now, keep in mind, unlike Act 179, Act 992 doesn’t make a Constitution mandatory. You don’t
need to add a Constitution; in fact, per the provisions of Section 23, it’s a choice. If you elect
against providing a Constitution of your own, then the default Constitution that is provided for in
the 2nd (in the case of private companies), 3rd (in the case of public companies) and 4th (in the
case of companies limited by guarantee) Schedules will apply to the Company as the case may
be.
There are also certain mandatory provisions that must be in your Constitution if you do elect to
have one. You must provide;
a. The name of the company

b. The names of the first directors of the company
c. A statement that the powers of the directors are limited in accordance with Section 189.
Section 189 has a number of provisions.
First, without an ordinary resolution of the company, the directors have no power to issue
new and unissued shares, other than treasury shares, unless those 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.
Second, without an ordinary resolution, the directors have no power to make voluntary
contributions to a charitable organizations or any other fund, other than pension funds for
the benefit of employees. And even with pension funds, the amount donated is not
supposed to exceed 2% of the retained earnings of the company at the end of the
preceding financial year.
Third, the directors have no power to pursue a major transaction, unless they have the
approval of the shareholders via special resolution. Major transactions include;
i. The acquisition of, or an agreement to purchase, assets the value of which is more
than seventy-five (75) per cent of the value of the company’s assets before the
transaction, except that such a transaction which involves raising capital from an
existing shareholder shall not count as a major transaction.
ii. The disposal of, or an agreement to dispose of, assets of the Company valued at
more than seventy-five (75) per cent of the value of the company’s assets before
disposal;
iii. A transaction likely to have the effect of the company acquiring rights or interests
valued at seventy-five (75) per cent of the company’s assets before the transaction,
except that such a transaction which involves raising capital from an existing
shareholder shall not count as a major transaction
iv. A transaction likely to incur liabilities including contingent liabilities the value of
which is seventy-five (75) per cent of the company’s assets before the transaction.
Fourth, unless some or all of the shares of the company are traded on a stock exchange,
or an application has been made to trade a company’s shares on a stock exchange, new

or unissued shares of a company cannot be issued to a director or past director of a

company, his nominee or a body corporate he controls, unless those shares have first been
offered on the same terms to all the existing shareholders, all the holders of the shares of
the class or class being issued but in proportion to their existing holdings, or to the
members of the public in the case of a public company.
d. A statement that the company has all the powers of a natural person of full capacity
e. A statement that the liability of members are limited, if the company is one with limited
liability
f. A statement of the number of shares with which the company is registered, if it is a

Company incorporated with shares
g. Three statements, if it is a company limited by guarantee

i. That each of the members undertake to contribute to the assets of the company
in the event that it is being wound up.
ii. That income and property of the company will be applied solely to the objects of
the company, and no portion shall be transferred to the members whether directly
or indirectly
iii. That upon dissolution of the company, the net assets of the company will not be
shared among members but applied to a company limited by guarantee with
similar objects or applied to a predetermined charity
h. The signatures of the subscribers and the Company Secretary
Once you’ve drafted your Constitution and incorporated these mandatory provisions, it must be
delivered to the Registrar, together with the application, by the subscriber or his authorized
representative if the delivery is to be done before incorporation. If the delivery is to be done post-
incorporation, then the Constitution has to be delivered by either the Company Secretary, a
director or an authorized representative.
The effect of a registered Constitution is provided for in Section 24. Remember that the Act
provides a default Constitution for private companies, public companies and companies limited
by guarantee. Where a Constitution is delivered to the Registrar, the provisions of that
Constitution are deemed to replace the provisions of the default Constitution that are inconsistent
with it. And if the Constitution filed by the Company is silent on something, then the provisions
of the default Constitution will fill that gap. There are also several instances where the Act states

“Unless the Constitution provides otherwise…”, meaning that in these instances, where the
Constitution is inconsistent with the Act, the Constitution prevails.
So once you choose to have a Constitution, the rights, duties, powers and obligations of the
company, the board, each shareholder and each director will generally be regulated by that
registered Constitution. This is unless the Constitution is silent on something, then the default
Constitution will step in to fill the gap. Section 18(3) also provides that the drafters of the
Constitution may include provisions regarding the capacity, rights, powers or privileges of the
company in the Constitution, as long as those provisions are there to restrict the capacity of the
company or those rights, powers and privileges.
So per Section 19, if the company states the nature of its business or its object, then it is deemed
that a restriction has been placed on the business or the activities that the company may engage
in, unless the Constitution provides otherwise. “Unless the Constitution provides otherwise” in this
instance merely means that the Company can state its business or object, and add that
notwithstanding the statement of the business/object, the company still has the power to engage
in whatever business it chooses to pivot to.
But even if it doesn’t include this loophole, the capacity and powers of the company shall not be
affected by the restriction. This basically means that if the company goes against its Constitution
and engages in a prohibited business or activity, and there is an obligation assumed or property
transferred in pursuance of that prohibited business or activity, that transaction will not be invalid
simply because it was done in contravention of the Constitution. The company cannot go and
enter a contract, assume certain obligations, and when it doesn’t go well for them, now turn
around and say, “hey it is against our constitution” or “hey, we don’t have capacity”. Per Section
19(7), the capacity of the company to enter into a contract will not be affected by the fact that the
act that the company engaged in is not in the best interests of the company.
What is likely to happen in these instances is that a member or a holder of a debenture secured
by a floating charge can apply to the Court, under Section 19(5) for an injunction or rescission or
payment of some compensation to the company.
3.4 THE PROCESS OF INCORPORATION

Section 13 says that the application for incorporation must be submitted to the Registrar in
the prescribed form. The form requires you to provide a number of details.
Name: First, you must provide the name of the company, as required by Section 21. Section
21 is what provides the suffixes for the different types of companies, and the relevant suffix
must be attached to the name. The general rules on names apply here. The Registrar is
obligated to withhold incorporation if the name is misleading, undesirable or if the name

was used by a company which has been dissolved in the last five years. Names are also not
set in stone. The Company can itself change the name of the Company, by letter to the
Registrar, following a special resolution to that effect. There are also several instances under
Section 21 where the Registrar may compel the Company to change its name. If the
Registrar requires you to change your name, you have 6 weeks within which to change it or
the Registrar will change it for you. Change of name also doesn’t affect the legal personality
of the Company. See Cowries Finance v Pako Bay
Type of Company: Second, you must indicate the type of company. So under Section 21,
when you’re incorporating a
a. private company limited by shares, the suffix at the end of the company is to be LTD
b. public company limited by shares, you use PLC
c. company limited by guarantee, the suffix is LBG
d. private company unlimited by shares, your suffix is PRUC
e. public company unlimited by shares, your suffix is PUC
Objects Clause (Optional): Third, if the company is to be registered with an object or

business, you should state it. If not, the Act does not require the promoters to necessarily
state an objects clause. However, for Companies formed for special purposes or those that
operate in highly regulated industries such as telecommunications, oil and gas and
financial services and banking, there is an obligation to state what their authorized
business/object is in their Constitution, and that Constitution must be filed with the
Registrar of Companies. That would then restrict their objects to the compliance
requirements for the specific industries in which they operate.
Address of Registered Office/Principal Place of Business: You need to also provide the
address of registered office, principal place of business, P.O. Box or digital address,
telephone number
E-Contact Details: Email and website of the company, if available
Details of Subscribers: Biodata, contact details, residential address, proof of nationality,

occupational details of each subscriber.
Details of Subscription: Where it is a company with shares, each subscriber must sign the
application and for the shares they have taken. The amount of shares and cash price
payable must be stated next to the name, where they sign.
Undertaking of Guarantors: Where it is a company limited by guarantee, you must state

amount that each member undertakes to contribute to the assets of the company, if they
are still a member, and the company must be wound up. Or how much each member

undertakes to pay as contribution to the expenses of winding up, if the company must be
wound up within a stipulated period after their membership ceasing.
Proposed Stated Capital & Authorized Shares: Also important is the proposed stated
capital of the company, and number of authorized shares for each class of shares.
The authorized shares is the total number of shares that the company is incorporated with.
Shares may be divided into equity shares and preference shares. So on the form, you must
state how many authorized shares are created within each class, whether equity or
preference.
At the incorporation stage, the stated capital of a company is basically capital received in
consideration of shares that the company has issued to subscribers. That amount has to
be stated on the incorporation form. When the company is running, however, stated
capital includes;
a. Total consideration received in cash for the issue of shares, which does not include
consideration received for the re-issue of treasury shares
b. Total consideration received in kind for the issue of shares, which does not include
consideration received for the re-issue of treasury shares
c. Amount of money that the company has by special resolution agreed to transfer from
the surplus account to the stated capital
d. Amount of money that the company has by special resolution agreed to transfer from
the share deals account to the stated capital
Names & Details of First Directors: If they hold other directorships, state that. Include
their residential and contact details
Statutory Declaration: One of the pretty important novel introductions is that you must
execute a statutory declaration that within the last five years, the director has not been
a. Charged with or convicted of a criminal offence involving fraud or dishonesty

b. Charged with or convicted of a criminal offence involving the incorporation or
promotion of a company
c. Declared insolvent. But if he has been declared insolvent, then he has to state the date
of the insolvency and the particulars of the company that he was insolvent
Written Consent of Director: You have to add the consent of each director as evidenced
on a document

Details of Secretary: Names, contact details, addresses and occupation of Secretary
Details and Written Consent of Auditor: Consent as evidenced on a document,

addresses and names of Auditor
Details of Beneficial Owner: Bio data, contact details, addresses, proof of nationality,
occupational details, nature of interest held and the fact of political exposure of a
beneficial owner
Statement in Lieu of Prospectus: This is done after the incorporation of public

companies. Section 303 says that 28 days after a public company comes into existence,
the forms in Part One and/or Part Two of the Ninth Schedule must be filled and signed by
all the directors or proposed directors of the Company
Once you have done all this, the promoter or the subscriber or his agent must then submit the
application to the Registrar, with or without the Constitution as the case may be. Once the
Registrar is satisfied that the application is regular and the applicable fees have been paid, she is
obliged to certify under her seal that that the Company has been incorporated, and where it is a
limited liability company, that the liability of the members is limited. This is according to Section
14.
From the date of incorporation, the company comes into existence and acquires separate legal
personality, capable of performing all the functions of a company. The Certificate of Incorporation
is conclusive proof of due incorporation of the Company. From that point on, the Registrar cannot
cancel the certificate or annul the incorporation, whether unilaterally or by Court action. See
Sections 14 & 15
Morkor v Kuma: Save as otherwise restricted by its [Constitution], a company,

after its registration, has all the powers of a natural person of full capacity (…) It
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
constituting it or employed by it. From the time the House of Lords clarified this
cardinal principle, more than a century ago, in the celebrated case of Salomon v
Salomon & Co [1897] AC 22, HL it has, subject to certain exceptions, remained the
same in all common law countries and is the foundation on which our Act is
grounded.

3.5 TYPES OF COMPANIES

According to Section 7, there are 7 types of companies. The type of company you choose depends
on several factors. Some are business considerations and others are legal.
There are certain industries that you cannot participate in without incorporating some type of
company. That’s legal. In other industries, such as the banking industry, the company you
incorporate cannot be a private company. Also legal.
You may also have to make a decision on what type of company you want to incorporate
depending on your access to capital, the amount you intend to raise, how you intend to raise it,
how much risk the owner intends to take, how many people (more or fewer than 50) are taking
up shares, whether or not you are trying to make a profit, tax considerations etc. These are
business considerations.
The decision you make must take into account these considerations. So assuming, you don’t want
your company to be vulnerable to hostile takeovers, or you don’t want disgruntled shareholders
selling off your company’s stock to strangers, a private company may be best for you. Why?
Because, by definition, private companies place restrictions on the right to transfer shares, but
public companies cannot have such restriction. The restriction you place on the right to transfer
shares can be that if any shareholder wants to transfer their shares, they have to first offer it to
you and give you one year to raise money to take them. If you are engaged in a business that
involves a lot of risk, you may want to go for a limited liability company. If you are not a man of
straw, and you want easy access to loan capital for an SME which will carry on a business that has
little risk, an unlimited company may be best for you. These are basically examples of how a
decision may be made.
3.5.1 Public & Private Companies

A private company is one that has certain restrictions stated in its Constitution. Some of these are
a. The right to transfer shares, if there are any, is restricted. So you must have at least one
restriction on the right to transfer shares. There is no limit on how many restrictions you can
have on this right, but there must be at least one. An example of a restriction would be telling
your shareholders that they cannot transfer their shares within the first two years; or that they
cannot transfer their shares without the approval of the MD; or that they cannot transfer their
shares without first offering them to the other shareholders etc. And this restriction must be
stated in the Constitution.
b. There is a limit on the total number of members and debenture holders to not more than 50,
except that this 50 will not include genuine employees who are also members/debenture
holders and such employees subsequently leave the employment of the company, but retain

their membership/debenture holdings. Also, persons who hold shares/debentures jointly are
counted as one.
c. There is a prohibition on the company from making a call to the public to come and acquire
shares
d. There is a prohibition on the company from inviting members of the public to come and
deposit money, whether for a fixed period or for payable at call. Doesn’t matter if that money
bears interest or not.
The Act states that any company that is not a private company is a public company. So if the
Constitution does not provide for all of these restrictions, then automatically, it is a public
company. Section 322 goes a step further to say that any provision inserted into the Constitution
of a public company whose effect is to restrict the right to transfer shares is void. So if you purport
to incorporate a private company, and you fail to provide for all the necessary restrictions, but
you remember to include the restriction on the right to transfer shares, then the legal effect of
that would be that the company you have incorporated is a public company, and the restriction
you put in there on the right to transfer shares is void.
Now, the Act does not provide a procedure for the conversion of public companies to private
companies, even though it provides a procedure for the conversion of private companies to public
companies. The reason for this might be because of the nature of the restrictions on private
companies. For example, private companies are not allowed to ask the public to deposit money
with them, whereas public companies are. There are practical and conceptual difficulties to be
grappled with where a public company has taken deposits from members of the public, and now
wants to become private. There’s the potential for a lot of abuse, where people will set up public
companies and take deposits, and then convert to private companies. So it is argued, on the one
hand that, a public company cannot be converted to a private company.
On the other hand, it is argued that these examples are simply practical difficulties. The question
is whether, in principle, the law allows for public companies to be converted to private companies?
Section 5 of the Act provides that common law principles may apply as long as they are not
inconsistent with the Act. Keep in mind that, even though the Act fails to provide the procedure
for the conversion of public companies to private companies, it does not expressly prohibit the
conversion. In contrast, Section 30 of the Act contains language that expressly prohibits the
conversion of unlimited companies to limited liability companies, and the conversion of
companies limited by guarantee to companies limited by shares. So we could interprete the
omission of the procedure as a lacuna in the law. Now at common law, public companies may be
converted to private companies. Thus, it may be argued that by invoking Section 5, a public
company may be converted to a private company.

The Act says that any company that is not a private company is a public company. In principle, all
a public company, which wants to be converted to a private company would have to do is first
ensure that the total number of its members + debenture holders is compliant with Section 7(5).
Then it will have to pass a special resolution to
a. alter its capacity to allow it to operate as a private company and

b. amend its Constitution to introduce the restrictions stated in the Act as applying to private
companies and change the suffix to its name in accordance with Section 26
As long as that company has not, in the past, engaged in any of the activities that the Act prohibits
private companies from engaging in, the conversion, should, for all intents and purposes, be
successful. But this is only an academic argument.
The procedure for the conversion of a private company to a public company is provided for in
Section 302. The members of the company will first have to alter the capacity of the company to
allow it to operate as a public company, and then amend its Constitution to delete the restrictions
stated in there. This is to be done by passing a special resolution. Then within 28 days, the
Company will have to deliver, to the Registrar, a printed copy of the resolution altering the
capacity of the company, attached to or embodied in the Constitution of the Company. The
Registrar will post a notice of the conversion in the Companies Bulletin. Within 28 days after the
conversion, you have to either submit a prospectus or fill the forms in Part One and/or Two of the
Ninth Schedule, have all the directors sign it, and deliver it to the Registrar as well.
3.5.2 Company Limited by Shares

A company limited by shares is a company which has the liability of its members limited to the
amount remaining unpaid, if any, on the shares. What does this mean?
Assuming you incorporate a company with 1000 shares. The 1000 shares are your authorized
shares. Some of those shares are taken up by subscribers, and some people enter into valid
agreements to take some shares, and you leave the rest (let's say 200 shares). The quantum of
shares that are taken up by shareholders are the issued shares. The rest are unissued shares.
Now out of the issued shares taken up, the shareholders who took them may pay full value or
they may only pay part of what is owed. So now you have paid up shares, and unpaid up shares.
The liability of the members is limited to the amount that remains unpaid on the shares. So if
there is a debt of 50,000 that the company itself cannot pay, but the amount remaining unpaid
on the shares is only 10 cedis. The members will be liable to pay only 10 cedis unless the corporate
veil is lifted/pierced.
The form you fill when you’re incorporating a company limited by shares will require you to state
what your authorized shares are, what the value of the shares are, and how many have been

issued, as well as which subscribers have taken up the shares, how many they have taken and what
the value of the shares they have taken is.
The Act permits companies limited by shares to be converted to companies limited by guarantee.
To do this, the company must first make sure that the liability on the shares is paid up. All the
shareholders must then enter into a formal shareholders agreement wherein the shareholders
agree to the conversion and voluntarily surrender up their shares to be cancelled for that purpose.
Finally, they have to adopt a new Constitution which is compliant with Section 7(8) and 27(3), and
they can do this either with a special resolution, a written resolution or a shareholders agreement.
So with that said, the two types of companies limited by shares are
1. Private Company Limited By Shares, LTD: These are companies limited by shares that are
subject to the restrictions placed on private companies by the Act and the Company’s
Constitution
2. Public Company Limited By Shares, PLC: These are companies limited by shares that are not
subject to the restrictions placed on private companies
3.5.3 Unlimited Company or Company Unlimited By Shares

It is a common misconception that an Unlimited Company has no shares or that it has no separate
legal personality. This is not the case. Unlike the Company Limited by Shares, an unlimited
company, has no limitation on the liability of its members. So notwithstanding the fact that the
company has shares, the members will still be personally liable for the debts, defaults and other
liabilities of the company. This, in no way, affects the separate legal personality of the company.
It can still be sued, it can still own property, it’s just the liability that the members will carry on
their heads.
Section 30(2)(i) also prohibits the conversion of an unlimited company to a limited company. This
prohibition exists to protect investors, who may have entered into transactions with the company
knowing that if shit hits the fan, they can come for the shareholders. The law will not allow you to
assume liability on those terms, and later go and hide behind limited liability.
Anyway, so under the Act there are two types of unlimited companies;
3. Private Unlimited Company, PRUC
4. Public Unlimited Company, PUC

3.5.4 Company Limited by Guarantee

Companies limited by Guarantee have no shares, and so by extension, they have no shareholders,
just members; See Section 7(8). The limitation on the liability of the members of the company
limited by guarantee is the amount that they themselves have undertaken or guaranteed to
contribute, if the company is being wound up, and there is the need to pay off the debts and
liabilities of the company and the costs of winding up.
The Company does not exist for making its members rich, and so for this reason, Section 27(3) of
the Act requires that the members agree that income and property of the company shall be
applied solely towards the promotion of its objects and no portion thereof shall be paid or
transferred directly or indirectly to the members of the company except as permitted by the
Constitution. Even when the Company is being wound up, the members must agree that assets
will be transferred to another company limited by guarantee with similar objects or applied to
some charitable objects determined by the members prior to the dissolution of the company.
This is why Section 30(2)(i) provides that an amendment shall not be made to the Constitution
which would have the effect of converting a company limited by guarantee into a company limited
by shares. Because the idea behind companies limited by guarantee is that they are not set up to
make profit, but for charitable purposes. The law will not allow you to take money from people
that you are going to engage in a charitable endeavor only for you to turn around and make it
into a business.
It is submitted that there are two types of companies limited by guarantee.
One reading of Section 7(5) & (7) suggests that you cannot have a private company limited by
guarantee. Section 7(7) provides that a company which is not a private company is a public
company, with the exception of companies limited by guarantee that have memberships of 50 or
less. So this would mean that public companies are
a. companies limited by guarantee with memberships of 50 or more, and
b. other companies excluded from the definition of private companies by Section 7(5).
What does section 7(5) say? It says that a private company, other than a company limited by
guarantee is a company -, and then it goes on to list rules. This suggests that companies limited
by guarantee with memberships of 50 or less are not private companies, but they are not public
companies either. If you look at Section 21, there is a differentiation between the suffices of private
and public companies limited and unlimited by shares, but none for companies limited by
guarantee, creating the impression that there is no differentiation. So per this initial reading you
can have a company limited by guarantee simpliciter (with 50 members or less) and a public
company limited by guarantee (with 51 members or more), both of which will use the LBG suffix.

