Company Law 1-10 PDF

PARTNERSHIP Definition and Formation of Partnership Section 3 of the Incorporated Private Partnership Act 1962, (Act 152), defines a partnership Partnership & Company Law 1  PARTNERSHIP CONTINUES as an association of two to twenty individuals carrying on business joint...

PARTNERSHIP Definition and Formation of Partnership Section 3 of the Incorporated Private Partnership Act 1962, (Act 152), defines a partnership Partnership & Company Law 1  PARTNERSHIP CONTINUES as an association of two to twenty individuals carrying on business jointly for the purpose of making profits. Partnership & Company Law 2  PARTNERSHIP CONTINUES Method of Registration of a Partnership Section 4(1) of Act 152 states that: “Registration under this Act shall be effected in the manner following, that is to say, Partnership & Company Law 3  PARTNERSHIP CONTINUES there shall be sent or delivered to the Registrar for registration a copy of the partnership agreement and a statement in the prescribed Partnership & Company Law 4  PARTNERSHIP CONTINUES form signed by all the partners containing the following particulars, namely; (a) The firm name of the partnership; Partnership & Company Law 5  PARTNERSHIP CONTINUES (b) The general nature of the business; (c) The address and Post Office Box number of, Partnership & Company Law 6  PARTNERSHIP CONTINUES (i) The principal place of business of the partnership; and (ii) All other places in Ghana at which the business is carried on; Partnership & Company Law 7  PARTNERSHIP CONTINUES (d) The names and any former names, residential addresses and business occupations of the partners; etc. Partnership & Company Law 8  PARTNERSHIP CONTINUES Powers of the Registrar to deny a Partnership Registration In order for the Registrar to arrive at a credible and transparent decision Partnership & Company Law 9  PARTNERSHIP CONTINUES when exercising his powers to deny the registration of a Partnership under s. 4(2), he may under s. 4(3), Partnership & Company Law 10  PARTNERSHIP CONTINUES call upon any partner or former partner to supply such information as he shall think fit; and may require the Partnership & Company Law 11  PARTNERSHIP CONTINUES books and accounts of the partnership to be produced for his inspection. Partnership & Company Law 12  PARTNERSHIP CONTINUES Appeal against Decisions of Registrar A proposed partnership, denied registration by the Registrar, may appeal against such a decision to the High Court. Partnership & Company Law 13  PARTNERSHIP CONTINUES Evidence of Partnership Registration Upon registration, the Registrar shall certify under his seal that the firm has been registered and is incorporated and such certificate shall state Partnership & Company Law 14  PARTNERSHIP CONTINUES the names of the partners and that their liability is unlimited. The Registrar shall insert a notice in the Gazette stating the issue of the certificate and the terms thereof. Partnership & Company Law 15  PARTNERSHIP CONTINUES Corporate Personality of the Partnership Section 12(1) provides that, from the date of registration mentioned in the certificate of registration issued in accordance with section 6 of Act 152, Partnership & Company Law 16  PARTNERSHIP CONTINUES the firm shall be a body corporate under the firm name, distinct from the partners of whom it is composed, and capable forthwith of Partnership & Company Law 17  PARTNERSHIP CONTINUES exercising all the powers of a natural person of full capacity in so far as such powers can be exercised by a body corporate. Partnership & Company Law 18  PARTNERSHIP CONTINUES Winding up a Partnership Under s. 44 of Act 152, the Winding up of a partnership may be either, (a) as a result of insolvency proceedings under Partnership & Company Law 19  PARTNERSHIP CONTINUES the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) Partnership & Company Law 20  PARTNERSHIP CONTINUES against all the partners jointly; or (b) under an order of the Court; or (c) by voluntary liquidation by the partners. Partnership & Company Law 21  PARTNERSHIP CONTINUES Voluntary Winding up under Section 48 of Act 152 A firm may be wound up by way of voluntary liquidation by the partners if all the partners Partnership & Company Law 22  PARTNERSHIP CONTINUES therein so agree and send notification thereof in the prescribed form to the Registrar for registration. Partnership & Company Law 23  PARTNERSHIP CONTINUES Dissolution after winding up under Act 1015 When the Registrar is satisfied that the winding up of the affairs of the firm is complete, Partnership & Company Law 24  PARTNERSHIP CONTINUES unless the undertaking of the firm has been disposed of as a going concern to another partnership and the change duly registered in accordance with Act 1015. Partnership & Company Law 25  PARTNERSHIP CONTINUES The Registrar shall strike the firm off the register and notify the same in the Gazette. The firm shall then be deemed to be dissolved as at the date of the publication in the Gazette. Partnership & Company Law 26  PARTNERSHIP CONTINUES Appeals to the High Court against Dissolution Any firm struck off the register per the provisions of Act 1015, Partnership & Company Law 27  PARTNERSHIP CONTINUES shall have a right to appeal to the High Court against the decision of the Registrar in accordance with the provisions of Act 1015. Partnership & Company Law 28  BUSINESS ORGANIZATIONS When starting a business, it is important to select the most appropriate business organization. There are four main types of business organizations available in Ghana. Partnership & Company Law 1 BUSINESS ORGANIZATIONS CONTINUES These are: (a) Sole Proprietor/Trader; (b) Partnership; (c) Private Limited Company (Ltd); Partnership & Company Law 2 BUSINESS ORGANIZATIONS CONTINUES and the (d) Public Limited Company (plc) (including ‘listed companies’) Partnership & Company Law 3 BUSINESS ORGANIZATIONS CONTINUES Sole Proprietor/Trader As the name suggests, the sole trader operates alone and, as such, is the simplest form of business organization. Partnership & Company Law 4 BUSINESS ORGANIZATIONS CONTINUES REASONS FOR SOLE PROPRIETORSHIP This type of business requires less capital for start-up; suitable for traders who wish to have complete control over the business; Partnership & Company Law 5 BUSINESS ORGANIZATIONS CONTINUES the Sole trader can easily vary the ‘objects’ of the business without hustle; and flexible working hours. Partnership & Company Law 6 BUSINESS ORGANIZATIONS CONTINUES LIABILITY OF THE SOLE TRADER As the main requirement is basically the registration of a business, all that a prospective Sole trader has to do, Partnership & Company Law 7 BUSINESS ORGANIZATIONS CONTINUES is to register and carry on business as a Sole owner, bearing all the liabilities and debts, and as such, the liability of the sole trader is said to be total. Partnership & Company Law 8 BUSINESS ORGANIZATIONS CONTINUES OWNERSHIP & CONTROL OF A SOLE PROPRIETORSHIP As the Sole trader operates alone, they have complete control over their business and are answerable to no one in the decisions which they take. Partnership & Company Law 9 BUSINESS ORGANIZATIONS CONTINUES ACCOUNTABILITY & REGULATION OF A SOLE PROPRIETORSHIP There is very little regulation and official accountability associated with sole trader status. Partnership & Company Law 10 BUSINESS ORGANIZATIONS CONTINUES Sole Traders are not required to register with the Registrar General Department, particularly, where the Sole proprietor is carrying on business in his own name. Partnership & Company Law 11 BUSINESS ORGANIZATIONS CONTINUES PARTNERSHIP LIABILITY OF A PARTNERSHIP Just like the sole proprietor, there is no distinction between the assets of the partnership and the assets of the individual partners. Partnership & Company Law 12 BUSINESS ORGANIZATIONS CONTINUES Therefore, the partners can be pursued personally for the debts of the partnership. Partnership & Company Law 13 BUSINESS ORGANIZATIONS CONTINUES However, as a separate and distinct corporate body, should a partner incur a private debt, the partnership assets shall not be liable to settle that debt. Partnership & Company Law 14 BUSINESS ORGANIZATIONS CONTINUES OWNERSHIP & CONTROL OF A PARTNERSHIP A Sole trader is accountable only to themselves but partners are accountable to each other Partnership & Company Law 15 BUSINESS ORGANIZATIONS CONTINUES and so must agree on decisions affecting the operation of the partnership. Ownership and control of the business, is therefore in the hands of the partners collectively Partnership & Company Law 16 BUSINESS ORGANIZATIONS CONTINUES ACCOUNTABILITY & REGULATION OF A PARTNERSHIP Apart from registering the Partnership Agreement, there is relatively little accountability Partnership & Company Law 17 BUSINESS ORGANIZATIONS CONTINUES or regulation attached to a partnership and no requirement to file reports and accounts with any Official Regulator. Partnership & Company Law 18 BUSINESS ORGANIZATIONS CONTINUES In Re Sasu Twum (Deceased); Sasu Twum v Twum, it was held that the Partnership Agreement must be registered, else it would be unenforceable. 1 GLR (HC) Partnership & Company Law 19 BUSINESS ORGANIZATIONS CONTINUES REGISTRATION OF A PARTNERSHIP UNDER ACT 151 Registration of a partnership under The Registration of Business Names Act, 1962 (Act 151), Partnership & Company Law 20 BUSINESS ORGANIZATIONS CONTINUES establishes a corporate body. As a separate and distinct corporate body, should a partner incur a private debt, the partnership assets shall not be liable to settle that debt. Partnership & Company Law 21 BUSINESS ORGANIZATIONS CONTINUES PRIVATE LIMITED (LTD) COMPANY The private limited company is the most common trading structure and is the central focus of company law. Partnership & Company Law 22 BUSINESS ORGANIZATIONS CONTINUES The company is created by a process of incorporation by individuals known as promoters. Partnership & Company Law 23 BUSINESS ORGANIZATIONS CONTINUES LIABILITY OF THE PRIVATE LIMITED COMPANY Unlike the sole trader and partnership, limited companies (both private and public) own assets which are Partnership & Company Law 24 BUSINESS ORGANIZATIONS CONTINUES entirely separate from those of the owners. Therefore, as a general rule, the creditors of the company can only pursue the company’s assets to settle any debt. Partnership & Company Law 25 BUSINESS ORGANIZATIONS CONTINUES They cannot pursue the personal assets of the owners, who are said to enjoy limited liability. Partnership & Company Law 26 BUSINESS ORGANIZATIONS CONTINUES OWNERSHIP & CONTROL OF THE PRIVATE LTD CO. Most limited companies are owned by ‘members’ who each own a number of shares in the company. Partnership & Company Law 27 BUSINESS ORGANIZATIONS CONTINUES For this reason, they are also known as ‘shareholders’. Control is in the hands of the directors. Partnership & Company Law 28 BUSINESS ORGANIZATIONS CONTINUES ACCOUNTABILITY & REGULATION OF THE PRIVATE LIMITED CO. Unlike a sole trader or partnership, trading by means of a private limited company involves a considerable degree of accountability and regulation. Partnership & Company Law 29 BUSINESS ORGANIZATIONS CONTINUES 1. Internal