Company and Commercial Practice Notes TLG v8

Patrick A. N.
Aboku 1
The Law Guide Society
The Law Guide Society 15-Jul-20

2
Section 7

▪ Companies may be categorized into whether they are;
▪ Incorporated or unincorporated companies
▪ Private or Public Companies
▪ Ghanaian-incorporated companies or external companies
▪ Type of liability on the members
▪ Company Limited By Shares
▪ Company Limited by Guarantee
▪ Unlimited Company
The Law Guide Society 15-Jul-20 3

▪ A company having the liability of its members limited to the unpaid on the shares respectively
held by them
▪ A shareholder cannot be made to pay more than the amount in shares the shareholder owes
▪ A member who has fully paid for that members shares cannot have that members liability
extended to the members personal assets
▪ The member will not be required to make further payments if the company is winding up
even if the company has unpaid debts

▪ A company having the liability of its members limited to an amount that the members may
respectively undertake to contribute to the assets of the company in the event of the
company being wound up
▪ The companies operations are funded by dues or contributions from its members
▪ The company cannot issue shares nor pay dividends
▪ It cannot carry out business for profits unless the profit is to be used to further the business
of the company – S 8
▪ The officers and members of the company limited by guarantee will be jointly and severally
liable for debts and liabilities incurred if they knowingly carry on business for profit used for
purposes other than for the furtherance of the companies business - S 8
▪ The amount of money payable by the members in the event of winding up shall not at anytime
be less than the amount specified during the application for incorporation - S 8

▪ A company which does not have a limit on the liabilities of its members
▪ The liabilities of the members is the same as for a sole proprietor except that it is
incorporated under the Companies Act, 2019, Act 992

▪ A body corporate formed or incorporated outside the Republic of Ghana which has an
established place of business in the country
▪ An established place of business is defined in Section 329 (2) to mean a branch, management,
share, transfer or registration office, factory, mine or any other fixed place of business
▪ An established place of business does not include an agency unless the agent has and
habitually exercises general authority to negotiate and conclude contracts on behalf of the
principal
▪ An agent who maintains a stock of merchandise belonging to the principal from which the
agent regularly fills orders on behalf of the principal is also considered an established place of
business
▪ The fact that a body corporate has a subsidiary which is incorporated, resident or carrying on
business in the Republic does not make it an external company
▪ Operating an External Company in Ghana - Sections 330
▪ An external company seeking to establish a place of business in the country shall within one month
of establishing the place of business, file the following documents with the Registrar
▪ Copy of the certificate of incorporation, copy of Constitution, Charter, regulations, memorandum or article
of incorporation
▪ Statement duly notarized in the jurisdiction of origin of the company the following details:
▪ Name of the company
▪ Nature of the business
▪ Name and address of local manager
▪ For companies with shares, the number and value of the authorised shares, issued shares and shares remaining payable
▪ Address and website of the principal in its country of origin
▪ Notarized document providing details of beneficial owners
▪ Particulars and copies of charges on the companies properties
▪ The registrar shall publish the details in the Companies Bulletin

▪ Please read: Sections 330 to 342 on External Companies

▪ Private Company – Section 7 (5)
1. Restriction on the transfer of shares of the company
2. Limit to the total number of members or debenture holders to 50 excluding
▪ Persons genuinely in the employment of the company
▪ Persons who were formerly in the employment of the company and who while in the employment and
continued after the determination of that employment are members or debenture holders
▪ In counting the number of shareholders or debenture holders, two or more persons holding shares or
debentures jointly are counted as one
3. Prohibits the company from making invitations to the public to acquire shares or debentures of the
company – Section 294, 295
4. Prohibits the company from making invitations to the public to deposit money for a fixed period or
payable at call whether bearing not bearing interest

▪ Other distinguishing features
1. Requisitioning an extraordinary meetings
a) Private Companies under Section 299, directors are to convene an EGM where
▪ Two or more members of the company or a single member with not less that 1/10 th of the shares of the
company makes a request
▪ In the case of a company limited by guarantee, by a person(s) with 1/10the of the total voting rights of the
company
b) Public companies under section 324 , directors shall convene an EGM where
▪ Members holding not less than 1/20th of the shares of the company
▪ In the case of a company limited by guarantee, by person(s) with not less than 1/20the of the voting rights

▪ Other distinguishing features
1. Tenure of directors
a) Private Companies under Section 300 (2), a director of a private company unless provided to the contrary
in the constitution shall continue to hold office until the director vacates office under section 172 or is
removed under section 176
b) Public Companies under section 325, directors are supposed to be on rotation. First directors shall all retire
at the first AGM but eligible for reinstatement. 1/3rd shall retire on subsequent AGMs based on first in first
out bases
2. Number of directors
a. Private Companies: minimum of 2 and maximum of 5
b. Public Companies: Minimum of 5 and maximum of 12

12
Section 13, 14 of Act 992

▪ Formation of a company comprises two processes:
▪ application under section 13 by the applicants
▪ incorporation under section 14 by the Registrar
▪ Incorporation is the process by which a company comes into being pursuant to the applicable
laws. It is the legal process used to for a corporate body
▪ The applicable legislation regulating the incorporation of Companies in Ghana is the
Companies Act, 2019, Act 992
▪ Section 14(2) provides that from the date of incorporation the company becomes a body
corporate by the name contained in the application for incorporation and subject to section
13 is capable of performing the functions of an incorporated company
▪ Note that, though the Act has a monopoly on the formation of companies, the regulation of
companies, such as are in banking and insurance, may be governed by special legislation

▪ Section 6 provides that
▪ one or more persons may form an incorporated company under Act 992
▪ Section 12 provides that

▪ A person of the age of eighteen years and above may apply for the incorporation of a company under
Act 992

▪ The process begins with a decision to form a company, identifying the name of the company, nature
of business, prospective subscribers, directors and beneficial owners
▪ Ensure capacity – Section 12
▪ Fill the appropriate forms - Section 13
▪ Provide the required information - Section 13
▪ File documents and information with Registrar of Companies - Section 13
▪ Pay the prescribed fee - Section 14
▪ Registrar certifies under seal- Section 14
▪ Registrar issues a certificate of incorporation - Section 15
▪ Commence business - Section 14
▪ Note: Certificate to commence business no longer required - Section 15

▪ The application must be made in the prescribed form and delivered to the Registrar
▪ The following information must be delivered to Registrar along with application
▪ Name of the company in compliance with section 21
▪ Type of the proposed company
▪ Nature of the proposed business ( for companies to be registered with an object)
▪ Address of the proposed registered office and principal place of business
▪ Contact details including phone number, post box, PMB, digital address etc of the registered office
▪ Email and website if available

▪ Particulars subscribers
▪ Full name and former names
▪ Date and place of birth
▪ Address (residential, occupational, postal, electronic mail)
▪ Nationality
▪ Phone numbers

▪ Particulars of each proposed directors
▪ Nationality
▪ Phone numbers
▪ Other directorship held
▪ Consent by each proposed director
▪ Statutory declaration of each proposed director indicating that within the last 5 years, that proposed
director has not been:
▪ Charged with or convicted of a criminal offence involving fraud or dishonesty
▪ Charged with or convicted of a criminal offence relating to the promotion, incorporation or management of a
company
▪ Declared insolvent or if that proposed director has been declared insolvent, the date and name of the company
(section 9 of Insolvency Act, Act 1015)

▪ Particulars of proposed Company Secretary
▪ Nationality
▪ Phone numbers
▪ Business occupation
▪ Particulars of proposed auditor
▪ Nationality
▪ Phone numbers
▪ consent

▪ Particulars of each beneficial owner
▪ Nationality
▪ Phone numbers
▪ Appropriate identification (National ID, passport etc) and proof of identity
▪ Nature of beneficial interest
▪ Details of what gave rise to the beneficial interest (debenture, legal or financial security etc)
▪ Confirmation whether beneficial owner is politically exposed

▪ For a company with shares
▪ Amount of the proposed stated capital per section 68
▪ The number of authorised shares of the company for each class
▪ For a company limited by guarantee
▪ The specified amount each member shall pay on winding up of the company
▪ The application shall be signed by each subscriber

▪ If the company is limited by shares, each subscriber must take at least 1 share and write
against the subscribers name the number of shares take and amount payable for the shares –
section 13(3)
▪ The application shall be attested by a witness
▪ A registered constitution (optional see section 19)

▪ Incorporation is conferred by the State acting through the Registrar
▪ Where the Registrar is satisfied that the application for incorporation of a company complies with the Act
shall after the payment of the prescribed fee certify under the seal of the Registrar that the Company is
incorporated and in the case of a limited liability company that the liability of the members is limited
▪ Mokor v Kuma
▪ Salomon v Salomon
▪ From the date of incorporation, the company becomes a body corporate by the name contained in the
application for incorporation and subject to section 13 is capable of performing the functions of an
incorporated company
▪ The Registrar shall issue a certificate of incorporation or a copy of that certificate certified as correct by the
Registrar and the certificate shall be conclusive evidence that the company has been incorporated in Ghana –
Section 15
▪ Section 15 does not preclude the institution of proceedings to wind up the company (section 16 and 274)
▪ The Company shall have full capacity to carry on or undertake any business or activity or do any act or enter
into any transaction. – Section 18
▪ The Company shall have full rights, powers and privileges – Section 18

▪ Section 383 defines constitution to include a registered constitution of a company duly
delivered to the Registrar in accordance with section 23
▪ Sections 23, 24 and 25 makes it optional for a company to have a registered constitution
▪ Section 23 provides that a company has the option to have a registered constitution and
where the company opts to have a constitution the document that represents the
constitution shall be:
▪ Signed by one or more subscribers or the secretary and
▪ Delivered to the Registrar by the subscribers, director, secretary or any authorised person

▪ Section 24 – unless restricted by the registered constitution, the right, powers, duties and
obligations of the company, Board, directors and shareholders shall be as determined by the
constitutions provided under
▪ 2nd schedule – private company
▪ 3rd schedule – public company
▪ 4th schedule- company limited by guarantee
▪ Section 25 – for a company without a registered constitution, the right, powers, duties and
obligations of the company, Board, directors and shareholders shall be as determined by the
constitutions provided under
▪ 2nd schedule – private company
▪ 3rd schedule – public company
▪ 4th schedule- company limited by guarantee

▪ Section 26 – Contents of Constitution – Refer to Draft
▪ Section 27 – Form of the constitution – Refer to Draft
▪ Section 28
▪ The constitution shall be signed by each subscribed and witnessed who shall attest to it
▪ Section 29 provides for the legal effect of a registered constitution

▪ Subject to Act 992, the constitution has the effect of a contract under seal
▪ Between the company and each member or officer
▪ Between the members or officers themselves

▪ Act 992 requires all companies depending on the type of company to be named with a suffix identifying the type of company
▪ Private Company Ltd by shares shall be Limited by Shares or LTD
▪ Public Company Ltd by shares shall be Public Limited By Shares or PLC
▪ Company Limited by Guarantee shall be Limited by Guarantee or LBG
▪ Private Unlimited Company shall be Private Unlimited Company or PRUC
▪ Public Unlimited Company shall be Public Unlimited Company or PUC
▪ Section 21(2) the Registrar shall not register a company if in the opinion of the company the name of the company is misleading – Ewing v Buttercup
Margarine Co and Exxon Corporation v Exonn Insurance Consultant
Ewing vs. Buttercup Margarine Co. Ltd: The plaintiff, who carried on business under the trade name of the Buttercup Dairy Company, was held entitled to restrain
a newly registered company from carrying on business under the name of the Buttercup Margarine Company Ltd on the ground that the public might reasonable think that
the registered company was connected with his business.
Exxon Corporation v Exxon Insurance Consultants International Ltd: Oil company adopted the name “Exxon” after considerable research and
expense; Time, skill and labour and expense went into developing that name for the company, the font to use etc; The defendant company, with no connection,
adopted the name - Exxon sought an injunction. Held: Although original it was not sufficiently substantial for copyright to subsist in the name
▪ Section 21(3) if the name of the company is that of a company dissolved within the last 5 years
▪ However, a company is entitled to be able to change the name of that company by special resolution and with the written approval of the Registrar
▪ Where through inadvertence or otherwise, a company on first registration or on registration by a new name is registered by a name which in the opinion of
the Registrar is misleading or undesirable, the company shall change the name of the company with approval of the Registrar

▪ If the directive of the Registrar for change of name is given within 6months, the company shall comply within 6weeks from the
date of the directive
▪ Again if the Registrar is of the opinion that a change of object or nature of business renders the name of the company
misleading or undesirable, the Registrar shall direct the company to change its name and the company shall comply within
6weeks except if the company has filed an appeal against the order at the court
▪ On an appeal against the order of the Registrar to change the name of the court, the court may cancel or confirm the
direction and where it is a confirmation, the company shall comply within 6 weeks from the date of confirmation
▪ The Registrar shall proceed to change the name of the company if the company refuse or fail to comply with the order
▪ Where the Registrar changes the name of the company, the Registrar shall issue a new certificate to reflect the change of
name
▪ Upon the change of name, the registrar shall publish it in the companies bulletin, newspapers and or its website
▪ The certificate and publishing is conclusive evidence of the change of name
▪ It is noted that a change of name does not affect the powers, rights and privileges of the company or render any legal
proceedings defective
▪ A company limited by shares shall comply with subsection 1 of section 21 within 6 months upon the commencement of act
992

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▪ Any

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Section 10

▪ Any person who is or has been engaged or has been engaged or interested in the formation
of a company ( Section 10(1))
▪ This excludes persons acting in a professional capacity for the persons who are engaged in the
formation of the companies (section 10(2)
▪ Lawyers
▪ Accountants
▪ Auditors etc

▪ Promoter stands in a fiduciary relationship to the company
(section 10(3)), Erlanger v New Sombrero Phospate Co
Ltd
▪ Promoter must observe utmost good faith towards the
company in any transaction with the company or on behalf of
the company
1. Section 10 (3) and 10 (4)
▪ Promoter must compensate the company for any loss 2. Erlanger v New Sombrero Phosphate
suffered by reason of failure to observe utmost good faith Co
In Erlanger v New Sombrero Phosphates Co
Ltd the Court held that the promoters owed
▪ Promoter must account for profits for property or fiduciary duties towards the company
including the duty to disclose all material
information in circumstances where such acquisition have facts relating to the contract to an
independent board of directors, which may
been for the company and not for the promoter (section then choose to agree with the terms. Failing
full disclosure of all material facts by the
10(4)), Erlanger v New Sombrero Phospate Co Ltd promoters, a contract between the
promoter and the company may be voided
by the company at the option of the
company.
3. Section 10(5) Company reserves the

right to rescind Contract on account of
failure of full disclosure of all material
facts relating to the contract