The alternative reading of the section is this. Section 7(7) provides that a company which is not a
private company is a public company, with the exception of companies limited by guarantee that
have memberships of 50 or less. So there are two types of companies. Public companies and
private companies, and if you’re not one, you’re the other. So if you’re not public, then you’re
private. The section says that companies limited by guarantee with memberships of 50 or less are
not public, and so, it stands to reason that, they are private.
Now you come to Section 7(5) which lists the rules for private companies and exempts companies
limited by guarantee (in this case, those that would ordinarily have qualified to be dealt with under
the section, but for the exemption i.e. companies limited by guarantee with 50 members or less)
from strict adherence to those rules. Now the majority of those rules deal with shares, and
companies limited by guarantee don’t have shares; this would explain why they are exempted
from strict adherence to Section 7(5). This alternative reading resolves the confusion.
So the two types of companies limited by guarantee are
5. Private Company Limited By Guarantee, LBG
6. Public Company Limited By Guarantee, LBG
3.5.5 External Companies

External companies are companies that were incorporated under the laws of a foreign country,
but have an established place of business in Ghana. Under the Act, before you are registered as
an external company in Ghana, you must have an established place of business here. An
established place of business may be a branch, management office, registration office, factory,
mines, or any fixed place of business (Section 392). External companies also need to appoint a
local manager. This is mandatory under the Act.
External companies are registered under Act 992, not incorporated. Within a month after the
establishment of the fixed place of business, the company must deliver to the Registrar
a. a copy of their certificate of incorporation and other incidental particulars;
b. a statement notarized in the country of origin containing among other things
 the name of the company,
 nature of business,
 name of local manager,
 address of principal place of business in the country of origin,

 name of the agent authorized to accept service or processes and documents on behalf
of the company (i.e. a process agent) and
 if there are any shares, the details of those shares
c. a statement notarized in the country of origin containing the details of the beneficial
owners of the company, including confirmation as to the fact of political exposure
d. if there are charges on the external company’s property within the jurisdiction, the
particulars of those charges, if there are no charges, state that.
Within 15 months of registration, accounts have to be filed.
If the external company has an agent or agency here that habitually exercises authority to
negotiate and conclude contracts on its behalf or the agent/agency maintains a stock of
merchandise belonging to the external company, from which the agent regularly fills orders on its
behalf, it will suffice as an established place of business. If the agency doesn’t have these
characteristics, then it won’t count as an established place of business.
A company that is running a business by virtue of franchise agreement is not an external company.
If you go and lobby for KFC to give you the right to run a similar business under that trade name,
and you come and incorporate a company here for that purpose, it will not be an external
company.
A subsidiary of a non-Ghanaian company is also not an external company. A subsidiary is a

company on its own, incorporated in Ghana, under conditions where the holding company has
the non-fiduciary power to remove or prevent the appointment of at least half of its directors, but
if that power is exercised by virtue of shares held by security, then the company is not a subsidiary.
So the final type of company is…
7. External Company
3.6 INCORPORATION Q&A

1. Who Can Form A Company?
Section 6 of the Companies Act states any 1 or more persons can form a company. The
key word here is “person” not “individual”, meaning a natural person or an artificial person
can incorporate a company. Recall that a partnership after incorporation becomes a legal
person, as does a company. By this, both a company and a partnership can incorporate a

company. If it is a natural person, then, according to Section 12, they have to be 18 years
of age, because only a person above the age of 18 can form a company
2. What About A Foreigner? Can A Foreigner Form A Company?
It depends. Under the Companies Act there is no restriction, hence the general prescription
is that anybody at all can form a company. However, even though there isn’t a restriction
provided by the Act, the ability of a foreigner to open a company depends on the sector
in which the foreigner hopes to operate.
Take the petroleum industry for example, a company incorporated to partake in that
industry will need to have Ghanaians forming at least 5% of its membership. Again, per
the GIPC Act, a foreigner cannot start a retail business unless they have a minimum capital
of about 1 million dollars. There are sectors which the GIPC Act may not allow a foreigner
to operate at all or may place some requirements before the foreigner can.
The GIPC Act
If there is an enterprise which foreign participation is allowed, the Act requires that after
its incorporation under the Companies Act, but before it commences business, that
enterprise registers with the GIPC and with any other authorities/bodies as required by law
i.e. SSNIT, GRA, EPA, FDA etc.
“An enterprise in which foreign participation is allowed” is significant because per Section
27 of the Act, foreigners are not allowed to invest in or participate in a number of
businesses including
a. Petty trading
b. Taxi business or Car Hire services with a fleet of less than 25 vehicles
c. Beauty Salon or Barbershop
d. Printing of recharge cards for telecom companies
e. Production of exercise books and other basic stationery
f. The retail of finished pharmaceutical products
g. The production, supply and retail of sachet water
h. Betting business, except football betting
Under Section 28, if a foreigner wants to invest in trading, then they must invest 1 million
dollars, and employ at least 20 Ghanaians. If they want to invest in any other business
other than trading and those stated in Section 27, then they have to invest $500K unless
they are entering into a Joint Venture with a citizen (where the citizen does not own less

than a 10% stake) then they have to invest $200K. 1 NB: These minimum capital
requirements are not applicable to portfolio investments and enterprises set up solely for
export trading and manufacturing.
Here’s how it works in practice. Once the company is incorporated, but before it begins
operations, the directors have to prepare a director’s resolution to open a bank account in
the country. Then the company has to download the application forms from the GIPC
website.
If the foreigner has the capital required under the Act, and it is in cash, he has to transfer
the forex into the account of the company. GIPC is not interested in money that was in the
country before the company was formed.
Once this is done, the company will inform its bankers that it has received forex in respect
of investment from a foreigner. The bank will convert the money into GHS, credit the
account of the company and then advice the BoG. The advice is done by sending a letter
attached to the bank statement of the company to the treasury department of BoG that it
has received forex in respect of investment from a foreigner in such-and-such company.
The BoG will then inform the CEO of GIPC that the money has been credited to the account
of the company as the equity contribution of the foreigner. After this, the company has to
fill the investor registration form and submit it to the CEO of GIPC, pay the applicable fee,
and provide whatever additional information the GIPC requires from them. Then the GIPC
gives you the certificate.
If the foreigner has the capital in goods, then the company must inform the GIPC about
the importation of the equipment or the goods. This advice must be accompanied by the
relevant customs entry forms.
Do you do this with foreigners too? First there must be an agreement for the acquisition
of equity in kind filed at the company’s registry. The agreement must state in monetary
terms the consideration that is being given in consideration for the shares. So if it is land
and that land is valued at 70000, you state the 70000 in the agreement. If however the
agreement is not in writing, you fill form 6. In either case, you submit the agreement or
form 6 to the Lands Commission’s stamp division, then you file it at the company’s registry
28 days after the allotment of the shares. – this may be wrong, and until verified, and the
red highlight removed, proceed with caution
1
This is prohibitive. You don’t need $200K or however much to start a software company, all you need is a laptop.
And so if someone wants to incorporate a software company here, they will not be able to, unless they have $200K

For the purposes of the Act, a Ghanaian is a Ghanaian citizen or a

company/partnership/association/body wholly owned by a citizen of Ghana. The
application of the Act for the purposes of determining who a foreigner is shall not be
applicable
a. to foreigners who have been married to Ghanaian citizens as long as
i. The marriage was validly conducted,
ii. The foreign spouse is ordinarily resident in Ghana AND
iii. The marriage has been for a period of at least 5 years OR the spouse has
an indefinite residence permit.
b. to citizens who have lost their citizenship upon assumption of the citizenship of
another country
Look at Keziah’s notes and update
3. Does The Companies Act Restrict The Number Of People Who Can Form A
Company?
Depends on what type of company is being incorporated.
If it is a private company, the Act says that they cannot exceed 50 members and debenture
holders cumulatively. So without any debenture holders, the maximum membership is 50.
Sometimes companies may have a management policy that allows employees to buy into
the company by acquiring shares. The idea behind this is that once the employee has a
stake in the business, they are extra motivated. Sometimes also, the company in its nascent
stages may not have money to pay the employees fully, and may come into an
arrangement with the employees to pay them in shares instead. In counting the 50, Section
298 says that we do not count such people i.e. genuine employees who are also
members/debenture holders. And even if they leave the employment of the company but
retain their membership/debenture holdings, we still are counted as one. will not count
them. And where multiple persons hold shares/debentures jointly, we count them as one.
Other companies do not have any maximum limit.

4 CORPORATE GOVERNANCE
4.1 INTRODUCTION
Corporate Governance is a system of rules, practices and processes by which a company is
directed and controlled.
There are three elements
a. Rules
b. Practices
c. Processes
The end goal is to
a. Direct
b. Control
And so clearly Corporate Governance goes beyond the letter of the law. A company can be
complying with all the legal rules, and it will still have a bad corporate governance system. Take
for example, the legal rule that a company must have at least two directors. The majority of
companies in Ghana have exactly two, so they are complying. But how do you make decisions?
How do you break a deadlock?
Another example; per the plain letter of the Act, a shareholder can be the Board Chair, and he can
also be appointed as the Managing Director and given all the powers of the Board. One of the
main principles of corporate governance is accountability, how does a system like this ensure
accountability? This is not to say that adopting a system such as this is the worst thing ever. In
small one man companies, this may very well be the best system of governance, where decision
making has to be made quickly.
The point being made is that, simply because a particular system that is adopted isn’t unlawful
doesn’t make it the best governance system for each and every company. The collapsed banks all
had corporate governance systems that were compliant with the Act but there was still a failure
of governance. Clearly, corporate governance is about best practices that optimize decision
making and balance competing interests within the company, having regard to its business/object
and with the ultimate aim of protecting the company’s best interests.
So why is Corporate Governance necessary? Well, as an artificial creation, a company/statutory

corporation cannot, literally speaking, work for, or by, itself, as a natural person can. It has no hand
with which to sign documents and no brain of its own with which to make decisions. However, its

powers are quite extensive, and in the past those powers used to be limited by the stated object
or business. Now that limitation has been taken away, and so as it stands, depending on its size
and resources, the powers of a company may either be equal to, or more extensive than, the
powers that an ordinary natural person will have.
It is the law that provides that once a company (or indeed a statutory corporation) is incorporated
(or formed) it acquires its own personality distinct from all others. As such, it is rightly prescribed
by the same law that a governance system should be in place to direct it, and natural persons
ought to man this system, on behalf of this company. These persons work within a specific
structure of authority, in which the power is distributed and checked. This is what the governance
system of companies is.
4.1.1 Rules of Attribution

So, who are these persons that are to act on behalf of the company and what are their powers?
The default governance system provided by the Act under Sections 144-148 encompass what is
known as the rules of attribution. The rules of attribution divide the power to act, for and on behalf
of the company, into two broad organs.
The Principal Organs: Acts of the principal organs are automatically acts of the company
according to Section 147. Even if the Constitution purports to limit this power, it won’t matter for
the purposes of holding the company liable, except where the person who intends to hold the
company liable was aware of the limitation; see Barclays Bank v Perseverance Transport, Boohene
v NSCB and Royal British Bank v Turquand.
The Act is also clear that just because the principal organs authorize the carrying on of an
unauthorized business does not mean that the company will escape liability on the grounds that
the business is not authorized by the Constitution.
By the combined effect of Sections 144 and 146, the principal organs are thus
a. The Board of Directors: According to Section 144, unless otherwise provided by the Act,
the power to manage and direct the business of the company is vested in the Board of
Directors. This makes the Board very powerful. It is the directing brain of the company.
Indeed, where the board is acting intra vires, they don’t even need to obey the people that
put them there i.e. the members; Section 190(5). Their fiduciary duties are not owed to the
members, but to the company; Boohene v GUA. Because of this, checks and balances are
needed to control this power. The Act provides some. Good corporate governance
practices are needed to provide the rest.
It also needs saying that individual directors are not principal organs. When the directors
act together as a Board, then they are a principal organ.

b. The Managing Director: By Section 146, the Board can either act through committees or
delegate some or all of their powers to a Managing Director appointed from among their
number. The Managing Director is a principal organ if he acts in the normal way that
Managing Directors act; see Section 147. By virtue of the Turquand Principle, even if the
Board has not delegated any powers to him, if he purports to bind the company into a
transaction with a third party, and the third party is not aware that he has no powers, the
company will still be bound, notwithstanding the fact that he acted ultra vires.
c. The Members in a General Meeting: The decision of the members acting through the
medium of a General Meeting is the principal way by which members may act on behalf
of the company. But by virtue of Section 163 (written resolutions), Section 301
(Shareholders Agreement) and the Duomatic Principle, shareholders may act outside of a
General Meeting, as long as whatever decision they take is taken unanimously. The only
thing they cannot do, outside of a General Meeting, is remove an auditor or a director.
Now, recall that according to Section 144, the general rule is that the power to administer
the business of the Company is vested in the Board of Directors, to the exclusion of the
members. Section 145 provides some exceptions to the general rule.
First, where there is a deadlock on the Board, the members have the power to act. Second,
where the directors are disqualified from acting, the members have the power to act. Third,
where the directors fail to take legal proceedings on behalf of the company, the members
have the power to act. Fourth, where the members are required to ratify or confirm an
action taken by the Board, the members will have the power to act. Finally, where the
recommendation of the members is required, in respect of an action to be taken by the
Board, then that would amount to participation in the management of the business by the
Members.
Outside of this, the rule in Shaw v Shaw is the only other recourse the members have. In
Shaw v Shaw, the Court held that once power is given to the Board, that power cannot be
exercised by the shareholders, and the only way the shareholders can control, override or
go around this is to either
i. amend the Constitution to take certain powers unto themselves or

ii. exert pressure on the directors by exercising, or threatening to exercise, the power
to remove the them, and appoint new ones who will do their bidding. But even if
they do this, they cannot invalidate an action already taken by the Board.

The Subordinate Organs: The subordinate organs are appointed by or under the principal
organs. Under Section 148, acts of the subordinate organs are binding on the company if the
principal organs either authorize said acts, ratify said acts (either expressly or by acquiescence) or
represent to the world or to an officer or agent, that the said officer or agent has the authority to
engage in said act.
They include
a. The Board Chair

b. Executive & Non-Executive Directors
c. The Company Secretary
d. Such Other Executives or Officers As The Company May Determine
An efficient corporate governance will provide for the distribution of decision making powers, the
management of the company itself, as well as the management of competing interests within the
company and between the company and the stakeholders in the governance of the company.
The Act provides that every company is free to allocate the powers among the three organs as it
deems fit.
4.1.2 Stakeholders
Corporate Governance relates to how companies are administered and directed. This requires
people to act on behalf of the company. In turn, the acts of the company affect people, the same
way that the companies are affected by people. The people that affect or are affected by the
company are called stakeholders, because they have a stake in how the company is governed.
Some of these stakeholders are internal to the company and others are external to it. External
stakeholders extend from the state itself, which may affect and be affected by the company’s
activities (see large corporations in the US, and MTN in Ghana) and ordinary citizens, which may
also affect and be affected by the company’s activities.
Take the example of MTN. When MTN launched its IPO, the government had to beg it not to
convert and transfer all their money away, because it would deplete the foreign exchange reserve
of the country and tank the economy. MTN by itself could lay all its workers off, and transfer all
their services to their South African offices, such that even though their network still functions
here, they don’t have a brick and mortar presence here. They would have at once caused a dire
unemployment situation not just in the capital but in the whole country. Imagine, they did this in
an election year. Or imagine they shut off their services on election day, so that polling agents
could not reach their party reps? Thus it is easy to see how the state is a stakeholder in the
outcomes of corporate governance at MTN.

MTN has an interest in making profit, but should it decide to raise the cost of using their services
past what the majority of the market can afford, they could run the risk of losing their customers
to other networks. Thus we can see how consumers, who are largely everyday citizens, are
stakeholders in the outcomes of corporate governance practices at MTN.
Another example is Ashanti Goldfields, a mining company. That mining company is not technically
responsible for the development of the surrounding companies. It can choose to turn a blind eye
to whether or not there is clean drinking water in the communities, and decide that that’s not their
job. But one day, there may be instability in the community, and in the end, if the mines are
attacked, or if the New York Times publishes an op-ed about Ashanti Goldfields, the company will
be affected. So the people in the community are stakeholders in the outcomes of corporate
governance practices at Ashanti Goldfields.
For a single company, there are many stakeholders whose interests conflict with one another. For
example, employees (an example of a stakeholder) want to do less work for more pay,
management (another example of a stakeholder) wants the employees to do more work for less
pay. The Government (a stakeholder) wants more taxes, the consumers (a stakeholder) want lower
prices, the Board and Shareholders (stakeholders) want to maximize profits, but employees
(stakeholders) want more pay. The marker of a good corporate governance system then, isn’t just
how power is distributed within the system, but also how effectively the system manages to
effectively balance competing interests within and without the company (i.e. every stakeholder
that is affected by the actions and inactions of the company).
4.1.3 Corporate Governance & State Agencies

As already stated regulation of corporate governance does not begin and end with the Companies
Act. Recently, the Bank of Ghana introduced its Corporate Governance Directive for the regulation
of Banks and Specialized Deposit Taking Institutions. The government of Ghana also recently
enacted the State Interests and Governance Authority Act to regulate the governance of State
Owned Enterprises
State Interests & Governance Authority (SIGA) Act
The SIGA Act was enacted to address problems identified in the management and performance
of the state’s commercial interests including
a. The fragmented and uncoordinated oversight of SoEs by multiple government

organizations
b. The lack of a clearly defined ownership framework for the state’s interests
c. Poor governance practices at SoEs
d. Capacity constraints of the now defunct State Enterprises Commission

