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UBGS 401
COMPANY LAW
College of Education
School of Continuing and Distance Education
INTRODUCTION:
What is Company Law?
It is that branch of the law that deals with the formation, regulation and dissolution of
Companies.
What constitutes Company Law has predominantly been shaped by;
(a) Statutory Provisions;
(b) Judicial Decisions; and
(c) Theoretical underpinnings of the Statutory and Judicial decisions.
WHAT IS A COMPANY?
➢ A Company does not lend itself to a single, simple definition. This is borne out of the fact
that Companies can exist in varied forms and shapes.
FEATURES OF A COMPANY
i. It is an artificial legal person;
It may own property; enter into contracts; inflict and suffer wrongs; sue
and be sued.
ii. It has a separate existence quite different from its Directors and
Members; - SALOMON V SALOMON –
iii. It has a Common Seal;
iv. It has a (potential) perpetual existence;
➢ The death or change of members does not affect its continued
existence.
TYPES OF COMPANIES:
➢ Broadly, the Companies Code, 1961 (Act 179) (now referred to as the Companies
Act) has two (2) categories of Companies;
i. Limited Liability Company;
a. Limited by Shares;
b. Limited by Guarantee.
ii. Unlimited Company.
➢ The Companies Act also makes a distinction between;
i. Private Company; and
ii. Public Company.
LIMITED LIABILITY COMPANY
➢ It is also called a Company limited by Shares, and the most common of
Companies.
➢ The Liability of its members is limited to the amount, if any that is unpaid on the
Shares respectively held by them.
➢ Advantages:
▪ Provides protection to shareholders against creditors.
▪ Allows shareholders to diversify holdings and become shareholders in several
companies knowing their liability is limited to the investment.
▪ Reduces risk involved in separation of ownership and control
➢ Disadvantages
▪ Unfavourable to creditors
▪ Encourages
irresponsible
investments;
shareholders
abandon
insolvent
company and form a new company
▪ Renders Directors and Shareholders liable to Creditors through Guarantees.
LIMITED BY GUARANTEE COMPANY
➢ The liability of its members is limited to such amounts as the members may
respectively undertake to contribute to the assets of the Company in the event of
winding up.
➢ They are usually non-profit making and mostly concerned with charitable or
UNLIMITED COMPANY
➢ It does not have any limitation on the liability of its member.
➢ Though
it
enjoys
all
the
features
and
advantages
of
incorporation, its members are liable to the last pesewa of the
Company’s debts.
PRIVATE COMPANY
➢ It Regulations imposes the following restrictions and prohibitions;
i. It restricts the right to transfer its Shares, if any;
ii. It limits the total number of its Members and Debenture holders to fifty (50) – in
computing the number, people who presently or previously were in the genuine
employment of the Company, and became Shareholders or Debenture holders
while in the employment are not counted as being part of the number.
➢ It prohibits the Company from making any invitation to the public to acquire
Shares or hold Debentures of the Company; and
➢ It prohibits the Company from making any invitation to the public to deposit
money with it either for fixed periods or payable at call, whether bearing interest
PUBLIC COMPANY
➢ It is any Company other than a Private Company.
➢ A key feature is its listing on the Stock Exchange.
Thus by permutation, one can say that there can be six (6) types of Companies
under the Companies Act;
i. Private Company limited by Shares;
ii. Private Company limited by Guarantee;
iii. Unlimited Private Company;
iv. Public Company limited by Shares;
v. Public Company limited by Guarantee; and
vi. Unlimited Public Company.
OTHER BUSINESS ENTITIES – SOLE PROPRIETORSHIP
➢ It is an unincorporated business usually owned and managed by one
person
➢ There is no strict requirement to register the business
➢ Where the business is other than the real name of the sole proprietor,
the name must be registered as a business name – the registration
of business names Act, 1961 (Act 151)
➢ Features
▪ It has no separate legal identity
▪ Unlimited liability
▪ No separation between ownership and management
Advantages:
▪ No formalities
▪ Total control
▪ No sharing of profits
▪ No corporate tax
▪ Ease of ending business
Disadvantages:
▪ Unlimited liability
▪ Difficulty in management
▪ Limited capacity to raise capital
▪ No perpetual succession or existence
OTHER BUSINESS ENTITIES - PARTNERSHIP
¶DEFINITION: It is the association of two or more individuals but not
more than twenty (20) carrying on business jointly for the purpose of
making profit. – s.3(1) of the Incorporated Private Partnership Act, 1962
(Act 152).
