Compiled by: Jojo K.S.

Bentsi-Enchill 2021/2022
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

GHANA SCHOOL OF LAW

COMPANY & COMMERCIAL PRACTICE
KONKI NOTES

FROM ACT 179 TO ACT 992: CHANGES IN THE NEW COMPANIES ACT

The primary legislation governing company law and its entire framework in Ghana is The
Companies Act, 2019 (Act 992). This Act repeals the previous Companies Code (Act 179).
Act 992 came into being to cater for the gaps in in Act 179 and to fix the outmoded nature of
company law in Ghana. It seeks to introduce improved corporate governance standards for
companies operating in Ghana.
There were several changes and innovations brought about by the new Act, which are highlighted
below:

Nature of Change Act 179 Act 992

. Commented [JE1]:
Company Constitution Previously, a company was With the exception of Companies may either file their own constitution, also
known as Registered Constitution, or they may adopt a
required to register its unlimited companies, all Standard Constitution as provided for in Act 992.
Constitution (previously other companies can decide Where a Company chooses not to register its own
termed as Regulations) before not to have a registered constitution, the Act provides a default constitution in its
Second, Third and Fourth Schedule, to govern operations
it would be incorporated. constitution. within a private company limited by shares, a public
company limited by shares, and a company limited by
guarantee respectively.
Issuance of a certificate to The issuance of Certificate to
commence business commence business by the
Registrar of Companies is
now abolished.

Registration of companies Previously there was a 2-step Currently, all the company
process for registration which needs it a certificate of
required that the company be incorporation, which once
issued with both a certificate issued, allows the company to
of incorporation, and a commence business.
certificate to commence
business, before the company Therefore, there would be no
could carry out its activities. minimum capital requirement
before commencement of
operations
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

. Commented [JE2]:
Office of the Registrar of No provision for the The new Act creates a new This new office should be in place within 2 years after the
passage of the Act.
Companies establishment of an office of independent office called the
Registrar. Office of the Registrar of
Companies, an autonomous Commented [JE3]: What this means is that Companies,
governmental body with like natural persons, can now engage in any activity that
perpetual succession. they wish to and unlike the previous regime, are not limited
to only activities stated in their regulations. That said, it is
important to note that regulatory restrictions will continue
It is set up to register and to apply to companies operating in restricted areas such as
regulate businesses and oil and gas, banking, insurance or telecommunications
where special licenses are required. Such companies may
corporate bodies operating in
file a constitution stating clearly the objects of the company
the country and thus restrict their operations to those sectors alone.
Commented [JE4]:
Private Company limited by shares shall be “Limited
. Company “or “LTD”
Stating the object of business Previously, a company was Currently, a company is not Public Company limited by shares shall be “Public Limited
Company” of “PLC”
and the Abolishment of ultra required to state its object of required to state the nature of Company Limited by Guarantee shall be “Limited by
vires rule business in the Regulations, its authorized business, or the Guarantee” or “LBG”
and could only carry on objects of business. Public Company Unlimited by Shares shall be Public
Unlimited Company or “PUC”
business within that scope.
Also, under Section 19, the This would ensure that third parties and stakeholders would
The Ultra Vires Rule is the ultra vires rule has ‘virtually’ have clarity on the legal form of the company with which
they are dealing.
rule that requires Companies been abolished such that a
to stick strictly to the company may engage in a
category of businesses stated business or activity outside Commented [JE5]: This innovation minimizes dissention
in their regulations. the scope of any stated object in a company and provides relief against oppression of
of business. minority shareholders.
. Commented [JE6]:
Company names Companies are now required Act 992 mandates the Registrar to collect Beneficial
Ownership information of Companies. Each company, must
under Section 21 to have set up a Register of Members, maintain and update
certain suffixes attached to Beneficial Ownership details in this Register and report to
their names the Registrar of Companies within twentyeight (28) days of
making such entry in the Register of Members.

A beneficial owner is an individual or natural person who

Buy-out for dissenting The new Act enhances owns, controls, has interest in, or exercises influence over a
legal person (or arrangement) or receives substantial benefits
Shareholders protection of minority from an individual.
shareholders. So, any living person who has a substantial and significant
For example shareholders interest or control over a company.
who oppose a particular This can be a direct interest, through for example, owning a
transaction of a company and significant proportion of shares in the company, or indirect,
have been outvoted, have the such as having influence over significant decisions related to
the running of business of the company.
opportunity to have their
shares bought out. . Note that a beneficial owner is an individual and not a
company.
. A politically exposed person is an individual who is or has
been entrusted with a prominent public function, in any
country orinternational organization. ...
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Disclosure of beneficial A company’s register of

ownership members must contain the
details of each beneficial
owner of the company, and
must also contain a
confirmation as to whether or
not the person is a politically
exposed person.

This information must also be

submitted to the Registrar of
Companies, who maintains
the Central Register.

Residence in Ghana of At least one of the directors

directors of a company must be
ordinarily resident in Ghana.

Notice of a meeting Notice of a meeting does not

have to be given to a director
who is absent from Ghana.
. Commented [JE7]:
Derivative actions A member of a company A new Section on derivative Representative actions are still recognized under Act 992.
However, under Section 200, a member of a company who
could sue to enforce liability action has been introduced. seeks to enforce liability may either sue through
by instituting an action in a representative action or through derivative action.
representative capacity. Unlike representative action
where all costs are borne by
In such situation, the member the person who institutes the
bears the cost of instituting action, with derivative action,
the action. as provided for in Section
202, the court can order that
There was no such thing as the whole or part of the
derivative actions. reasonable costs of instituting
proceedings be borne by the
company, unless the court
considers that it would be
inequitable for the company
to bear those costs.

Statutory declaration by No statutory declaration was Application for incorporation

Directors required as to whether a shall include a statutory
person being appointed as a declaration by each proposed
director had a conviction director, indicating that
within the last 5 years within the preceding 5 years,
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

involving fraud, dishonesty, they have not been charged

promotion, incorporation and with or convicted of a
management of a company criminal offence involving
fraud or dishonesty, or
relating to the promotion,
incorporation or management
of a company or declared
insolvent or if they have, the
date and particulars of the
insolvency
. Commented [JE8]:
Qualifications of Company Qualifications of a company Companies are now required A Company Secretary should meet at least one (1) of the
following requirements per Section 211 of Act 992:
Secretary secretary was not prescribed. to appoint a Company
Secretary duly qualified  Professional Qualification, Tertiary level qualification with
Anyone above the age of under the Act to perform the requisite knowledge in performing Company Secretarial
duties.
majority could be appointed duties of a company  Company Secretary trainee/ under the supervision of a
as a company secretary secretary. qualified company secretary.
 Barrister or Solicitor in the Republic of Ghana.
Major transactions Under the new law,  A Member in Good Standing of the Institute of Chartered
Accountants.
shareholders now have  A Member in Good Standing of the Institute of Chartered
increased influence in major Secretaries and Administrators.
transactions of companies.  By virtue of an academic qualification or as a member of a
Professional Body, appears to the Directors as capable of
performing the functions of Secretary to the Company.
It does not allow a Company
to enter into a major In summary, a company secretary is at the very basic level
required to have a comprehensive knowledge of company
transaction unless the law and legislation and have the ability to guide the Board of
transaction is approved by Directors and the Company in their decision making. In
special resolution. . more specific terms, the Company Secretary is required to
effectively navigate the complex corporate governance
framework and ensure that the companies they work for are
abreast and compliant with their obligations under the law.
Ultra Vires Acts The ultra virus doctrine is
Note: Company Secretaries may either be a body corporate
abolished. or an individual
A company shall have the full
Commented [JE9]:
capacity to carry out any The effect of the provisions is to remove from the board of
business or activity unless directors the authority to enter into such major transactions
specifically restricted by its without the authorization of the majority of shareholders. It
therefore strengthens shareholder democracy
constitution

The list above is not exhaustive.

Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

MECHANICS OF INCORPORATION

Legal Structures for doing business in Ghana

A company is one of the several legal structures of doing business in Ghana. These structures
include:
 Sole Proprietorship
A sole proprietorship is an unincorporated business usually run by one individual in his or her
legal name, or under a trade name. A sole proprietor who adopts a trade name must register
and renew the registration annually. A sole proprietor is prohibited from carrying out business
in the finance, banking or communications sectors. The liability of a sole proprietor is
unlimited.
 Partnerships
A partnership is an association of two or more individuals (not exceeding twenty) carrying out
business jointly for the purpose of making profit. A partnership must be registered. The
members of a partnership are referred to as “partners”, and the terms and conditions of their
relationship are documented in a partnership agreement.
 Companies
A company refers to an entity incorporated under Act 992, which upon incorporation acquires
a separate legal identity distinct from its members, officers, and directors.
It is a legal entity created by law and given legal personality.
Incorporating a company means registering the company under the applicable law of the country
where the company is formed, thereby establishing a legal identity for the company that is separate
from the legal identity of its directors or shareholders.
It is the process by which a company comes into being pursuant to the applicable laws.
Unincorporated business describes a business that has not been legally registered as a business
with the relevant state authorities. Unlike an incorporated business, which has an independent
legal existence, unincorporated companies are not distinct from their owners.
Some benefits of incorporation are that it allows a company to contract in its own name, limits the
liability of the company's directors and shareholders, and ensures continuity of the company in the
event of the death or bankruptcy of a shareholder.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Types of Companies
Under Ghanaian law, specifically Section 7 of Act 992, an incorporated company may be any of
the following:
 Company limited by Shares
This is a company which has the liability of its members limited to the amount unpaid on the
shares respectively held by them. It is a limited liability company such that the liability of
members in this type of company, is limited to the amount unpaid, if any, on the shares they
have subscribed to.
There are shareholders who are the owners of the company and directors, secretary and auditors
who are the officers of the company.
In a company limited by shares, the shareholder need not pay the whole amount of his shares
to the company at once when acquiring the shares. The usual practice is that shareholders make
payments when the directors make "calls" upon them to pay. The shareholder's liabilities are
therefore limited to any amounts unpaid on the shares, and once a shareholder has fully paid
for his shares, he is not to incur any further liabilities in respect of the company. The
shareholder’s personal assets are protected in the event of the company’s insolvency. Commented [JE10]: The company raises money by
issuing shares. A person can buy shares without paying the
This type of company has shareholders, who own a share in the company. They own a piece full cost of the shares immediately. Should the company run
into debt or be wound down (liquidated), the only money the
of the company so when that company or business makes profits they are paid dividends. The shareholder is liable to pay is the remaining price of the
business is designed for profit-making. A company limited by shares is incorporated with shares (if any). That is why it is known as limited liability
shares capital, so it can not offer its shares to the public. company.

 Company limited by guarantee

Companies limited by Guarantee have no shares, and so by extension, they have no shareholders,
just members.
This is a company which has the liability of its members limited to an amount that the members
may respectively undertake to contribute to the assets of the company in the event of its being
wound up.
This type of company is also a limited liability company, and it is prohibited from registering with
shares, creating or issuing shares. This type of company is therefore only suitable if no initial funds
are required or those funds are obtained from other sources, e.g., endowments and donations. The
company is also not permitted to engage in trading. The company is not permitted to pay dividends
or distribute/return any assets to members.
The company cannot carry on business for profits, unless the profit is to be used to further the
business of the company. Thus, Section 8 of Act 992 provides that 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.
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The liability of members of such companies are limited to the amount the members may agree to
contribute to the assets of the company in the event of the company being wound up. So it does
not have shares but has guarantors who agree to pay a set amount of money towards company
debts. Commented [JE11]: These are companies that are not
formed for the purpose of making profit. It may be an NGO,
a charity, a union, society, council, church, etc.

 Unlimited company Although they are not formed to make profit but to carry out
some objectives, the company may undertake activities to
make profit for the purpose of funding its activities.
It is a common misconception that an Unlimited Company has no shares or that it has no separate
legal personality. This is not the case. This is a company which does not have a limit on the liability Members guarantee to pay various amounts of money
should the company run at a loss or be wound up. This is the
of its members. This company is also registered with shares, and, there is no limit on the liability extent of their liability (i.e, the amount which they guarantee
of the members. Here, the liability of members is basically the same as that of a sole proprietor. or pledge to pay in the event of a winding up).

There are not too many of such companies in Ghana. Although it is unusual for companies to The company has an executive council instead of a board of
directors and its members are often referred to as
incorporate with unlimited liability, some professional services companies are required to operate 'guarantors'.
their business under this type of company. The few that exist are mostly law firms and other
Commented [JE12]: This kind of company also issues
professional establishments who may be prevented from operating as limited liability companies shares as a way of raising capital but the liability of the
by professional ethics. members is distinguished from that of a company limited by
shares.
Section 30(2)(i) also prohibits the conversion of an unlimited company to a limited company. This
prohibition exists to protect investors, who may have entered into transactions with the company
knowing that if shit hits the fan, they can come for the shareholders. The law will not allow you to
assume liability on those terms, and later go and hide behind limited liability.

 External company
This a body corporate formed outside the Republic which, has an established place of business in Commented [JE13]: The expression “established place
the country. of business” means a fixed place of business such as a
branch, registration office, factory or mine.
Essentially, it is a corporate body incorporated outside of Ghana which seeks to register a place of The following are not considered as established place of
business in Ghana. It is branch of an existing company usually registered by a Local Manger on business:
• An agency through which the external company makes
behalf of the company registered outside the jurisdiction of Ghana, who wants to own a branch or purchases, except where the agency does more than mere
place of business in Ghana. purchases, for instance, exercising general authority to
negotiate and conclude contracts on behalf of the body
Although an external company is subject to Ghanaian tax laws (income & corporate tax), such a corporate outside Ghana
• Bona fide brokers
company is regulated by the laws of the country in which it was originally incorporated in. • General commission agents
• The established place of business of a subsidiary
Note that an external company is not the same as a subsidiary. As the external company
incorporated outside Ghana is merely being registered in Ghana, that is, no subsidiary has been
created, there is no requirement to appoint directors and shareholders or to take any other action
normally associated with the incorporation of a new company. 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.
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A company that is running a business by virtue of franchise agreement is not an external company.
If you go and lobby for KFC to give you the right to run a similar business under that trade name,
and you come and incorporate a company here for that purpose, it will not be an external company.

Public & Private Companies

A company limited by shares, a company limited by guarantee and an unlimited company may be
classified as either private or public.
On the difference between a private company and a public company, Section 7(5) of Act 992
defines a private company as one, which by its constitution;
i) Restricts the right to transfer the shares of the company, if any, Commented [JE14]: So you must have at least one
ii) Limits the total number of the members and debenture holders to 50, . restriction on the right to transfer shares. There is no limit
on how many restrictions you can have on this right, but
iii) Prohibits the company from making an invitation to the public to acquire shares or there must be at least one. An example of a restriction
debentures of the company; and would be telling your shareholders that they cannot transfer
iv) prohibits the company from making an invitation to the public to deposit money for their shares within the first two years; or that they cannot
transfer their shares without the approval of the Managing
fixed periods or payable at call, whether bearing or not bearing interest. Director.

The above is what classifies a company as private. Having in mind what constitutes a private Section 322 goes a step further to say that any provision
company, Section 7(7) provides that a public company is one which is not private. So if the inserted into the Constitution of a public company whose
effect is to restrict the right to transfer shares is void.
Constitution does not provide for all of these restrictions, then automatically, it is a public
company. Commented [JE15]:
There is a limit on the total number of members and
debenture holders to not more than 50.
This does not include:
Conversion of a company limited by shares to a company limited by guarantee a) Persons who are genuinely in the employment of the
company
Under Section 9, a company limited by shares may be converted into a company limited by
guarantee if: b) Persons who were formerly in the employment of the
company, and who while in the employment, and
continued after the determination of that employment, to
a) the liability on any of its shares is fully paid; be members or debenture holders.
b) all the members agree in writing to the conversion and to the voluntary surrender to the
Also, in counting the number of shareholders or debenture
company for cancellation of the shares held by them immediately before the conversion holders, two or more persons holding shares or debentures
c) a new constitution, appropriate to a company limited by guarantee, is adopted by the jointly are counted as one.
company pursuant to section 30; and
d) a member agrees or the members agree in writing to contribute to the assets of the company,
in the event of the company being wound up, to an amount of money not less than that
prescribed by subsection (3) of section 8
Once a statutory declaration by a Director and the Company Secretary is delivered to the Registrar,
confirming that the above conditions have been complied with, the Registrar will issue a new
certificate of incorporation to the effect that the company is limited by guarantee.
From the date stated in the certificate;
- the company is converted into a company limited by guarantee,
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- the shares in the company shall be validly surrendered and cancelled despite the provisions
of section 58, and
- the members of the company who have not agreed to contribute to the assets of the
company in the event of the company being wound up cease to be members of the company
Note however that a company limited by guarantee cannot be converted to a company limited by
shares.

Conversion of a private company to public company

The company may alter its capacity to operate as a private company and if it has a registered
constitution, it may alter this as well in a manner that is appropriate to a public company.
Procedure:
1. Pass a special resolution to alter the capacity of the company to operate as a private one to
a public one. Or a special resolution to alter the registered constitution if the company has
one.
2. Deliver a copy of the special resolution and the SR form to the Registrar for registration
within 28 days of the date of the special resolution.
3. Alter the registered constitution if any
4. Change the name of the company to reflect the change. Report this Registrar
5. Registrar to issue new certificate of incorporation and publish new name in Companies
Bulletin and publish notice of the conversion in the Companies Bulletin.

Forming/Incorporating a Company
A company may be incorporated by any person, whether natural or legal. Incorporation is
conferred by the State acting through the Registrar of Companies.
When a client approaches and seeks advice/assistance regarding the formation of a company, the
role of a lawyer is not just to ask the client to sign the prescribed form and constitution (if any), to
begin the process of incorporation.
For a number of clients, various questions must be asked in order to determine what it really is that
the client wants, and the lawyer must explain the options available to find out whether the client’s
desire is really to have a company incorporated, and if so, the type of company. The client would
have to make a decision on what type of company he wants to incorporate depending on his access
to capital, the amount he intends to raise, how he intends to raise it, how much risk the owner
intends to take, how many people (more or fewer than 50) are taking up shares, whether or not he
is trying to make a profit, tax considerations etc. These are business considerations.
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You must decide on who will act as the company's first directors. A company incorporated and
registered in Ghana must have a minimum of two directors, both natural persons over 21 years,
one of whom must be a permanent resident of Ghana.
The directors appoint the company secretary, who may be a natural person or a corporate body.
(Many law firms provide company secretarial services to businesses)
The directors also appoint the first auditor of the company who, is required, by law, to be a member
of the Institute of Chartered Accountants. The auditor must not be an officer or employee of the
company.
The process of incorporation can be divided into 3 stages.
There is the pre-incorporation stage, the incorporation stage and then the post-incorporation stage.
 Pre-Incorporation Stage:
This stage deals with all the preliminary issues before beginning the process to incorporate the
company. Section 6 of Act 992 provides that one or more persons may form an incorporated
company.
The person(s) seeking to incorporate the company must have capacity to do so. Accordingly,
Section 12 highlights that a person who is 18 years and above may apply for the incorporation of
a company.
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.
Next step is to take steps regarding the proposed name of the company. The applicant must conduct
a search in the Registry to ensure that the proposed name for the company is available to be used.
So you must check with the Registrar General's Department whether their preferred business name
is available. If the preferred name is already taken or too similar to the name of an existing
corporation, the company must choose a different name.
If the name is available, under Section 22, the applicant can reserve the name pending the
incorporation of the company, by an application sent to the Registrar for that purpose. After receipt
of the application and payment of the prescribed fee, the Registrar may reserve the proposed name
for 2 months (which is renewable), pending registration of the company.
It must be noted that Section 21(2) prevents a company from being registered by a name which,
in the opinion of the Registrar, is misleading or undesirable. Also, a company is not permitted to
be registered with a name of a company that has been dissolved within the preceding five years of
the intended registration.
Finally, there is the information gathering stage. In registering the company, particulars of various
people (the subscribers, directors, auditors, company secretary, beneficial owners, etc) would be
needed. All this information, particularly, the Ghana Card number and digital addresses of each,
must be readily available.
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Directors for instance, are required to provide a consent letter and statutory declaration, and this
must be obtained.
After this is done, the next step is the incorporation stage, where the actual process begins.

 Incorporation Stage:
Section 13 states that an application for incorporation is made in the prescribed form and delivered
to the Registrar. So the process of incorporating a company starts with the completion and
submission of the prescribed form to the Registrar. For each type of company, there is a
prescribed form that must be filled.
The prescribed form requires information about:
- the name of the company,
- an indication of the type of proposed company,
- nature of the proposed business (for companies to be registered with an object),
- the proposed stated capital and the proposed number of authorized shares (if the company Commented [JE16]: The authorized shares is the total
has shares), number of shares that the company is incorporated with.
Shares may be divided into equity shares and preference
- registered office of the company, and shares. So on the form, you must state how many
- specified particulars of the proposed directors, subscribers, beneficial owners, auditors, authorized shares are created within each class, whether
company secretary, among other things. equity or preference.

- Statement in lieu of prospectus Commented [JE17]: -Date & place of birth

-Present full name & any former name
The proposed directors in particular must provide the particulars of any business occupation and -Residential, occupational & postal addresses
-E-mail address
other directorships held. They must also provide a consent letter and a statutory declaration -Telephone contact
indicating that within the last 5 years, that proposed director has not been: -Nationality
-Ghana Card Number & TIN Number
i. Charged with or convicted of a criminal offence involving fraud or dishonesty Note that where there is an error or omission in a document
ii. Charged with or convicted of a criminal offence relating to the promotion, containing particulars delivered to the Registrar, the
incorporation or management of a company company and every signatory of the document is liable to
pay to the Registrar, an administrative penalty of 150 penalty
iii. Declared insolvent or if that proposed director has been declared insolvent, the date units.
and name of the company Commented [JE18]: This is done after the incorporation
of public companies. Section 303 says that 28 days after a
Each beneficial owner is required to provide particulars of the following: public company comes into existence, the forms in Part One
and/or Part Two of the Ninth Schedule must be filled and
i. Appropriate identification & proof of identity (National ID, passport etc) signed by all the directors or proposed directors of the
ii. Place of work and position held Company
iii. The nature of the beneficial interest
iv. Details of the legal, financial, security, debenture or informal arrangement giving rise
to the beneficial ownership
v. Confirmation as to whether the beneficial owner is a politically exposed person
vi. Any other information as may be determined by the Registrar
The application must 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
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taken and amount payable for the shares. A subscriber who is a member must have shares and the
number of shares, amount paid or unpaid must be provided.
Once all this is done, the promoter or the subscriber or his agent must then submit the application
to the Registrar, with or without the Constitution as the case may be.
After the application is made, and all the requisite details have been submitted, along with the
payment of the prescribed fee, and the Registrar is satisfied that the application for incorporation
is complete, then the Registrar shall, in line with Section 14, certify that the company is
incorporated and in the case of a limited liability company, that the liability of the members is
limited. A certificate of incorporation is issued by the Registrar.
Section 14(2) further 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.
From the day the certificate of incorporation is issued, the company is duly formed.
Under Section 15, the certificate of incorporation serves as conclusive evidence that the company
has been duly incorporated under the Act, and provides that proceedings shall not be brought in
court to cancel or annul the incorporation. However, Section 16 provides that this does not
preclude the institution of proceedings to wind up the company.
Once incorporated, the company has full rights, powers and privileges, and full capacity to carry
on or undertake any business or activity, do any act, or enter into any transaction.
Previously, it was a requirement for a company to have a registered constitution. However, Section
23 provides that this is optional. So a company may choose to have a registered constitution or
not, and this is no longer a legal obligation.
Where the company chooses to have a registered constitution, it must be signed by one or more
subscribers of the company, or the Company Secretary, and delivered to the Registrar by the
subscriber or an authorized representative before incorporation, or delivered by the Company
Secretary, director or authorized representative.
If the company chooses not to have a registered constitution, Act 992 in its Schedules, provides a Commented [JE19]:
standard default constitution for the constitution to adopt and abide by. Private company – 2nd Schedule
Public company – 3rd Schedule
Company limited by guarantee – 4th Schedule
Section 24 provides that where the company has its own registered constitution, then the rights,
powers, duties and obligations of the Company, the Board, each director and each shareholder of
the company, shall be determined by the standard default constitutions unless they are restricted
by the company’s registered constitution.
Section 25 provides that for a company without a registered constitution, then the rights, powers,
duties and obligations of the Company, the Board, each director and each shareholder of the
company, shall be determined by the standard default constitutions.
Section 26 outlines the content of a registered constitution.
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So where at incorporation, the company chooses to have a registered constitution, it must contain
the following:
i. The name of the Company (with the necessary suffix/last words)
ii. Names of the first directors
iii. It must state that the powers of the directors are limited in accordance with Section 189
iv. In the case of a company having shares, the number of shares with which the company
is to be registered
Where a company has been incorporated in accordance with the Act, and subsequently opts to
have a registered constitution, it may state the nature of the business which the company is
authorised to carry on, or if the company is not formed for the purpose of carrying on a business,
the nature of the objects for which the company is incorporated.
A registered constitution may contain any other lawful provisions relating to the structure and
administration of the company. The legal effect of a registered constitution is that it has the effect
of a contract under seal between the company and each member or officer, and between the
members or officers themselves.

 Post-Incorporation Stage:
After the company has been duly incorporated and issued with the certificate of incorporation,
there may be some other matters to attend to. For example, companies seeking to be incorporated
that have a foreign element in their ownership structure must register with GIPC. Also, there are
industry specific processes and procedures, such that if the company is one within a specialized
institution, like banks, there may be a requirement to comply with some legislation

Foreign Participation
Companies with foreign participation (i.e. non-Ghanaian shareholders), must after incorporation
or registration, and before commencement of business, be registered with the Ghana Investment
Promotion Centre (GIPC).
The GIPC Act, 2013 (Act 865), requires every enterprise with foreign participation to register
with the Centre immediately after incorporation and before the commencement of operations. The
application must be in the prescribed form. Commented [JE20]:
You fill the GIPC registration form in triplicate, attach your
The GIPC has set out the various minimum capital requirements (i.e. the least amount of money certificate of incorporation, bank statement of the money
from the foreigner or any document to show the minimum
to start the business with) for businesses to be established by. capital requirement by the foreigner.
File these documents at the GIPC center for registration.
Except where exempt, a company with foreign participation must submit an application for After considering the registration, then they’ll issue a
registration with the GIPC and pay the appropriate fee, which is determined on a sliding scale, certificate.
based on the type of business, and the proportion of foreign equity in the business.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

A company with foreign ownership that wishes to register with the GIPC, must meet the minimum
foreign capital requirement for its type of business. Presently, the minimum foreign capital
requirements are:

In a joint venture/enterprise
between a non-Ghanaian and a
Joint venture US$ 200,000 Ghanaian partner with at least
10% equity participation, the
minimum capital requirement
is 200,000 US Dollars.

This can be either in cash or its

equivalent in capital goods.

Where the enterprise is wholly

Wholly-owned foreign US$ 500,000 owned by a non-Ghanaian, the
business: minimum capital requirement
is 500,000 US Dollars.

This can be either in cash or its

equivalent in capital goods.

In the case of a trading

General trading company US$ 1,000,000 enterprise, irrespective of
whether it is wholly or partly
owned by a non-Ghanaian, the
minimum capital requirement
is 1,000,000 US Dollars.

Such enterprise is required to

employ at least 20 skilled
Ghanaians.

NB: there are some exceptions;

Not every foreigner must contribute foreign capital:
- A foreigner can evade the minimum capital requirement if he is continually and validly
married to a Ghanaian for at least five years or if the marriage is less than five years ,
he must hold a resident permit.
- Also, if you’re a Ghanaian and you loose your citizenship by reason of a citizenship
requirement in a foreign country, you’ll still be treated as a Ghanaian for the purposes
of GIPC requirements.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Note also that when it comes to the incorporation of a company, the foreigner may be an individual
or a company. So if a foreign company approaches and wants to incorporate a company in Ghana,
you must inform the company that they can incorporate a fresh company under Ghanaian law or
they can register their existing company as an external company in Ghana.
GIPC registration is valid for 2 years and must be renewed on expiry. After first registration, GIPC
gives you a document. To renew, you present that document and any document evidencing the
continuing contribution of the investor to the company.
Act 865 also reserves certain enterprises for Ghanaians only. BEFORE registering with GIPC, you
must know that there are some activities foreigners cannot engage in, which are restricted to
Ghanaians. All other activities are permissible once the foreigner complies with GIPC regulations.
Thus, a non-Ghanaian can neither invest nor participate in any of those enterprises. These include:
a) the sale of goods or provision of services in a market, petty trading or hawking or selling
of goods in a stall at any place;
b) the operation of taxi or car hire service in an enterprise that has a fleet of less than twenty-
five vehicles
c) the operation of a beauty salon or a barber shop;
d) the printing of recharge scratch cards for the use of subscribers of telecommunication
services;
e) the production of exercise books and other basic stationery;
f) the retail of finished pharmaceutical products;
g) the production, supply and retail of sachet water; and
h) all aspects of pool betting business and lotteries, except football pool
The Act defines a Ghanaian as a citizen of Ghana or a company, partnership or association or body,
whether corporate or incorporated, which is wholly owned by a citizen of Ghana.