▪ The case of Erlanger v New Sombrero Phosphate Co. Ltd played a role in defining Ghana’s law on
Promoters and Pre-Incorporation Contracts
▪ In Ghana, where a promoter fails to disclose all material facts on a contract between the Promoter
and the Company, the company has the right to rescind that contract (Section 10(5)
▪ This right to rescind has no time limitation and the right can be exercised at any time on
application by the Company to the court (Section 10(6))
▪ Rational for the above principle is based on the following
▪ promoters may deliberately or inadvertently enter into contracts with the company they are forming which
may not be in the interest of the company
▪ In such contracts the company is considered the vulnerable party and the Promoter the superior party
▪ Until such contracts are accepted by the Company, the Promoter is personality liable for any
contract entered into with the company for or on behalf of the company
▪ Between the Promoter and the proposed Company
▪ Between the proposed Company and third parties

▪ The Court may relieve the Promoter in whole or in part from liability if the Court thinks it fit
and equitable to do so (Section 10(7)
▪ In determining whether or not to relieve a Promoter of liability, the following factors may be
considered
▪ Lapse of time
▪ Whether the Promoter acted in utmost good faith
▪ Whether the Promoter acted in the interest of the Company
▪ Whether payments made to the Promoter or his assigns were competitive
▪ Whether the Company has become reasonably prosperous or successful

▪ A Promoter can enter into a contract with the yet to be formed Company
▪ For such a contract to be enforceable, it must be ratified (Section 10(5)
▪ Ratification generally is process of agree to or confirming a specific legal action
▪ Ratification is the process of adopting a contract entered into by a company with a third party
either because the company did not exist at the time the contract was entered into or
because the officer lacked the legal authority to bind the company in transaction
▪ The Act adopts a special set of processes and conditions to be satisfied in order to ratify a
contract entered into between a promoter and the company
▪ These are set out in Section (5)

▪ A contract entered to between a promoter and the company may be rescinded by the
company unless after:
▪ Full disclosure of material facts : There must be full disclosure by the Promoter of all material facts
known to the Promoter; and
▪ Ratification by the Board of Directors if all the Company’s Directors are independent of the
promoter; or
▪ Ratification by all members of the company e.g. written resolution; or
▪ Ratification in a General Meeting at which neither the promoter nor shareholders of any shares in
which the Promoter has beneficial interest is voting
▪ Full disclosure is a necessary condition but not a sufficient condition. In addition to full
disclosure there must be ratification by any of the following three ways i.e. ratification by
▪ Independent Board of Directors
▪ All members by resolution – it must be all, not majority
▪ A General Meeting by resolution in which the promoter and his assignees are not voting

▪ What is material fact for the purpose of full disclosure
▪ A fact is material if a reasonable person may be swayed one way or the other in his or her decision
after knowing it
▪ Whether or not a fact is material is a question of fact to be determined by the court
▪ And in making such determination the court will be guided by all the circumstances of the matter

▪ Where or not a BOD is independent is a question of fact to be determined by the court
▪ The court will consider all the circumstance surrounding the matter in determining whether
or not the BOD is independent e.g.
▪ Where or not the Member or BOD is appointed and removable by the promoter
▪ Where there is a spousal, parental or blood relationship between the promoter and the Director
▪ Whether the director is the employee of the promoter
▪ Whether the promoter provides necessary accommodation/funds for the director
▪ Note that even if only one of the BOD is not independent, it will invalidate the ratification
even if the said director recuse him/her self

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SECTION 11

▪ A Pre-incorporation contract or transaction is one that purports to be entered into by a
company before its incorporation or a contract or transaction by any person on behalf of a
company before its incorporation - Section 11(1)
▪ Is a contract that is made between persons other than the subject incorporated company in
connection with the company before incorporation
▪ A company may ratify a pre-incorporation contract or transaction
▪ Ratification may be done by
▪ An Independent BOD
▪ All the members e.g. by written resolution
▪ A resolution of members in General Meeting

▪ One or both parties to a pre-incorporation contract did not exist at the time the contract
was signed e.g. the promoters
▪ The subject matter is usually in anticipation of the incorporation of a company
▪ Every pre-incorporation contract is made before the company is formed

▪ A contract cannot be entered into by a party who did not exist at the time of the contract was
entered into and that party cannot purport to ratify it at a later date
▪ The contract may be binding on the person purporting to be signing on behalf of the yet to be
incorporated company
▪ This principle was espoused in Kelner v Baxter where the Court of Common Pleas per Erle CJ
said
Where a contract is signed by one who professes to be signing as agent but who has not principal existing at the time and the
contract would altogether be inoperative unless binding upon the person who signed it, he is bound thereby and a strange cannot by
a subsequent ratification relieve him from that responsibility
▪ In Newborne v Sesolid (Great Britain) Ltd,

the promoter signed a contract in the name of a non-existing company (yet to be incorporated) to sell goods to the
defendant who later refused to take delivery. In a suit to enforce the contract, the court held that the contract was not
enforceable against the defendant because the company was not in existence at the time the contract was signed and
secondly, the promoter could not personally enforce the contract because he was neither a party to the contract.
▪ In Ghana a contract entered into by and on behalf of a non-existing or yet to be incorporated
company is permitted under the Act
▪ The Act also provides for the option of the company to ratify the pre-incorporation contract
▪ However, unless and until the company ratifies the contract or transaction, the liabilities or
risks are borne by the parties and so are the benefits
▪ The parties can avoid the liabilities associated with pre-incorporation contracts by
▪ Avoiding pre-incorporation contracts or
▪ Expressly excluding such liabilities in the contract

▪ Act 992 allows for Pre-incorporation contracts
▪ The pre-incorporation contract can be ratified by one of the organs of the company
▪ Ratification must be done within eighteen months (18) after the formation of the company
▪ Once ratified the company is bound by the terms of the contract or transaction and also
entitled to the benefits therein
▪ Before ratification, the person(s) who purports to act on behalf of the company shall in the
absence of an express agreement be bound and entitled to the benefits of the contract or
transaction

▪ Under Act 992, section 11, in the absence of ratification, the persons purporting to have acted
on behalf of the company are liable – Phonogram Ltd v Lane
▪ Ratification must be an express act and cannot be inferred from conduct –see
Panayiotopoulos v Plastico
▪ However, ratification will be implied or inferred under the following circumstances as was held
in Panayiotopoulos v Plastico
▪ The beneficial enjoyment of the property by the company
▪ The payment to the plaintiff
▪ A provision in the Constitution authorizing the ratification of the pre-incorporation contract
▪ A resolution by the directors ratifying the pre-incorporation contract
▪ Further acts by the company in respect of the subject matter of the pre-incorporation contract such
as fixing the company’s seal to the agreement etc

46

▪ It a system of administering a body corporate with the objective of achieving transparency,
accountability, compliance, disclosure, social responsibility and fairness

▪ In order to achieve effective corporate governance, legal and regulatory frameworks have been
designed
▪ These include
▪ The Companies Act, 2019, Act 992
▪ Public Finance Management Act, 2016 for State Owned Enterprises
▪ State Interest and Governance Authority Act 2019, Act 990 for State Owned Enterprises etc
▪ Some countries such as the UK have also adopted corporate governance codes to ensure
compliance to corporate governance regulations
▪ However, In Ghana, there is no such universal corporate governance codes
▪ There are instead institution and industry based codes such as the Bank of Ghana Corporate
Governance Codes
▪ Ghana has also adopted the International Financial Reporting Standard for financial reporting

▪ Act 992 in order to achieve effective corporate governance, distributes corporate powers
including responsibilities, duties and liabilities among the organs of the company in order to
ensure checks and balances
▪ Thus, Under Section 144 of Act 992, the company acts through its organs including
▪ The Board of Directors (the board)
▪ The members in a general meeting
▪ Other officers or agents appointed by the members in a general meeting or the board

▪ The Board of Directors are made up of the directors and they collectively are responsible for the
management of the company per Hayfron-Benjamin J in Okudjeto v Irani Brothers
▪ Directors are appointed to direct and administer the business of the company – Section 170(1)
▪ Section 144 which is entitled division of powers between general meeting and the board of
directors provides as follows;
▪ A company shall act through the members in a general meeting or the board or through the officers or
agents appointed by or under the authority derived from the members in a general meeting or the board
▪ That the respective powers of the members in a general meeting or the board subject to Act 992 may be
determined by the company’s registered constitution
▪ That unless otherwise provided, the business of the company shall be managed by the board who may
exercise the powers not exercisable by the members in an AGM
▪ The BOD in exercising powers conferred on them under the Act or the registered constitution unless
otherwise provided by the Constitution are not bound to comply with the directions or instructions of the
members in a general meeting

▪ Directors act through the board and a decision can only be made in a meeting where there is a quorum.
▪ Note that, the decision in Montero and Another v Redco Co. Ltd to the effect that a decision may be reached without a quorum is not an authority for quorums
▪ Note also that, the decision in Montero and Another v Redco Co. Ltd did not state categorically that without a quorum business can still take place.
▪ The next sections

▪ Appointment and removal of directors
▪ Duties of directors
▪ Types of directors
▪ Powers of directors
▪ Limitations on the powers of directors
▪ Liabilities of Directors
▪ Proceedings of Meetings
▪ Notices
▪ Quorum
▪ Voting
▪ Minutes
▪ Resolutions
▪ Committees
▪ Chairperson

▪ Directors means those persons by whatever name called who are appointed to direct and
administer the business of the company (de jure director) – Section 170 (1) or
▪ A person not being a duly appointed director of a company but who holds himself out or allows
himself to be held out as a director of that company (de facto director) Section 170 (2) or
▪ A person not a duly appointed director but on whose directions or instructions the duly appointed
directors are accustomed to act (shadow director) - Section 170 (2)
▪ De facto and shadow directors although not duly appointed as directors of the company are
subject to the same duties and liabilities as if they were duly appointed as directors of the company
(Commodore v Fruit Supply (Ghana) Ltd)
▪ Note that there is an administrative penalty to be paid by the company, the officers and such
persons who knowing allow shadow and de facto directors to act in the company -Section 170 (4)
▪ Their presence does not also derogate the duties or liabilities of the duly appointed directors -
Section 170 (3)

▪ Note also that, they need not be called directors. They may be referred to as
▪ Governors
▪ Management Committee
▪ Executives
▪ Trustees etc
▪ In Buosiako Co. Ltd v Cocoa Marketing Board, the Defendant Board purported to deny the
validity of a letter written on its behalf by on Dr. Erbynn by which the Board agreed to make
certain payment to the plaintiffs. In disposing of this argument Osei-Hwere J described the three
member IMC as the directing minds of the CMB
▪ Also, in Kwapong v Ghana Cocoa Marketing Board, the IMC was considered as the de facto
governing body of the defendant company
▪ In Commodore v Fruit Supply (Ghana) Ltd, the court held that someone who allowed himself to
be held out as a director was a director and that his actions were binding on the company

▪ Companies shall have at least two Directors.
▪ The rationale is to avoid the situation where the affairs of the company are disturbed on the
death of a sole director
▪ A company that carries on business for more than four weeks with less than two Directors is
liable to an administrative penalty for each day it carries on business without the required
number of directors. The liability is jointly and severally for all members, officers, directors and
the company (Section 171 (3))

1. First Directors: The first Directors are named in the application for incorporation (Section 13(2)(g) & Section 172(1)
2. Appointment under Constitution: The constitution of the company may provide for the appointment of a director or
directors by a class of shareholders, debenture holders, creditors, employees or any other person (Section 170(4) refer
Section 29 (2)
3. Filling a Casual Vacancy: If there is casual vacancy occurs, the Board of Directors or the Members in a General shall by
ordinary resolution appoint to fill the vacancy (Section 172(5))
4. Appointment by Application to Court: in the event that there are no directors of a company or the number of directors is
less than the quorum required for a meeting of the board and it is not possible or practicable to appoint directors in
accordance with the constitution of the company, a shareholder or creditor of the company may apply to the court to
make an appointment if the Court considers that it is in the interest of the company to do so. (Section 172 (8))
5. For public company, at the first AGM all the directors shall retire subject to re-appointment. Subsequent appointment
shall be by election (section 325)
6. For private companies, the directors shall continue hold office until they vacate office under section 175 or removed
under section 176
7. The appointment must be consented by the director in writing within 28 days after appointment (Section 172(2)(b))

1. Substitute Director – Section 180
▪ A substitute director is a director appointed by the company to act as a deputy director to a named
director and a substitute in the absence of that director
▪ Unless otherwise provided by the Constitution of the company, Substitute directors are appointed by
the company
▪ Substitute Directors Can attend meetings in the presence of the Principal but cannot vote in that
meeting
▪ Substitute Directors are appointed and removed in the same way the other directors are appointed
and removed (Section 180(5)
▪ Substitute Directors does not cease to be a director by reason of the fact that the Director for
whom he or she is appointed to substitute ceases to be a director
▪ Substitute Directors are not counted in determining the minimum or maximum number of directors
▪ Substitute Directors are counted for the purpose of forming quorum

2. Alternate Director – Section 181
▪ An alternate director is a director appointed by another director to act as an alternative director for a period of six months or less where the director
is out of the republic or unable to act as a director for a reason if the constitution allows the director to so appoint
▪ The appointment must be in writing and signed by the appointing director(appointor) and appointee and lodged with the company
▪ an existing director may be appointed as an alternate director and shall an additional vote as an Alternate Director
▪ An alternate director cannot appoint another person as an alternate director because of the principle of delegatus non potest delegare
▪ An alternate director shall not attend or vote at meetings if the appointing director is present
▪ An alternate director may act for at most 6 months
▪ The appointment of the alternate director shall be approved by resolution of the Board of Directors – Okudjeto v Irani Brothers
▪ The appointed director is for the period of appointment a director and officer of the company and not an agent of the appointing director
▪ Alternate directors are not counted in determining minimum or maximum number of directors but shall be counted in determining the quorum
▪ The remuneration of the alternate director unless otherwise provided in the constitution is to be borne by the appointing director
▪ The appointment of the alternate director ceases
▪ upon the expiration of the period for which the/she was appointed
▪ Upon a written notice by the appointing director to that effect
▪ When the appointing director ceases to be a director

3. Executive Director – Section 183
▪ An executive director is a director who holds another office or place of profit under the company
other than the office of auditor
▪ An executive director may be paid salary, commission or share of profit or participate in the
company’s pension or retirement scheme
▪ Examples are managing director, production or sales manager, Company Secretary or Accountant
▪ Except for Executive Directors, directors are not required to give full time attention to the company
▪ The constitution of the company may prohibit the company from having executive directors