The SIGA Act gives SIGA the authority to regulate the state’s commercial interests. There are
different vehicles the state uses to engage in commercial activity. The government can incorporate
a company under the Companies Act or it can acquire all or some of the shares of a company, by
itself or in partnership with other persons (e.g. Ghana National Petroleum Company, Precious
Minerals Marketing Company, Tema Oil Refinery etc). The government can also pass a law
establishing an entity that functions much in the same way that a company does. These entities
are called Statutory Corporations (e.g. Ghana Revenue Authority), and are regulated by the Act
that set them up. The term State Owned Enterprise may be viewed as an umbrella term covering
companies solely owned by the government, joint ventures with private persons and statutory
corporations which engage in commercial activities (as opposed to regulatory ones).
Prior to the enactment of the SIGA Act, shares owned by the government in companies were
issued to the Minister of Finance. The SIGA Act, in Section 3, now vests the right and power to
hold and manage shares on behalf of the government in SIGA. This is restated in Section 4 which
provides that one of the functions of the Authority is to coordinate the sale or acquisition of state
interests.
The Act also gives SIGA extensive powers for the regulation of State Owned Enterprises. Section
3 of the Act provides that SIGA exists to promote efficient and profitable operations of the entities
it governs. Section 4 empowers SIGA to sign performance contracts with SoEs and ensure
adherence to those performance contracts with a view to achieving profitability as provided for in
Section 3. It also has the power to evaluate the mandate and strategic plans of SoEs and statutory
corporations, in consultations with Ministers of the sectors in which these SoEs and SCs operate.
The Authority also exists to ensure that the entities it governs adhere to good corporate
governance practices. To do this, Section 4 of the Act gives the Authority the power to develop a
corporate governance code for SoEs, and advise the government on the appointment and removal
of CEOs or Board Members, among others.
As SIGA is itself an artificial person, it needs a governance structure. This governance structure is
provided for in Section 5, 6, 8 & 17 of the SIGA Act. Together, these sections state what the
membership of the Board is, the mode of appointment and tenure of the members of the Board,
as well as the functions of the Board.
The Governing Body of SIGA is comprised of
The President: The President doesn’t sit on the Board of SIGA himself, however, he is as
important to the governance of the authority as any of the members on the Board, if not
more so. Under Section 5, it is the President who, in consultation with the Council of State,
appoints the members of the Board. Some of the members of the Board are nominated
by professional bodies. Those nominations are confirmed by the President exercising his

power to appoint, before the nominated persons can assume office as members of the
Board. Outside this power to appoint members of the Board, the President also has the
power to appoint General Managers to take charge of the operations and finance +
administration of the Authority, and also the staff of the Authority.
A Representative from the Office of the President: While the President does not
personally sit on the Board, the Act requires that a representative from his office sit on the
Board in his stead. The Act requires the President to satisfy himself of the person’s
expertise in some relevant field before appointing that person to sit on the Board.
Three Persons Appointed By The President: At least two of which must be women.
Again, the President must satisfy himself of their expertise in some relevant field before
appointing them to sit on the Board.
An Official From The Ministry of Finance: Prior to the enactment of the SIGA Act, the
functions of SIGA were exercised by the Ministry of Finance. Since the work of many SoE’s
is closely linked with the finances of the state, it is only sensible, that a person from the
Ministry of Finance sits on the Board and partakes in the decision making. The person to
be nominated from the Ministry of Finance must not occupy a rank lower than Director.
The nomination is also to be done by the Minister for Finance
The Director General of SIGA: Also appointed by the President under Article 195 of the
Constitution
Persons Nominated by Professional Bodies: An accountant and a lawyer nominated by

the Chartered Institute of Accountants and the Ghana Bar Association respectively, both
of whom must be considerably experienced in the industry and the law on company and
commercial practice.
The Chairperson of the Board: Also appointed by the President under Article 70 of the
Constitution
Section 7 details the duties of the members of the Board of the Authority and all other entities it
governs, and states that the duties placed on company directors both at common law and under
Act 992 are applicable here. It further goes ahead to state certain duties expressly
a. The duty to act in the best interest of the Authority or entity

b. The duty to exercise the degree of care and diligence reasonably expected
c. The duty to act honestly in the performance of the functions of the member
d. The duty to not use information improperly
e. The duty to not abuse the office
f. The duty to disclose interest (Section 10)

Breach of these duties may leave the member of the Board liable to criminal prosecution, a fine
and an order to compensate the Authority for any loss it suffers as a result of the breach or an
order to account for any profits made. The Courts may also set aside any transaction entered into
by the Authority as a result of the breach.
In exercising its functions, Section 9 requires that the Board meet at least once every quarter, and
if a minimum of 1/3rd of the members of the Board (i.e. 3) make a request in writing to the
chairperson, then he must convene an extraordinary meeting of the Board. Meetings may be
convened physically or virtually. The quorum for meetings of the Board is 5, and it is to be chaired
by the Chairperson. If the Chairperson is unavailable, then the members may elect one person
from among their number to chair, except that the Director General of the Authority is ineligible
for election.
Decision making at meetings is effected by a vote of a simple majority of those present and voting.
If there is a tie, the person chairing is the one who will have the casting vote. Where a decision is
to be made on a matter in which a member of the Board has interest in, that member has to
disclose his interest. If he doesn’t, and it is later found out, the Act states in Section 10 that the
Chairperson has to write to the Minister, who will then inform the President to revoke the
appointment of the person, and recover whatever benefit the person made.
Now, even though the Act gives the Board the power to allow a non-member to sit in meetings,
such a person will not have any right to vote on matters. An example is the Secretary to the Board.
The Secretary to the Board is the one that keeps the minutes of the meetings. At the end of the
meeting, the Chairperson signs the minutes and the signed minutes serve as prima facie evidence
of everything that occurred.
If it is later found out that there was a defect in the appointment of a member of the Board, or
that there was a vacancy on the Board, it won’t invalidate the meeting as long as everything else
was in conformity with the Act. Finally, any member of the Board who misses 3 consecutive
meetings, without cause, automatically ceases to be a member.
Under Section 11 of the Act, the Board may set up Committees of the Board to perform any
function that the Board may perform. However, under Section 12, the Act itself sets up a
Management Committee, comprised of the Director General (who acts as the Chair), the General
Managers and any other head of Department that the Director General may determine. The
Director General of the Authority (Section 18), the General Managers (Section 19) and the
Management Committee (Section 12) itself all report to the Board, as does the Secretary to the
Board (Section 21).
The Director General is ultimately responsible for the day-to-day administration of the Authority,
even though he is allowed to delegate his powers. Unlike the other members of the Board, Section

17 says that he is a public officer appointed by the President, acting in accordance with the advice
of the Authority and the Public Services Commission. Each General Manager is also appointed by
the President, in accordance with Article 195, and is to be responsible for either the Operations or
Finance & Administration of the Authority
We see from the above that there are two categories of officers appointed by the President.
Members of the Board are appointed by the President under Article 70 (Appointments by the
President), and officers in the employment of the Authority are appointed under Article 195
(Appointment of Public Officers). Article 195 of the Constitution comes under Chapter 14 which is
titled the Public Services of Ghana.
Clearly, the staff of the Authority, which includes the Director General, the General Managers, the
Secretary etc. are covered by the provisions of Chapter 14, key among which is Article 191 which
protects them from removal from office without just cause. However, this is not the case for the
members of the Board.
Unless their appointment ceases or is terminated in any other way, the tenure of members of the
Board, with the exception of the Director General and those who membership of the Board is
granted by virtue of their occupancy of an office, lasts for a term of four years, renewable only
once; See Section 8 of the Act. Other ways their membership may cease before the expiration of
their tenure is through
a. resignation by written letter to the President

b. cessation by reason of non-attendance of meetings
c. inability to act, for good reason and
d. revocation of their appointment by the President
e. upon the assumption of a new President (Section 14 of Act 845)
Theophilus Donkor v AG
Section 14 of Section 14 of Act 845 provides that on the assumption of office of the person elected
as President, a person holding any of the offices specified in the Schedule shall cease to hold that
office, and shall be paid the relevant retirement benefits and enjoyment of facilities as provided
by law. Paragraph 6 of the Schedule to section 14 [specifies] persons appointed by the President
or a Minister of State as members of Statutory Boards and Corporations [as part of those who
cease to hold office on the assumption of office of a new President.
[However] a public officer, whose office is not specified in the Schedule, continues to hold office
on the assumption of office by the person elected as President, subject to the provisions of the
Constitution and of the relevant law applicable to that public officer.

After a thorough review and consideration of this issue and the relevant constitutional provisions
we hold that members of the governing bodies of statutory boards, corporations, authorities
(howsoever described) are not members of the public services, and not public officers by virtue of
their membership of the governing body of a statutory board or corporation. They are therefore
not governed by article 191(b) of the Constitution.
Members of governing bodies are appointed by the President in consultation with the Council of
State. Such members of governing bodies, appointed pursuant to article 70 are not members of
the service in respect of which they serve on the governing body. So, for example a person who
serves on the Council of the University of Ghana as a representative of the alumni association, or
Conference of Heads of Assisted Secondary Schools (CHASS) or by appointment of the President
does not become a public officer or a member of the public service by virtue of his or her
membership of the governing council.
The overwhelming majority of staff of public corporations and authorities would [however] be
members of the public service as described by article 190 of the Constitution. Such staff must, in
accordance with article 195 of the Constitution, be appointed by the President acting in
accordance with the advice of the governing board of the corporation given in consultation with
the Public Services Commission. Such persons are public officers and therefore governed by article
191(b).
Our first conclusion is therefore that paragraph 6 of the schedule to section 14 of Act 845 only
applies to members of the governing bodies of statutory boards and corporations appointed by
the President or a Minister of State and not to the permanent Staff of these public corporations
who are public officers and not affected by Act 845. This is reiterated by section 14(3) of Act 845
which excludes public officers from the operation of the section.
Joseph Sam v AG
[Insert Brief Here]
Bank of Ghana Corporate Governance Directive
The Bank of Ghana Corporate Governance Directive was published to regulate Banks and
Specialized Deposit Taking Institutions regulated by the Bank of Ghana. It contains certain rules
that all companies regulated by the Bank of Ghana must follow in their corporate governance
structure.
The definition of Corporate Governance from a banking perspective is provided as the manner in
which the business and affairs of a Bank, Special Deposit-Taking Institution or Financial Holding
Company (FHC) are governed by its Board and Senior management, including how they

a. set the strategy and objectives of the regulated financial institution;

b. determine the regulated financial institution’s risk tolerance/appetite;
c. operate the regulated financial institution’s business on a day-to-day basis;
d. protect the interests of depositors, meet shareholder obligations, and take into
account the interests of other recognised stakeholders; and
e. align corporate activities and behaviour with the expectation that the regulated
financial institution will operate in a safe and sound manner, with integrity and in
compliance with applicable laws and regulations.
The Directive, referencing Act 930, immediately sets about confirming the disqualification criteria,
not just for directors as you would find in the Companies Act, but also for key management
personnel. The definition of key management personnel is provided and includes
a. Chief & Deputy Chief Executive Officer b. Board Secretary
c. Chief Operating Officer d. Chief Internal Auditor
e. Chief Finance Officer f. Chief Risk Officer
g. AML Reporting Officer h. Head Of Compliance
i. Chief Legal Officer j. Head Of Internal Control Functions
k. The manager of a significant business unit of the bank, a specialised deposit taking
institution, or a financial holding company or any person with similar responsibilities
Before any of these persons are appointed, the institution in question must compile a
comprehensive due diligence report and submit to the Bank of Ghana for approval. The Bank of
Ghana may confirm or disqualify them according to the criteria provided in the Banks and
Specialized Deposit Taking Institutions Act as provided below;
1. Disqualifications As To Capacity
Persons who have been adjudged as being of unsound mind, and persons who have been
detained, under any enactment, because of a mental disorder are immediately disqualified.
Persons under the age of 18 years are also disqualified from acting in any of those
capacities
2. Disqualifications On Grounds of Mismanagement
Persons who have been declared insolvent are disqualified.

If you have defaulted in the payment of your debt, you too are disqualified.
If you have entered into an agreement to pay someone else’s debt, and you have
suspended payment, you are also disqualified.
If you are or have been the director or a key management personnel of an institution that
has been or is being wound up by Court of competent jursidiction on account of
bankruptcy, it’s a wrap for you as well.
3. Disqualifications on Grounds of Criminal Behaviour
If you are or have been the director or a key management personnel of an institution that
has been or is being wound up on account of criminal conduct, you’re disqualified.
If you have been convicted of an offence involving fraud, dishonesty or moral turpitude,
you’re disqualified
4. Disqualification on Administrative Grounds
Can’t act in any of those capacities without the prior approval of the Bank of Ghana
If the Bank of Ghana indicates that it won’t approve their appointment for any of the above
reasons, it will provide an opportunity for the affected parties to be heard. Same goes for persons
who are already acting but have been determined by the Bank of Ghana to be unfit to act. If after
the hearing, the Bank of Ghana affirms its decision, then they have to removed within one month.
MDs and CEOs are to be appointed for no more than 12 years, and those 12 years may be divided
into four 3-year terms. Other directors are restricted to a maximum of 9 years to be divided into
three 3-year terms. Where such a director retires or reaches the end of his limit, he may be
appointed as an MD or a CEO, but the Directive gives him a maximum of 15 years which will be
calculated including what he has already served. So if he retires as a director after serving for 6 six
years, and then he is appointed as an MD, he will only have 9 years to serve as an MD. If he retired
after 9 years of serving as director, and he is subsequently appointed as MD, then he will only
have 6 years as an MD.
The Chairman of the Board must be an independent non-executive director, which means that the
MD and the Board Chair cannot be the same person, nor can they even be related to each other.
The Board Chair can also not serve on any sub-committees. He must be ordinarily resident in
Ghana, unless it can be shown that his non-resident status will not affect his ability to discharge
his functions competently. His job is to ensure that the decisions of the board are taken on a well-

informed basis, promote checks and balances, and promote a constructive relationship between
the Board and Management. He is elected for a maximum of two 3-year terms.
The competencies of Directors are provided for in the Act. Each individual director must possess
the necessary integrity, professionalism, experience and qualification to discharge their functions.
No director must hold more than five directorships cumulatively, whether those directorships are
held in institutions regulated by the Bank of Ghana or not. The composition of the directors on
the Board must also be diverse to cover different relevant areas, including Economics, Law,
Finance, Information Technology, Entrepreneurship, Risk Management etc. Together, the
membership of Board should have a reasonable knowledge of global market forces and the
regulatory environment within which it operates.
Each director is under a duty of care to his institution, and the Directive defines this duty of care
to mean the duty of a director to act in utmost good faith towards his institution, and to act at all
times to preserve its assets and further its business. Each director is also under a duty of loyalty,
which is defined to include the director’s duty to not act in his own interest or in the interests of
other persons so as to not conflict with the interests of his institution. The duty of loyalty requires
directors to declare
a. Whatever professional interest he holds or whatever other office he holds whether as

manager, director, trustee etc
b. Whatever investment he holds anywhere, and this is necessary to anticipate and
prevent conflicts of interest
c. If he has an interest in a credit facility that is going to be given to somebody, or if he
has an interest in a transaction that this institution is going to entered into with
someone else
The Board should also have no less than 5 members and no more than 13, 30% of which must be
Ghanaian citizens. The majority of the members of the Board must be independent, non-executive
and resident in Ghana. A non-executive director is one who is not employed by the bank. An
independent director is a non-executive director who
d. does not directly or indirectly own more than 5% of shares in the relevant institution
e. does not have any relatives that have been employed by the institution or its related
companies within the two years prior to his appointment
f. was not himself in the employment of the institution or its related companies within
the two years prior to his appointment
g. within the two years prior to his appointment was not engaged in a transaction with
the institution that was less favourable to it than would have been allowed for ordinary
persons

h. has not served in the institution as a director for more than two terms, unless he can
affirm that his independence is not impaired
i. is not related to a significant shareholder and does not have any employment
connections to a significant shareholder
Independent directors must form a minimum of 20% of the directors of the institution, and there
shouldn’t be more than 2 related persons on the Board. The Board should have a formal written
conflict of interest policy that at minimum includes;
a. the duty of a director to avoid all possible activities that could create a conflict of
interest
b. a review or approval protocol that directors engage in before undertaking an activity
to ensure that there is no conflict
c. the duty of the director to disclose any matter that may or has already resulted in a
conflict
d. the responsibility of the director to abstain from voting on any matter where the
director has a conflict
Further, the balance of power on the Board must be such that no one individual or group can
dominate decision making of the Board. It is also important that the Audit and Risk sub-
committees of the Board be chaired by independent directors.
The Board is supposed to meet at least four times every year, and directors must attend at least
half of all the meetings that are held. If he doesn’t, the Board Chair is supposed to recommend
his removal. The number of Board Meetings held and the attendance of each director is to be
disclosed in its annual report.
Finally, it is the Board’s duty to supervise its sub-committees as well as the management
committees to ensure adherence to business strategy, management of risk, engagement of
competent staff, etc etc. The Board has to establish a rigorous system for the recruitment of key
management personnel, a policy document for its corporate culture and governance etc.
Public Service Guidelines on Corporate Governance
Good corporate governance in public service organizations
a. encourages global investors to invest in various sectors of the economy

b. facilitates efficient and effective allocation of resources
c. assures stakeholders, including citizens that their welfare is of primary concern to the
government and that the public services will be managed efficiently and effectively
d. creates an enabling environment where citizens are empowered to voluntarily participate
in governance so as to contribute towards national development

e. assures stakeholders that those who mismanage or abuse the trust in them shall be
sanctioned in accordance with the relevant rules and regulations
Rule of Law: Board/Council Members shall follow due process. The rights of employees shall be
upheld during the investigation of the offence. The employee shall therefore be given the
opportunity to defend himself before a decision as to disciplinary action is taken. Penalty imposed
shall be commensurate with the offence/misconduct so proven
Accountability: Board/Council Members must be ready to render account of their stewardship

to the appointing authority. They shall be held responsible for all acts or omissions on their parts.
Accountability implies that Board/Council members shall protect the interests of the organizations
and govern them properly.
Transparency: Board/Council Members in their dealings with others shall handle all transactions
with a forthright, frank and open manner. Transparency implies full disclosure. If a member is
interested in a transaction or contract that the organization is about to enter into, the member
shall make his intentions known.
Conflicts of Interest: Article 284 of the Constitution states that a public officer shall not put
himself in a position where his personal interest conflicts or is likely to conflict with the
performance of his office.
Integrity: Relates to honesty and strong moral values, faithfulness and diligence
Efficiency & Effectiveness: Leadership that produces results. Resources should be used to
produce maximum results.
Social Accountability: Board/Council Members shall adhere to international principles as

appropriate on human rights, labour, the environment etc
Code of Conduct: Board/Council Members shall impose on themselves a code of conduct which
shall have sanctions to make them effective
Independence: Board/Council Members must demonstrate independence of mind and thought
Evaluation: Board/Council Members shall on an annual basis assess their performance and
effectiveness as a team and that of individual members, including the CEO. Weaknesses noted
should be corrected.
SEC Corpoate Governance

4.2 DIRECTORS
Remember that there are three organs of the company; members in a General Meeting (principal
organ), Board of Directors (principal organ), and officers and agents (subordinate organ).
According to Section 144, the general rule is that the power to administer the business of the
Company is vested in the Board of Directors, to the exclusion of the members.
Directors individually are officers of the company, once appointed. Individually, directors are not
a principal organ. This is why Section 148 says that generally, when directors act individually, that
act is not automatically considered an act of the company. It only becomes binding on the
company where
a. The act is ratified

b. The act is authorized or
c. The company is estopped from denying liability
Where, however, the directors are acting collectively or unanimously then they become the board,
and the board is a principal organ of the company.
Directors exist as the very essence of the corporate governance structure. In Regal Hastings v
Gulliver, the court described directors as follows: “Directors of a limited company are the creatures
of statute and occupy a position peculiar to themselves. In some respects, they resemble trustees,
in others they do not. In some respects, the resemble agents, in others they do not. In some
respects, they resemble managing partners in others they do not.” And in the case of The Forest
of Dean Coal Mining Co., they were described as “commercial men managing a trading concern
for the benefit of themselves and all the other shareholders in it”.
Under the Act, issues dealing with Directors span from Section 170 to Section 210. Section 170
states that any person, by any name called or appointed to direct and to administer the affairs of
a company is a director. This provision may easily mislead you into believing that you can only
be a director if you are appointed. That is not the case. Appointment is not the only way you can
become a director, you can become a director by other ways. Appointment is the only “lawful”
way you can become a director, the other ways are….”extra-lawful” ways.
So if you look at Section 170(2), it says that notwithstanding the fact that you’re not a director, if
you’re held or you hold yourself out as a director, or if you instruct the directors on what to do,
the law will impose on you the same duties and liabilities as it imposes on duly appointed
directors, but without the attendant benefits. See: Okudjeto v Irani Brothers, Cudjoe v Conte and
The Quality Grain Case.
The sum of this is that to lawfully call yourself a director, you must be appointed as such, to direct
and/or administer the business of a company. It also doesn’t matter what you’re called. In some

organisations, you can’t identify a single person bearing the title of director. Some companies
have a President, others have a Council of Elders. Those persons under the law are still recognised
as directors, because what matters, in that case, is not the label on their door, what matters is
whether they perform the function of directing the business of the company. See also: Kwapong
v Cocoa Marketing Board and Bousiako Co Ltd v Cocoa Marketing Board where an interim
management board was described as the directing brain of the company and were thus held to
be directors of the company.
4.2.1 Qualification & Appointment of Directors