Commented [JE21]: Under the Income Tax Act 2015

(Act 896), companies are required to pay taxes. Companies
Regulatory requirements are therefore required to register with the Ghana Revenue
Authority.
After incorporation and issuance of the certificate of incorporation, the company must comply with
industry specific procedures, rules and permits, before it can carry on business. This includes The company must obtain a tax identification number (TIN)
for itself and personal TINs for its intended directors and the
registering with any other regulatory body that by virtue of the nature of business, the company intended secretary, if they don't have them already, as well as
needs to register with. Ghana (National Identification) Cards.

For example, the registration with the Ghana Revenue Authority, Social Security and National Commented [JE22]: Ghana operates a three-tier pension
Insurance Trust (SSNIT), Data Protection Commission, Environmental Protection Agency, Food scheme of which contributions to the first tier (basic national
social security scheme) and the second tier (occupational
and Drugs Authority, etc. pension scheme) are mandatory. It is a criminal offence for
an employer not to make the mandatory contribution.
Companies that operate under the authorization of other Regulatory Bodies would have to register An employer must contribute at least a sum equal to 13% of
their companies with their own Registered Constitutions and disclose the specific objects in these the employee's basic salary towards the mandatory tiers of
the scheme and the employee must make a minimum
Registered Constitutions. contribution of 5.5% of their basic salary. Employers and
employees may make voluntary contributions towards any
Such Companies regulated by other Regulators among others include; tier of the pension scheme.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

- Banks, Savings and Loans, Microfinance and Microcredit Companies regulated by Bank
of Ghana
- Companies in Academia regulated by the Accreditation Board and other Educational
Regulatory bodies,
- Security Firms regulated by the Ministry of Interior,
- Companies in the Securities Industry and Capital Markets regulated by the Securities And
Exchange Commission (SEC) and the Ghana Stock Exchange
- the Extractive Industry regulated by the Minerals Commission,
- Petroleum Commission,
- Companies operating in the Free Zones Enclave,
- Companies engaged in games and betting regulated by the Gaming Commission,
- Legal Firms, Architectural Firms and such other professional firms.
Banks, insurance companies, non-bank financial companies and companies in the securities
industry among other are required to comply with specific minimum capital requirements peculiar
to their industries.
Some specific companies are considered below:
1. Banks:
Banks in Ghana operate under the supervision of the Bank of Ghana. No person is allowed to carry
on the business of banking in Ghana unless that person:
- is a body corporate
- has obtained a license from the Bank of Ghana
- maintains the minimum paid-up capital prescribed by the law, the quantum of which
differs, depending on whether it is a Ghanaian banking business, foreign banking business,
development banking business or a rural bank
The Banking Law provides that no person other than a bank, shall use or assume the word "bank"
or any of its derivatives of the word in whatever language, indicating the carrying on of the
business of banking.

2. Insurance Companies:
Insurance companies in Ghana operate under the supervision of the National Insurance
Commission, established under the Insurance Law, 1989 (PNDCL 227). No person is allowed to
carry on insurance business in Ghana unless:
- that person is a body corporate
- the Government of Ghana has an automatic 20% interest in the capital in that business, and
at least another 40% of the capital is owned by a Ghanaian.
- that person maintains a prescribed minimum paid-up share capital, part of which should be
in Government securities and deposited as security deposit with the Bank of Ghana. The
amount of minimum paid up capital varies, depending on whether the company is involved
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

in life insurance, non-life insurance, composite (that is both life and non-life insurance), or
reinsurance.

3. Dealing in Securities:
Under the Securities Industry Law, 1993 (PNDCL 333), the entity;
- must be a body corporate
- is required to obtain a Dealer's Licence from the Securities Regulatory Commission and
from the Ghana Stock of Exchange and
- must maintain certain minimum capital requirements.

4. Finance Lease Companies:

A finance lease is defined by the Finance Lease Law, 1993 (PNDCL 331) as an arrangement by
which a Lessor leases to a Lessee, either the lessor's own already acquired assets, or an asset that
the lessor agrees to acquire from a third party, for the Lessee's use only and against payment of
mutually agreed lease rentals over a specified non-cancellable period and under which the Lessee
may exercise an option to purchase the asset outright after the period of the lease at an agreed
price, subject to the agreement of the Lessor.
Under the Finance Lease Law, a person is not allowed to become a lessor under a finance lease
agreement unless that person;
- is incorporated as a company
- is specifically licensed to engage in finance leasing
- complies with guidelines prescribed by the Bank of Ghana, including any prescriptions
relating to minimum paid-up capital requirements.

Additional information:
Under Section 20, where applicable, a company may change the business for which the company
was incorporated to carry on, or in the case of a company not formed for the purpose of carrying
on a business, the objects of the company by special resolution.
Also, after a company has been incorporated, and later changes its name, under Section 21(11),
the Registrar must record the new name in place of the former name, and must issue a certificate
of incorporation that indicates the change of name. The change of name must also be advertised in
the Companies Bulletin, in one daily newspaper and on the website of the Office of the Registrar
of Companies.
Section 21(14) further provides that a change of name by a company shall not affect the rights or
obligations of the company or render defective legal proceedings by or against the company, and
legal proceedings that might have been continued or commenced against the company under the
former name may be continued or commenced against the company under the new name.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Drafting a company constitution

Here is a sample constitution (Courtesy of Sedinam Botwe)
THE CONSTITUTION OF A PRIVATE COMPANY LIMITED BY SHARES
1. The name of the company is Chop Life Ltd. Commented [K&P23]: Section 26 of Act 992

2. The nature of business which the company is authorized to carry on are: Commented [K&P24]: This is not mandatory, But per
Section 19, where the registered constitution does set out
a) Sale of party favors the nature of business, there is deemed to be restriction on
the business or activities of the company, unless the
b) Event organizing registered constitution provides otherwise.

3. Pursuant to Section 18 of the Companies Act, 2019 (Act 992), this company has the powers
of a natural person of full capacity. Commented [K&P25]: Section 26(1) (c) of Act 992.

4. The first directors of the company are Sedinam Botwe and Esmeralda Afenyo. Commented [K&P26]: Section 26(1)(b) of Act 992.

5. The powers of the board of directors are limited in accordance with Section 189 and 195 Commented [K&P27]: Limitations on the powers of
of the Companies Act, 2019 (Act 992). directors.
Commented [K&P28]: Disclosure of interest by directors
6. The liability of the members of the company is limited.
7. The company is to be registered with 5 million shares of no-par value. Commented [K&P29]: Section 26(3) of Act 992.

8. The company is a private company and accordingly:

a) The right to transfer shares is restricted in that the directors may in their absolute
discretion and without assigning a reason, decline to register a transfer of a share;
b) The number of members and debenture holders of the company, exclusive of persons
who are genuinely in the employment of the company and of persons who having been
formerly genuinely in the employment of the company were while in that employment
and have continued after the determination of the employment to be members or
debenture holders of the company, is limited to 50, but where 2 or more persons hold
one or more shares or debentures jointly, they shall for the purposes of this clause be
treated as a single member;
c) The company is prohibited from making an invitation to the public to acquire any of
the shares or debentures of the company;
d) The company is prohibited from making an invitation to the public to deposit money
for fixed periods or payable at call whether bearing or not bearing interest.
The rest of the constitution may adopt clauses 5 to 76 of the Second Schedule or modify them as
long as the modifications are not in contravention of Act 992.
The last page of the constitution should look like this:
I, the undersigned, am desirous of forming an incorporated company in pursuance of this
constitution and I agree to take the number of shares in the company set opposite my name and to
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

pay for the shares in the company set opposite my name and to pay for the shares in cash the
consideration stated.
Name, address and description Number of shares Consideration
or occupation of subscriber payable in cash
Sedinam Botwe (Ghanaian) of 20,000 GHS 20,000
H.No. 114, Clifton Heights
Labone, Accra
Dated the 14th day of February 2021.
Witness to the above signature:
Name: ……………………………………………………..
Address: ………………………………………………….
Description or Occupation: ……………………….
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

CORPORATE GOVERNANCE

Introduction
Corporate governance has received a lot of attention after the 2008 global credit crunch that
culminated into bank failures and worldwide economic crises. In many developing countries,
disclosures and the compliance with the corporate governance codes of best practices existing in
such countries, have become necessary due to ever increasing foreign investors who rely upon the
financial reports of companies in those countries, before having huge economic and financial
investments in them.
In the case of Ghana for example, following the enactments of the 2002 Corporate Governance
code by the SEC, many codes of best practices have emanated, although there have been calls by
various regulators and stakeholders for a single code.
Definition of corporate governance
Corporate governance is an ever-changing system of rules and practices designed to assist
companies to achieve their objectives, through efficient management and control of the company’s
operations.
It is the structure of rules, practices, and processes used to direct and manage a company. The basic
principles of corporate governance are accountability, transparency, fairness, and responsibility.
The Organization for Economic Co-operation and Development (OECD) defines it (corporate
governance) as a set of relationships governing the various members of a corporation.
It is further defined by the OECD (1999) as the system by which business corporations are directed
and controlled. It specifies the distribution rights and responsibilities among different participants
in a corporation, such as: the board, managers, shareholders and other stakeholders, while spelling
out the rules and procedure for making decisions on corporate affairs. By doing this, it provides
the structure through which the objectives are set and the means of attaining those objectives and
performances monitoring.
Corporate governance is important because it creates a system of rules and practices that determine
how a company operates and how it aligns the interest of all its stakeholders. It enhances investor
trust, helps to protects minority shareholders, and can encourage better decision making and
improved relations with workers, creditors, and other stakeholders.
It lays down the procedures or systems by which an incorporated company is to act, be controlled
in the society. It is to ensure that the company continually does better; this has a ripple effect of
benefiting the members or investors. If you comply with good corporate governance, it ensures the
perpetuity of the company.
The principles/pillars of corporate governance are:
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Fairness: Equal treatment of all stakeholders especially shareholders. Corporate players

are expected to display a high sense of fairness to their institutional investors and individual
shareholders in the corporate enterprise. Fairness should be a hallmark in the dealings of
corporate institutions and their constituents. It is their responsibility of every corporate
entity to protect Shareholders rights, treat all shareholders including minorities, equitably
and provide effective redress for violations.

 Accountability: The responsibility of the Board to explain the reasons behind the
company’s decisions to its stakeholders. Corporate governance is based on the premise that
corporate officers operate best when they are held to account for what they do. In the area
of accountability, the question that is usually posed is to whom the board is accountable to.

 Responsibility: Where a person is given power to act and he fails to do so, it is a breach
of that duty.

 Transparency: An openness or willingness by the company to provide crucial

information to its stakeholders. Directors must ensure that they inform all stakeholders
periodically of what they are doing and must seek their consent where necessary and
required. Eg. Major transactions.

Ghana SEC identified some common elements that underlie good corporate governance upon
which further evolution and developments in governance structures are built upon today. They are:
1. the rights of shareholders
2. the equitable treatment of shareholders
3. the roles of stakeholders
4. disclosure and transparency
5. the responsibilities of the board.
These pillars are explicitly uncovered in the 2002 code of best practices released by the Ghana
Securities and Exchange Commission.
Serious attempts have been made in the past time in Ghana to promote effective corporate
governance through various organizations. This include the formation of the Institute of Directors,
the development of the National Accounting Standards, the formation of Ghana Securities and
Exchange Commission which developed a Corporate Governance Code of Best Practice to be
followed by the companies in Ghana.
Thus, the SEC Guidelines on Best Corporate Governance Practices is based on OECD principles.
The Bank of Ghana (BoG) also incorporated some corporate governance rules into the Banking
Act 2004 (Banking Act 2004 amended in 2007) and published the BoG code of Conduct for
Primary Dealers (ROSC, 2005).
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Key problems and challenges of corporate governance

As is the case in many less developed economies, the private sector in Ghana continues to be
dominated by small unincorporated businesses organized primarily as sole proprietorships or as
de facto partnerships. Under the law, such unincorporated businesses are not treated as independent
legal entities with identities and assets that are separate or distinct from those of their owners.
In practice too, such businesses are typically owner-managed and without limited liability, i.e. they
have unlimited liability.
For these reasons, unincorporated businesses do not generally raise “corporate governance” issues
or problems. As an issue, corporate governance is normally identified with the ‘corporate form’
of business organization. With the corporate form, the company is viewed and treated under the
law as an “artificial person,” or a separate legal personality with an identity, assets, and obligations
that are legally distinct from those of its owners or shareholders.
The corporate form gives rise to concerns about corporate governance because of two kinds of
risks normally associated with it;
1. The risk that a controlling shareholder will manage and control the company and its assets
as if the business were a sole proprietorship, thus disregarding the interests of minority
shareholders, creditors or the company itself.
2. The risk of employee-managers, including directors, using the company’s assets and
opportunities to benefit themselves instead of the company and its shareholders
Because the corporate form of business organization is vulnerable to serious abuse by both
management and controlling shareholders, businesses that adopt and operate under the corporate
form are subject to substantially more extensive and stringent legal regulation than unincorporated
businesses. In Ghana, the legal regime that governs entities using the corporate form is Act 992.
Previously, it was Act 179 that governed, and the Code contained among other things, provisions
that regulate the internal governance of companies. However, this was not enough to bring
corporate governance practices in companies to the high, yet reasonable standards set by the law.
Many companies in Ghana continued to operate like sole proprietorships. Shareholder
accountability and minority-protection systems in most companies appeared to exist only on paper,
leaving room for much self-dealing by corporate management and insiders. At the same time, the
corporate form, especially the private company option, had grown in popularity among Ghana’s
entrepreneurs and businesses

Legal & Regulatory framework

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
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

- 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 code.
There are instead institution and industry based codes such as the Bank of Ghana Corporate
Governance Directives for the regulation of Banks and Specialized Deposit Taking Institutions.
Ghana has also adopted the International Financial Reporting Standard for financial reporting.

Act 992 and Corporate Governance

In Ghana, the passage of Act 992 and the issuance of directives by regulatory bodies such as the
Registrar of Companies, the Bank of Ghana, and the Securities and Exchange Commission, have
ushered in a new era of corporate governance rules meant to modernise the management of
companies in the country.
These regulations comprise provisions for the use of technology in company regulatory matters,
increased duties for directors and acknowledgment of minority rights of shareholders, amongst
other things.
Act 992 was introduced to help meet the rapidly changing local and international business
landscape needs. It has introduced more significant corporate governance standards for companies
situated and operating in Ghana. The timing of this new law is ideal as 2018 saw a string of
collapsed banks, many of which experienced a breakdown in their corporate governance regime.
A key benefit of Act 992 is its inherent strict requirements that seek to improve corporate
governance. The Act has a wide range of provisions designed to ensure that the ‘corporate form’,
does not become a device for management or controlling shareholders to fleece investors or other
third parties, or to oppress minority shareholders. Among these are provisions dealing with such
matters as;
- how and by whom the Board of Directors of a company is to be constituted,
- what category of persons are disqualified from participating in the management of a
company,
- mechanisms for ensuring officer and director accountability to shareholders (e.g. through
annual general meetings of shareholders, the right of shareholders to inspect the company’s
books, and shareholder entitlement and access to annual audited reports),
- the powers and duties of directors and officers,
- what conduct on the part of a director will constitute a conflict of interests,
- what remedies exist for a breach of duty by a director (including breaches involving
conflict of interests and insider self-dealing and actions that exceed the permitted powers
of a director), and
- rules designed to preserve and maintain the stated capital of the company.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Enhanced Corporate Governance Requirements for Directors

Some of the core changes made to the Act were put in place to encourage a broader focus on
corporate governance. In particular, the corporate governance requirements for directors were
enhanced.
The role of directors has come under immense scrutiny following the collapse of a number of
banks and non-bank financial institutions in the country. This compelled the regulator, Bank of
Ghana, to issue new corporate governance directives for banks and non-bank financial institutions,
which brought in much needed institutional changes.
Similarly, the Securities and Exchange Commission has issued directives governing the conduct
of affairs of publicly listed companies.
Act 992 and other corporate governance rules have raised the qualifying criteria, duties and
liabilities of persons appointed as directors of companies. The objective is to weed out persons
whose involvement could be inimical to the growth of enterprises, or at a minimum keep their
actions in check. For instance, in addition to the qualification requirements for directors under Act
992, the Bank of Ghana has set out additional criteria for directors and key management personnel
of banks and other financial institutions.
Under the Bank’s directive, a person appointed as a director must be a fit and proper person. “Fit
and Proper” means the person is suitable to hold the particular position as regards:
 the probity, competence, and soundness of judgment of that person for purposes of
fulfilling the responsibilities of that person;
 the diligence with which that person fulfils or is likely to fulfil those responsibilities;
 whether the interest of depositors or potential depositors of the entity is threatened, or likely
to be, in any way threatened by the person holding that position; and
 that the integrity of the person is established and the qualifications and experience of the
person are appropriate for the position in the light of the business plan and activities of the
entity, which they serve, or is likely to serve, taking into account the size, nature and
complexity of the institution.
Directors' liabilities:
In addition to previously existing responsibilities, stringent liabilities underpin the performance of
directors’ duties to ensure proper management and accountability of directors towards companies.
The extent of the power exercised by directors is also restricted by Act 992 and made subject to
the constitution of the company.
For example, without a prior resolution of the company, directors may not issue new or unissued
shares or contribute to any charitable fund other than a pension fund. Similarly, a contract or
transaction classified as a “major transaction” under Act 992 requires a special resolution of
shareholders before its execution by the company’s directors.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

A director is liable for breach of their duties. Such liability includes, compensating the company
for any loss occasioned to it. Act 992 precludes any attempt to exclude such liability either through
express provisions in the company’s constitution or by agreement between a director and the
company.
Enhanced Qualification of Company Secretaries
As part of the corporate governance enhancement provisions under Act 992, companies are
required to appoint only duly qualified persons to serve as company secretaries. This is a shift from
the previously existing situation where directors had the freedom to appoint any person they
deemed fit, with no recourse or reference to set criteria.
Going forward, appointing authorities must have regard to minimum qualification metrics when
making such appointments. However, both companies and individuals can serve as secretaries,
except that the specific individual appointed (from the company for instance) must meet at least
one of the following stated criteria:
 holding a tertiary level education with a corporate secretary bias;
 previous service under a qualified company secretary for at least three years; or
 being a member in good standing of the Institute of Chartered Secretaries (Ghana); the
Institute of Chartered Accountants (Ghana); or has been enrolled to practice as a solicitor
or barrister in Ghana.
It has to be stated that, despite the above breadth of qualifying criteria, most companies,
particularly SMEs and large corporations, opt for a qualified lawyer to fill this role.
The Concept of Beneficial Ownership:
This is a new concept, without any historic antecedence. It has evolved out of government’s drive
to stem systemic corruption and money laundering. This is designed to improve transparency in
company profiling with a view to ascertaining persons actually controlling a company. It has been
a common practice in Ghana for companies to hide the actual owners, and instead present
ostensible shareholders for a range of reasons.
Under penalty of law, this new development makes it mandatory for registered companies to make
available to the Registrar of Companies the bio data of actual owners, “beneficial owners” under
Act 992, and indicate persons who are considered to be “politically exposed persons”.
Major Transactions:
Additionally, there is a new requirement for shareholders to approve certain intended steps and
decisions taken by the Board before they go into effect. This is in contrast with the previously
existing pattern of keeping shareholders out of the day-to-day running of the affairs of the
company.
The current trend is to involve as much as possible, the owners of the company in the taking and
implementation of significant steps. These type of decisions are classified as “major transactions”
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

under Act 992. The idea, inter alia, is to enhance corporate accountability, mitigate losses and
safeguard the assets of companies.
The Act defines a “major transaction” as:
- the acquisition or the agreement to acquire assets, the value of which is more than 75% of
the value of the assets of the company, or
- the disposition or agreement to dispose of assets, the value of which is more than 75% of
the value of the assets of the company, or
- a transaction where the company acquires rights or interests, or incurring obligations and
liabilities, the value of which is more than 75% the value of the assets of the company.
A shareholder who voted against a resolution to undertake a “major transaction”, which resolution
is passed in any event, has the option to request the company to buy him out.
Minority Rights:
Act 992 grants specific remedies for minority shareholders who feel oppressed. In addition to the
option open to a shareholder to have their shares bought out after a vote on a major transaction (as
discussed above), a dissenting shareholder on a matter has the right to institute legal action in
situations where they feel oppressed.
Moreover, where the company has done or threatens to undertake an action, which tends to
discriminate against or is unfairly prejudicial to some of the shareholders, such shareholders may
be entitled to a cancellation of such action by court order.
Further, to curtail dissension and prolonged litigation, Act 992 allows shareholders to opt-out of
the company where a company amends its constitution to vary the previous objects or business of
the company. This also applies where a special resolution is passed approving a major transaction
or an arrangement for a merger and acquisition or the variation of a class of shares is undertaken
(against the shareholder’s will). The option for a buy-out allows minority shareholders to utilise
remedies under Act 992 to protect their investments. No longer will minority shareholders who
wholly vote against resolutions for matters specified above continue to hang on with dissatisfaction
and acrimony.
Additionally, minority shareholders have the option to enforce their rights through derivative
actions. This is where they apply to the court for leave to institute proceedings in the name of the
company or on behalf of the company to enforce their rights or recover assets of the company.
Derivative actions present an existential avenue accessible by minority shareholders to hold the
directors of the company accountable for their actions by leveraging the courts.
Declaration of Interests:
A common issue which comes up in corporate governance is what do to about situations where
directors and senior management of companies partake in contracts which involve the companies
whom they serve. Under Act 992, directors should declare the nature and extent of all interests
they may have in contracts involving the company. This should be in a meeting of directors and to
be neither present or vote in a matter in which the director is interested. This requirement to
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

disclose the interests of a director in contracts involving the company would go a long way to
reduce losses made by companies in respect of contracts entered into with directors and other
related parties.
Act 992 further requires companies to maintain an “Interests Register” which contains all
directors’ interests in the company and in contracts involving the company. The Interests Register
is to be available for inspection at least 2 hours each day and also during company meetings.
Failure of a director to declare and register their interests in the affairs of a company would amount
to a criminal offense punishable upon summary conviction to a fine between 250 penalty units
(GHS 3000) and 500 hundred penalty units (GHS 6000).

General overview of corporate governance in Act 992

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.
A company has 3 main organs as set out in Section 144, namely;
- Board of Directors
- The Members in a general meeting
- Other officers or agents appointed by or under authority the members in a general meeting
or the Board
Each of these organs have their own powers. 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.
The Board of Directors
This is the primary power-yielding organ of the company. The Board of Directors is made up of
the directors, and they are collectively responsible for the management of the company. At the core Commented [JE30]: Directors individually are officers of
of corporate governance practice is the Board of Directors which oversees how the management the company, once appointed. Individually, directors are not
a principal organ.
serves and protects the long term interests of all the stakeholders of the company.
The Board is responsible for policies, human resource development, risk management, financial
statements, among other things.
The Board may exercise the powers of the company which have not been given to the members in
Act 992 or the constitution of the company.
Additionally, Section 144(4) provides that unless the Constitution of the company otherwise
provides, the Board of directors, when acting within the powers conferred on them by the Act or
the constitution of the company, are not bound to comply with the directions or instructions of the
members in general meeting. This means that the Board may take decisions that the members may
not even want, as long as it is within the powers conferred on them.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

There are however some limitations placed on the power of the Board.

The Members in a General meeting

These are basically the shareholders of the company. As a general feature, a company must have
at least one member.
The role of members in governance is to appoint the directors and auditors, and to satisfy
themselves that an appropriate governance structure is in place.
Members have the power to remove directors. So theoretically, although the Board wields the most
power, the shareholders may be considered more powerful since they have the power to remove
directors. Commented [JE31]:
There is often the question as to whether reasons are required
Section 189 also places limitations on the powers of the Board, such that the directors of a to be given.
There are 2 schools of thought on the matter;
company with shares cannot, without the approval of an ordinary resolution of the company; One says that there is no express provision in the law that
mandates shareholders to give reasons.
i. Issue any new or unissued shares, other than treasury shares, in the company unless the The other says reasons should be given.
shares have first been offered on the same terms and conditions, to all the existing
shareholders or to all the holders of the shares of the class or classes being issued in
proportion as nearly as may be to their existing holdings,
ii. make voluntary contributions to a charitable or any other fund, other than pension funds
for the benefit of employees of the company or an associated company, of the amounts
the aggregate of which will, in a financial year of the company, not exceed two per cent
of the retained earnings of the company at the end of the preceding financial year.
Furthermore, the directors can not without the approval of a special resolution, pursue a major
transaction.
Lastly, except as provided in the constitution of a company, the directors of a company with shares
cannot, without the approval of an ordinary resolution, borrow in excess of its stated capital.
Also, subject to Section 145, the members may:
- act in a matter if the members of the board of directors are disqualified or are unable to act
by reason of a deadlock on the board 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 an action to be taken by the
board.
Other powers of shareholders include;
- Appointment of directors
- Appointment of auditors
- Declaration of dividends
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

THE BOARD OF DIRECTORS

Who is a Director?
Section 170 (1) provides that “directors” means those persons, by whatever name called, who are
appointed to direct and administer the business of the company. The term includes persons
occupying the positions of directors, but may be called different names such as governors,
commissioners, etc. Commented [JE32]:
The law makes it clear that a director is simply a director –
Directors, as a body, constitute an organ of the company. They are collectively known as the Board irrespective of the descriptions that may attach to the
person’s name.
of Directors.
When incorporated, the company becomes a separate legal entity, but it is an artificial person
existing only in contemplation of law, and as such, others must act on its behalf. Thus, directors
are the frontline agents of the company. Commented [JE33]:
It is also important to bear in mind that as a general rule,
In Ferguson v Wilson1, Lord Cairns highlighted that ‘the company itself cannot act in its own there is no obligation on a director to own shares in the
company – even though some companies insist that directors
name for it has no person. It can only act through directors – the ordinary case of principal and own some shares in the company. The insistence on share
agent.’ ownership springs from the fact that it makes the directors
part of the company itself and ensures that they take
At the same time, directors are also considered as trustees of the company. In Great Eastern decisions that are in the best interest of the company. It is
important to note that the office of a director is personal and
Railway v Turner2, the court observed that the directors are the mere trustees or agents of the attaches personal liabilities to a person. As a result, a person
company. cannot assign his office to any other person. For example a
father assigning his director role to his son is not acceptable
It must be noted that a person who has not been formally appointed as a director, may in certain as one cannot appoint a person as a director in a will or any
testamentary document.
cases spelt out in Section 170(2), be saddled with the responsibilities and liabilities of a director,
Commented [JE34]:
as if he had been formally appointed as one. There are 2 situations where this is possible; The law is not only concerned about those who are formally
and properly appointed as directors. The law seems to also
o A person who holds himself out as a director, or knowingly allows himself to be held out be concerned with those who are not properly appointed as
as a director, although he has not formally been appointed as one. This person is termed a directors and yet for one reason or another, either hold
themselves out as directors or allow themselves to be held
De Facto Director. out as directors.

The primary concern of the law is to find those who “direct

o A person on whose directions or instructions, the duly appointed directors are accustomed and administer” the company. therefore, the law also ropes in
to act. This person is termed a Shadow Director. persons who “control” the duly appointed directors. These
categories of persons are referred to as shadow directors.
Both Shadow and De Facto directors are subject to the same duties and liabilities as if they were a As the name suggests, these persons are hardly on the
frontline, but would be the reason the company would move
duly appointed director of the company. However, Section 170(3) provides that this does not in one direction and not the other.
derogate from the duties or liabilities of the duly appointed directors, including the duty not to act
on the directions or instructions of any other person.
In Re Hydrodan (Corby) Ltd3, the court established that there are;

1
(1886) 2 Ch. App. 77
2
(1872) LR 8 Ch
3
[1994] 2 BCLC 180
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

- De jure directors (those appointed to office)

- De facto directors (those who assume to act as directors but are not appointed)
- Shadow directors (a person in accordance with whose directions or instructions the
directors of the company are accustomed to act)
Millet J went on to distinguish between them. He highlighted that a de facto director is a person
who assumes to act as director although never actually or validly appointed as such, and to prove
that a person is a de facto director, it must be established that he undertook functions in relation to
the company, which could properly be discharged only by a director.
The court further defined the key points of a shadow director. Accordingly, a shadow director
claims not to be a director, but instead lurks in the shadows, sheltering behind the one who he
claims are the directors of the company. So to establish that a person is a shadow director, you
must prove;
1. That someone or some other people are the directors of the company (whether de jure or
de facto)
2. That the defendant directed those directors as to how to act in relation to the company
3. That the directors acted in accordance with those directions
4. That they were accustomed so to act
In Commodore v Fruit Supply (Ghana) Ltd4, the name of an individual who had never been
appointed as director, appeared on the company’s letterhead as director of the company. Moreover,
he was allowed to transact all kinds of business on behalf of the company. This person then
committed the company into a deal that went bad, and a suit followed. The company then denied
him, saying that he was on his own, and since he was not a duly appointed director, he did not
have the power to bind the company in any transaction.
The court held that not only was he a director within the meaning of the Act, but also his acts were
binding on the company, unless the person dealing with him knew or ought to have known of the
irregularity.
It must be noted that under Section 170(1), except otherwise provided in the constitution of a
company, a director is not required to be a member of the company or hold a share in the company.

Number of Directors
A company is required under Section 171, to have at least two directors, one of these directors
being ordinarily resident in Ghana.
The rationale is to avoid the situation where the affairs of the company are disturbed on the death
of a sole director.

