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SH ARES

DAD/GIMPA/CL/NOTES/16 1
NATURE OF SHARES
A share is not a sum of money. It only
represents the interest of a shareholder in a
company measured by a sum of money
Issuance of shares is one of the means by
which a company raises fund to run its
business as companies, with the exception of
public companies may not be allowed to raise
money from the public.
Shares are defined in the First Schedule of Act
179 as the interests of members of a body
corporate who are entitled to share in the
DAD/GIMPA/CL/NOTES/16 2
A share does not only represent the interest of
a shareholder; a share is made up of a bundle
of rights and obligations. A share carries with
it certain rights and liabilities while the
company is a going concern or while the
company is being wound up.
These rights and liabilities attached to the
shares are dependent on the terms of issue
and of the companys Regulations as amended
from time to time so far as they are consistent
DAD/GIMPA/CL/NOTES/16 3
The interest a shareholder has in a company
by his ownership of shares does not connote
ownership of the company. Neither does the
shareholder own or hold any interest in the
assets of the company.
A share is thus referred to as chose-in-action
(rights in action as distinct from rights in
possession), meaning any legal claims of the
shareholder can only be enforced by against
the company by a court action.
DAD/GIMPA/CL/NOTES/16 4
A shareholders interests are only to share in
the interest and capital of the company while
his liabilities may be a potential loss of the
capital contributed to the business company
and his obligation to pay all unpaid liabilities
during winding up. (see also S 55)

DAD/GIMPA/CL/NOTES/16 5
Other rights may be set out by the companys
Regulations, but generally the ownership of
share entails the right to attend and vote at
general meetings (except with preference
shareholders), the right to receive dividends
when declared, a return of capital on winding
up after creditors and other persons who are
priority have been paid.

DAD/GIMPA/CL/NOTES/16 6
Shares are classified as personal estate and
not real or immovable property. Shares have
been likened to for instance a bale of cloth or
a bag of wheat though of an incorporeal
(intangible ) nature brought into existence by
legislation.
Shares are a specie of property which a
shareholder can buy, sell, charge and deal
with in like manner. A share also creates both
legal and beneficial interest.
DAD/GIMPA/CL/NOTES/16 7
In some jurisdictions, shares are referred to as
goods and classified as a movable property.
Shares issued under Act 179 are of no par
value.
Par value, sometimes referred to as face value
is the amount that is shown on the face of a
share as its value. The amount is arbitrary and
may not reflect the true worth of a share. This
value is normally used so that no share can be
issue for a payment less than that value.
DAD/GIMPA/CL/NOTES/16 8
Due to its misleading nature, Gower
recommends that they be cleared and that a
share be simply looked at as a fluctuating
value of a business and not a piece of paper
worth the value endorsed upon it.
Converse to par value shares are the no par
value shares as prescribed by Act 179. No par
value shares are issued without a stated par
value. The share is sold based upon what the
company decides should be paid for it and the
DAD/GIMPA/CL/NOTES/16 9
Shares issued in Ghana are of no par value. All
shares issued prior to the Act at par value are
to be converted to no par value shares. This
conversion however shall not affect any
unpaid liability on those shares nor the rights
of the shareholders in respect of dividends,
voting or repayment on winding up or a
reduction of capital.

DAD/GIMPA/CL/NOTES/16 10
ISSUE OF SHARES-S 41
The company determines , per its Regulations,
the total number of its authorized shares to
issue, at which times and at which
consideration.
The company and the member agrees on the
times that the shares shall be paid for.

DAD/GIMPA/CL/NOTES/16 11
CLASSIFICATION OF SHARES Ss 46,
48,49,50
The Regulations of a company may provide for
different classes of shares.
Shares shall not be deemed to be of the same
class unless they rank at the same rate FOR
ALL PURPOSES.
These classes may be attached certain
preferred, deferred or any other special rights
or restrictions as regards either dividend,
voting, repayment
DAD/GIMPA/CL/NOTES/16 12
There are two types of shares under Act 179:
preference and equity shares
A preference share is a share by whatever
name designated in the Regulations of a
company, which does not entitle the holder of
the share to a right to participate beyond a
specified amount in a distribution whether by
way of dividend, or on redemption, in a
winding up. Any other share is equity share (
also referred to as ordinary shares or
DAD/GIMPA/CL/NOTES/16 13
One may be a preference shareholder as to
either dividend or capital or both. S 51
A preference share may be cumulative or non
cumulative; convertible or non-convertible;
redeemable or non-redeemable (Section 51)
Refer to Sections 49 and 50 on preference and
equity shares respectively.