4. Managing Director – Section 184
▪ A managing director is a director to whom other directors have entrusted to and conferred on any or all
power(s) exercisable by the Directors with such terms and restrictions that the Board of Directors deem
fit – Section 184(c)
▪ Section 383 defines a managing director as a director to whom has been delegated the powers of the
board of directors to direct and administer the business of the company.
▪ The powers vested on the managing director may be collateral to or to the exclusion of the Board of
Directors
▪ The MD has apparent or ostensible authority to undertake commercial transactions on behalf of the
Directors and/or company
▪ The MD does not have the right to institute legal action on behalf of the company, unless such right is
conferred by the Constitution or by a resolution of the Board or Members in a General Meeting.
▪ Instituting legal actions are not considered to be part of the ordinary business of a company
▪ Every MD is an executive director but not every executive director is an MD
▪ An acting MD has all the power of the substantive MD – West African Express (Ghana) v Craig
▪ To bind the company, the MD must enter the contract or transaction for and on behalf of the company

▪ All persons above the age of eighteen years are qualified to be appointed as directors –
Section 12
▪ A person other than an infant is qualified to be a director unless disqualified
▪ The combined effects of section 173 and 177 creates three categories of disqualified persons
namely
1. Those permanently disqualified
▪ Infants i.e. persons under 18 years – Section 173(1)(a)
▪ Persons adjudged to be of unsound mind – section 173(1)(b)
▪ A body corporate – section 173(1)(c)

2. Those automatically disqualified for a period: Certain category of persons are due to personal
history or track record are disqualified from being appointed as directors and it is only the
effluxion of time(5 years) that will redeem them and restore their eligibility to be appointed as
directors. These include:
▪ Persons convicted with the last 5years of an offence involving fraud or dishonesty or The promotion,
formation or running of a company – Section 177(2)(a). Where is a second conviction, the 5 years
disqualifications extends to 10 Section 177(3)(a) and for life on a third conviction Section 177(2)(b).
▪ A director or Senior Executive of a company that has become insolvent with the last five years on account of
or partly as a result of the culpable activities of that director - Section 177(2)(b)
▪ A person disqualified by Court to act as Company Secretary, Receiver, Manager or Liquidator of a company

3. Those disqualified unless with leave of the court:
▪ Persons convicted in Ghana or abroad of any offence involving fraud or dishonesty or of any offence in connection
with the promotion, formation or management of a corporate body or an offence which is not a misdemeanor –
section 177(1). E.g. An order of this kind was made against Prince Kludjeson involving Kasapa Telephone
Company.
▪ Persons adjudged in Ghana or abroad to be bankrupt can only be appointed with leave of the Court which
adjudged him bankrupt – Section 173(1)(e), section 177(1)(b) e.g. R v High Court, Accra; ex parte Ploetner Taylor
JSC stressed that the Act gives jurisdiction to the High Court in appropriate circumstances to restrain persons adjudged
bankrupt whether in Ghana or outside the jurisdiction of the courts from managing companies in Ghana as directors
▪ Persons culpable of a criminal offence whether convicted or not in relation to a body corporate or of fraud or
breach of duty in relation to a body corporate – section 177(1)(c)
▪ A person appears to have been debarred by the competent authority from being a member of a recognised
professional body as a result of a disciplinary inquiry – section 177(1)(d)
▪ A person who is the subject of an ongoing criminal investigation by a criminal investigation body or the Registrar or
the equivalence in a foreign jurisdiction regarding the matters stated above
▪ The issue as to suitability of such an otherwise disqualified person to be given leave to become or act as Director
may be raised by the Court itself or an application may be made to the Court by a Member or Officer of the
Company who can demonstrate an interest in the case, the Registrar or Official Trustee, the Trustee in Bankruptcy
of the person concerned or a liquidator (Section 177(1) and (6)

▪ A vacancy may occur in the office of Director either
▪ Upon the expiry of the term to which the Director is appointed to serve or
▪ Through other means such as death, registration, the Director becoming disqualified or removal
▪ A vacancy which occurs by the term of office of the Director expiring is a normal vacancy
▪ A vacancy which occurs by any means other than by the term of office of the Director
expiring is called a casual vacancy – Section 172(5) and (7)
▪ Removal of Directors is governed by section 176 which provides that subject to section 176
and 327 a company may by ordinary resolution at a general meeting remove from office all or
any of the directors despite anything in the constitution of that company or in an agreement
with the director

▪ Section 176 stipulates that 35 days prior notice of the proposed Ordinary Resolution to remove
the Director must be given to members
▪ A shorter period of 21 days notice may be given if the 35 days notice is impracticable – section
176 (4)
▪ After receiving notice of the intention to move the ordinary resolution to remove the director, the
company shall immediately send a copy of the notice to the director concerned
▪ The director concerned shall have the right to be heard on the resolution at the meeting and also
to send the company a written statement copies of which the company shall send with every
notice of the General Meeting or shall send forthwith if received sooner than 7 days before the
meeting
▪ Section 176(7) provides that without limiting the right of the director to be heard orally on the
resolution, the director may, unless the Court makes an order, also require that the written
statement by the director to read to the meeting – Cal Mechant Bank Case (2008)
▪ In Pinamag v Abrokwa the court held that one has to first attempt to resort to the procedure set
out by the Act to remove a Director, failure of which as a last resort, the relief

▪ A director may also be removed under section 217 which provides that the rights, duties and liabilities
of officers and agents of companies shall continue to be governed by the rules of the common law and equity
relating to principal and agent and master and servant except in so far as those rules are not inconsistent with
the express provisions of Act 992.
▪ Thus, since a director is an officer of the company, there exist a principal agent relationship between company
and director respectively
▪ Just as a principal may dismiss an agent, the company can remove a director without recourse to section 176.
The court has held that a director could be removed summarily without resorting to the requirements under
s.176.
▪ Hence, in Adams v Tandoh, the court held that under section 217, a director could be summarily dismissed
without resort to the procedure under section 176.
▪ It is submitted that an argument that compliance with section 176 is mandatory for the removal of directors
may be akward to defend and difficult to be maintain when considered in the light of section 29(2) which
empowers persons who may not be members to appoint and remove directors of a company.
▪ If section 176 is considered as mandatory then how will such parties remove the director they have appointed
since they are not members of the company

▪ In Summary, directors may be removed in three ways
▪ By Ordinary Resolution in a General Meeting by Members under Section 176
▪ By Order of the Court pursuant to section 219
▪ By Summary Dismissal pursuant to Section 217

1. Issuance of new or unissued or treasury shares
▪ Directors shall not without approval of an Ordinary Resolution issue any new or unissued shares other
than treasury shares in the company – Section 189(1)(a)(i)
▪ Directors may issue unissued and news shares only after those shares had first been offered on the same
terms and conditions to all existing shareholders or the affected class of shareholders in proportion to
their existing shareholdings
▪ If directors are given the freedom to issue shares, they may act irresponsibly with the Company’s reserve
shares
▪ Treasury shares are an exemption because they are shares which previously had been issued and were
acquired back and held by the company
▪ Directors can thus issue treasury shares but not new or unissued shares
2. Voluntary contributions to Charitable funds in excess of 2% of retained earnings
▪ Directors shall not without the approval of an Ordinary Resolution make voluntary contributions to any
charitable or other funds in amounts the total of which in any financial year of the company will exceed 2%
of the Retained Earnings of the company at the end of the immediately preceding financial year – section
189(1)(a)(ii)
▪ An exception to this rule is contribution to pension funds for the benefit of employees

3. Borrowing in excess of stated of capital
▪ Directors of a company with shares shall not without the approval of an Ordinary Resolution
exercise the company’s power to borrow money or to charge any of its assets where the moneys to
be borrowed or secured will exceed the stated capital for the time being of the company (section
189(9)) except as may be provided by the Constitution of the Company
4. Major transactions
▪ Directors shall not without approval by a Special Resolutions, pursue a major transaction (section
189(1)(b)
▪ The special resolution should not be more than a year old (Section 189(3)
▪ Section 145(2)(b) provides that a major transaction refers to
▪ The acquisition or an agreement to acquire of 75% of the assets of the company
▪ The disposition or agreement to dispose of 75% of the assets of the company
▪ Any other transaction with actual or potential impacts affecting assets

▪ Directors stand in a fiduciary relationship to the company – section 190
▪ Directors have a duty to avoid conflict of interest–section 190(2), section 192. In Commodore v Fruit Supply,
the Court of Appeal held that a Director occupied a fiduciary position and therefore was precluded from entering
into a binding transaction on behalf of the company which he himself has a personal interest which conflicted or
might conflict with the interest of the company because he had a fiduciary duty to protect the interest of the
company
▪ A duty not to make secrete profits and not to take bribes. In Commodore v Fruit Supply, the Court of Appeal
held that the Director was not entitled to keep the benefit or profit of the transaction entered into when conflicted
unless the Constitution provided otherwise
▪ A duty to keep proper accounts. In Commodore v Fruit Supply, the Court of Appeal futher held that although the
de facto director was entitled to 50% of the company’s profits, he was at the same time under a legal duty by
reason of his fiduciary position, not to have mixed up his share of the proceeds with what was intended for the
company.The director was therefore in law accountable to the company. Cudjoe v Conte Ltd
▪ A duty to take reasonable care in the management of the company’s affairs.
▪ A duty to act in the best interest of the company as a whole to preserve the company’s assets,
further the company’s business and to promote the company’s purposes – Asafu-Adjaye v
Agyekum; Golden Gates Services Ltd v Ghana Ports and Harbours Authority

▪ The Board of directors
▪ Determines the company’s mission and the strategy for accomplishing the same
▪ Decides the company’s major policies
▪ Ensures or monitor the financial integrity of the company
▪ Ensure compliance with law
▪ Determines the company’s capital structure
▪ Appoints and removes key officers of the company such as the company secretary and members of
top management
▪ Sets compensation for management
▪ Proposes dividends payable per share

Despite the specific duties imposed on the directors, if there is a duty imposed on the company, it is
a duty imposed on the directors
1. Directors shall convene the First Annual General Meeting (AGM) with 18 months of
incorporation (Section 157(3). After the first AGM, the Directors shall convene an AGM every
year and in any event with 15 months of the last AGM (section 157(2))
2. Directors may convene an extraordinary meeting (EGM) whenever they deem fit (Section 158)
or if requisitioned by Members (section 299 and section 324)
3. The directors shall cause to be circulated to Members and Debenture holders every year the
following documents Financial statements, Auditors report, Directors report
4. The Directors shall ensure that the company keeps proper accounting records
5. The directors being officers shall deliver or make available to the company’s Auditors
6. Directors may fill a casual vacancy on the Board of Directors – section 172(5) unless the
Members in General Meeting do otherwise
▪ Directors shall ensure the filing of various ▪ Register of Directors and Company Secretary
documents with the Registrar ▪ Returns regarding External Companies and
▪ Register of members various alterations in their particulars
▪ Written contract regarding true value of shares ▪ The directors shall maintain or cause to be
that were not paid wholly in cash
maintained at the registered office of the
▪ Stated capital company various documents including
▪ Court orders ▪ Register of members
▪ Charges created by the company ▪ Register of debenture holders
▪ Notice of enforcement of security by ▪ Register of charges
appointment of receiver or entry into
possession ▪ Register of directors and company secretary
▪ Notice of cessation of enforcement of security ▪ Register of holdings of directors
▪ Annual return within 42 days of the date that
the company’s statement, account and reports
are sent to Members and Debenture holders

▪ The directors shall cause to be established a share deals ▪ For public companies, the Directors or some of them
account when a company first redeems or purchases its shall sign and deliver a Prospectus in triplicate within 6
shares (Section 63). The moneys transferred from the months before making an invitation to the public
Company’s Retained Earning an amount sufficient to (Sections 304 and 308) or a statement in Lieu of
purchase or redeem the shares Prospectus within 28 days of incorporation or
conversion to t public company (section 303(1)
▪ Every director and former director shall provide the ▪ On winding up by way of private liquidation, the Directors
company with notice of matters relating to the director shall execute an affidavit of Solvency to the effect that the
to enable the company prepare: Directors have made a full inquiry into the affairs of the
▪ Particulars of emoluments and Pensions of Directors (Section company and have satisfied themselves that the company will
132-134) be able to pay its debts and liabilities in full within 12 months
from the date of winding up (Section 275)
▪ Particulars of amounts due from Officers (sections 132 – 134)
▪ Being vested with the superintendence of the company, it is
▪ Register of Holdings of Directors (section 210(8) and (9)) the Directors who may institute various Cour proceedings on
▪ Statement of information regarding directors’ Interest in the company’s behalf, including bring an application for a
Arrangement, Compromise, Merger of Division (Section 258) confirmation order regarding the reduction of capital, shares
or liability (Section 79). Initiating litigation is not a matter for
Management but the for the Board of Directors
▪ In the event of an Arrangement, Compromise, Merger or
Division, the Directors are to provide certain information
to Members and creditors including a statement
explaining the effects of the Arrangement, Compromise,
Merger or Division and any material interests of the
arrangement or amalgamation (section 258)

▪ The directors of the company shall meet at ▪ Alternatively a director my requisition the
least once every six months in each year to Company Secretary to summon a meeting, in
consider financial and operational affairs of which case the Company Secretary shall
the company summon a Director’s Meeting (Section
188(2)(b)
▪ Directors may meet in Ghana or elsewhere
to dispatch business and/or adjourn their ▪ Directors who are not present in Ghana are
meetings not required to be served with notices of
Directors’ Meetings
▪ Directors may delegate any of their powers
to Committees of Directors and impose ▪ The quorum for Directors’ Meetings or of
limits on and set regulations for the Committee of Directors is two (2)
Committees of Directors (section 188(2)) ▪ Unless the Directors fix a different quorum or
▪ Directors’ Meetings may be summoned by any ▪ Except in the case of a Sole-Member Director’s
Director (section 188(2)(b)) Committee (section 188(2)(b)