4
[1977] 1 GLR 241
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Therefore, where a company carries on business for more than four weeks with less than two
Directors, the company, the director and each member of the company that is in default, is liable
to pay to the Registrar, an administrative penalty of 25 penalty units for each day during which the
company so carries on business after the expiration of the four weeks without having at least two
directors.
Further, every director and every member of the company who is aware of the fact that the
company is carrying on business with less than two directors, are jointly and severally liable for
the debts and liabilities of the company incurred during that time.

Appointment of Directors
Section 172 deals with the appointment of directors.
Before a person is appointed as a director, that person must go through some pre-appointment
formalities. First, the person has to make a statutory declaration.
In the statutory declaration, the person to be appointed must make a number of declarations. These
declarations include a statement to the effect that he or she during the last five (5) years before the
incorporation of the company, has not:
o been charged or convicted of an offense involving dishonesty or fraud
o been charged or convicted of a criminal offence relating to the promotion, incorporation of
management of a company
o been a director or a manager of a company that has become insolvent or if the person has
been, the date of the insolvency and the particular company
The person to be appointed must also have consented to act as a director and filed the consent Commented [JE35]:
The procedure for appointment is that the appointment must
within twenty eight (28) days of appointment. be made by the members at a general meeting.

A copy of the statutory declaration must be first placed with the company, and subsequently with There are certain preliminary steps:
There must be a nomination of that person. If the person
the Registrar of Companies. It is worth mentioning that directors are not required to be members agrees to the nomination, he must make the statutory
or shareholders of the companies on whose boards they act. declaration which must be submitted to the Company, and
then filed at the Registrar Generals Department.
The first directors of a company are appointed and named in the application for incorporation.
He must also provide the consent letter, consenting to his
After incorporation, subsequent directors are appointed by an ordinary resolution of the members appointment.
in a general meeting. .
Commented [JE36]:
Section 29 (2):
However, in the Constitution of a Company, the Constitution may commit the appointment of a Where the constitution empowers a person to appoint or
director to a class of people, or even to a person who is not a member of the Company, such as a remove a director or any other officer of the company, that
power is enforceable by that person although that person is
creditor. So appointment of directors may be regulated by the registered constitution of a company. not a member or officer of the company.
The constitution of a company may provide for the appointment of a director/directors by a class
of shareholders, debenture holders, creditors, employees or any other person. Commented [JE37]:
A vacancy on the Board of Directors that occurs by any
Where there is a casual vacancy, it may be filled by the continuing directors, or by members at a means, other than by the term of office of the director
general meeting with the passage of ordinary resolution. However, if the continuing directors and expiring.
So for example, if a director dies, or resigns or is removed,
there is a casual vacancy.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

the General meeting both purport to fill the position, the appointment by the General meeting will
prevail. Commented [JE38]:
After all, the company is being managed by the Board on
behalf of members.

Qualifications of a Director
Basically, anyone is qualified to act as a director unless disqualified under Section 173 or Section
177.
Thus, the following people are not qualified to be appointed or to act as directors;
Section 173 Section 177

The following are permanently disqualified: The following are automatically disqualified
for a period of 5 years: Commented [JE39]:
 An infant Certain category of persons are due to personal history or
track record, disqualified from being appointed as directors,
 A person who, within the last 5 years, and it is only the effluxion of time (5 years) that will redeem
 A person adjudged to be of unsound has been convicted of an offence them and restore their eligibility to be appointed as directors.
mind involving fraud or dishonesty, or an
offence relating to the promotion,
 A body corporate formation or running of a company. Commented [JE40]:
Where such a person is subject to a second conviction, the 5
years disqualifications extends to 10.
 An undischarged bankrupt (unless he  A person who has been a director or
has been granted leave by the court senior executive of a company that has Where there is a third conviction, that person is permanently
which declared him bankrupt) become insolvent within the last 5 disqualified.
years on account of, or partly as a
 A person who is prohibited from being result of the culpable activities of that
a director under an order made under director.
Section 177, so long as the order
remains in force, unless leave has been  A person who has been disqualified to
granted by the court. act as Company Secretary, receiver,
manager or liquidator of a company.

 There are those who are disqualified

unless they obtain leave of the court to
be appointed or to act as directors.

In some cases, the court may on its own, or by Commented [JE41]: - Any member or officer of the
application of specified persons, order that a company
person shall not, without the leave of the - A person who can show interest in the case
- The Registrar
court, be a director or otherwise take part in - The Trustee in bankruptcy of the person concerned
the management of a company. This includes: - The liquidator of a body corporate
Commented [JE42]: - An offence involving fraud or
 Where the person is convicted of dishonesty
certain offences, whether in Ghana or - An offence relating to the promotion, formation or
anywhere else. management of a body corporate
- An offence involving insider dealing
- Any criminal offence which is not a misdemeanour
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Where the person is adjudged

bankrupt, whether in Ghana or
elsewhere . Commented [JE43]: In Ex Parte Ploetner, Taylor JSC
stressed that the Act gives jurisdiction to the High Court in
appropriate circumstances to restrain persons adjudged
 Where the person has been culpable of
bankrupt whether in Ghana or outside the jurisdiction of the
a criminal offence, whether convicted courts from managing companies in Ghana as directors
or not, in relation to a body corporate
or of fraud or breach of duty in
relation to a body corporate . Commented [JE44]:
One does not need to be convicted of a criminal offense. It
appears that the mere implication or appearance of a person
 Where it appears that the person is commiting an offence (irrespective of the outcome of a
debarred by the competent authority criminal trial) is enough to disqualify a person as a director.
from being a member of a recognised
professional body as the result of a
disciplinary inquiry

 Where there is an ongoing

investigation by a criminal
investigating body or by the Registrar
or the equivalent in a foreign
jurisdiction, regarding the matters
listed above.

Types of Directors
1. Substitute Directors
Section 180 provides that except as otherwise provided in the constitution of a company, a
company may appoint substitute directors.
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.
They are not to be counted as a director for the purposes of a provision in the Act or the constitution
of a company prescribing a minimum or maximum number of directors, other than a provision
relating to quorum. Commented [JE45]:
Substitute Directors are not counted in determining the
Substitute Directors can attend meetings if the Principal is present but cannot vote in that meeting, minimum or maximum number of directors. They are
however counted for the purpose of forming quorum.
since the principal/substantive director is present.
So assuming, the Constitution says you need a minimum of
Substitute Directors are appointed and removed in the same way the other directors are appointed 5 directors, you cannot appoint 3 substantive directors and
and removed. They do not cease to be a director by reason of the fact that the Director for whom two substitutes and say you have met the criteria.
he or she is appointed to substitute, ceases to be a director.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

2. Alternate Directors
Section 181 makes provision for alternate directors.
An alternate director is a director appointed by another director, to act as an alternative director
for a period of 6 months or less, where the director is out of the Republic or unable to act as a
director. Commented [JE46]: So if a director is out of Ghana or is
unable to act as director, he may appoint another director
The appointment must be approved by a resolution of the Board of Directors, and it must be in in the company or any other person, to be an alternate
writing and signed by the appointing director (appointor) and appointee, and afterwards lodged director.
This can only be done if the constitution allows the director
with the company. to so appoint.

The appointed director is, for the period of appointment, a director and officer of the company and
not an agent of the appointing director. He cannot appoint another person as an alternate director
because of the principle of delegatus non potest delegare.
Again, 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.
When it comes to meetings of directors, unless the alternate director is personally a director
himself, he cannot attend or vote at meetings when the appointing director is present.
When the alternate director is personally a director himself, he has an additional vote at meetings
for each director for whom he acts as alternate director.
The appointment of an alternate director ends:
a) upon the expiration of the period for which he/she was appointed
b) Upon a written notice by the appointing director to that effect
c) If the appointing director ceases to be a director, or
d) if the alternate director resigns by notice in writing to the company.

3. Executive Directors
Section 183 makes provision for Executive directors.
An executive director is the director who holds any other office or place of profit in the company Commented [JE47]: The phrase “office or place of profit”
(other than the office of an auditor). In other words, the executive director is a director who also means that the director in question is being paid by way of
salary, commission, share of profits, participation in pension
acts as an employee of the company. and retirement schemes, or in any other means that the
directors may determine
Examples are managing director, production or sales manager, Company Secretary or Accountant.
An executive director may be paid salary, commission or share of profit or participate in the
company’s pension or retirement scheme.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

For the executive director, it is important to note that his office comes to an end when his role as
a director comes to an end and vise-versa. Except for Executive Directors, directors are not
required to give full time attention to the company.
The non-executive director is the opposite of the executive director. They are sometimes referred
to as the independent directors. Non-executive directors are independent to the extent that they are
not involved in the day to day running of the company. In other words, they do not devote all of
their time to the business activity of the company. Further, they do not hold positions of profit in
the company. They are simply directors.
Note that the constitution of the company may prohibit the company from having executive
directors.
Note also that the law does not draw a distinction between the executive director and the non-
executive director for the purposes of liability.
4. Managing Directors
Section 184 makes provision for managing directors.
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 Board may from
time to time, appoint one or more of their own to the office of managing director.
The appointment of a managing director automatically ceases if the holder of the office ceases
from a cause to be a director.
The directors may entrust to and confer on a managing director, any of the powers exercisable by
them, on the terms and with the restrictions that the directors think fit. The powers vested on the
managing director may be collateral to or to the exclusion of the Board of Directors.
The Managing Director has apparent or ostensible authority to undertake commercial transactions
on behalf of the Directors and/or company. He however, 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.
A managing director is an executive director.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Removal of Directors
There are 2 procedures for removing a director.
 Formal Procedure
There is the formal procedure under Act 992, governed mainly 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 the company,
or in an agreement with the director.
Notice of the intention to move a resolution for the removal of a director must be given to the
company at least 35 days before the meeting at which the resolution is to be moved. If this notice
is not given, the resolution cannot be moved. A shorter period of 21 days notice may be given if
the 35 days notice is impracticable.
After the company receives notice of the intention to move a resolution for the removal of a
director, the company must immediately send a copy of the notice to the director concerned.
The director is entitled to be heard on the resolution at the meeting, and to send the company a
written statement to be circulated to members together with the notice of the general 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.
The Act does not require reasons to be given for the removal of a director. All that must be done
is to comply with Section 176. The requirement of notice to be issued is important. Because the
company is not required to give reasons for removal, the director may give a response and give a
statement, but not to enquire for reasons for his removal. However, where reasons are provided in
the notice, the director must be given the opportunity to address the allegations against him.
The vacancy created by the removal may be filled at the meeting or at a later date.
 Procedure under Equity
Yet again, Section 217 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 exists a principal - agent relationship
between the company and the director respectively. Just as a principal may dismiss an agent, the
company can remove a director without recourse to Section 176.
There has been some debate on the issue of whether a director may be removed under Section 217,
without recourse to the procedure set out under Section 176.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

In Pinamang v Abrokwa, the Court held that the provisions of Section 176 are mandatory in
removing a director, thus a resort to Sections 217 was not applicable until Section 176 was
complied with.
It has been held however in another case that a director could be removed summarily without
resorting to the requirements under Section 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 awkward to defend and difficult to 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?
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 ruling in Adams v Tandoh that directors may
be removed through other methods such as Section 217.
So in effect, directors may be removed by either;
1. ordinary resolution of members in a general meeting under Section 176, or
2. by summary dismissal pursuant to Section 217.

Limitations on the Board of Directors

Section 189 places some limitations on the power of the Board of Directors;

 Issuance of new or unissued shares

The directors of a company with shares cannot issue any new or unissued shares (other than
treasury shares) without approval of an ordinary resolution of the company. Those shares must be
Commented [JE48]: This is known as the right of
first offered on the same terms and conditions to all existing shareholders, or to all the holders of preemption.
the shares of the class/classes being issued, in proportion as nearly as may be to their existing It is the right shareholders have to be offered shares in a
holdings. company before they are made available to anyone else.
Thus shares proposed to be issued must be offered to
If Directors are given the freedom to issue shares, they may act irresponsibly with the company’s existing members in proportion to their present
shareholdings before being issued to anyone else.
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 These rights are deemed to be necessary to protect
shares but not new or unissued shares. shareholders against dilution of their shareholdings. The
basic principle is that shareholders should be able to protect
their proportion of the total equity by having the
opportunity to acquire or purchase any shares that are
being transferred or sold.
The main reason includes the fact that shareholders do not
want to easily allow their influence in the company to
reduce as a result of holding a relatively small number of
shares.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Voluntary contributions to charitable funds in excess of 2% of retained earnings

Without the approval of an ordinary resolution, directors of a company with shares may not 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.
An exception to this rule is contribution to pension funds for the benefit of employees of the
company or an associated company.

 Borrowing in excess of stated capital

Except as otherwise provided by the constitution of the company, the directors of a company with
shares may 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.

 Major transactions
Without the approval of a special resolution, Directors of a company with shares cannot pursue a
major transaction. The resolution must not be more than a year old.
Section 145(2) 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

Duties of Directors
The duties of a director are two-fold:
i) There are the fiduciary duties under Equity
ii) There are the duties provided for under statute.
Directors are vested with all powers that are necessary and incidental to managing and directing
the affairs of the company. Consequently, their powers are broad but not unlimited.
Section 190 and 192 spells out the duties of directors.
The director of a company stands in a fiduciary relationship with the company. This means that
the director holds a position of trust and confidence and as a result, the director is under an
obligation to act solely in the company’s interest.
By extension, the director must;
(a) act in utmost good faith in relation to the company at all times, and
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

(b) always act in what he believes to be the best interest of the company as a whole. Commented [JE49]: In considering whether a particular
transaction or course of action is in the best interests of the
In more specific terms, the directors should act in order to preserve the company’s assets, further company as a whole, a director may consider the interests of
the employees, as well as the members, of the company, and,
the business and promote the purposes for which the company was formed in a manner that a where appointed by, or as representative of, a special class of
faithful, diligent, careful and ordinary skilled director would act in the circumstances. members, employees, or creditors may give special, but not
exclusive, consideration to the interests of that class.
The duties of a director are akin to the duties owed by agents to their principal, thus;
Commented [JE50]: So directors are not agents for the
o A director has a duty to avoid a conflict of interest. majority shareholders, or shareholders even. Unless the
company constitution makes provision otherwise, members
In Commodore v Fruit Supply (Ghana) Ltd, the Court of Appeal held that a Director occupied in a General Meeting may not, in any way, instruct and
a fiduciary position and was therefore precluded from entering into a binding transaction on behalf direct the directors on how to exercise their exclusive
power.
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.
Where it is not possible to avoid the conflict of interest, the directors must disclose all such interests
in the company that is likely to create a conflict of interest between the directors role and the
company.
o A director has a duty not to make secrete profits and not to take bribes.
In Commodore v Fruit Supply (Ghana) Ltd, 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.
o A director has a duty to keep proper accounts
In Commodore v Fruit Supply (Ghana) Ltd, the Court of Appeal 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.
o A director has a duty to take reasonable care in the management of the company’s
affairs

o A director has 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.
This is reiterated in the case of Asafu-Adjaye v Agyekum.
A director is under a duty to act in accordance with the constitution of the company, and must only
exercise powers for the purposes for which the powers are conferred.
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What does the Board do?

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. After the first AGM, the Directors shall convene an AGM every year and in
any event with 15 months of the last AGM.

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. Directors may fill a casual vacancy on the Board of Directors – section 172(5) unless the
Members in General Meeting do otherwise.

6. Directors shall ensure the filing of various documents with the Registrar. Commented [JE51]: This includes:
- Register of Members
-Register of Directors and Company Secretary
7. The Directors shall maintain or cause to be maintained at the registered office of the -Written contract regarding true value of shares that
company various documents including: were not paid wholly in cash

- Register of members
- Register of debenture holders
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- Register of charges
- Register of directors and company secretary
- Register of holdings of directors

8. The directors shall cause to be established a share deals account when a company first
redeems or purchases its shares in line with Section 65.
9. For public companies, the Directors or some of them shall sign and deliver a Prospectus in
triplicate within 6 months before making an invitation to the public (Sections 304 and 308)
or a statement in Lieu of Prospectus within 28 days of incorporation or conversion to t
public company (section 303(1))

Meetings of the Board of Directors

Under Section 188, the directors of a Company are required to meet at least once every six months
in each year, to consider financial and operational affairs of the company.
They may meet in Ghana or anywhere for the conduct of their business, and may adjourn and
otherwise regulate their meetings as they think fit.

Summoning Board meetings:

A Board meeting may be summoned by a Director at any time. Alternatively a director may
requisition the Company Secretary to summon a meeting. A Company Secretary who receives
from a Director, a requisition for a Board meeting is under obligation to summon the meeting.
However, a Secretary has no power to summon a meeting of the Directors on his own.
Notice of Board meetings:
The Notice for a Board meeting must state the place, time, date and agenda for the meeting.
Directors who are not present in Ghana are not required to be given notices of Director’s meetings.
Quorom:
The quorum for Directors’ Meetings or of Committee of Directors is two (2), unless the Directors Commented [JE52]: Quorum is the minimum number of
fix a different quorum or except in the case of a Sole-Member Director’s Committee. The persons who should be present at the Board meeting before
proceedings can begin.
Company is prohibited from proceeding with a Board meeting unless it has the requisite quorum.
Under Section 188(2)(e), a quorum is always required, both for the commencement as well as for
the continuation of Directors’ Meetings to conduct the general business of the company. If for any
reason, the number of directors fall below the number required by law or the constitution for a
quorum, the continuing directors may continue to perform the functions of the Board for the next
4 weeks despite the shortfall.
Appointment of Chairperson:
The Chairperson of the Board of Directors is elected by the Directors.
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The Directors may elect one of them to be Chairperson and determine the period to hold office. If
no Chairperson is elected by the Board of Directors or the Chairperson is late for a Board Meeting
by more than 5 minutes, the Directors present may choose one their fellow Directors to chair that
meeting.
The main business of the Chairperson is to preside at both Directors’ and General Meetings so as
to direct affairs.
Voting:
Under Section 188(2)(i), attendance and voting by proxy is not permitted at meetings of Directors
or committees of Director. At meetings, matters are decided by majority vote (show of hands) of
members present. However, on non-controversial issues, decisions are often by consensus. Where
there is a tie, such that the votes or views are equally divided, the Chairperson has a second or
casting vote to break the tie. However, the Company may by its Constitution, deny a Chairperson Commented [JE53]: A second vote occurs when the
the right of a second or casting vote. Chairperson voted the first time resulting in a tie.
A casting vote occurs when the Chairperson did not vote the
Resolutions: first time but a tie resulted

Decisions of the Board are called Resolutions.

A Company Resolution is a formal decision of the Company made at meetings of the Board of
Directors, (or at meetings of the Shareholders)
Decisions can be taken by Directors either in a Board meeting or by written resolution.
Traditionally, resolutions are passed at physical meetings of the Company’s Shareholders or Board
of Directors. Board Resolutions may be made at a meeting of the Board of Directors, while
Shareholders Resolutions may be made at a general meeting of Shareholders.
If they take a decision in a Board meeting, this is typically known as a 'board resolution'.
However, it may not always be convenient to hold physical meetings with the relevant parties
physically present. Directors may also decide on matters without the need of attending a Board
Meeting. This is achieved by a written resolution signed by all the Directors for the time being
entitled to receive notice of a meeting.
Thus, under Section 188(2)(j), Directors may lawfully and conveniently sign written resolutions
without the formalities of a meeting. A Company can choose to pass a resolution by written means
instead. If they take a decision by written resolution, this is sometimes called a 'directors' written
resolution', although in practice this is often also referred to as a board resolution.
A Written Resolution is a resolution in writing signed by all members (i.e. all Directors) entitled
to attend and vote. It requires 100% approval and it will have the same effect as if passed as an
Ordinary Resolution. Written Resolutions are as good as a resolution from a meeting duly held.
A Resolution should have two legs:
- Background – narrations i.e. the reason for the conclusion
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- 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 Director and an auditor cannot be removed by written resolution because the said Director must
be heard. A resolution to remove an Auditor or a Director can only be passed at an annual general
meeting.
Minutes:
The minutes of both Directors’ and General Meetings are to be kept by the company. This is
handled by the Company Secretary.
A report is different from minutes because reports contain details which are lacking in minutes
Committees of the Board:
The Directors may appoint one or more of their number at a meeting duly convened, as a committee
of the Board, and give it such powers of the Board as they may consider necessary. For good
corporate governance, the Audit Committee seems to be the most popular in Ghana and other
jurisdictions.
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THE MEMBERS IN A GENERAL MEETING

Where a company is incorporated with shares, the members are better known as the shareholders.
In companies limited by shares, each member must hold at least one share, which is why we call
them shareholders.
Where the company is limited by guarantee, its members are referred to as members or guarantors.
General Meetings
A general meeting is a meeting of a company's shareholders (unlike a board meeting, which is a
meeting of the directors).
Such meetings are important because company law reserves certain decisions in the running of the
company to be taken by the shareholders. Thus, they enable shareholders to discuss matters within
their authority and pass resolutions on matters prescribed by law or in the Company's Constitution.
It also presents an opportunity for shareholders to call to account, the Board of Directors and to
ask questions about the Board’s performance and future plans.
There are 2 types of General Meetings:
i. Annual General Meeting
ii. Extraordinary General Meeting

Annual General Meeting (AGM)

Section 157 provides that a company must hold an Annual General Meeting in each year, in
addition to any other meetings in that year, and must specify the meeting of the AGM in the notice
calling the meeting.
The period between one AGM and the next must not exceed 15 months. This means that an AGM
must be held every calendar year, and that the AGM should be held within 15 months of the
previous one. However, if the company holds its first AGM within 18 months of incorporation,
the company is not required to hold the annual general meeting in the year of incorporation or in
the following year.
In exceptional cases, the Auditors and the Members may together, agree to dispense with an AGM
for a particular year.
Where there is a default in holding the AGM, the Registrar may on his own motion, or by
application by any officer or member of the Company, call or direct the calling of the AGM and
give direction to its conduct, and further give any ancillary/consequential directions as the case
may be.
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Notice of the meeting, 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 must dispatch the following documents to Members Commented [JE54]: Paragraph 1 of the Eighth Schedule
and Debeture-holders; makes provision to extend the 21 days notice.
However, abridging the 21 days notice requires a special
procedure which requires all members entitled to attend and
- Company’s financial statements vote to agree to shorten the 21 days notice requirement.
- Consolidated financial statements
- Director’s Report on Financial Statements
- Auditor’s Report on Financial Statements
There is a standard business to be transacted at the AGM, and this is referred to as the ordinary
business of the AGM. It is sufficient therefore that a notice of meeting will invite Members for a Commented [JE55]: This simply means the business to be
meeting at a given time and place to conduct the ordinary business of an AGM. transacted at the AGM

The ordinary business of an AGM includes:

- 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
Resolutions passed at an AGM must be registered with the Registrar generally 28 days after its
passing.

Extraordinary General Meeting (EGM)

An EGM is a General Meeting, other than the AGM. This means that apart from the AGM, any
meeting that will be held is called an EGM.
These are meetings which can held at any time by the company as it deems fit. This meeting may
be used to address certain pressing issues confronting the members which cannot wait until the
holding of an 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
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Additionally, Directors are infrequently removed at EGMs.

Convening General Meetings

The question is who can convene General Meetings?
All meetings of a company are called by the directors either by themselves or upon the requisition
of the members. In relation to AGMs, the directors determine when within the statutorily required
period the meeting will be held.
A valid meeting of a Company cannot be held unless the meeting was summoned by the proper
summoning authority and this proper authority is the Board of Directors. Case in point is State of
Wyoming Syndicate5 and Luguterah v Northern Engineering Co. Ltd6.
The following people may convene an AGM:
1) Directors
It is a mandatory and statutory requirement for Directors to convene AGMs. In Asafu Adjaye
v Agyekum, the court held that it is part of the management functions of directors to convene
meetings.
Where Directors have to convene a meeting, it has to be a joint or collective decision of the
directors. One Director alone cannot convene a meeting unless he is authorized by the Board. Commented [JE56]: In Luguterah v Northern
Engineering, the Managing Director, also acting as
2) The Registrar Secretary, signed Notice of a meeting. There was no
indication that he was acting on behalf of the Board.
Under Section 157(6), where an AGM is not held in a particular year, the Registrar may on his It was held that the Notice was defective because a
Secretary cannot convene an AGM. The general proposition
own motion, or by application from any officer or member, call or direct the calling of an
is that one director alone cannot convene an AGM, and it
AGM. must be done under the authority of the Board.

3) The Court
The Court may also call for the holding of a General Meeting.

The following people may convene an EGM:

1) Directors
Section 158(1) provides that an EGM may be convened by the Directors whenever they deem
fit. When there are not enough Directors in Ghana capable of forming a quorum, then a single
Director may convene the meeting.
2) Members

5
(1901) 2 ch. 431)
6
(1979) GLR 477
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Members may also requisition Directors to convene an EGM under Section 158(3).
Different rules apply to private and public companies.
Private Companies Public Companies

Section 299 provides that the Directors Section 324 provides that the Directors
shall duly convene an EGM on the shall duly convene an EGM on the
requisition of: requisition of:

- 2 or more members, or - Members holding at least 5% of the

- In the case of a company with shares of the company, or
shares, a single member who holds - In the case of a company limited by
at least 10% of the shares of the guarantee, by a Member with at least
company, or 5% of the voting rights
- In the case of a company limited by
guarantee, a member with at least
10% of the voting rights.

In both cases, the requisition must be in writing and signed, and must state the nature of the
business to be transacted at the meeting. It must then be delivered to the registered office of
the company.
If the Directors fail to convene the EGM within 28 days after being requisitioned to do so, Commented [JE57]: In Luguterah v Northern
either the requisitionists or any of the members may proceed to convene a meeting, which must Engineering, it was explained that only Directors are
entitled to convene an EGM. A shareholder without any
be held within 4 months from that date. prior requisitioning of the Directors, has no statutory right
to convene an EGM.
The reasonable expenses incurred by them in convening the meeting shall be repaid by the
company and taken from the directors fees or other remuneration of the directors. So there must be a prior step of request/requisition made to
the Directors, before a Member may convene an EGM on
3) The Court his own.

An EGM may also be convened 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.

Notice of a General Meeting

Section 159 provides that unless the Constitution otherwise provides, General Meetings are to be
held in Ghana.
Notices of meeting shall be given to all Members of the company. The notice of a meeting is issued
by the Secretary of the Company after the directors have ordered the calling of a meeting.
A meeting of a company can only be convened by a Notice in writing to those entitled to attend
the meeting.
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The persons entitled to receive Notice of Meetings are:

- Every member
- Every Director of the company
- Auditors
- Every person on whom the ownership of a share devolves by reason of that person being a
legal personal representative, receiver or trustee in bankruptcy of a member.
Note that under Section 34 of the Companies Act, the registered Constitution of a Company may
provide that a member with unpaid calls against his shares should not be entitled to attend and vote
at a meeting of the Company. This notwithstanding, such a member will be entitled to receive
notices of meetings.
The Eight Schedule of Act 992 provides that Notice must be given to all entitled to vote, at least
21 days in writing before the meeting. In the case of a special resolution for voluntary liquidation
of the company, 7 days’ notice in writing will suffice. Commented [JE58]: These Notice periods are the
minimum requirements imposed by the Act. The registered
All the members entitled to attend and vote can agree to shorten the period for notice. Constitution of the Company may stipulate a longer, but not
shorter, notice period.
Notice of meetings must contain the following particulars:
Despite this, if a meeting is called in contravention of the
- The place, date and time of the meeting minimum required Notice period, it will be deemed to have
been regularly called if it is an AGM and all the members
- Sufficient detail of the general nature of the business to be transacted entitled to attend and vote, ratify the short notice, or in the
- The terms of any Special Resolution to be considered case of an EGM, majority of the shareholders with at least
95% shares with rights to vote and attend, ratify the short
NB: If the meeting is designated as an AGM, it is sufficient if the notice provides that the meeting notice.
shall transact the “ordinary business of the AGM”
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.
SAMPLE NOTICE OF AGM:
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of [INSERT COMPANY] will be held as follows:
Date: Monday, 10th July, 2020
Time: 11:00am (Ghana Time)
Venue: Room 3, Ghana School of Law – GIMPA Campus, Greenhill Accra (Registered Office) Directors
and members and their proxies may also participate in the meeting via video conference.

The Agenda for the meeting is hereby attached for your information.
We have also attached the Minutes of the last Annual General Meeting Board Meeting.
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All other relevant documents in connection with the meeting will be circulated before the meeting.