Control: Companies are accountable to their shareholders by means of regular meetings and also by means of a series of registers Partnership & Company Law 30 BUSINESS ORGANIZATIONS CONTINUES which the company is required to keep in order to comply with the provisions of the Companies Act 2019, (Act 992). Partnership & Company Law 31 BUSINESS ORGANIZATIONS CONTINUES 2. In addition to ‘internal’ accountability to its members, a company is also subject Partnership & Company Law 32 BUSINESS ORGANIZATIONS CONTINUES to ‘external accountability’ to the wider public. This process is supervised by the Registrar General Department. Partnership & Company Law 33 BUSINESS ORGANIZATIONS CONTINUES FUNCTIONS OF THE REGISTRAR GENERAL DEPARTMENT 1. Supervising the incorporation and dissolving of limited companies; Partnership & Company Law 34 BUSINESS ORGANIZATIONS CONTINUES 2. Collecting and storing certain information which companies are required to provide under the Companies Act and other legislation; and Partnership & Company Law 35 BUSINESS ORGANIZATIONS CONTINUES 3. Making this information available to the public. Partnership & Company Law 36 BUSINESS ORGANIZATIONS CONTINUES PUBLIC LIMITED COMPANY (Plc) The public limited company is the largest and most complex business organization. Partnership & Company Law 37 BUSINESS ORGANIZATIONS CONTINUES Like the private limited company, it is created by a process of registration but most public companies begin as private companies and are later re- registered to change their status. Partnership & Company Law 38 BUSINESS ORGANIZATIONS CONTINUES DIFFERENCE BETWEEN A PRIVATE LTD CO. & THE PUBLIC LTD CO. The crucial difference between private and public companies is that only the latter (public companies), may offer shares for sale to the public. Partnership & Company Law 39 BUSINESS ORGANIZATIONS CONTINUES LIABILITY OF THE PUBLIC LTD CO. Like private companies, there is a legal barrier between the assets of public companies and those of the shareholders. Partnership & Company Law 40 BUSINESS ORGANIZATIONS CONTINUES OWNERSHIP & CONTROL OF A PUBLIC LIMITED COMPANY As with private companies, there is a distinction between ownership Partnership & Company Law 41 BUSINESS ORGANIZATIONS CONTINUES (which lies with the shareholders) and control (which lies with the directors). Partnership & Company Law 42 BUSINESS ORGANIZATIONS CONTINUES ACCOUNTABILITY & REGULATION OF A PUBLIC LIMITED COMPANY Public companies are subject to a far greater burden of accountability and regulation than private companies. Partnership & Company Law 43 BUSINESS ORGANIZATIONS CONTINUES LISTED COMPANIES Those public limited companies which wish to trade their shares are ‘listed’ on the Ghana Stock Exchange. Partnership & Company Law 44 BUSINESS ORGANIZATIONS CONTINUES LIABILITY OF LISTED COMPANIES Shareholders in listed companies enjoy the same protection of ‘limited liability’ afforded to members of other public and private companies. Partnership & Company Law 45 BUSINESS ORGANIZATIONS CONTINUES OWNERSHIP & CONTROL OF LISTED COMPANIES As with public companies, there is a wide gap between the small number of directors and potentially thousands of shareholders Partnership & Company Law 46 BUSINESS ORGANIZATIONS CONTINUES and this is more pronounced in listed companies, where shareholders may live anywhere in the world. Partnership & Company Law 47 BUSINESS ORGANIZATIONS CONTINUES ACCOUNTABILITY & REGULATION OF LISTED COMPANIES Listed companies are subject to the most rigorous regulatory of all, with not only internal accountability to members Partnership & Company Law 48 BUSINESS ORGANIZATIONS CONTINUES and external accountability to the Registrar General Department, but also the additional demands of the Stock Exchange, Partnership & Company Law 49 BUSINESS ORGANIZATIONS CONTINUES which imposes its own rules and continuing obligations in order to maintain the integrity and reputation of the Market. Partnership & Company Law 50 BUSINESS ORGANIZATIONS CONTINUES THE END Partnership & Company Law 51  PROMOTERS DEFINITION OF PROMOTER Promoter is broadly defined to cover any person who is or has been engaged or interested in the formation of a company; s. 10(1) of Act 992. Partnership & Co. Law 1  PROMOTERS CONTINUES However, it excludes a person acting in a professional capacity for the persons who are engaged in procuring the formation of the company; s. 10(2) of Act 992. Partnership & Co. Law 2  PROMOTERS CONTINUES DUTIES AND LIABILITIES OF PROMOTERS The promoter has certain statutory and fiduciary duties; Act 992 provides that the promoter is to: Partnership & Co. Law 3  PROMOTERS CONTINUES 1.Stand in a fiduciary relationship to the company; s. 10(3)(a) 2.Observe utmost good faith towards the company; s.10(3)(b) Partnership & Co. Law 4  PROMOTERS CONTINUES 3. Compensate the company for any loss suffered by reason of any of the promoter’s above failings; s.10(3)(c); and Partnership & Co. Law 5  PROMOTERS CONTINUES 4. Account for profits for property or information in circumstances where such acquisition should have been for the company and not for the promoter; s. 10(4). Partnership & Co. 6  PROMOTERS CONTINUES Case law further imposes fiduciary duties on the promoter. See Erlanger v. New Sombrero Phosphate Co. Partnership & Co. Law 7  PROMOTERS CONTINUES The ratio decidendi of Erlanger v. New Sombrero Phosphate Co was a major factor in shaping the Ghanaian law on promoters and pre-incorporation contracts. Partnership & Co. Law 8  PROMOTERS CONTINUES In Ghana, where a contract is entered into between a promoter and the company, the company has the right to rescind the said contract; s. 10(5) of Act 992. Partnership & Co. Law 9  PROMOTERS CONTINUES Indeed, the company may rescind at any time and there is no limitation period on proceedings brought by the company; s. 10(6) of Act 992. Partnership & Co. Law 10  PROMOTERS CONTINUES Ratification of Contracts with Promoters Nothing forbids a company from entering into a contract with its promoter; and a contract between a promoter and the company may be ratified by the company. Partnership & Co. Law 11  PROMOTERS CONTINUES A contract between a promoter and the company may not be rescinded, and may withstand challenge, if the following conditions are present: Partnership & Co. Law 12  PROMOTERS CONTINUES 1. There is full disclosure by the promoter of all material facts known to him; and Partnership & Co. Law 13  PROMOTERS CONTINUES 2. The contract is entered into, or ratified by the board of directors if all the company’s directors are independent of the promoter; or Partnership & Co. Law 14  PROMOTERS CONTINUES 3. The contract is entered into, or ratified by all members of the company; or 4. The contract is entered into, or ratified by a general meeting at which neither Partnership & Co. Law 15  PROMOTERS CONTINUES the promoter nor shareholder of any shares in which the promoter is beneficially interested shall have voted on the resolution to enter or ratify that transaction. Partnership & Co. Law 16 PROMOTERS CONTINUES THE END Partnership & Co. Law 17 PRE-INCORPORATION CONTRACTS DEFINITION OF PRE-INCORPORATION CONTRACTS: A pre-incorporation contract is one that is made between persons other than Partnership & Co. Law 1 PRE-INCORPORATION CONTRACTS CONTINUES the subject incorporated company, in connection with the company, before incorporation. Partnership & Co. Law 2 PRE-INCORPORATION CONTRACTS CONTINUES Features of Pre-Incorporation Contracts There are three (3) main features of Pre-Incorporation Contracts. These are: Partnership & Co. Law 3 PRE-INCORPORATION CONTRACTS CONTINUES 1. Parties to the pre-incorporation contract 2. Subject-matter of the pre- incorporation contract 3. Chronology Partnership & Co. Law 4 PRE-INCORPORATION CONTRACTS CONTINUES The Common Law Position On Pre- Incorporation Contracts The traditional common law position on pre-incorporation contracts is expressed in the case of Kelner v Baxter. Partnership & Co. Law 5 PRE-INCORPORATION CONTRACTS CONTINUES OBSERVATIONS FROM KELNER v. BAXTER 1. The offer was to named individuals, albeit on behalf of a yet unformed company. Indeed, when the pre-incorporation Partnership & Co. Law 6 PRE-INCORPORATION CONTRACTS CONTINUES contract was executed, the promoters had no principal in existence and they could therefore not have been acting as agents; Partnership & Co. Law 7 PRE-INCORPORATION CONTRACTS CONTINUES 2. The acceptance of the offer was by the named individuals, albeit on behalf of a yet unformed company; Partnership & Co. Law 8 PRE-INCORPORATION CONTRACTS CONTINUES 3. The date of the purported ratification by the potential directors of the proposed company predated the complete formation of the company, Partnership & Co. Law 9 PRE-INCORPORATION CONTRACTS CONTINUES that is, the purported ratification was premature; and Partnership & Co. Law 10 PRE-INCORPORATION CONTRACTS CONTINUES 4. The agreement was to the effect that, by a certain date payment for the wine would be made. Partnership & Co. Law 11 PRE-INCORPORATION CONTRACTS CONTINUES The agreement was not made contingent on formation of the proposed company. Partnership & Co. Law 12 PRE-INCORPORATION CONTRACTS CONTINUES Contrast Kelner v. Baxter with Newborne v. Sensolid (Great Britain) Ltd. Partnership & Co. Law 13 PRE-INCORPORATION CONTRACTS CONTINUES Lord Denning in Phonogram Ltd v. Lane stated that: If there was an express agreement that the man who was signing was not to be liable, the section would not apply. Partnership & Co. Law 14 PRE-INCORPORATION CONTRACTS CONTINUES But, unless there is a clear exclusion of personal liability, s. 9(2) should be given its full effect. It means that in all cases such as the present, Partnership & Co. Law 15 PRE-INCORPORATION CONTRACTS CONTINUES where a person purports to contract on behalf of a company not yet formed, then however he expresses his signature Partnership & Co. Law 16 PRE-INCORPORATION CONTRACTS CONTINUES he himself is personally liable on the signature. Partnership & Co. Law 17 PRE-INCORPORATION CONTRACTS CONTINUES THE END Partnership & Co. Law 18  INCORPORATION FORMATION OF A COMPANY Section 1(1) of the Companies Act, 2019 (Act 992) provides that: Partnership & Company Law 1  INCORPORATION CONTINUES “Except as otherwise provided, this Act applies to companies formed in the Republic, whether before or after the commencement of this Act”. Partnership & Company Law 2  INCORPORATION CONTINUES Under s. 13(1) of Act 992, an application for incorporation shall be made in the prescribed form and delivered to the Registrar. Partnership & Company Law 3  INCORPORATION CONTINUES Under section 14(1) of Act 992, where the Registrar is satisfied that the application for incorporation of a company complies with this Act, Partnership & Company Law 4  INCORPORATION CONTINUES the Registrar shall, after payment of the prescribed fee, certify under the seal of the Registrar that the company is incorporated Partnership & Company Law 5  INCORPORATION CONTINUES and in the case of a limited liability company, that the liability of the members is limited. Partnership & Company Law 6  INCORPORATION CONTINUES BUSINESSES GOVERNED BY SPECIAL LEGISLATION Though