▪ A quorum is always required both for the ▪ Attendance and voting by Proxy are prohibited at
commencement as well as for the continuation of Directors' Meetings and meetings of a Committee of
Directors’ Meetings to conduct the general business Directors (section 188(2)(i)
of the company (section 188(2)( e))
▪ Matters are decided at meetings by majority vote
▪ If for any reason the number of directors fall below and if there is a tie, the Chairperson has a second
the number required by law or the constitution for a or casting vote to break the tie (Section 188(2)(h))
quorum, the continuing directors may continue to ▪ A second vote occurs when the Chairperson voted the
perform the functions of the board for the next 4 first time resulting in a tie
weeks despite the shortfall ▪ A casting vote occurs when the Chairperson did not vote
the first time but a tie resulted
▪ The directors may elect one of them to be
Chairperson and determine the period to hold office ▪ Directors may decide on matters without the
▪ If no Chairperson is elected by the Board of
necessity of attending a Board Meeting
Directors or the Chairperson is late for a Board ▪ This is achieved by a written resolution signed by all
Meeting by more than 5 minutes, the Directors the Directors for the time being entitled to receive
present may choose one their fellow Directors to notice of a meeting
chair that meeting (section 188(2)(g)

▪ Minutes must be concise and precise ▪ Watch out for titles and subtitles
▪ Capture everything
▪ As much as possible, do not include names. Use
▪ It should not be too long or too brief positions if possible
▪ It should be clear and unambiguous
▪ Avoid being legalistic or citing laws if they were
▪ It must be accurate i.e. a record of the essentials not cited in the meeting
of each item
▪ Prepare minutes promptly. If possible prepare a
▪ Do not add your comments or opinions draft first
▪ Capture only the resolutions and conclusions ▪ Minutes must be drafted in past tense
▪ Do not lump more than once conclusion into ▪ Avoid recording people
one sentence
▪ It must be self standing i.e it does not need
further explanations from other documents
▪ Watch out for grammatical errors i.e. sentences
and spellings
15-Jul-20 77
▪ Decisions of the Board or AGM are called Resolutions
▪ A Resolutions should have two legs
▪ Background – narrations i.e. the reason for the conclusion
▪ Decision/Resolution – i.e. the decision itself. This is the part that should be included in the minutes
▪ Some resolutions are for instant and others for future implementation
▪ A written Resolution must be signed by all directors
▪ A Director cannot be removed by written resolution because the said Director must be
heard
▪ Written Resolutions are as good as a resolution from a meeting duly held
▪ Note: A report is different from minutes because reports contain details which are lacking in
minutes

▪ However, subject to section 145, the members in a general meeting may
▪ Act in a matter if the members of the board are disqualified or are unable to act by reason of a deadlock or
otherwise
▪ Institute legal proceedings in the name of and on behalf of the company if the board of directors refuse or
neglect to do so
▪ Ratify or confirm an action taken by the board of directors or
▪ Make recommendations to the board of directors regarding actions to be taken by the board
▪ Note that the Constitution cannot be amended to invalidate an act by the board which would have
but for the amendment been valid
▪ There are two types general meetings
▪ General Meeting
▪ Class Meetings
▪ Two kinds of general meetings

▪ Annual General Meeting
▪ Extraordinary General Meeting

▪ Annual General Meeting (AGM) – Section 157
▪ An AGM shall be held every year and shall be designated as such in the notices
▪ The period between AGMs must not exceed 15 months
▪ The First AGM shall be held within 18 months on incorporation
▪ After the first AGM, the second year’s AGM may be dispensed with
▪ In exceptional cases, the Auditors and the Members may together agree to dispense with an AGM for a particular year –
Section 157(5)
▪ Notice, the agenda and supporting papers are required to be given to persons entitled to attend and vote at the AGM
▪ Within 21 days before an AGM, the company shall dispatch the following documents to Members and Debetureholders
▪ Company’s financial statements
▪ Consolidated financial statements
▪ Director’s Report on Financial Statements
▪ Auditor’s Report on Financial Statements
▪ Paragraph 1 of the Eighth Schedule makes provision to extend the 21 days notice
▪ Abridging the 21 days notice requires a special procedure which requires all members entitled to attend and vote to agree
to shorten the 21 days notice requirement

▪ There is a standard business to be transacted at a meeting designated as an AGM
▪ These are referred to as ordinary business of the AGM
▪ It is sufficient therefore that a notice of meeting will invite Members for a meeting at a given time
and place to conduct the ordinary business of an AGM
▪ An ordinary business of the AGM include – 8th Schedule paragraph 2 subparagraph b
▪ Declaration of dividends
▪ Considering the company’s Financial Statements and Directors and Auditor’s Report
▪ Electing Directors to replace retiring directors
▪ Fixing the remuneration of the Auditors
▪ Removing and electing the Auditors and Directors
▪ Eshun v Poku – Nothing in the Act makes the consideration of director’s and auditors report as a
precondition to holding an AGM

▪ Extra Ordinary Meeting
▪ An EGM is General Meeting other than the AGM
▪ It may become necessary to hold an EGM because an important and urgent matter has come up for the
Members’ input and decision and the matter cannot wait till the AGM which may be scheduled several
months away or
▪ Because the agenda for the AGM is already cluttered with its ordinary business and it would be
inappropriate to add other business
▪ EGMs are held to discuss
▪ Emergencies
▪ Major threats to the company
▪ Special resolutions such as relating to amendment or alteration of the company’s Constitution, change company’s
name, alter object of the business or even to voluntarily wind up the company
▪ Directors are infrequently removed at EGMs
▪ The statutory 21 day notice may be extended or shorted according to law – Luguteragh v Northern
Engineering Co. Ltd – applicant was given only 2 days notice instead of 21 days

▪ Extra Ordinary Meeting can be convened in the following ways
▪ Directors suo motu
▪ EGMs may be convened by directors on their own motion whenever they deem fit or by a director when there are no
sufficient directors in Ghana to form a quorum to do so – Section 158 (1) and (2)
▪ Directors upon Members’ Requisition
▪ Members may also requisition Directors to convene an EGM
▪ Different rules apply to private(section 299) and public(section 324) companies respectively
▪ Private Companies: An EGM shall be convened by Directors haven been requisitioned in writing and signed by
▪ Two or more members or
▪ In the case of a company with shares, a single member who holds at least one-tenth(10%) of the shares of the
company
▪ In the case of a company limited by guarantee by a Member with at least 10% of the voting rights
▪ Note: the requisition shall state the nature of business to be transacted filed at the registered office
▪ Note: Directors shall within 7 days of receipt of the requisition fix a meeting with the following 28 days by
causing notice to be sent to the members entitled to attend and vote

▪ Public Companies: An EGM shall be convened by Directors haven been requisitioned in writing and signed by
▪ Shareholders of at least one-twentieth (5%) of the shares of the company or
▪ In the case of a company limited by guarantee, by a Member with at least 5% of the voting rights
▪ Note: The requisition shall state the nature of business to be transacted and filed at the registered office of the
company
▪ Note: Directors shall with 28 days of receipt of the requisition, fix a meeting with the following 28 days by
causing notices to be sent to parties entitled to attend
▪ EGM requisitioned and convened by Members
▪ If the directors fail to convene a meeting after being requisitioned to do so, the members may proceed to convene a
meeting
▪ either the requisitions of any member may convene the meeting with 4months if the directors fail to convene the
members
▪ Any reasonable expenses incurred in convening the meeting shall be repaid by the company and taken from the
directors fees or other remuneration of the directors
▪ In 2008 Mr. Afari Donkor who held 11% of the issues shares of Cal Bank Ltd successfully requisitioned an EGM
▪ By Order of Court
▪ In Adryx Mining and Metals Ltd v Ashanti Goldfield Co Ltd, the applicants successfully got the Court to order the
Respondent Company to convene and EGM

▪ General Meetings may be convened by
▪ Directors
▪ On their own
▪ After being requisitioned by members
▪ Order of Court or
▪ Registrar
▪ Members
▪ If the Directors fail to convene a meeting after being requisitioned
▪ Registrar
▪ By application to the court
▪ Court
▪ Upon application by Members or the Registrar

▪ Notices of meeting shall be given to all Members of the company;
▪ Notices shall be given to all entitled to vote at least 21 days in writing
▪ All the members entitled to attend and vote can agree to shorten the period for notice – Luguterah v Northern Engineering Co Ltd
▪ In the case of a special resolution for voluntary liquidation of the company, 7 days’ notice in writing will suffice
▪ Notice of meetings shall contain the following particulars (8th Schedule paragraph 2(a)
▪ The place, date and hour of the meeting
▪ Sufficient detail of the general nature of the business to be transacted
▪ The terms of any Special Resolution to be considered
▪ If the meeting is designated as an AGM it is sufficient if the notice provides that the meeting shall transact the “ordinary business of the AGM”
▪ The ordinary business of the AGM connotes the following 8th Schedule Para 2(b)
▪ Declaration of dividends
▪ Considering the company’s Financial Statements and the Directors’ and Auditors’ Reports
▪ Electing Directors to replace retiring directors
▪ Fixing Remuneration of the Auditors
▪ Removing and Electing the Auditors and Directors
▪ Tiessen v Henderson – held the proposition that notice convening a meeting must contain sufficient details as place, time and subject matter of the meeting to enable the
person entitled to notice of the meeting make a properly informed decision whether or not it is in his own interest to attend the said meeting

▪ 3 Types of notices for a General Meeting
1. Notice containing one(1) item
▪ Notice to transact the ordinary business of the AGM
▪ Ideal for small group of persons
▪ Ideal for enlightened persons
2. Notice containing Specific Details
▪ Financial Statement
▪ Directors Reports
▪ Auditors Reports
▪ Payment of Dividends
▪ Remuneration of Auditors
3. Notice containing all details

▪ Quorum refers to the number of Members required to be present at the meeting venue within a
specified waiting period after the notified commencement time of the meeting before the meeting
can properly commence
▪ Two key components of quorum
▪ The minimum number requirement and
▪ The waiting period requirement
▪ If the company has only one member, that member in person or by duy appointed proxy form a
quorum
▪ In any other case a minimum of two members in person or duly appointed proxiies
▪ By one member holding more than 50% of the voting rights
▪ If the meeting was adjourned due to lack of quorum,if a quorum is not present within half an hour
after the time appointed the Member(s) present shall constitute a quorum

▪ Voting could be done in three ways
▪ Show of hands at meeting
▪ Regular means of voting
▪ Everyone has one vote irrespective of the size of the shareholding
▪ The rule is one-hand-one-vote
▪ Polling at meetings
▪ May be done alone or after a vote by hand
▪ May be requested by the Chairperson, at least 3 persons present in person or by proxy or Members with at least 5% of the total voting rights of all Members having the right to attend and vote on
that resolution
▪ Although the Constitution may regulate voting, any provision that excludes the right to request for a poll will be void – 8th Schedule Paragraph 16(b)
▪ Each shareholder entitled to vote shall have one vote for each share
▪ The rule is one-share-one-vote
▪ Postal ballot in lieu of meeting
▪ Chairperson may directing voting to be by postal ballot
▪ Once so directed, ballot papers shall be served on each Entitled to vote on that resolution in the same manner that notice is served
▪ Voting by ballot shall occur when the chairperson
▪ In his/her discretion directs or t
▪ The company’s Constitution directs the Chairperson to do so
▪ On or after the Chairperson has directed a poll, an Ordinary Resolution in favour of a postal ballot is moved at the meeting and passed on a show of hands
▪ At any meeting, if there is a tie after a vote, the Chairperson has second or casting vote unless the Registered Constitution provides otherwise – 8th Schedule paragraph
16(m)
▪ Casting Vote: this occurs if the Chairperson in the first vote had no vote or did not vote
▪ Second Vote: This occurs if the Chairperson voted in the first vote resulting in the tie. It can also occur if the chairperson had a vote and did not vote

▪ There are two types of resolutions
▪ Ordinary resolution
▪ Special resolution
▪ Ordinary Resolution
▪ Passed by a simple majority of voters cast by the Members of the company entitled to vote in person or by
duly appointed Proxy at the General Meeting
▪ Special Resolution
▪ This resolution is required to be passed by at least 75% of the vote cast by such Members of the company
entitled to vote in person or by duly appointed Proxy at the General Meeting of which notice specifying the
intention to pass the resolution as a Special Resolution has been duly given
▪ Every Special Resolution requires proper advance notice to Members that it is designated as such
▪ Thus, Special Resolution has two key requirements
▪ Notice requirement
▪ Special majority requirement
▪ The notice must indicate that a Special Resolution shall be passed

91
Private – Sections 274,275,276,278,282,288 of Act 992

Public – Corporate Restructuring and Insolvency Act, 2020 (Act 1015)

▪ Incorporation is the process the corporation is brought into being and liquidation is the process of having it cease to exist
▪ Liquidation, winding up and dissolution are often regarded as synonyms but there are some differences
▪ Winding up
▪ Winding up refers to the steps taken to have a functioning corporate entity or a going concern cease to be a corporate entity.
▪ It includes the appointment of the Liquidator who gathers any assets, pays any debts and distributes any surplus in accordance with law
▪ Dissolution
▪ Is the formal pronouncement by the Registrar that the corporate entity no longer exists and has been struck off the register and the public has been so
notified by publication in the Companies Bulletin
▪ Section 289 of Act 992 distinguishes between dissolution without full winding up and dissolution after winding up
▪ Both solvent and insolvent companies may be liquidated
▪ Section 4 of schedule 1 defines insolvent in relation to any body corporate to mean that its liabilities exceed its assets or that it is
unable to pay its debs as they fall due
▪ Liquidation of solvent companies is called private liquidation (or Voluntary or Solvent Liquidation) and is governed by Act 992
▪ Official Liquidation concerns liquidation of insolvent companies and is governed by the Corporate Restructuring and Insolvency Act
2020, Act 1015

▪ Liquidation commences in one of three ways
1. By Special Resolution of the company calling for its Private Liquidation – Section 276(1)
2. Petition presented to the Court to wind up the company by way of Official Liquidation
3. Petition presented to the Registrar to wind up the company by way of Official Liquidation
▪ A liquidator is appointed to conduct the liquidation process and
▪ The liquidator assumes the powers of the Directors, takes control of the assets of the company, collects its assets,
pays debts and then distributes any surplus to the Members in accordance with their rights – Section 282
▪ In Union Maritime et Commerciale v Rabensteiner and Another; Amissah JA stated
▪ that on the appointment of a liquidator for the purposes of private liquidation, all the powers of the board shall vest in the liquidator and the
powers and authorities of the directors shall cease.
▪ The only savings in the directors’ powers is in so far as the company in general meeting or the liquidator sanctions their
continuance.
▪ They could also exercise their powers so far as is necessary to prepare statements and accounts of the company