Dated this 15th day of June, 2020 By order of the Board of Directors

[Name of Company Secretary]

(Company Secretary)

AGENDA FOR THE MONDAY, 10TH JULY, 2020 ANNUAL GENERAL MEETING TO BE
HELD AT ROOM 3 GHANA SCHOOL OF LAW – GIMPA CAMPUS, GREENHILL ACCRA
(REGISTERED OFFICE) AT 11:00AM GHANA TIME AGENDA
1. Opening
2. Review and adoption of minutes of previous Annual General Meeting
3. Matters Arising.
4. Consideration and approval of 2019 financial statements.
5. Changes in directorship of the Company.
a. Resignation of Mr. OB as Director and Managing Director
b. Appointment of Mr. Akoto as director
c. Appointment of Mr. Adjei as director
6. Appointment of Ernst and Young as new External Auditor
7. Closing

Quorum
This is the minimum number of suitable persons required to be present for a meeting to commence.
Paragraph 8(a) of Schedule 8 is to the effect that general meetings may only start when there is
a quorum of members present. Once the meeting has started with the right quorum, the meeting
may still proceed even though the members present may be less than the quorum.
Unless otherwise provided in the Constitution of a company, the following constitute quorum:
 If the Company has one member, that member in person or his duly appointed proxy,
satisfies the quorum requirement
 In any other case, a minimum of 2 members in person or by duly appointed proxies
 By one member holding more than 50% of the voting rights of all members having the
right to vote at the meeting
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In the case of a meeting convened on the requisition of members, if there is no quorum present
within half an hour after the appointed time, the meeting is dissolved. In any other case, the meeting
is adjourned to the same day in the next week, at the same time and place, or any other day, time
and place the Directors may determine. Where the meeting is adjourned to the same day, place and
time in the following week, notice is not required to be given.
If at the adjourned meeting, a quorum is not present within half an hour of the appointed time, the
members present shall constitute a quorum.

The Chairperson
A Chairperson is required to, among other things, preside over the meeting.
Unless otherwise provided for in the registered Constitution of the Company, the Chairperson of
the Board of Directors shall preside as the Chairperson at General Meetings.
If the Board of Directors lack a Chairperson, or if he is 15 minutes late or unwilling to act, the
Directors may elect one of them to be Chairperson of the meeting. If no Director is present or
willing to act, the members present shall choose one of them to be Chairperson.

Adjournment of Meetings
A meeting may be adjourned by ordinary resolution of members. No business shall be transacted
at the adjourned meeting other than the unfinished business at the previous meeting. Notice must
be given of any new matters to be discussed at the adjourned meeting.
Proxies
Every member who is entitled to attend and vote at a meeting is entitled to appoint a proxy to
attend and vote on his behalf. The appointment should be in writing and should be signed by the
appointing shareholder of his duly authorized agent. In the absence of contrary provisions in the
registered constitution of a company, the instrument appointing a proxy is required to be deposited
with the designated receiving officer and other specified place within 48 hours of the relevant
meeting. The Company’s registered constitution cannot include provisions requiring proxy
instrument to be deposited earlier than 48 hours.
The appointment of a proxy shall be terminated by the death or insanity of the appointer. It will
also be terminated by the revocation of the proxy or the authority under which it was executed.
Further, the personal attendance of the appointor at the meeting shall amount to revocation of the
proxy. Also, a later appointment of another proxy in respect of the same share shall revoke an
earlier appointment.
The Minutes Book
A company is mandated to cause the minutes of the proceedings of General Meetings to be entered
in a book kept for that purpose.
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The company is required under Section 166 to keep minutes of all meetings of members. Minutes
signed by the chairman of the meeting shall be prima facie evidence of the proceedings of the
meeting. Where a company fails to keep minutes of meetings, the company and every officer of
the company who is in default is liable to an administrative penalty of two hundred and fifty
penalty units.
Voting
Voting by members or their proxies may be done in 3 ways:
- By show of hands
- By poll
- By postal ballot
Unless the Constitution provides otherwise, voting at meetings is done by show of hands. Here,
every member present in person or by proxy has a single vote, regardless of the value of shares
held by each member. So its one hand – one vote.
However, voting by poll may be demanded before voting by show of hands has commenced, or
where it has commenced, after the votes have been counted and declared (entered into the minutes
book). The following person/persons may demand for voting by poll:
- The Chairperson
- At least 3 members present in person or by proxy
- A member with at least 5% shares of the the total voting rights of all Members having the
right to attend and vote on that resolution
A demand for voting by poll may be withdrawn.
Unless a poll is effectively demanded, the Chairperson’s declaration of the results by a show of
hands voting, and an entry to that effect in the minutes book, is conclusive evidence of the fact
without proof, of the number or proportion of votes recorded in favour or against the resolution.
Although the Constitution of the Company may regulate voting, any provision that excludes the
right to request for a poll will be void.
With a vote by poll, each shareholder entitled to vote shall have one vote for each share. The rule
is one-share-one-vote.
The third way of voting is by postal ballot. Rather than directing that a poll be taken of all
members present in person or by proxy, the Chairperson may direct that voting be by postal ballot
of all members entitled to attend and vote. Once so directed, ballot papers shall be served on the
members entitled to vote on that resolution, in the same manner as notice of the meeting is required
to be served.
When voting is by postal ballot, each member has one vote per share. Members may vote
themselves or through their appointed proxies, by completing the ballot papers and depositing
them not less than 24 hours before the deadline for closing ballot.
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Voting by ballot occurs when:

i. 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
ii. The Company’s Constitution directs the Chairperson to do so
At any meeting, if there is a tie after a vote, the Chairperson has second or casting vote unless the
Registered Constitution provides otherwise

Resolutions
Company decisions are made by passing resolutions. These are simply motions placed or filed at
the meeting, and the members will go on to make a decision one way or another.
As indicated earlier, Company Resolutions can be passed by two groups of people: Shareholders
and the Board of Directors
When it comes to shareholders, there are 2 kinds of resolutions:
1) Ordinary Resolution
An ordinary resolution is one passed by a simple majority of votes cast by the Members of the
company entitled to vote in person or by duly appointed Proxy at the General Meeting.
2) Special Resolution
A special resolution is one 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.
A special resolution is needed by a Company when it wants to, among other things:
- Increase its shares
- Change the name of the Company
- Declare its dividends
- Alter the objects of business, etc
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A certified true copy of every special resolution passed by the company is required to be forwarded
to the Registrar for registration within 28 days of the passing of the resolution.
Members may also go by written resolutions under Section 163. These are resolutions signed by
all the members entitled to attend and vote at a meeting of the company. The resolution shall be
valid and effective for all purposes as if it had been passed at a meeting of the company.
NB: A written resolution cannot be used to remove an auditor or a director.
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PRACTICAL ISSUES IN THE ENFORCEMENT OF DIRECTORS’ LIABILITY OR

MEMBERS’ RIGHTS THROUGH LITIGATION

Why litigate?
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 Directors.
In the day-to-day working of a company, certain decisions need to be taken regarding the
management of the company and these decisions are generally taken by the majority members. In
this process of decision-making, there may arise certain occasions wherein the interests of the
majority shareholders may come in conflict with that of the minority shareholders.
Decisions are generally taken by members passing resolutions via ordinary/special resolution.
Once passed by majority members as per requirements, it becomes binding on all the members of
the company. In such cases, courts do not generally interfere in the management of the company
on the insistence of shareholders, in matters of internal administration, as long as the Directors are
acting within the powers conferred them. The Court will not ordinarily intervene to protect the
minority interest affected by the resolution, since on becoming a member of the company, each
person impliedly consents to submit to the will of the majority of the members. Thus, if any wrong
is done to the company, it is the company, having its legal personality, that can sue the wrongdoer
and shareholders individually, do not have the right to do so.
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.

The Rule in Foss v Harbottle

In the case of Foss v Harbottle, two shareholders commenced legal action against the promoters
and directors of the company, alleging that they had misapplied the company assets and had
improperly mortgaged the company property. Their claim was for the court to hold the directors
accountable for the losses the company had suffered.
The court disallowed the claim on 2 grounds;
- First, the court thought that irrespective of the substance of their claim, procedurally, they
were not the proper persons to sue to vindicate the wrongs done to the company, but the
company itself. The Court opined that such an action cannot be brought by minority
shareholders and rejected the two shareholders' claim, holding that a breach of duty by the
directors of the company was a wrong done to the company for which it alone could sue. In
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other words, the proper plaintiff in that case was the company and not the two individual
shareholders.

- Secondly, the court held that because the wrongs complained of were matters the company
could—in any case—confirm or ratify through a general meeting, it would be improper for
the court to entertain the action. The court reasoned that it would be redundant for it to do
what the company could easily and validly undo.
Therefore, this rule, which has two strands, precludes a shareholder from bringing an action to
pursue wrongs which have been done to the company.
As explained by Jenkins LJ in Edwards v Halliwell, there are two legs to the rule, i.e:
- Firstly, the proper plaintiff rule, which states that the proper plaintiff in actions alleging a
wrong done to the company is the company itself.
- Secondly, the majority rule, that if the alleged wrong is a matter which the company may
lawfully settle by itself, or in the case of an irregularity ratify or rectify through its own
internal governance structures, then no individual member may bring an action. . Commented [JE59]: The common law position is that,
even if there has been an irregularity or breach of the
The rule is premised on the considerations that: Constitution, so long as the irregularity or breach can be
remedied by an Ordinary Resolution, the aggrieved member
1) A company is a legal person is deprived of the right to sue.

The Majority Rule or internal management rule states that

Since the company is a separate legal entity at law, the action is vested in it and cannot be the courts would not interfere in the internal management of
brought by a single person the company to cure irregularities which can be rectified by
an ordinary resolution of the majority of the company. This
2) The majority have a right to rule is known as the internal management rule.
This means that where the majority of members or director
does an act which is illegal or irregular such that the said act
The justification for the rule is the need to preserve the right of the persons who can exercise can be remedied or corrected by the same majority by
a majority of the voting rights at a general meeting of the company to decide how the passing an ordinary resolution, a minority member cannot
company’s affairs shall be conducted. sue and the court will not interfere to force them to do
something against their wishes.
3) There is the need to prevent multiplicity of suits
If each individual member of the company were allowed to bring an action in respect of a
wrong done to the company, this could result in multiple suits in respect of the same wrong, a
situation the courts prefer to avoid.
4) The avoidance of ineffective court orders
The courts will not make orders in vain, If the court were to grant an order in an action brought
by a single shareholder, the order may later be rendered ineffective by an ordinary resolution
at a subsequent meeting.
It has however been recognized that an unmitigated application of the rule in Foss v Harbottle can
result in undue hardship to minority shareholders. Accordingly, there are some exceptions under
common law, to the rule in Foss v Harbotle, which are:
 Acts infringing the personal rights of shareholders
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Every shareholder has vested in him certain personal rights, for instance, the right to vote and
attend meetings. An individual is entitled to enforce his personal rights, eg such as where
profits have been declared but he has not been paid a share proportionate to his investment, he
has been deprived of his right to vote at a general meeting, or where his vote has not been
recorded . If the act complained of, infringes on the personal rights of the shareholder, the
shareholder can not be prevented by the rule in Foss v Harbottle from enforcing his rights.
In Pender v Lushington, The articles of a company entitled every member to one vote for
each 10 shares held, up to maximum of 100 votes. The plaintifff had registered his shareholding
in the names of several nominee to exceed this voting limit. At a general meeting of the
company, the chairman refused to accept the votes of the nominees and rejected them as
invalid. The plaintiff sued for an injunction restrain the directors from acing on the basis that
the nominees votes had been bad. It was held that as a member of the company, the plaintiff
had a right to have his vote recorded, and as such he could bring an action to enforce it.
 Where the act complained of can only be confirmed by a special or extraordinary
resolution.
Again, the rule in Foss v Hartbottle is not applicable when a member sues to challenge an
action taken by the company without the required special resolution.
There are several decisions which shareholders of a company cannot take by a simple/ordinary
resolution. Some decisions need to be passed by a special resolution, i.e. they require the vote
of 3/4 of the members present and voting. So if the majority purport to do any such act by
passing only an ordinary resolution or without passing a special resolution in the manner
required by law, any member of the company may bring an action to restrain the majority.
Case in point is Edwards v Halliwell. Here, there were two members of a trade union who
obtained a declaration that a resolution increasing members’ subscriptions was invalid because
the required two-thirds majority for such a resolution was not obtained. It was stated in this
case that the alleged act could have been done only by a two-thirds majority and not by a simple
majority and thus the rule in Foss v Harbottle could not be relied upon as the members were
suing in their own right only to protect their own rights in their capacity as members and were
not infact suing in the right of the union because here the wrong has not been done against the
union(in which case, the union would solely have been able to bring a cause of action). Instead,
here the defendants had by breaching the rules of the union by which they are bound, had
invaded the personal and individual rights of the minority.
 Where the act complained of is ultra vires the company
The rule in Foss v Harbottle only applies as long as the company is acting within its powers.
Ultra vires acts are those that lie beyond the power or authority of the company to perform.
The case of Simpson v Westminster Palace Hotel Co establishes that where the company is
proposing to do an ultra vires or illegal act, the principle of majority rule is not applicable since
the shareholders can not, even by a unanimous vote, ratify an ultra vires or illegal act. Parke
v Daily News Ltd establishes that in these circumstances, the shareholder has a right to bring
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a personal action, since he has a right to have the company act in accordance with the terms of
its constitution and within the law.
This exception was seen in the case of Bharat Insurance Co. Ltd v. Kanhaiya Lal, where
the plaintiff, who was a shareholder of a respondent company, complained about several
investments being made by the company without adequate security, which was contrary to the
memorandum and therefore, sought a permanent injunction against the company making any
such further investments. The court ruling for the plaintiff, said that even though in matters of
internal management, the company was the best judge of its affairs, and the rule was that the
court should not interfere, application of assets of a company was not merely a matter of
internal management. In the instant case, the company directors were acting ultra vires and
therefore, a single shareholder was eligible to bring an action against the company.
 Where there is fraud on the minority
The rule in Foss v Harbottle cannot be used by the majority to commit wrongs against the
company and benefit from those wrongs at the minority’s expense simply because the minority
cannot bring an action in respect of such wrongs. The law will not be used to perpetuate fraud.
The Court has interpreted the term "fraud" loosely to include fraud in a strict sense as well as
a breach of duty which results in conferring some benefit on the directors or third parties. What
constitutes fraud against the minority extends beyond the traditional notion of fraud and may
include misappropriation of company property, discrimination against a section of the
shareholders, mala fide use of power etc. It has been held that gross negligence may also
amount to fraud against the minority.
In Estmanco (Kilner House) Ltd v Greater London Council , Megarry V-C said that ‘the
essence of the matter seems to be an abuse or misuse of power’ and that the term carried its
wider equitable meaning.
In BURLAND V. EARLE, the court defined this type of fraud as involving all cases where
the wrong doers are endeavouring directly or indirectly to appropriate for themselves money,
property or advantages which belong to the company or in which the other shareholders are
entitled to participate. Fraud therefore involves in this context an unconscionable use of
majority power resulting in disproportionate advantage to the minority or financial loss to the
company and may also cause unfair and discriminatory treatment of the minority.
So where the wrong constitutes a fraud perpetrated against the minority, and the wrongdoers
are those in control of the company, i.e the majority and the directors, individual shareholders
are allowed to sue. Lord Davey, in Burland v Earle, stated that the one true exception to the
rule in Foss v Harbottle is where a fraud has been perpetrated against the company by those
who ‘hold and control the majority of shares in the company and will not permit an action to
be brought in the name of the company.
In Cooks v Deeks, a shareholder was allowed to bring an action against directors who were in
breach of their duties to the company in diverting to themselves a contractual opportunity
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which, in equity, belonged to the company. They were not allowed to use their majority voting
power in general meeting to prevent an action being brought against them.
Menier v Hooper’s Telegraph Works is also an authority for this point and is a clear example
of misappropriation of corporate assets. In this case, where Menier, a minority shareholder
complained that there were self-interested transactions between a majority member and the
company, the court held that a minority shareholder’s action was properly bought in these
circumstances.

The applicability of the rule in Foss v Harbottle under Ghana Law

It is established that the common law forms part of the Ghanaian law, and thus, being a common
law principle, the rule in Foss v Harbottle is applicable in Ghana, subject to the statutory
modifications of course.
The rule in Foss v harbottle has been applied in Ghana in a number of cases. In the case of
Appenteng v Bank of West Africa7, the court applied the proper plaintiff leg of the rule in Foss
v Harbottle. In that case, the plaintiffs who were shareholders of a company, Mpotimma Ltd., sued
the defendant bank in their capacity as shareholders to recover damages for negligent financial
advice that the bank gave to the company. They alleged that due to the bank’s negligent advice,
the company lost heavy sums of money as result of which they had also lost “their business
interests and yearly profits and dividends.” Justice Ollennu agreed with the bank that the plaintiffs
did not have standing to sue. He held, applying the rule in Foss v Harbottle that since a company
is a distinct personality having an existence separate from its members, the plaintiffs could not sue
for a wrong done to the company. He therefore dismissed the action.
Then, in Bank of West Africa v Appenteng8, the Court of Appeal affirmed Ollennu’s decision in
the 1961 case. In one of the four consolidated appeals heard by the court, another shareholder of
Mpotimma Ltd had again raised the question of Bank of West Africa’s negligent advice to the
company and its attendant losses. Endorsing Justice Ollennu’s application of the proper plaintiff
rule in the 1961 case, the Court of Appeal held that a shareholder cannot sue for a wrong done to
a company or to recover money due as damages to it, unless the action is instituted by the company
itself. Accordingly, that second suit was also dismissed for offending the proper plaintiff rule in
Foss v Harbottle.
The case of Pinamang v Abrokwa9 endorsed Foss v Harbottle’s majority rule. The parties, Mr
Michael Abkrowa, Mr James Mensah and Mr Francis Pinamang were all shareholders and
directors of Ashanti Furniture Co. Ltd. Messrs. Abrokwa and Mensah brought an action against
Mr. Pinamang, the Managing Director of the company, alleging that he was conducting the affairs
of the company in a manner oppressive to them and in disregard of their interests. Specific charges
included mismanagement of the company’s finances, exploitation of the company’s business for

7
[1961] GLR 196
8
[1972] 1 GLR 153 (CA)
9
[1991] 2 GLR 384 (CA).
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personal gain and unlawful demotion of Mr. Abrokwa from his position in the company. The High
Court found the allegations as proved. Among others, it ordered an investigation into the finances
of the company, and also ordered Mr. Pinamang to account for various sums he had taken from
the company. On appeal, not only did the Court of Appeal reverse the finding of oppression under
section 218 of the Companies Act 1963, it also rebuked the trial judge for entertaining matters
concerning the internal management of the company. Speaking for the Court, Justice Lamptey
said:
“In this respect the courts have held that the rule in Foss v. Harbottle must be observed by the
trial court and it must not inquire into matters of internal management or, at the instance of a
shareholder, interfere with transactions which though prima facie irregular and detrimental
to the company, are capable of being rectified by an ordinary resolution of the company in a
general meeting. It will be shown in due course that the learned trial judge fell into the error
of inquiring into matters of internal management such as, for instance, as the complaint by
one of the applicants that he has been demoted and that his post had been downgraded.”
The above cases show how the Ghanaian courts have applied the rule in Foss v Harbottle.
The Supreme Court in P.S. Investments Ltd. V. CEREDEC10. exhaustively discussed the
question of whether the continued application of the rule is fundamentally consistent with the
Ghanaian company law. This discussion was done under the old Companies Act, however the
decision is nonetheless relevant to the new Companies Act (Act 992).
The facts of the case are as follows:
In that case, the controversy was about the sale of 40% of the majority shares held in Twifo Oil
Palm Plantation Ltd (TOPP) by the Central Regional Development Corporation (CEREDEC) on
behalf the government. The Regulations of TOPP contained a “first refusal” or pre-emptive clause.
That is to say, a shareholder who wished to sell its shares in the company had to first offer them to
the existing shareholders. It was only when they waived the right to buy, that the shares could be
sold to a third party.
In 1997, the government decided to sell 40% of its shares in TOPP held by CEREDEC. A letter to
this effect was written to the minority shareholders of TOPP including PS Investment Ltd, the
plaintiff. The plaintiff replied this letter and expressed its wish to exercise its pre-emptive rights if
and when the shares were offered for sale. The Divestiture Implementation Committee (DIC)
which was tasked to oversee the sale of the shares adopted an open tender process that allowed
companies which were not existing shareholders of TOPP to make bids. At the end of process,
Unilever Ghana Ltd was selected as the highest bidder for the sale of the 40% shares. The plaintiff
protested the tendering process as irregular and a violation of Regulation 32(a) of the TOPP
Regulations that provided for pre-emptive rights of existing shareholders. When the protest was
ignored, the plaintiff instituted an action in the High Court, on behalf of itself and the other
minority shareholders, against CEREDEC, the DIC, Unilever, the Attorney General and all the
directors of TOPP apart from the plaintiff’s nominee on the Board at the time of the tender.

10
[2012] 1 SCGLR 618
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At the High Court, the defendants argued among others that since the irregularity complained of
was a wrong done to the company, it was the company, and not the plaintiff, that had the capacity
to sue to remedy the wrong. And that in any case, since the alleged irregularity was one that could
be ratified by a general meeting of the company, the plaintiff’s action was unfounded.
The High Court agreed with the defendants on this point. It held that since the plaintiff’s witness
“admitted during cross-examination that the irregular procedure [complained of] is capable of
being ratified by a special resolution of TOPP in a general meeting and that the vote of CEREDEC
alone could pass that special resolution, there [was] no need for [the] court to interfere in what the
company has done”. The Court therefore dismissed the action and this was affirmed by the Court
of Appeal.
On appeal to the Supreme Court, one of the principal questions the Court set out to answer was:
“To what extent does the Companies Act 1963 (Act 179) retain the rule in Foss v Harbottle?”
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. (Section 5 of Act 992).

 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 992. However, 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).
Thus, in general, individual members cannot sue to protect the rights of the company in
accordance with the Rule in Foss v. Harbottle.

 The Common law exceptions to the Rule in Foss v. Harbottle 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 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.
The Act has created statutory exceptions to the rule in Foss v Harbottle by providing for
representative actions, derivative actions and remedies against oppression.
Under Section 199 of Act 992, there are civil liabilities that may attach for a Director’s breach of
duty.
By virtue of Section 200, proceedings may be instituted by the company itself or by a member
to:
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- Enforce the liabilities under Section 199

- Prevent a threatened breach of duty by a Director
- Recover company property from a Director
Where the proceedings are brought by a member, the member may bring:
1) A derivative action under Section 201, or
2) A representative action under Section 205

Representative Actions
Representative actions may be considered as exceptions to the Rule in Foss v. Harbottle.
These actions are governed by Section 205 of Act 992.
Representative actions are commenced by a member where Act 992 creates a cause of action in
the member(s), but requires or permits the member/plaintiff to sue not just for himself, but also on
behalf of the members of a relevant class.
Act 992 provides that where the alleged breach or act complained of, affects any other member or
officer, that person must sue in a representative capacity on behalf of that member or officer and
all other members or officers other than any who are made defendants and the provisions of Section
205 shall apply.
It is critically important that the Act expressly authorize the person to sue in a representative
capacity. No representative action can be properly commenced if Act 992 does not authorize the
commencement of a suit in a representative capacity on behalf of the plaintiff and other persons.
So, it is necessary to ensure that there is a specific provision which entitles the plaintiff to sue in a
representative capacity.
The following provisions require a member, officer or debenture holder to sue in a representative
capacity;
- Section 29(3) – authorizes members to sue in a representative capacity to enforce
obligations under the constitution
- Proceedings to challenge the legality of dividend payments under Section 72 (3) & (4)
- Proceedings by a debenture holder to enforce the security of a series of debentures which
the debenture holder does not entirely hold under Sections 89(4)
- Proceedings to enforce liabilities for director’s breach of duty pursuant to Section 199 and
200(1)(a)
- Proceedings to restrain a threatened breach of duty under Sections 190 & 192 pursuant to
Section 200(1)(b)
- Proceedings to recover company property from a director pursuant to Section 200(1)(c)
Though a representative action may inure to the company’s benefit, it is not instituted in the name
of the company. Rather it is instituted in the name of the plaintiff member or creditor.
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The plaintiff does not need to seek the consent of the company, or the members of the class
represented in order to sue.
The plaintiff cannot name the individual members of the class as parties to the suit without their
approval. They may opt to 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 though the suit was commenced in a
representative capacity.
Whether or not a member of a class is joined as a party, the decision of the Court will be binding
on that member.

Derivative Actions
Act 992 has introduced, for the first time, what is known as derivative action into the company
laws of Ghana.
Derivative actions may be considered as exceptions to the Rule in Foss v. Harbottle. These actions
are governed by Sections 201- 204 of Act 992.
Derivative action, at common law, is an action commenced by member in the name of and on
behalf of the company when the directors or members having the authority to act have refused or
failed to do so. The said member in the action acts as a representative of the Company on whose
behalf he institutes the proceedings. The case of Wallesteiner v Moir [No.2] illustrates this
principle. As an agent initiating proceedings on behalf of the company, he is entitled to be
indemnified for his just and reasonable expense and cost of action.
Unlike the rule in Foss v Harbottle which provides that only the company itself may sue for alleged
wrongs, derivative actions allow for a member or director to sue for a wrong done to the company,
in the name of the company (they derive the right to sue from the company).
An action may be considered to be a derivative action if:
a) A director or member of a company sues in the name of a company or a subsidiary of the
company.
b) A director or member of a company intervenes in proceedings to which the company or a
related company is a party to, in order to continue, defend, discontinue the proceedings on
behalf of the company or the related company.
A derivative action enforces the company’s rights as separate from the rights of the shareholders
and is a useful tool for minority members to prevent the directors from abusing their fiduciary
responsibilities to the Company in favour of one or more majority shareholders.
Shareholders may apply to the Court for leave to bring an action in the name and on behalf of the
Company to enforce the rights or recover assets belonging to the Company. This strengthens the
capacity of shareholders to hold directors accountable for their actions. It provides a remedy to
shareholders who wish to hold the directors of the company to account but may otherwise be
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unable to bring proceedings because the directors or the majority members of the company refuse
to bring or maintain such proceedings on behalf of the company.
Under Section 201 of Act 992, a member or a director of a company may, on justifiable grounds,
seek leave of the court to bring proceedings in the name of the company or intervene in action in
which the company or its subsidiary is a party to, for the purpose of continuing, defending or
discontinuing the proceedings on behalf of the company.
This provision has paved a leeway for members and directors to institute actions against
wrongdoers, whether internal or external, when those entitled to act fail or refuse to act for the
company. This right never existed under the previous Act 179. In effect, this operates as an
exception to the time-honoured principle that when a wrong is done to a company, the company
alone is entitled to sue.
There are prerequisites for a derivative action to be instituted;
- The member/director must apply for leave of the Court to sue or intervene.

- The Application for leave must be on notice to the company or its subsidiary.

- To succeed, the member/director must prove that;

(a) the company or the related does not intend to sue, continue or diligently defend the suit
(b) it is in the interest of the company or a subsidiary of the company that the decision to
sue is not left to its directors.
Derivative actions may be commenced in all situations where the company has a right to sue. They
also have the advantage of entitling members or directors of companies to protect the interest of
related or subsidiary companies.
It is not necessary that a specific provision entitles the member or director to sue. Nonetheless
derivative actions may be brought in:
- Proceedings to enforce liabilities for director’s breach of duty pursuant to Section 199 and
200(1)(a) of Act 992.
- Proceedings to restrain a threatened breach of duty under Sections 190 & 192 pursuant to
Section 200(1)(b).
- Proceedings to recover company property from a director pursuant to Section 200(1)(c)
There are some important principles when it comes to derivative actions.
1) Under Section 204, derivative actions may not be settled, compromised, or discontinued
without leave of the Court. Otherwise, the majority will simply exercise their powers to
discontinue those actions.
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2) Under Section 203, the Court has very wide powers to ensure that the derivative actions
are effectively prosecuted. This ensures that the officers of the company who may have
been opposed to the suit may not frustrate it.

3) Under Section 202, 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. This
ensures that costs do not operate to prevent members or directors from instituting derivative
actions where necessary.

Remedies against oppression

This is not about wrongs done to the company or a particular class of members, as is the case with
representative and derivative actions. Section 219 provides a remedy for the minority member,
where oppressive conduct is alleged. This remedy extends even to debenture holders.
It provides, inter alia, that a member may apply to the Court for an order on the ground that “the
affairs of the company are being conducted or the powers of the directors are being conducted or
the powers of the directors are being exercised in a manner oppressive to one or more of the
members or debenture holders or in disregard of his or their proper interests as members,
shareholders, officers, or debenture holders 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:
1. The Applicant must be a member or debenture holder of the Company; and Commented [JE60]: The case of Re West Coast Dyeing
2. The Company must be run in a manner oppressive to or in disregard of the proper interests Industries: Adams v Tandoh held that a director or an
officer of the company who was also not a shareholder as
of the members, debenture holders, or officers of the company; or well, and consequently did not qualify to be a member of
3. There must be an actual or threated unfair discrimination or prejudice to members or the company concerned, was not entitled to seek any
debenture holders from the company or through a resolution from the members or remedy under the section.

debenture holders or a class of the members or debenture holders

The ratio in Pinamang v. Abrokwa provides insight into the attitude of the Courts where remedies
against oppression are sought. It must be proved that:
i) 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.
ii) 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.
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iii) 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.
It was held on appeal however that 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)
The case of Adams v Tandoh held that if it is a matter of personal right, then the rule in Foss v
Harbottle does not apply.
Prevention of ultra vires & illegal acts
By virtue of Section 19(2), (4) & (7) of Act 992, where a company acts in excess of its authority
under the registered constitution, the company’s acts do not become void.
This ensures that third parties may confidently deal with the company on the presumption that the
company acted regularly.
However, as a mitigating measure, the law allows members and debenture holders to prohibit
illegal or ultra vires acts. Such applications may be brought under Section 19 of Act 992 or Section
218, or both where appropriate.
It must be noted that these prohibitions are consistent with the common law exceptions against
ultra vires acts.
If an application is being brought under Section 19:
- The Applicant must be:
i) A member of the company or
ii) A debenture holder or
iii) 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.
The law seeks to strike a balance where contractual obligations are involved. Thus, in appropriate
Section 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.
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Section 218 applications are similar to Section 19 Applications as they are both applications for
prohibitory injunctive orders. However, in Section 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.

