GIMPA FACULTY OF LAW

COMPANY LAW II
TUTORIAL QUESTIONS 1

Question 1: SD Ltd is a Private Limited Liability Company. The Company has not held an annual
general meeting for the last three (3) years. Yaa Tweea, who holds 10% of the issues shares of the
Company, was quite unhappy with the Directors. Yaa sent a notice to the registered office of the
company requisitioning a meeting of shareholders to discuss the following matters:

(i) a declaration of dividends for the long suffering shareholders of the company;

(ii) summary dismissal of the Managing Director for Corrupt practices; and

(iii) issuance of free shares to all shareholders.

Mr. Sam the Company Secretary, on receipt of the notice of requisition was spurred into action.
He immediately sent out notices and extraordinary general meeting of the company with agenda
being to discuss urgent matters affecting the interest of the Company.

On the day of the meeting, Armah Dagadu, a director and shareholder of the Company, was
denied entry to meeting by armed thugs hired by Yaa Tweaa. He was handed a note stating that
since he has an unpaid liability on his shares, he has no right to attend the meeting.

At the meeting Yaa Tweaa, proposed a resolution to reduce the dividend rights of the preference
shareholders of the Company to allow equitable sharing of the profits of the Company. This
resolution and all the other resolutions proposed by Yaa Tweaa in her requisition notice were
approved.

The directors of the Company have approached you for advice. Consider the issues arising and
advise them.

Question 2: Kobina Quansah and Joe Mensah were childhood friends .they all worked at
Anuanom Rural Bank. They recently obtained early retirement from Anuanom Rural Bank and
set up Great Future Savings and Loans Company Limited, a private limited liability company.
The Company prospered very quickly. They all served as executive directors of the Company.
Joe Mensah, who is the majority shareholder with 55% of the shares, is the managing director of
the Company. All earnings of the Company are distributed as executive remuneration. Joe

FERDINAND D. ADADZI, GIMPA FACULTY OF LAW, COMPANY LAW II.

Mensah Junior, a son of Joe Mensah, has recently become a shareholder of the Company and has
also been made director.

The Company applied for a banking license and it was given a provisional banking license
provided it can raise the required minimum capital with six months. At a board meeting held to
discuss how to raise the require capital, Joe Mensah proposed that there should be a call on all
issued shares with unpaid liability, after a revaluation of the unpaid liabilities on the basis of the
current value of the business. Kobina Quansah had unpaid liability on his shares.

Kobina Quansah and Joe Mensahs relationship has become quite hostile due to disagreements
about how to raise the required capital. Joe Mensah requisitioned a meeting of the Company and
Kobinah Quansah was duly removed as a director of the Company. At the same meeting, Joe
Mensah and Joe Mensah Junior passed a resolution to issue all the treasury shares in the Company
to themselves to raise the required capital for the banking license. Kobina Quansah voted against
the resolution.

Kobina Quansah is unhappy about the conduct of Joe Mensah and Joe Mensah Junior and has
come to consult you for advice. Consider the issues arising and advise him.

Question 3: if the thing complained of is a thing which in substance the majority of the company are
entitled to do, or if something has been done irregularly which the majority of the company are entitled
to do regularly, or if something has been done illegally which the majority of the company are entitled to
do legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting
has to be called, and then ultimately the majority gets its wishes.

Mellish L.J., MacDougall v. Gardiner (1875) 1 Ch.D. 13 at p.25 C.A. Does this statement correctly
reflect Ghanaian law?

Question 4: Secretary of companies in Ghana, as officers of the company have the power to bind
the company to a contract. With the aid of decided cases and statutory provisions, discuss
whether this assertion is true or otherwise.

Question 5: Kofi Poku is one of the first directors of Bigambitions Limited, a construction
company. In the regulations of the company, a director is required to hold 5,000 ordinary shares
to be paid for within two months after incorporation. Mr. Poku did not fulfill his share
qualification within the two months in spite of repeated calls by the board of directors to him to
fulfill the qualification requirement.

FERDINAND D. ADADZI, GIMPA FACULTY OF LAW, COMPANY LAW II.

Mr. Poku continued to carry on his duties as a director though not meeting the share qualification
requirement. His name appeared on all the letterheads and the all trade circulars of the company
as a director. He negotiated business for the company and signed letters as director. He acted in
various capacities for and on behalf of the company.

Kofi Poku privately negotiated a contract with Good Health Ltd to build a hospital for it. He made
a substantial profit from the contract. When Bigambitions Limited got to know of it, the board
asked Mr. Poku why he did not offer the contract to the company, but privately handled it. He
retorted that he was not a director of the company, so his business affairs should not be the
concern of the company.

Bigambitions are very frustrated by Mr. Pokus conduct. The directors have approached you for
advice. Consider the issues arising and advise company.

Question 6: Whether the Company could or would have taken that opportunity, had it been aware of it,
is not to the point: the existence of the opportunity was information which it was relevant for the Company
to know, and it follows that the appellants were under a duty to communicate it to the Company.

Bhullar v Bhullar [2003] 2 BCLC 241. Consider the relevance of this statement to the scope of the
fudiciary duties of directors under the Companies Act, 1963 (Act 179)

Question 7: Justice Smart sitting at the High Court at Brahabebome recently opined as follows:
The rule in Foss v Harbottle should be assigned by the graveyard of archaic Victorian theories. It
has no relevance for Ghanas modern company law

With the aid of decided cases, comment on this statement.

Question 8: The directors of Oman Ghana Ltd are not on talking terms. Board meetings are
hopelessly deadlocked. This affected key decisions relating to the companys business. The
shareholders met and passed resolutions on several matters, which under the companys
regulations were preserved for directors. One of the directors has instructed you to challenge the
decisions taken by the shareholders as being unlawful and irregular. Comment on the instruction
given to you by the director.

Question 9: The ruling in Trevor v Whitworth (1886) All. ER 46; which seeks to prevent reduction
of Companys Capital has been codified in S. 56(1) of the Companies Act 1963 Act 179 which
provides as follows:

FERDINAND D. ADADZI, GIMPA FACULTY OF LAW, COMPANY LAW II.

Except as hereinafter mentioned a Company shall not

(a) Alter the number of its shares or the amount remaining payable thereon;

(b) Release any Shareholder or former Shareholder from any liability on the shares;

(c) Provide any financial assistance, directly or indirectly, for the subscription or purchase of
its shares or the shares of its holding Company;

(d) Acquire, by way of purchase or otherwise, any of its issued shares or any share of its
holding Company

(i) What are the reasons behind these prohibitions?

(ii) Are there any exceptions to these prohibitions?

(iii) What safeguards have been put in place under the code to ensure that the reasons
behind these prohibitions are not defeated?

Question 10: Auditors of companies are one of the constituent powers in corporate governance
and put in place as a risk mitigation measure in corporate affairs. It has been suggested that some
of the provisions in the Companies Act, 1963 (Act 179) that are to ensure that the potential risks
that the duties of auditors are to prevent or minimize are counter-productive especially in the
light of current development in corporate affairs particularly leading to collapse of corporations
(e.g. Enron case). Ghana seeks to enact a new Companies Act to address some of this challenges.

Comment on the gaps in the Companies Act, 1963 relating to provisions regulating auditors of a
company which are address in the Companies Bill and determine in the light of legislation passed
in developed countries, whether the Companies Bill addresses all emerging issues relating to
ensuring the auditors effectively discharge their duties.

FERDINAND D. ADADZI, GIMPA FACULTY OF LAW, COMPANY LAW II.