▪ Consequences upon commencement of winding up
1. On appointment of a Liquidator, all the powers of the Board of Directors vest in the Liquidator.
1. The directors are rendered functus officio.
2. The Members in General Meeting may sanction the directors to continue to exercise their powers and authority to
enable them prepare the statements and accounts of the company – Section 282
2. Although the company shall continue as a corporate entity until its dissolution, it shall cease to carry on
business except as may be required for its beneficial winding up – Section 278(2)
3. The financial year of the company shall be deemed to end just before the commencement of
winding up and therefore the preparation, auditing and dispatch of all statements, accounts and reports have
to be done - section 277
4. Transactions entered into within certain periods before the commencement of liquidation may be invalid
on the grounds of being fraudulent preferences or fraudulent conveyances
5. If the winding up commences within 12 months of the creation of a floating charge on the undertaking or
property of the company, such a charge shall be invalid – section 93
6. All actions and civil proceedings against the company other than proceedings by a Secured Creditor for
the realization of his security shall be stayed unless the court gives leave to proceed

▪ Only a private company may undergo a Private Liquidation
▪ Some reasons why a private company may opt for liquidation
▪ Its constitution may have stipulated a duration for the company to carry on business and that
period has now expired
▪ It constitution may have stipulated an event, and if such event occurs, the company should be
dissolved
▪ Shareholders of a small company may have lost interest in the business
▪ There may be major divisions amongst the shareholders
▪ It may also be for strategic reasons such as to facilitate mergers or arrangements

▪ 4 Stages for Private Liquidation
1. Affidavit of solvency deposed to by the directors
2. Special Resolution for winding up including appointment of Liquidator by the Members
3. Managing the affairs of the company is not as a going concern but with a view to identifying,
gathering and protecting assets; paying just debts, distributing any balances to the Shareholders
entitled to a return on winding up and keeping accounts. These activities are undertaken by the
Liquidator
4. Dissolution or striking off the company’s name from the register of companies by the Registrar

1. Affidavit of solvency deposed to by the directors
▪ First, the majority of Directors shall prepare an Affidavit of Solvency deposing that they have made a full inquiry
into the affairs of the company and have formed the opinion that the company will be able to pay its debts and
liabilities in full within 12 months from the commencement of winding up – section 275(1)
▪ The Affidavit of Solvency shall also list all the assets and liabilities at the latest practicable date before it is made
– Section 275(2)(b)
2. Special Resolution by Company
▪ First, The company shall pass a Special Resolution within 5 weeks of the Affidavit of Solvency– section 275(2)(a)
▪ Second, a copy of which shall be filed with the Registrar within 14 days of its passing – section 276(3)
▪ Third, the Special Resolution should also appoint the Liquidator who should consent in writing - Section 278(1)
▪ Fourth, the company shall deliver both the Special Resolution and the Affidavit of Solvency to the Registrar for registration
and Publication in the Companies Bulletin – Section 275(2)(a) and 276(1) and (3)
▪ Benin J in Billy v Kuwor and Another held that a Member cannot petition to Court for a winding up order by way of
Private Liquidation
▪ Private Liquidation is deemed to commence when the Special Resolution is passed – Section 276(2)
▪ The Financial Year is deemed to have ended immediately before passing the Special Resolution
▪ Fifth, The various statements, accounts and reports have to be prepared, audited and sent to all persons – Members,
Debenture Holders and Liquidator- within 3 months from the date of passing the Special Resolution – Section 277

3. Winding up - Liquidator’s Obligations
▪ Keeping proper records and accounting for all transactions in respect of the winding up
▪ Hold General Meeting every 12 months if the winding up actives exceed 12 months – at the meeting the Liquidator shall
update all members of the progress of the process
▪ Within 28 days after the said General Meeting, the Liquidator shall send a copy of the audited accounts to the Registrar for
registration – section 284 (2)(b) and (7)
▪ So soon as the affairs of the company are fully wound up, the Liquidator shall convene a General Meeting of the company to lay
before the meeting the accounts and offer an explanation of the accounts – section 284(3)(b)
▪ Within 28 days after the Final General Meeting, the Liquidator shall send to the Registrar for registration copies of the audited
accounts laid before the meeting and a statement of the holding of the meeting and the date of the meeting – section 284(4) and
(7)
▪ The Liquidator is required to preserve the books and papers of the company and of the liquidator for 5 years from the
company’s dissolution – section 284(10)
▪ If in the opinion of the Liquidator, the company will not be able to pay its debts within the period as stated in the Affidavit of
Solvency, the Liquidator shall immediately notify the Registrar and add a statement of the company’s assets and liabilities – Section
286(1)
▪ The Registrar shall then register both the notice and statement and cause a copy of the notice to be published in the
Companies Bulletin and proceed as in the case of an Official Liquidation – section 286(3)
4. Dissolution and Restoration
▪ Dissolution may occur after
▪ Winding up – section 288
▪ Without full winding up – section 289
▪ Dissolution after full winding up – Section 288
▪ When satisfied that the winding up of the company is complete, the Registrar shall strike the name of the company off register and notify the public by
publication in the Companies Bulletin
▪ The company shall be deemed dissolved on the date of publication of the notification in the Bulletin – section 288(1)
▪ Dissolution without full winding up
▪ Occurs when the Registrar knows or has reasonable cause to believe by information supplied by an Officer, Member or Creditor that the company is not
carrying on business or is not in operation
▪ The Registrar may by Written Communication to the company inquiring whether it is carrying on business or is in operation – Section 289(1)
▪ If a reply is not received within 2 months of the first inquiry by Written Communication, the Registrar may send a second Written Communication referring
to the first and stating that if no response is received to the second letter within 2 months, a notice will be published in the Companies Bulleting with a view to
striking the company’s name off the register – section 289(2)
▪ If there is no response or a negative response is received, the Registrar shall cause a notification to be published in the Companies Bulletin and send a third
Written Communication that at the expiration of 3 months from the date of that notice the name of the company will be struck off the register of companies
and the company dissolved – section 289(5)
▪ Despite dissolution without full winding up, the liability, if any of every Director, Officer or Member of the company shall continue and may be
enforced as if the company had not been dissolved
▪ The Court’s power to order the winding up of the company remains intact as well – section 289(6)

▪ Restoration after dissolution of a company
▪ Upon dissolution after winding up or before full winding up, the Court may declare a dissolution
void and restore a company to the Register of Companies
▪ The application for restoration may be brought by the Liquidator or any former Officer, Member or
Creditor of the Company (or any person claiming through or under them)
▪ In the case of dissolution after winding up, the application must be brought within 2 years of
dissolution – Section 288(3)(a)
▪ In the case of dissolution without full winding up, the application must be brought within 12
months of dissolution – section 289(7)
▪ The Court must first determine whether the dissolution was valid or not, it is only then the
Restoration Oder may be made

▪ Official Liquidation is governed by the Corporate Insolvency and Restructuring Act, 2020 Act 1015
▪ Official Liquidation may commence in one of 4 ways

▪ Conversion from a Private Liquidation
▪ Special Resolution of the company
▪ Petition addressed to the Registrar
▪ Petition to the Court

▪ By Conversion from a Private Liquidation
▪ If in the course of private liquidation it becomes apparent that the company will not be able to pay its debts in full with the period
stated in the Affidavit of Solvency, the Liquidated shall ask the Registrar to make an Order for Conversion
▪ The statement to the Registrar must include a statement of the company’s assets and liabilities – Section 289(1)
▪ On receiving the notice and statement , the Registrar is duty bound to register both the notice and statement and to cause a copy
of the notice to be published in the Companies Bulletin - Section 289(3)
▪ The Registrar shall then proceed with the liquidation that commenced as a private liquidation in the same manner as a liquidation
under an Order of the Court pursuant to Act 1015 – Section 286(4)
▪ A Liquidator who fails to comply with the provisions on conversion where one is required is liable to pay to the Registrar an
administrative penalty of 750 penalty units – Section 286(4)
▪ By Special Resolution of Company

▪ A Special Resolution may specifically state that the winding up shall be by way of Official Liquidation
▪ A copy of this Special Resolution shall be sent to the Registrar who shall cause it to be published in the Companies Bulletin

▪ By Petition to Registrar
▪ The Registrar may be petitioned to order the liquidation of a company by a Contributory or Creditor of the Company
▪ A Contributory is any past or present Member of the company who is liable to be called upon to contribute to settle the company’s liabilities
▪ Shareholders with unpaid shares
▪ Shareholders of unlimited company
▪ Members of a company limited by guarantee
▪ Read Conte v Kpelgo
▪ Only a member who has been a shareholder for at least 6 months during the last 18 months can petition the Registrar
▪ A Creditors who petitions the Registrar to wind up a company must post security for cost and establish a prima facie case to the satisfaction of the
Registrar why the company must be wound up
▪ The Registrar shall then take account of all liabilities of the company and when satisfied that the company cannot pay its debts, shall order the winding
up of the company
▪ A copy of the petition shall be served on the company by the Petitioner
▪ The Creditor shall then lodge proof of debt with the Registrar
▪ The Registrar shall publish the winding up Order in the Companies Bulletin
▪ NOTE: Contributory is a person liable to pay monies for the winding up of a company

▪ By Petition to Court
▪ A company may be wound up by Order of Court through a petition by
▪ Contributory
▪ Registrar
▪ Creditor
▪ Attorney General
▪ The Right to petition the court cannot be removed by the Constitution of the company but can be postponed for a reasonable period through a
resolution of the company or the Constitution
▪ Even though a contract to oust the jurisdiction of the court to order a winding up is not binding on the court, the court will respect the parties wishes
to postpone the right to petition the court for a reasonable period – Krusevac Co v Bonsu
▪ Krusevac Co v Bonsu affirms the right of a Contributory to petition for the winding up of the company although the Court may uphold in favour of an
innocent party a contract which forbids a contributory from petitioning for the winding up of the company for a reasonable duration
▪ The AG may also present a petition to the Court for the winding up of the a company
▪ The grounds on which the AG can present a petition for a company to be wound up are that the business or object of the company are unlawful, the
company is being operated for an illegal purpose and the business being carried on by the company is not authorised by its Constitution.
▪ In any other case, the best option of the AG is to notify the Registrar

Factors considered by court in granting a petition
1. The company fails to carry on business within 1 year from the date of
inception
2. The company suspends any of its authorised business for 1 year
3. The company has no members
4. The business or object of the company are unlawful
5. The company is being operated for illegal purposes
6. The business being on by the company is not authorised by the
Constitution of the company
7. The company is unable to pay its debts
8. In the opinion of the court it is just and equitable to do so
Obligations of the Official Liquidator
▪ The Liquidator assumes the powers of the directors when liquidation commence
▪ The directors shall furnish the liquidator with
▪ Statement of affairs which should contain particulars of all the assets of the company as well as the reasons for the
resolution or petition for liquidation
▪ The complete financial statement of the company for the last 3 years preceding the petition or resolution
▪ The liquidator shall place notice in a national daily newspaper calling on all creditors to file their proof of
debt before a determined fixed date
▪ The liquidator shall also call on all debtors to pay up or make arrangements before a fixed date to pay their
debts
▪ The Liquidator may also continue to carry on business of the company for its beneficial winding up
▪ The liquidator shall proceed to settle the company’s indebtedness
▪ The payments are based on two principles
▪ Priority Principle:
▪ Proportionality Principle

Principle for settlement of debts ▪ Class C
1. Priority Principle ▪ Debts or part of debts which does not fall within
class D and is or was owed to a Director or
▪ This principle requires Creditors to be paid first former Director or to a near relative of any such
before Shareholders Director or former Director
▪ Creditors are ranked into classes starting from A, B, C ▪ Class D
in that order
▪ Debts or part of debts including excess benefits
▪ Class A Creditors include restored to the Liquidator under section 31 of Act
▪ Remuneration owed to employees of the company 992
in respect of employment during the past 4 ▪ Excess interest that is any proportion of a debt
months preceding commencement of the winding with an interest rate in excess of seven per
up centum per annum
▪ Rates, Taxes or similar payments owed to the 2. Proportionality Principle
Republic or local authority due for the last one
year preceding commencement of winding up ▪ Requires that if there is insufficient assets to pay all
the Members of each class of Creditors its full claims,
▪ Class B Creditors
then each member of that class is to be paid
▪ Debts or part of debts which do not fall within any proportionally to their claim
other debts e.g. Debenture holders secured by
floating charge

Payments shall be made in the following order
▪ Official Liquidator’s fees and other charges and cost associated with the liquidation
▪ Current rent, rates and taxes of the company
▪ Creditors secured by a fixed charge
▪ Class A creditors
▪ Class B Creditors including debenture holders secured by floating charge
▪ Class C creditors
▪ Class D creditors
▪ Preference Shareholders
▪ Equity Shareholders

109
Section 68,77,83, 294,295

▪ A company needs capital for various purposes including incorporation and ▪ Primary market is for the new issue of debt or equity instruments by the
undertaking business operations issuer. The proceeds go to the issuer of the securities
▪ Company law provides various means by which a company may raise capital ▪ The Secondary market is where investors buy and sell already-issued
securities. The issuer is not involved in the trading and proceeds go to the
▪ The method and procedure used to raise capital is determined by whether selling investor
the company is a private or public company, the preference of the directors,
the financial market situation etc ▪ Primary and secondary markets are interdepend able because the securities
are issued or created on the primary market and the trading takes place on
▪ The capital must be raised on terms that are acceptable, cheap and quick the secondary market
▪ Capital market is the market for the buying and selling of medium-term and ▪ The secondary market provides provides liquidity to investors by providing
long-term equity(shares) and debt securities (debentures) the platform for conversion of the securities into cash.
▪ Capital Market should be distinguished from money market which is the ▪ Secondary market platforms include the stock exchange and over the
market for the buying and selling of short-term (from overnight to under a counter platforms
year) financial instruments (e.g. commercial papers, treasury bills, certificate
of deposits etc)
▪ Two types of capital markets

▪ Primary market and
▪ Secondary Market

▪ Capital in a company may be in the form of equity or debt Loan capital may also be raised
through bank loans– section 83
▪ A company may raise capital through
1. Issuing shares in exchange for cash or payments in kind or
2. Transfer from reserves to stated capital – section 68( c)
3. Debt, which may take the form of debentures (bonds) or bank loans
▪ Equity capital is the capital a company raises through the issue of its shares.
▪ Loan capital on the other hand refers to capital raised by the issue of debentures (bonds)

A. Raising Capital through Equity Shares
▪ Equity capital is the capital a company raises through the issue of its shares
▪ The Capital received through the issuance of shares goes into stated capital
▪ Section 68 defines stated capital as
▪ The total proceeds of every issue of shares for cash including the amount paid on calls made on
shares issued with an unpaid liability, less deductions for transaction co0sts that are direct and
incidental to share issue
▪ The total value of the consideration as stated in the agreement, received for every issue of shares
otherwise than for case
▪ The total amount which the company by special resolution resolves to transfer to stated capital from
reserves as defined in section 70 including the credit balance on the share deals account referred to
in section 65