the Act has a monopoly on the formation of companies, the regulation of Partnership & Company Law 7  INCORPORATION CONTINUES companies such as banking and insurance, may be governed by special legislation. Section 4 of Act 992 therefore provides that nothing in the Act Partnership & Company Law 8  INCORPORATION CONTINUES shall abrogate or affect any special legislation relating to companies carrying on business of banking, insurance or any other business from time to time subject to special regulation. The argument of Mensgold shredded! Partnership & Company Law 9  INCORPORATION CONTINUES FEATURES OF INCORPORATION 1.It is an artificial legal person 2.A company may also be prosecuted for criminal offences and it is criminally liable for certain acts Partnership & Company Law 10  INCORPORATION CONTINUES 3.It has a common seal 4.Perpetual succession, (potentially) Partnership & Company Law 11  INCORPORATION CONTINUES 5. The company is managed by directors passing resolutions at directors’ meeting. The powers of directors are collective Partnership & Company Law 12  INCORPORATION CONTINUES TYPES OF COMPANIES The Act has four broad categories of companies: (a) a company limited by shares; (b) a company limited by guarantee; Partnership & Company Law 13  INCORPORATION CONTINUES (c) an unlimited company; or (d) an external company Partnership & Company Law 14  INCORPORATION CONTINUES COMPANY LIMITED BY SHARES A company limited by shares is one where the liability of its members is limited to the amount, if any, that is unpaid on the shares respectively held by them (section 7(2)(a)). Partnership & Company Law 15  INCORPORATION CONTINUES COMPANY LIMITED BY GUARANTEE A company limited by guarantee is one where the liability of its members is limited to such amount Partnership & Company Law 16  INCORPORATION CONTINUES as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up (section 7(2)(b)). Partnership & Company Law 17  INCORPORATION CONTINUES UNLIMITED COMPANY An unlimited company does not have any limit on the liability of its members (section 7(2)(c)). Partnership & Company Law 18  INCORPORATION CONTINUES A PRIVATE LIMITED COMPANY A private company is one whose constitution contain a number of restrictions and prohibitions Partnership & Company Law 19  INCORPORATION CONTINUES EXTERNAL COMPANY An external company is a body corporate formed outside the Republic which has an established place of business in the country, section 329(2) of Act 992. Partnership & Company Law 20  INCORPORATION CONTINUES Attributes of an external company: There are two key attributes of an external company: First, it must be a foreign company (or other body corporate): and Partnership & Company Law 21  INCORPORATION CONTINUES second, it must have an established place of business in Ghana. Partnership & Company Law 22  INCORPORATION CONTINUES External companies are required to deliver to the Registrar within one month of the establishment of the place of business, the following documents for registration under section 330 of Act 992: Partnership & Company Law 23  INCORPORATION CONTINUES A copy of the certificate of incorporation and where applicable a copy of the constitution, charter, statutes, regulations, memorandum and articles, or Partnership & Company Law 24  INCORPORATION CONTINUES any other instrument constituting or defining the constitution of the company, in a language acceptable to the Registrar; Partnership & Company Law 25  INCORPORATION CONTINUES A statement duly notarised in the jurisdiction of origin of the company giving the following particulars regarding the company: Partnership & Company Law 26  INCORPORATION CONTINUES A statement duly notarised in the jurisdiction of origin of the company giving the following particulars regarding the beneficial owners of the company: Partnership & Company Law 27  INCORPORATION CONTINUES (i) the name; (ii) the nature of business or businesses or other main objects of the company, etc. Partnership & Company Law 28  INCORPORATION CONTINUES (i) the full name and any former or alternate name; (ii) the date and place of birth; (iii) the telephone number, etc Partnership & Company Law 29  INCORPORATION CONTINUES Features of a Private Limited Co. 1.The first feature of a private company is that it restricts the right to transfer its shares, if any section 7(5)(a): Partnership & Company Law 30  INCORPORATION CONTINUES 2. The second feature of a private company limits the total number of its members and debenture- holders to fifty section (7(5)(b): Partnership & Company Law 31  INCORPORATION CONTINUES 3. The third feature of a private company is that it is prohibited from making any invitation to the public to acquire its shares or Partnership & Company Law 32  INCORPORATION CONTINUES debentures or to deposit money for fixed periods or payable at call, whether bearing interest or not section 7(5)(c) and (d). Partnership & Company Law 33  INCORPORATION CONTINUES PUBLIC COMPANY A company which is not a private company is a public company; section 7(7). Partnership & Company Law 34  INCORPORATION CONTINUES CONVERSION OF PRIVATE COMPANIES TO PUBLIC COMPANIES There are three main differences between a private and a public company section 7(5), namely: Partnership & Company Law 35  INCORPORATION CONTINUES 1. A private company, if it has shareholders, is required to restrict the shareholders’ right to transfer their shares; Partnership & Company Law 36  INCORPORATION CONTINUES 2. A private company has a limited number of members and debenture holders. This limited number is not to exceed fifty persons; and Partnership & Company Law 37  INCORPORATION CONTINUES 3. A private company is prohibited from making invitations to the public to acquire its shares Partnership & Company Law 38  INCORPORATION CONTINUES or debentures or to deposit money with it for a fixed period or payable at call whether bearing or not bearing interest. Partnership & Company Law 39  INCORPORATION CONTINUES Conversion of Companies Limited by Shares to Companies Limited by Guarantee Companies limited by shares can convert to companies limited by guarantee. Partnership & Company Law 40  INCORPORATION CONTINUES However, companies limited by guarantee cannot be converted into companies limited by shares. Partnership & Company Law 41  THE VEIL OF INCORPORATION After incorporation of a company limited by shares or guarantee, the only liability the members/shareholders may be Partnership & Co. Law 1 THE VEIL OF INCORPORATION CONTINUES pursued for is any amount which remains unpaid on any shares which have been bought or amount guaranteed - partly paid. Partnership & Co. Law 2 THE VEIL OF INCORPORATION CONTINUES Definition of Corporate Personality The terms ‘Veil of Incorporation’ or ‘Corporate Veil’, are used to refer to the consequences of separate corporate personality. Partnership & Co. Law 3 THE VEIL OF INCORPORATION CONTINUES The concept of limited liability requires a distinction to be made between the assets of the individual shareholder and the assets of the company itself. Partnership & Co. Law 4 THE VEIL OF INCORPORATION CONTINUES For the company to be able to own its assets, it must have a legal capacity separate from its owners. Partnership & Co. Law 5 THE VEIL OF INCORPORATION CONTINUES In short, the separate legal status of a registered company provides it with an identity which is separate from that of its members, shareholders and employees. Partnership & Co. Law 6 THE VEIL OF INCORPORATION CONTINUES Establishment of the Doctrine of Corporate Personality The principle of a separate corporate personality was acknowledged by the House of Partnership & Co. Law 7 THE VEIL OF INCORPORATION CONTINUES Lords in Salomon v Salomon & Co Ltd, AC 22 (HL) where every effort was made, on behalf of creditors of a failed company, to impose Partnership & Co. Law 8 THE VEIL OF INCORPORATION CONTINUES liability of the company’s debts on its controlling shareholder. Partnership & Co. Law 9 THE VEIL OF INCORPORATION CONTINUES In that case the House of Lords held that Salomon’s debenture took priority over the other debts of the company as the company Partnership & Co. Law 10 THE VEIL OF INCORPORATION CONTINUES was a separate legal entity, completely distinct from its members. Partnership & Co. Law 11 THE VEIL OF INCORPORATION CONTINUES Therefore, the company could owe money to its members and, accordingly, the debenture in favour of Salomon was valid. Partnership & Co. Law 12 THE VEIL OF INCORPORATION CONTINUES Effect of Corporate Personality 1. The company can sue and be sued in its own right. Partnership & Co. Law 13 THE VEIL OF INCORPORATION CONTINUES 2. The company can be a party to contracts. For example, buy and sell goods and employ staff. Partnership & Co. Law 14 THE VEIL OF INCORPORATION CONTINUES 3. The company can continue to function after the death of a shareholder – perpetual succession. Partnership & Co. Law 15  THE VEIL OF INCORPORATION CONTINUES Macaura v Northern Assurance Co. Ltd AC 619 (HL) – a shareholder cannot make an insurance claim over timber which he sold to his company even Partnership & Co. Law 16 THE VEIL OF INCORPORATION CONTINUES though the policy is in his name. It is only the company which can take a policy over its assets in its own name and make claim on same. Partnership & Co. Law 17 THE VEIL OF INCORPORATION CONTINUES Lee v Lee’s Air Farming Ltd AC 12 (PC) - TheHouse of Lords held that, on the basis of Salomon, there was nothing to prevent the company as a separate legal entity from employing a shareholder. Partnership & Co. Law 18 THE VEIL OF INCORPORATION CONTINUES Lifting or Piercing the Veil of Incorporation The veil of incorporation is not caste in iron. Therefore, in some cases the veil will either be ignored, pierced, Partnership & Co. Law 19 THE VEIL OF INCORPORATION CONTINUES or lifted to saddle the members or shareholders of the company with liability beyond their unpaid shares. Partnership & Co. Law 20 THE VEIL OF INCORPORATION CONTINUES The corporate veil may be lifted in three main ways 1. By the Companies Act, 2019 (Act 992); 2. By other legislation; and Partnership & Co. Law 21 THE VEIL OF INCORPORATION CONTINUES 3. By the courts when it is just, equitable and in the public interest to do so (common law). Partnership & Co. Law 22 THE VEIL OF INCORPORATION CONTINUES Consequences of lifting the veil When the veil is lifted, the separate legal status of the corporation is disregarded and certain consequences follow. Partnership & Co. Law 23 THE VEIL OF INCORPORATION CONTINUES These include: (a) Civil liability of individuals (b) penal liability of individuals (fine) Partnership & Co. Law 24 THE VEIL OF INCORPORATION CONTINUES (c) tax liability imposed on others; (d) nullification or disregarding the transactions apparently entered into by the company. Partnership & Co. Law 25 THE VEIL OF INCORPORATION CONTINUES Act 992 allows for the corporate veil to be pierced or disregarded by permitting individuals and related companies of a subject company to Partnership & Co. Law 26 THE VEIL OF INCORPORATION CONTINUES be held responsible, whether jointly or severally, with the subject company, for acts done by or in the name of the