Persons Who Can Appoint Directors
As has been said time and again, a company is an artificial person and, notwithstanding the
declaration in Morkor v Kuma and Salomon v Salomon that it can do everything that a natural
person can do, the fact remains that a company does not have a brain to think and act for itself.
It is the directors who must act on its behalf, but before the directors can do so, they must be
appointed. And yet, without anyone to act on the company’s behalf at this point, who appoints
the directors?
Subscribers or Promoters: Section 172(1) provides that the first directors of the company shall
be named in an application for incorporation. Under Section 10, it is the promoters who take the
steps to incorporate the company. And under Section 12, it says that a person who is 18 years or
above can apply to incorporate a company. We can see that even though Section 10 explicitly
referenced promoters, Section 12 did not. However, the First Schedule of the Act defines a
subscriber as a person who applies for the incorporation of a company. A subscriber is also a
person who indicates in the application that he will become a member of the company upon its
incorporation.
In sum, a person who takes steps to incorporate a company is a promoter. If that person indicates
on the application that the application is theirs and that they will become a member of the
company upon its incorporation, then they are a subscriber. Now, Section 13(2)(g) states that in
the application for the company, the person who fills out the form must ensure that the
application names the first directors and provides their details.
Consequently, we may say that the subscriber or the promoter appoints the first directors of the
company. Twycross v Grant and Dolphyne v Speedline Stevedoring
Whoever The Constitution Provides: Section 29 provides that when the Constitution is
registered, it has a number of effects. First, it becomes a contract under seal between and among
the members, directors and officers. Second - which is what is relevant here - is that whoever is
given the power to appoint and remove a director can exercise and enforce that power, even if

they are a stranger to the company. This includes, members, creditors, debenture holders and
even employees. See Sections 29(2) and 172(4).
Members: Under Section 172(4), you are permitted to name anyone to appoint directors in your
Constitution, and that includes all or some or a class of the members of the company.
Sometimes, in practice, companies distribute the power to appoint directors among different
members. So for example, you can have a situation where the Constitution provides that the
Company should have 7 directors, 3 of which will be appointed by the equity shareholders, 2 of
which will be appointed by Class A preference shareholders and 2 of which will be appointed by
Class B preference shareholders. But note that notwithstanding the fact that you have divvied up
the power to appoint, the power to remove any director can still be exercised by ordinary
resolution. So, for example, assuming David Tagoe is the majority shareholder and the power to
appoint directors is given to minority shareholders who cumulatively do not hold more shares
than David Tagoe, all he has to do is remove them whenever they are appointed. And if a director
is appointed by, say, the Class A shareholders, all you need to remove that director is an ordinary
resolution of the members.
Also keep in mind that notwithstanding the fact that the Constitution states that the power to
appoint directors can be given to a stranger, the members still retain the power to appoint
directors by ordinary resolution where there is a casual vacancy. Section 172(5) says that nothing
in the Constitution can take away the power of the members to fill a casual vacancy by ordinary
resolution. NB: A casual vacancy occurs where before the director’s tenure has expired or before
he retires, something happens that makes him leave his role. Only thing is, the directorship of the
person who is appointed to fill the casual vacancy ceases automatically when the person who has
the power to appoint directors proper exercises that power.
Again, where you do not give anyone the power to appoint directors in your Constitution, the
default position under the Act, if you look at section 300 (applying to private companies) and
sections 325-327 (applying to the public companies), is that it is members who have the right to
appoint directors. Sections 325-327 are confusing even to lawyers, it’s not laypersons that will
understand it. So the rule of thumb when you’re incorporating a public company for a client is
don’t leave the appointment of the directors to be determined by Sections 325-327.
The import of Sections 325-327 is that for public companies, the appointment and re-election of
directors of a public company is done by the members. It says that except as provided in the
Constitution,
a) at the first AGM all the directors, except the managing director, will be deemed to have
retired but they will be eligible for re-election, if they indicate to the company within 3 and
28 days to the meeting that they are available for re-election.

b) at all subsequent AGMs, one third of the directors, with the exception of the managing
director, will be deemed to have retired and will be eligible for re-election if they indicate
between 3 and 28 days of the meeting that they are available for re-election
c) the determination of that one third is to be determined according to who has stayed as
director longest. So the longest serving one third are the ones who will be deemed to be
retiring. If you have a situation where there is a final slot to be filled for us to determine
that one third, and there are multiple directors that were appointed on the same day, how
do we determine who takes up that final slot? Well, prior to the meeting, the directors
have to either agree among themselves as to who should fill the slot or it will be decided
by lot.
d) The retired directors will either be replaced or re-elected by an ordinary resolution of the
members. If the matter is not addressed at the AGM, the retired directors are deemed to
have been re-elected.
e) If a member wants to move a resolution to put someone up for election as a director, then
that member has to give notice in writing to company of his intention to move that
resolution within 3 and 28 days before the day of the meeting.
f) Decision making on each director will normally be made by show of hands or by poll. You
call director A, and members who want to elect them raise their hand to signify whether
they want to elect them or not. Director B, and so on and so forth.
g) However, if the Constitution provides for cumulative voting, then things change.
i. First, you cannot have cumulative voting if you have less than 3 directors.
ii. Second, if you are doing cumulative voting, then all the directors INCLUDING the
Managing Director will retire
iii. Third, each member’s votes will be multiplied by the number of vacancies available.
So if we are voting by show of hands, and you have only one vote, then your one
vote will be multiplied by the number of vacancies. But if you have 10 votes, maybe
because of the percentage of shares you hold, then you multiply those ten votes
by the number of vacancies
iv. The total number of votes you hold as a result of the multiplication can now be
split, if you so desire, among the candidates that are up for election. Let’s say you
have 10 votes and there are three vacancies, that means you now have 30 votes.
You can either give all those 30 votes to one director, or you can split them up
among different candidates

v. Now if there are five vacancies being contested among 7 candidates, then after we
count the votes, the candidates that got the highest five will be deemed to have
been elected.
h) In any company other than a company limited by guarantee, if a member of the company
wants to put two or more people up for directorship with one motion, the other members
must unanimously consent to the moving of that motion.
Continuing Directors: If the Constitution of the company names continuing or existing directors
as the ones who have the power to appoint directors, then they can exercise that right. See Section
172(4). What happens if all the directors resign at the same time? You go to the default position,
where members appoint.
Section 172(5) also gives continuing directors the power to appoint a person to fill a casual
vacancy, despite anything to the contrary in the Company’s constitution. In Politis v Plastico (2),
the court held that a casual vacancy is any vacancy other than one occurring by effluxion of time,
or through the director retiring by rotation. The directors are required to observe the rules laid
down in sections 190 and 191 of the Companies Act and should not appoint any person to be a
director unless they have taken reasonable steps to satisfy themselves that he is a person of
integrity and suitable to be a director of the company. The director appointed by the continuing
directors or by an ordinary resolution of the company in general meeting, as the case may be,
shall cease to hold office so soon as any other director is duly appointed in accordance with the
Regulations
The reason directors & members are given this power, despite anything to the contrary, is because
they are the ones who bear liability, if the number of the directors falls below the requisite number.
So in order to prevent the liability accruing, they are given the power to prevent the default
The High Court: Under Section 172(8), the High Court is given the power to appoint a director
or directors of a company in certain limited instances. Three conditions have to come together for
the Court to be able to intervene. So where
a) there are no directors or the number of directors falls below what is needed to form a
quorum and
b) it is impossible or impracticable to appoint a director in the manner contemplated by the

Constitution, then
c) a shareholder or creditor may apply to the Court to appoint one or more persons as
directors of the company

This is when the Court may make an appointment if the Court considers that it is in the interest
of the company to do so, and when it does so, it will decide on the conditions of the person’s
directorship.
Qualification
The first and most important rule governing the appointment of directors is that they must be
natural persons over the age of 18. Artificial persons cannot be made directors, for the simple
reason that directors are appointed to personally think and participate in directing the affairs of
the company. To appoint an artificial person would be to outsource that duty to the people
controlling that artificial person.
Other than this, the popular position is that the Act does not actually state a qualification criteria
for directors. This is both true and false. Unlike the Bank of Ghana Corporate Governance Directive,
the Act does not require the director to have attained a certain level of expertise or education.
What the Act does provide is a qualification criteria that is stated in the negative i.e. a
disqualification criteria.
For instance, under Section 173, a person cannot hold office as a director of a company, if:
a. they are a body corporate

b. they are an infant i.e. a person under the age of 18 or a person that is not yet up to the
age fixed by an enactment to be the full age for legal purposes
c. they have been adjudged by a Court to be of unsound mind
Further, an individual is automatically disqualified from acting as a director for a period of 5 years,
where the individual;
a. has been convicted within the last five (5) years of an offence involving dishonesty, fraud
or relating to the promotion, formation and running of a company. If they are slapped with
a second conviction, they will be automatically disqualified for ten. If they get a third
conviction, they are permanently disqualified.
b. has been the director or a senior executive of a company that became insolvent within the
past five (5) years on account of or partly as a result of the culpable activities of that
director; or
c. has been disqualified to act as Company Secretary, receiver, manager or liquidator of a

company.

Finally, a Court may, either of its own motion, or on the application of any of the persons listed in
Section 177(6), order that the following people may not act, be appointed or, in any way, directly
or indirectly, be concerned with or take part in the management of a company
a. A person convicted of an offence involving fraud or dishonesty whether in Ghana or

elsewhere;
b. A person convicted of an offence an offence in connection with the promotion, formation
or management of a body corporate,
c. A person convicted of an offence involving insider dealing
d. A person convicted of an offence which is not a misdemeanor
e. A person who has been adjudged bankrupt whether in the Republic or elsewhere. See Ex
Parte Ploetner for this position.
f. A person who has been culpable of a criminal offence, whether convicted or not, in relation
to a body corporate or
g. A person who has been culpable in fraud or breach of duty in relation to a body corporate,
whether convicted or not
h. A person who has been debarred from being part of a recognized professional body as a
result of disciplinary action;
i. A person who has committed or has been convicted of an offence related to insider dealing
or any other offence which is not a misdemeanour;
j. A person who is the subject of an ongoing criminal investigation or investigation by the
Registrar or by an equivalent body in another jurisdiction regarding any of the matters
listed above
A person who is disqualified from acting as a director is mandated to disclose his disqualification
to the Board and the Company Secretary in writing or may be liable on summary conviction to a
fine between 500 penalty units (GHS 6000) and 1000 penalty units (GHS 12,000) or a term of
imprisonment of not less than two (2) years.
Note also that under Sections 38 and 40 of the Banking & Specialized Deposit Taking Institutions
Act, a person cannot be appointed as a director of a bank if he:
a. has been adjudged to be of unsound mind or is detained as a criminal lunatic under any
law in force in Ghana;
b. has been declared insolvent, has entered into terms with any person for payment of that
person's debt or has suspended payment of the person's debt;
c. is convicted of an offence involving fraud, dishonesty or moral turpitude;

d. has been a director or manager or associated with the management of an institution which
is being or has been wound up by a court of competent jurisdiction due to offences
committed under a law or a bankruptcy;
e. is a director, chief executive or employee of another bank;
f. is under the age of eighteen years; or
g. is not, in the opinion of the Bank of Ghana, a fit and proper person to be a director.
Number of Directors To Be Appointed
Under Section 171 every company must have a minimum of two directors. Your job as a promoter
of a company or as a member of a company isn’t simply to stick with this minimum number
because that is what the law says. Your job is to assess the needs of the company and determine
what number of directors your particular company needs, especially having regard to the sector
you’re in, consider the expertise you need on your Board, how many directors you can afford given
your present or expected turnover etc etc. Once you come to a specific number or a range you
make that provision in your Constitution (e.g. the directors of this company shall not be less than
five in number and shall not thirteen).
According to the Section 171, if the company operates without two directors for more than four
weeks, the remaining director (if one exists), and each of the members of the company will pay an
administrative penalty of 25 penalty units for each day that the default continues. If the remaining
director (if one exists) and/or some or all of members are aware of the default as it continues,
then those who are aware will be liable for all debts and liabilities of the company incurred during
that time.
Residence of Directors in Ghana
Section 171 also provides that when you’re appointing directors, you have to make sure that at
least one of them is ordinarily resident in Ghana. This is one of those provisions that inhibits
foreign participation in the Ghanaian economy. Basically, if a foreigner wants to incorporate a
company here, and he doesn’t know or trust a person who is already resident here, then he has
to go through the extra expense of bringing a director to live here.
Under the Act, if at any point, you do not have a director that is ordinarily resident here, then the
company will not be able to enforce its rights under any contract that was entered into during the
time that the default was occurring. So basically, all the Act is saying is make sure that you don’t
enter any contract during that time, because if you do and it goes to shit, you can’t enforce it,

unless the Court grants you leave. Other people can freely enforce the contract against you
though. So be safe out there.
Also, in practice, the Registrar tends into interpret this “ordinarily resident” rule to mean “physically
present” in Ghana. So, if we were to go by this obviously problematic interpretation, assuming
you wanted to have a Board meeting outside the country, you cannot take all your Board
members, you have to take all but one or you take the number you need to form a quorum. And
if there are only two Board members, then only person can go, and the meeting will be held via
Skype or something.
Mode of Appointment
Section 170 states that any person, by any name called or appointed to direct and to administer
the affairs of a company is a director. This provision may easily mislead you into believing that
you can only be a director if you are appointed. That is not the case. Appointment is not the only
way you can become a director, you can become a director by other ways. Appointment is the
only “lawful” way you can become a director, the other ways are….”extra-lawful” ways.
Section 172 provides that the regulation of the manner of appointment of directors is to be done
by the Constitution and the Act. The Act provides that BEFORE a person is appointed as a director,
he must satisfy two conditions;
a. First, he must provide express written consent to the Company. See Quarcoopome v
Sanyo.
What happens in practice is that the Company sends a letter of appointment, to the
director, which is attached to a pre-drafted letter of consent. The letter of appointment
contains the terms of the appointment and is dated a day after the letter of consent. So
the proposed director can read the terms and if he finds them satisfactory, he appends his
signature to the letter of consent. NB: Once you consent, you’re a director. But within 28
days of the consent, you have to file it with the Registrar. If the 28 days lapses, the consent
becomes ineffectual and you have to sign a new one.
b. He must provide a statutory declaration wherein he declares that in the last five years he
has not been
i. charged or convicted of fraud or an offence involving dishonesty
ii. charged or convicted of an offence relating to the management or promotion of a
company
iii. a director or senior manager of a company that has been insolvent, but even if you
have, you just provide the date of the insolvency

These are the things that are stated in the disqualification criteria. Under Act 179, the
burden was on the company to do the background checks, and satisfy itself that the person
they want to appoint is not disqualified under the law. That’s onerous. Now, the burden is
shifted onto the incoming director to execute a statutory declaration, so that if you lie and
you’re caught, you can face all the penalties under the Statutory Declaration Act.
4.2.2 Types of Directors

De Facto Directors
If you look at Section 170(2), it says that notwithstanding the fact that you’re not a director, if
you’re held out, or you hold yourself out, as a director, or if you instruct the directors on what to
do, the law will impose on you the same duties and liabilities as it imposes on duly appointed
directors, but without any of the attendant benefits. See: Okudjeto v Irani Brothers.
Persons who hold themselves out, or allow themselves to be held out as directors, without having
been through the appointment procedure are de facto directors. So to establish that a person is
a de facto director, there has to be a lack or failure of appointment + certain facts which indicate
that they are acting or holding themselves out as directors.
In Re Hydrodam, the Court said that “a de facto director is a person who assumes to act as a
director. He is held out as a director by the company and claims and purports to be a director
although never actually or validly appointed as such. To establish that a person was a de facto
director of a company it is necessary to plead and prove that he undertook functions in relation
to the company, which could properly be discharged only by a director. It is not sufficient to show
that he was concerned in the management of the company’s affairs or undertook tasks in relation
to its business which can properly be performed by a manager below board level”
As to what level participation in management will make a person a de facto director, the court
held that it is difficult to postulate any one decisive test. In the case of Secretary of State v Tjolle,
the Court said that “what is involved is very much a question of degree. The courts take into
account all relevant factors. Those factors include at least whether or not there was a holding out
by the Company by the company of the individual as a director. Whether the individual used the
title, whether the individual had proper information (eg management accounts) on which to base
decisions, and whether the individual had to make major decisions and so on. Taking all these
factors into account, one asks ‘was this individual part of the corporate governing structure?’” So
the Court ended up holding that a person who only had knowledge of peripheral matters
concerning the affairs of the company and has no right, legal or de facto senior management
position should not in substance be considered as a director of the company.
In Re Richborough Furniture, the Court opined as follows “for someone to be made liable (…) as
a de facto director, the court would 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 in this case, a consultant, the person in question
must be entitled to the benefit of the doubt”
Section 170(5) is a novel addition to Act 992. It says that those persons who merely serve as heads
of departments or unit heads but are described as directors, even though they don’t exercise any
of the functions (e.g. local director, marketing director, project director, finance director etc) will
be deemed to have been held out as directors for the purposes of penalizing both them and the
company under the Act. This does not apply to government agencies where you have “Chief
Directors” and co., because those are not companies.
The reason for the recognition of a person as a de facto director is not so we can confer benefits
on them on a quantum meruit basis. That’s not how this works. Directors are supposed to be
appointed, so that if there is any liability to be fixed on those directing the company, it will be
fixed on them. The law isn’t interested in the benefits attached to becoming a director, it is
primarily concerned with protecting those who the actions and inactions of the company affects.
So if you aren’t appointed and you act as such, and any liability arises, we will have to fix it on
somebody. Since you are so interested in being a director, we will fix it on you. In that case, even
though you weren’t appointed, the law will deem you to be a director for the purposes of fixing
you with liability. A de facto director can thus never sue in court to enforce powers of a director
or to enjoy benefits that directors are entitled to.
Shadow Directors
A person who has not been duly appointed as a director of the company nonetheless directs the
duly appointed directors of the company on the execution of their functions, such that they are
accustomed to taking orders from him, is a shadow director. See the Quality Grain Case.
In Re Hydrodam, the court distinguishing between a shadow director and a de facto director held
that, “A shadow director, unlike a de facto director, does not claim or purport to be a director. On
the contrary he claims not to be a director. He lurks in the shadows, sheltering behind others who,
he claims, are the only directors of the company to the exclusion of himself. He is not held out as
a director by the company. To establish that a defendant is a shadow director it is necessary to
allege and prove:
a. who the directors of the company are, whether de facto or de jure;

b. that the defendant directed those directors how to act in relation to the company or that
he was one of the person who did so;

c. that those directors acted in accordance with such directions; and

d. that they were accustomed in accordance with the defendant’s directors.
So what is needed is first a board of directors claiming and purporting to act as such; and a pattern
of behavior in which the board did board not exercise any discretion or judgment of its own but
acted in accordance with the directions of others.”
Expanding on the definition offered in Re Hydrodam, the Court in Re Unisoft (No.3) held that “the
shadow director must be, in effect, the puppet master controlling the actions of the board. The
directors must be (to use a different phrase) the ‘cat’s paw’ of the shadow director. They must be
people who act on the directions or instructions of the shadow director as a matter of regular
practice. The last requirement follows from the reference follows from the reference in the
subsection to the directors being ‘accustomed to act’. That must refer to acts not one individual
occasion but over a period of time and as a regular course of conduct.” The same Court further
held that “unless the whole of the Board, or at the very least a governing majority of it are
accustomed to act on the directions of an outsider, such an outsider cannot be a shadow director.”
And in Secretary of State v Deverell, the Court summarizing the law on Shadow Directors
submitted that
a. The reason the law on Shadow Directors exists is to identify those, other than professional
advisers, who have the real influence in the corporate affairs of the company. While this is
certainly true, it is not necessary, for a person alleging the existence of a shadow director
to show that such influence was exercised over the whole of the company’s corporate
activities.
b. In proving the existence of a Shadow Director, the question of whether any particular
communication from the alleged shadow director, whether by words or conduct, is to be
classified as a direction or instruction must be objectively ascertained by the court in the
light of all the evidence. In many, if not most, cases it will suffice to prove the
communication and its consequence.
c. Even though the cases have used the words “direction”, “instruction” and “orders”, this
does not mean that advice will not count. Non-professional advice may come within that
description, simply because they all share the common feature of one person/entity
guiding another.
d. If you are able to prove that communications were made by the alleged Shadow Director
and you are able to prove the consequence i.e. a pattern of the Board acting in accordance
with the communication, then that would be enough. Implicit in that would be the

conclusion that the Board are accustomed to acting on his advice/instruction/direction. It

is not necessary to demonstrate a degree of compulsion in excess of that.
e. Even though the Shadow Director often lurks in the shadows, it is not necessary to prove
that for him to be recognized as a Shadow Director.
The shadow director is subject to the same duties and liabilities as the duly appointed directors.
Under Section 170(3), the de jure directors, taking instructions from someone else and not
exercising independent judgment, will also be in breach of the duty imposed on him under Section
190(5) to exercise independent judgment, and will thus be liable.
Executive Directors
An executive director is a director who exercises additional responsibilities of in the day-to-day

management of the company. In that executive capacity, the director becomes an employee of
the company.
Managing Director
The Managing Director is special. Section 184 of the Act provides that the board may appoint a
managing director among their number and give him some or all of the powers of the board.
When the managing director is acting individually, but in the normal way that managing directors
act in the ordinary course of business, the law elevates him from a mere officer of the company,
to a principal organ. Unless the Constitution otherwise provides, if his directorship ceases, then
he also ceases to be a managing director
Substitute Directors
Section 180 defines a substitute director as one appointed to act as a deputy to another named
director and to act as a substitute in the absence of the main director. He performs two functions
a. He is a deputy, and
b. In the absence of the substantive director, the substitute acts in his shoes as a substantive
director.
A substitute director is not entitled to vote in meetings where the substantive director is present,
but they must attend meetings for which the substantive director is present and they can make
contributions. They are considered a part of the count when determining quorum for meetings,
however they are not counted for the purposes of fulfilling minimum or maximum requirements
for the appointment of directors. So assuming, the Constitution says you need a minimum of 5
directors, you cannot appoint 3 substantive directors and two substitutes and say you have met
the criteria.