ᴥ The following are not considered as Partnership by Act 152;
1. Associations & Body Corporates;
(a) Association of members of a Company;
(b) Company, body corporate or unincorporated association;
(c) Body corporate formed under a foreign law
(d) Joint venture without a firm name
2. Family or co-ownership of property;
3. Remuneration by a servant or Agent by a share of the profits of a
business
 ¶ FORMATION OF PARTNERSHIPS
 A Partnership can be of two types;
(a) Trading Partnership;
(b) Non-Trading Partnership.
 A Partnership is formed by registration with the Registrar General of the
Partnership Agreement.
 The Partnership Agreement must contain the following;
(a) The name of the Partnership;
(b) The general nature of business;
(c) The Address and Principal place of business;
(d) Names, Address and occupations of the Partners;
(e) Date of commencement of the Partnership;
(f)
Particulars of any charges over assets of the partnership requiring registration
ᴥ Basis of refusal to register a Partnership by the Registrar
The Registrar would refuse to register a Partnership on the following grounds;
(a) it consists of more than twenty (20) partners or has a body corporate as a
member;
(b) carrying out unlawful business;
(c) misleading or undesirable name;
(d) a member lacks capacity – infant, unsound mind, bankrupt, guilty of fraud
or dishonesty.
(e) incomplete, irregular, or inaccurate information on registration form.
ᴥ once the Registrar is satisfied that all requirements have been complied with,
he issues a certificate, which is renewable yearly.
 ᴥ Effects of Registration
(a) Firm becomes a body corporate capable of exercising the powers of a
(b)
(c)
(d)
(e)
(f)
natural person.
Each partner is jointly and severally liable with the firm and other
partners for the debts and obligations of the firm, while he remains a
partner.
Each partner is entitled to an indemnity from the firm and contribution
from co-partners.
The Firm must carry out business under the registered name only.
It must have a name plate indicate the names of the partners.
It must exhibit its registration certificate
 ¶Implied Powers of Partnerships (Trading)
(1) Buy or sell goods for the purpose of the business;
(2) To give legally binding receipts;
(3) Employ and dismiss employees
(4) To draw Cheques on behalf of the Firm
(5) Pledge goods and assets of the partnership as collateral
¶Implied Powers of Partnership (Non -Trading)
(1) To contract and pay debts on behalf of the firm;
(2) Draw, accept or discount bills of exchange or other negotiable
instruments;
(3) Borrow money on the firm’s behalf
 ¶ TYPES OF PARTNERS
(1) General Partner: he is a general agent of the partnership and has authority to
bind the firm in transactions and;
(a) takes active part in managing the partnership;
(b) has authority to draw Cheques, borrow and pledge security;
(c) contributes his share of capital
(d) jointly and severally liable with other partners for liabilities of the partnership.
(2) Quasi or Nominal Partner:
(3) Dormant Partner
(4) Salaried Partner: paid a salary as compared to share in the profit
(5) Incoming Partner: admitted into the partnership
(6) Outgoing Partner: leaving the partnership
 ¶Acts that bind the Firm:
(1) Acts authorised expressly or impliedly or subsequently ratified by other
partners.
(2) Acts done in the usual way of business of the firm, unless partner acted without
authority, and known by the other party.
(3) Acts unconnected to the Firm’s business are not binding on the Firm unless
partners authorised or acts ratified.
(4) Acts done in contravention of restrictions imposed on a partner are not binding
in the Firm if the other party knew of the restriction.
(5) Any act done or instrument executed that relates to the business of the firm or
shows an intention to bind the firm by a person authorised to do so is binding
on the firm.
 ¶Nature of liability of the firm and partners
(1) Every Partner is jointly and severally liable with the firm and other partners for debt
whilst he is a partner.
(2) Incoming partner not liable for existing debts
(3) Outgoing partner is liable for debts incurred whilst a member until discharged
(4) A person who deals with a retired partner with the belief that he still is a partner is
entitled to so treat him until he has notice of retirement.