Conclusion
In PS Investment v CEREDEC, the Supreme Court puts it succinctly that the overall effect of
these statutory provisions is that the proper plaintiff leg of the rule has been whittled away
significantly. A member is allowed to bring an action where it is alleged that the member’s right
has been violated.
In relation to directors, Sections 200(1) and 200(5), when read together, have the effect of clothing
a shareholder/member with capacity to institute actions for breach of directors’ duties, even if that
breach resulted in damage to the company alone. That member may either bring a derivative action
under section 201 or a representative action under section 205 on behalf of that member and all
other members except members who are defendants to the action and shall join the company as a
defendant.
The internal management rule or the majority rule also, has since the passage of the repealed Act
179 in 1963, ceased to apply in corporate or company law in Ghana.
Under Section 218 (1) of Act 992, the Court may on an application by a member restrain the
company by way of injunction from doing an act or entering into a transaction which is illegal or
beyond the powers or capacity of the company or which infringes a provision of the constitution
of the company or from acting on a resolution not properly passed in accordance with the Act of
the Constitution of the Company and declare that act, transaction or resolution already done,
entered into or passed to be void.
The right afforded to members under Section 218 of Act 992, previously section 217 of the
repealed Act 179 has whittled away the second leg of the rule in Foss v Harbottle, which is the
Internal management rule. Professor Gowers’ commentary to section 217 of Act 179 which has
been maintained or repeated under section 218 of Act 992, is to the effect that the internal
management rule or the majority rule has since 1963, ceased to apply to in Ghana.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Which originating process must be used?

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. Case in point is Boyefio v. NTHC Properties Ltd11.
First, if the law states that the court must be approached by an application (for example, Section
218 & 219 action), then the appropriate process is 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 Section 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 Rule 2 of CI
47 since the High Court has original jurisdiction over actions created under Act 992. (See Section
383 & 1st Schedule to Act 992) So, in general, derivative and representative actions are to be
commenced by a writ.

11
[1997-1998] 1 GLR 768
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

COMPANY SECRETARIAL PRACTICE

The Company Secretary is a key Officer in the governance and affairs of a company.
In the modern corporate world, a company’s operations are subject to an increasingly complex
web of rules and regulations, and as such, it becomes a bit difficult for companies to keep up with
what the law requires of them. The activities of a company revolve around legislations and
regulations, good corporate governance practices, and corporate social responsibility. These are
mostly the responsibilities of the Company Secretary.
Thus, under Section 211(1) of Act 992, every company is required to have a Company Secretary
who possesses the requisite qualifications.
If a company carries on business for more than 6 months without a Company Secretary, the
Company and every officer of the Company who is in default is liable to pay to the Registrar, an
administrative penalty of 25 penalty units per day.
The First Schedule of Act 992 points out that the Company Secretary ‘includes a person
occupying the position of secretary by whatever name called’. This means one does not necessarily
need to be called/labelled Company Secretary to be the Company Secretary.
The Company Secretary plays a pivotal role in the smooth administration of the Company and in
fulfillment of its responsibilities towards the Company’s shareholders and other stakeholders.
The Company Secretary is responsible for the efficient administration of a Company, particularly
with regard to ensuring compliance with statutory and regulatory requirements and to ensuring
that decisions of the board of Directors are implemented.

Status of the Company Secretary

The Company Secretary is an Officer of the company and an advisor to the Board. The First
Schedule of Act 992 in the definition of “Officer” includes the Company Secretary.
Despite the name, the role is not clerical or secretarial, such that, Company Secretaries are not
mainly executive administrative assistants. Although in the past, the company secretary was
viewed merely as a clerk and his acts could not bind the company, presently, the Company
Secretary plays a much more important role.
The Secretary is considered as an Officer of the Company whose acts bind the company, as
established in the case of Panorama Development (Guildford) Ltd v Fidelis Furnishing
Fabrics Ltd12.

12
[1971] 3 ALL ER 16
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

The Company Secretary may be an individual. Subject to the limitations imposed by Section 213, Commented [JE61]: Where a person acts as both director
a Company Secretary may be a Director (If the Secretary is a Director, then the person is an and Company Secretary of a company, a provision requiring
or authorising an act to be done by or to a director and a
Executive Director). Company Secretary shall not be considered as done if the
act is done by or to that person acting in both capacities.
The Company Secretary may also be a body corporate, but that body corporate must have as one
of its promoters, subscribers, directors or operating officers, a person who is qualified to be a So a person may be a Director and Secretary. But one
person cannot play the dual role of director and secretary in
Company Secretary.
respect of a thing that is required to be done by two
persons, i.e. a director and a secretary.

For instance if a document is required to be signed by a

Appointment of the Company Secretary Director and a Secretary, one person cannot sign in both
capacities.
The Company Secretary is usually appointed and removed by the Directors, but the Constitution
may vest the appointment of the Company Secretary in the Members or in any other person. Commented [JE62]: Section 29(2) provides that where
the company’s constitution empowers a person to appoint
Thus, Section 211(5) provides that ‘unless the constitution of a company otherwise provides, the or remove a Director, or any other officer of the company,
Company Secretary shall be appointed by the directors for the term, at the remuneration and on that power is enforceable by that person.

the conditions that the directors consider fit, and may be removed by them, subject to the right of Thus, the Company Secretary, who is an Officer of the
the Company Secretary to claim damages from the company if removed in breach of contract’. Company, may be appointed/removed by the Board of
Directors, Member or any other person as provided for in
Once appointed, the Company Secretary is required to submit to the Company, his written consent the Constitution.
to serve as a Company Secretary. This is forwarded to the Registrar.
Per Section 211 (7) of Act 992, where there is a vacancy in the office of a secretary, the duties of
a Secretary may be performed by a deputy secretary or any other officer appointed by the Board
to be acting secretary

Qualifications of the Company Secretary

Under the Old Companies Act, a person did not have to meet strict qualification requirements to
be appointed as a Company Secretary. The company could simply appoint anyone whom they saw
fit for the role.
Consequently, many companies appointed individuals without the requisite knowledge to
adequately perform their company secretarial duties, and this led to the companies faltering on
their corporate compliance requirements.
This changed with the introduction of Act 992. Specific criteria has been introduced to ensure that
persons appointed as company secretary have knowledge to perform duties of the role, and to
improve good corporate governance practices.
Section 211(3) provides that the directors shall not appoint a person as a Company Secretary unless
that person;
a) has obtained a professional qualification or a tertiary level qualification that enables that Commented [JE63]: Section 211(4) highlights that a
person to have the requisite knowledge and experience to perform the functions of a professional or tertiary level qualification is a discipline with
an offering in company law practice and administration.
Company Secretary,
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

b) has held office, before the appointment, as a Company Secretary trainee or has been articled
under the supervision of a qualified Company Secretary for a period of at least three years,

c) is a member in good standing of;

- the Institute of Chartered Secretaries and Administrators, or
- the Institute of Chartered Accountants, Ghana,

d) having been enrolled to practice, is in good standing as a barrister or solicitor in the

Republic, or

e) by virtue of an academic qualification, or as a member of a professional body, appears to

the directors as capable of performing the functions of secretary of the company.

Duties of the Company Secretary

Section 212 of Act 992 sets out the statutory duties of the Company Secretary. These include;
 Assisting the Board to comply with the constitution of the company and with any relevant
enactment;
 Keeping the books and records of the company;
 Ensuring that the minutes of the meetings of the shareholders and the directors are properly
recorded in the form required by this Act;
 Preparing and issuing out notices in the name of the company;
 Ensuring that the annual financial statements of the company are despatched to every
person entitled to the statements as required by this Act;
 Ensuring that all statutory forms and returns are duly filed with the Registrar;
 Maintaining the statutory registers of the company; Commented [JE64]: These Registers are:
 Providing the Board with guidance as to the duties, responsibilities and powers of the Board -The Register of Members (Section 35)
-The Register of Directors and Secretary (Section 215)
and on the changes and development in the laws affecting the operation of companies; -The Share egister
 Informing the Board of legislation relevant to or affecting meetings of shareholders and
directors and their failure to comply with the legislation and reporting accordingly at any
meeting; and
 Advising the directors on their responsibilities as directors
There are also some common law duties of the Company Secretary. As an Officer of the Company,
the Company Secretary stands in a fiduciary relationship with the company, and owes it all the
fiduciary duties akin to those of an agent to a principal. This includes the following;
 Confidentiality: The Company Secretary is not at liberty to make use of the Company’s
records, such as trade secrets or lists of customers that are classified as confidential, for his
own purposes. He/she cannot, with the insights gained from the company, run to disclose
corporate matters and secrets to outsiders.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Diligence: The Company Secretary must also exercise care, diligence and skill. These
cover the proper performance of the duties required to be undertaken by the Secretary. The
secretary will be liable for any losses or damages caused through lack of care, diligence or
skill in performing those duties.

 Faithfulness: This includes avoiding a conflict of interest or making a secret profit. The
Secretary is expected to act in good faith, by acting in the best interest of the Company and
not use his or her position to make gains for him or herself. Case in point is Golden Gates
Services Ltd v Ghana Ports and Harbours Authority.

Capacity of the Company Secretary to bind the Company

As an Officer of the Company, under Section 148, the Secretary’s acts are not considered to be
acts of the company and are not binding on the company, unless:
 the Company, through its Members in general meeting, Board of Directors, or Managing
Director, has expressly or impliedly authorised such officer or agent to act in the matter;
Commented [JE65]: As an Administrative Officer to the
 the Company, through the above mentioned organs, has presented the officer/agent as Board and an Officer of the Company, the Company
having authority to act in the matter; or Secretary has authority to bind the company on
administrative matters.

 his acts are within acts customarily performed by Secretaries. For example, in preparation of a Board or General Meeting
of a Shipping Company, the Secretary may order stationery,
book a venue, order refreshments, place newspaper
The Company shall be liable, unless the person who relied on the acts of the Secretary had actual advertisements of the meeting etc. Such matters are
incidental to the work of the Company Secretary, and he
knowledge that he had no authority to act or unless, having regard to his position with, or may routinely undertake them and bind the company.
relationship to the Company, he ought to have known of such absence of authority.
But to do something such as place an order for the purchase
Any act of the Company Secretary beyond his authority may however be ratified by the Board of of a ship, would be outside of the scope of his duties and
the company secretary cannot in his own name, do that.
Directors or the Members, either by subsequent approval or by knowledge and acquiescence.
So as an Administrative Officer to the Board, the Company
So for instance, where a Company Secretary issues a notice of a meeting without prior board Secretary, in this capacity, without the Director’s consent by
approval, if all the directors become aware of the irregularity, they may expressly ratify the notice resolution, cannot make commercial decisions for the
or acquiesce in its issuance. In Hooper v Kerr, Stuart & Co Ltd13, upon a requisition to the company, or borrow funds in the company’s name, or
conclude contracts on behalf of the company, or call
directors for an extraordinary general meeting, the secretary sent out the notices of the meeting meetings, etc etc.
without the formal authority of the Board. At a subsequent meeting of the board, a resolution had
been passed ratifying the actions of the secretary. On a motion to restrain the holding of an Because he lacks the inherent power to do such things,
when done under the hand of the Company Secretary, the
extraordinary general meeting of shareholders on the ground that the same had not been lawfully instrument or document must state the Company
summoned, the question before the Court was whether the ratification was effective. The Court Secretary’s authority for doing so. in this vein, it is
customary for the Company Secretary to act “by order of
held that subsequent ratification by the directors of the secretary’s action rendered the notice
the Board” or “as directed by the Chairperson of the
effective. Board” or “upon requisition by Members”.

The Company’s Constitution may however permit the

Directors to delegate power to persons such as the
Company Secretary. So if the Constitution so permits, the
13
(1900) TLR 162 Company Secretary may discharge the authorized matters.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Thus, the Secretary’s capacity to bind the Company in relation to transactions with third parties,
will depend on the scope of his duties and what he is allowed to do in the ordinary course of
business by the Company.
In the English case of Panaroma Development (Guldford) Ltd. v Fidelis Fabrics Ltd., the
Secretary of the Defendant Company hired cars in the name of the Company, without
authorization, and for his personal use. The orders for the cars were written on the Defendant
Company’s letterheads, signed by the Secretary. When the bills were presented for payment, the
Company refused to pay them. Counsel cited the authorities indicating that the Secretary of a
Company was mere humble servant with no authority or power to make contracts or
representations on behalf of the Company. Disagreeing with this argument, Lord Denning held as
follows:
“…… times have changed. A Company Secretary is a much more important than he was in 1887.
He is an officer of the Company with extensive duties and responsibilities. This appears not only
in the modern Companies Acts , but also by the role, which he plays in the day-to-day business of
companies. He is no longer a mere clerk. He regularly makes representations on behalf of the
Company and enters into contracts on its behalf, which come within the day to day running of the
Company’s business. So much so that he may be regarded as held out as having authority to do
such things on behalf of the Company. He is certainly entitled to sign contracts connected with the
administrative side of a Company’s affairs, such as employing staff, and ordering cars and so
forth. All such matters now come within the ostensible authority of a Company Secretary.”
Thus, ostensible authority is deemed to vest in the Company Secretary, who is capable of binding Commented [JE66]: Also known as apparent
the company by his acts, unless evidence to the contrary is proven or it is shown that the party with authority, ostensible authority is the authority an agent is
assumed to have been given by a principal in the eyes of a
whom the Secretary dealt with had actual or constructive knowledge that the Secretary had no such reasonable third party.
authority.
Under Section 150 of Act 992, a person described as a secretary by the Company in particulars
filed at the Companies Registry, is deemed to have been properly appointed and has all the powers
customarily exercised by persons in that position in a Company carrying business of the type
carried on by the Company.
Further, it is presumed that the Secretary of the Company has authority to issue documents or
certified copies of documents on behalf of the Company, and also has authority to warrant the
genuineness of the documents or the accuracy or the copies so issued.

Removal of the Company Secretary from Office

The Secretary may be removed by the Board, unless the Companies Constitution otherwise
provides.
The Secretary may also resign his position.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

The issue of the effectiveness of a resignation of a Secretary of a Company came up in the case of
Centre Properties v Obuom Goldfields Limited14, where the Court held that the resignation of
a Secretary takes effect from the date of the resignation, and not from the date when the relevant
notification of the resignation was given to the Registrar of Companies.
The Court relied on the case of Lartey and Lartey v Beanie15, where the High Court held that it
was not the filing of the required prescribed forms at the Registrar of Companies, which made the
appointment of a director effective but the passing of the required resolution appointing him.
In the view of the Court in the Obuom Case, it was not the acceptance of the resignation of a
Secretary by the Company or the filing of it with the Registrar that makes the resignation effective,
but that it is effective from the date when it is made, except where there is a provision under a
contract of service indicating otherwise. The Court however held that even though the resignation
was effective, since the directors had allowed the Secretary to continue in office and issue notices
of meetings and sign documents in that capacity, they should be deemed to have acquiesced in his
acting in that capacity.

The Company Secretary & The Board of Directors

The Company Secretary makes arrangements for Board Meetings. Under Section 188(2)(b), upon
the requisition by a Member of the Board/Director, the Company Secretary shall summon a Board
Meeting.
The Company Secretary also sends out the Notices of Meetings and Agenda, takes down Minutes
of meetings and keeps copies of Minutes in the Minutes Book of Director’s Meetings.

The Company Secretary & Members

Usually, it is the Company Secretary who sets in motion, the machinery to convene General
Meetings of Members, and circulation of the various statutory documents (i.e. Notices of Meetings
complete with Agenda, proxy notices and forms, and for Annual General Meetings, the financial
statements of the company and the reports of Directors and Auditors)
The Company Secretary also takes down minutes of proceedings and keeps copies in the Minute
Book, which is required to be kept for Members.
Also, it is usually the Company Secretary who attends to the issuance of Share Certificates.

14
(High Court, October 13, 2004, Justice Baffoe Bonnie)
15
(1987-88) 1 GLR 590
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Taking of Minutes
Minutes are a record of the business that transpired at a meeting.
The Law requires a company to keep minutes. Minutes purporting to be signed by the Chairperson
of that meeting, or the Chairperson of the next succeeding meeting, serve as prima facie evidence
of the proceedings of Director’s meetings and sufficient evidence of the proceedings of meetings
of members.
Under Section 166, Minutes of the proceedings of general meetings and meetings of a class of
members are to be recorded and entered into a Minutes book kept for that purpose.
Under Section 188(3), Minutes of the proceedings of meetings of the Directors and a committee
of Directors are to be recorded and entered into a Minutes book kept for that purpose.
It is the Company Secretary who is required to take minutes at these meetings.
Minutes are not meant to be a verbatim transcription of the discussion, or an attempt at recording
what each speaker said on a matter under discussion. Rather, they are meant to record:
 The persons present at each meeting and their capacities, distinguishing between Members
present, Members absent and Non-Members in attendance.
 The Agenda/Business intended to be transacted at the meeting
 The context of the discussion of each Agenda item, and especially
 The decision taken on each Agenda item (the reasons for the decision reached on each item
is included only if necessary)
Thus, the essentials of good minutes are as follows:
- Minutes should be precise and concise
- Minutes should stand alone and be a true accurate reflection of the meeting Commented [JE67]: It must be self standing i.e it does
- Minutes should be written in past tense, and must be devoid of personal comments and not need further explanations from other documents
opinions.
- Minutes must state the decisions reached at the meeting, and not necessarily the
deliberations and reasons for the decision reached.
- Minutes should not lump several conclusions together.
- Minutes must capture everything stated on the Agenda.
- As much as possible, stick to titles/positions rather than names, unless a person has asked
to be identified by name and placed on record
- Avoid being legalistic or citing laws if they were not cited in the meeting
The proper person to sign the Minutes of a meeting is the Chairperson, and not the Company
Secretary. At best, the Company Secretary can co-sign the Minutes.
The Company Secretary would have discharged the minute-taking responsibility by producing a
true and fair report of the proceedings for signature by the Chairperson.
A sample of Minutes is presented below (This is a sample for the 1st Board Meeting of a Company):
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

MINUTES OF THE 1st BOARD MEETING OF KAKA KOLA CONSTRUCTION

LIMITED HELD AT THE COMPANY’S CONFERENCE ROOM, NO. 12 MAKOLA
STREET, ACCRA, ON MARCH 10, 2022 AT 2.30 P.M. Commented [JE68]: This is the Title

PRESENT Commented [JE69]: Under this heading, all actual

members present are listed in their capacities, i.e. either
ESI HANDWASH - CHAIRPERSON Members of the Board or Members of the Company.
BEDIAKO FANICE - DIRECTOR
If a Member is late, it is still indicated under the Heading
KEKELI FACEMASK - DIRECTOR PRESENT, but you must further indicate at which point of
ANANIAS COVID AGBENUGAH - DIRECTOR the Agenda he was present. For example:
AFIA KONADU - DIRECTOR
KWEKU FRIMPONG DIRECTOR (From Item 3 – 6 only)
SULLEY ADAMU - DIRECTOR
FACESHIELD KWAME SOSKET - DIRECTOR If a Member is absent, this is indicated under a New heading
labelled ABSENT WITH APOLOGIES. This follows
ADWOA APPIAH QUARANTINE - DIRECTOR immediately after the PRESENT heading.
AKRONG DANGOTE - DIRECTOR

IN ATTENDANCE Commented [JE70]: Under this Heading, you list all Non-
Members who were present at the Meeting. For instance,
ADUSEI LOCKDOWN - COMPANY SECRETARY the Company Secretary.

Unless the Company Secretary is also a Member of the

meeting, the Company Secretary is usually listed as being in
OPENING attendance at a meeting, rather than present.

The Chairman welcomed everyone and declared the meeting open at 2:30 pm.
1. ELECTION OF CHAIRPERSON
Esi Handwash was elected Chairperson of the Board of Directors.
2. REGISTRATION OF COMPANY
The board received and noted the certificate of incorporation as evidence of due registration of
the company.
The registration of the interest of the foreign investor at the Ghana Investment Promotion Centre
was reportedly being handled by the company’s external lawyers.
3. PAYMENT FOR SHARES
It was noted that with the exception of Sulley Adamu whose offer of his TICO bulletproof car
was accepted by the board as consideration for the remaining 40% of his shares subject to
valuation by STC Coaches Limited, all other shareholders had fully paid for their shares in cash.
The company secretary was instructed to enter the names of the members in the Register of
Members and to prepare share certificate for each member for the signatures of Esi Handwash
(Chairperson), Bediako Fanice (Director) and Edusei Lockdown (the company secretary).
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

4. STATUTORY BOOKS
The Board noted that an order had been placed by the company secretary for the printing of the
company’s statutory books.
5. RATIFICATION OF APPOINTMENTS
The Board noted with approval the details and terms of engagement of officers and professionals
appointed prior to the incorporation of the company circulated to members prior to the board
meeting. The Board ratified the appointment of Philo Jude & Associates as the company’s first
auditors.
The Board ratified the appointment of Adusei Lockdown as the company secretary.
6. OPENING OF BANK ACCOUNT
The Board considered a number of banks and names of prospective signatories for the purpose of
opening a bank account.
It was resolved THAT
a) A Ghana cedi current account be opened at the High street branch of Ecobank Ghana
Limited
b) The JOINT signatories to the account shall be Afia Konadu (Director) and Sulley Adamu
(Director).
c) Any cheque instructions, statement or other negotiable instrument signed JOINTLY by
the two directors should be honoured.

7. ANY OTHER BUSINESS

It was agreed that the date, time and agenda for the next Board meeting should after consultation
with directors be communicated by the company secretary by email.

CLOSING
The meeting closed at 4.04pm

…………………………. ………………………..
Chairman Secretary
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

KAKA KOLA CONSTRUCTION LIMITED

EXTRACT DEMANDED BY THE BANK
IT WAS RESOLVED THAT
a. A Ghana cedi current account be opened at the High street branch of Ecobank Ghana
Limited
b. The JOINT signatories to the account shall be Afia Konadu (Director) and Sulley
Adamu (Director).
c. Any cheque, instructions, statement or other negotiable instrument signed JOINTLY by
the two directors should be honoured

DATED THIS …………….. DAY OF ………………. 2022

………………………………….. …………………………
Esi Handwash Edusei Lockdown
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

CAPITAL MARKETS

The Capital Market

Capital markets are financial markets that bring buyers and sellers together to trade stocks, bonds,
currencies, and other financial assets.
Financial capital is raised through capital markets, and this is mainly by selling bonds, which are
like loans that the business will repay at a later date with interest, or by selling stocks, which are
sold in exchange for the partial ownership of the business.
A company needs capital for various purposes, including incorporation and undertaking business
operations. Companies require capital to undertake their various operations.
Company law provides various means by which a company may raise capital. The method and
procedure used to raise capital is determined by whether the company is a private or public
company, the preference of the Directors, the financial market situation, etc.
The capital must be raised on terms that are acceptable, cheap and quick.

Raising Capital
This is simply the process a company goes through in order to raise money.
A company may raise capital through either equity financing or debt financing.
Debt capital comes in the form of loans or issues of corporate bonds/debentures. Funding by means
of debt capital happens when a company borrows money and agrees to pay it back to the lender at
a later date.
Equity capital comes in the form of cash in exchange for company ownership, usually through
stocks. Equity capital is generated through the sale of shares of a company, rather than through
borrowing.
Thus, a company may raise capital through:
1) Issuing shares in exchange for cash or payment in kind; or
2) Transfer from reserves to stated capital; or
3) Debt, which may take the form of debentures (bonds) or bank loans.
These are considered below:
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Raising Capital through equity shares (Issuing Shares)

Equity capital is the capital a company raises through the issue of its shares.
When companies raise capital through equity, it goes to form part of their stated capital. Thus, the
capital received by a company through the issuance of its shares goes into the stated capital of the
company.
Section 68 of Act 992 defines stated capital as;
a) the total proceeds of every issue of shares for cash, including the amounts paid on calls
made on shares issued with an unpaid liability, without deductions for expenses or
commissions;
b) the total value of the consideration, as stated in the agreement, received for every issue of
shares otherwise than for cash; and
c) the total amount which the company by special resolution resolves to transfer to stated
capital from surplus, as defined in section 70 including the credit balance on the share deals
account referred to in section 65.
Essentially, stated capital is the amount of consideration received by the company on the issue of
shares, plus whatever amount the company resolves to transfer from its reserves to stated capital. Commented [JE71]:
Note that the proceeds/value of consideration received on the
There are several ways of raising equity capital: re-issue of treasury shares is not added to the stated capital.

Invitation to the public

This is a direct offer made to the public for the public to acquire shares or other financial
instruments such as bonds in the company to the public in order to raise capital.
Offering shares to the public is often governed by Act 992, The Security Industry Act, 2016 (Act
929) and the Ghana Stock Exchange rules in the case of companies listed on the Stock Exchange.
This is reserved for public companies only. It is only public companies that may make a public
offer of shares. There are penalties for a private company that engages in invitation to the public. Commented [JE72]:
When there is a breach of this provision, the person who
Under Section 294, a person shall not make an invitation to the public; made the invitation and an officer of a body corporate who
made the invitation each commits an offence, and is liable on
(a) to acquire or dispose of any shares or debentures of a company, or summary conviction to a fine of 500 - 1000 penalty units (in
the case of a body corporate), and 500-1000 penalty units or
a term or imprisonment of 1-2 years, or both the fine and
(b) to deposit money with a company for a fixed period or payable at call, whether bearing or not imprisonment (in any other case).
bearing interest,
unless the company concerned is a public company and the appropriate provisions contained in
Part A of Chapter Four are duly complied with.
So, before an invitation to the public can be made, the following must be in place:
- The Company must be a public company
- The appropriate provisions in Part A of Chapter 4 must be complied with.
The question then is what constitutes an invitation to the public?
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Section 295 explains that an invitation is made to the public, if an offer or invitation to make an
offer is:
a) advertised or disseminated in the Republic by newspaper, broadcasting, cinematograph,
electronic communication or any other means;
b) made to or circulated among persons whether selected as members or debenture holders of
the company concerned or as clients of the persons making or circulating the invitation or
in any other manner;
c) made to one or more persons on the terms that the person or persons to 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
d) 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 a stock exchange subject to subsection
(5).
However, the law recognizes some exceptions, i.e. to say, there are situations in which a private
company would not be restricted from offering shares to the public, because these situations are
not considered as an invitation to the public.
For instance, a domestic concern where invitations are made to existing shareholders does not
constitute an invitation to the public. A domestic concern is generally understood to include
transactions, which are for all intents and purposes, targeted at the shareholders of the company.
Such an offer should not be renounceable and the shares should not be listed on any stock
exchange.
Additionally, an invitation made by a private company to its shareholders or employees is not
considered an invitation to the public, unless it is renounceable and the means by which the offer
is undertaken gives the appearance of a public offer.
Finally, by virtue of 294(2), a private company can make an invitation to the public to buy shares
by provision and under supervision of the court.
Invitation to the public will take the form of one or a combination of the following forms:
- An offer made directly by the company to the public, or an offer for subscription or direct
offer by prospectus
- an invitation directly made to the public to make an offer
- applications made by the public for shares
- offering shares through financial intermediaries , eg issuing houses, stock brokers or
investment bankers
The key transaction documents when making an invitation to the public are as follows:
1) The Prospectus
Every public invitation must be accompanied by a prospectus.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

The Prospectus is the main transaction document, which is issued by the Company in compliance
with Section 304 of Act 992 and the Securities and Exchange Commission Regulations, 2003
(LI 1728). It is the common means by which the company achieves its disclosure objectives.
The Prospectus is required to comply with the disclosure requirements under Schedule 7 of the
Companies Act and Schedule 5 of LI 1728. The Prospectus is usually prepared by the Lead
Manager for the offer and the Legal advisors. It is a document prepared by or on behalf of a
company, registered with the Registrar and distributed to every person to whom a public invitation
is made to acquire or disclose of any shares/securities.
Thus, the prospectus is a document providing the achievements of the company, the financial
health of the company and prospects of the company. The prospectus must be truthful and contain
a complete information about the company so that members of the public will have adequate
information on the company before they decide to purchase. Where there are misstatements in the
prospectus, it is a ground for piercing the veil of incorporation so that directors and members will
be directly liable.
2) Escrow Agreement: This is entered into between the Company, the Lead Manager and
the Escrow Bank for the purpose of holding the offer proceeds until the conclusion of the
offer.
3) Receiving Bank Agreements: This agreement is between the Company, the Lead
Manager and Receiving Banks governing the receipt of applications and offer proceeds.

