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What are the two documents required for incorporation of a company?
What are the two documents required for incorporation of a company?
Articles of Association and Memorandum of Association
Which of the following must the Memorandum of Association of a company include?
Which of the following must the Memorandum of Association of a company include?
In Ghana, companies are restricted in the activities they wish to carry out.
In Ghana, companies are restricted in the activities they wish to carry out.
False
In Ghana, a company must pay a nominal fee for a search by the Registrar's Office to find out whether the proposed name ____________.
In Ghana, a company must pay a nominal fee for a search by the Registrar's Office to find out whether the proposed name ____________.
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What types of companies are listed in Section 7 (1) of Act 992 in Ghana?
What types of companies are listed in Section 7 (1) of Act 992 in Ghana?
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Company limited by Guarantee is suitable for non-profit-making bodies.
Company limited by Guarantee is suitable for non-profit-making bodies.
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A _____ is a body corporate formed outside the Republic which has an established place of business in the country.
A _____ is a body corporate formed outside the Republic which has an established place of business in the country.
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What section permits a company to adopt, alter, amend, and revoke its constitution by a special resolution?
What section permits a company to adopt, alter, amend, and revoke its constitution by a special resolution?
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Match the following case examples with their descriptions:
Match the following case examples with their descriptions:
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What are the two methods of incorporation mentioned in the content?
What are the two methods of incorporation mentioned in the content?
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What information is required in an application for incorporation according to Section 13? (Select all that apply)
What information is required in an application for incorporation according to Section 13? (Select all that apply)
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After incorporation, the company has separate legal personality from its members.
After incorporation, the company has separate legal personality from its members.
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After incorporation, the corporate property belongs to the company and not its __________.
After incorporation, the corporate property belongs to the company and not its __________.
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Match the following advantages of incorporation with their descriptions:
Match the following advantages of incorporation with their descriptions:
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What does a company gain by incorporating in terms of borrowing powers?
What does a company gain by incorporating in terms of borrowing powers?
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Under what circumstances may the corporate veil be lifted?
Under what circumstances may the corporate veil be lifted?
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A company without any membership can still legally operate.
A company without any membership can still legally operate.
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What is the significance of general meetings in a company?
What is the significance of general meetings in a company?
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In Newborne v. Sensolid, Newborne signed a letter to sell __ to the defendant.
In Newborne v. Sensolid, Newborne signed a letter to sell __ to the defendant.
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When was the first British legislation on companies passed?
When was the first British legislation on companies passed?
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What types of companies are classified under the mode of ownership?
What types of companies are classified under the mode of ownership?
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What was the Gold Coast Company Ordinance of 1907 a reproduction of?
What was the Gold Coast Company Ordinance of 1907 a reproduction of?
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Company law is derived from formal enactment and custom.
Company law is derived from formal enactment and custom.
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The 1st Schedule of the Companies Act, 2019 (Act 992) defines a company as 'a body formed and registered under this __.'
The 1st Schedule of the Companies Act, 2019 (Act 992) defines a company as 'a body formed and registered under this __.'
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Under the Companies Act, what are the 4 types of companies governed by the Act?
Under the Companies Act, what are the 4 types of companies governed by the Act?
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What are the specific thematic areas covered by the Companies Act of 2019 (Act 992)?
What are the specific thematic areas covered by the Companies Act of 2019 (Act 992)?
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The Companies Act imposes penalties for defaults and ensures compliance.
The Companies Act imposes penalties for defaults and ensures compliance.
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What is the purpose of an Annual General Meeting (AGM)?
What is the purpose of an Annual General Meeting (AGM)?
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Who may convene general meetings?
Who may convene general meetings?
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Directors must hold an Annual General Meeting every year.
Directors must hold an Annual General Meeting every year.
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Without a ___, no valid resolution can be passed and no business can be transacted validly.
Without a ___, no valid resolution can be passed and no business can be transacted validly.
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Match the following types of resolutions with their descriptions:
Match the following types of resolutions with their descriptions:
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What rights does a shareholder have? (Select all that apply)
What rights does a shareholder have? (Select all that apply)
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What are the two types of shares in Ghana?
What are the two types of shares in Ghana?
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A preference share entitles its holder to any right to participate beyond a specified amount of money in any distribution.
A preference share entitles its holder to any right to participate beyond a specified amount of money in any distribution.
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A cumulative preference share entitles its holder to receive his full dividends as declared for that and previous periods before dividends are payable to others. No dividend shall be payable on any ______ ranking subsequent thereto until all arrears of the fixed dividend have been paid.
A cumulative preference share entitles its holder to receive his full dividends as declared for that and previous periods before dividends are payable to others. No dividend shall be payable on any ______ ranking subsequent thereto until all arrears of the fixed dividend have been paid.
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Match the type of debenture with its description:
Match the type of debenture with its description:
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Study Notes
Company Law
- The development of company law in Ghana is linked to the historical development of company law in Britain.