(5) A person who deals with a firm prior to retirement of a partner is not deemed to have
notice of the retirement unless he has actual notice.
(6) The estate of a deceased partner is not liable for debts of the firm incurred after his
death. Same as one declared bankrupt or retired.
ᴥ Holding Out – Quasi Partner
ᴥ Revocation of continuing Guarantee –upon change in composition, Guarantee revoked
as to future commitments unless partners agree to the contrary.
ᴥ Judgment against the firm or a partner seperately
 ¶Relation of Partners with each other (Rights & Duties)
(1) Fiduciary relationship – to firm and co partners
(2) Disclosure of full information to all partners
(3) Account for secret benefits for use of firm’s name and or property
(4) Account for and pay for profit from competing business
(5) Equality – profits, capital and losses
(6) Paying more than agreed capital, entitles partner to 5% interest per annum on excess
contribution; after determination of profits
(7) Indemnity by the firm to partners for acts done in the ordinary course of business of the
firm or for preservation of business property.
(8) Every partner may be part of management but without remuneration
(9) New partners join with the consent of existing partners
(10) Decisions are by majority vote, except to change the nature of business which must be
unanimous.
(11) Access to partnership books of accounts
 ¶Cessation by a Partner
(a) Death
(b) Alien enemy at a time of war
(c) Insolvency
(d) By a Court Order
Permanently of unsound mind;
(ii) Permanently incapable of performing his part of the partnership Agreement
(iii) Guilty of conduct considered bad for the nature of business of the firm
(iv) Willful and consistent breach of partnership Agreement
(v) Circumstances render it just and equitable for a person to cease to be a partner
(e) Retirement
(f) Resignation
(i)
 ¶Action by continuing partners when a partner ceases to be a Member
 Where a upon the cessation of a person being a partner, the partnership is
left with only one partner, the continuing partner must within 6 months;
(a) Admit another member or member to the firm or
(b) Commence winding up proceedings – voluntarily or through Court.
Where the continuing partners are more than two (2), then they must within six (6) months;
(a) Admit into partnership persons who have acquired the interest of the former partner(s)
(b) Purchase the interest of the former partner at a valuation;
(c) Commence winding up proceedings
ᴥ Apportionment of premium: - paid upon entering. To be repaid upon winding up, save
where winding up due to misconduct of payee, or cessation is by agreement without
provision for repayment.
 ¶Winding up of a firm
(1) Voluntary liquidation;
(2) Order of the Court;
(3) Insolvency proceedings.
ᴥ Voluntary Winding up
(1) Unanimous Agreement of Partners followed by a notification to the Registrar.
(2) Authority of partners to bind the firm continues so as to complete transaction started but
not finished before the commencement of the winding up process.
(3) If Partners realise that the firm cannot pay its debt in full within 6 months from
commencement of winding up, notice must be given to the Registrar, which will be
registered and published in the gazette.
(4) Twenty-one (21) days after expiration of 6 months from commencement, a statement as
to whether all debts have been paid in full must be submitted to the Registrar for
publication in the gazette. – failure may lead to imprisonment for 6 months.
 ᴥ Winding up under a Court Order
 A partnership may be wound up under an order of the court, on the
application of;
(1) A Partner;
(2) A former Partner or his representative upon an amount owed the former partner by
the firm
(3) Registrar, before Insolvency proceedings have been commenced against all the
Partners.
ᴥ Winding up by Insolvency Proceedings
This is usually at the instance of Creditors of the Firm, to whom the firm has failed to pay its
debts. The proceedings may be commenced on the following grounds;
(1) The Creditor is owed a minimum of GHC1,000.00
(2) The firm has given notice it is suspending or about to suspend payment of its debt
(3) The firm’s property has been attached in execution of a judgment (sold or retained for 21
days)
(4) Any of the firm’s creditors is entitled to go into execution as a result of a judgment
obtained within the past 7 days to the application.
 ¶Effects of an Insolvency Order
 It makes all the Partners bankrupt whether they are solvent or not.
 The joint estate is applied in the first instance to pay joint debts; any surplus is apportioned
according to extent of interest in the joint estate.
 The separate estate is applied in the first instance to pay separate debts; any surplus is
applied to pay joint debts as part of the joint estate.