subject company. Partnership & Co. Law 27 THE VEIL OF INCORPORATION CONTINUES Relevant Sections Section 41 – a company ceasing to have a member and carrying on business without at least one member. Partnership & Co. Law 28 THE VEIL OF INCORPORATION CONTINUES Section 171(2) & (3) - where a company carries on business for more than four weeks after the number of its directors falls below two Partnership & Co. Law 29 THE VEIL OF INCORPORATION CONTINUES Section 125(2) & (3) – use of company’s name and seal Partnership & Co. Law 30 THE VEIL OF INCORPORATION CONTINUES Section 8(2) and (4) - any company limited by guarantee carrying on business for the purpose of making profit. Partnership & Co. Law 31 THE VEIL OF INCORPORATION CONTINUES Other provisions - 8(3), 17(1), 82(3). Partnership & Co. Law 32 THE VEIL OF INCORPORATION CONTINUES Lifting the Veil of Incorporation by the Courts This is only done when it is just, equitable and in the public interest to do so (common law). Partnership & Co. Law 33 THE VEIL OF INCORPORATION CONTINUES Consider Adams v Cape Industries Ch 433 - refusal to lift the veil on grounds of single economic unit, façade and agency. Partnership & Co. Law 34 THE VEIL OF INCORPORATION CONTINUES 1. The Veil may be lifted by the Courts where there is Fraud and Improper Conduct Partnership & Co. Law 35 THE VEIL OF INCORPORATION CONTINUES Morkor v. Kuma (East Coast Fisheries Case) [1998-1999] SCGLR 620, (SC) - where it is shown that the Partnership & Co. Law 36 THE VEIL OF INCORPORATION CONTINUES company had been established to further fraudulent activities or to avoid contractual liability, the veil would be lifted. Partnership & Co. Law 37 THE VEIL OF INCORPORATION CONTINUES The corporate veil would be pierced by the court if the following conditions are met: If the court is satisfied that the company is the alter ego of a particular person; Partnership & Co. Law 38 THE VEIL OF INCORPORATION CONTINUES Improper business conduct; Willful misdeeds; Company used as a scheme to evade contractual obligations; Partnership & Co. Law 39 THE VEIL OF INCORPORATION CONTINUES Negotiating an agreement on ones’ own behalf; Securing an immediate personal benefit from a corporate transaction;Partnership & Co. Law 40 THE VEIL OF INCORPORATION CONTINUES To avoid trading with the enemy; and To treat a group of associated companies as one and not several. Partnership & Co. Law 41 THE VEIL OF INCORPORATION CONTINUES 2. The corporate veil may be lifted to prevent the deliberate evasion of a contractual obligation. Partnership & Co. Law 42 THE VEIL OF INCORPORATION CONTINUES Gilford Motor Co v. Horne Ch 935 (CA) - It was held that, the defendant had set up the company, not as a genuine business, Partnership & Co. Law 43 THE VEIL OF INCORPORATION CONTINUES but rather as a ‘sham’ or ‘façade’ to hide his intention to break the covenant with his former employers. Partnership & Co. Law 44 THE VEIL OF INCORPORATION CONTINUES Jones v. Lipman 1 WLR 832 – The court held that, the defendant company was the creature of the first defendant, a device and a sham, Partnership & Co. Law 45 THE VEIL OF INCORPORATION CONTINUES a mask which he holds before his face in an attempt to avoid recognition by the eye of equity” Partnership & Co. Law 46 THE VEIL OF INCORPORATION CONTINUES 3. The Veil of Incorporation may be lifted Pursuant to Other Legislation Partnership & Co. Law 47 THE VEIL OF INCORPORATION CONTINUES Fraudulent Trading – Section 117 - Corporate Insolvency and Restructuring Act, 2020 (Act 1015) – Partnership & Co. Law 48 THE VEIL OF INCORPORATION CONTINUES where in the course of official winding up, it appears that any of the corporation’s business has been carried on Partnership & Co. Law 49 THE VEIL OF INCORPORATION CONTINUES with intent to defraud the creditors of the corporation or for fraudulent purposes, the High Court on the application by appropriate persons Partnership & Co. Law 50 THE VEIL OF INCORPORATION CONTINUES may hold any such fraudulent any person personally. SEE ALSO SECTION 119 of Act 1015 Partnership & Co. Law 51 THE VEIL OF INCORPORATION CONTINUES Section 33 - BANKS AND SPECIALISED DEPOSIT TAKING INSTITUTIONS ACT (ACT) Partnership & Co. Law 52 THE VEIL OF INCORPORATION CONTINUES Doctrine of Corporate Personality and Groups of Companies By the doctrine of corporate personality, another company (holding company) Partnership & Co. Law 53 THE VEIL OF INCORPORATION CONTINUES can own a company (subsidiary) and be separate from it to take advantage of the principle of limited liability. Partnership & Co. Law 54 THE VEIL OF INCORPORATION CONTINUES It is yet to be conclusively decided whether the separate personalities of companies in a group of companies may be ignored Partnership & Co. Law 55 THE END Partnership & Co. Law 56 DIRECTORS Partnership & Company Law 1  DIRECTORS Directors are appointed to direct and administer the business of a company (Companies Act, 2019 Act 992, section 170 (1)). Partnership & Company Law 2  DIRECTORS CONTINUES “The conduct of a company’s business is the responsibility of the board of directors”. Okudjeto v Irani Brothers Partnership & Company Law 3  DIRECTORS CONTINUES Directors need not be called directors. They may be called for example, governors, council members, senate, regents, trustees, executive, management committee etc. Partnership & Company Law 4  DIRECTORS CONTINUES A person who is described as director of a company, whether the description is qualified by the word “local”, “special”, “executive” or Partnership & Company Law 5  DIRECTORS CONTINUES in any other way, shall be deemed to be held out as a director of that company. Partnership & Company Law 6  DIRECTORS CONTINUES There are two kinds of directors who may not be appointed but are saddled with the responsibilities of directors in the general sense of the word- Section 170 (2)a & (2)b Partnership & Company Law 7  DIRECTORS CONTINUES DE FACTO DIRECTORS – Persons who, although not duly appointed directors, hold themselves out as directors, or who allow themselves to be held out as directors. Commodore v. Fruit Supply (Ghana) Ltd 1 GLR 241 Partnership & Company Law 8  DIRECTORS CONTINUES SHADOW DIRECTORS – persons on whose directions or instructions the duly appointed directors are accustomed to act although not being duly appointed directors of a company. Partnership & Company Law 9  DIRECTORS CONTINUES Refer to the Quality Grain case Partnership & Company Law 10  DIRECTORS CONTINUES Duly appointed directors are not absolved from performing their duties even with the existence of de factor or shadow directors. Section 170 (3) Partnership & Company Law 11  DIRECTORS CONTINUES A director need not be a member or shareholder of the company except where the constitution of the company mandates it. Partnership & Company Law 12  DIRECTORS CONTINUES Where the company’s constitution requires a director to hold a specified share qualification, the director shall obtain the share qualification within two months Partnership & Company Law 13  DIRECTORS CONTINUES of his appointment or within any shorter period that is specified by the constitution - Section 174. Partnership & Company Law 14  DIRECTORS CONTINUES Number of Directors Companies shall have at least two directors, one of these directors being ordinarily resident in Ghana. - Section 171(1) Partnership & Company Law 15  DIRECTORS CONTINUES Appointment of Directors Persons to be appointed directors must consent in writing. The first directors of a company must be named in the application for incorporation Partnership & Company Law 16  DIRECTORS CONTINUES Types of Directors SUBSTITUTE DIRECTOR - A substitute director is one who is appointed to act as a director for another named director Partnership & Company Law 17  DIRECTORS CONTINUES and as his substitute in his absence. Appointed by the company – Section 180(1)&(2). Partnership & Company Law 18  DIRECTORS CONTINUES Except as ALTERNATE DIRECTORS - otherwise provided in the constitution of a company, a director may, appoint another director or any other person approved by a Partnership & Company Law 19  DIRECTORS CONTINUES resolution of the board of directors, as an alternate director to act as a director in respect of a period not exceeding six months Partnership & Company Law 20  DIRECTORS CONTINUES in which that director is absent from the Republic or unable for a reason to act as a director. Section 181(1) Partnership & Company Law 21  DIRECTORS CONTINUES Executive Director - A director who holds office or a place under the company other than the office of auditor. An executive director can get salary, commission, share of profits, Partnership & Company Law 22  DIRECTORS CONTINUES or participate in the company’s pension or retirement schemes. Eg a director who works as MD, production manager, secretary or accountant, is an executive director. Section 183 Partnership & Company Law 23  DIRECTORS CONTINUES Managing Director - is a director to whom other directors have entrusted to and conferred on any or all power(s) exercisable by the Partnership & Company Law 24  DIRECTORS CONTINUES directors with such terms and restrictions that the board of directors deem fit. Per Act 992 they can be one or more. Section 184 (a) Partnership & Company Law 25  DIRECTORS CONTINUES Every managing director is an executive director, but not every director is an executive director, and not every executive director is a managing director. Partnership & Company Law 26  DIRECTORS CONTINUES Whereas the feature of an executive director is that the director holds some other office or place with the company (except for being the company’s auditor), a managing director is the beneficiary of Partnership & Company Law 27  DIRECTORS CONTINUES delegated powers of the board to exercise some or all the board’s powers, whether conditionally or unconditionally. Partnership & Company Law 28  DIRECTORS CONTINUES Persons Disqualified from being Appointed as Directors (a) an infant; (b) a person adjudged to be of unsound mind; (c) a body corporate; Partnership & Company Law 29  DIRECTORS CONTINUES (d) a person who is prohibited from being a director or promoter as a result of an order made under Partnership & Company Law 30  DIRECTORS CONTINUES section 177 (restraining fraudulent persons from managing companies), so long as the order remains in force. Partnership & Company Law 31  DIRECTORS CONTINUES (e) an undischarged bankrupt, unless that bankrupt has been granted leave to act as director by the Court which adjudged that person as bankrupt. Partnership & Company Law 32  DIRECTORS CONTINUES Sanctions for Breach of Directors’ Qualification Requirements Where an unqualified person other than a body corporate, or a person of unsound mind, acts Partnership & Company Law 33  DIRECTORS CONTINUES as a director of a company or agrees to be appointed a director, that person commits an offence. Partnership & Company Law 34  DIRECTORS CONTINUES The constitution of a company may provide that, classes of persons additional to those provided in subsection (1) are incompetent to be directors of the company. Partnership & Company Law 35  DIRECTORS CONTINUES Vacancy in the Office of Director Vacancy: