Professional Documents
Culture Documents
Powers of companies
18. (1) Subject to this Act and to any other enactment, a company
shall have
(a) full capacity to carry on or undertake any business or activity,
do any act, or enter into any transaction; and
(b) full rights, powers and privileges for the purposes of paragraph (a).
(2) Without limiting subsection (1), and despite the provisions of
any other enactment, a company shall be capable of giving and entering
into and being bound by and claiming all rights under a deed or
mortgage or other instrument.
(3) The registered constitution of a company may contain a
provision regarding the capacity, rights, powers or privileges of the
company if the provision restricts the capacity of the company or those
rights, powers and privileges.
Morkor v Kuma (East Coast fisheries)
Brief facts. The Appellant was the Managing
director of East Coast Fisheries Ltd. The Appellant
and another director of the above stated company
entered into a sale agreement for the purchase of
400 metric tonnes of frozen fish valued at
$180,000 with an agent of Faroe Sea Food.
The Main issue with respect to the veil of
incorporation was whether the Appellant as the main
shareholder and Chief executive of the company
could be personally liable for the liability of her
company.
Was the managing director just using the company as
an alter ego to defraud third parties?
"Save as otherwise restricted by its regulations, a company, after
its registration, has all the powers of a natural person of full
capacity to pursue its authorised business. In this capacity a
company is a corporate being, which, within the bounds of the
Companies Code, 1961 (Act 179) and the regulations of the
company, may do everything that a natural person might do. In its
own name, it can sue and be sued and it can owe and be owed
legal liabilities. A company is, thus, a legal entity with a capacity
separate, independent and distinct from the persons constituting it
or employed by it.
From the time the House of Lords clarified this
cardinal principle, more than a century ago, in the
celebrated case of Salomon v Salomon & Co [1897]
AC 22, HL, it has, subject to certain exceptions,
remained the same in all common law countries and
is the foundation on which our Act 179 is grounded."
per Her Ladyship Sophia Akuffo JSC
Lifting the corporate veil
Akuffo JSC went further in Morkor v Kuma and
explained the Ghanaian position on circumstances in
which the veil could be lifted to enable the court have a
proper look at the real persons behind the company and
whether the actions of the company can be attached to
that of the personalities hiding behind the corporate veil
She posited that "The corporate barrier between a
company and the persons who constitute or run it
may -be breached only under certain circumstances.
These circumstances may be generally
characterised as those situations where, in the light
of the evidence, the dictates of justice, public policy
or Act 179 itself so require. It is impossible to
formulate an exhaustive list of the circumstances that
would justify the lifting of the corporate veil."
The veil can be lifted in very limited circumstances and
these are
1. By the Companies Act itself;
2. By other Legislation,
3. Where the courts deem it just and in the public's
interest
Consequences of Lifting the veil
The separate legal status of the company will be
disregarded where there can be any of the following
actions against the individuals behind the company.
1. Civil liability
2. Fines
3. Tax liabilities
4. Declarations that the company's transactions are void
Lifting the veil by Act 179/Act 992
Section 38(s41 Act 992)—Companies Ceasing to have
Members.
If at any time a company ceases to have any member and it
carries on business for more than six months without at least
one member, every person who is a director of the company
during the time that it so carries on business after those six
months shall be jointly and severally liable for the payment of
all the debts and liabilities of the company incurred during that
period.
2. Section 180 (3)(s171(2)) If at any time the number of directors is
less than two in breach of either of the foregoing subsections of this
section and the company continues to carry on business for more
than four weeks thereafter, the company and every director and
member of the company who is in default shall be liable to a fine
not exceeding five pounds for every day during which it so carries
on business after the expiration of such four weeks without having
at least two directors; and every director and member of the
company who is cognisant of the fact that it is carrying on business
with fewer than two directors shall be jointly and severally liable for
all the debts and liabilities of the company incurred during that time.
3. Section 121(125)—Publication of Name of Company.
(a) paint or affix, and keep painted or affixed, its name on the outside of its
registered office and of every office or place in which its business is carried on,
in a conspicuous position in letters easily legible;
(c) have its name accurately mentioned in legible characters at the head of all
business letters, invoices, receipts, notices, or other publications of the
company, and in all negotiable instruments or orders for money, goods or
services purporting to be signed or endorsed by or on behalf of the company.
(2) If any company makes default in complying with subsection
(1) of this section the company and every officer of the company
who is in default shall be liable to a fine not exceeding fifty
pounds. (two hundred and fifty penalty units.)
(3) If an officer of the company or any person purporting to act on
its behalf uses or authorises the use of a seal purporting to be a
seal of the company whereon its name is not engraved as
required by subsection (1) of this section he shall be liable to a
fine not exceeding fifty pounds. (two hundred and fifty penalty
units.)
(4) If any officer of the company or other person shall sign or
endorse or authorise the signing or endorsement on behalf of the
company of any negotiable instrument or order for money, goods
or services wherein the name of the company is not accurately
mentioned in accordance with paragraph (c) of subsection (1) of
this section, such person shall be personally liable to discharge
the obligation thereby incurred unless it is duly discharged by the
company or otherwise, but without prejudice to any right of
indemnity which such person may have against the company or
any other person.
Current position s 125 (5) Act 992
I have not found the exact equivalent in Act 992. Still searching.
5. Companies limited by guarantee are prevented
from engaging in profit making activities. Breach
of this rule can incur civil and other penal
liabilities.
Section 10 (2) (s 8(2))
10(2) If any company limited by guarantee shall carry on
business for the purpose of making profits, all officers and
members thereof who shall be cognisant of the fact that it is so
carrying on business shall be jointly and severally liable for the
payment and discharge of all the debts and liabilities of the
company incurred in carrying on such business, and the company
and every such officer and member shall be liable to a fine not
exceeding five pounds for every day during which it shall carry on
such business.
Other Legislations
Bodies Corporate (official Liquidation) Act, 1963 (Act 180)
1. Fraudulent Trading - Section 26—Order Against Fraudulent or Delinquent
Persons.
(1) If in the course of the official winding up of a company it appears that any
business of the company has been carried on with intent to defraud the
creditors of the company or creditors of any other person or for any fraudulent
purpose, the Court may, on the application of the liquidator or of any creditor,
member or contributory of the company, if it thinks fit so to do, declare that the
persons who were knowingly parties to the carrying on of the business in the
manner aforesaid shall be personally responsible, without any limitation of
liability, for all or any of the debts or other liabilities of the company as the Court
may direct.
2. Internal Revenue Act 2000 section 45 -
Payment of dividends - in a less than 5 member
company. Has been amended by the Income Tax
Act 2015 (Act 896)- see section 59(8)
Lifting the veil by the Courts
Akuffo JSC in the Morkor Case gave instances whereby
it will be appropriate for the court to lift the corporate veil.
- If the company is just being used as a front (mere
façade)
- Fraud
- Alter ego
- Wilful Misdeeds
Gilford Motor Co v Horne [1933] Ch 935 (CA)
Non-compete clauses in employment contracts.