 Losses (other than deficiency in capital) are paid out of profit, then out of capital, and then
individually based on how profits are shared.
ᴥ Application of Assets of the firm
(1) To pay debts and liabilities owed to third parties;
FORMATION OF A COMPANY
i. Who may form a Company?
Any one or more persons may form an incorporated Company
by complying with the Companies Act.
i. Promoters – S. 12 (1)
➢ Any Person who is or has been engaged or interested in the
formation of a Company.
➢ This however does not include a person who is acting in a
professional capacity for the persons who are interested in forming
i. Duties of the Promoters – S. 12 (2) & (3)
Until the complete formation of a Company, a Promoter owes
the following duties to the yet to be formed Company;
a. He is to stand in fiduciary relationship to the Company;
b. He must observe utmost good faith towards the Company;
c. He must compensate the Company for any losses suffered due to
his failure to perform his duties;
d. Account for profits for properties where the acquisition should have
been for the Company and not for the Promoter.
Pre-incorporation Contracts – S. 13
➢ A contract or transaction that purports to be entered into before the
incorporation or a contract or transaction by any person on behalf of a
Company prior to its formation.
➢ A Company may ratify a pre-incorporation contract or transaction. If so
ratified the Company shall become bound, and shall equally benefit
therefrom.
➢ Prior to ratification by the Company, the person who purports to act on
behalf of the Company in the absence of an express agreement to the
contrary shall be personally bound and also be entitled to any benefit if the
pre-incorporation contract.
Remedies available to the company
➢ Ratification
➢ Company must have been incorporated
➢ There must be full disclosure of all material facts known to the Promoter
➢ Actual ratification by the appropriate organ(s) of the Company
-Panagiotopoulos v Plastico / Jadbranska Slobodna v Oysa
Limited
➢ Novation
➢ Rescission
➢ Compensation
The Formation Procedure
In order to form a Company, the Promoters must deliver to the Registrar of
Companies for registration a copy of the proposed Regulations of the Company.
➢ Unless the Registrar is of the opinion that;
i. The Regulations do not comply with the Companies Act; or
ii. The Company is being formed for an illegal purpose; or
iii. Any of the signatories is an infant or of unsound mind; or
iv. Any of the Directors is incompetent to act as such,
he will register the Company and issue it with a certificate of incorporation, and
gazette the registration.
The Regulations
➢ It is the fundamental document that governs the activities of the Company. In a
sense it can be said to be the Constitution of the Company or its Charter.
➢ The Regulations of the Company serves the following functions;
i. It sets out the purpose of the Company.
ii. It defines the limitations of the powers of the Company.
iii. It sets out the organs and defines the duties, rights and powers of the organs
and the members of the Company.
iv. It defines the inter-relationship between the organs, members, officers and the
Company.
v. It spells out how the Company’s internal affairs may be changed from time to
time.
➢ In some jurisdictions, what we call the Regulations in Ghana is split into two (2)
documents;
i. Memorandum of Association; and
ii. Articles of Association.
➢ The Regulations of the Company (MEMO OF ASSOC) must contain the following;
i. The name of the Company with “Limited” as the last word for a Company limited by
shares;
ii. The nature of authorized business;
iii. A statement that the Company has all the powers of a natural person with full
capacity;
iv. The names of the first Directors of the Company;
v. A statement that the powers of the Directors are limited by Section 202 of the
Companies Act;
vi. In the case of a limited liability company, a statement that the liability of its members
is limited;
vii.For companies with shares, the number of shares with which the Company is to be
registered;
viii.In the case of a Company limited by Guarantee, a Declaration by the Directors that
the income of the Company will be applied solely towards the promotion of the
objectives of the Company;
i.
Effect of Registration of the Regulations – S. 21
➢ The Company’s Regulations upon registration has three (3) effects;
i. It constitutes a contract under seal between;
a. The Company and its members;
b. The Company and its officers;
c. The members and the officers of the Company;
d. The members of the Company inter se (among themselves);
e. The officers of the Company inter se.
ii. It vests power in any person stated by the Regulations to appoint or remove any Director or Officer
of the Company, regardless whether such person is a member or not. This power is usually
conferred on Debenture holders or their Trustees.
iii. Any suit by a member or officer for a breach of the Regulations should be brought in a
representative capacity on behalf of oneself and the member or officer who may be affected. This
is to prevent multiplicity of actions.
i. Alteration of the Regulations – S. 22
➢ The Regulations of a Company are not cast in stone and can be changed by members by
adding, deleting and replacing the Regulations through a Special Resolution (75%).