This may occur in the office of director either upon the expiry of the term to which Partnership & Company Law 36  DIRECTORS CONTINUES he is appointed to serve or through other means such as death, resignation, the director becoming disqualified or removal. Partnership & Company Law 37  DIRECTORS CONTINUES Casual Vacancy: A vacancy which occurs by any means other than by the term of office of the director expiring is called a casual vacancy. Partnership & Company Law 38  DIRECTORS CONTINUES The continuing directors or a general meeting may by ordinary resolution fill the position. A shareholder or creditor of the company may also appoint one or more persons as directors of the company. Partnership & Company Law 39  DIRECTORS CONTINUES Removal of directors A company may by ordinary resolution at a general meeting remove from office all or any of the directors despite anything in its constitution or in an agreement with the director. Partnership & Company Law 40  DIRECTORS CONTINUES Thirty-five (35) days prior notice of the proposed resolution to remove a director must be given to members. Partnership & Company Law 41  DIRECTORS CONTINUES On receipt of such notice, the company shall forthwith notify the director, Partnership & Company Law 42  DIRECTORS CONTINUES and the director concerned shall have the right to be heard on the resolution at the meeting and also to send to the company a written statement. Partnership & Company Law 43  DIRECTORS CONTINUES A director may be removed by members in a general meeting passing an ordinary resolution following the procedure spelt out under Section 176 Partnership & Company Law 44  DIRECTORS CONTINUES A director may be removed by a court order pursuant to Section 219. Partnership & Company Law 45  DIRECTORS CONTINUES Remedies Available to Removed Directors (a) compensation to which the director may lawfully be entitled under that agreement on the termination of the directorship, or Partnership & Company Law 46  DIRECTORS CONTINUES (b) damages if the removal from the directorship constitutes a breach of the service agreement. Partnership & Company Law 47  DIRECTORS CONTINUES Powers of Directors Directors are vested with all powers that are necessary and incidental to managing, directing and having superintendence over the affairs and business of a company. Partnership & Company Law 48  DIRECTORS CONTINUES Directors are not agents for the majority of shareholders, or even for all shareholders. Shareholders may not by ordinary, special or even Partnership & Company Law 49  DIRECTORS CONTINUES unanimous resolutions instruct and direct the directors as to how to exercise their exclusive powers. Partnership & Company Law 50  DIRECTORS CONTINUES Duties of Directors A director of a company stands in a fiduciary relationship towards the company and shall observe utmost good faith Partnership & Company Law 51  DIRECTORS CONTINUES towards the company in a transaction with or on behalf of the company. Partnership & Company Law 52  DIRECTORS CONTINUES A director of a company shall: (a) act in accordance with the constitution of the company; Partnership & Company Law 53  DIRECTORS CONTINUES (b) only exercise powers for the purposes for which the powers are conferred. (c) A director shall exercise independent judgment Partnership & Company Law 54  DIRECTORS CONTINUES (d) Directors are not to make secret profits or take bribes. (e) Directors are to keep proper accounts Partnership & Company Law 55  DIRECTORS CONTINUES Limitations on the Powers of Directors Despite their broad powers to direct and administer the affairs of a company, there are several things that directors are proscribed from doing. Partnership & Company Law 56  DIRECTORS CONTINUES Certain matters have therefore been reserved to members: (a) Major transactions – Section 189(1)(b) Partnership & Company Law 57  DIRECTORS CONTINUES (b) Issuance of new or unused shares except treasury shares - Section 189(1)(a)(i) Partnership & Company Law 58  DIRECTORS CONTINUES (c) Voluntary contributions to any charitable or other funds other than pension funds for the benefit of employees. - Section 189(1)(a)(ii) Partnership & Company Law 59  DIRECTORS CONTINUES (d) Issuance of any new or unissued shares or treasury shares to any director or past director of the company or any associated company or to a director’s nominee or to any company controlled by a director. Section 189(5)Partnership & Company Law 60  DIRECTORS CONTINUES (e) Exercise of the powers of the company to borrow money or to charge any of the company’s assets - Section 189(9) Partnership & Company Law 61  DIRECTORS CONTINUES Approval by resolutions Ordinary resolution – A resolution is an ordinary resolution when it is passed by a simple majority of votes cast Partnership & Company Law 62  DIRECTORS CONTINUES by the members of the company who, being entitled so to do, vote in person or, where proxies are allowed, by proxy at a general meeting. Partnership & Company Law 63  DIRECTORS CONTINUES Special resolution – A resolution is a special resolution when it is passed by not less than three- fourths (75%)of the votes cast by the members of the company who being entitled Partnership & Company Law 64  DIRECTORS CONTINUES so to do, vote in person or, where proxies are allowed, by proxy at a general meeting of which, notice specifying the intention to propose the resolution as a special resolution, has been duly given. Partnership & Company Law 65  DIRECTORS CONTINUES Directors’ Meetings (a) Directors of a company shall meet at least once every six months in each year to consider financial and operational affairs of the company. Section 188(1) Partnership & Company Law 66  DIRECTORS CONTINUES (b) A director may, and the Company Secretary on the requisition of a director shall, at any time summon a meeting of directors, Partnership & Company Law 67  DIRECTORS CONTINUES and a director being a member of a committee may, and the Company Secretary on the requisition of that member shall summon a directors meeting. Partnership & Company Law 68  DIRECTORS CONTINUES (c) The quorum for directors’ meetings is two, unless the company’s constitution otherwise provides. However, in the case of a one-person committee, the quorum is onePartnership & Company Law 69  DIRECTORS CONTINUES (d) The directors may elect one of them to be Chairman and determine the period he is to hold office Partnership & Company Law 70  DIRECTORS CONTINUES (e) Attendance and voting by proxy are prohibited at directors’ meetings. Matters are decided at meetings by majority vote; and should there be a tie, the Chairman has a second or casting vote. Partnership & Company Law 71  DIRECTORS CONTINUES (i) Second vote – This occurs when the Chairman voted the first time, resulting in a tie. Partnership & Company Law 72  DIRECTORS CONTINUES (ii) Casting vote – This occurs when the Chairman did not vote the first time but a tie resulted. In either case, when there is a tie, it is the Chairman who breaks the tie and determines the matter by his vote. Partnership & Company Law 73  DIRECTORS CONTINUES (f) Written resolution - A resolution in writing, signed by all the directors for the time being entitled to receive notice of Partnership & Company Law 74  DIRECTORS CONTINUES meeting of the directors shall be valid and effectual as if it had been passed at a meeting of the directors duly convened and held. Partnership & Company Law 75  SHARES SECURITIES (SHARES AND DEBENTURES) Shares and debentures are instruments by which companies may raise funds. PARTNERSHIP & COMPANY LAW 1  SHARES CONTINUES Shares and debentures are securities – they are the most common form of securities in Ghana, but by no means the only form. PARTNERSHIP & COMPANY LAW 2  SHARES CONTINUES The current definition is contained in section 60 of the Central Securities Depository Act, 2007 (Act 733) which provides that, securities include: PARTNERSHIP & COMPANY LAW 3  SHARES CONTINUES (a) debentures, shares, bonds or notes issued or proposed to be issued by a corporate body and any right, warrant or option in respect of them; PARTNERSHIP & COMPANY LAW 4  SHARES CONTINUES (b) bonds, treasury bills or other loan instruments of the Government of Ghana or of any country; (c) rights or interest, whether described as units or otherwise under a collective investment scheme; PARTNERSHIP & COMPANY LAW 5  SHARES CONTINUES (d) other rights or instruments as the Minister responsible for Finance may, by notice in the Gazette, prescribe. PARTNERSHIP & COMPANY LAW 6  SHARES CONTINUES NATURE OF SHARES Shares are a type of securities. The First Schedule of Act 992 defines shares as the interest of members of a body corporate who are entitled to share in the capital or income of the body corporate. PARTNERSHIP & COMPANY LAW 7  SHARES CONTINUES Section 42 (1) of Act 992 provides that: “The shares of a member in a company are movable property”. From the foregoing provisions a share can be said to have some of the following features: PARTNERSHIP & COMPANY LAW 8  SHARES CONTINUES (a) It is a personal estate, that is, a share is considered property of the shareholder but it belongs not to the class of real or immovable property like land or a building. PARTNERSHIP & COMPANY LAW 9  SHARES CONTINUES (b) A share in a business company confers its holder with interests, rights and liabilities with respect to that company. PARTNERSHIP & COMPANY LAW 10  SHARES CONTINUES But since a company is a distinct legal person from its members, a shareholder is not an owner of the company or any part of it. PARTNERSHIP & COMPANY LAW 11  SHARES CONTINUES (c) The interests that attach to a share (the interests of a shareholder) of a company are in respect of entitlement to share in the capital or income of the company. PARTNERSHIP & COMPANY LAW 12  SHARES CONTINUES The sharing process is referred to as a distribution. PARTNERSHIP & COMPANY LAW 13  SHARES CONTINUES (d) The rights that attach to a share (the rights of a shareholder) of a company are set out by the company’s constitution and the terms of issues of the share. PARTNERSHIP & COMPANY LAW 14  SHARES CONTINUES A shareholder has the right to: (a) receive dividends when declared; PARTNERSHIP & COMPANY LAW 15  SHARES CONTINUES (b) attend, speak and vote at general meetings; and PARTNERSHIP & COMPANY LAW 16  SHARES CONTINUES (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. PARTNERSHIP & COMPANY LAW 17  SHARES CONTINUES The liabilities that attach to a shareholder are the potential loss of the capital contributed to the company. PARTNERSHIP & COMPANY LAW 18  SHARES CONTINUES A share is a chose in action and not a chose in possession. Therefore, a shareholder can enforce his rights and interests in respect of the share only by court action and PARTNERSHIP & COMPANY LAW 19  SHARES CONTINUES not by seizing or attaching the assets or property of the company. PARTNERSHIP & COMPANY LAW 20  SHARES CONTINUES According to Black’s Law Dictionary, a chose in possession is a personal thing of which one has possession; and a chose in action is a personal right not reduced into possession, but recoverable by a suit at law. PARTNERSHIP & COMPANY LAW 21  SHARES CONTINUES TYPES OF SHARES There