4) Underwriting Agreements: This agreement will be used where a part or all the offer is
underwritten by another party.
There is also what is known as Offers for sale, which under Section 296, is considered as an
invitation to the public.
An offer for sale is used when the company is selling a very high number of shares such that the
company thinks it will be difficult to deal with persons. The company transfers its shares to a
financing house which has the responsibility of publishing the prospectus and looking for the
people to buy the shares. The financing house (issuing house) is only buying to re-sell and not to
become a shareholder. Where there are losses, the company will not be liable because it will be
born by the financing house. So an offer for sale will arise where a company allots its shares or
debentures to a person with the view that the person will be responsible for selling the shares. It is
both the company and issuing house that is issuing the shares; the rationale is that the Act imposes
the responsibility on the company of ensuring that the issuing house and itself comply with the
statutory requirements of issuing shares. The only liability they escape is the risk of loss where the
shares are not bought by the general public.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Rights Issue
A rights issue is an invitation to existing shareholders to purchase additional new shares in the
company. This refers to an issue of shares in compliance with the pre-emption rights of existing
shareholders, under Section 189 (1)(a). Commented [JE73]: A rights issue gives preferential
treatment to existing shareholders, where they are given the
So the company grants existing shareholders the right (not an obligation) to buy new shares. This right (not obligation) to purchase shares before non-
shareholders are given that option. The number of additional
means that all shareholders receive the shares in proportion to their existing holdings to avoid a shares that can be purchased by the shareholders is usually in
dilution. proportion to their existing shareholding.

In relation to companies listed on the Ghana Stock Exchange, a rights issue is always required to Commented [JE74]:
be renounceable. This means that a shareholder entitled to participate in the rights issue may sell Under Section 189(1)(a), the directors of a company with
or transfer the participation right to another shareholder or to third party who is not a shareholder. shares shall not, without the approval of an ordinary
resolution of the company, issue any new or unissued shares,
other than treasury shares, in the company unless the shares
Whenever there is a rights issue, there are certain key transaction documents involved, regarding have first been offered on the same terms and conditions to
the type of company; all the existing shareholders or to all the holders of the shares
of the class or classes being issued in proportion as nearly as
Public Companies Private Companies may be to their existing holdings.

Prospectus: Disclosure requirements are Private Companies do not issue prospectuses

usually limited and not as broad as an offer to for rights issues.
the public.
The Directors will typically issue allotment
Escrow Agreement: This is entered into letters to each shareholder requesting the
between the Company, the Lead Manager and shareholders to confirm their participation in
the Escrow Bank for the purpose of holding the rights issue.
the offer proceeds until the conclusion of the
offer.

Receiving Bank Agreements: This

agreement is between the Company, the Lead
Manager and Receiving Banks governing the
receipt of offer proceeds.

Underwriting Agreement: This agreement

will be used where another party underwrites
a part or the whole offer.

Private placement
This refers to the issuance of shares to a small group of usually high net worth or sophisticated
investors. So with private placement, shares are issued to a select group of persons/investors rather
than to the open market. Here, the shares are not necessarily offered to the direct public. The
method is also relatively cheaper as compared to an offer for subscription as there will be no
expensive road shows or advertisement.
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However, shares sold through placing may be offered at a discount which in the long run, may be
expensive for the company.
What usually happens is that the company takes its shares and places it in the hands of an
intermediary under a contract. Here, the intermediary will be buying the shares outrightly and bears
the ultimate risk of selling the shares. Where the intermediary is unable to purchase the shares,
they are deemed to still hold the shares.
With private placement, the company is not offering the shares to the public, but instead to a select
person/institution. This placement is usually done with financial institutions with ready clients
interested in buying the shares.
There are two types of placement;
a) Bought deal – Here, the intermediary/issuing house purchases all the shares directly from
the company, and assumes all risk if it is unable to sell the shares. If it is unable to sell the
shares, it cannot sell it back to the company.

b) Best endeavor deal – Here, the intermediary only acts as an agent of the company and
does not necessarily buy the shares. If the issuing house is unable to sell all the shares, it
can always resell back to the company. The issuing house , as agent, undertakes to use its
best endeavors to have its clients take up the company’s securities but it bears no risk of
remaining the holder of those securities if its clients do not take any or all of the issues.
Both private and public companies can raise capital through private placement. A key requirement
is that the pre-emption rights of existing shareholders under Section 189(1)(a) of Act 992 or under
any shareholders’ agreement should be waived.
A company may use this mechanism to raise equity capital relatively quickly and to avoid the
complexities of a public offer. It may also be used to attract investors for the purpose of creating
strategic alliances.
Companies usually prefer placement because companies would want to select their
investors/members/creditors, since with other methods, it is open to everyone. With placement,
they are able to offer their shares to a select few.
Again, it can be used by both private and public companies since it is not considered as an offer to
the general public. Commented [JE75]: There are certain restrictions when it
comes to offering shares to the general public regarding the
There are certain key transaction documents required when doing a private placement: type of company.

 Information Memorandum: The Company prepares an information memorandum

including a brief history, issued shares, stated capital, number of shares to be issued, the
amount of money required and what it is to be used for.

 Term Sheet: This is a document setting out the key terms of the investment between the
Company and the Investor. It is usually not intended to be binding except in relation to
specified clauses, for example, relating to exclusivity, confidentiality etc.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Share Subscription Agreement: This is to be signed between the investor and the
company. This sets out the key commercial terms of the investment or on which the
investor acquires the shares. The investor will usually require broad indemnities to cover
undisclosed potential risks.

 Shareholders Agreement: This is an Agreement entered into between the investor,

company and other shareholders of the Company. It is meant to supplement the Registered
Constitution in the governance of the company and will typically include;

- Board constitution;
- Proceedings of the Board
- Approval of specified reserved matters
- Meetings of Shareholders
- Share Transfer Restrictions
- Put Options Commented [JE76]: Put options in a shareholders
- Call Options agreement gives the owner of the rights, the ability to sell
an amount of the assets of the company at a set price at the
- Drag along provisions occurrence of a specified event. This is to protect the
interest of the investor.
Commented [JE77]: It allows a person the right to buy
Raising Capital by Transfer from reserves to Stated Capital the stock or shares at a certain price in the future. It can be
beneficial to the company or the right holder.
A company may raise capital by transfer from reserves to stated capital. This is an internal means Commented [JE78]: This is important when the investor
of raising capital. It refers to transactions involving the transfer of funds from the reserve to stated is seeking to buy the shares but there is a minority who do
capital. not want to sell their shares, it allows the minority to be
forced to sell their shares. This is to protect the interest of
majority shareholders when they want to sell their share
Sections 70 & 71 explains what the reserves of a company are. It is essentially an account in which
reserve profit is retained for the purpose of dividend payment.
Section 77 provides that on the recommendation of the directors, the members may by special
resolution, resolve to transfer from reserves directly to stated capital, without issuing shares.
The company may by the same or subsequent resolution, resolve on the recommendation of the
Board, that unissued shares be issued and credited as fully paid up to the members who would
have been entitled to dividends, had the amount been distributed by way of dividend.
This is known as capitalization issue.
This is used as a means of compensating shareholders for what they have lost for the transfer of
funds from reserve to stated capital, since these funds would have been available for dividend
distribution.
Essentially, the company may transfer capital from its reserves to its stated capital. Ordinarily, if
the company declares dividends, such amounts would be paid to shareholders out of the reserves.
Thus, in the instance where the company resolves to transfer from its reserves, it may further
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

resolve that the shareholders who were entitled to be paid dividends initially, be issued with shares
credited as fully paid up.

Raising Capital through debt

A company may raise loan capital by the issue of a debenture (bonds) or a series of debenture Commented [JE79]: Section 83 defines a debenture as a
stock. written acknowledge of indebtedness by a company, setting
out the terms and conditions of the loan.
A company may also borrow from banks and other financial institutions.
Essentially, debt capital may be raised in the following ways:
 Public offer of debt securities
This is the same as an invitation to the public under Sections 294 and 295 of Act 992, and
may only be undertaken by public companies, with the same restrictions and exemptions
applying to private companies. Commented [JE80]: Debt securities raised by invitations
to the public are regulated by the Securities Industry Act
The key documents involved are as follows: 2016, Act 929 and Act 992.

1) Prospectus: (This has the 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

3) Trust Deed: A trustee is appointed under a trust deed to act as an intermediary between
the Company and the debentureholders. The trustee monitors the Company’s compliance
with the terms of the debentures and holds any security on behalf of the debenture holders.
The appointment of a trustee is mandatory for debt securities listed on the Ghana Stock
Exchange

 Private placement
 Bank loan
Conversion Issue
There is also what is known as 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 Act 992 states that debentures may be issued on the terms that in lieu of redemption
or repayment the debentures may, at the option of the holder or the company, be converted into
shares in the company on the terms that are stated in the debentures.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

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.

Regulatory Issues
A security is an investment in a business. It is a financial instrument, typically any financial asset
that can be traded.
Companies create 2 kinds of securities; i.e. bonds (representing debt), and stocks/shares
(representing ownership or equity interest in their operations)
The Securities and Exchange Commission (SEC) is the regulator of the securities industry. It is
set up the under the Securities Industry Act, 2016 (Act 929)
The SEC has the following core functions:
- To advise the Minister of Finance on matters relating to the securities industry;
- To maintain surveillance over activities in securities to ensure orderly, fair and equitable
dealings in securities;
- To register, licence, authorise or regulate, stock exchanges, investment advisers, unit trust
schemes, mutual funds, securities dealers, central securities depositories, and their agents,
and to control and supervise their activities with a view to maintaining proper standards of
conduct and acceptable practices in the securities business;
- To formulate principles for the guidance of the industry;
- To monitor the solvency of licence holders and take measures to protect the interest of
customers where the solvency of the licence holder is in doubt;
- To protect the integrity of the securities market against abuses arising from the practice of
insider trading;
- To adopt measures to minimise and supervise conflict of interests that may arise for
dealers;
- To review, approve and regulate takeovers, mergers, acquisitions and any form of business
combinations in accordance with the law or code of practice requiring it to do so;
- To create the necessary atmosphere for the orderly growth and development of the capital
market;
- To perform the functions referred to in section 308 of the Companies Act, 2019 (Act 992);
- Examine and approve invitations to the public; and
- To undertake any other activities that are necessary or expedient for giving full effect to
the SEC Act.
A key requirement for invitations to the public is that the contents of the Prospectus should comply
with the disclosure requirements under Schedule 5 of the Securities and Exchange Commission
Regulations, 2003 ( LI 1728).
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Regulation 50 also requires companies undertaking public offers to comply with the requirements
under the Companies Act. This means that the disclosures in the Prospectus should also comply
with Schedule 7 of the Companies Act.
Every company undertaking an invitation to the public is required to submit its Prospectus to the
SEC for review and approval before commencing the invitation.

Distinction between general and restricted invitation

There is a distinction between a general and a restricted invitation.
An invitation to the public is considered as a restricted invitation if:
a) an invitation by a company in respect of shares or debentures of that company or any of its
associated companies is made solely to the existing shareholders or debenture holders of that
company; or
b) an invitation by a company is in respect of shares or debentures of that company which are in
all respects, uniform with shares or debentures of that company previously issued and for the time
being dealt in on an approved stock exchange.
A Prospectus issued by a company in respect a restricted invitation is not required to contain all
the disclosures required under Schedule 7 of the Companies Act.
An invitation not falling within the parameters of a restricted invitation is considered as a general
invitation and any Prospectus issued in respect of the invitation is required to fully comply with
the disclosure requirements under Schedule 7 of the Companies Act.
The distinction between a general invitation and a restricted invitation is also reflected in
Regulation 51(2) of LI 1728 which provides that a Prospectus or offer document issued in
connection with, or in respect of an offer or invitation to existing shareholders of a company to
acquire additional shares, need not contain all the disclosure requirements under Schedule 5 of LI
1728.
All that is required is that it should contain such information as the SEC considers necessary for
shareholders to make an informed decision about the offer.

Experts Consent
Under Section 307, where a Prospectus includes a statement purported to be made by an expert,
the expert should have given his consent to the inclusion of the statement in the Prospectus in the
form and context which is included in the Prospectus.
An expert includes an engineer, a valuer, an accountant, an assayer, and any other person whose
profession or calling gives authority to a statement by that person.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

Void subscriptions
Every offer to the public is required to include a statement by the directors indicating the minimum
amount to be raised by the offer. If the minimum amount is not raised, the directors are required
to refund all monies raised to the subscribers. The subscriptions are required to be repaid within 8
days after the close of the offer. If the subscriptions are not repaid within the prescribed period,
interest of 5% per annum is chargeable. The directors of the company are jointly and severally
liable to repay that money with interest under Section 312.
Private Placement of Securities
Private placements are usually not subject to SEC approval, since the SEC’s jurisdiction is targeted
at protecting the public in relation to offer of securities to the public. Private placements are
generally for the benefit of high net worth individuals and sophisticated institutional investors.
High net worth individuals and sophisticated investors are generally understood to have the
resources to protect themselves in relation to offer of securities.
Liabilities for misstatements in the Prospectus
 Civil liability
Under Section 313, there is a civil remedy for mis-statements and omissions in a prospectus. ‘
If a prospectus is published in connection with a general or restricted invitation to the public in
respect of shares or debentures of a public company, and it contains an untrue statement or omits
to state any of the particulars or to set out any of the reports which it is required to state or set out,
then a liability is imposed on certain persons to pay compensation to the persons who who acquire Commented [JE81]: This includes:
or dispose of the shares or debentures on the faith of the prospectus for the loss they may have - A person making the invitation to which the prospectus
relates;
sustained by reason of the untrue statement or omission.
- A person who was a director of a body corporate making
Such persons may however escape liability in some situations set out under Section 313(3). the invitation at the time when the prospectus was
published;
 Recission
- A person who, pursuant to section 307 has consented to
Under Section 314, where a person acquires shares or debentures of a public company from that the publication of the prospectus containing a statement
company, or disposes of shares or debentures of a public company to that company, as a result of by that person as an expert
an untrue statement of a material fact made, whether innocently or fraudulently, in a prospectus - Where the invitation was made by the company to
published in connection with an invitation to the public made by or on behalf of that company, that whose shares or debentures the invitation relates, (i) a
person is entitled to rescind the acquisition or disposition of the shares or debentures. person who has personally authorised to be named and is
named in the prospectus as a director or as having agreed
A person is not entitled to rescind however if after discovery of the untrue statement made, he did to become a director, immediately or after an interval of
time; or (ii) a promoter of the company who was a party
not act timeously. to the preparation of the prospectus;

 Criminal liability
Under Section 318, where a prospectus, an advertisement or a circular, published in relation to an
invitation to the public to acquire or dispose of shares or debentures of a company or to deposit
money with a company, contains an untrue statement or omits to state any matter it is requires to
state, then a person who authorised the publication of the prospectus, advertisement or circular
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

commits an offence and is liable on summary conviction to a fine of at least 500 -1,000 penalty
units, or to a term of imprisonment of at least 1-2 years, or to both the fine and imprisonment.
In the case of a body corporate, the punishment is a fine of at least 500 – 1,000 penalty units.
Such criminal liability may be avoided if that person proves that the untrue or omitted statement
was immaterial or that, that person had reasonable grounds to believe and did believe, up to the
time of publication of the prospectus that, the statement was true.

RAISING CAPITAL - PROCESS/PROCEDURE & RESOLUTIONS FOR INCREASING

STATED CAPITAL OF A COMPANY

This is a Drafting segment.

Companies need money to survive and therefore need to raise capital. As we have discussed,
raising capital can be done in 3 ways:
1) Through Equity, i.e. issuing shares in exchange for cash or payment in kind
2) Transfer from Reserves/Surplus to Stated Capital
3) Debt, i.e. in the form of debentures or loans
Under the first two methods, (which is the focus here), the amount raised goes to form part of the
stated capital of the company.
Under Section 68, the stated capital of a company comprises of the total value of consideration
received from the issue of shares, whether in cash or in kind, + whatever amount that the
company resolves to transfer from its Reserves to stated capital.

Procedure for increasing stated capital through the issuance of new (equity) shares
If the company is raising capital through the issuance of shares, the following must be taken into
account;
1) Does the company have authorized shares?
Determine whether the company has exhausted its authorized shares. Commented [JE82]:
Authorized shares are the legally allowed maximum number
Where the company has enough authorized shares, no question comes up. (Move to step 3) of shares that a company can issue to investors.

However, where the company has exhausted its authorized shares, the Board of Directors must If a company’s authorized shares are exhausted, it has no
shares that it can issue out.
pass a Resolution to recommend to shareholders to increase the authorized shares of the
company, in order to enable the company increase its stated capital.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

This is achieved by the company altering or amending its Constitution by special resolution of
the members, pursuant to Sections 30 and 59 of Act 992.

2) Amending Constitution to increase authorized shares

So the Company’s constitution would need to be amended in order to increase the number of
authorized shares.
The Shareholders/Members on their part, would approve by way of special resolution for the
Constitution to be amended to increase the authorized shares.

3) Pre-emption Rights
Having increased the authorized shares of the Company (if need be), the Directors must seek the
approval of the Members, by ordinary resolution, pursuant to Section 189 of Act 992, to issue
new shares. Commented [JE83]:
This is the case where the person whom the shares are being
Shareholders shall then waive their pre-emption rights. issued to is NOT an existing shareholder, and as such the
pre-emption rights of the existing shareholders must be
However, if the person receiving the issue of shares is an existing shareholder, the Directors upheld.

need not seek approval of the Members. So the Directors would seek the approval of the
shareholders, who would waive their pre-emption rights by
passing an ordinary resolution.

4) Authorization
Shareholders will then by ordinary resolution, approve/authorize the Directors to proceed to
accept the investment and in return, issue the shares commensurate with the value of the
investment.
Note that due diligence must be carried out when the consideration for the shares to be issued is
proposed to be made in kind. (Does the person actually have title to the property he intends to
use as consideration?)

EXAMPLE:
FJ Ltd, a foreign company involved in IT solutions, registered by the GIPC with equity
participation of 2 persons, a Ghanaian and a Lebanese, has a stated capital of $500,000. The
shareholding structure between them is 60-40 in favour of the Lebanese, which exhausted the
authorized shares of the Company.
The Company wants to go into trading after another person, an Indian, has expressed interest in
investing in the company as a shareholder. The Indian brings on board machinery for packaging
valued at about $1,000,000.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

The Shareholding structure agreed upon is as follows:

Ghanaian – 20%
Lebanese – 30%
Indian – 50%
The need to raise the stated capital of FJ Limited has therefore arisen.
Required:
a) Advise the board on the process for increasing the stated capital of the company
Considering the fact that the company has exhausted all its authorized shares, the board must do
the following in order to increase the stated capital;
• First and foremost, the Directors must by a board resolution or a written resolution, recommend
to shareholders to increase the authorized shares to enable the company increase the stated
capital. This can be achieved by the company amending or altering its Constitution by a special
resolution of members pursuant to Section 30 and 59 of the Companies Act, 2019 (Act 992).
• Shareholders on their part shall approve by a special resolution to increase the authorized
shares to enable the company increase its stated capital.
• Having increased its authorized shares, the Directors must seek the approval of members, by
ordinary resolution, pursuant to Section 189 of Act 992 to issue new shares of no-par value to
the Indian investor as consideration for the $1,000,000 million capital investment. The price of
the shares shall be a subject of negotiation between the parties
• Shareholders shall waive their pre-emption right by an ordinary resolution.
• Shareholders shall by ordinary resolution approve or authorize the Directors to proceed to
accept the $1,000,000 capital investment and in return issue him with shares commensurate with
the value of the investment.

b) Draft the relevant written resolutions

Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

WRITTEN RESOLUTION OF THE BOARD OF DIRECTORS FJ LTD PURSUANT TO

SECTION 188(2)(J) OF THE COMPANIES ACT, 2019 (ACT 992).
We the undersigned being directors of FJ Ltd, having noted that:
a. The company has exhausted all its authorized shares.
b. The company wants to go into trading, after another person, an Indian has expressed interest in
investing in the company as a shareholder.
IT IS HEREBY RESOLVED THAT;
1. A recommendation be and is hereby made to shareholders to alter or amend the company’s
constitution to increase the authorized shares.
2. A recommendation be and is hereby made to shareholders to increase the company’s stated
capital from USD500,000 to USD1.5 million by issuing new shares of no-par value to the Indian
investor in exchange for the USD1 million capital investment as consideration for the shares.

DATED IN ACCRA THIS 21ST DAY OF SEPTEMBER, 2020

SIGNED BY;
………………………. ………………………
DIRECTOR DIRECTOR

WRITTEN RESOLUTION OF THE SHAREHOLDERS OF FJ LTD PURSUANT TO

SECTION 163 OF THE COMPANIES ACT, 2019 (ACT 992).
Following the recommendation of the Board of Director to increase the authorized shares of the
company and further issue new shares to the Indian investor with a view to increasing the stated
capital of the company,
IT IS HEREBY RESOLVED THAT;
Special Resolution
1. Directors be and are hereby authorized to increase the authorized shares of the company from
500,000 ordinary shares to 2,000,000 ordinary shares of no-par value by amending the
constitution.
Ordinary Resolution
2. The pre-emptive rights to which shareholders are entitled to under section 189 of the
Companies Act, 2019 (Act 992) and the Constitution of the company be and are hereby waived.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

3. Directors be and are hereby authorized to increase the company’s stated capital from
USD500,000 to USD1.5 million by issuing one million (1,000,000) unissued ordinary shares of
no-par value to the Indian investor in exchange for the USD1 million capital investment as
consideration for the shares.
DATED IN ACCRA THIS 21ST DAY OF SEPTEMBER, 2020
SIGNED BY;
………………………. ………………………
SHAREHOLDER SHAREHOLDER
(Ghanaian) (Lebanese)

c) Specify the statutory forms which should be completed and filed with the Registrar
of Companies.

- Form 6 – Particulars of Contract Relating to Shares [Allotted as Fully or Partly Paid up

Otherwise than in Cash]
- Form 7 – return of issue of shares
- Form 8 – particulars of alteration in the stated capital of the company
There are some Statutory forms that are required to be completed and filed with the Registrar.
Whenever payment for shares is made in kind, and not in cash, Form 6 must be filed.
When new shares are issued, Form 7 must be filed.
Where the stated capital of the Company has been altered, Form 8 must be filed.

Procedure for increasing stated capital by transfer from reserves to stated capital
Section 77 provides that on the recommendation of the directors, the members may by special
resolution, resolve to transfer from reserves directly to stated capital, without issuing shares.
The process is as follows:
 The Directors would have to make a recommendation (by way of resolution) to the
Shareholders to increase the company’s stated capital by transfer from reserves to stated
capital.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

 Shareholders on their part, would approve by way of special resolution, for a transfer to
be made from reserves to stated capital.

 The Directors may also recommend, and the Shareholders may also approve, that
unissued shares be issued and credited as fully paid up to the members who would have
been entitled to dividends, had the amount been distributed by way of dividend. Commented [JE84]:
“THAT EXISTING SHAREHOLDERS BE AND ARE HEREBY
CREDITED WITH FULLY PAID UP SHARES IN PROPORTION AS
NEARLY AS MAY BE TO THEIR EXISTING SHAREHOLDING”
EXAMPLE:
You are the Company Secretary of Best Insurance Limited, an insurance company. The current
shareholding of the company is as follows:
- Mrs. Daisy Lamptey – 60%
- Mr. Yaw Frimpong – 30%
- Lawyer Eric Asiedu – 8%
- Mr. Foster Gidi – 2%
The current stated capital of Best Insurance is Ghc10 Million. The National Insurance
Commission , the Regulator, has issued a directive that with immediate effect, all insurance
companies should have a new stated capital of Ghc50 Million.
The Company intends to comply with the directives of the Regulator by increasing its stated
capital from Ghc10 Million to Ghc50 Million as follows:
a) Office Building from Mrs. Daisy Lamptey – Ghc30 Million
b) Transfer from reserves to Stated Capital – Ghc10 Million
Required:
Advice the Board on the process for increasing the stated capital of the company and draft the
relevant written resolutions.
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WRITTEN RESOLUTION OF THE BOARD OF DIRECTORS OF BEST INSURANCE

LIMITED PURSUANT TO SECTION 188(2)(J) OF THE COMPANIES ACT, 2019 (ACT
992).
Following the directive of the National Insurance Commission that all insurance companies
should have a new stated capital of 50 Million Ghana Cedis (GHS50,000,000),
IT IS HEREBY RESOLVED
1. That a recommendation be and is hereby made to the Shareholders of the Company to transfer
an amount of 10 Million Ghana Cedis (GHS10,000,000) from the Company’s Reserves to its
Stated Capital.
2. That a recommendation be and is hereby made to the Shareholders of the Company to approve
the increase of the stated capital of the Company through the issuance of Thirty million
(30,000,000) new and unissued shares at GHS1 per share to Mrs Daisy Lamptey in consideration
of an Office building valued at Thirty Million Ghana Cedis (GHS30,000,000).
DATED IN ACCRA THIS 21ST DAY OF SEPTEMBER, 2020
SIGNED BY;
………………………. ………………………
DIRECTOR DIRECTOR
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WRITTEN RESOLUTION OF THE SHAREHOLDERS OF FJ LTD PURSUANT TO

SECTION 163 OF THE COMPANIES ACT, 2019 (ACT 992).
Following the recommendation of the Board of Directors and the Directive of the National
Insurance Commission that all insurance companies should have a new stated capital of 50
Million Ghana Cedis (GHS50,000,000);

IT IS HEREBY RESOLVED THAT:

1. In order to increase the stated capital from 10 Million Ghana Cedis (GHS10,000,000) to
50 Million Ghana Cedis (GHS50,000,000),

a) The Board of Directors be and is hereby mandated to accept the office building from Mrs.
Daisy Lamptey valued at 30 Million Ghana Cedis (GHS30,000,000) as consideration for
30 Million equity shares at One Ghana Cedis per share (GHS 1.00 a share)

b) 10 Million Ghana Cedis (GHS 10,000,000) be and is hereby transferred from surplus to
stated capital.

DATED IN ACCRA THIS 21ST DAY OF SEPTEMBER, 2020

SIGNED BY:
…………………….. ……………………..
Mrs. Daisy Lamptey Mr. Yaw Frimpong
SHAREHOLDER SHAREHOLDER

…………………….. …………………….
Lawyer Eric Asiedu Mr. Foster Gidi
SHAREHOLDER SHAREHOLDER
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COMMERIAL AGREEMENTS

Introduction to Commercial Agreements

The work of a lawyer is not entirely centered on litigation. Part of the lawyer’s work is
transactional, that is to say lawyers also focus on helping individual clients and businesses with all
different types of transactions in their business dealings, like mergers, sales and acquisitions. This
means they help with contracts and agreements when it comes to business transactions, among
other things.
Thus, the transactional part of a lawyer’s work involves planning and drafting documents to
achieve the client’s goals while minimizing the risk of future conflict, unlike the litigation aspect
which deals with protecting clients already in conflict.
Often, parties come together and agree to trade or do business with each other, and lawyers turn
their agreement into a contract. This is generally described as commercial agreements.
Commercial contracts define and regulate business relationships.
In the simplest terms, a commercial contract is a legally binding agreement between two or more
parties, typically regarding a business arrangement. The contract lays out the terms and conditions
of the transaction or relationship, and explain, in detail, what all parties are obligated to do in order
for the contract to remain valid, and what the repercussions are should any party fail to comply
with the agreed upon terms and conditions.
Most of the time, commercial contracts come in the form of written documents, but they can also
be verbal agreements in certain situations.
Commercial agreements cover a wide range of agreements that a business may choose to enter
into. Common examples of commercial agreements include:
- Employment contracts;
- Share agreements;
- Loan agreements;
- Partnership agreements;
- Franchising agreements;
- Joint Venture agreements;
- Sale/Purchase of a business; and
- Contract for the sale of goods and services.

Pre-Contractual processes
When negotiating a deal, it is common for parties to execute pre-contractual documents outlining
the principal terms and the general key commercial terms of the proposed transaction.
Compiled by: Jojo K.S. Bentsi-Enchill 2021/2022

So before entering into a binding agreement, parties would usually first negotiate the deal
framework and put it together in a non-binding document.
The deal framework document must set out they key commercial elements for the definitive/main
agreement. The lawyer’s job at this stage is to clearly memorialize what the parties intend for each
other.
The deal framework document could be any of the following:
1) Letter of Intent (LOI)
2) Heads of Agreement (HOA)
3) Term Sheet (TS)
4) Memorandum of Understanding (MOU)
5) Heads of Terms (HoTs)
6) Comfort Letter (CL) or Letter of Comfort (LOC)
7) Letter of Agreement or Agreement Letter

Such documents are not intended to be binding, unless expressly provided in any particular case
that it is binding. Often, these pre-contractual documents provide that they are "non-binding" and
that the deal is subject to, for example, due diligence and the execution of definitive agreements.
It is always important to state whether a pre-contractual document is binding, not binding or subject
to contract. If it is binding, it is advisable to have some boilerplate terms to provide stability and
certainty.