- The first British legislation on companies was passed in 1844 (Registration, Incorporation and Regulation of Joint Stock Companies Act, 1844).
- The Gold Coast Company Ordinance of 1907 was the first general law on companies in Ghana, which was a reproduction of the 1862 English Companies Act.
- In 1958, the Government appointed Prof. Gower to review the Gold Coast Companies Ordinance of 1907, which led to the Companies Code of 1963 (Act 179).
- Act 179 regulated the activities of companies in Ghana from 1963 to August 2019.
- The new Companies Act, 2019 (Act 992) was introduced to improve corporate governance standards and draw on international best practices.
Nature of Company
- A company is an association of persons formed for the purpose of an undertaking or business carried on in the name of the association.
- A company may be classified as:
- Chartered (formed by a grant from the government)
- Statutory (formed by an Act of Parliament)
- Registered (incorporated under the Companies Act)
- The 1st Schedule of the Companies Act, 2019 (Act 992) defines a company as “a body formed and registered under this Act”.
Classification of Companies
- Companies can be classified based on:
- Object or specific business undertaking (e.g., financial institutions, leasing companies, insurance companies)
- Mode of ownership (e.g., joint venture, affiliated, associated)
- Extent of liability (limited or unlimited)
- Mode of formation and legalization (e.g., partnership, sole proprietorship, limited liability)
Company Law
- Company law can be defined as the written body of rules and guidelines that govern the formation, operation, and dissolution of companies.
- Company law is a single document that governs and regulates the formation of companies in Ghana by incorporation.
- It is a national law that belongs to private law branches, but also has aspects of public law.
Scope of the Companies Act, 2019 (Act 992)
- The Act covers the following thematic areas:
- Formation and dissolution of companies
- Requirements for companies to commence business
- Rights and duties of members, directors, officers, and auditors
- Raising, disbursing, accounting, and auditing of funds and capital
- Supervision of corporate affairs by the executive (Registrar) and the judiciary (courts)
Objectives of the Companies Act
- To enhance the position of members and ensure greater participation in the governing of companies
- To provide for greater accountability by fiduciaries (e.g., directors, officers, receivers, managers, liquidators, auditors, and promoters)
- To protect the general public, particularly creditors and investors
- To take legal action against offenders for non-compliance with the Act's provisions
- To ensure compliance with the Act's provisions and protect the interests of persons in employment relationships with companies
Sources of Company Law
- The sources of company law in Ghana include:
- The Constitution
- Enactments (e.g., Companies Act, 2019)
- Rules and Regulations
- Existing law
- Common law (including judicial precedents)
- Equity
- Customary law
Legislative Source (Statutes/Decrees)
- Enactments by Parliament and decrees made by military regimes that are still in force
- The Ghana Companies Act, 2019 (Act 992) is the primary legislative source of company law in Ghana
- Other relevant statutes that have special provisions regulating business associations and the conduct of business
Statutory Instrument (LI) as Supplementary Source
- Regulations made by ministries and other authorities under power conferred by Parliament
- Examples of such regulations include:
- Companies (Prescribed Forms) Instrument, 1963 (L.I. 289)
- Registration of Business Names Regulations, 1974 (L.I. 982)
- Stock Exchange (Ghana Stock Exchange) Membership Regulations 1990 (L.I. 1510)
Common Law Source (Judicial Precedents)
- Examples of judicial precedents that have shaped company law in Ghana include:
- Salomon v Salomon & Co. (1897)
- Trevor v Whitworth (1887)
- Ewing v Buttercup Margarine Co. Ltd. (1917)
- Royal British Bank v Turquand (1855)
- Foss v Harbottle (1843)
Formation of a Company
- The documents required for incorporation in Ghana include:
- Application form
- Memorandum of Association
- Articles of Association
- Names and particulars of first directors
- Names and particulars of each subscriber
- Names and particulars of proposed company secretary
- Names and particulars of proposed company auditor
- Names and particulars of each beneficial owner
Memorandum of Association
- The Memorandum of Association regulates a company's external activities and should include the following clauses:
- Name of the company
- Objects
- Registered Office(s) and domicile
- Names and particulars of first directors### Incorporation of Companies
Required Documents for Incorporation
- A company's name must be stated on the company's seal, business letters, negotiable instruments, and order for goods.
- The name must indicate the type of company (e.g. Ltd or PLC).
- The Registrar can direct a change of name if it is found to be misleading or undesirable.
- A company may appeal to the court against a directive to change its name.
The Name Clause
- A company's name must be affixed outside every office or place of business.
- If a company fails to change its name within 6 weeks of a directive, the Registrar can change the name in the Register of companies.
- The defaulting company and its directors are liable to pay an administrative penalty.
Object Clause
- The object of a company is its authorised business.
- The object must not be illegal or against public policy.
- Companies are not required to state their authorised business or objects in the application for registration or the company's constitution.