➢ Though a Special Resolution is always required, in certain instances there are additional
requirements;
o Company’s Name: - this requires the consent of the Registrar.
o Number of Shares:o Company’s business or objects: - this requires prior notice to Debenture holders secured by
a floating charge. Recourse may also be had to the Court for approval regarding an
arrangement or amalgamation of the Company.
o Classes of Shares: - changing the rights attached to any different classes of shares requires
the prior written consent of at least seventy-five percent (75%) of the holders of shares of
that class.
o Regulations itself:- where the Regulations restrict or excludes the Company’s power to alter
i. Limitation Regarding the alteration of Regulations
➢ No alteration shall conflict with the Court’s order to providing remedy against
oppression.
➢ The altered Regulations shall contain the statements and Regulations required to
be contained in Regulations (S.16).
➢ Unless a member agrees in writing to do otherwise, a member shall not be bound
by an alteration that is made after the he became a member which seeks for the
member to;
i. Take more shares;
ii. Increase his liability to pay more money to the Company;
iii. Increase or impose restrictions on the right of the members to transfer his shares.
➢ No alteration shall have the effects of;
i. Converting an Unlimited Company to a Limited Liability Company;
ii. Converting a Company limited by Guarantee to a Company limited by shares.
➢ The Court can restrain or cancel an alteration for illegal or irregular activity or
THE CONCEPT OF A CORPORATE ENTITY
➢ A Company once incorporated by the registration of its Regulations and the
subsequent issue of a Certificate of Incorporation becomes an entity separate
and distinct from its members and Directors. It assumes a separate and artificial
legal person status.
SALOMON V SALOMON
i. CORPORATE VEIL
➢ The fact that the Company upon incorporation assumes an independent and
separate personality has given rise to the concept of the existence the existence
of a Corporate Veil that “stands” in between the Company and its members and
Directors.
➢ This Veil separates the Company from its members and Directors. In effect, the
LIFTING OR PIERCING THE CORPORATE VEIL
➢ There are instances where the “Corporate Veil” is done away with to hold the
Directors and Members personally liable for the acts of the Company. In such
instances, the Corporate Veil is said to be lifted or pierced, and this can happen
under any of the following instances;
i. Violations of the Companies Act:
a. Where a Company carries on business for more than six (6) months without at
least one (1) member, the Directors become personally liable for all debts incurred
by the Company during that period – S. 38
b. Where a Company carries on business for more than four (4) weeks after the
number of its Directors fall below two (2), there shall be a penal liability and any
Director or Member in default shall be liable to a fine. Also, for every debt incurred
during the period, the Directors and Members shall be jointly and severally liable.
a.Where a Company fails to affix its name at its offices, engrave its
name on its seal, or have its name accurately mentioned on all of
its stationery, publications and negotiable instruments as required
under the Code, the Company and every officer in default shall be
liable to a fine – S. 121 (2)
b.Where the Seal which does not have the Company’s name
engraved on it is used, the officer who used it shall be liable to a
fine – S. 121(1) c & S. 121(4)
c.Where a Company does not have its name on its negotiable
instrument and same is endorse, the officer who endorsed it shall
a.Where the Company fails to file its returns prior to transacting
business – S. 29(a)
a.When the Company breaches its Minimum Capital Requirement,
the Company and every officer in default becomes liable to a fine
for each day of the default – the Directors and members shall be
jointly and severally be liable for all debts and liabilities of the
Company.
a.Where a Company limited by Guarantee engages in profit making
ii. Violation of Legislation
➢ Fraud – during winding up
iii. Decisions of the Court
➢ Scheme to evade contractual liability
Gilford Motor Co. Ltd v Horne / Jones v Lipman
➢ Fraud – Amartey v SSB Bank /Morkor v Kuma
➢ Agency – companies in a group – Kuni v State Gold Mining Company
➢ Public Policy – Daimler v Continental Tyre
ULTRA VIRES - S.25
Any purported exercise of a power in excess of that provided in the Regulations or
engaging in an unauthorized business or transaction.