Negotiating the Definitive (Commercial) Agreement

The negotiation process can take a few days, to a few weeks or months even.
What usually happens is that one of the parties will first draft the definitive agreement, based on
the pre-contractual document (if any).
This first draft, and the other party’s initial observations form the basis for the negotiation of the
terms of a binding agreement.
Most often, the ‘business issues’ would be handled and negotiated by the parties directly, i.e.
things concerning price, quantity, delivery schedule, etc. Once these are resolved, the lawyers draw
up the contract and focus on the ‘legal issues’ surrounding the commercial agreement. This boils
down to things such as negotiating the allocation of risks of the transaction and expanding
opportunity for the client. “What will the parties do? – How do they perform their obligations and
what will happen if they don’t?”.
The key elements of a commercial agreement include the following:
1. Date of the Agreement
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2. Description of the Parties (names, legal status and addresses, including place of
incorporation in the case of a body corporate)

3. Recitals (Recitals set the background and help give some context to the transaction. They
set out the background facts and purpose of the agreement)

4. Main Provisions/Operative Provisions

- Definitions
- Conditions precedent (if any)
- Main commercial obligations (eg. provision of services, manufacturing of product, supply
of goods, price payment terms, etc)
- Secondary commercial issues (risk, possession of property and retention of title,
intellectual property, confidentiality, term, breach, termination, warranties and liability)

5. Miscellaneous
- Boilerplate clauses
- Governing law and jurisdiction
- Notices
- Assignment
- Interpretation
- Amendment, etc

6. Schedules or Appendices
7. Signatures
When drafting a commercial agreement, it is advisable to find out if there is any developed
template for such an arrangement. Note however, that the template must be used as a guide only
since every deal is different.
It is also important to research and read caselaw and practice notes on the commercial area before
negotiating and drafting.

Boilerplate clauses in Commercial Agreements

Boilerplate clauses, also known as standard, miscellaneous, or general clauses, are located at the
end of most corporate legal documents. However, they should not be mistaken as unimportant and
parties should pay as much attention to them as they do to the main clauses of the Agreement.
While perhaps not as commercially sensitive as other terms in a contract and consequently often
overlooked, boilerplate clauses nevertheless perform a valuable and useful purpose in a contract.
Boilerplate clauses in commercial contracts are provisions which do not necessarily form part of
the commercial deal, but which are necessary or standard to include, in order to provide some form
of protection for a party, to explain certain processes or procedures which may arise pursuant to
the contract or commercial relationship or to set out the legal situation.
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These provisions address a range of things such as what happens if a document is declared
unenforceable, how disputes will be resolved, which laws govern the contract, and more.
Generally, subject to statutory restrictions and illegality, the parties to a contract are free to define
their contractual relationship between each other. By including boilerplate clauses, the parties to a
contract can better define the relationship between themselves, which provides certainty if terms
in the contract are ever disputed. Omitting such boilerplate clauses may create uncertainty and
expose certain elements of the relationship or agreement between the parties open to interpretation
in a court of law, which is often an expensive and unpredictable exercise.
NB: The term boilerplate suggests standardized provisions that can be used in all circumstances.
But they cannot. You will regularly find key business issues hidden in these provisions, and they
will get you into trouble if you do not redraft them. By learning the business and legal implications
of the general provisions, you will know when and how to modify them.
Some common boilerplate clauses are outlined below:
 Entire Agreement Clause
Entire agreement clauses provide that the contract in question constitutes the entire agreement
and understanding between the parties with regard to the subject matter of the contract.
By having an entire agreement clause, the contract will supersede any previous agreements
and understandings between the parties, and therefore avoids the risk of any agreement made
orally or in writing prior to the execution of the written contract being interpreted as being part
of the legal contract between the parties. The clause therefore ensures clear legal relations
between the parties and clarity on the exact terms agreed. Conversely, when entering into a
contract which contains an entire agreement clause, care must be taken that the terms of any
previous understandings or agreements are reflected in the final written contract.
 No representation/no reliance clause
Under Common law as well as Ghana law, pre-contractual misrepresentations, and reliance on
such misrepresentations by another party may have significant adverse consequences for the
contracting party who made such misrepresentations. “No representation” and “no reliance”
clauses are used to avoid the risks of a claim for misrepresentation being brought by one of the
parties to the contract.
The purpose of a no representation and no reliance clause is to provide that the parties have
not made any pre-contractual representations and, even if they have, that neither party has
relied on any representation made by the other that is not set out in the contract itself.
This clause provides protection against pre-contractual representations but does not guard
against representations contained within the contract that are untrue and parties should take
care to ensure that they do not misrepresent facts within the contract.
 No Waiver clause
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A breach of contract will often give the non-defaulting party the right to terminate the contract,
whether under the express terms of the agreement or under general contract law. The non-
defaulting party does not have to exercise its right of termination immediately on learning of
such breach, as it is entitled to some time to consider its options.
However, if the non-defaulting party does nothing for too long a period of time, there is a risk
that it will be treated as having affirmed the contract. More significantly, a right to terminate
will be lost by the non-defaulting party doing something that is inconsistent with termination.
A waiver of a right to terminate a contract requires: (a) knowledge of the facts giving rise to
the right to terminate; and (b) clear and unequivocal notice to the other, whether by words or
conduct, of the waiver of an election to terminate.
No waiver clauses generally provide that a failure or delay in exercising a right will not
constitute a waiver of that right and thus aim to preserve termination (and other) rights and can
avoid inconsistent acts constituting a waiver of a contractual right of termination.
Of course, these have no application where the contract sets out the steps a party must take
(and by when) in order to terminate the contract and the non-defaulting party has not followed
such steps.
 Severance clause
At times, certain clauses of a contract may be held void or unenforceable due to illegality,
invalidity, or unenforceability. This may occur for example by a change in regulatory laws
after a contract is signed which make certain obligations set out in such contract illegal to
perform, or if a restrictive covenant in an employment agreement is considered to be too broad.
Without a severance clause, a void clause may cause the entire contract to become void. A
severance clause provides that, instead of the entire contract terminating or becoming void,
only the offending clauses will be void or unenforceable and the rest of the contract will remain
intact.
There are limitations as to what a severance clause can achieve and at times a contract may not
avoid being found to be void or unenforceable despite the existence of such clause, because
the void terms are so fundamental to the contract that the contract has no meaning without such
provisions.
Care should therefore be taken to ensure all key terms of the contract are legal and fully
enforceable, whether or not such contract incorporates a severance clause.
 Counterparts clause
Signing in counterparts is when a party signs a separate physical copy of a document to the
physical copy signed by the other party (or parties) to the contract. This is in contrast to where
the same physical document is signed by all parties.
This method is commonly used where documents are signed electronically and has advantages
in terms of logistics and timing on complex cross-border contracts. Another advantage of this
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method is that the parties are able to sign the documents in advance and release the signed
documents simultaneously to make the contract effective.
Execution in counterparts however requires a counterparts clause to ensure that executing
documents in this fashion is sufficient to create a binding contract between the parties. A
counterparts clause should therefore be included in a contract if execution by counterparts is a
possibility.
 Third party rights
The Contracts Act, 1960 (Act 25) gives a person who is not a party to a contract a right to
enforce a term of a contract (including relying on a disclaimer) if:
(i) the contract expressly provides for it; or
(ii) a term purports to confer a benefit on the third party, unless on a proper construction
of the contract it appears that the parties did not intend the term to be enforceable by
the third party.
Since there is a risk that such rights may be conferred implicitly, contrary to the intentions of
the parties named in the contract, a clause excluding this right is often included in the contracts.
A clause excluding third party rights may also be modified to suit the parties' agreement. It is
for example, possible for the clause to grant specific rights to a third party, while excluding all
other rights of third parties.
 Governing Law
This clause identifies which substantive laws will govern the interpretation of the agreement
and any disputes and claims under it. Sometimes referred to as an ‘applicable law’ clause, this
will be most relevant where there is a cross-border element to a dispute. In such a case there
are two issues:
1) Which country’s laws should apply?
2) In which country should the claim be brought? (This is a separate consideration from that
of the governing law and is concerned with jurisdiction)
Generally, the parties are free to choose an applicable law. Governing law clauses can be
drafted to cover both contractual and non-contractual disputes.
Where the parties do not choose an applicable law, this will need to be determined if a cross
border dispute occurs. This can add considerable costs and delays to proceedings and cause
uncertainty.
 Jurisdiction clause
This Clause identifies which courts will have jurisdiction to hear disputes that arise in relation
to an agreement. It is distinct from a governing law clause. A jurisdiction clause specifies the
courts that are to apply the governing law when determining a dispute.
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The clause may confer exclusive or non-exclusive jurisdiction on specified courts. Exclusive
jurisdiction means only the specified courts may hear the dispute. Non-exclusive jurisdiction
means that other courts may be able to hear it.
It should be considered alongside a dispute resolution clause and any alternative dispute
resolution procedure (whether as an alternative to or as a condition precedent to litigation
through the courts). Generally, the parties have the freedom to choose which courts are to have
jurisdiction in relation to an agreement, subject to some restrictions.
Considerations when choosing a jurisdiction include:
1) The governing law
2) Nationality and domicile of the parties
3) Location of performance
4) Potential subject matter of dispute
5) Potential remedies to be sought
6) Enforcement of judgment
7) Quality of legal system
8) Convenience (language, speed, procedure, and costs)
9) Any tax implications

 Dispute resolution clause

This clause states how the parties will deal with disputes arising between them. Typically, this
clause will include obligations to use reasonable endeavours to resolve disputes, time-bound
internal escalation mechanisms and referral to alternative dispute resolution procedures before
resorting to litigation through the courts.
The purpose of this clause is to provide the parties with a mechanism to attempt to resolve
disputes as quickly and cost effectively as possible without the need to issue proceedings in
the courts or go to arbitration. A dispute resolution clause can take a number of different forms
(e.g., multi-tier, mediation, arbitration or a combination of these). The type of mechanism will
depend on the nature of the agreement and the needs of the parties.
A dispute resolution clause can provide the parties with a route to resolving disputes without
resorting to litigation. A governing law clause should also be considered and where litigation
might still be a possibility if the parties exhaust any dispute resolution procedure, a jurisdiction
clause will still be needed.
 Force majeure
This clause explains the consequences of a ‘force majeure’ event on the parties’ performance
obligations. A force majeure event will usually be defined with reference to an event which is
beyond the control of the parties and may be supplemented by a list of examples.
Typically, it relieves a party, to some extent, from fulfilling its obligations if it is impacted by
a force majeure event.
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Force majeure clauses can be drafted to:

- benefit one party only or for different parties to bear different risks
- excuse a party’s obligations in whole or in part
- suspend performance
- allow a right to terminate for a continued force majeure event

 Further assurance clause

This clause ensures that one or both parties to an agreement carry out all actions and execute
all documents required to give full effect to the agreement. This is a particularly useful clause
if it is known that there will be a number of steps to be taken following signature of the
agreement.
It is most relevant where the agreement envisages further formalities (for example, execution
or registration of additional documents). Consideration should be given to:
- allocation of costs for such actions
- whether the obligation is an absolute commitment or to use ‘reasonable endeavours’
- whether a power of attorney is to be incorporated into the obligation (in which case it will
need to be executed as a deed)

 Assignment clause
This clause usually sets out if, and to what extent, a party’s rights under an agreement can be
assigned, transferred, mortgaged, charged, or otherwise dealt with and if, and to what extent,
a party’s obligations under an agreement can be sub-contracted.
A party may freely assign its rights under an agreement unless such a right is personal, or it is
agreed otherwise. Generally, obligations under an agreement (the ‘burden’ of the contract)
cannot be assigned unless it is agreed otherwise, or permissible sub-contracting can be inferred
from the circumstances.
Subcontracting is the delegation by one party (the main contractor) of some or all of its
obligations under a contract between it and a customer to a third party (the subcontractor) for
performance by the subcontractor. There is no transfer of the contractor’s liability under the
main contract with its customer to the subcontractor. The contractor remains liable to the
customer under the main contract for the non-performance by the subcontractor. There will be
no privity of contract between a customer and subcontractor. Subcontracting is permissible
unless expressly excluded or the nature of the services to be provided are personal to (and can
only be provided by) the supplier.
Although a contractor is likely to want the freedom to subcontract, a customer may want to
restrict this. Consider including an assignment clause in an agreement:
1. Where it is appropriate to restrict or exclude a party’s ability to assign its rights or
subcontract its obligations
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2. To clarify the scope of a party’s ability to deal with its rights and obligations
Key considerations will be:
- whether the restriction binds all or only one party
- what dealings are permitted
- whether dealings are prohibited or subject to conditions and exceptions
- rights of third parties

 Confidentiality clause
With this clause, each (or one) party commits to keep the other party’s information
confidential. In most commercial situations, however, the parties will choose to expressly agree
the confidentiality obligations between the parties. This allows them to define the information
to be protected and reduces the risk of disputes as to whether certain information is confidential
in nature.
Additional protections such as indemnities, breach notifications and specific remedies can also
be included.
In conclusion, each boilerplate clause has a purpose and can achieve different results depending
on how it is drafted. It is therefore important that these clauses are reviewed by the lawyer in
conjunction with the operative terms to ensure that they reflect the final agreement between the
contracting parties.

Legal Opinion
Apart from drafting or reviewing documents in a commercial transaction, a lawyer in corporate
and commercial practice may be instructed by clients to undertake the following;;
- Writing of letters
- Writing of memorandum
- Writing of legal opinion on a given set of facts or legal issues
- Writing of legal opinion in relation to a loan transaction at the request of the lender

Legal Opinions are opinions from lawyers issued in letter form, expressing legal conclusions
and/or analysis about a transaction or matter, which is relied on by the recipient/addressee of the
opinion.
The main purposes of a legal opinion are:
1) To inform the addressee of the legal effect of a transaction or matter
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For example, in a cross-border transaction, lawyers in a foreign jurisdiction may give an

opinion on whether a transaction document is valid and enforceable in that jurisdiction and
complies with local law (such as local registration or stamp duty requirements).
2) To identify legal risks that the addressee should consider further and evaluate (set out all
the things that can go wrong)

The need for an opinion may arise;

- In cross-border transactions involving foreign law, from foreign lawyers opining on
whether a transaction document is valid and enforceable in the foreign jurisdiction and
complies with foreign law;
- In finance transactions, on the conditions precedent in the transaction documents and other
standard matters; in share or bond subscription transactions. In public offers this is usually
published in the offer document.
It is important to note that a Legal Opinion is not Legal Advice. It is not a substitute for legal
advice which, in a transactional context, is likely to be more extensive.
However, the addressee of a legal opinion will be expected to and will actually rely on the accuracy
of the opinion for the purposes of evaluating the legal risks of the transaction. If the opinion
subsequently turns out to be inaccurate or misleading in any way, the addressee of the opinion may
be entitled to bring an action against the lawyer/law firm issuing the opinion in contract and/or in
tort.
Liability will depend on the wording of the opinion. That is why due diligence, assumptions and
qualifications are essential.
Where the addressee is a client, even without a legal opinion, Rule 35 of the Code of Ethics of
the Ghana Bar Association provides that it is a misconduct to:
1) Make any misrepresentation or to conceal material facts from the client with dishonest or
improper motives or
2) Give the client any opinion which is not honest and candid on the facts submitted by the
client
Where addressee is not a client, there is a clear duty of care to the addressee in tort.
The key features/content of a legal opinion are as follows:
o Addressee(s)

o Background information - an explanation of the relevant transaction/matter, including

detailed information about its parties, the subject and terms of the agreement, as well as
other crucial provisions of the document defining the transaction.
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o Disclosures - permitted disclosure by addressee/beneficiary to certain persons (such as

advisers) and disclosures required by law

o Documents reviewed

o Assumptions on which the opinion is made - a number of assumptions will be made in

the opinion, mainly about factual matters which the law firm cannot reasonably check. For
example that all signatures on the documents are authentic. These matters will be excluded
from the scope of the letter of opinion. The assumptions may vary based on the nature and
circumstances of the transaction

o Qualifications: The opinion may be qualified by certain reservations usually in respect of

the searches, limitations on enforcement, limitation of actions and recognition of choice of
foreign law and jurisdiction. These will limit the opinion when absolute assurance cannot
be given. They often relate to points of law such as the approach local courts would take
to enforcing the transaction documents.

o Capacity, power and authority

o Due execution of documents opined on

o Enforceable obligations to be assumed of any under the law

o Valid security interests: Confirmation that the security interest created have been duly
perfected.

o Stamping, registrations and filings

o Taxes: Confirmation of the taxes applicable to the transaction Governing law, jurisdiction
and enforcement
Good opinions are practical and written in plain language. They provide an executive summary
with a short clear answer. The details follow in the body of the opinion. When lawyers draft legal
opinions, they set out the facts, the relevant law, and then apply the law to the facts. They also
usually give you a list of decisions or actions you can take based on the legal opinion. Opinions
should be an objective analysis and not subjective.
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LENDING TRANSACTIONS

What is a lending transaction?

A lending transaction is simply the making of a loan of money by a lender to a borrower. This can
range from a small overdraft from a bank to a customer, to secured, syndicated facilities made to
make an acquisition of a multi-national group.
Lending transactions in Ghana are governed by various laws including:
- The Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930)
- The Borrowers and Lenders Act, 2008 (Act 773)
- The Non-Bank Financial Institutions Act, 2008 (Act774)
- The Companies Act, 2019 (Act 992)
- The Loans Act, 1970 (Act 335)
- The Central Securities Depository Act, 2007 (Act 733)
- Land Title Registration Act, 1986 (PNDCL 152)
- Mortgages Decree, 1972 (NRCD 96)
- Foreign Exchange Act, 2006 (Act 73)
- Stamp Duty Act, 2005 (Act 689)
It is the type of lending transaction and the terms of the agreement which determine which
particular legislation covers the transaction.
Thus, the parties in a lending transaction are:
1) Borrowers (this ranges from individuals to multinational corporations)

2) Lenders (Lenders can range from family members and connected companies or
shareholders to commercial banks, funds and central banks. Commercial lenders, however,
can broadly be divided into banks and institutional lenders)
With a lending transaction, parties would normally execute a financing agreement (loan
agreement). This is a document in which a lender sets out the terms and conditions under which
it is prepared to make a loan available to a borrower. It formalizes the loan process and details the
terms and schedule associated with repayment.
Financing agreements are generally governed by the Contracts Act, 1960 (Act 25) and applicable
principles of common law. There are 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 Commented [JE85]: A facility is essentially another name
interest rate payable, repayment provisions and dispute resolution clauses. for a loan taken out by a company

Loan facilities can broadly be divided into committed and uncommitted facilities.
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Where a facility is ‘committed’, it means that the lender is obliged to make the loan, provided the
conditions set out in the facility agreement are met.
Where a facility is uncommitted, it means that the lender is not obliged to make any loan and
(normally) can demand repayment at any time.
Types of loan facilities include:
 Overdraft
An overdraft is an uncommitted facility that is used to help solve short-term, day-to-day cash
flow issues.
The key features of an overdraft are that it:
- It is generally uncommitted, i.e. it can be withdrawn by the lender at any time
- It is repayable on demand, i.e. the lender can require that it is repaid immediately, even if
the borrower has not defaulted in any way
- It has interest payable on the amount overdrawn—interest is calculated at the close of each
business day and is based on the closing balance of the designated account
The lender will usually review the status of an overdraft facility at least once a year. Although
an overdraft facility is repayable on demand, in practice, an overdraft will not usually be called
in unless the lender is concerned about the financial condition or activities of the borrower.
 Revolving credit facility
A revolving credit facility is also used to assist with the day-to-day needs of the business.
However, unlike an overdraft, it is a committed facility. It allows the borrower to draw down,
repay and re-draw loans up to the maximum aggregate amount during the term of the facility.
The key features of a revolving credit facility are that:
- It is committed
- It allows the borrower to draw down, repay and re-draw loans up to the maximum aggregate
amount during the term of the facility, and
- It allows the borrower to select the length of an interest period and to fix the interest rate it
pays for that period

 Term loan
A term loan enables the borrower to borrow sums for a specified period of time, known as the
'term'. The purpose of the loan will influence the length of the term.
The key features of a term loan are that:
- It is typically a committed facility under which, once the facility agreement has been
executed and the relevant conditions precedent have been met, the lender will advance
funds to the borrower.
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- It is available for a fixed term and is repayable in line with an agreed repayment schedule—
it can only be repayable prematurely on an event of default or the occurrence of certain
other events.
- It cannot be re-drawn once it has been repaid by the borrower (unlike a revolving facility),
and,
- It may be made available in a range of pre-agreed currencies.

Secured & Unsecured Lending

Lending transactions may be secured or unsecured.
A lending transaction is secured where the lender or a third party creates an encumbrance over an Commented [JE86]: An encumbrance is a claim against a
asset or a legal right as a collateral for the obligations of the borrower. property by a party that is not the owner. An encumbrance
can affect the transferability of the property and restrict its
So a secured lending transaction is one in which the lender acquires a security free use.

interest in collateral owned by the borrower and is entitled to foreclose on or repossess the
collateral in the event of the borrower's default.
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.
Taking security gives the lender a proprietary interest in the borrower’s assets. This means that,
subject to a few exceptions, it will recover its money before unsecured creditors, should the
borrower become insolvent. Taking security also gives lenders other rights such as the right to sell
the asset to recover their money.
Security for a lending may also take the form of a guarantee.
Security for lending transactions may take any of the following forms, among others:
- A mortgage
- A fixed charge over an asset
- A floating charge over undertakings
- A security assignment
- A pledge of goods

Bilateral and Syndicated Lending

A loan transaction involving one lender is known as a bilateral loan.
Lending transactions are mostly bilateral, i.e. between a single lender and the borrower.
A syndicated loan is one in which two or more lenders (often many more lenders) join together to
provide funding to a borrower or group of borrowers. The lenders are together known as the
syndicate.
So under certain circumstances a lending transaction may be syndicated, and this means that the
transaction will be between a group of lenders and a single borrower.
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Bilateral loans are normally used for loans of relatively small amounts and where less complex
financing arrangements are required (eg; a simple overdraft or term loan). Where the borrower
requires a large loan, and particularly if the proposed finance is complex or risky, a single lender
may be unwilling or unable to advance the full amount required by the borrower. In these cases, a
syndicated loan may be a better option.
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.
Syndicated loan agreements, while looking very similar to bilateral loan agreements for the most
part, contain some additional provisions and variations to reflect the fact that there is more than
one lender.
Syndicated loans also require some additional parties. In addition to the borrower(s) and lenders,
there will be a mandated lead arranger to arrange the syndication and underwrite the loan, and a
facility agent to act as a postbox between the borrower and lenders.
If the syndicated loan is secured, there will be a security agent to hold the security on behalf of all
the lenders.
The lenders, or syndicate, together with the financial institutions holding these roles, are together
known as the finance parties.

The Lending Process

A typical loan transaction documentation will include the following:
- Term Sheet
- Loan/Facility Agreement
- Mortgage
- Directors joint and several guarantee (if required by the lender)
- A charge on the assets of the borrower
- Other documents, such as a legal opinion of the borrowers counsel, depending on the nature
of the lending transaction
The lending process is set out in a number of stages:
 Stage 1: Agreeing the Terms
The process starts with the parties agreeing the terms.
Most lending transactions commence with an application by the borrower for a credit facility from
the lender. The Lender will usually demand information regarding the borrower, its business and
the proposed utilisation of the loan to determine whether to grant the facility.
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Most lenders will take credit applications through a credit approval process. At the beginning of a
transaction, the lender and the borrower will enter into confidentiality arrangements. Information
will then be provided to the lender by the borrower so that the lender can analyse the risk of lending
to the borrower and obtain credit approval for the transaction.
The lender will perform due diligence on the borrower (including reviewing the accounts) and
consider the size and type of loan it is prepared to offer depending on its analysis. After the lender
has performed its due diligence, it will need to obtain internal credit approval to make the proposed
loan.
After the credit approval process, if the credit is approved, the borrower is usually provided with
a Term Sheet setting out the key terms of the credit facility.
Section 18 of the Borrowers and Lenders Act requires a lender to provide borrowers with a pre-
lending disclosure statement setting out all the key terms of the credit facility.
In syndicated transactions, the borrower will enter into a commitment or mandate letter with the
financial institution or institutions who are to lead the syndication process, setting out their role.
The term sheet will typically be annexed to the mandate letter. The borrower will accept the terms
by signing the mandate letter.
The Term Sheet is a document which records in writing, the principal terms on which the lender
proposes to lend to the Borrower.
It is drafted by the Lender after initial discussions with the Borrower. It focuses the mind of the
parties on the fundamental issues of the deal and sets the parameters for further negotiations. It
also provides an accurate summary of the main terms of the transaction when an arranger tries to
sell the deal to potential members of a syndicate of banks.
For lawyers, the term sheet serves as a fair guide for pricing the transaction and also gives an
outline for drafting the loan agreement.
The term sheet is usually not intended to be binding and will be stated expressly to be “subject to
contract”. The parties do not expect a material derogation from the broad outline of the Term
Sheet.
If the Borrower finds the terms of the proposed credit facility acceptable, the parties will proceed
to the formal documentation of the proposed transaction.

 Stage 2: Negotiating & Drafting

Most Lenders use standard legal documents/precedents for lending transactions. However, care
must be taken when using such precedents
Once the main terms have been agreed (in the term sheet), the parties will proceed to the key
documentation phase of the transaction. Documents that govern the relationship between the
lender(s) and borrower(s) are typically referred to as finance documents.
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The key finance documents include:

- A Loan/Facility Agreement: this sets out the terms on which the lender will make the loan
and is necessary for all lending transactions.

- Security documents—these will only be needed if the transaction is to be secured. The type
of security agreement to be drafted will be determined by the nature of the security
requested by the Lender.

- Guarantees—these will only be needed if the transaction is to be guaranteed. Where

guarantees are to be provided by group companies the guarantee will often be included in
the facility agreement.

- An intercreditor agreement, subordination deed or deed of priority—these regulate the

priority of debt and/or security so will only be required on certain transactions.

- Hedging arrangements—if the borrower wishes (or is required by the lender) to cover its
exposure to the risk of an adverse movement in a variable rate, for example, a floating
interest rate.

Typically, the lawyer for the Lender will make the first drafts of all these documents, except the
Hedging documentation.
The lawyer for the Borrower will then review the draft documents and provide comments. The
Lawyer for the Lender will revise the drafts if necessary. This process carries on until the parties
are agreed on the documents.
The Hedging documentation will usually be prepared by the hedging bank’s in-house lawyers. In
some cases, the lawyer for the Lender will be asked to review them.

 Stage 3: Fulfillment of condition precedents

After the execution of the transaction documents, the next key item is for the borrower to satisfy
all the conditions precedent for the disbursement of the credit facility.
The term ‘conditions precedent’ refers to the conditions the borrower must meet before it is
permitted to draw down the facility or facilities. In some transactions there may also be conditions
precedent to the facility agreement being signed.
The nature and scope of the conditions precedents will usually be determined by the nature of the
credit facility and its purpose, and vary from transaction to transaction. The conditions precedent
will usually cover the following:
i) Provision of certified copies of constitutional documents of the borrower;
ii) Provision of certified copies of the borrower’s corporate approvals;
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iii) Evidence that the borrower is in compliance with regulatory requirements relating to
its business and the borrowing; and
iv) Evidence that the security documents have been perfected i.e. duly stamped under the
Stamp Duty Act and registered at the appropriate public registry.
v) legal opinions—the vast majority of finance transactions include legal opinions as
conditions precedent either to funding or to signing of the finance documentation

 Stage 4: Signing and completion

Signing is the point at which the parties execute the agreed versions of the finance documents and
the deal becomes binding (albeit, in most cases, subject to certain conditions precedent being
satisfied).
If there are any other documents relevant to the transaction requiring signature, they may also be
signed at the same time (particularly if they involve the same signatories). The lender's lawyers
usually arrange the execution of the finance documents either through a signing meeting or a
virtual signing.
The borrower's lawyers might be required to assist with the execution of the finance documents by
their clients.
Completion is the point at which money moves between the parties and the transaction is
'completed'. In a simple corporate facility, this will involve money moving from the lender to the
borrower (or the client account of the borrower's lawyers). In other types of financing, such as
acquisition or asset financing, this will usually involve money moving from the lender(s) to the
borrower and then from the borrower (as purchaser) to the seller of the business or asset.
The lender's lawyers will conduct the final pre-completion searches and liaise with the lender about
the arrangements for the transfer of the completion funds. The lender's lawyers and the borrower's
lawyers may be required to enter into undertakings as part of those arrangements.
The lender's lawyers will sign off on the conditions precedent by issuing a conditions precedent
satisfaction letter.
There are two possibilities as to timing:
1) Signing and completion take place on the same day—in such cases, all the conditions
precedent to funding will need to be satisfied (or have been waived, i.e., the lender has
agreed in writing that they are not required) before signing and completion can take place

2) There is a gap between signing and completion—this allows the parties to commit to the
deal on signing but leave themselves time between signing and completion to satisfy any
outstanding conditions precedent to funding

 Stage 5: Post-completion processes

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There are various steps that may be required after completion of a loan transaction, some are legal
in nature and some are administrative.
The three key tasks are:
1) Satisfying any conditions subsequent—these are conditions that the lender requires to be
satisfied after (rather than before) funding

2) Dealing with original documents—the lender's lawyers will usually distribute the original
transaction documents to all the parties. They may also prepare electronic copies of the key
transaction documentation for distribution to the various parties

3) Dealing with any security registrations. (The completed and signed loan documentation,
especially the security documents, requires stamping under the Stamp Duty Act. The
security must also be registered)

Perfection of Transaction Documents

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 2 months of their creation, or where executed abroad, within 2 months after
they are first received in Ghana, in order 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 within 2 months after the execution of the instrument.
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.