Again, where the substantive director dies/ceases to be a director, the substitute director remains
in that very position; he does not become a substantive director.
The law provides that other than the differences stated above, substitute directors are no different
from full directors. Their removal, appointment, remuneration and, as with any other activity
incidental to directors, is the same as substantive directors, the only exceptions being the ones
stated above.
Substitute Directors are important for reasons of Succession planning. They serve as the memory
of the company
Alternate Directors
Alternate directors are treated under Section 181. Unless the Constitution prohibits it, where a
director is either absent from the jurisdiction or otherwise unable to act, he may either appoint
another director or any other person to act as an alternate director, subject to Board’s approval
through a board resolution.
A number of things are important here. First, the director must be either absent or otherwise
unable to act. Second, it is the director that appoints the alternate. This is the main distinction
between a substitute director and an alternative director; an alternate is appointed by a director
whereas a substitute director is appointed in the same manner as a substantive director.
Third, a director can appoint another director as his alternate. Where a director appoints an
existing director as an alternate director, a resolution of the board is not needed. The appointment
must however be in writing, signed by both the substantive and alternate director, and must be
lodged with the company to have any effect.
The existing director upon appointment acquires two votes. In fact, if more than one person
appoint the same person as their alternate, that person acquires all their votes. However, where
such an existing director (with multiple votes) also has to be absent, and he appoints his own
alternate director, that alternate director only acquires the existing director’s personal vote. The
existing director cannot assign the extra vote(s) he acquired in his capacity as someone’s alternate.
Why? Because it is only a director that can appoint an alternate director. An alternate director
cannot appoint an alternate director. The extra votes that the existing director holds are votes he
holds in his capacity as an alternate director, so he cannot assign those votes simply because he
cannot appoint an alternate in his capacity as an alternate. He can only assign his personal vote,
because he would be doing so in his capacity as a director.
The alternate director is an officer of the company and not an agent of the substantive director.
He owes a fiduciary duty to the company and not the substantive director. As such, he must

exercise independent judgment, and is not under any obligation to obey the instructions of the
substantive director.
If there is a requirement stated in the Constitution that directors are supposed to have shares in
the company, it will not apply to alternate directors. They’re only going to be around for 6 months
at a time anyway, what’s the point? At any meeting of the company where the alternate director
is present, he is to be counted when determining quorum.
Under the Act, there is no additional obligation on the company to make payments to an alternate
director. The Act permits the Constitution to provide that the remuneration that would have been
paid to the substantive should be re-routed to the alternate, but no positive obligation is created.
In practice, some Constitutions state that the remuneration of the substantive director should be
given to the alternate, while others allow for payment for both of them. Without a provision the
in the Constitution, the question of remuneration is to be decided solely between the substantive
and the alternate
The appointment of the alternate director is determined:
a. Upon expiration of time: It’s a maximum of 6 months, but the appointment instrument
may state a lesser time
b. The substantive director may, notify the company in writing, that he has terminated the
alternate director’s appointment
c. The alternate may resign
d. Determination of the directorship of the substantive director
e. Death of the alternate
Keep in mind, until the appointment of the alternate is determined, both of them are directors,
and either of them may act, with the proviso that the alternate may not attend meetings at which
the substantive is present.
See Okudjeto v Irani Bros for a discussion on the types of directors
NB: Note the distinction between Alternate Directors and Substitute Directors.
a. Substitute Directors are appointed the same way as Substantive Directors. If the power of
appointment of Directors is given to an Employee, that employee will have the power to
appoint both directors and substitute directors. However, with alternate directors, it is the
director who appoints, so even if the general power of appointment of directors is given
to a stranger, that person cannot appoint an alternate
b. Again with the substitute director, unless expressly otherwise stated, all the provisions
applicable to the director are applicable to them. That’s not the case for alternate directors.

This includes, for example, the fact that substitute directors enjoy the same term of office
that directors do, but alternate directors are limited to a maximum of 6 months
c. Thirdly, a director cannot be a substitute director, but a director can double as an alternate
director
4.2.3 Duties of Directors

The Act does not pay much attention to the day to day duties of directors. So before getting into
what the general duties of directors are, we must first look at the case of Re City Fire Equitable
Insurance which states that a director is not bound to give continuous attention to the affairs of
his company, because his duties are of an intermittent nature, to be performed at periodical board
meetings and at meetings of any committee of the board which he may serve on. He is not even
bound to attend all the board meetings, just a majority of them.
Now to the Act. Section 190 creates a fiduciary relationship between directors and the company,
and in this relationship, the director is the fiduciary and the company the principal/beneficiary. A
fiduciary relationship exists between parties when one party is placed in a position of
trust/confidence on account of the power reposed in him to act on behalf of the other party. So
in Cudjoe v Conte, the Court summed it up perfectly when it said that “directors of a company are
in a fiduciary position and all the powers entrusted to them are only exercisable in that fiduciary
capacity”. This simply means that the duties of the director are owed to the company, not the
members, even though in certain instances, the directors may have to take the interests of others
into account as long as those interests are not inconsistent with the best interests of the company;
e.g.
a. Shareholders, according to the case of Boohene v GUA

b. Employees, according to Section 190(4)
c. Creditors, especially where the company is in distress, according to Kinsela v Kinsela
At common law, once a fiduciary relationship is created, the fiduciary assumes a number of duties,
key among which include the duty to act honestly and in good faith, duty to act in the best interest
of the principal, duty of care and the duty of loyalty. These common law duties, and others not
mentioned, which are attached to all fiduciary relationships, by virtue of the provisions of Section
5 of the Act, exist alongside the duties expressly provided in the Act.
Section 190 imposes a number of duties on directors. The primary duty of the director is stated in
Section 190(2), and it requires the directors, in exercising their powers, to act in what they believe
to be the best interests of the company; Cudjoe v Conte. Acting in the best interests of the
company means in all their activities, directors must ensure that
a. they preserve the assets of the company

b. further its business and

c. promote the object/business of the company.
The director must, after considering these three factors, act in a manner which a faithful, diligent,
careful and ordinarily skillful person, in his position, would in his or her decision making. Diligence
requires looking at the
a. the likely long term consequences of any decision that is taken on the company and its
internal stakeholders
b. the impact of the operations of the company on its external stakeholders, and
c. the desirability of the company maintaining a reputation for high standards of business
conduct.
Section 190(1) also imposes on directors a duty to act in the utmost good faith in their transactions
with the company and when they are entering into transactions in the name of the company. This
simply requires the directors to exercise their powers transparently and honestly, seeking only the
best interest of the company, and no other collateral purpose; JJ Harrison v Harrison.
In Charterbridge v. Lloyds Bank, the test was stated as follows; “Whether an intelligent and honest
man in the position of a director of the company concerned could in the whole of the existing
circumstances have reasonably believed that the transaction was for the benefit of the company.”
And so even though in Re City Fire Equitable Insurance, the court held that, the director is not
bound to attend such meetings, only a majority of them, the case of Dorchester Finance v Stebbing
is authority for the position that if the absence of the Director results in losses for the company,
he could be held liable. Because the test is really whether the acts or omissions of the director are
such as would further the best interests of the company.
Flowing from this, there is a further duty placed on directors to avoid conflicts of interest in the
exercise of their powers. Conflicts may arise where a director has a direct or indirect personal
interest in a transaction with the company. For example, where the director wants to enter into a
contract with the company; or where the director owes a duty to the third party who wants to
contract with the company; or where the director has shares in another company that wants to
contract with the company which he is a director of. All of these are conflict of interest situations.
In these situations, to ensure the company does not avoid the contract or demand an account of
profits, the director has to fully disclose his interest to the company, either prior to the transaction
or within fifteen months after the transaction first occurred. After disclosure, the company will
have to authorize/consent to/ratify the transaction or waive the conflict, either through the Board
of Directors or the Members in a General Meeting (particularly in the case of ratification, because
the members must ratify no later than fifteen months after the ratification first occurred. See
Sections 192-194

Disclosure must be made in the manner required by Section 194. Under Section 194(2), a director
who is directly or indirectly interested in a proposed contract that the company could enter into
must make the disclosure of the nature and extent of his interest at the meeting at which the
contract is to be considered or, if he is not there that day, at the next meeting. Where he becomes
interested in the contract after it is made, then he must disclose his interest at the first directors
meeting after he comes interested.
Disclosure may also be made by a general notice in writing to the Board, under Section 194(4), if
the notice states the nature and the extent of the director’s interest, he ensures that the notice is
brought up and read at the Board Meeting at which the contract will be considered, and at the
time of the meeting, the nature and the extent of his interest has not seen any upward adjustment.
Disclosure made by notice will only be effective for 12 months, so if the contract is not executed
within 12 months, he will have to do a new notice.
The interest of the director must, after the disclosure, be registered in the Interest Register of the
Company. The Act also bars any director from binding the company into a contract if he knows
that another director has an interest in a contract, until disclosure is made and the Board pass a
resolution to enter the contract. But in all cases, disclosure is not necessary where the interest of
the director in a public company which wants to enter into a contract with the director’s company
is less than 2% of its shares. The Act says that that is not material enough.
At the Board or General Meeting where the contract will be considered, neither the interested
director/member nor his proxy can be present, and neither can vote, except in cases where the
director is taking on personal liabilities for the benefit of the company. For example, where the
interest of the director in the transaction is that he is lending the company money, and they are
giving him security. Or the company is incurring a liability and the director is undertaking to
guarantee or indemnify the company. Or where the director is taking shares by subscription or
underwriting shares or debentures for the company. In these cases, the director can be present
and vote at the meeting.
There is also a duty to not compete with the company. This is a specie of conflict of interest and
it arises where the director is interested, whether directly or indirectly (in any capacity other than
being a mere shareholder or debenture holder of a public company), in a company whose
business/object is in competition with the company he is a director of.
Conflicts may also arise where the director uses any money, property, confidential information or
knowledge that either belongs to the company or which he came into as part of his work for the
company, to his own personal advantage or for his own personal purposes.
Section 190(3) also requires directors to act in accordance with the constitution of the company
and exercise their powers for the purposes for which those powers were given to them. They may

not exceed the powers given to them by the Act and/or the Constitution, even if they believe it is
in the best interest of the company, unless the members authorize it with an ordinary resolution
under Section 191. Where a single director contravenes this, he will be personally liable to pay to
the company or to any other person, the amount of moneys lost to the company or to the other
person or the monetary value of the damages caused to, or suffered by, the company or that
person as a result of the failure, act or omission of the director. If it’s the Board of Directors who
exceeded their powers, then they will be jointly and severally liable in the same way.
In exercising their powers, directors must act independently and exercise independent judgment,
and must not allow themselves to be directed in their duties by anyone else, not even the
members; Section 190(4). This also means that they directors cannot fetter their power to act in
the best interest of the company or contract it away. This is why Section 188 does not allow voting
by proxy at directors meetings.
Civil liability
4.2.4 Remuneration of Directors

Outside of insurance benefits, end of service benefits/compensation, and other indemnities which
may be provided for by the Constitution, remuneration payable to directors is to be determined
from time to time by an ordinary resolution of the Company. Where the members resolve to pay
directors fees, the default position of the Act is that those fees accumulate on a day-to-day basis,
and are distinct from the compensation the director is entitled to for travelling and incurring other
expenses in attending and returning from meetings or any other expense he properly incurs in
connection with the business of the company.
Now Executive Directors aren’t just directors. They are directors who also serve the company as
employees. As employees, they are entitled to remuneration by virtue of the laws of Ghana. In this
capacity, their remuneration is to be determined by the Board of Directors, subject to approval of
the members by ordinary resolution. In determining the remuneration of executive directors, the
directors are required to take into account their fiduciary duties and to ensure that the
remuneration is commensurate with the services to be rendered by the holder of the office. See
section 183(d) and Section 185. Also, see section 214 which provides that a director, in whatever
capacity, cannot be paid tax free remuneration by the company.
Professor Gower’s speaking on the rationale behind the requirement of an ordinary resolution,
even for Executive Directors, said that “I am hopeful that this section will do much to prevent one
of the most common abuses, namely, running companies, for the sole benefit of the directors who
take everything by way of' remuneration leaving nothing for the shareholders. I can see no reason

why it should prove unduly, restrictive; it merely forces directors to come clean and to justify
themselves to the shareholders instead of being sole judges in their own cause.”
In practice, however, most companies avoid this scrutiny by getting shareholders to pass
resolutions authorizing the directors to determine the remuneration and other emoluments of
executive directors, without the need for an ordinary resolution every time.
4.2.5 Meetings of the Board of Directors

The purpose of section 188 is to provide a liberal regime within which directors can meet to
deliberate on the company’s business. It allows them to make their own procedure as may suit
the particular circumstances. Some key points are as follows:
a. Any director can call a meeting;

b. No statutory notice period required for directors meetings. They can determine this
themselves;
c. A director outside the jurisdiction need not be given notice of a meeting;
d. The directors may decide their own quorum for meetings. The default quorum
requirement is 2;
e. Proxy voting is not permitted at director’s meetings;
f. Directors can take decisions by written resolution.
A company is required to keep a minute book of all meetings of directors and committees of the
board. Minutes signed by the chairman of the meeting or chairman of the next meeting shall be
deemed to be prima facie evidence of what took place at the meeting. Unlike minute books of
general meetings, the members are not entitled to inspect the minutes of directors' meetings.
Minutes of directors’ meetings may become available to shareholders in the context of litigation
pursuant an order for discovery.
4.2.6 Cessation of Directorship

Vacation of Office of Directors
Under Section 175, a director is deemed to have vacated his office:
a. if he becomes incompetent to act as director under Section 173 of the Act i.e. if he
becomes of unsound mind or if he falls foul of the provisions of Section 177 which mostly
involve bankruptcy, dishonesty and criminal behavior.
b. if he fails to meet a share qualification requirement under Section 174. Note: Ordinarily
directors are not required to hold shares in a company. The Constitution of a company

may however require that directors should hold a certain minimum number of shares in
the company. If the Constitution of a company include such a requirement then every
director of the Company is required to acquire the shares within 2 months after his
appointment or such shorter period as may be imposed by the Constitution. A person who
fails to acquire the relevant number of shares shall be deemed to have vacated his post,
and cannot be reappointed until he has acquired the
c. if he resigns by notice to the company; or
d. he vacates by any other means provided for in the Constitution of the Company.
Removal of Directors
Section 176 of the Companies Act allows a company to remove any director by ordinary resolution
notwithstanding any provision in the Company’s Constitution or in any agreement with director.
So even if the power to appoint and remove a director is given to someone other than the
members, in the Company’s Constitution, or if the members enter into an agreement with a
director to appoint him for life, they can still remove that director and any other director, by
ordinary resolution. In Okudjeto v Irani Brothers, the Court said that Section 176 (1) vests
shareholders with the absolute right to determine who manages their business. The court will
therefore hesitate to interfere in the exercise of the right, except in cases of procedural
irregularities or oppressive and discriminatory behaviour.
The procedure for removing a director is stated in the same section. It provides that a director
cannot be removed at any meeting unless at least n 35 days’ notice of the intention to remove
him has been given to the company. When the company receives a notice of an intention to
remove a director, it is required to send a copy of the notice to the relevant director immediately.
It must then circulate the notice to the members of the company in the same manner as notices
of a meeting are usually circulated.
The relevant director is entitled to:
a. be heard at the meeting;

b. send a written statement to the company, which shall be circulated to all members
Note however that there are two circumstances under which the company may decide against
circulating the statement. If the company receives the statement less than 7 days to the meeting,
then they are under no obligation to circulate it. If the statement is unreasonably long or the
director in question is abusing his rights for the purposes of publishing something defamatory,
then the Company may apply to the Court for an order to not circulate it.