➢ Generally at law an Ultra Vires act is deemed to be void.
➢ Under Ghanaian Law however, an act deemed Ultra Vires does not by itself in
certain circumstances render the act invalid or void.
➢ The following acts though done in excess of the powers would not constitute Ultra
Vires;
a. Conveyances and Transfers by the Company.
b. Acts in pursuance of an Ordinary Resolution of members authorizing Directors to
exceed powers.
c. Third party without notice who benefits from an Ultra Vires act.
➢ The Court may in certain instances intervene to prevent or remedy Ultra-Vires
transactions;
a. Upon the application of a Member, Debenture holder secured by a floating charge
grant;
i. An Injunction to prohibit Ultra Vires transaction.
ii.An Order to set aside the performance of a contract.
iii. Compensation to the Company or parties to the Contract for loss or damage
sustained by the setting aside or prohibition of the performance of the
Contract.
b. Restrain a threatened breach of duty
c. Order the recovery of property from the Directors of the Company
d. Provide remedy against oppression
THE RULE IN TURQUAND’S CASE
➢ This Rule seeks to provide a certain measure of protection to third parties
who deal with the Company vis-a-vis the doctrine of Ultra Vires.
➢ The strict adherence or application of the Ultra Vires rule would mean that
any third party, without knowledge that the person representing the
Company were acting Ultra Vires cannot proceed against the Company, or
in other words the Company cannot be held liable.
ASHBURY RAILWAY CARRIAGE & IRON CO. V RICHIE
➢ The Rule in Turquand’s case is to the effect that third parties
are not
required to inquire to ascertain if all internal processes and procedures of
the Company have been complied with;
➢ and that where a Company is regulated by an Act of Parliament, and its
Regulations are filed in a designated public office, it is incumbent on
persons dealing with the Company to read the Regulations and the Act;
➢ to ascertain whether the proposed transaction is consistent with the
Regulations and the Act;
➢ but the third party needs not inquire into the regularity of the internal
proceedings, but is entitled to assume that all is being done regularly.
➢ ROYAL BRITISH BANK V TURQUAND
➢ The logic of the Rule is to prevent an unnecessary delay or total stagnation
of commercial transactions where for each transaction third parties would
have to inquire, ascertain and satisfy themselves that indeed all internal
rules of the Company have been complied with.
➢ To mitigate abuse, the law itself placed some limitations on the Rule in
Turquand’s case as follows;
➢ i. If a person has notice that the proposed transaction is inconsistent with the
Regulations or registered documents of the Company, he is affected by the
notice and thus cannot come under the Rule.
HOWARD V PATENT IVORY MANUFACTURING CO.
➢ A Director cannot rely on the Rule so as to obtain its protection.
➢ The Rule does not apply where the requisite signatures are forged.
➢ Where the Director acting for the Company was doing so in his ostensible
authority even though he had no actual authority
LOCKYER V BUCHAREST PROPERTIES LIMITED
➢ The Rule in Turquand’s case has received statutory recognition in Ghana in
S.202(6) of the Companies Act which stipulates that “ No person dealing
with a Company in good faith or registering any disposition of, or title to
property shall be concerned to see whether the conditions in S.202(6) have
been fulfilled and the provisions of Sections 139-143 of this Code shall
apply to any transaction of the type referred to in this section
notwithstanding that such conditions have not been fulfilled”
➢ Section 142 of the Companies Act allows parties dealing with the Company
to make the following assumptions;
➢ i. That the Company’s Regulations have been complied with.
➢ ii. That every person described in the Company’s filed Particulars as Director,
Managing Director or Secretary of the Company has been duly appointed
and has authority to exercise all the powers which by custom may be
exercised by the Director, Managing Director or Secretary.
➢ iii. That the Company’s Secretary, or any other officer who has authority to
issue or certify documents has the authority to warrant the genuineness of
such documents.
➢ iv. That any document is deemed sealed by the Company if the document
bears what appears or purports to be the Company’s seal attested by the
signatures of two persons who may be taken or assumed to be the
Company’s Director and Secretary.
➢ BARCLAYS BANK V PERSEVERANCE TRANSPORT SERV.