Key Legal Issues

Does the borrower have the capacity to borrow?
This will be determined from a review of its Constitution, or in the case of a statutory corporation,
its establishment legislation. It is important to verify that the borrower’s Constitution does not limit
its capacity to enter into the financing transactions.
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In the case of statutory corporations, approval is required from the Minister of Finance under
Section 7 of the Loans Act for such entities to enter into financing transactions.
Where the borrower is the government, parliamentary approval is required under Article 181 of
the 1992 Constitution and the Public Financial Management Act before it can undertake the
borrowing.
Where the borrower is a regulated entity, for instance, in the case of banks and insurance
companies, it will be important to verify whether there are any regulatory restrictions affecting the
proposed transaction.

What corporate approvals are required for the transaction?

Usually a board resolution is adequate. Note however that under Section 189(1)(b) of Act 992,
the directors will require shareholders’ special resolution to pursue a major transaction.
By Section 145 of Act 992, a company is not to enter into a major transaction unless the transaction
is:
(a) approved by special resolution; or
(b) contingent on approval by special resolution

Does the purpose of the loan come within the authorised business of the borrower?
Under Section 18 of the Companies Act, a company has the full capacity to carry on or undertake
any business or activity, do any act, or enter into any transaction. Accordingly, the Act grants the
company the full rights, powers and privileges this regard.
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.
However, a transaction that has or is likely to have the effect of the company incurring obligations
or liabilities, including contingent liabilities, the value of which is 75% of the value of the assets
of the company before the transaction, needs shareholders’ approval by way of special resolution.
Other key matters are as follows:
1) 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 date and at the time
of any disbursement. If the terms of the representations and warranties are incorrect, it can
lead to an event of default and an acceleration of the loan.
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2) When acting for the borrower, verify that any undertakings to be provided by the borrower
are reasonable and not onerous, since failure to comply will constitute an event of default
and lead to the acceleration of the loan.
Taking Security in Loan Transactions
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 is the 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.
There are different types of security, outlined below:
 Mortgages
Mortgages in Ghana are governed by the Mortgages Act 1972 (NRCD 96).
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 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.
 Pledges
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:
- the 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 pledger
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 Charges
A charge is a form of security for a loan under which certain property is agreed to “charged”.
It 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 a floating charge.
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.
This means that the chargor cannot dispose of the asset without the consent of the chargee.
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. The chargee's rights attach in the first instance
not to specific assets but to a shifting class of assets, including future assets.
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.
In Re Yorkshire Woolcombers Association Ltd16, the court set out 3 key characteristics of
floating charges as follows:
1. It is a charge on a class of assets of the company present and future;
2. The charge is over a class of assets which in the ordinary course of business would be
changing from time to time; and
3. 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.
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 later charge having

16
[1903] 2 Ch 284 @ 295
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priority over the floating charge, the fixed charge will not have priority if the grantee had actual
notice of the prohibition.
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.

Registration of Security
After the stamping of security documents in accordance with the Stamp Duty Act, the security
documents should be registered at the appropriate statutory registry.
Under Section 110 of Act 992, charges created by companies incorporated in Ghana are required
to be registered at the Companies Registry.
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 related to transactions in Ghana are however required to be registered at the Collateral
Registry created under the Borrowers and Lenders Act. The Act provides a broad definition of
charges. Commented [JE87]: means charge, mortgage, security,
interest, lien, pledge, assignment by way of security,
Companies Registry Charges created by companies incorporated in Ghana are required to be covenant, restriction, reservation, lease, trust, order,
registered within 45 days of creation. decree, judgment, title defect (including retention of title
claim), or any other encumbrance of any nature other than
liens arising by operation of law
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
118 of the Companies Act.

Collateral Registry:
The Borrowers and Lenders Act, 2020 establishes the Collateral Registry under Section 21.
Under Section 25(1), all charges related to transactions in Ghana are required to be registered at
the Collateral Registry within 28 days of creation.
Failure to register renders the charge void.
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Land Registry:
Registration at the Lands Commission for mortgages- Section 148 of the Lands Act 2020 (Act
1036)
Land in registrable districts, i.e. Accra, Kumasi, Tema and some parts of Winneba (Section 89 of
the Lands Act)- must be registered at the Land Title Registry, whereas land in other parts of the
country must be registered at the Deeds Registry (Section 206 of the Lands Act).
Mortgages shall not have effect until registered. See Section 148 of the Lands Act, 2020.

Regulatory Issues in Lending

A key statutory intervention is the Borrowers and Lenders Act, 2020 (Act 1052).
The purpose of the Act is to:
i. Regulate transactions between borrowers and lenders;
ii. Establish a Collateral Registry;
iii. Provide a legal framework for the registration and enforcement of security interests in
collateral; and to
iv. Establish an order of priority of security interests, to provide for credit agreements
generally and provide for related matters.
The Act applies to a broad range of credit transactions and only excludes agreements listed under
Subsection (3) of Section 1 to the Act.
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 52);
- Protection against disclosure of information obtained from a lender unless the information
is required under the Credit Reporting Act, 2007 (Act 726), any other law or a court of
competent jurisdiction (section 56);
- Provision to the borrower by a lender of a pre-lending disclosure statement setting out the
key terms of the credit transaction (section 57);
- Right to prepay a loan subject to applicable notice requirements and charges (section 59);
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 60).
Another key intervention is the Banks & Specialised Deposit-Taking Institutions Act (Act 930).
Under Section 61, 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.
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Section 62 states that 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 25% percent of its net own funds.
“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 exposure to an insider (Section
67), on lending to staff (Section 69), among others.
An insider with respect to a bank or 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.

There are also regulatory issues concerning borrowing by the Government or State-Owned
Enterprises.
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.
The cases of Attorney General v. Faroe-Atlantic17 and Attorney General v. Balkan Energy
Ltd18 are instructive on this point.
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”.

17
[2005-2006] SCGLR 271
18
[2012] 2 SCGLR 998
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LEGAL DUE DILLIGENCE

What is Legal due diligence?

In ordinary parlance, due diligence in a broad sense refers to the level of judgment, care, prudence,
determination, and activity that a person would reasonably be expected to do under particular
circumstances.
In corporate law, legal due diligence is simply an audit into the affairs of companies (or sometimes
an individual), in relation to a transaction, for the purpose of providing information and assurances
in relation to legal compliance, and existing and potential liabilities.
It is an exercise by virtue of which legal risks are evaluated during a commercial transaction.
It is usually undertaken by a party as part of the preliminary steps in most significant commercial
transactions.
In most commercial transactions, legal due diligence would be undertaken after the parties have
executed a Term Sheet or have agreed on the key commercial terms for the transaction.
In capital markets transactions, for example, equity and bond offerings, legal due diligence is
undertaken by the lawyers for the issuing company.
In investment transactions, the due diligence will usually be undertaken by the lawyers for the
investor.
In asset purchase transactions, it will usually be undertaken by lawyers for the purchaser.

Why conduct legal due diligence?

The purpose of legal due diligence is to gain a legal perspective on the target company/individual.
Basically, the ultimate aim is to ensure that everything is in order.
Lawyers, with their clients, usually approach the legal due diligence process by asking: “Is there
any legal reason that we shouldn’t enter this transaction?” This question needs to be fleshed out,
hence the purpose of the exercise.
It is important to conduct legal due diligence for a number of reasons:
1) Identification of legal risk
Helps to identify, isolate and inform the client of all the legal risks involved in the proposed
transaction. This is a necessary as it helps the client to evaluate and take actions to avoid
potential risks before concluding the transaction.
2) Legal compliance issues
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Helps inform the client of all issues of legal compliance related to or affecting the counterparty,
its assets and the proposed transaction.
This can affect the negotiation of transaction documents, including the scope of representations
and warranties that may be demanded.
3) Valuation
Legal due diligence is a key component in the valuation of a business or assets. Identification
of legal risks relating to the business or the specific asset can have an impact on the valuation
of the business or a specific asset.
4) Transaction structuring
Helps to inform and influence the legal or commercial structure of a transaction to avoid
regulatory risk or to enhance commercial value.
5) Disclosure verifications
In a capital markets transaction, legal due diligence is used by the lawyers for the issuing
company to verify all the disclosures required to be made by the company in the prospectus.
6) Integration issues
In a merger transaction, legal due diligence can help to identity the key post transaction issues
relating to the integration of the merging businesses
Although legal due diligence is not cheap, it is a lot cheaper than finding some legal skeletons in
the closet six months after the deal has closed. It’s a necessary expense and clients should not cut
corners.

The Legal Due Diligence Process

The process involves gathering information and documents, reviewing them, and then writing a
report to the client.
Step 1: The lawyer and the client must agree on the scope of the due diligence to be conducted.
Most clients will rely on their lawyers to guide them on the scope of the due diligence exercise
depending on the nature of the relevant transaction.
Step 2: Sign an NDA (non-disclosure agreement) with the counterparty of the transaction to
govern the disclosure of confidential information by the counterparty. The purpose is to keep the
documents and information disclosed during the negotiations and the due diligence exercise, as
private and confidential between the parties.
Step 3: Prepare a document checklist setting out all the documents required from the counterparty
for the due diligence exercise. The documents would typically be divided into a number of
categories and would cover aspects such as corporate, material commercial and financing
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agreements, property, employment, litigation, intellectual property, environmental, regulatory

and other compliance and insurance.
Step 4: File searches at the relevant public registries and statutory bodies for independent
regulatory confirmations on the counterparty’s compliance status.
Step 5: Conduct review and analysis of documents provided by the counterparty and commence
report drafting.

Report Drafting
Following the assessment of all the documents provided and consideration of the independent
searches carried out, a Legal Due Diligence Report is produced.
There is no universally agreed format for report drafting. Said Report may take various formats
depending on the Client’s needs and budgets. Some clients request that note-worthy matters are
indicated with a green, amber or red flag to distinguish between the importance of the findings
with respect to the planned transaction. Other Reports only include matters which are to be
considered as Red Flags and do away with any other description of the documents under review.
The report should usually contain;
- a summary of all documents reviewed in the due diligence,
- the key findings (identify legal issues)
- the relevant considerations for the proposed transaction. (Advise on how to address
problem)
Note that the due diligence report is not used for a detailed analysis of legal issues. Discussion of
legal issues is usually brief with the focus being on legal issues and risk identified from the review
of due diligence materials.
The due diligence report usually follows this format:
 Introduction
Sets out the background of the report. The transaction necessitating the due diligence exercise,
the scope of the report and the relevant assumptions and disclaimers.
 Executive Summary
A summary of all the key findings of the due diligence report and their implications for the
proposed transaction
 Corporate Information
This will cover a review of the incorporation documents of the due diligence subject to confirm
compliance with applicable law. Will also cover a review of the capital structure, capital
history, shareholding and governance structure of the due diligence subject.
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 Regulatory & Statutory compliance

This will usually cover review of compliance with industry specific legal requirements. Also
covers review of continuing Companies Act compliance requirements, including filing of
annual returns and maintenance of statutory books and registers.
 Employment
Covers a review of the employment documents of the due diligence subject to identify the
following:
- What are the current terms and conditions of the employees?
- Are the terms and conditions compliant with applicable law?
- Does the proposed transaction trigger any redundancy payment or other severance issues?
It will also cover a review of pensions obligations and compliance with the requirements of
the National Pensions Act, 2008 (Act 766)
 Material business contracts
Review all key terms of such agreements to confirm enforceability, assignability, consent
requirements and any onerous provisions, inter alia.
 Intellectual property
Review all intellectual property rights of the due diligence subject to ensure that they are
enforceable. In the case of a licence, confirm compliance with licence terms and any consent
requirements triggered by the proposed transaction.
 Litigation
Review all material litigation and confirm pending claims against the due diligence subject
that may have a material adverse financial or reputational effect on the due diligence subject
 Financing arrangements
Review of all indebtedness, lending and other financial transactions of the due diligence
subject to confirm whether these are properly reflected in the most recent audited financial
statements of the entity.
In relation to banks, the review will usually cover the top 20 exposures of the bank to test the
bank’s credit policy, security perfection policy and the overall quality of its loan book.
Further, review should confirm any consent requirements in financing documents triggered by
the proposed transaction
 Taxes and levies
Covers a review of tax compliance. Will also usually cover compliance with local government
levy obligations.
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 Immovable property
Review to confirm that the due diligence subject has good title to its immovable property and
that these assets are unencumbered

Mistakes to avoid
o Avoid an undefined and vague due diligence scope.

o Scope of due diligence should be defined with certainty to manage client expectations on
report findings.

o Avoid being superficial. Always consider the effect of each factual finding on the potential
transaction.

o Ensure that your report contains a detailed list of each document you have reviewed, to
avoid arguments on documents you were given for the report.

o Your report should not be overly legalistic. The report should be pragmatic and
commercially relevant in the context of the proposed transaction.

o Always name any sources you had to interview for the report. Indicate the status of the
source and when you met or spoke to the source

Legal Due Diligence Checklist

When conducting legal due diligence, it is common for lawyers to use a due diligence checklist to
create organization. The checklist should include a suggested list of documents to gather.
The legal due diligence checklist is also used to keep the investigation focused on the primary
goals.
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LIQUIDATION

Winding up, liquidation and dissolution are often regarded as synonymous. But there are slight
differences.
Winding up is the processes through which a company ceases to exist or steps taken to have a
functioning cooperate entity cease to be a cooperate entity.
Once a company is wound up, the Registrar will have it gazetted and officially have the company’s
name eliminated from the Register of Companies. This is known as dissolution. So 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 Gazette.
The process of winding up and dissolution are collectively termed as liquidation.
Section 274 of Act 992 highlights that the life of a company may formally be brought to an end
by one of the 2 modes of winding up:
- By private liquidation in accordance with Act 992
- By official liquidation in accordance with the Corporate Insolvency and Restructuring
Act (CIRA) of 2020 (Act 1015)

Private/Voluntary Liquidation
This is what is often referred to as the member’s voluntary liquidation. Only a private company
may undergo private liquidation.
Section 276 provides that a company may be wound up privately where it resolves by way of
special resolution that it be wound up by way of private liquidation, and before the date of the
resolution, an affidavit declaring that the company is solvent is made in accordance with section
275.
Benin J in Billy v Kuwor held that a Member cannot petition to Court for a winding up order by
way of private liquidation.
Some reasons why a private company may opt for liquidation are:
- 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
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In a voluntary winding up, the winding up commences on the date that the resolution is passed,
and Section 276(3) mandates that the company must, within 14 days after the passage of the
resolution, send a copy to the Registrar to be published in the Companies Bulletin.
The procedure for undergoing a private liquidation is set out in 4 stages;
STAGE 1: Affidavit of solvency
First, the majority of Directors are required under Section 275 to 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. Commented [JE88]: The rationale is that a company will
not be allowed to voluntarily wind up when it is insolvent.
The Affidavit of Solvency shall also list all the assets and liabilities at the latest practicable date
before the making of the affidavit.
The affidavit must be delivered to the Registrar 5 weeks prior to the passing of the special
resolution.
The affidavit forms the basis of holding the directors liable if the debts and liabilities of the
company are not paid or provided for in full within the period stated in the affidavit.
A director who makes an affidavit without having reasonable grounds for the opinion that the
company will be able to pay off its debts and liabilities in the specified time frame, commits an
offence and is liable on summary conviction to a fine of 325 – 750 penalty units or a term of
imprisonment of 6 months- 1 year, or both the imprisonment and fine.
STAGE 2: Special Resolution
The company must pass a special resolution to wind up the company by way of private liquidation
within 5 weeks of the Affidavit of Solvency. A copy of the resolution must be filed with the
Registrar within 14 days of its passing.
The Resolution must also appoint the liquidator, who will consent in writing to the appointment.
The company must deliver both the Special Resolution and the Affidavit of Solvency to the
Registrar for registration and Publication in the Companies Bulletin.
STAGE 3: Managing the affairs/Winding up
The third step is that the liquidator, once appointed, will take steps towards the winding up of the
company and will manage the affairs of the company.
STAGE 4: Dissolution
Where the Registrar is satisfied that the winding up of the company is complete, the Registrar shall
strike the name of the company off the register and publish the record of the strike off in the
Companies Bulletin. From the date of the publication, the company is deemed to be dissolved.
Where a company is dissolved, the court upon an application made by the Registrar or by the
liquidator of the company or a former officer, member or creditor of the company, at any time
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within two (2) years, may make an order on appropriate terms, declaring the dissolution void and
ordering the name of the company to be restored to the register.
A copy of the order made by the court restoring the name of the company to the register shall be
delivered to the Registrar for registration and the Registrar shall publish the order in the Companies
Bulletin and the effect of that is that the name of the company shall be restored and the company
shall be deemed to have continued in existence as if there has never been a dissolution. This is
affirmed in the case of Union Maritme et Commerciale. v. Rabeinsterner.
Note that it is possible for a company to be dissolved without going through the winding up
process. This is outlined in Section 289. So where the Registrar, either on his own personal
knowledge or information supplied by any officer, member or creditor of a company, has reason
to believe that the company is not carrying on business or in operation, the Registrar may send to
the company a written communication enquiring whether the company is carrying on business or
is in operation.
If within 2 months of sending the written communication, the Registrar does not receive any
answer, the Registrar may send a second written communication making reference to the first one
stating that he has not received a response to the first written communication and that if an answer
is not received to the second written communication within 2 months from the date of the second
written communication, a notice will be published in the Companies Bulletin with a view to
striking the name of the company off the register.
If the company confirms that it is not carrying on business, or does not give an answer to the
second written communication within the time specified, the Registrar may publish in the
Companies Bulletin and send to the company by written communication, a notice that at the
expiration of three 3 months from the date of that notice ,the name of the company shall, unless
cause is shown to the contrary be struck off the register and the company shall stand dissolved.

Passing special resolution for

Declaration of solvency by the Filing Special resolution at the
the winding up of the
Directors Companies Registry
Company

Registrar of companies strikes

Members file winding up Liquidator appointed under
out the name of the Company
accounts presented by the Special resolution commences
and publishes notice in the
Liquidator liquidation process
Gazette/Companies Bulletin
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The Role of the Liquidator

As indicated earlier, when a company is being wound up privately, Section 278 mandates that a
liquidator is appointed, who will be responsible for the liquidation. The resolution passed to
voluntarily wind up the company shall not be valid unless the person named as the liquidator has
previously consented in writing to his appointment.
Where the liquidator dies, resigns or vacate his/her office, a General Meeting may be called by
any member or where there were more than one liquidator, by the continuing liquidator(s) to fill
the vacancy.
Under 278(3), any member of the company, or the Registrar, may apply to the court to have the
liquidator removed, and a new one appointed. Where a new liquidator is appointed, or a liquidator
is removed, Section 278(4) mandates the company or the court as the case may be, to give notice
to the Registrar of the removal or appointment. The Registrar will register this notice and publish
it in the companies bulletin
Remuneration of the liquidator:
Section 279 provides that the company, at a general meeting, fixes the remuneration payable to
the liquidator. Where the appointment is done by the court, then the remuneration shall be fixed
by the court.
Who can act or be appointed as liquidator?:
Under Section 280, anyone can be appointed as a liquidator except the following;
- An infant
- a person found by a court of competent jurisdiction to be a person of an unsound mind
- A body corporate
- Any person convicted on indictment of an offence involving fraud or dishonesty, or of an
offence in connection with the promotion, formation or management of a body corporate
- An undischarged bankrupt or any other person subject to insolvency proceedings under the
Insolvency act, 2006 (Act 708)
- A director of a company
- An auditor of a company
Any appointment made in contravention of the above will be deemed void.
Status of liquidator:
Section 281 provides that a liquidator appointed for the purpose of a private liquidation, stands in
a fiduciary relationship to the company as if he/she were a director of the company. For that
purpose, all the provisions relating to the duties and powers of the director found in Sections 190
– 217 shall apply mutatis mutandis.
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Powers of the liquidator:

On the appointment of a liquidator, the powers of the Directors are vested in the liquidator. The
powers and authority of every Director ceases except where authorized by the liquidator or the
general meeting.
Section 282 provides that once appointed, all the powers of the Board of Directors shall vest in
the liquidator and all the powers of the Board shall cease except;
- Where it is necessary to enable the directors to prepare statements and accounts of the
company, and
- Where the company in general meeting or the liquidator sanctions a continuance of the
powers
Duties of the liquidator:
Sections 284, 285 and 286 of Act 992 outline the duties of the liquidator.
They are as follows;
- to keep proper records and accounts with respect to his/her acts and dealings, conduct of
the winding up, and receipts and payments by him/her.
- Where he/she carries on the business of the company, he/she must keep a separate account
of the trading
- Where the winding up last more than a year, the liquidator must summon a general meeting
of the company at the end of the first year from the commencement of the winding up, and of
each succeeding year. The liquidator must lay before the meeting, an account of his/her acts
and dealings and the conduct of winding up during the preceding year and of the trading during
the time that the business of the company has been carried on. Copies of such accounts shall
be sent to the Registrar.
- As soon as the winding up is complete, the liquidator must prepare and deliver to every
member of the company, final accounts of the winding up showing how the winding up has
been conducted, the result of the trading during the time that the business of the company has
been carried on, and how the property of the company has been disposed of. The Liquidator
must also call a general meeting and lay the final account before the company, along with an
explanation. Within 28 days of this final meeting, a copy of the final account must be sent to
the Registrar. Any account sent by the liquidator to the general meeting of the company must
first be audited.
- The liquidator must also preserve his/her books and papers and that of the company, for a
period of at least 5 years from the dissolution of the company. After that 5 year period, the
books and papers may be destroyed, unless the Registrar directs otherwise.
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- The liquidator must also open an account known as the ‘’Private Liquidation Account’’
into which all receipts and payments made by him/her in respect of the company shall be
credited or debited.
- Where the liquidator is of the opinion that the company will be unable to pay its debts
within the period stated in the affidavit of solvency, he/she must give notice to the Registrar,
together with a statement of the assets and liabilities of the company. The Registrar shall then
publish this in the Companies Bulletin. In the case like this the Registrar will then turn it into
official liquidation.
Stay of Proceedings:
Under Section 287, at any time during the course of a private liquidation and prior to the
dissolution of the company, the company in general meeting may, by special resolution, resolve
that, subject to the confirmation of the court, the liquidation proceedings shall be stayed.
After the resolution is passed, the liquidator or any member shall apply to the court for the stay
and the court may grant the stay subject to such terms and conditions imposed. It shall then
discharge the liquidator and permit the directors to resume the management of the company.
At least twenty eight (28) days before the application for stay is heard in cases where it is a member
who applies to the court, the applicant should notify the Registrar, all the company’s directors and
the liquidator, and these persons shall be entitled to appear on the hearing of the application, call
witnesses and give evidence.

Official Liquidation
Official Liquidation is governed by the Corporate Insolvency and Restructuring Act, 2020 Act
1015.
Section 81 of Act 1015 provides that the official winding-up of a company may be commenced in
a number of ways:
- By special resolution of the company;
- By petition addressed to the Registrar;
- By petition to the Court
- By conversion from a private liquidation

Special Resolution
A Company may pass a special resolution for the winding up of the company by way of an official
winding up. This will happen where for instance the company is not in a position to file an
Affidavit of Solvency.
Section 82 of Act 1015 mandates that a copy of the special resolution and notice of the meeting
must be served on the Registrar, and the Registrar shall be afforded the opportunity to attend the
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meeting at which the special resolution shall be passed in person or by his authorised
representative.
Thus, a copy of the resolution must be delivered to the Registrar as soon as may be practicable.
The Registrar must publish the resolution in the Gazette.

Petition to the Registrar

The law allows a member, creditor or contributory to petition the Registrar for the official winding Commented [JE89]: A Contributory is any past or present
up of a company. Member of the company who is liable to be called upon to
contribute to settle the company’s liabilities
It must be noted, that in the case of a company with shares a member cannot present the petition
unless he had held his shares for not less than six (6) months preceding the date of presentation of
the petition.
Also, in the case of a creditor, his petition will not be considered unless he provides security for
cost and also establish a prima facie case for winding up.
The petition is in the form of a letter addressed to the Registrar, with supporting documents setting
out the reason(s) why the company should be liquidated.
A copy of the petition must be served on the company on or before it is submitted to the Registrar.
The Registrar, upon review of the petition may order the official winding up of the company, if
satisfied that the company is unable to pay its debts, taking into account its contingent and
prospective liabilities.
Under Section 83(5) of Act 1015, a company is deemed unable to pay its debts:
a) If a creditor, by assignement or otherwise, to whom the company owes money not more
than 10,000 currency points then due, has served on the company, a written demand
requiring the company to pay up, and the company has for 30 days after the demand,
neglected to pay or to make reasonable arrangement for its payment to the reasonable
satisfaction of the creditor.
b) Where a judgment decree or court order has been made in favour of the company’s creditor
and it is returned unsatisfied either in whole or in part.
c) If it is proved to the satisfaction of the Registrar that the company is unable to pay its debts

Petition to the Court

Under Section 84 of Act 1015, the following people may petition the court for an order for official
winding up of the company:
- the Registrar of companies
- a creditor of the company
- a member of the company
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- a contributory of the company Commented [JE90]: Kruseval Company v Bonsu affirms

- the Attorney-General the right of a contributory to petition for a winding up.

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
Based on a petition presented by any of the above persons, the Court may order the winding up of
the company, if satisfied that
i) The company has failed carry on all authorized business within a year of incorporation
or suspends any of those business for a year.
ii) The company has no members/shareholders
iii) The business or objects of the company are unlawful, or the company is operated for
an illegal purpose, or the business being carried out by the company is not authorized
by the Constitution.
iv) The Company is unable to pay its debts
v) In the opinion of the court, it is just and equitable to order the winding up
The petitioner may rely on any of the above grounds. On hearing the petition, the court may;
- Dismiss the petition,
- Adjourn the hearing conditionally or unconditionally, or
- Make an interim order or any other appropriate order
However, Section 84(5) provides that the court shall not refuse to make a winding up order on the
only ground that the assets of the company had been mortgaged to an amount equal to or in excess
of those assets or that the company has no assets.

Conversion from private liquidation

The law requires a liquidator to notify the Registrar where on commencement of private
liquidation, the liquidator realises that the company may not be able to pay its debts within the
period stipulated under the declaration of solvency.

The liquidator files form 19 with the companies The private liquidation process
The Registrar publishes the
registry and attaches a statement of the assets is converted into an official
notice in the
and liabilities of the company at the latest liquidation under the Corporate
Gazette/companies bulletin
practical date. Insolvency and Restructuring
Act, 2020 (Act 1015)
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The (Official) Liquidator

Once an order for winding-up is made, an official liquidator must be appointed. Section 95 of
Act 1015 says that the creditors of a company may nominate and appoint a person to be
liquidator for the purposes of winding up.
A person shall not be appointed as liquidator unless he/she is qualified under section 155 to be
an insolvency practitioner. Again, a person shall not be appointed a liquidator unless he/she has
consented to the appointment in writing, and such consent has been filed with the Registrar.
Where the creditors are unable to appoint a liquidator, they must, within 7 days, notify the
Registrar, who will then be the official liquidator.
Section 96 of Act 1015 provides that the liquidator stands in a fiduciary relationship to the
company, as if he were a director of the company. As such, all the provisions of the Companies
Act relating to directors as captured in Sections 190 to 217 of Act 992 shall apply to the
liquidator.
Section 89 of Act 1015 provides that an official winding-up commences on the passage of a
resolution for the winding up of the company, or on the making of a winding-up order.
Section 90 of Act 1015 states that on commencement of the winding-up all the functions of the
directors shall vest in the liquidator and under Section 91, the company shall cease to carry on
business except as may be required for the beneficial winding up of the company. However, the
corporate status and corporate powers of the company shall continue until the final dissolution.
Under Section 92 of Act 1015, the Liquidator shall take into his custody and control all the
property and things remaining vested in the company. Any property in the possession of the
company at any time within six months before the commencement of the winding shall be
deemed to belong to the company until the contrary is shown. Also, where anybody is in
possession of the company’s property, the liquidator can order him to surrender it.
Section 97 of Act 1015 outlines the powers of the official liquidator, which is the same as those
of a private liquidator. The only exception is that the official liquidator, under Section 98, may
delegate his functions.
Also, the powers of the court in an official liquidation are the same as those in a private
liquidation.
Section 93 of Act 1015 is on the prohibition of civil proceedings. Accordingly, once winding-up
commences, a person may not proceed with or commence an action or civil proceedings against
the company without leave of the court, except proceedings by a secured creditor for realization
of the security of that secured creditor.
Section 94 of Act 1015 provides that a transfer of shares made after the commencement of any
winding-up is void unless the transfer is made to the liquidator or with the approval of the Court.
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Section 100 of Act 1015 establishes the liquidation fund. All the monies received by the
liquidator are to be deposited here, and moneys disbursed by him shall be paid out of this
account.
The general duties of the liquidator provided in Act 1015, are outlined as follows:
- Collection of debts ( Section 101)
- Vesting property of the company in the liquidator (section 102)
- Realising assets of the company (Section 103)
- Verifying debts ranking for dividends (section 104)
- Classification and priority of debt (section 107)
In The Liquidator v Joseph Karam, Adjei Frimpong J. succinctly stated the principal duty of
the Liquidator as follows: “There cannot be any question about the basic function of an official
liquidator appointed by a court to wind up a company. The liquidator is to secure, that the assets
of the company are got in, realized and distributed to the company’s creditors and, if there is
surplus, to the persons entitled to it. This statutory duty is without doubt what the Plaintiff sought
to discharge.

Principle for settlement of debts

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

2. Proportionality principle
Requires that if there is insufficient assets to pay all the Members of each class of Creditors
its full claims, then each member of that class is to be paid proportionally to their claim.