Now there are two schools of thought on whether following the procedure Section 176 is
mandatory, one of which is espoused by the case of Pinamang v Abrokwa, and the other, Adams
v Tandoh. In Adams v Tandoh (1985), the Court held that a Managing Director, who had
committed acts of serious fraud and criminal misconduct in his dealings with the company, and
had thereby breached his fiduciary duties, could be summarily dismissed, both in his capacity as
a Director and as a Managing Director. The reason the Court gave was that the relationship
between the Director and the company was, notwithstanding the provisions of Section 176, also
guided by common-law principles of Master-Servant, and at common law, the Master could at
any time dismiss the servant. Further, the conduct of the Managing Director had been so
prejudicial to the interests of the company that it would have been against the company’s best
interests to keep him on. Swift action was therefore absolutely necessary to safeguard the interests
of the company.
We may thus sum up the ratio in Adams v Tandoh as follows. Generally, the provisions of Section
176 must be followed. Where, however, it is expedient or in the best interests of the company that
the process is bypassed, then the process can rightly be bypassed. One such instance where it
would be in the best interests to bypass the provision is where the director in question is
manifestly guilty of actions that are or have been seriously prejudicial to the company. In that
case, swift action would be required to preserve the interests of the company.
However, according to Pinamang v Abrokwa (1990-91), to remove a director, the procedure under
Section 176 of Act 992 is mandatory. If you attempt to remove the director under 176 and it does
not work, then you can go under Section 219 (oppression). Pinamang v Abrokwa is also bolstered
by the case of NTHC v Boyefio which says that where a statute has provided a process by which
something should be done, following that process is compulsory.
The Adams v Tandoh position is certainly favourable especially, if you look at Section 29(2) which
allows the company to give the power to hire and fire a director to anyone. What happens if that
power is given to a stranger to the Company? He is not entitled to vote at general meetings, and
so if the procedure must be followed, then how will he exercise his rights to remove? I submit
however that the two positions aren’t necessarily incompatible with each other. In all other cases
other than those contemplated by the Adam v Tandoh ratio, the Pinamang ratio must be followed.
The case of Okudjeto v Irani Bros. also contemplates what happens where the power to appoint a
director is given to a stranger or a minority class or an employee or anyone other than the
members as a collective, and the members keep using an ordinary resolution to remove whoever
the person appoints. In construing the predecessor to Section 176, the Court said “It seems
therefore that a resolution to remove a director can fall within the provisions of section 218 if it is
found to be oppressive, or prejudicial, or discriminatory, or in disregard of the interests of a
member. In this case, however, there is no evidence that the members at the general meeting do
not want the class "B" shareholders to be represented. The members do not want a particular

director appointed, and I think the provisions of section 185 that the general meeting can remove
any director “notwithstanding anything in its Regulations" would be rendered meaningless if such
a decision of the shareholders in circumstances such as appear in this case were held to be
oppressive or discriminatory, etc. The class "B" shareholders are free to nominate another person
as director. It is only when every person nominated by them is rejected that the court may
legitimately draw the inference that the shareholders at general meeting are trying to deprive the
class of representation on the board, and therefore stamp their conduct or acts as discriminatory
or oppressive”
Retirement
Go to the appointment of directors by members for an explanation of retirement
4.3 MEMBERS
Where a company is incorporated with shares, the members are better known as the shareholders.
Where the company is limited by guarantee, its members are referred to as members or
guarantors. For the purposes of these notes, members and shareholders shall be used
interchangeably.
4.3.1 The Limited Power of Members to Administer the Business

By Section 170, the power to administer or manage the business of the company is vested in the
Board unless otherwise provided for by the Act itself or by Constitution. If the Constitution doesn’t
vary the default position stated by the Act, then the shareholders cannot exercise powers properly
vested in the Board. So we may recall the case of Shaw v Shaw where the Court held that once
the power is given to the Board, that power cannot be exercised by the shareholders, and the only
way the shareholders can control, override or go around this is to
a. amend the Constitution to take certain powers unto themselves or

b. exert pressure on the directors by exercising or threatening to exercise the power to
remove the directors, and appoint new ones who will do their bidding.
Outside of the workaround provided in Shaw v Shaw, Section 144 of the Act, provides certain
limited instances where members are allowed to act in the administration of the business of the
company.
These instances are stated as follows

a. Where there is a deadlock on the board, the members will have the power to act.
b. Where the directors are disqualified from acting, the members will have the power to act.
c. Where the directors fail to take legal proceedings on behalf of the company, the members
have the power to act
d. Where the members are required to ratify or confirm an action taken by the board, the
exercise of that power to ratify is them acting
e. Where the recommendations of the members is required regarding an action to be taken
by the board, then the exercise of the power to make recommendations is them acting.
4.3.2 Becoming a Member of a Company

To recap a number of foundational rules; it’s already been stated in these notes that for private
companies, the maximum number of members (and debenture-holders altogether, if there are
any) is 50. It’s also already been said that there is no limitation on the number of members public
companies can have. Again, in companies limited by shares, each member must hold at least one
share, which is why we call them shareholders.
Now, the Act treats members as very important to the existence of the company. In fact, under
Section 46, one of the ways in which the veil of incorporation may be lifted, and liability imputed
to the directors, is if the company carries on business or incurs liability without having any
members. But curiously enough, despite this, the Act doesn’t actually define who members of a
company are. What the Act does is tell us how a person can become a member of a company.
So under the Act, a person can become a member of a company in four ways
By Subscription: The First Schedule defines a subscriber as a person who applies for the
incorporation of a company. That person has to be at least 18 years of age, and must sign the
application. If it is a company incorporated with shares, he must also write beside his name the
number of shares that he is taking in that company and the amount he’s paying for the shares.
See Section 13
Those who become members by subscription are referred to as the first members of the company
or the founding members or original members. They are called that because they are the people
who gave their intention to become members of the company even before the company was
incorporated. And once the company was incorporated, they becaime entitled to have their names
entered into the register of members. See Section 33(1).
By Agreement: Members by agreement become members of the company based on an

agreement with the company subsequent to the incorporation of the company. The agreement

must be a valid agreement under all contract law principles. Once the agreement is valid and in
force, your name must be entered into the register of members.
Remember, there are two condictions
a. The existence of a valid agreement

i. If it is a company limited by shares, the agreement will be an agreement to acquire
shares in the company.
ii. If it is a company limited by guarantee, the agreement will be an agreement under
which the company confers membership on that person and the existing members
of the company approve that agreement by resolution. See Section 9
b. Entry of the name in the register of members. However, in Adehyeman Gardens v Assibey,
it was held that entry in the name of the register of members is mainly evidentiary. Failure
to enter the name in the register, subsequent to a valid agreement, will not nullify the fact
of one’s membership.
By Transfer Of Shares: This is where a person who is already a shareholder of a company

incorporated with shares makes someone else a shareholder by transferring some or all of his
shares to that person. For that other person to be a shareholder, there must be a valid transfer of
shares.
Do not forget the provisions of Section 98 which says that unless the Constitution of the company
otherwise provides, shares are transferrable without restriction by a written transfer in common
form. And so, the takeaway is that once you are a shareholder, if the Constitution doesn’t limit
your right, then you are free to transfer your shares however you wish, as long as you are doing
so pursuant to a written instrument.
The restriction becomes especially relevant when we recall the fact that private companies must
necessarily have a restriction on the transferability of their shares stated in their Constitution. So
with them, any transfer of shares must be done in accordance with those restrictions, in addition
to the requirement of a written instrument signed by both the transferor and the transferee.
But public companies have no such restriction (again, other than the requirement of a written
instrument signed by both the transferor and the transferee). In fact, Section 322 says that if the
registered constitution of a public company purports to place any restrictions on the
transferability of shares, that restriction shall be void.
Section 101 says that once the transfer agreement is concluded, either of the transferor or the
transferee would have to lodge the written instrument of the transfer with the company, as well
as the original share certificate that was given to the transferor. Recall that when a person acquires
shares in a company, the company is supposed to give them a share certificate within two months

of their being issued with the shares. That share certificate contains the amount of shares that was
issued to the transferor and serves as prima facie evidence of his shareholding. So assuming he
had 1000 shares, and he has transferred 500 to you. That share certificate must be given back to
the company alongside the written instrument so that they can register the transfer and the new
shareholder and issue new share certificates that reflect the current shareholding of the two of
you.
By transmission of shares by operation of law: Two situations are envisaged here under Section
102.
a. The first is when a shareholder dies. His shares are transmitted (i.e. devolved) by operation
of law to another person.
i. So when the shares are held by a sole shareholder, they devolve onto his personal
representative. The executor or administrator, as the case may be, automatically
becomes a shareholder and is registered.
ii. Where two or more shareholders hold shares jointly, the right of survivorship
applies.
b. The second scenario envisaged is where a shareholder is declared bankrupt or insolvent.

Here the shareholder is unable to satisfy his liabilities when they fall due. A receiver or
trustee in bankruptcy will be appointed to manage his affairs. Once that person is
appointed, they must automatically be registered as the holder of the shares that he
owned.
4.3.3 Rights & Responsibilities of Members

Now once you become a member or a shareholder, you do not technically own the company.
What you acquire is certain rights and responsibilities in relation to the company.
Ascertaining the totality of the rights a person is entitled to as a shareholder is done by reference
to the Constitution of the Company and then the Companies Act. It is these two documents that
define the scope of the rights of a member.
The Act provides certain generic rights that a shareholder acquires
The Right To Attend And Vote At General Meetings: Under the Act, every member has the
right to attend and vote at General Meetings.
The Act however allows the Constitution to take this right away if you fail to pay for the shares. If
the Constitution contains such a provision taking the right away, then the Constitution will apply,
and you will not have the right to attend and vote at General Meetings unless you pay. See Section
34

The Act, in Section 52, also allows for the company to suspend the right of preference shareholders
to attend, speak and vote at General Meetings, except in circumstances where the resolution to
be moved at the meeting involves
a. The removal of the auditor

b. Variation of their class rights
c. The winding up of the company
d. Any decision that is to be taken, during the period after the preferential dividend has been
in arrears for more than 12 months, or any other lesser period that the Constitution of the
company may provide
The Right To Share In The Profits Of The Company: Where the company, as a going concern,
makes profits and declares some of those profits as dividends of the company, the members will
have a right to share in those profits.
Sections 72-76 deal with the test of distribution of dividends. For a company to declare dividend,
first there must be retained earnings, because dividend can only be paid out of retained earnings
of the company. Second, the Board must satisfy itself that payment of dividend will not affect the
ability of the company to discharge its liabilities when they fall due.
The procedure is for the board to recommend declaration of dividend for shareholders to declare.
The declaration of dividend is done by the shareholders, but it has to be based on what is
recommended. So let’s say that the company made profit of 900,000 but the board recommends
that you pay dividend of 600,000. The members cannot pass a resolution to declare any dividend
that is more than that 600,000. They can go below, but they can’t go above. If the board
recommends zero dividends, shareholders can’t declare 1 cedi in dividends. All they can do sack
the directors, but even the newly appointed directors appointed to replace the sacked ones cannot
retrospectively change the recommendation
The Right To Share In The Distribution Of The Net Assets Of A Company Incorporated With
Shares.
The Right To Have Your Name Entered In The Register Of Members. According to Section 39,
entry of your name in the Register is prima facie evidence of your membership of the company.
Section 35 tells you the particulars that must be in the Register. Section 36 tells you that you have
the right to inspect the Register. If you discover a mistake or an omission, you can apply to the
Court for an order of Rectification, under Section 38. The Register may be closed for up to one
month, under Section 37, to enable the company clean it up.
Once you have rights there are responsibilities or liabilities. Some of them are as follows

Responsibility to Observe the Constitution: A member is under a responsibility to observe the

Constitution. If you look at Section 29(1)(b) it says that the Constitution has the effect of a contract
between and among the members and officers of the company, by which they undertake to
observe the functions stated in the Constitution as they relate to the company. If they fail to do
so, they will be in breach of that contract and so they can be sued.
Responsibility to Pay for Shares: Shareholders are liable to pay for the shares that they acquired
from the company, and that payment has to be in compliance with the terms of issue or the
agreement pursuant to which they acquired the shares in the company. Recall that under Section
45, shares can never be issued by the company for free. But that is different from an existing
shareholder transferring his shares to another person. That existing shareholder can transfer it for
free. It is the company that cannot issue shares for free.
Again, if we look at Section 40, it says that before winding up of the company limited by shares, a
member of the company is liable to pay the balance remaining unpaid on his shares. It also says
both a member and a past member is liable to contribute to the assets of the company in the
event of winding up, but for a past member to be called to contribute to the assets of the
company, two conditions must be satisfied.
a. The existing members must be unable to satisfy the contributions required by them on the
shares they’ve taken
b. The cessation of the past member’s membership must have been for a period of less than
a year
And even then you cannot ask the past member to contribute more than the amount remaining
unpaid on the shares that he had when he was still a member. If it is a company limited by
guarantee, then the maximum amount the member must pay is the amount he undertook to pay.
If it is an unlimited company, and you are the shareholder, then God help you. Shalom
Finally, Section 40 also says a shareholder is liable to pay whatever is outstanding should the
company make a valid call on the shares.
4.3.4 Termination of Membership

Under Section 33(6), membership in a company may be terminated in a number of ways
Valid Transfer Of Shares To Someone Else: Remember this is done by a valid agreement +
registration of the transfer. Once you transfer all your shares to someone else, you cease to be a
member.
Termination By Transmission Of Shares By Operation Of Law: Recall how when you die or are
declared bankrupt, your shares are transmitted by operation of law to someone else?

Forfeiture: Here the shareholder’s shares are forfeited for non-payment of a validly made call –
Section 61(3) and Section 33(6)(b)
Retirement & Exclusion (firing): Only for a company limited by guarantee.
4.3.5 General Meetings

If you have a set of facts before you indicating that an act is binding on a company because it has
been done by members in a General Meeting, you have to ascertain two things to determine that
the act is indeed binding on the company.
The first is whether the act was indeed done by members of the company. If Kojo, Ama and Kwesi
purported to pass a resolution to engage in a transaction, and the other party is alleging that that
the transaction is binding on the company, your first point of inquiry is whether Kofi, Ama and
Kwesi are members. How did they come to be members? Was it by subscription, did they acquire
the shares by agreement with the company, transfer of shares or by transmission of shares by
operation of law.
The next thing is that you have to satisfy yourself about is whether they acted in a General Meeting
i.e. whether the meeting was properly convened, properly conducted and properly closed? This
corollary of this is that you cannot simply say that an act is binding on the company simply
because you’re told that five people are members of the company, three of them have met
somewhere and done something and so you think to yourself that well that is the majority and so
it must be binding. That’s not how it works son.
These things tend to acquire relevance to lawyers when their clients participate in meetings and
are looking for specific outcomes, and when their clients don’t get those outcomes, they ask their
lawyers to find a way around the decision that was taken. So your job as a lawyer would be to go
through every single provision in the Constitution that governs General Meetings and find
something that wasn’t complied with.
So there are two types of meetings under the Act
a. Annual General Meetings, dealt with under Section 157 of the Act
b. Extraordinary General Meetings dealt with under Section 158 of the Act
Annual General Meetings are meetings that must be held every year. That’s why they’re called
“Annual”, d’oh. Even though AGMs are supposed to be held every year, the requirement of the
law is that the time gap between the last AGM and the next AGM should not exceed 15 months.

The only exception is the first AGM after the company is incorporated. With that, you have a
maximum time gap of 18 months after incorporation. So if you incorporate in October of 2021,
you won’t need to hold an AGM within 2021 or 2022. Because 18 months takes you to October
2023 (I had to spell it out, I could literally see you scratching your head. You were confused weren’t
you?)
On whatever date the AGM is scheduled, the directors must make sure that the AGM is held no
less than 21 days after the circulation of the financial statement, director’s report and auditor’s
report. This is to give the members time to go through it.
Under the Act, having an AGM is mandatory. There is only one exception i.e. where all the
members of the company + the auditors have a written agreement to waive an AGM for a
particular year. You cannot waive an AGM for multiple years at a time, you can only waive for a
particular year at a time. So if you are skipping out on AGMs and you don’t have written
agreements to waive them, the law provides that the Registrar can on her own, or upon a report
being made her, convene an AGM for the company. See Section 157.
Outside of that it is generally the responsibility of directors to hold an AGM. Now assuming the
Company has made the decision to waive the AGM, then two weeks after the directors realize
there is something that the Company needs to meet on. What do you do? You have an
Extraordinary General Meeting. See Section 158.
Section 158 says that an EGM may be convened by directors whenever they think fit. And if at any
time there aren’t enough directors in the country capable of forming a quorum for a Board
meeting, a director can convene an EGM so that the members in a General Meeting can act on
behalf of the company.
On the face of it, the directors are the ones given the discretion to hold the EGM i.e. when they
think fit. But the rationale behind an EGM is for members to meet, not for directors to meet. So
why should directors have that discretion? Assuming members are unhappy with a particular
director who is powerful or well liked among his colleagues. Members requisition an EGM with
the agenda communicated to be the removal of that particular director. The directors receive the
requisition notice and start to abuse the process by ignoring it.
This is why Section 299 has provisions to ensure that this doesn’t happen in relation to private
companies, and Section 324 has provisions to ensure same doesn’t happen in relation to public
companies
Section 299 states that if
a. Two or more members of a private company or;

b. A single member holding 10% or more shares of the company or in the case of a company
limited by guarantee, at least 10% of the voting rights
requisitions a meeting, the directors must within 7 days of receiving the requisition convene the
meeting to be held on a date not later than 28 days from the receipt of the requisition. So within
7 days they must schedule the meeting, send out notices etc. otherwise they will be deemed to
have failed to convene.
If they don’t do it within the 7 days, the requisitionists can convene the meeting themselves, at
any time within 4 months from the date the requisition was received by the directors and they will
charge the expenses incurred in the convening of the meeting on the company and the company
will take it out of the directors fees.
In the case of a public company, the requisitionists must hold at least 5% of the shares or voting
rights of the company as the case may be. The directors have 28 days to schedule the meeting
and send out notices and do all that stuff for the meeting to be held at a date not later than 28
days from the day they received the requisition notice. All other provisions remain the same
Remember, it is the director’s duty to manage the business of the company, not the members.
You’re asking the director’s to cut their own pay because members went ahead and held an EGM
that they didn’t want to hold. If the directors don’t want to take that money out of their pay, how
do the members enforce that? They do that under Sections 199 and 200, which states that a
member can sue to enforce liabilities for a breach of duty against directors.
Luguterah v Northern Engineering
The only persons entitled to convene an extraordinary General Meeting are the directors.
A shareholder qua shareholder without any prior requisitioning of the directors in terms of
[section 299] has no statutory right to convene such a meeting. All that a shareholder as a member
can do is to prevail on the directors by requisition to convene one and it was only after failure to
secure one that the member might then convene one in accordance with the provision of [section
299]. In the instant case, the meeting convened by the secretary of the company
See also Politis v Plastico No. 2, Lugutherah v Northern Engineering, Hamer v BML, Re Sticky
Fingers
So it’s established that Directors are the ones who have the power to convene an AGM. If the
directors don’t do it, the next person is the Registrar, either by herself or upon application of a
member or officer. Where it’s an EGM, it is the directors who convene it. If the directors don’t
convene it, the members can. In either case, nothing stops anyone from going to Court to seek
an order to compel the directors to convene a meeting.

In fact, Section 162 says that where 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 company’s registered constitution or
the Companies Act, the court may, on the application of a director or member of the company, or
of the Registrar, order a meeting of the company to be called, held and conducted in the manner
directed by the Court.
In Re El Sombrero Ltd [1958] 3 All ER 1, the court held that the focus of a similar English statute
was the scope of the word “impracticable”. In the court’s view the question was whether as a
practical matter the meeting of the company could be conducted in the usual manner.
So, where as a practical matter the conduct of members prevent meetings from being held in the
usual way, then the Court may call the meeting. In Re British Union for the Abolition of Vivisection,
an application was made to the court for a meeting, attended by only 13 out of the company’s
9000 members, to be called for the purposes of amending the company’s Regulations to introduce
voting by proxy and postal ballot because meetings of the company were ending in violence and
threatening a breach of the peace. The court held that it was a proper case to exercise its
jurisdiction to call a meeting since the conduct of the radical minority had rendered it
impracticable for meetings of the company to be conducted in the usual manner.
Again, where members are using quorum provisions to abuse the statutory rights of the majority,
the Court may exercise its discretion to call the meeting. In such cases, the court distinguishes
between such cases and where there is a class right and cases where there is an intended equality
of power. In El Sombrero, the plaintiff held 90% of the shares of a company. The company had 3
shareholders. The quorum for meetings for the company was 2. The 2 other shareholders refused
to come to meetings rendering them inquorate because the plaintiff intended to remove them as
directors. The Plaintiff applied to the court that it has become impracticable to hold a meeting of
the company and therefore the court should order a meeting at which the quorum should be one.
The court held that it was a proper case to exercise its discretion because failing to do so would
have denied the applicant of his statutory right to remove the directors and appoint new ones.
However, where a quorum provision has been included in the Constitution or a Shareholders’
Agreement as a class right, the Court cannot override that provision. In Harman v BML, a meeting
was proposed to remove two directors who did not have the protection of a shareholder’s
agreement. There was a quorum provision that stated that if one class of shareholders was not
present, the meeting would not be quorate. The order was sought by shareholders of one class,
and if the order was granted it would have had the effect of overriding the class rights of the other
class. The court held that it did not have a power under section 371 to order a company meeting
to be held for one of shareholders over another class. It was not right to invoke the section to
override class rights attached to a class of shares which had been deliberately imposed for the
protection of the holders of those shares although they were a minority.