are two types of shares in Ghana: 1.Preference shares; and 2.Equity shares. PARTNERSHIP & COMPANY LAW 22  SHARES CONTINUES PREFERENCE SHARES A preference share is a share, by whatever name designated in the company’s constitution which does not entitle PARTNERSHIP & COMPANY LAW 23  SHARES CONTINUES its holder to any right to participate beyond a specified amount in any distribution whether by means of a dividend, or on redemption, in winding up, or otherwise (s. 51(1) of Act 992). PARTNERSHIP & COMPANY LAW 24  SHARES CONTINUES EQUITY SHARES Any other share, whatever it is called in the company’s constitution, that is not a preference share is an equity share. PARTNERSHIP & COMPANY LAW 25  SHARES CONTINUES Equity shares are sometimes called common shares or ordinary shares. PARTNERSHIP & COMPANY LAW 26  SHARES CONTINUES A preference share relates to specified participation in respect of distributions. The distribution may be in respect of; (1) A dividend or (2) Redemption or PARTNERSHIP & COMPANY LAW 27  SHARES CONTINUES (3) Winding up or (4) Other unspecified forms of distributions. PARTNERSHIP & COMPANY LAW 28  SHARES CONTINUES In the case of preference shares relating to dividend, if directors recommend the payment of dividends and if members declare that dividends be paid, PARTNERSHIP & COMPANY LAW 29  SHARES CONTINUES the shareholder is entitled to be first paid the dividend, PARTNERSHIP & COMPANY LAW 30  SHARES CONTINUES up to a specified amount per share, and thereafter the shareholder will receive no further dividend and will not be entitled to anything more. PARTNERSHIP & COMPANY LAW 31  SHARES CONTINUES In the case of preference shares relating to redemption, the entitlement of the shareholder is not triggered by the payment of dividend but rather by the redemption by the company of its shares. PARTNERSHIP & COMPANY LAW 32  SHARES CONTINUES The common feature of all preference shares therefore, is that, they assume less risk than equity shares and they have more security and certainty as to returns on them, PARTNERSHIP & COMPANY LAW 33  SHARES CONTINUES although they do not necessarily generate a larger distribution to their holders. The preference shareholder- whether as to dividend, winding up or otherwise – PARTNERSHIP & COMPANY LAW 34  SHARES CONTINUES is like the chief who is content with one pound of meat and cares less whether it is a rat or an elephant that the hunter catches! PARTNERSHIP & COMPANY LAW 35  SHARES CONTINUES ADVANTAGES OF PREFERENCE SHARES 1. A preference share secures for its holder a fixed return on his investments when dividends are duly declared. PARTNERSHIP & COMPANY LAW 36  SHARES CONTINUES 2. A preference share is less risky than an equity share. PARTNERSHIP & COMPANY LAW 37  SHARES CONTINUES 3. In the event of winding up, a preferential shareholder as to repayment of capital on winding up has his capital returned to him first, after creditors have been paid and thereby gets paid off for his investment in the company. PARTNERSHIP & COMPANY LAW 38  SHARES CONTINUES DISADVANTAGES OF PREFERENCE SHARES 1. When a considerable amount of dividend has been declared, preference shares PARTNERSHIP & COMPANY LAW 39  SHARES CONTINUES does not entitle its holder to participate in the distribution of such bounty. PARTNERSHIP & COMPANY LAW 40  SHARES CONTINUES 2. After having his capital returned to him, the preferential shareholder as to repayment of capital cannot participate in any excess assets that are being distributed to the other shareholders upon winding up. PARTNERSHIP & COMPANY LAW 41  SHARES CONTINUES TYPES OF PREFERENCE SHARES Preference shares may be cumulative or non-cumulative; convertible or non-convertible; and redeemable or non- redeemable PARTNERSHIP & COMPANY LAW 42  SHARES CONTINUES 1. Cumulative and Non-cumulative Preference Shares A cumulative preference share entitles its holder to receive his full dividends as declared for that and previous periods before dividends are payable on other classes of shares. PARTNERSHIP & COMPANY LAW 43  SHARES CONTINUES Non-cumulative preference shares A non-cumulative preference share entitles its holder to receive his full dividends as declared for that period only before dividends are payable on other classes of shares. PARTNERSHIP & COMPANY LAW 44  SHARES CONTINUES 2. Convertible and Non- Convertible Preference Shares Convertible Preference Shares This is where the company’s constitution permits shareholders to convert their preference shares into equity shares. PARTNERSHIP & COMPANY LAW 45  SHARES CONTINUES Non-Convertible Preference Shares This is where the company’s constitution does not permit shareholders to convert their preference shares into equity shares. PARTNERSHIP & COMPANY LAW 46  SHARES CONTINUES 3. Redeemable and Non-Redeemable Preference Shares Non-Redeemable Preference Shares A non-redeemable preference share is one that cannot be acquired back by the company which issued it, whether at the instance of the company or at the shareholder’s instance. PARTNERSHIP & COMPANY LAW 47  SHARES CONTINUES Redeemable Preference Share A redeemable preference share can be acquired back by the company that issued it PARTNERSHIP & COMPANY LAW 48  SHARES CONTINUES Rights of Equity Shareholders Fully paid-up equity shareholders shall have the right: (a)To attend any general meeting of the company; and (b)To speak and vote on any resolution before the meeting. PARTNERSHIP & COMPANY LAW 49  SHARES CONTINUES Payment for Shares Three propositions generally apply to the issue of shares: 1.Issued shares require corresponding valuable consideration. PARTNERSHIP & COMPANY LAW 50  SHARES CONTINUES 2. The valuable consideration has to be paid or payable to the company. 3. The payment invariably has to be in cash. PARTNERSHIP & COMPANY LAW 51  SHARES CONTINUES A shareholder does not get his shares free of charge and at the company’s expense. He should have given, or someone on his behalf should have given, valuable consideration. PARTNERSHIP & COMPANY LAW 52  SHARES CONTINUES Valuable consideration, simply put, is what one gives to get the shares. Valuable consideration may be in cash or kind. PARTNERSHIP & COMPANY LAW 53  SHARES CONTINUES Transferring property or rendering services to the company in exchange for shares are considered to be valuable consideration in kind, not in cash. PARTNERSHIP & COMPANY LAW 54  SHARES CONTINUES If the company agrees to accept payment for its issued shares in kind rather than wholly in cash, the company has to deliver to the Registrar for registration within 28 days after the allotment PARTNERSHIP & COMPANY LAW 55  SHARES CONTINUES of such shares, a contract in writing duly stamped evidencing the terms of such agreement and the true value of the consideration or, if such agreement has not been reduced into writing, PARTNERSHIP & COMPANY LAW 56  SHARES CONTINUES the particulars of such agreement, in prescribed form and duly stamped, as if it were a written agreement. PARTNERSHIP & COMPANY LAW 57  SHARES CONTINUES Capitalisation issues are however excluded from meeting this requirement (s. 45 of Act 992). PARTNERSHIP & COMPANY LAW 58  SHARES CONTINUES A capitalisation issue is when a company chooses to give a shareholder additional shares in lieu of dividend. The shareholder’s reward for his shareholding is therefore more shares rather than money. PARTNERSHIP & COMPANY LAW 59  OFFICERS OF A COMPANY DEFINITION OF OFFICERS Officers of a company refers to persons who are appointed or regularly employed as part of their business or occupation in conducting the company’s affairs. PARTNERSHIP & COMPANY LAW 1  OFFICERS OF A COMPANY CONTINUES Officers usually include directors, the managing director, managers, the secretary, solicitor when remunerated by a fixed salary as opposed to being retained in a regular way, PARTNERSHIP & COMPANY LAW 2 OFFICERS OF A COMPANY CONTINUES persons whose duty is to invest moneys of the company and hold the investment, and a liquidator. PARTNERSHIP & COMPANY LAW 3 OFFICERS OF A COMPANY CONTINUES The First Schedule of Act 992 provides that: “Officer in relation to a body corporate includes any director, secretary or employee of that body corporate and a receiver and manager of a part of the undertaking of that body corporate, PARTNERSHIP & COMPANY LAW 4  OFFICERS OF A COMPANY CONTINUES appointed under a power contained in an instrument, and a liquidator of a company appointed in a members’ voluntary winding up, but does not include a receiver, not being a manager, a receiver and manager appointed by the Court, PARTNERSHIP & COMPANY LAW 5  OFFICERS OF A COMPANY CONTINUES or a liquidator appointed under the provisions of the Corporate Insolvency and Restructuring Act, 2020 (Act 1015). PARTNERSHIP & COMPANY LAW 6 OFFICERS OF A COMPANY CONTINUES Officers therefore comprise: Directors; The Company Secretary; Employees; Receivers and Managers whose appointment is by or authorized by the company; PARTNERSHIP & COMPANY LAW 7 OFFICERS OF A COMPANY CONTINUES and Liquidators appointed by the company in a members’ voluntary winding up. PARTNERSHIP & COMPANY LAW 8  OFFICERS OF A COMPANY CONTINUES Persons associated with a company but who are not its officers are: Receivers who are not Managers; Receivers and Managers appointed by a court; Liquidators in an official or compulsory winding up; and Auditors. PARTNERSHIP & COMPANY LAW 9 OFFICERS OF A COMPANY CONTINUES Section 217 of Act 992 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-agent PARTNERSHIP & COMPANY LAW 10 OFFICERS OF A COMPANY CONTINUES and master-servant, save in so far as such rules are not inconsistent with the express provisions of Act 992. PARTNERSHIP & COMPANY LAW 11 OFFICERS OF A COMPANY CONTINUES Officers are usually appointed and their remuneration fixed by the directors of the company. But the company’s constitution may stipulate that the appointment PARTNERSHIP & COMPANY LAW 12  OFFICERS OF A COMPANY CONTINUES and remuneration of officers or any one of them may be fixed at a general meeting. PARTNERSHIP & COMPANY LAW 13 OFFICERS OF A COMPANY CONTINUES Failing agreement on the remuneration of the officers, they are entitled to bring an action for quantum meruit, but they have no lien rights on the property of the company for monies due. PARTNERSHIP & COMPANY LAW 14 OFFICERS OF A COMPANY CONTINUES RECEIVERSHIP The First Schedule of Act 992 defines a receiver as a person appointed to exercise the functions referred to in subsection (1) of section 266 of Act 992. PARTNERSHIP & COMPANY LAW 15  OFFICERS OF A COMPANY CONTINUES A person appointed receiver of any property of a company shall, subject to the rights of any prior encumbrances, take possession of and protect the property, receive the rents and profits and discharge all outgoings in respect thereof and PARTNERSHIP & COMPANY LAW 16  OFFICERS OF A COMPANY CONTINUES realise the security of those on whose behalf he is appointed; but unless also appointed manager, he shall not have power to carry on any business or undertaking. PARTNERSHIP & COMPANY LAW 17 OFFICERS OF A COMPANY CONTINUES A receiver’s function is not to run a company. Rather, it is principally to receive income to pay off the