A. Raising Capital through Equity Shares ▪ Prospectus is issued but disclosure
requirements are usually limited and not as
▪ How is Equity Capital raised broad as an offer to the public
1. Right Issue ▪ Create and Escrow Agreement between
Company, Lead manager and the Escrow Bank
▪ Involves issuing shares to existing shareholders in
for the purpose of holding the offer proceeds
accordance with the pre-emption rights of the until conclusion of the offer
existing members under section 189(1)(a)(i)
▪ Issue an underwriting Agreement especially
▪ All shareholders receive the shares in proportion
where another party underwrites a part or the
to their existing holdings to avoid dilution whole offer
▪ For public companies listed on the Ghana Stock
▪ Private Company
Exchange, the rights issue is required to be
renounceable i.e. the shareholder entitled to ▪ No need for prospectus
participate in the right issue may sell or transfer ▪ Allotment letters are issued to each
the participation right to another shareholder or a shareholder to confirm their participation
third party
▪ Public Companies:

A. Raising Capital through Equity Shares and the company. This sets out the key commercial terms of
the investment or on which the investor acquires the shares.
▪ How is Equity Capital raised The investor will usually require broad indemnities for
2. Private Placement undisclosed potential risks.
▪ Refers to issuance of shares to a small group of usually high net ▪ Shareholders Agreement entered into between the investor,
worth or supplicated investors company and other shareholders of the company. It is meant to
supplement the Registered Constitution of the company and
▪ A key requirement is that the pre-emption rights of existing will typically include;
shareholders under section 189(1) (a)(i) of Act 992 or under any ▪ (a) Board constitution;
shareholders’ agreement should be waived
▪ Both private and public companies can raise capital through private ▪ (b) Proceedings of the Board
placement ▪ (c) Approval of specified reserved matters
▪ The arrangement is a private one not meant for the public ▪ (d) Meetings of Shareholders
▪ A prospective investor is made to sign an NDA ▪ (e) Share Transfer Restrictions
▪ The Relevant agreements are eventually signed ▪ (f) Put Options
▪ It is often used to avoid the complexities of a public offer and/or ▪ (g) Call Options
attract strategic investors
▪ (h) Drag along provisions
▪ Key activities and documentation
▪ An information memorandum is prepared by the company
stating brief history, issued shares, stated capital, shares to be
issued, amount of money required and its purpose etc
▪ A term sheet stating the terms of the investment and clauses
for confidentiality etc
▪ Share Description Agreement to be signed between investor

A. Raising Capital through Equity Shares with section 304 and Securities and Exchange Commission Regulations,
2003 (LI 1728)
▪ How is Equity Capital raised ▪ The prospectus must also comply with schedule 10 of Act 992 and Schedule
5 of LI 1728
2. Invitation to the public
▪ The prospectus is usually prepared by the Lead Manager of the offer and
▪ Reserved for public companies only - section 294 the legal advisors.
▪ There are penalties for a private company that engages in invitation to the public ▪ Other agreements required include
▪ section 295 provides that an offer to the public is made if an offer or invitation to ▪ Escrow Agreement: This is entered into between the Company, the
make an offer is Lead Manager and the Escrow Bank for the purpose of holding the
▪ Advertised or disseminated in the republic by newspaper, broadcasting, offer proceeds until the conclusion of the offer
cinematograph, electronic communication or any other means ▪ Receiving Bank Agreements: This agreement is between the
▪ Made to or circulated among persons whether selected as members or Company, the Lead Manager and Receiving Banks governing the
debenture holders of the company concerned or as clients of the persons receipt of applications and offer proceeds.
making or circulating the invitation or in any other manner ▪ Underwriting Agreement: This agreement will be used where a
▪ Made to one or more persons on the terms that the person or persons to part or all the offer is underwritten by another party
whom it is made may renounce or assign the benefit of the invitation or of
shares or debentures to be obtained under the invitation in favour of any
other person or
▪ Made to one or more persons to acquire shares or debentures dealt in on a
stock exchange or in respect of which the invitation states that application
has been or will be made for permission to deal in those shares or
debentures on the stock exchange
▪ Note: an invitation made by a private company to its shareholders or employees
is exempted from what constitutes an invitation to the public
▪ A domestic concern where invitations are made to existing shareholders does
not constitute an invitation to the public
▪ Key agreements and documents
▪ First and most important document is the prospectus issued in compliance

B.Transfer from Reserves to Stated ▪ Another resolution may also be passed that
Capital unissued shares in the company should be
issued as fully paid to the shareholders in the
▪ This refers to transactions involving the
proportions they would have received the
transfer of funds from the reserve to stated amount transferred if it had been distributed
capital as dividends – section 77
▪ Reserve refers to an account in which reserve
▪ This is called capitalization issue – section 77
profit is retained for the purpose of dividend
payments – section 70 and 71 ▪ This is used as a means of compensating
shareholders for what they have lost for the
▪ On the recommendation of the directors , the
transfer of funds from reserve to stated
shareholders may pass a special resolution to capital, since these funds would have been
transfer directly from the reserves to stated available for dividend distribution
capital – section 77

C. Debt
▪ A company may raise a loan capital by the issue of a debenture (bonds) or a series of debenture stock.
▪ A debenture is written acknowledge of indebtedness by a company setting out the terms and conditions of the
loan – section 83
▪ Debt Capital may be raised by
▪ Public offer of debt securities
▪ Private Placement
▪ Bank Load
▪ Public offer of debt security procedure

1. Prospectus: Same considerations as in the offer of equity securities to the public.
2. Programme Memorandum: This is used where the transaction involves the establishment of a debt programme,
instead of a single issue - Section 83 of the Companies Act
3. Trust Deed: A trustee is appointed under a trust deed to act as an intermediary between the Company and the
debenture holders. The trustee monitors the Company’s compliance with the terms of the debentures and holds any
security on behalf of the debenture holders - Section 95 of the Companies Act.
▪ The appointment of a trustee is mandatory for debt securities listed on the Ghana Stock Exchange.

Conversion issue
▪ This refers to debt contracted by a company on terms that at the option of the holder or the
Company, it can be converted into equity- Section 88 of the Companies Act.
▪ In such transactions, the transaction documents should set out the term of the conversion,
including valuation and pricing of the shares to be issued to the creditor.

119
Source: Kimathi & Partners

This is provided for personal study purposes only.

▪ Why Litigate? ▪ Derivative Actions: Some Important Principles
▪ The Relevant Principles ▪ Remedies Against Oppression
▪ The Rule In Foss V. Harbottle ▪ Remedies Against Oppression: Prerequisites

▪ The Rule In Foss V. Harbottle: Common Law Exceptions ▪ Remedies Against Oppression: The Judicial Perspective
▪ The Rule In Foss V. Harbottle: Applicability Under Ghana Law ▪ Prevention Of Ultra Vires & Illegal Acts
▪ Codification Of The Rule In Foss V. Harbottle ▪ Prevention Of Ultra Vires & Illegal Acts: S 19 Applications-
Prerequisites
▪ Representative Actions
▪ Prevention Of Ultra Vires & Illegal Acts S 19 Applications- Special
▪ Representative Actions: Prerequisites Provisions For Contracts
▪ Representative Actions: Uses Of Representative Actions ▪ Prevention Of Ultra Vires & Illegal Acts: S 218 Applications-
Prerequisites which Originating Process Must Be Used?
▪ Representative Actions: Some Important Principles
▪ Which Originating Process Must Be Used?
▪ Derivative Actions
▪ Conclusion
▪ Derivative Actions: Prerequisites
▪ Derivative Actions: Uses

▪ Corporate litigation between the directors and members of a company is a common
phenomenon which may have dire consequences for the management of the company
▪ However, these conflicts are inevitable as they usually arise from disagreements over the
control and management of the company and its resources by the director(s)
▪ And once the company does not resolve these disputes internally, the aggrieved member(s)
may seek redress in the Courts

▪ The applicable legal principles governing actions which are commenced to enforce the
Directors’ Liabilities or Members’ Rights may be found in both the common law of Ghana and
statute.
▪ To have a strong grasp of these principles, one must understand:
▪ The Rule in Foss v. Harbottle and its application under Ghana law.
▪ The Principles Governing Representative Actions.
▪ The Principles Governing Derivative Actions.
▪ The Principles Governing the Remedies against Oppression.

▪ The rule in Foss v. Harbottle[1843] 2 Hare 461;67 ER 169 is a two-pronged common law
principle which provides that :
▪ The proper person to sue to redress a wrong done to a company or to the property of the company,
or to enforce rights of the company is the company itself.
▪ Where an alleged wrong is a transaction which might be made binding on the company and all its
members by a simple majority of the members, no individual member of the company is allowed to
maintain an action against the company.
▪ The rule is premised on the considerations that a company is a legal person, the majority have
a right to rule, the prevention of multiplicity of suits, and the avoidance of ineffective court
orders.

▪ There are, however, exceptions to the Rule in Foss v. Harbottle at common law including:
▪ Acts infringing the personal rights of shareholders such as the unlawful restriction of a shareholder’s
voting rights (see Pender v Lushington [1877] 6 Ch D 70.)
▪ Where the act complained of can only be confirmed by a special or extraordinary resolution. (See
Edwards v. Halliwell [1950] 2 ALL ER 1064.)
▪ Where the act complained of is ultra vires the company (See Prudential Assurance v. Newman (1982)
Ch. 204)
▪ Where there is fraud on the minority (Estamanco v. Greater London Council (1982) 1 All ER 437)

▪ The common law forms part of Ghana law by virtue of Article 11(1)(e) & (2) of the 1992
Constitution. Thus, being a common law principle, the Rule in Foss v. Harbottle is applicable in
Ghana (subject to the statutory modifications.)
▪ The Supreme Court in P.S. Investments Ltd.V. CEREDEC [2012] 1 SCGLR 618. exhaustively
discussed the applicability of the Foss v. Harbottle principle in Ghana under the old
Companies Act. The decision is nonetheless, relevant to the new Companies Act (Act 992).
Broadly speaking, the main takeaways from the decision are that:
▪ The Companies Act, has retained the Rule in Foss v. Harbottle to the extent that it is not inconsistent
with the act. (See s 5 of Act 992).
▪ The Common law exceptions to the Rule in Foss v. Harbottle (already referred to) are applicable in
Ghana.
▪ The Companies Act has in some respects codified the Rule in Foss v. Harbottle.
▪ The Companies Act has also created statutory exceptions to the Rule in Foss v. Harbottle.

▪ ACT 992 has, to an extent, codified the Rule in Foss v. Harbottle :
▪ Under section 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 the members in general meeting may sue in the name of the company where the Board of
Directors neglects or refuses to do so under section 144(5)(b) of Act 992.
▪ Thus, in general individual members cannot sue to protect the rights of the company in accordance
with the Rule in Foss v. Harbottle.

▪ Representative actions may be considered as exceptions entirely hold under sections 89(4) of Act 992
to the Rule in Foss v. Harbottle. These actions are ▪ Proceedings to enforce liabilities for director’s breach of duty
governed by s 205 of Act 992. pursuant to section 199 and 201(a) of Act 992.
▪ Proceedings to restrain a threatened breach of duty under
▪ Representative actions are commenced by a member sections 190 & 192 pursuant to section 200(b).
where Act 992 creates a cause of action in the
member(s) but requires or permits the member/plaintiff ▪ Proceedings to recover company property from a director
to sue not just for himself but also on behalf of the pursuant to section 200(c) of Act 992.
members of a relevant class.
▪ Important Principles on Representative Actions
▪ Prequisites ▪ Though a representative action may inure to the company’s
▪ No representative action can be properly commenced if Act benefit, it is not instituted in the name of the company. Rather
992 does not authorize the commencement of a suit in a it is instituted in the name of the plaintiff member or creditor.
representative capacity on behalf of the plaintiff and other ▪ The plaintiff does not need to seek the consent of the
persons. company, or the members of the class represented in order
▪ So, it is necessary to ensure that there is a specific provision to sue.
which entitles the plaintiff to sue in a representative capacity. ▪ The plaintiff cannot name the individual members of the class
as parties to the suit without their approval. They may opt to
▪ Uses of Representative Actions join the suit after commencement if they are interested, but if
they fail to do so, the plaintiff has full conduct of the case even
▪ Proceedings to challenge the legality of dividend payments though the suit was commenced in a representative capacity.
under section 72 (3) & (4) of Act 992.
▪ Whether or not a member of a class is joined as a party, the
▪ Proceedings by a debenture holder to enforce the security of decision of the Court will be binding on that member.
a series of debentures which the debenture holder does not

▪ Derivative actions may be considered as exceptions to the Rule in a right to sue. They also have the advantage of entitling members or directors
Foss v. Harbottle. These actions are governed by s 201- 204 of Act 992. of companies to protect the interest of related or subsidiary companies.
There is, however, no clear definition of what a derivative action is ▪ It is not necessary that a specific provision entitles the member or director to
under Act 992. sue. Nonetheless derivative actions may be brought in :
▪ Proceedings to enforce liabilities for director’s breach of duty pursuant to
▪ However, an action may be considered to be a derivative action if: section 199 and 201(a) of Act 992.
▪ A director or member of a company or sues in the name of a company or a ▪ Proceedings to restrain a threatened breach of duty under sections 190 & 192
subsidiary of the company. pursuant to section 200(b).
▪ A director or member of a company intervenes in proceedings to which the ▪ Proceedings to recover company property from a director pursuant to section
company or a related company is a party to in order to continue, defend, 200(b) of Act 992
discontinue the proceedings on behalf of the company or the related company.
▪ important Principles
▪ Pre-requisites ▪ Derivative actions may not be settled, compromised, or discontinued without
▪ The member/director must apply for leave of the Court to sue or intervene. leave- s 204. Otherwise, the majority will simply exercise their powers to
discontinue those actions.
▪ The Application for leave must be on notice to the company or its subsidiary.
▪ The Court has very wide powers to ensure that the derivative actions are
▪ To succeed, the member/director must prove that (a) the company or the effectively prosecuted- s 203. This ensures that the officers of the company
related does not intend to sue, continue or diligently defend the suit (b) it is in who may have been opposed to the suit may not frustrate it.
the interest of the company or a subsidiary of the company that the decision
to sue is not left to its directors. ▪ The Court may 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-
Section 202. This ensures that costs do not operate to prevent members or
▪ Uses directors from instituting derivative actions where necessary.
▪ Derivative actions may be commenced in all situations where the company has

▪ S 219 of Act 992 provides members or debenture holders of a company remedies to the oppressive conduct against them in the name of the company. These remedies
may include:
▪ Mandatory and Prohibitory Orders.
▪ Orders for the cancellation or variation of a transaction/resolution.
▪ Orders regulating the future conduct of the company’s affairs.
▪ Orders for the purchase of shares or debentures of aggrieved persons
▪ To successfully apply for the remedies against oppression:

▪ The Applicant must be a member or debenture holder of the Company; and
▪ The Company must be run in a manner oppressive to or in disregard of the proper interests of the members, debenture holders, or officers of the company; or
▪ There must be an 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.
▪ The Judicial Perspective
▪ The ratio in Pinamang v. Abrokwa [1991] 2 GLR 384 provides insight into the attitude of the the Courts where remedies against oppression are sought. It must be
proved that:
▪ The action was commenced with the genuine object of obtaining the relief claimed and not for exerting pressure in order to achieve a collateral purpose.
▪ The matters complained of must affect the person alleged to have been oppressed in his character as a member of the company and not in any other capacity.
▪ The applicant must adduce evidence seeking to show a chain of events and occurrences of harsh and burdensome conduct which continued up to the date of presentation of the
petition.
▪ The court is, however, precluded from inquiring into matters of internal management or, at the instance of a shareholder, interfering with transactions which though prima facie
irregular and detrimental to the company, were capable of being rectified by an ordinary resolution of the company in general meeting. (Note that this is consistent with the rule in
Foss v. Harbottle)

▪ Where a company acts in excess of its authority under the registered constitution, the
company’s acts do not become void- S 19(2), (4) & (7) of Act 992. 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 S 19 of Act 992 or S 218 of
Act 992 or both where appropriate.
▪ It must be noted that these prohibitions are consistent with the common law exceptions
against ultra vires acts.