And where there is equality of shareholding coupled with a requirement that both shareholders
should be present at meetings for the meeting to be quorate, it would not be appropriate for the
Court to call a meeting. In Ross v Telford, it was held that the provisions of the section could not
be used to break a deadlock between 2 equal shareholders where it was intended to protect the
interest of either shareholder.
Venue (Section 159)
Unless otherwise stated in the Constitution, if the company is incorporated in Ghana, the venue
of the meeting must be in Ghana. It is possible for you to provide for meetings by telephone
conference or Zoom etc. So if you contemplate using those methods, then provide for it in your
Constitution
Notice (8th Schedule)
Other than adjourned meetings, all General Meetings must be convened by a notice in writing to
those who are entitled to be notified of the General Meeting. Those entitled to notice are
a. Every member of the company

b. Every person on whom shares devolve by reason of the fact that he’s a deceased
shareholder’s legal personal representative
c. A receiver or trustee in bankruptcy
d. Every director of the company
e. Every auditor
The default position is that the notice must be in writing and, served according to the dictates of
Section 290, which deals with service of documents by a company. Service by (not on) a company
is done by
a. serving the person personally or

b. posting the document to the registered address of the individual being served, in which
case it is deemed to be served after 48 hours have passed or
c. leaving it at the registered address of the individual with a person that appears to be 16
or above or
d. dispatching it via airmail, for persons resident outside Ghana.
You can also provide for a different method of service in your Constitution. You can say notice will
be communicated via email or via publication in a newspaper of national circulation.
The minimum length of notice that must be given is 21 days. You can provide for a period more
than 21 days in your Constitution though, just not less. In counting the 21 days, note that we do
not count the date of service of the notice, but we count the date of service of the meeting as

part of the 21 days. If multiple people are to be served and they are served on different days, you
start counting from the day after the last person is served. Even if it is the Registrar convening the
meeting, she must comply with the 21 days or if there is something else stated in the Constitution,
she must comply with the Constitution.
But get this. With an AGM, if all the members meet and decide to proceed with the meeting at a
date shorter than the notice period, then notwithstanding the fact that the 21 days hasn’t come
to pass, For an EGM, you need members with 95% of shares or voting rights (for company limited
by guarantee) to waive the requirement of 21 days notice.
There are certain specific things that must be in the notice.
You must state the place of the meeting with the utmost specificity, right down to the last detail.
You can’t just say Golden Tulip. You need to state the specific name of the Conference Room or
the Room Number
You must be specific about the date and time. Again, you must be precise. The time especially is
very important because the Act has certain consequences attached to time. If, for example, the
meeting has no quorum for 30 minutes after the time stated, the meeting will stand adjourned.
And if it is a meeting requisitioned by a member, it should be dissolved. If you have the meeting
in breach of this rule, it can be invalidated.
You must state the general nature of the business that is to be transacted at the meeting in
sufficient detail to enable people to make a decision as to the decisions that may be taken. That
is what is known as the agenda. What amounts to sufficient notice of the matters to be discussed
at a meeting of shareholders is a question of fact in each case. Depending on the complexity of
the matter and its potential impact on the financial interest of shareholders, an explanatory
memorandum may be required to explain the import and consequences of the proposed
resolutions.
In Re N. Slater, a company sent to its shareholders a notice for a meeting setting out a plan for an
arrangement or compromise between the company and its shareholders. The plan involved a
conversion of shares into different classes. Attached to the notice for the meeting was a letter
from the President of the Company stating the reasons why the directors of the company were in
favour of the plan. The company’s shareholders approved the plan by a three-fourths majority at
the meeting called for that purpose. A dissenting shareholder brought action to challenge the
validity of the resolution on the grounds of insufficient information provided to shareholders
because the information provided failed to provide adequate information on the financial aspects
of the advantages and disadvantages of the proposed plan. The Court held that the objection
should prevail because the statement of the President of the company simply stated that “… the
directors favoured the proposed conversion in order to maintain the company’s liquid position

(which was not explained) and to meet its immediate expansion requirements (which were not
disclosed)”, and for that Court this was not good enough. The Court laid down the principle that
a shareholder is entitled to such information as will permit him to reach his own decision.
Also where, for example, the meeting is to consider a special resolution, the terms of the resolution
should be set out in the notice. In Boohene v. GUA and Dan Ofori and Ghana Commercial Bank,
the High Court held that in the case of a rights issue with a potential for diluting the interest of
shareholders who do not participate, it was the duty of the directors to provide the shareholders
with adequate information to allow them to make an informed decision on the matter being put
before them. The court held in Boohene that the right of shareholders to attend, speak and vote
at a meeting under Section 31 of the Companies Act implies a right to be provided with
information to exercise those rights.
In Peel’s Case, the issue before the court was whether the directors of a company had a duty to
issue circulars with the notice of a meeting explaining the reasons behind the resolutions
proposed for the meeting. The court held, at page 5, as follows:
The question is not whether the directors have the right to issue these circulars, the question is
whether they have a duty – a duty which might reasonably involve the issue of circulars…Is it to
be said that the board of directors of a company …who have had to adopt a particular policy …
have not the positive duty to inform the shareholders what have been the reasons for the policy
which has theretofore been adopted and why they think the policy should be maintained in the
future. I cannot myself understand anyone having a doubt as to the directors having such a duty.
They are not to abstain from their duty to give information to the shareholders of the company
as they think as they think may be desirable for them interest of the company because of the
accident that a certain number of shareholders take the view that the policy theretofore exercised
by the directors has been a wrong policy. It is their duty to give information to the shareholders
of the facts, which they think justify the policy. It is their duty to put forward to the company those
reasons, which they think justify the policy, which the company with their assistance as managers
has adopted…
Act 992 provides that you cannot transact any business at the General Meeting for which notice
has not been given. As a way around this, Company notices tend to include “AOB” at the end,
presumably as an omnibus provision allowing for the discussion of other things not stated in the
notice. For the avoidance of doubt, “AOB” is not sufficient detail. Once it’s not on the agenda, you
cannot meet and decide that you just remembered something so you want to discuss it and
subsume it under AOB. That one de3, the law says your morda. That AOB de3, it should be who
bought the latest car and next weekends odds.
But if you state that the business of the meeting is the ordinary business of an annual General
Meeting, then that is sufficient detail for notice of the following;

a. That you are going to declare dividends

b. That you are going to consider the financial statements, report of auditors and directors
c. The election of directors in place of those retiring
d. Fixing of remuneration of auditors
e. Removal and election of auditors and directors
Ordinary business of an AGM means these 5 things, so you don’t need to state them in extenso
after you’ve written “Ordinary Business of an AGM” in your notice.
Finally, if, by accident, you failed to give a member (or any other person entitled to the notice)
notice of the meeting, or where the notice was sent, but the person didn’t receive it, the general
position of the Act, as provided in the Eighth Schedule, is that it will not invalidate the meeting.
But, remember that the Constitution is a contract under seal between and among members and
office. Under the Constitution, every member has a right to attend meetings. If you don’t give a
member notice, you have breached that contract, and that member is entitled to sue for damages
for breach of contract or he can bring an injunction to prevent the meeting from taking place.
Right to Attend & Vote at Meetings
According to Section 34, the general rule is that each member of the Company has the right to
attend and vote at General Meetings. However, the same section allows the company to limit the
right to attend and vote at General Meetings in two ways.
First, the Act allows the Company’s Constitution to state that members who have not paid for their
shares be denied the right to attend and vote at General Meeting. The Act further permits the
Company’s Constitution to limit the right of preference shareholders to attend and vote, with a
few exceptions provided for in Section 52. So regardless of what the Constitution says about
limiting the right of preference shareholders to attend and vote,
a. Preference shareholders as to dividend will be entitled to attend and vote at General

Meetings if after twelve months (or any other lesser period specified in the Constitution
or Shareholder’s Agreement) their preferential dividend remains unpaid.
b. If what is to be voted on involves a variation of the rights attached to preference shares,

then the members of whichever class of preference shareholders is going to have their
rights varied will be entitled to attend and vote
c. If what is to be voted on involves the removal or replacement of an auditor, the preference

shareholders will be entitled to attend and vote

d. If it’s a resolution to be passed on the decision to wind up a company, or any resolution

being passed after the decision to wind up the company has been taken, then the
Each director of the company is entitled to attend General Meetings, but is not entitled to vote.
The Company Secretary and each Auditor may attend, but neither are entitled to vote. Finally, the
Chairman may permit any other person to attend the meeting, but they will also not be entitled
to vote.
Voting At General Meetings
Voting is the process by which members take a decision on a particular matter to be decided on.
Under the Act, there are two types of voting that can be done.
The first is voting by a show of hands. Unless the Constitution otherwise provides, a resolution
that is put to vote at the meeting is to be decided by show of hands. Par. 16 of the Eighth Schedule
then says that if at any point before the result is declared, or upon the declaration of the result,
a. the chairman
b. at least three members present in person or by proxy or
c. any member/members who hold at least 5% of the voting rights and have the right to
attend and vote at the meeting
demand that the vote should be by poll, then the vote must be by poll, and there’s nothing any
one can put in the Constitution to negate this. Where the vote is by poll, the quantum of shares
is decided by the number of votes a person has. A person holding a certain number of votes (e.g.
10) need not cast all his votes in one direction if he doesn’t want to. He can cast 7 for the motion,
and 3 against the motion if he so wishes.
The Chairman can also decide that there should be voting by postal ballot. So if the meeting is
getting too heated and tempers are rising, he can ask the members to go home, and send their
vote via post.
Proxies – Section 160-161 along with Eighth Schedule
Members are generally supposed to exercise their right to speak and vote at General Meetings in
person, but the law allows a member to do so by his representative. That proxy can either be
another member or director of the company, or a total stranger to the company.
For a proxy to be appointed, there must be a written instrument of appointment, signed by both
the appointor. After it is signed, you deliver it at least 24 hours before the meeting, but if the vote
is to be held by poll, then you deliver it 48 hours before the meeting.

A proxy has the same right as the member as if the member is present in person. The instrument
of appointment may also instruct the proxy on how he should vote on a matter. So when the
instrument shows that the proxy should have voted on a matter one way, and he voted in another
way, the instrument must be taken into account, and what is in the instrument must be recorded
as the vote of the member. Remember, the instrument must be deposited with the company, so
the company will know which way you actually intend to vote. If the instrument doesn’t show, but
you instruct him to vote one way, and he votes another way, then you can sue him. Because the
proxy owes a fiduciary relationship to the member who appointed him, and act in the best interest
of the member who appointed him. (Contrast Proxies with Alternate Directors)
The appointment of the proxy can be terminated in a number of ways including
a. automatic termination by the death of the member

b. automatic termination by the insanity of the member
c. Revocation of the appointment by the member
d. Personal attendance of the member at the meeting terminates the proxy’s authority
e. Subsequent appointment of a new proxy
Any act done by the proxy before termination remains valid.
Quorum of General Meetings
Business shall not be transacted at any General Meeting unless quorum is present at the time
when the meeting commences, but when the quorum is then present, the meeting may then
validly proceed with that business notwithstanding that at some point in the meeting, the number
fell below the number required for the quorum.
So basically, at General Meetings, a quorum is required at the commencement of a discussion of

a particular agenda i.e. at the commencement of each item of the agenda, we must determine if
there is a quorum. By contrast, when it comes to board meetings, the quorum is required
throughout.
Here’s an illustration. Assuming the quorum for the General Meeting is 5. You need a simple
majority to vote on a matter. At the start of the meeting and the discussion of the first agenda,
there were 5 members. During the discussion, 2 leave. The three remaining can take a decision
without the 2 that have left. But at the beginning of the next agenda, the chairman has to make
sure that 5 are present again or the meeting cannot move forward.
Even where the meeting is quorate, but a provision of the Constitution states that some members
may vote on some things, and others may not vote, and one of those things is on the agenda, you
need to form a quorum at the beginning of that particular agenda which is fully constituted by
members who can vote.

Under the Act, the default position, if it is not varied by the Constitution is that, where the company
has only one member, the quorum for that meeting is just one. If the company has more than one
member, the quorum is either 2 or one member holding at least 50% of the issued shares/voting
rights.
Who Chairs General Meetings
Under the Act, the default position is that the Chairman of the General Meeting is the Chairman
of the Board of Directors. You are free to change this in the Constitution to bring it in line with
your ideas of how the Corporate Governance system of your company should be structured. But
before you do, you have to understand that the reason the Chairman of the General Meeting is
usually the Board Chair is because it is the business of the Company that is going to be discussed
at the General Meeting. The person who knows the most about that business is likely to be the
Board Chair, because the Board is the head of the directing mind of the business of the Company
(i.e. the Board). Also note, that it is the chairman that has the casting vote where there is a tie on
a resolution.
If the Chairman is not available or one doesn’t exist or he is not present within 15 minutes of the
time that the meeting is to commence, then the Act provides that the remaining directors can
appoint one of their number to chair the meeting. If they appoint one, the Chairman cannot come
later after one hour and say he was supposed to be Chair so….! So nothing, boss. But if none of
the directors wants to play regent for the day, then the members can appoint one of their number
to chair the meeting.
Adjournment of Meetings – par. 13, Eighth Schedule
Adjournment = Postponing. Adjournment is done by the chairman of the meeting, subject to the
consent of the members in the General Meeting. Now for those members to be able to consent
to adjourn the meeting, there must have been a quorum at the beginning of the meeting. It is
only when the meeting is quorate that they can pass an ordinary resolution to adjourn. Once the
resolution is passed, the chairman can declare the meeting adjourned to a particular day.
If the adjournment does not take more than 30 days, then you don’t need a notice for the
adjourned meeting. Further, at the adjourned meeting, you can only discuss matters that were
stated in the notice for the original meeting.
Resolutions – Section 163 & the Eighth Schedule
Resolutions are binding decisions. Resolutions of the company are binding decisions taken by the
members of the Company. There are two types of resolutions that the company can pass at the
General Meeting, under the Act.

a. The first is an Ordinary Resolution. An ordinary resolution of the company is passed by a

simple majority of the members present and voting on a matter at a validly conducted
general meeting.
b. The second is a Special Resolution. A special resolution requires a 75% majority of the total
votes of members who are present and voting on a matter at a validly conducted general
meeting.
There is a third type that is not required to be passed at the General Meeting. This is known as a
written resolution of the company, and it is treated under Section 163 of the Act. It is a resolution
in writing that is signed by all the members of the company who are entitled to attend and vote
on a resolution at a meeting i.e. there is a requirement of unanimity. It becomes effective and
binding on the company on the day that the last member signs it. A written resolution can do
everything that a resolution passed at a meeting can do, except for removing directors and
auditors.
So in all, there are three types of resolution, but only two can be passed at the General Meeting.
4.3.6 The Power of Members to Act outside General Meetings

As already stated, the general rule is that it is only when members are acting through the medium
of a General Meeting that they are considered a principal organ of the company, vested with the
power to act on behalf of the company. As such, the logical inference must be that generally if
members act outside a general meeting, then the act cannot be binding on the company.
The Duomatic Principle as a Common Law Exception to the General Rule
If you will recall, Salomon v Salomon was the case which decided that companies have legal
personality, separate and distinct from the members that constitute it. A lesser known fact about
that case is that, it was also stated, by the Court, in obiter that a company is to be bound by the
unanimous act of its members, as long as the act was intra vires the capacity and powers of the
company.
It was this statement, made in obiter, which was built upon by the British case of Re Duomatic.
That case concerned the validity of payments made to directors, without the prior authorization
of an ordinary resolution of the members. When the company went into liquidation, the
liquidators sought to reclaim these payments from the directors of the company. The Court found
that the payments had been made with the full knowledge and consent of the members of the
company, and held that because of this, the directors did not have to pay the money back. Justice
Buckley said, that where it could be shown that all shareholders who have a right to attend and
vote at a general meeting of the company assent to some matter which a general meeting of the

company could carry into effect, that assent is as binding as a resolution in general meeting would
be. This statement by Justice Buckley has now become known as the Duomatic Principle.
Prior to Re Duomatic, the principle had been applied in Re Express Engineering Works Ltd. In that
case, the five directors of a company were also the members of the company. At a meeting of the
board of directors, they resolved to purchase certain property in which they had interest by issuing
debentures. Now, under the law, we know that where a director has an interest in the subject
matter of a transaction which would bind the company, the director is disqualified from voting on
the resolution. This meant that they could not technically resolve at the meeting of the Board to
purchase the property. When the company went bust, the liquidator claimed that the transaction
was ineffective. The Court held that “even though the meeting was referred to in the minutes as
a board meeting, if the five persons present had said ‘We will now constitute this a general
meeting’ it would have been within their powers to do so, and that was in fact what they did”.
In EIC v Phipps, the Court approved and expanded the principle by saying that where the
[Constitution] of a company requires a course of action to be approved by a group of shareholders
at a General Meeting, that requirement can be avoided if all members of the group, being aware
of the relevant facts, either give their approval to that course, or so conduct themselves as to
make it inequitable for them to deny that they have given their approval. See also: Parker &
Cooper v Phibbs.
Thus, as long as the requirement of unanimity is satisfied, the decision of the shareholders made
outside the meeting, whether expressly or by acquiescence, would carry the weight of an ordinary
resolution or special resolution as the case may be. Even the Constitution of a company may be
amended by the application of the Duomatic Principle. Thus, in Cane v Jones, where the members
unanimously agreed to deny the Chairman of the Board his casting vote, the agreement was
deemed to have amended the constitution.
The cases above distilled show that the Duomatic Principle is, at its core, an exception to the rule
that members of a company must act through the medium of a general meeting for their actions
to be binding on the company. Further, even where the unanimous decision of the members
outside the general meeting goes contrary to the constitution, it would still be binding on the
company. Later in Runciman v Runciman, the principle was expanded to included decisions of the
Board of Directors taken outside meetings of the Board. There, it was held that an informal and
unanimous consent of the board of directors is also effective as a resolution passed at a duly
convened meeting.
It can thus be observed that at common law the application of the Duomatic Principle contains
two core requirements. First, the consent of shareholders (or board of directors) to the proposed
course of action must be unanimous. Secondly, the shareholders (or board of directors) must
consent with full knowledge of what it is they are consenting to. At common law, the consent

which is given has to be evidenced by some outward manifestation, either in the form of a
document, a statement or by conduct.
The Recognition of the Duomatic Principle in Ghanaian Statute Books
The Duomatic Principle receives statutory expression in Sections 26, 163, 188, and 301 of Act 992.
Section 26: Under Section 26(4), it is the Companies Act together with the Constitution that
generally spell out the procedures to be followed in doing things related to the company.
Section 163: Section 163 is titled Written Resolutions. The general import of the section is that a
resolution in writing, which is signed by all the members who are for the time being entitled to
attend and vote at general meetings (or their authorized representatives) shall be as valid and
effective for all purposes, as if the resolution had been passed at a general meeting of the
company duly convened and held. Further, if the written resolution is described as a special
resolution, then it will be deemed to be a special resolution.
So essentially, the written resolution can do everything an ordinary or special resolution can do,
with two exceptions provided in Section 163(5). Section 163(5) says that you cannot use a written
resolution to remove a director or an auditor, because the procedure to remove an auditor and
director under Sections 141 and 176 respectively must necessarily be followed.
Section 301: Section 301 is titled Unanimous Agreement By Shareholders. This Section provides
that where all the shareholders of a private company agree to, or concur in any action, which has
been taken or is about to be taken by the company, the taking of that action will be deemed to
have been authorized by the company, despite any contrary provision stated in the Constitution.
The Section further provides that the decisions that may be taken by an agreement under Section
301 include, but are not limited to;
a. Decisions on various transactions in shares (e.g. issuing shares, giving financial assistance
to purchase shares, redeeming shares etc.). See the case of Asafu Adjaye v Agyekum which
decided that shareholders could issue shares without going through an ordinary resolution
b. Decisions to waive the protections that the Act gives to shareholders are given from the
directors (contracts between the companies and directors interested in the subject matter,
remuneration of directors, conferring a benefit on directors, loaning money to the
directors). See the case of Zastava v Bonsu which decided that shareholders can limit their
own rights
c. Decisions to enter major transactions
d. Ratification

Section 188(2): Following on from Runciman v Runciman which expanded the Duomatic Principle
to include directors, Section 188(2)(j) provides that a resolution in writing, which is signed by all
the directors, who are for the time being entitled to receive notice of a meeting of the directors,
or of a committee of directors, is as valid and effectual as if it had been passed at a meeting of
the directors or a meeting of the committee of directors which was duly convened and held.
Similarities & Differences Between Shareholders Agreement & Written Resolutions
Both the written resolution and the shareholders agreement may be used as an alternative to an
ordinary or special resolution. However, the shareholders agreement has a number of unique
features.
a. If the formal shareholders agreement is inconsistent with the Constitution, it is deemed to

have automatically amended the Constitution, even if the agreement does not expressly
say that it should.
b. A shareholders agreement may also embody special relations and obligations which may
be unconnected to the administration of the company; for instance it may spell out that
members are to provide additional capital under specified conditions to the company; or
that a member with special expertise to provide that expertise to the company.
Again, notwithstanding the fact that both the written resolution and the shareholders’ agreement
are ways for members to act outside general meetings, there are a number of differences between
them.
First, there is no requirement that the shareholders’ agreement, under Section 301, be written. It
may thus be formal (i.e. written) or informal (i.e. unwritten). However, a written resolution under
Section 163 must be written. Secondly, under Section 301, for the agreement to be binding on
the company, all of the members must agree. By contrast, under Section 163, all that you need is
the assent of all the members who are, for the time being, entitled to attend and vote at meetings.
Thirdly, shareholders agreements under Section 301 are restricted to private companies, Section
163 does not have any such restriction.
Question: Shareholders’ Agreements are provided for under Section 301 and are restricted
in their application to private companies. Assuming a public company has only five
members, does this mean that those five members cannot unanimously agree to something
outside a general meeting, without it being in writing? Or do you use Section 5 to apply
common law provisions to save such an agreement?
Ans: It can be saved by Section 5. See also the ratio in Dhalomal v Puplampu, which gives
us the test for waiving statutory requirements stated by the Act. As long as the application
of the Duomatic Principle by members of public companies falls within the scope of what

was stated in the Dhalomal Test, it would not be invalid for members of public companies
to unanimously agree to do something without recourse to a written resolution
Dhalomal v Puplampu
This case recognized that the right of members to act outside a general meeting constituted
waiver of the statutory requirement of meetings. Thus, even though the Act provides how
members ought to take decisions, the application of the Duomatic Principle constitutes a waiver
of those statutory requirements by the members.
The judge explained that any decision taken by the exercise of this right could not be designated
as having been taken by “an ordinary resolution” or a “special resolution”, but rather it should be
viewed as an alternative power given to the shareholders to override or waive the provisions of
the Act. So where, for example, the Act states that an amendment to the Constitution should be
done by a special resolution, and the members effect an amendment through a shareholders
agreement, that shareholders agreement should not itself be viewed as a special resolution, but
as an act overriding or waiving the requirement of a special resolution.
So having established that the application of the Duomatic Principle was a way for the members
to override or waive the provisions of the Act, the Court laid down the general principle governing
the exercise of such waivers. In the Court’s view, statutory provisions can be waived if
a. they have been enacted solely for the benefit of the person or class of persons waiving
them; see Section 301(2)(d)-(h) of Act 992
b. they are merely procedural in nature;
c. the statute does not expressly prohibit the waiver; and
d. the waiver is not contrary to public policy.
Thus, this general principle may be viewed restricting the absolute right of shareholders to act
outside a general meeting as they see fit.
If the decision they are taking outside the general meeting affects more than just the members,
they will restricted from doing so. The Court cited the example of a decision being taken that
would affect debenture holders.
Again, if the statute expressly prohibits the waiver of the requirements of the Act, then the
members will be restricted from doing so. This is why, under Section 163(5) of Act 992, the process
for the removal of an auditor or director cannot be overridden by the members on the authority
of the Duomatic Principle. And if allowing the members to take the decision without recourse to
a meeting would be contrary to public policy, the members will not be allowed to. The judge said
that whether or not the decision or act would be contrary to public policy may be determined by
looking at whether there are any penalties for not following the statutory requirements.