company’s creditors. PARTNERSHIP & COMPANY LAW 18 OFFICERS OF A COMPANY CONTINUES Therefore, a receiver is always, first, an agent of the creditors on whose behalf he is collecting moneys from the company to pay off (s. 268 (1) of Act 992); PARTNERSHIP & COMPANY LAW 19  OFFICERS OF A COMPANY CONTINUES and second, an officer of the court if appointed by a court (s. 267 (1) of Act 992). PARTNERSHIP & COMPANY LAW 20 OFFICERS OF A COMPANY CONTINUES FUNCTIONS OF A RECEIVER 1.To take possession of the company’s property in question; PARTNERSHIP & COMPANY LAW 21  OFFICERS OF A COMPANY CONTINUES 2. To protect the said property both physically by, say employing security guards, and legally by, say, registering the charges at the appropriate registries PARTNERSHIP & COMPANY LAW 22 OFFICERS OF A COMPANY CONTINUES 3. To receive the rents and profits due to the company, such as collecting rents due from property let out to tenants and accounts receivable from various creditors of the company PARTNERSHIP & COMPANY LAW 23  OFFICERS OF A COMPANY CONTINUES 4. To discharge all outgoings in respect of the properties possessed by the receiver including the payment of rents, utility bills, salaries, rates to municipal authorities, PARTNERSHIP & COMPANY LAW 24 OFFICERS OF A COMPANY CONTINUES social security contributions on behalf of employees, income tax, remittance of Valued Added Taxes (VAT) and National Health Insurance Levies (NHIL), and so on. PARTNERSHIP & COMPANY LAW 25 OFFICERS OF A COMPANY CONTINUES 5. To realise the security of those on whose behalf he is appointed, that is, to sell the secured property and with a view, after discharging the outgoings, PARTNERSHIP & COMPANY LAW 26 OFFICERS OF A COMPANY CONTINUES to give the funds received to the creditors who appointed the receiver, with any balance to remain with the company. PARTNERSHIP & COMPANY LAW 27 OFFICERS OF A COMPANY CONTINUES 6. The person appointed receiver- manager, however, has the power to perform a sixth duty, namely, to carry on the business or undertaking. PARTNERSHIP & COMPANY LAW 28  OFFICERS OF A COMPANY CONTINUES TYPES OF RECEIVERS 1.Receiver who is appointed by the creditor concerned (or appointed out of court). 2.Receiver who is appointed by the court. PARTNERSHIP & COMPANY LAW 29 OFFICERS OF A COMPANY CONTINUES 3. Receiver-manager who is appointed by the creditor concerned (or appointed out of court). 4. Receiver-manager who is appointed by the court. PARTNERSHIP & COMPANY LAW 30  OFFICERS OF A COMPANY CONTINUES The appointment, status and functions of each of these types of receivers are different. PARTNERSHIP & COMPANY LAW 31 OFFICERS OF A COMPANY CONTINUES RECEIVER APPOINTED BY CREDITORS The receiver appointed by creditors is not appointed by the court but by the creditors. PARTNERSHIP & COMPANY LAW 32  OFFICERS OF A COMPANY CONTINUES Such a receiver is therefore not an officer of the court but an agent for the creditors who appointed him and the functions do not include managing the business in any shape or form to keep it as a viable going concern, PARTNERSHIP & COMPANY LAW 33  OFFICERS OF A COMPANY CONTINUES The receiver appointed by creditors performs a military or surgical type of operation: get into the company, identify the secured assets, possess them, sell them, and pay off the costs associated with the receivership and the creditors, and get out! PARTNERSHIP & COMPANY LAW 34  OFFICERS OF A COMPANY CONTINUES The role of the receiver appointed by creditors is not to salvage the company but to salvage the proceeds that its appointing creditors are entitled to. PARTNERSHIP & COMPANY LAW 35 OFFICERS OF A COMPANY CONTINUES Type one receivers as they are sometimes called, are usually appointed by debenture- holders who have a fixed charge over lands, buildings and other specific properties and assets and where the PARTNERSHIP & COMPANY LAW 36  OFFICERS OF A COMPANY CONTINUES debenture allows them the right to appoint receivers should the company default in meeting its obligations under the debenture, especially the obligation to pay the loan back as and when due. PARTNERSHIP & COMPANY LAW 37  OFFICERS OF A COMPANY CONTINUES RECEIVER APPOINTED BY THE COURT The second type of receivers is the receiver appointed by the court. Being so appointed, he is therefore an officer of the court and not merely an agent for the creditors who applied to the court for an order appointing him. PARTNERSHIP & COMPANY LAW 38  OFFICERS OF A COMPANY CONTINUES As an officer of the court, anyone who interferes with the receiver from carrying out his lawful functions commits contempt of court. As in the case of type one receiver, the type two receiver, PARTNERSHIP & COMPANY LAW 39  OFFICERS OF A COMPANY CONTINUES as is the case here, is also not given rights or powers to manage the company but only to collect funds and perform incidental functions and exercise incidental powers to the collection. PARTNERSHIP & COMPANY LAW 40  OFFICERS OF A COMPANY CONTINUES Type one and two receivers are mere receivers – not receivers-cum– managers – and as such company management is not part of their remit. The receiver appointed by a court also performs a similar military or surgical type of operation. PARTNERSHIP & COMPANY LAW 41  OFFICERS OF A COMPANY CONTINUES But being appointed by the court, and being an officer of the court, the type two receiver has obligations to report the outcome of the receivership to the court. PARTNERSHIP & COMPANY LAW 42  OFFICERS OF A COMPANY CONTINUES Type two receivers are usually appointed by debenture-holders who have a fixed charge over lands, buildings and other specific properties and assets but where the debenture does not specifically confer on the debenture holder the right to appoint PARTNERSHIP & COMPANY LAW 43 OFFICERS OF A COMPANY CONTINUES receivers should the company default in meeting its obligations under the debenture, especially the obligation to pay the loan back as and when due. In such a case, the affected debenture holder has to apply to a court for the appointment of a receiver. PARTNERSHIP & COMPANY LAW 44  OFFICERS OF A COMPANY CONTINUES THE RECEIVER/MANAGER APPOINTED BY CREDITORS The receiver-cum-manager (type three receiver) is appointed by creditors, and not by the court. PARTNERSHIP & COMPANY LAW 45  OFFICERS OF A COMPANY CONTINUES Such a receiver is therefore not an officer of the court but an agent for the creditors who appointed him. But because the officer has management functions, the type three receiver is also an agent of the company. PARTNERSHIP & COMPANY LAW 46 OFFICERS OF A COMPANY CONTINUES The functions of the type three receiver include managing the business with a view to keeping it as a viable going concern. PARTNERSHIP & COMPANY LAW 47  OFFICERS OF A COMPANY CONTINUES In managing a company under receivership, it may be most practicable under the circumstances for the receiver to down-size the business in order to make it a viable operation or a viable undertaking to be sold off. PARTNERSHIP & COMPANY LAW 48 OFFICERS OF A COMPANY CONTINUES This type of receiver is not required to limit his receivership role to military or surgical type operation. PARTNERSHIP & COMPANY LAW 49  OFFICERS OF A COMPANY CONTINUES The role of the receiver-cum- manager appointed by creditors has a management responsibility too, of trying, if feasible, to keep the company afloat as a going concern. PARTNERSHIP & COMPANY LAW 50 OFFICERS OF A COMPANY CONTINUES Type three receivers are usually appointed by debenture – holders who have a floating charge over the whole or substantially the whole of a company’s properties and undertaking and PARTNERSHIP & COMPANY LAW 51 OFFICERS OF A COMPANY CONTINUES where the debenture allows them the right to appoint a receiver- manager should the company default in meeting its obligations under the debenture, especially the obligation to pay the loan back as and when due. PARTNERSHIP & COMPANY LAW 52  OFFICERS OF A COMPANY CONTINUES THE RECEIVER-MANAGER APPOINTED BY THE COURT Finally, the receiver-manager appointed by the court (type four receiver) albeit pursuant to an application by the affected creditors. PARTNERSHIP & COMPANY LAW 53  OFFICERS OF A COMPANY CONTINUES Such a receiver is therefore an officer of the court and an agent for the creditors who appointed him, but not an agent of the company. PARTNERSHIP & COMPANY LAW 54 OFFICERS OF A COMPANY CONTINUES The functions of the receiver- manager appointed by the court include managing the business with a view to making it a viable going concern, as in the case of the type three receiver. PARTNERSHIP & COMPANY LAW 55  OFFICERS OF A COMPANY CONTINUES The receiver-manager appointed by the court also has a management responsibility of trying, if feasible, to keep the company afloat as a going concern. PARTNERSHIP & COMPANY LAW 56  OFFICERS OF A COMPANY CONTINUES Type four receivers are usually appointed by debenture- holders who have a floating charge over the whole or substantially the whole of a company’s properties and PARTNERSHIP & COMPANY LAW 57  OFFICERS OF A COMPANY CONTINUES undertaking but where the debenture does not specifically confer on them the right to appoint a receiver-manager PARTNERSHIP & COMPANY LAW 58  OFFICERS OF A COMPANY CONTINUES should the company default in meeting its obligations under the debenture, especially the obligation to pay the loan back as and when due. PARTNERSHIP & COMPANY LAW 59  OFFICERS OF A COMPANY CONTINUES POWERS OF RECEIVER As from the date of the appointment of a receiver, the powers of the directors or liquidators in a member’s voluntary liquidation to deal with the property or PARTNERSHIP & COMPANY LAW 60 OFFICERS OF A COMPANY CONTINUES undertaking over which he is appointed shall cease unless and until the receiver or the manager is discharged. PARTNERSHIP & COMPANY LAW 61 OFFICERS OF A COMPANY CONTINUES This does not mean that when a receiver is appointed, the directors are dismissed or become irrelevant. What the provision means is that PARTNERSHIP & COMPANY LAW 62 OFFICERS OF A COMPANY CONTINUES directors’ powers are suspended in respect of the particular property or undertaking over which the receivership is taking place. PARTNERSHIP & COMPANY LAW 63 OFFICERS OF A COMPANY CONTINUES RECEIVER’S LIABILITY INDEMNITY A receiver goes on a frolic at his personal risk. Section 269 (1) of Act 992 provides that a receiver or manager of a property or an undertaking of a company is PARTNERSHIP & COMPANY LAW 64  OFFICERS OF A COMPANY CONTINUES personally liable on a contract entered into by the receiver or manager except as the contract otherwise expressly provides. PARTNERSHIP & COMPANY LAW 65  OFFICERS OF A COMPANY CONTINUES A receiver is not personally liable for the company’s pre-existing contracts, such as relating to payment of rent and salaries, maintenance of equipment, and so forth. PARTNERSHIP & COMPANY LAW 66 OFFICERS OF A COMPANY CONTINUES But for new contracts entered into by the receiver, such as employing or re-employing staff, getting a valuer to appraise property for sale; in respect of any of these, the receiver is personally liable. PARTNERSHIP & COMPANY LAW 67 OFFICERS OF A COMPANY CONTINUES A receiver is entitled to