▪ The Applicant must be:
▪ (a) member of the company or
▪ (b) a debenture holder or a trustee of a debenture holder with a floating charge of the company’s asset(s).
▪ The Act complained of must be contrary to the company's registered constitution.

▪ The Act complained of must be an act capable of being prohibited by the Court- it must not have
already been executed.
▪ Special Provisions for Contracts
▪ The law seeks to strike a balance where contractual obligations are involved. Thus, in appropriate s 19
applications, the Court may:
▪ Set aside a contract and its performance.
▪ Make appropriate compensatory orders resulting from the setting aside of the contract.
▪ Thus, the court may prohibit the company from performing contracts and also provide reasonable
compensation to the company or any other injured party to the contract for the cancellation of the
contract.

▪ S 218 Applications are similar to S 19 Applications as they are both applications for
prohibitory injunctive orders. However, in S 218 applications, the court may declare the acts
complained of to be void.
▪ The following prerequisites must be satisfied:
▪ The Applicant must be a member of the company; and
▪ The act which the Applicant seeks to prohibit must be illegal, in excess of the company’s capacity, or
contrary to the company’s constitution; or
▪ The Applicant must seek to restrain the company from acting on a resolution passed contrary to Act
992 or the Constitution.

▪ It is not sufficient to understand the substantive requirements of the various causes of actions created under
Act 992. It is also necessary to appreciate the procedural rules governing the commencement of those actions,
including the rules governing the proper originating process.
▪ This is because where the law provides a special procedure in order to do an act that procedure must be
followed.- Boyefio v. NTHC PROPERTIES LTD [1997-1998] 1 GLR 768
▪ First, if the law states that the court must be approached by an application (for example, S 218 & 219 action)
then the appropriate process is an an originating motion on notice. Please note that most of the actions under
Act 992 require an application to the court but a prudent lawyer must not make assumption.
▪ Second, if the law requires that the court must be petitioned then a petition must be filed. This only appears in
s 234(b) in relation to the Registrar of Companies petitioning for the company to be wound up.
▪ Third, if the provision of Act 992 creating the cause of action does not provide a special procedure, the action
must be commenced by a writ of summons in accordance with Order 4 r. 2 of CI 47 since the High Court has
original jurisdiction over actions created under Act 992. (See s.383 & 1st Schedule to Act 992.) So, in general,
derivative and representative actions are to be commenced by a writ.

▪ Act 992 has whittled down the application of the Rule in Foss v. Harbottle in Ghana by
providing members and to some extent debenture holders the legal capacity to enforce their
rights and director’s liabilities in Courts
▪ These statutory modifications should be welcome as effective tools for ensuring proper
corporate governance in Ghana.

135

▪ Financing agreements are generally governed by the Contracts Act, 1960 (Act 25) (the
“Contracts Act”) and applicable principles of common law.
▪ No specified legal requirements in respect of the terms of a financing agreement.
▪ Most financing agreements specify, inter alia, the facility amount, the purpose of the facility,
the interest rate payable, repayment provisions and dispute resolution clauses.
▪ The Borrowers and Lenders Act, 2008 (Act 773) has introduced some credit regulation. The
main thrust of the legislation is to provide some measure of borrower protection
▪ Bank and Specialized Deposit Taking Institutions Act 2016, Act 930
▪ The type of lending transaction or terms of agreement will determine the applicable law

▪ Lending transactions may be secured or unsecured.
▪ A lending transaction is secured where the borrower or a third party creates an encumbrance
over an asset or a legal right as a collateral for the obligations of the borrower.
▪ This means that where the borrower fails to satisfy the secured obligations, the lender can
enforce the collateral and use the proceeds to satisfy the obligations of the borrower under
the loan.
▪ Security for a lending may also take the form of a guarantee

▪ Types of Security
▪ Security for lending transactions may take any of the following forms, among others:
1. A mortgage
2. A fixed charge over an asset
3. A floating charge over undertakings
4. A Security Assignment
5. A Pledge of Goods

▪ Lending transactions are mostly bilateral i.e. between a single lender and the borrower.
▪ Under certain circumstances a lending transaction may be syndicated. This means that the
transaction will be between a group of lenders and a single borrower.
▪ Lending may be syndicated where the amount being borrowed may be above the prudential
limits or capital requirements of a single lender. Under such circumstances, the risk will be
shared by a group of lenders. One of the lenders will usually lead the syndicate and act as an
agent and security trustee on behalf of the other lenders

▪ Most lending transactions commence with an application by the borrower ▪ The key legal documents are: the Facility Agreement and the Security
for a credit facility from the lender. Documents. The type of security agreement to be drafted will be
determined by the nature of the security requested by the lender.
▪ The lender will usually demand information regarding the borrower, its
business and the proposed utilization of the loan to determine whether to ▪ After the execution of the transaction documents, the next key item is for
grant the facility. Most lenders will take credit applications through a credit the borrower to satisfy all the conditions precedent for the disbursement of
approval process. the credit facility.
▪ After the credit approval process, if the credit is approved, the borrower is ▪ The nature and scope of the conditions precedents will usually be
usually provided with a term sheet setting out the key terms of the credit determined by the nature of the credit facility and its purpose. The
facility. conditions precedent will usually cover the following:
1. provision of certified copies of constitutional documents of the
▪ Section 18 of the Borrowers and Lenders Act requires a lender to provide borrower;
borrowers with a pre- lending disclosure statement setting out all the keys
of the credit facility 2. provision of certified copies of the borrower’s corporate
approvals;
▪ If the borrower finds the terms of the proposed credit facility acceptable, 3. evidence that the borrower is in compliance with regulatory
the parties will proceed to the formal documentation of the proposed requirements relating to its business and the borrowing; and
transaction. 4. evidence that the security documents have been perfected i.e. duly
stamped under the Stamp Duty Act and registered at the appropriate public
▪ Most lenders use standard legal documents for lending transactions. registry
Depending on the complexity of the proposed transaction, external counsel
may be engaged to draft legal documents

▪ Does the borrower have the capacity to borrow? This will be determined power of the directors to borrower
from a review of its Regulations or in the case of a statutory corporation, its
establishment legislation. ▪ Does the purpose of the loan come within the authorised business of the
borrower?
▪ It is important to verify that the borrower’s Constitution do not limit its
capacity to enter into the financing transactions. ▪ Under section 24 of the Companies Act, the powers of the company, including
the power to borrower, must be exercised in furtherance of the authorised
▪ In the case of statutory corporations, approval is required from the Minister of business of the Company.
Finance under section 7 of the Loans Act for such entities to enter into financing
transactions. ▪ The contracting of a loan by the company for a purpose which is unrelated to its
business may be ultra vires the directors of the Company. Rolled Steel v British
▪ Where the borrower is the government, parliamentary approval is required under Steel [1986] Ch. 246. See also section 204 of the Companies Act
Article 181 of the 1992 Constitution and the Loans Act before it can
undertake the borrowing ▪ When acting for the borrower, it important to ensure that all the representations
and warranties contained in the loan agreement are correct at the agreement
▪ Where the borrower is a regulated entity, for instance, in the case of banks and date and at the time of any disbursement.
insurance companies, it will be important to verify whether there are any
regulatory restrictions affecting the proposed transaction. ▪ If the terms of the representations and warranties are incorrect, it can lead to
an event of default and an acceleration of the loan.
▪ What corporate approvals are required for the transaction? Usually a
board resolution is adequate. Please note however that under section 202(7) of the ▪ When acting for the borrower, verify that any undertakings to be provided
Companies Act, the directors will require shareholder approval to borrower by the borrower are reasonable and not onerous, since failure to comply will
where the loan exceeds the stated capital of the company. Barclays Bank v constitute an event of default and lead to the acceleration of the loan.
Perseverance Transport [1965] GLR 665
▪ The Regulations of some companies may disapply this limitation on the

▪ Perfection refers to the process of complying with registration and other formalities required to make a loan
agreement and related security documents enforceable under Ghanaian law
▪ Perfection involves stamping and registration of loan documentation
▪ Under the Stamp Duty Act, Loan Agreements and related security documents are required to be stamped to
make them admissible in evidence in legal proceedings in Ghana.
▪ Under section 12(1) and (4) of the Stamp Duty Act, the transaction documents are required to be stamped
within two (2) months of their creation or where executed abroad, within two (2) months after they are first
received in Ghana to render them admissible in evidence in court or in arbitral proceedings in Ghana,
otherwise they are not available for any purpose
▪ Under sections 12(2) and 32(1) and (2) of the Stamp Duty Act, the transaction documents may be stamped at
any time after the expiration of two (2) months on the payment of the appropriate penalty in addition
to the current stamp duty payable.
▪ The loan agreement is subject to a nominal stamp duty.
▪ Security agreements are however subject to an ad valorem stamp duty of 0.5% of the secured liability in the
case of a primary security instrument and 0.25% of the secured liability in the case of an auxiliary security
document.

▪ A security is a right given to one party in the asset of another party to secure payment or
performance of an obligation by that other party or a third party.
▪ The right is by way of grant of an interest in the debtor’s asset or the asset of a third party,
not by way of reservation of title to the creditor.
▪ The debtor cannot give security over an asset in which he has no interest or of which he has
no power to dispose.
▪ A security merely creates an encumbrance on the ownership rights of the chargor; it does not
transfer title to the lender.
▪ A key purpose of security is the reduction of credit risk and to give the lender priority over
other creditors in the event of the borrower’s insolvency.
▪ Credit risk is the risk of loss of principal or loss of a financial reward stemming from a
borrower's failure to repay a loan or otherwise meet a contractual obligation

▪ Mortgages in Ghana are governed by the Mortgages Act 1972 (NRCD 96)(“Mortgages Act”).
▪ A mortgage is a contract charging immovable property as security for the
due repayment of a debt and the interest accruing on the debt or for the
performance of any other obligation for which it is given, in accordance with the terms
of the contract
▪ A mortgage is an encumbrance on the property charged, and does not, except as provided the
Mortgages Act, operate so as to change the ownership, right to possession or any other
interest, whether present or future in the property charged

▪ A pledge is the actual or constructive delivery of possession of the asset to the creditor by
way of security.
▪ As possessor, the pledgee enjoys a limited legal interest in the asset but ownership remains in
the pledgor.
▪ The pledgee’s interest goes beyond a mere right to detain the asset. It encompasses the
following rights:
▪ right to use the asset at the pledgee’s risk so long as this will not impair it;
▪ right to sell the pledgee’s interest or to assign it by way of gift;
▪ right to deliver the asset to another for safe keeping;
▪ right to sub-pledge the asset on the same conditions as the pledgee holds it and for a debt no greater
than the pledgee’s own; and
▪ right to sell the asset in the event of default in payment by the pledgor.

▪ A charge is an agreement between a creditor and debtor by which a particular asset or class of asset is encumbered for the benefit of the
creditors. It entitles the creditor to look to the asset for the satisfaction of the secured obligations. A charge does not depend on either
the delivery of possession or the transfer of ownership.
▪ A charge may be a
▪ fixed charge or
▪ floating charge – section 90 of Act 992
▪ A fixed charge is a form of security, which is usually created over specific asset and places restrictions on the rights of the chargor to use the
assets in the ordinary course of business. (AIB Finance Ltd v Bank of Scotland [1995] 1 BCLC 185, Re Cosslett (Contractors) Ltd, Clark v
Mid Glamorgan CC [1996] 1 BCLC 407)
▪ Even where a charge may have been described as a fixed charge by the parties, if in the course of dealing, the chargor is allowed to use
the asset in the ordinary course of business with little or no restriction, it would be construed to be a floating charge(Chalk v Khan [2000] 2
BCLC 361, Agnew v CIR [2001] 2 BCLC 188)
▪ A floating charge is an equitable charge over the whole or a specified part of the company's undertaking and assets both present and future.
Section 90 of the Companies Act
▪ In Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 @ 295, the court set out 3 key characteristics of floating charges as follows:
▪ it is a charge on a class of assets of the company present and future;
▪ the charge is over a class of assets which in the ordinary course of business would be changing from time to time; and
▪ it should be contemplated that until some future step is taken by the charge, the company can carry on its business with those assets in the ordinary course of
business

▪ A key characteristic of a floating charge is that it does not preclude the company from dealing with the charged
assets until:
▪ the security becomes enforceable and the holder appoints a receiver or manager or enters into possession of such assets
pursuant to a power in the security instrument;
▪ the High Court appoints a receiver or manager of such assets on the application of the holder; or
▪ the company goes into liquidation.
▪ On the occurrence of any of these events, the floating charge becomes a fixed charge and the company’s right
to deal with the charged assets in the ordinary course of business will be curtailed. Section 87(3), Cmpanies Act.
▪ A fixed charge has priority over a floating charge affecting the same property. However, where the terms of creation
of the floating charge prohibit the company from granting a later charge having priority over the floating charge, the
fixed charge will not have priority if the grantee had actual notice of the prohibition. Companies Act, section 90(5).
▪ A fixed charge may be construed as a floating charge and therefore lose its priority if in spite of contractual
restrictions, in practice, the chargor is allowed to use the charged asset in the ordinary course of business without
restriction.
Read: (Re New Bullas Trading Ltd [1994] 1 BCLC 485, Re Keenan Bros Ltd [1985] BCLC 303, Northern Bank Ltd v
Ross [1991] BCLC 504, Siebe Gorman v Barclays Bank [1979] 2 Lloyds 142, Re Brumark Investments Ltd [2000] 1
BCLC 353, Re Spectrum Plus Ltd [2004] 4 All ER 995)

▪ A security assignment is an interest created over the assignor’s legal rights as security for
the assignor's debts or other obligations.
▪ A security assignment does not extinguish the legal title of the borrower. It simply encumbers
the borrower’s interest until the satisfaction of the secured obligation.
▪ See section 7 of the Contracts Act, 1960 (Act 25)

▪ After the stamping of security documents in accordance with the Stamp Duty Act, the security
documents should be registered at the appropriate statutory registry.
▪ Charges created by companies incorporated in Ghana are required to be registered at the
Companies Registry within 45 days else it becomes void – section 110 of Act 992.
▪ Unregistered charges are void and the monies become payable immediately
▪ Exceptions
▪ Pledges
▪ Properties not belonging to the company
▪ Possessory securities e.g. bill of laden,
▪ Mortgages are registered at the Land Title Registry in respect of registered land and at the
Deeds Registry in respect of unregistered land.
▪ All charges are however required to be registered at the Collateral Registry created under the
Borrowers and Lenders Act.