LTD/CHALLERAMS & SONS V HALABI/CUDJOE V CONTE
➢ A Company is still liable if the signature is forged or the document is forged
– S.143
➢ A person shall however not be entitled to any of the assumptions if;
➢ That person has actual knowledge or notice to the contrary.
➢ Having regard to the person’s position or relationship with the Company he
ought to have known the contrary.
➢ A person can equally not assume that the functions of a Committee have
been delegated to an individual simply because the Company’s Regulations
permit that.
ORGANS OF A COMPANY
➢ A Company upon incorporation attains a separate legal status and is viewed and
deemed by the law as a person, albeit an artificial person. To be able to function as
a person, the Company has to act through others, and it is these entities that we
shall refer to as the organs of the Company.
➢ A Company acts through;
i. Members – in general meetings
ii. Directors – through the Board of Directors
iii. Officers and Agents – appointed by Members or Directors.
I. MEMBERS
a. Who are Members – S.30
➢ The Members of a Company comprise;
i. Persons who have subscribed to the Regulations of the Company;
ii. Persons who agree to be members of the Company and whose names are entered
in the Register of members; Shareholders
subscribers
➢ They are the original or founding members whose names are contained in
the regulations.
➢ They are there at inception;
➢ With respect to companies registered with shares, the law requires that
each subscriber takes at least one share; and become shareholders upon
incorporation.
➢ Payment for shares and entering of names in the register are not conditions
for membership because, “until the company is formed, no register can
be made, and until there are some members the company cannot be
formed”
➢ A key distinction between subscriber and others is that a subscriber is a
member whether or not his name is entered in the register; others need to
be entered in the register to be members.
MEMBERSHIP BY AGREEMENT
➢ Membership by Agreement involves three elements depending on whether
the company is registered with shares;
➢ i. Agreement to become a member
➢ Compliance with terms of membership
➢ Simple offer and acceptance suffices
➢ Letter of allotment
➢ ii. Directors issue shares
➢ New or unissued shares
➢ iii. Entry of name in the register
➢ Transfers/ Operation of law
EVIDENCE OF MEMBERSHIP
➢ Regulations
➢ Register of members
➢ Entries to be made within 28 days
➢ Share Certificate
➢ Applicable to private companies and public companies not listed
➢ Dematerialisation – Central Securities Depository Act, 2007 (Act 733)
➢ Permits public company to issue shares or debentures in uncertificated or
dematerialised form; or convert to uncertificated securities
➢ Prohibits the issue of certificate in respect of a dematerialised security.
Members Rights
A fully paid up member of a Company has the following enforceable individual
rights;
i. To receive notice of general meetings and accompanying statutory reports;
ii. To attend general meetings or to appoint a proxy to represent him;
iii. To speak at general meetings;
iv. To vote on any resolution at general meetings;
v. To have his name and shareholding entered in the members register and to
prevent unauthorized alteration of same;
vi. To receive declared dividends or that shall become due under the Regulations;
vii.To exercise preemption rights;
viii.To have his capital returned to him in proper order of priority upon winding up or
Members Rights
i. To transfer his shares unless restricted by the Regulations;
ii. Not to have his financial obligations increased without his consent;
iii. To inspect the Companies Register relating to Members, Debentures,
Mortgages and Charges.
iv. To obtain a copy of the Regulations;
v. To
recover
compensation
from
Promoters
and
Directors
for
misrepresentation;
vi. To obtain a refund of money paid for shares which are not allotted;
vii.To resort to the Court for redress on matters relating to his right as a
member of the Company;
viii.To determine who should manage the affairs of the Company.
MEMBERS LIABILITY
Members are liable to contribute the balance of the amount payable in
respect of shares prior to winding up.
i. In the event of winding up, past members are liable if winding up
occurs within one (1) year of their ceasing to be members and
where the contributions of present members are insufficient to meet
the debts, liabilities, costs, charges and expenses of winding up.
ii. In any event, for limited liability companies, the contribution by past
and present members is limited to unpaid shares.
Termination of Membership
A person’s membership of a Company is terminated under any of the
following;
i. Valid transfer of Shares
ii. Operation of law eg. Nationalization, Receivership
iii.Forfeiture of shares for non payment
iv.Death.