an indemnity from the property over which he has been appointed to act as receiver under s. 269 in respect of contracts PARTNERSHIP & COMPANY LAW 68  OFFICERS OF A COMPANY CONTINUES entered into by the receiver in the proper performance of his functions, subject to the rights of any prior encumbrances. PARTNERSHIP & COMPANY LAW 69  OFFICERS OF A COMPANY CONTINUES QUALIFICATIONS OF RECEIVER An infant, persons of unsound mind as determined by a competent court, a body corporate, a convict (if the conviction touches on fraud or dishonesty), PARTNERSHIP & COMPANY LAW 70 OFFICERS OF A COMPANY CONTINUES A director or auditor is also precluded from being a receiver in respect of that company. An undischarged bankrupt cannot be appointed receiver. PARTNERSHIP & COMPANY LAW 71 OFFICERS OF A COMPANY CONTINUES In other jurisdictions, such as the United Kingdom and New Zealand, a receiver must be a qualified insolvency practitioner, such as a chartered accountant, PARTNERSHIP & COMPANY LAW 72  OFFICERS OF A COMPANY CONTINUES barrister or solicitor or other person or professional who has had the requisite training and experience to qualify as such. PARTNERSHIP & COMPANY LAW 73 OFFICERS OF A COMPANY CONTINUES NOTICE OF RECEIVERSHIP Financial difficulties, corporate distress are related cankers that the unsuspecting public must be warned about, PARTNERSHIP & COMPANY LAW 74  OFFICERS OF A COMPANY CONTINUES much like the lepers in biblical times who were required to announce their uncleanliness as they approached people. PARTNERSHIP & COMPANY LAW 75 OFFICERS OF A COMPANY CONTINUES Consequently, when a receiver is appointed for any property of a company, notice shall be given to the Registrar of Companies and every corporate document thereafter, PARTNERSHIP & COMPANY LAW 76 OFFICERS OF A COMPANY CONTINUES such as business letters, invoices, orders, shall contain a statement that a receiver has been appointed (s. 270 of Act 992). Failure to comply shall attract a fine against the company and the receiver. PARTNERSHIP & COMPANY LAW 77  OFFICERS OF A COMPANY CONTINUES STATEMENT OF AFFAIRS A receiver-manager appointed over the whole or substantially the whole undertaking of a company is required to obtain from its directors a statement of affairs of the company. PARTNERSHIP & COMPANY LAW 78 OFFICERS OF A COMPANY CONTINUES The directors’ powers in respect of the property or undertaking concerned ceases– or are suspended – while the company is in receivership. PARTNERSHIP & COMPANY LAW 79 OFFICERS OF A COMPANY CONTINUES Since the receiver-manager assumes management of the undertakings of the company under receivership, the statement of affairs serves as handing-over notes by the directors to the receiver-manager. PARTNERSHIP & COMPANY LAW 80 OFFICERS OF A COMPANY CONTINUES Thus, receivership –management results in changing of the guard from the existing directors to the receiver-manager and, concomitant with the change, the old guards, PARTNERSHIP & COMPANY LAW 81 OFFICERS OF A COMPANY CONTINUES that is the directors, are to present a written report of the state of affairs of the company to the current guard that is the receiver- manager. PARTNERSHIP & COMPANY LAW 82 OFFICERS OF A COMPANY CONTINUES ABSTRACT OF RECEIVERSHIP The purpose of an abstract of receivership is to set out in documentary form how much the receiver has received and paid out during the period under review: PARTNERSHIP & COMPANY LAW 83  OFFICERS OF A COMPANY CONTINUES The abstract of receivership is a form of financial reporting on income and expenditures during the period in question. PARTNERSHIP & COMPANY LAW 84 OFFICERS OF A COMPANY CONTINUES The abstract shall be in a prescribed form and it shall show the receipts and payments during the 12 months. PARTNERSHIP & COMPANY LAW 85 OFFICERS OF A COMPANY CONTINUES An abstract shall be filed every 12 months. And when the receivership ends, the receiver shall file a composite or aggregated abstract covering the entire period. Any default is sanctioned with a fine. PARTNERSHIP & COMPANY LAW 86  OFFICERS OF A COMPANY CONTINUES MANAGER Managers are operating officers, whilst receivers are principally debt collectors. When one is appointed both receiver and manager, PARTNERSHIP & COMPANY LAW 87  OFFICERS OF A COMPANY CONTINUES whether under authority of the company’s instrument or by a court, that person is conferred with the dual responsibility of running the PARTNERSHIP & COMPANY LAW 88  OFFICERS OF A COMPANY CONTINUES company as a going concern and of applying the net proceeds collected to paying the creditors who appointed him. PARTNERSHIP & COMPANY LAW 89 OFFICERS OF A COMPANY CONTINUES The manager shall be bound by the duties of directors although, in the exercise of his powers as manager, the person may give special but not exclusive consideration to the interests of those on whose behalf he is appointed. PARTNERSHIP & COMPANY LAW 90  LIQUIDATION Incorporation is the process of bringing the corporation into being; liquidation is the process of having it cease to be. PARTNERSHIP & COMPANY LAW 1  LIQUIDATION CONTINUES Liquidation, Winding Up & Dissolution Liquidation, winding up and dissolution are often regarded as synonymous. But there are slight differences. Liquidation includes both winding up and dissolution. PARTNERSHIP & COMPANY LAW 2  LIQUIDATION CONTINUES Winding Up Winding up refers to the steps taken to have a functioning corporate entity or a going corporate concern cease to be a corporate entity. PARTNERSHIP & COMPANY LAW 3  LIQUIDATION CONTINUES It includes the appointment of the officer (the liquidator) who gathers any assets, pays any debts, and distributes any surplus in accordance with the law. PARTNERSHIP & COMPANY LAW 4  LIQUIDATION CONTINUES Dissolution Dissolution is the formal pronouncement by the Registrar that the corporate entity no longer exists and has been struck off PARTNERSHIP & COMPANY LAW 5  LIQUIDATION CONTINUES the register and the public has been so notified by publication in the Gazette. PARTNERSHIP & COMPANY LAW 6  LIQUIDATION CONTINUES Both solvent and insolvent companies may be liquidated. Under section 169 of the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), PARTNERSHIP & COMPANY LAW 7  LIQUIDATION CONTINUES “insolvent means unable to pay debts as the debts fall due”. The Companies Act governs the liquidation of solvent companies. PARTNERSHIP & COMPANY LAW 8  LIQUIDATION CONTINUES Such liquidations are referred to as private or voluntary liquidation. PARTNERSHIP & COMPANY LAW 9  LIQUIDATION CONTINUES The Corporate Insolvency and Restructuring Act, 2020 (Act 1015), governs the liquidation of insolvent companies. PARTNERSHIP & COMPANY LAW 10  LIQUIDATION CONTINUES Commencement of Liquidation Liquidation commences in one of three ways: (1) The company passing a special resolution calling for its liquidation (section 276 (2)); PARTNERSHIP & COMPANY LAW 11  LIQUIDATION CONTINUES (2) By the presentation of a petition to the court to wind up the company; and (3) By the presentation of a petition to the Registrar to wind up the company. PARTNERSHIP & COMPANY LAW 12  LIQUIDATION CONTINUES A liquidator is appointed to conduct the liquidation process. The liquidator assumes the powers of the directors, takes control of the affairs of the company, collects its assets, pays the debts, PARTNERSHIP & COMPANY LAW 13  LIQUIDATION CONTINUES and then distributes any surplus to members in accordance with their rights (section 282 of Act 992; section 131 of Act 1015). PARTNERSHIP & COMPANY LAW 14  LIQUIDATION CONTINUES Amissah J. A., sitting as a High Court Justice said in Union Maritime et Commerciale v Rabensteiner and Another; PARTNERSHIP & COMPANY LAW 15  LIQUIDATION CONTINUES that Section 245 (of Act 179) thus s. 273 of Act 992 states that, on the appointment of a liquidator for the purposes of a private liquidation PARTNERSHIP & COMPANY LAW 16  LIQUIDATION CONTINUES all the powers of the board of directors shall vest in the liquidator and the powers and authority of every director shall cease. PARTNERSHIP & COMPANY LAW 17  LIQUIDATION CONTINUES The only saving in the directors’ powers is in so far as the company at a general meeting or the liquidator sanctions their continuance. PARTNERSHIP & COMPANY LAW 18  LIQUIDATION CONTINUES They could also exercise powers so far as is necessary to prepare statements and accounts of the company. PARTNERSHIP & COMPANY LAW 19  LIQUIDATION CONTINUES Consequences of Winding Up Upon the appointment of a liquidator, the board becomes spent and it has no further role to play. PARTNERSHIP & COMPANY LAW 20  LIQUIDATION CONTINUES Although the company shall continue as a corporate entity until its dissolution, it shall cease to carry on business except as may be required for its beneficial winding up. PARTNERSHIP & COMPANY LAW 21  LIQUIDATION CONTINUES The purpose of this is to make it clear that a company undergoing liquidation is not to be treated as a going concern with brisk business and profit-making in mind. PARTNERSHIP & COMPANY LAW 22  LIQUIDATION CONTINUES It must be treated as a perishing entity whose affairs are being put in order before it dies off! PARTNERSHIP & COMPANY LAW 23  LIQUIDATION CONTINUES Transactions entered into within certain periods before the commencement of liquidation may be invalid on the grounds of being fraudulent preference or fraudulent conveyance. PARTNERSHIP & COMPANY LAW 24  LIQUIDATION CONTINUES 2. Where the relationship between the members of a company is marred by acrimony, allegations of fraud, and litigation, it may be just and equitable to wind it up. Refer to Re Yenidje Tobacco Co Ltd. PARTNERSHIP & COMPANY LAW 79  LIQUIDATION CONTINUES 3. A third instance when it will be just and equitable to wind up a company is when the company’s main object, that is, its substratum is gone, or never existed. Refer to Re German Date Coffee Co. PARTNERSHIP & COMPANY LAW 80  LIQUIDATION CONTINUES 4. When the company has been carrying on business at a loss and it is insolvent, it may also be just and equitable to wind it up. Refer to Billy v Kuwor and Another. PARTNERSHIP & COMPANY LAW 81  LIQUIDATION CONTINUES Settling The Company’s Indebtedness Once debts have been proven, and assets of the company have been collected, the liquidator proceeds to settle the company’s indebtedness. PARTNERSHIP & COMPANY LAW 82  LIQUIDATION CONTINUES The priority and proportionality principles are applied in settling indebtedness. PARTNERSHIP & COMPANY LAW 83  LIQUIDATION CONTINUES The Priority Principle The priority principle requires that the liquidator pays creditors first and shareholders last. PARTNERSHIP & COMPANY LAW 84  LIQUIDATION CONTINUES Creditors are ranked into classes and class A creditors are to be settled first, class B creditors next, and so forth till all 4 classes of creditors are paid off. PARTNERSHIP & COMPANY LAW 85  LIQUIDATION CONTINUES The Proportionality Principle The proportionality principle requires that, if there are insufficient assets to pay all the members of each class of creditors its full claims, PARTNERSHIP & COMPANY LAW 86  LIQUIDATION CONTINUES then each member of that class is to be paid proportionally to his claim. Class A and secure