Kwame Nkrumah University of
Science & Technology, Kumasi, Ghana
MAS 354
Company Law II
UNIT 6 : SHARES AND DEBUNTURES
LIQUIDATION
Oswald K. Seneadza
SHARES AND DEBUNTURES
• Shares and debentures are instruments by which business companies
may raise funds. They are the most common form of securities in
Ghana, but they are not the only forms of security.
• The First Schedule of the Act defines shares as:
• “The interest of members of a body corporate who are entitled to
share in the capital or income of such body corporate.”
• S.42 of the Act stipulates that shares have right and liabilities
attached and liabilities are dependent on the terms of issue, the
company’s Constitution and the Act.
• S.43 Share issued in Ghana are of no par value (i.e. the value of share
is not fixed)
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Features of shares
•
It is personal estate, and not real or immovable property like land or
a building.
• The interests that attach to a share (i.e. the interest of a shareholder)
of a company are in the capital or income of the company.
• The liability that attach to a shareholder are the potential loss of the
capital contributed to the company. In the event of a share not having
been fully paid up particularly during winding–up or in accordance
with a call validly made by the company, the shareholder is liable to
pay up the balance or what is due. (s.44).
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Features of shares
• The rights that attach to a share (i.e. the rights of a shareholder) of a
business company are set out by the company’s Constitution and the
terms of issue of the share. But in any event, a shareholder has the
right to:
• a. receive dividends when declared,
• b. attend and vote at general meetings, and
• c.the return of his capital on winding up or reduction in capital, after
creditors and others who rank in priority to him have had their claims
settled.
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Types of shares S.51
• There are two types of share in Ghana: preference and equity shares
(s. 51).
• The company may issue one or different classes of preference and
equity shares (s. 46)
A preference share - is a share which does not entitle its holder to
any right to participate beyond a specified amount of money in any
distribution whether by means of a dividend, or on redemption, in
winding up (s. 51(1)).
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Preference Share
• Secures for shareholders a fixed return on its investments.
• His capital will be returned to him first, after creditors have been
paid.
• A preference share is less risky than an equity share.
• The constitution of a company may permit preference shareholders
to convert their preference shares to equity shares .
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Types of Preference Share
•
•
•
•
•
Preference shares may be:
cumulative or non-cumulative
convertible or non-convertible
redeemable or non- redeemable.
A cumulative preference share is one which entitles its holder to
receive his full dividends as declared for that and previous periods
before dividends are payable to others. With respect to cumulative
dividends, no dividend shall be payable on any shares ranking
subsequent thereto until all arrears of the fixed dividend have been
paid (s.54)
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Types of Preference Share
• A redeemable preference share is one that is capable of being
acquired back by the company which issued it. A non–redeemable
preference share on the other hand is one that cannot be acquired
back by the company which issued it, whether at the instance of the
company or at the shareholders instance. Therefore a non –
redeemable share cannot be redeemed.
• convertible or non-convertible
• Preference shares that can be converted to equity shares. This must
be permitted by the constitution of a company.
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Equity Shares
• Equity shares – They are sometimes called common shares
or ordinary shares. It is the issued share capital of a
company and carries rights to participate in the distribution
of dividend when declared. Unlike preference share,
dividend is not a specified amount but dependent on the
number of shares held by a shareholder
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DIVIDENDS
• Dividends are payable at the instance of the company and they can
be paid in one of three ways:
• The directors may resolve the declaration of dividends;
• The shareholders may resolve the declaration of dividends if the
Regulations so provide; and
• The Constitution may stipulate that thereby shall be automatic
payment of dividends if there is a surplus to the company.
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DEBUNTURES
• First Schedule – defines debenture as “a written acknowledgement
of indebtedness by the company setting out the terms and conditions
of the loan”. A debenture acknowledges indebtedness and it may or
may not be secured by charge.
• S.83(5) – “debenture holder SHALL NOT be a member of the
company.., is not entitled to attend and vote at a general meeting of
the Company.”
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Types of Debenture
• Irredeemable/ Perpetual Debenture and Redeemable Debenture S.87
• A perpetual or irredeemable debenture is one that is made
irredeemable except during liquidation.
• A debenture may be made redeemable on the happening of a
contingency however remote or on the expiration of a period
however long.
• Convertible Debentures – S.88
• It gives the holder the option of converting it into shares. The option
may be exercised by the Company or the holder to convert the
debenture into shares. Where the debenture is converted into shares
it is akin to issued shares for non-cash consideration.
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Types of Debenture
• Secured and Unsecured/naked Debentures – S.89
• A secured debenture is one secured on charge of the company’s
property. The debenture could be secured on a floating charge or
fixed charge.
• Where a loan is unsecured it is called naked debenture. It is a
debenture not secured by any charge over the company’s property. In
this case, the creditor has a personal claim. Thus, after he has
secured judgment, he may enforce it against any property of the
company except properties secured by a fixed charge
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LIQUIDATION
 Winding up, Dissolution and Liquidation,
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Winding up, Dissolution and Liquidation
Incorporation and liquidation are very crucial in company law why?
Liquidation;
The process whereby the affairs of the business is ended. Assets are
converted into cash to pay off liabilities.
• Voluntary Liquidation;
Winding up is predetermined by the company and its creditors by the
passage of a special resolution.
• Dissolution;
Formal pronouncement by Registrar that the company is struck of the
register (Gazette notices issued).
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Modes of Winding Up
Two main methods:
1) Official Liquidation under Bodies Corporate
(official Liquidation) Act, 1963 Act 180.
2) Private Liquidation
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1. Official Liquidation
 S. 1 of Act 180 gives four modes namely;
 Special resolution of the Company.
 A petition addressed to the Registrar,
 A petition to Court and
 A conversion from private liquidation.
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SPECIAL RESOLUTION
• The resolution shall state that the Company shall be
wound up by way of official winding up.
• The Registrar should be served with a copy of the Resolution
• The registrar must publish same in the gazette
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Petition to Registrar
 Petition can be made by a creditor, member or
contributor of the company to the Registrar.
Conditions;
 The company is unable to pay its debts.
 Security must be given to the Registrar and a prima facie
case should be made.
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Petition to Court s. 4
Registrar, creditor, member/contributory of the company or
the Attorney General may bring a petition to court for the
winding-up of a company.
Grounds;
 Failing to commence business within a year,
 Where the company has no members,
 Unauthorised business or unlawful or illegal business,
 Inability to pay company debts and
 Where it is just and equitable to do so.
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Conversion to Official winding up
• Where a company commences a private liquidation in
accordance with the Companies Act, it may send a
petition to the Registrar indicating that the company is
unable to pay its debts. Thereafter, the Registrar may
convert the winding up process from private
liquidation to official winding up
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2. Private Liquidation Sec 274-276
 Private Liquidation cannot proceed without
declaration of solvency by the directors.
Procedure s. 275;
 Passage of special resolution,
 Affidavit that company is solvent to date and able to
pay its debts within a period of not more than 12
months.
 Within 14 days of resolution, registrar must be notified
and the Registrar shall publish the resolution in the
Companies Bulletin.
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Cases
In Re Yenidje Tobacco Co. Ltd. [1916] 2 ch 436;
Ebrahimi v. Westbourne Galleries [1973] 2 WLR 1289;
Conte v. Kpeglo and Another [1964] GLR 311-317.
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Kwame Nkrumah University of
Science & Technology, Kumasi, Ghana
THANK YOU