4.4 AUDITORS
4.5 COMPANY SECRETARIAL PRACTICE

Companies are now required to appoint a Company Secretary duly qualified under the Act to
perform the duties of a company secretary. This is a direct contrast to the old regime where
anyone above the age of majority could be appointed as a company secretary.
Under the new Act, it is the directors/promoters that appoint a person as a Company Secretary,
determine their remuneration and terms of service, and remove them. To qualify for appointment
as a secretary, that person must have;
a. obtained a professional qualification or tertiary level qualification in a discipline that offers

company law practice and administration, which would enable the person to have the
requisite knowledge and experience to perform the functions of a Company Secretary or;
b. held office, before the appointment, as an apprentice or has been articled under the
supervision of a qualified company secretary for at least 3 years or;
c. is a member in good standing of the Institute of Chartered Secretaries and Administrators

(Ghana); the Institute of Chartered Accountants (Ghana); or has been enrolled to practice
as a solicitor or barrister in Ghana and is in good standing or;
d. is a member of a professional body for which reason the directors believe he/she is capable
of performing the functions of company secretary.
Where the Board appoints an artificial person to serve as secretary, that person must have as one
of its promoters, subscribers or directors a person who is qualified by the criteria stated above.
In sum, a company secretary, as an officer of the Company, is at the very basic level required to
have a comprehensive knowledge of company law and legislation and have the ability to guide
the Board of Directors and the Company in their decision making. In more specific terms, the
Company Secretary is required to effectively navigate the complex corporate governance

framework and ensure that the companies they work for are abreast and compliant with their
obligations under the law.
Section 212 provides the duties of Secretaries and they include;
a. Assisting the Board to comply with the Constitution of the Company and with any relevant
enactment
b. Keeping the statutory books and records of the company
c. Ensuring that the minutes of the meetings of shareholders and directors are properly recorded
in the form required by the Act
d. Preparing and issuing out notices in the name of the company
e. Ensuring that the company’s annual financial statements are dispatched to every person
entitled to the statements as required by the Act
f. Ensuring that all statutory forms and returns are duly filed with the Registrar
g. Providing the Board with guidance as to its duties and responsibilities and powers and on the
changes and developments in the laws affecting the operation of companies
h. Ensuring that all statutory forms and returns are duly filed with the Registrar
i. Maintaining the statutory registers of the company
j. Informing the Board of legislation relevant to or affecting meetings of shareholders and

directors and the consequences of failure to comply with said legislation
The Company Secretary is an officer of the company, and so unlike the principal organs, his powers
are not automatically the acts of the company. His powers are regulated by Section 148 of the
Act, which make his acts binding on the company in certain circumstances including;
a. Where he has been authorized, whether expressly or impliedly by any of the principal organs
to act on behalf of the company
b. Where any of the principal organs has represented to Secretary (or indeed to any other officer)
that they have the power to do the act which binds the company

c. Where the company is aware and acquiesces in the Secretary doing the act that binds the
company
d. Where the company ratifies the act that binds the company, subsequent to it
e. Where the Secretary does an act within the scope of his employment that the company may
be held vicariously liable for
5 REMEDIES FOR CORPORATE IMPROPRIETY

As already observed in these notes, a company is an artificial person constituted by its members,
administered principally by its directors and served by its officers. The work of the company is
affected by these three groups of people, but as we’ve already said, there are other stakeholders
who affect and are affected by the work of the company. Sometimes, the best interests of the
company are in conformity with, or furthered by these stakeholders. But in other instances, the
best interests of the company may be hampered or infringed upon by the activities of these
stakeholders.
The rule in Salomon v Salomon established the principle that the company is separate and distinct
from its members, and thus management and ownership of a company were, in principle, two
separate activities. It is for this reason why companies are “owned” by members, but administered
by directors. And even though members may double as directors, the members as a collective,
acting in a general meeting, are a separate and distinct organ from the board of directors. Because
management ≠ ownership.

So if you look at Section 144, it says that the business of the company is administered by the
Board of Directors to the exclusion of the members. In the administration of the business of the
company, directors are under a duty to act in the best interests of the company. And even though
the company is separate and distinct from its owners, the fact remains that any act done in the
best interests of the company is generally an act done in the best interest of its owners. So it
stands to reason that if the best interests of the company is being harmed, it would be illogical to
expect members to sit back and watch, simply because it is the directors that are supposed to
administer the business of the company.
But what if the company commits a wrong on its stakeholders. Granted, the company is separate
and distinct from its members and its management, but the company has no brain with which to
think. It is people that work on its behalf. If those people lead the company to commit a wrong
on its stakeholders, is it always proper for them to escape liability while the company suffers.
Assuming directors breach their duty to act in the company’s best interests and lead the company
to commit a wrong for which the company is liable to a certain amount, the payment of which
would severely affect the company’s finances. Do the directors escape liability?
So under this section, we are looking at the remedies or legal solutions that the law provides for
a wrong committed to or by the company. Two types of wrongs here:
a. Wrongs that are committed by the company against its constituents and stakeholders
b. Wrong committed against the company by third parties
5.1 THE RULE IN FOSS V HARBOTTLE (THE INTERNAL MANAGEMENT RULE)

The rule in Foss v Harbottle answers two questions
a. Who can take action where a wrong is committed against a company, who can take action?
b. Whether or not individuals can sue a company for wrongful decisions taken on behalf of
the company.
In Foss v Harbottle, the claimants alleged that the property of the company had been misapplied
and wasted, and various mortgages had been given improperly over the company’s property.
They asked that the guilty parties be held accountable to the company and that a receiver be
appointed.
The Court held that individual members could not assume the right of suing in the name of
corporation, because where a wrong is done to the company may be vindicated by the company
alone. And because it is the board of directors who administer the business of the company, they
are the ones who have to make the decision to sue on behalf of the company. This is known as
the Proper Plaintiff Rule.

Secondly, the Court held that if the act being complained about by the members is something
that can easily be remedied by an ordinary resolution, then the Court cannot grant an order.
Because what’s the point? Take this scenario: Directors with the consent of the majority
shareholders make voluntary contributions to a charitable organization. Minority sues because
the decision wasn’t taken at a general meeting nor was it unanimous. This is a decision that can
easily be remedied with an ordinary resolution. This is known as the Majority Rule.
5.1.1 Common Law Exceptions to the Rule in Foss v Harbottle

The rule clearly leaves the minority unprotected. Exceptions were thus developed by the common
law to allow the minority to sue in exceptional circumstances, where despite the vote of the
majority, the rights of the minority still need to be protected.
The first exception is stated in Pender v Lushington and it says that where the act or decision of
the company is one which would have the effect of infringing the personal rights of shareholders,
such as the unlawful restriction of a shareholder’s voting rights, then the proper plaintiff rule will
be waived, for the affected members to sue.
The second exception flows from the statement of the Majority Rule principle. The Majority Rule
principle says that if the act being complained about can easily be confirmed or remedied by an
ordinary resolution of the company, then the Court will not interfere. As such in Edwards v
Halliwell, the Court held that if the nature of the act complained of is such that you will need a
special resolution to confirm it, then the member can sue and it will be appropriate for the Court
to interfere where necessary
The third exception is where the act complained of is ultra vires the company or illegal, the
member sue and it will be allowed. See the case of Prudential Assurance v Newman
Finally, where the act complained of is an act which constitutes a fraud on the minority, the
members of the minority would be allowed to sue.
5.1.2 Applicability of the Rule in Ghana

Section 5 of the Companies Act, Act 992 provides for the applicability of the rules of common law
and principles of equity as they apply to companies as long as they are not inconsistent with the
Act.
The Companies Act has in some respects codified the Rule in Foss v. Harbottle. Under s 18 of Act
992, the company has legal personality and, thus, the capacity to sue. This power is generally
exercised by the Board of Directors under section 144(3) of the Act 1992, but where they refuse
or neglect to do so, the Members in a General Meeting pursuant to the passage of an ordinary

resolution may sue in the name of the company; see Section 144(5). In other specific instances, a
receiver, manager or liquidator may initiate an action in the name of the company.
The rule thus remains, under the Act, that generally, where a wrong is done to the company, it is
the company that can sue, and that suit may be initiated by those who the Act vests with the
power to act on behalf of the company, subject to certain rules.
5.1.3 Statutory Exceptions to Rule in Ghana

The Companies Act has also created statutory exceptions to the Rule in Foss v. Harbottle. By
exceptions, we are looking at the instances where the law allows individual or minority members
to sue for remedies where a wrong has been committed against them or against the company.
Representative Actions
The second exception is provided for under Section 205 titled Representative Actions. It says that
where a member is vested with a cause of action under the Act, that person may sue on behalf of
that member and any other member who is also vested with the cause of action, without seeking
the consent of the other members. If he proceeds without consent, then he will be solely
responsible for conducting the case and bearing the costs, even though any judgment obtained
will bind or benefit all those vested with the cause of action.
It is critically important that the Act expressly authorize the person to sue in a representative
capacity. No representative action can be properly commenced if Act 992 does not authorize the
commencement of a suit in a representative capacity on behalf of the plaintiff and other persons.
So if you look at Section 29(3), it authorizes members to sue in a representative capacity to enforce
obligations under the Constitution. This extends to proceedings to enforce the liability of directors
under Sections 199-200. Section 72 also authorizes shareholders or creditors to initiate injunction
proceedings in a representative capacity to restrain unlawful dividend payments. Under Section
89, debenture holders may sue in a representative capacity to enforce the security of a series of
debentures which the debenture holder does not entirely hold. Under Section 218, individual
members may also apply to the court for an injunction to restrain an illegal act or an ultra vires
act of the company.
Finally Representative actions cannot be settled or compromised without leave of the Court.
Otherwise, the majority will simply exercise their powers to discontinue the action
Derivative Actions

A derivative action enforces the company’s rights as separate from the rights of the shareholders
and can be a useful tool for minority members to prevent the directors from abusing their fiduciary
responsibilities to the Company in favour of one or more majority shareholders.
Even though derivative actions are governed by Sections 201-204 of Act 992, none of those
sections provides a clear definition of what a derivative action is. It is observed that an action may
be considered to be a derivative action where
a. it is initiated by a director or member of a company who sues in the name of the company
or a subsidiary of the company or
b. A director or member of a company intervenes in proceedings to which the company or a

related company is a party to in order to continue, defend, discontinue the proceedings
on behalf of the company or the related company.
The difference between a derivative action and the representative action is that with the derivative
action, the action is brought in the name of the company and for the benefit of the company.
Shareholders and directors may apply to the Court for leave to bring an action in the name and
on behalf of the Company to enforce the rights or recover assets belonging to the Company.
One of the benefits of this is that it strengthens the capacity of shareholders to hold directors
accountable for their actions by providing a remedy to shareholders who wish to hold the
directors of the company to account but may otherwise be unable to bring proceedings because
the directors or the majority members of the company refuse to bring or maintain such
proceedings on behalf of the company. So if you look at Sections 199-201, they allow derivative
actions to be brought in respect of enforcement of the civil liabilities of directors for breaches of
duty.
Another difference between derivative actions and representative actions is that derivative actions
may be commenced in all situations where the company has a right to sue. Thus, it is not necessary
for a specific provision to entitle the member or director to sue
Derivative actions also have the advantage of entitling members or directors of companies to
protect the interest of related or subsidiary companies.
Per Section 201, where a Court is satisfied that the company does not intend to take or continue
with legal action to protect its own rights, or that the circumstances are such that it would not be
in the best interest of the company to allow the conduct of proceedings to be left to directors or
the members as a whole, it may grant leave to a member or director of the company to either
a. bring proceedings in the name, and on behalf of the company or

b. intervene in proceedings to which the company is already a party for the purposes of
defending, continuing or discontinuing the proceedings.
Such a member or director must apply to the Court, on notice to the company or its subsidiary,
for leave commence or intervene in proceedings, and on the day when the application is heard,
the company must come to Court to inform the Court whether or not it intends to do by itself,
what the member or director is trying to do.
The Court has very wide powers to ensure that the derivative actions are effectively prosecuted to
ensure that the officers of the company who are opposed to the suit do not frustrate it. So just
like Representative Actions under 205, derivative actions may not be settled, compromised, or
discontinued without leave of the Court. The reason for this, as we’ve already noted, is to prevent
the majority from simply exercising their powers to discontinue the action.
The Court may also in appropriate cases order that the costs of the suit be paid by the company
rather than the member or director who commenced the suit, to ensure that costs do not operate
to prevent members or directors from instituting derivative actions where necessary.
Derivative actions may be initiated in respect of, among others,
Remedies Against Illegal and Ultra Vires Acts
Under Section 19, where a company acts in excess of its authority under the registered
constitution, the company’s acts do not become void. This ensures that third parties may
confidently deal with the company on the presumption that the company acted regularly.
However, as a mitigating measure, the law allows members and debenture holders to prohibit
illegal or ultra vires acts. Such applications may be brought under Section 19 of Act 992 or Section
218 of Act 992 or both where appropriate.
The Applicant must be:
a. member of the company or

b. a debenture holder with a floating charge over the company’s asset(s) or his trustee
The Act complained of must be contrary to the company's registered constitution, and it must be
an act capable of being prohibited by the Court i.e. it must not have already been executed.
Because the law seeks to strike a balance where contractual obligations are involved, in
appropriate applications under Section 19, the Court may set aside a contract and its performance
and order compensation to be paid by the other party to the company or vice versa as the ends
of justice demand.

Applications under Section 218 are similar to those under Section 19 as they are both applications
for prohibitory injunctive orders. However, in the case of Section 218, the court is empowered to
also declare the acts complained of to be void. To initiate an action under Section 218, the
Applicant must first be a member of the company. Secondly, the act which the Applicant seeks to
prohibit must either be
a. illegal, in excess of the company’s capacity, or contrary to the company’s constitution; or
b. it must be an act predicated on a resolution that was improperly passed
Unlike section 200 where the defendant would be a director, here the defendant is the company.
It is the company that intends to engage in the illegal or ultra vires act, so the member applies to
have the intended illegal or ultra vires act restrained.
Remedies Against Oppression
Where the affairs of the company are being conducted in a manner oppressive to a debenture
holder, a member or class of members, any one of them may apply to the Court under Section
219 for an appropriate remedy.
Oppression isn’t easy to prove, in fact, members may be better served exploring all the options
listed above before resorting to oppression. First, there must be actual or threated unfair
discrimination or prejudice to members or debenture holders from the company or through a
resolution from the members or debenture holders or a class of the members or debenture
holders.
Second, the evidence must show that this actual or threatened discrimination or prejudice is
something that has been happening over time. In Adams v Tandoh and Okudjeto v Irani Brothers,
the Court held that for an applicant to succeed in proving oppression, “there must have been a
course of oppressive conduct and one isolated act, even if oppressive will not suffice”. So if a
director were to take excessive remuneration this would not constitute oppression unless he used
his position as a majority shareholder to retain that remuneration or to stifle proceedings by the
company or its shareholders in relation to it. Again, if the power to appoint a director was given
to a particular person, and the shareholders continually defeated that power by removing whoever
that person appointed, that could amount to oppression.
Pinamang v Abrokwa
[Insert Brief Here]
PS Investments v CEREDEC

[Insert Brief Here]
5.2 LIFTING THE VEIL OF INCORPORATION
6 RAISING CAPITAL

7 POINTERS FROM KEZIAH’S NOTES

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These are my personal notes. If there is any mistake, I made it for myself. I didn’t make it for anybody.

1 Differences Between Act 179 & Act 992 ............................................................................................... 4

Sometimes people call me Breezy

3.5.1 Public & Private Companies ................................................................................................ 26

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6 Raising Capital ................................................................................................................................... 104

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1 DIFFERENCES BETWEEN ACT 179 & ACT 992

1.1 CREATION OF THE OFFICE OF REGISTRAR GENERAL

The governing board comprises

Sometimes people call me Breezy

1.2 INTRODUCTION OF THE CONSTITUTION

If they elect to file one, it will have to be signed by

and delivered to the Registrar.

a. Private Company limited by shares shall be “Limited Company “or “LTD”

1.4 DEPLETION OF THE ULTRA VIRES RULE

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Section 19(5) On the application of

a. a member of the company, or

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1.5 PRE-INCORPORATION CONTRACTS

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1.6 DERIVATIVE ACTIONS

a. bring proceedings in the name, and on behalf of the company or

1.7 REGULATION OF SECRETARIES

1.8 ENHANCED REGULATION OF DIRECTORS

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1.9 ROTATION OF AUDITORS

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1.10 BENEFICIAL OWNERSHIP

1.11 UNCLAIMED DIVIDEND

1.12 ACCOUNTS & AUDIT

a. Details of the state of affairs of the company

Sometimes people call me Breezy

c. How much money has been spent on CSR

1.13 MAJOR TRANSACTIONS

So by Section 220, if a dissenting minority shareholder is outvoted on a matter involving

a. the amendment of the Constitution

that member may require the company to purchase his shares.

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1.16 THE COMPANIES BULLETIN

The Bulletin would contain notifications in respect of companies such as:

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d. Notices striking company names off the register of companies

1.17 INTEGRATION OF ELECTRONIC PROCESSES

a. the incorporation or registration of a company

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Once a company is incorporated, it must be run and managed. It is managed according to a

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3 MECHANICS OF INCORPORATING COMPANIES

This section is relevant for two reasons

3.2 KEY PERSONS IN THE INCORPORATION PROCESS

3.2.1 The Registrar of Companies

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a. non-compliance with the Act,

Two things determine whether a person is engaged in the formation of a company

a. finished raising its working capital

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b. been granted its certificate of incorporation

Accordingly, the promoter has a duty to

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3.3 THE CONSTITUTION

a. The name of the company