Members Register
Every Company must keep a Register of its members which must contain the
particulars of the members, the number of shares held, remaining amount payable, if
any, the date on which entered as a member and the date on which once ceased to
be a member.
Members Meetings
➢ The Companies Act recognizes two (2) basic meetings of members;
i. General Meetings; and
ii. Class Meetings.
➢ We shall however limit ourselves to General Meetings.
➢ There are two (2) types of General Meetings; Annual General Meeting and
Annual General Meeting
• It is held every year and not later than fifteen (15) months from the last time it was held.
• Auditors and Members who are eligible to attend and vote may agree in writing to dispense with
an Annual General Meeting.
• The Company shall at least twenty-one (21) days before the Annual General Meeting dispatch
the following documents to Members and Debenture holders; Profit and Loss Account, Balance
Sheet, Group Accounts, if any, Director’s Report, and Auditors Report on the financials.
• The Ordinary Business of the Annual General Meeting comprises;
a. Declaration of Dividends;
b. Consideration of the Company’s Accounts and the Director’s and Auditor’s Reports;
c. Electing Directors to replace those retiring;
d. Fixing the remuneration of Auditors;
e. Removing and Appointing Auditors and Directors.
Extra-Ordinary General Meeting
• May be convened by Directors when they think fit or by any Director if
there are insufficient Directors in Ghana to form a quorum.
• May be convened by Directors of a Private Company upon the
requisition in writing and signed by any two (2) or more members or a
single member with at least ten percent (10%) shares. Within seven
(7) days of receipt, a meeting date must be fixed for the meeting to be
held within twenty-eight (28) days.
• May be convened by Requisitionists upon failure by the Directors of a
Private Company. Meeting ought to be held within four (4) months.
• May be convened by Directors of a Public Company upon the
requisition in writing and signed by a Member who holds five percent
(5%) of the shares of the Company. Within twenty-eight (28) days of
receipt, a date must be fixed for a meeting to be held within twentyeight (28) days.
• May be convened by Requisitionists upon failure by the Directors of a
Public Company. Meeting ought to be held within four (4) months.
i. Who may convene General Meetings ?
➢ General Meetings may be convened by;
a.Directors.
b.Members.
c. The Registrar – when AGM not held in normal course.
d.Court – where it is impractical to call a meeting.
▪ On the application of the Registrar
▪ On the application of any Director
▪ On the application of a member
Grounds for the court’s intervention
➢ Statutory requirement to hold an annual general meeting.
➢ To enable majority shareholder exercise his contractual and
statutory rights – in Re El Sombrero
➢ To deny the minority veto power – in Re Opera Photographic
➢ Equality of votes :▪ Court will not intervene with equal voting rights – Ross v Telford
➢ Class Rights – Harman v BML Group
➢ Where there is fear of violence – British Union for the abolition
of vivisection.
➢ Meetings are communicated through notices to all Members for a minimum
period of twenty-one (21) days – S.152.
➢ However for a Special Resolution to liquidate the Company, Seven (7) days
notice is sufficient.
➢ The Notice must contain sufficient information as to nature of business to be
transacted, any resolutions, the place and time.
Quorum (minimum number for meeting)
General Meetings may only commence with a quorum, but meetings may still
proceed if quorum is lost thereafter.
➢ The following shall constitute a quorum in the absence of any by the
Regulations;
a. One (1) member, if the Company has only one member.
b. In any other case, two (2) people in person or by proxy.
c. By one (1) member holding more than 50% of the voting rights of all
members.
d. At an adjourned meeting, when the previous meeting was adjourned due to
lack of quorum, if a quorum is not attained within half an hour of the stated
Proxy – S.163
➢ Proxy has two meanings in the Companies Act; first it refers to the
agent of a member appointed to attend a meeting on his behalf;
secondly, it refers to the document by which the agent is appointed
Voting – S.170
➢ Voting by members can be done in three (3) ways;
a. Show of hands.
b. Polling – demanded by chair; three (3) members or 5% voting right.
c. Postal ballot in lieu of meeting.
Resolutions – S.168
➢ There are three (3) types;
a. Ordinary Resolution – Simple Majority
b. Special Resolution – 75% with due notice specifying it as a
special resolution.
c. Written Resolution – signed by all members entitled to attend
and vote