▪ Charges created by companies incorporated in Ghana are required to be registered within 45
days of creation. Companies Act, section 110
▪ An unregistered charge is void as security and all moneys secured by the charge become
immediately repayable
▪ Possessory security and certain types of documentary security are not required to be
registered.
▪ Registration of a charge constitutes actual notice of the existence of the charge
▪ Where parties fail to register a charge after 45 days, an interested party can apply to the High
Court under section 115 of the Companies Act

▪ All charges related to transactions in Ghana are required to be registered at the Collateral
Registry within 28 days of creation – section 25.
▪ Failure to register renders the charge void.
▪ The Borrower and Lenders Act, Act 773, provides a broad definition of charges:
“means charge, mortgage, security, interest, lien, pledge, assignment by way of security, covenant,
restriction, reservation, lease, trust, order, decree, judgment, title defect (including retention of title
claim), or any other encumbrance of any nature other than liens arising by operation of law”
▪ Section 21 – establishment
▪ Section 22 – objects
▪ Section 25 – registration within 28 days

▪ Registration at the Lands Commission for mortgages -
▪ Section 24(1) of Lands Registry Act, 1962 (Act 122) &
▪ Section 32 of the Land Title Registration Act , 1986 (PNDCL 152)
▪ Land in registrable districts i.e. Accra, Kumasi, Tema and some parts of Winneba- must be
registered at the Land Title Registry whereas land in other parts of the country must be
registered at the Deeds Registry.
▪ Mortgages shall not have effect until registered
▪ Section 24(1) of the Land Registry Act, 1962 (Act 122) &
▪ Section 72 of the Land Title Registration Act 1986 (PNDL 152)

▪ A key statutory intervention is the Borrowers and Lenders Act, 2008 (Act 773)
▪ The purpose of the Act is to:

▪ provide an improved general legal framework for credit;
▪ improve standards of disclosure of information by borrowers and lenders;
▪ prohibit certain credit practices; and
▪ promote a consistent enforcement framework for credit transactions
▪ The Act applies to a broad range of credit transactions and only excludes agreements which are not at arm’s length, of a value below GHC100
or has been expressly excluded by the Bank of Ghana.
▪ The Bank of Ghana exercises supervisory and enforcement powers under the Act.
▪ The Act grants borrowers the following rights:

▪ Protection against discrimination on grounds of race, gender, ethnicity, political affiliation in relation credit transactions Section 14);
▪ protection against disclosure of information obtained from a lender unless the information is required under the Credit Reporting Act, 2007 (Act 726) (section 17);
▪ provision to the borrower by a lender of a pre-lending disclosure statement setting out the key terms of the credit transaction
▪ (section 18);
▪ Right to prepay a loan subject to applicable notice requirements and charges (section 20); and
▪ In case of a payment default, a lender is required to serve a 30 day default notice to the Borrower before commencing enforcement proceedings (section 32).

▪ Act (Act 930)
▪ Banks are prohibited from lending against the security of their own shares, the shares of its holding company,
the shares of its subsidiary or the shares of a subsidiary of its holding company. Act 930, section 61.
▪ A bank is not allowed to assume financial exposure in respect of any one person or a group of persons which
constitutes in the aggregate a liability to the bank amounting to more than twenty-five percent of its net own
funds. Section 62.
▪ “Net Own Funds” is defined as “the sum total of share capital that has been paid-up, free reserves, but
excludes revaluation reserves, and the Reserve Fund established under section 34, subject to netting out
accumulated losses, goodwill, and unwritten-off capitalised expenditure including pre-operating expenses and
deferred tax.”
▪ The Act also imposes restrictions on transactions with affiliates (Section 64), on purchases or transfers of
certain assets from affiliates (Section 65), on financial exposures to an insider (Section 67), on lending to staff -
(Section 69), among others.
▪ An “insider” with respect to a bank or a specialised deposit-taking institution is defined as a director, an
executive director, key management personnel and a significant shareholder other than a financial holding
company.

▪ Financing transactions involving the Government are primarily governed by the 1992 Constitution and the
Public Financial Management Act, 2016 (Act 921)
▪ Under Article 181 of the 1992 Constitution and sections 55 and 56 of the Public Financial Management Act,
all loans raised by Government are required to be approved by Parliament after the terms and conditions of
the loan have been laid before Parliament
▪ Statutory corporations and state-owned enterprises are required to obtain the approval of the Minister
of Finance before undertaking borrowing transactions - (Section 76 of the Public Financial Management Act)
▪ Curiously, “state-owned enterprise” is defined under the Public Financial Management Act as “an entity
whether incorporated or not under the Companies Act, 1963 (Act 179) whose shares are wholly or partially
held or controlled by Government”
▪ Consideration of key Transaction Documents
▪ Bilateral Loan Facility Agreement
▪ A Debenture
▪ A Pledge Agreement
▪ Prescribed Form 9, to be filed at the Companies Registry

156

▪ The corporate body is distinct from the persons who incorporated it
▪ The company after incorporate becomes an artificial legal person separate from the members,
directors and other officers of the company (Salomon v Salomon)
▪ There is a metaphorical veil separating the company from the incorporators
▪ The Ghanaian position was held Morkor v Kuma (East Coast Fisheries Case)
▪ To be continued

158

▪ Principles of Representative Government
▪ Principle of Majority Rule
▪ Minority Rights
▪ Corporate Litigation
1. Section 200
▪ Non-judicial remedies against corporate improprieties 2. Section 201
3. Section 205
▪ Question
▪ How has Act 992 impacted on application of the rule in 4. Section 218
corporate litigation? 5. Section 218
6. Section 219
7. Section 220
8. Foss v Harbottle
9. Edwards and Halliwell
10. Okudjeto and Others v Irani
Brothers
11. PS Investments ltd v CREDEC & 13
OTHERS
12. Pinaman v Abrokwah
▪ As a general rule the company is the proper plaintiff in suits
▪ Suits against the company
▪ Suits on behalf of the company
▪ The common law position is that if a member is dissatisfied with the decision of the BOD or
Majority of the shareholders and brings an action to court
▪ The company can successfully object to the locus standi of the member to sue by an application to
court to stay proceedings or
▪ The court on its own motion can stay proceedings
▪ The common law position is that, even if there has been an irregularity or breach of the
Constitution, so long as the irregularity or breach can be remedied by an Ordinary Resolution,
the aggrieved member is deprived of the right to sue
▪ The limitation of the right of the minority to sue is known as the Rule in Foss v Harbottle

▪ The rule in Foss v Harbottle has been applied in Ghana in the case of
▪ Appenteng and Others v Bank of West of Africa Ltd and Others
▪ Bank of West of Africa Ltd and Others v Appenteng and Others

QUESTION
▪ Chairman's casting vote during meetings
▪ Pre-emption rights
▪ Substitute directors
▪ Company’s Registered Constitution
▪ Shareholder Agreement

1. Chairman's casting vote during meetings
▪ Questions arising at any meeting e.g. directors or committee meeting, shall be decided by a
majority of votes and in the case of equality of votes the chairperson shall have a second or
casting vote.
▪ A casting vote applies when at the first instance the chairperson had not vote or did not vote.
Thus in the event of a tie the chairperson cast a vote to break the tie. This is subject to any
contrary provision in the constitution of the company.
▪ A second vote applies when in the first instance the chairperson had a vote and did in fact
voted. In such as instance, the chairperson shall break a tie by voting the second time.
▪ Reference is made to section 188(h) of Act 992

▪ Alternate directors and Substitute Directors
▪ Allotment of Shares and Issue of Shares
▪ Rights Issue and Capitalisation Issue
▪ Private Liquidation and Official Liquidation

QUESTION
▪ Force Majeure
▪ Dispute Resolution
▪ Entire agreement
▪ Waiver
▪ Severability

▪ a. What is a private liquidation ? Outline the procedure for private liquidation, making
reference to relevant legislation and decided cases.
▪ b. What is an official liquidation? Outline the procedure for official liquidation, making
reference to relevant legislation and decided cases.

▪ It not necessary to hire a company secretary, after all, all that the secretary does is to file
documents the companies registry which anybody can do
▪ Discuss
▪ What provisions has Act 992 made regarding the position of a company secretary

▪ What is a foreign company and an external company
▪ How may a foreign company and external company be incorporated under ghana’s laws

QUESTION
TO: Mr. Kumi Kwame

Accra- Ghana
Dear Sir,
Legal Opinion on removal of Directors under laws of Ghana
Introduction
Opinion
Conclusion
Sign

▪ Removal of Directors is provided for under Companies Act in Ghana
▪ A director is defined under section 170 as
▪ Directors are appointed by the Members in a general meeting or named in the constitution or during incorporation
▪ Removal of directors provisions are provided to increase the control of shareholders over directors to ensure
effective corporate governance
▪ Like any officer of the company there are laid down procedures for removing directors
▪ Even though the Act does not specifically provide for reasons to be provided for the removal of directors, upon a
careful analysis of the various sections and case law, it may be inferred that this requirement was tacitly intended by
the drafters of the Act
▪ Sections176 outlines specifically how directors may be removed under Act 992. However, other provisions namely
Section 29, 217 and the 8th Schedule especially relating to notices will be thoroughly discussed in the following
sections.
▪ The cases of Pinamang v Abrokwa, Adams v Tandoh, Okudzeto v Irani Brothers, Montero v Redco and
Henreich Koch v Horteng Limited will also reviewed in order to give you a good peek into this area of law in
Ghana

▪ A director may be removed by members in a general meeting under section 176 or any person given the
powers of appointment and removal of directors in the constitution of the company under section 29
▪ Section 176 of Act 992 previously section 185 of Act 179 provides the first and commonly used means of
removing directors. The section provides the procedure by which members may remove a director.
▪ In compliance with the natural justice principle of the audi alteram patem rule a 35 day notice is to be given
to a director prior to the meeting in which he will be removed. This notice can be abridged to 21 days if it is
not practicable to give the 35 days notice.
▪ The director is entitled to respond in writing and to be heard at the meeting in which he will be removed
▪ The Section also requires members to be given a minimum notice of 21 days of the meeting at which the
director is to be removed. Paragraph 2 of the 8th schedule on notices provides for the information to be
included in a notice for a general meeting.
▪ The said provision provides that sufficient details of the agenda should be stated in the notice for the recipient
to decide whether to attend or not.
▪ Secondly, section 176 provides that the members shall be ordinary resolution remove the director at a general
meeting. This will require the members to vote on the decision. Members cannot vote without knowing why
they are voting

▪ The only inference that can be drawn from the above is that some reasons for the removal should
be made available to the members and the director first for the director to be able to respond and
second for the members to be able to take an informed decision
▪ In Pinamang v Abrokwa, the CA held that the provisions of sections 185 now 176 are
mandatory in removing a director thus a resort to sections 218 now 219 was not applicable until
the section 185 now 176 was complied with
▪ However, in Adams v Tandoh, the CA taking a different stance indicated that a director may be
removed summarily under section 216 now 217 under Act 992 without going through the
procedure under 185 as previously stated under Pinamang v Abrokwa
▪ The ruling in Adams v Tandoh ushers the need to discuss the second alternative of removing a
director without recourse to section 185. Section 217 of Act 992 previously section 216 saved the
principles of agency (principal and agents or master and servant) in equity and the common law as
long as they were not inconsistent with the Act.
▪ This provision applied to the position of the director and the company, it may be stated that the
director is an agent of the company and by the principle of agency, the director (agent) may be
summarily removed

▪ The Act further provides for the removal of a director under section 29(2) which provides that the
constitution of a company may empower certain persons to appoint and remove directors. This
can only be interpreted to mean that section 176 is not as mandatory as was held in the case of
Pinamang v Abrokwa and resonates with the CA ruling with Adams v Tandoh that directors
may be removed through other methods such as section 217.
▪ Sections 217, 29(2) and the ruling in Adams v Tandoh seems to point to the inference that a
director may be removed without assigning reasons especially with considered in the light of
Okudzeto v Irani Brothers where the court held that it is within the rights of shareholders to
remove a director without assigning any reasons
▪ In Heinreich Koch v Horteng Limited the High Court held that it was necessary to state the
grounds of removal of directors under section 176. This is in compliance with the requirement of
the audi alteram parterm principle, hence the director must be given notice and is entitled to know
the reason for his removal. However, this is not mandatory especially where there is none.
▪ In conclusion, it would seem that a removal under section 176 would require some reason to be
given if there are any but a removal under any other provision such as section 29(2) and 217 may
not necessarily require any reasons to be given at all

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The Law Guide Society 15-Jul-20

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▪ The registrar shall publish the details in the Companies Bulletin

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Section 13, 14 of Act 992

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▪ Section 12 provides that

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▪ The application shall be signed by each subscriber

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▪ Section 29 provides for the legal effect of a registered constitution

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3. Section 10(5) Company reserves the

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▪ In Newborne v Sesolid (Great Britain) Ltd,

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▪ The next sections

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