Types of Companies
- Companies limited by shares (liability of members limited to unpaid share capital)
- Companies limited by guarantee (liability of members limited to amount undertaken to contribute to assets in the event of winding up)
- Unlimited companies (no limit on the liability of members)
- External companies (companies formed outside Ghana with an established place of business in Ghana)
Legal Effect of a Constitution
- A company's constitution binds the company, its members, and officers to the same extent as if it had been signed and sealed by each of them.
- The constitution creates rights and obligations for the company, its members, and officers.
Alteration of Constitution
- A company's constitution can be altered by a special resolution.
- Alterations must be made in good faith and in the interest of the company.
- Alterations cannot conflict with a court order or require a member to take more shares, increase their liability, or restrict their right to transfer shares.
Incorporation of Companies
- A company is incorporated by submitting an application for incorporation in the prescribed form to the Registrar.
- The application must include the company's name, type, nature of business, address of the registered office, and details of the subscribers, directors, secretary, and auditor.
- The Registrar issues a certificate of incorporation upon satisfaction that the application complies with the Act.
Advantages of Incorporation
- A company becomes a separate legal entity with its own powers and liabilities.
- The company can own assets and enter into contracts.
- The company has perpetual succession, meaning it continues to exist even if its members change.### Advantages of Incorporation
- Death of a member does not automatically bring the company to an end
- Company has the capacity to:
- Enter into contracts with third parties through its personnel
- Sue and be sued in its own name (legal action)
- Borrow money (borrowing powers) - banks prefer dealing with companies than natural human beings
- Transfer shares (especially with a public company) - not permitted under partnership
- Decision making is improved due to the need for diverse ideas and notification of all members on important decisions
- Company cannot be regarded as an agent, nominee, or trustee of the members (no agency relationship)
Case Examples
- Salomon v. Salomon & Co. - the company was validly formed and distinct from Salomon
- Morkor v. Kuma - the CEO was separate from the company and the company was responsible for its own debts
Ownership of Company Assets
- After incorporation, the corporate property belongs to the company and not its members
- The property a member has in the company is their shares
- Example: Macura v. Northern Assurance - the plaintiff had no insurable interest in the forest after selling it to the company
Perpetual Succession
- A company can exist in perpetuity if professionally run
- The company must have at least two directors; if not, the existing director and each member shall be liable for any loss
- Section 41 and 171 of the Act are crucial in this regard
Legal Action after Incorporation
- The company has the capacity to sue and be sued in its own name
- Legal documents shall be served at the registered office of the company (Section 291)
Borrowing Powers/Raising of Capital
- The company's ability to borrow money is enhanced
- Only companies can create debentures (acknowledgement of indebtedness)
- Debentures can be fixed or floating
Disadvantages of Incorporation
- Expenses incurred (e.g., service of promoters, legal advisers, auditors, accountants, and registration)
- Loss of privacy (e.g., involvement of the public, documents kept with Registrar General's Department)
- Loss of control (members lose control over the company's business)
- Decision making may take time due to consulting boards, members, etc.
- Lifting the veil (courts could ignore distinct legal personality)
- Double taxation (members suffer from double taxation)
Company Promoters
- A person engaged or interested in the formation of a company
- They are responsible for starting the company
- Definition: S.10(1) of the Act
- Examples: Twycross v. Grant CJ Cockburn
Duties of Promoters
- Until the company's capital has been raised, the promoter shall:
- Stand in a fiduciary relationship with the company
- Act in utmost good faith towards the company
- Compensate the company for losses incurred
- Account and not make secret profit
- Strict disclosure requirements to all directors and members at a general meeting
Remedies
- In breach of fiduciary duties, there are remedies such as:
- Rescission of contract made with promoter
- Account for secret profit
- Damages for breach of fiduciary duty
Pre-Incorporation Contracts
- Refers to contracts made before the company comes into existence
- Common Law Position: legal nullity (Kelner v. Baxter)
- Modified in England (Section 51 of the Companies Act of 2006)
- Ghanaian Position: ratification of pre-incorporated contracts by the company within 18 months after its incorporation (Section 11 of Act 992)
Corporate Veil
- Doctrine: separate legal entity and individual members/directors are not personally liable
- Lifting the veil (piercing the veil): exceptions to the Salomon rule
- Circumstances under which the veil may be lifted:
- By Statute (e.g., Companies Act, other legislation)
- By the courts when it is just and in public interest to do so (e.g., fraudulent trading, evading of contractual obligations, agent company, tax avoidance/evasion)
Meetings
- Importance of meetings: decisions relating to the management of the company have to be taken through certain resolutions
- Types of meetings:
- General meetings (e.g., Annual General Meeting (AGM), Extraordinary General Meeting (EGM))
- Class meetings
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Description
This quiz covers the fundamentals of company law, including its history, nature, and scope. It is a part of the MAS 354 course at Kwame Nkrumah University of Science and Technology. Test your knowledge of company law and its applications.