DAD/GIMPA/CL/NOTES/16 14
PAYMENT OF SHARES- S 42,45
Generally, shares shall not be issued except for
valuable consideration and unless otherwise
agreed, in cash.
There may however be circumstances where
by a capitalization issue, the company may
decide to issue shares to members as fully
paid instead of payment of dividend, and in
the same proportions so that the sum
transferred to the stated capital of the
company from the surplus will be deemed to
DAD/GIMPA/CL/NOTES/16 15
Valuable consideration may either be cash or
kind
Example of payment in kind may be rendering
of services to the company or transfer of
property by member to the company

DAD/GIMPA/CL/NOTES/16 16
Where the company accepts payment of the
shares in kind rather than wholly in cash, the
company must deliver to the Registrar within
28 days of the allotment of the shares a
contract in writing duly stamped evidencing
the terms of the agreement and the true value
of the consideration, or if not evidenced in
writing , particulars in the prescribed form of
the agreement
The statement in the agreement of the value
of the non-cash consideration is prima facie
DAD/GIMPA/CL/NOTES/16 17
However, upon winding up under Act 180, the
liquidator or a creditor may apply to the court
and if the court is satisfied that the true value
of the consideration was less than as stated in
the agreement, the court may direct that the
shares be treated as unpaid to the amount
that it shall direct.

DAD/GIMPA/CL/NOTES/16 18
RETURN OF ISSUE OF SHARES- S 43
Where a company issues shares other than treasury
shares, it shall within 2days deliver to the Registrar for
registration a return in the prescribed form showing:
The amount of its stated capital attributable to the
items that constitute stated capital under s 66
The number of its authorized shares of each class
The total number of its issued shares of each class and
the amount paid (distinguishing between those paid in
cash and kind) and the amount remaining payable on
he shares, distinguishing between those presently due
for payment and those yet to be due for payment

DAD/GIMPA/CL/NOTES/16 19
The total number of its treasury shares of each
class.
Failing to comply with this section, the company
and every officer of the company who is in
default shall be liable to a fine not exceeding 25
penalty units for every day during which the
default continues.
The same fine applies to the failure to deliver to
the Register the contract agreement or the
prescribed form under S 42
DAD/GIMPA/CL/NOTES/16 20
SHARE CERTIFICATE-S 53,54
Within two months after issue of share or after
the registration of the transfer of share, the
company shall deliver to the registered holder of
the share a certificate under the common seal of
the company
The share certificate shall state the number and
class of shares held by that holder and the
definitive number of the shares (S 52), the
amount paid and the shares and the amount
remaining unpaid, as well as the name and
address of the registered holder

DAD/GIMPA/CL/NOTES/16 21
Where the share certificate is defaced, lost or
destroyed, a registered holder of the shares
may request and the company shall renew the
certificate n payment of a nominal fee and on
the terms to be decided.
Statements made in the share certificate
under the common seal of the company are
prima facie evidence of the title to the shares
of the person named in the certificate

DAD/GIMPA/CL/NOTES/16 22
Where a person changes his position or acts
to his detriment in reliance in good faith on
the continued accuracy of the statements
made in the certificate, the company is
stopped form denying the continued accuracy
of those statements and shall compensate
that person for any loss incurred as a result of
his reliance on those statements.

DAD/GIMPA/CL/NOTES/16 23
This does not preclude the company to any
right of indemnity it may have against any
other person.
It has however been argued that a forged
certificate was a nullity and does not create an
estoppels against the company. See Ruben v
Great Fingall Consolidated [1907] A.C. 439

DAD/GIMPA/CL/NOTES/16 24
PROHIBITED TRANSACTION IN
SHARES S 56-62
The Code prohibits the dealing of a company
in its own shares whereby such dealing will
reduce the capital of the company, or reduce
the company to insolvency or be used by the
directors to unfairly enhance their control of
the company to the disadvantage of other
shareholders.

DAD/GIMPA/CL/NOTES/16 25
The Act abhors certain transactions in shares. The
company shall not:
alter the number of its shares or the amount remaining
payable thereon;
release any shareholder or former shareholder from
any liability on the shares;
provide any financial assistance, directly or indirectly,
for the subscription or purchase of its shares or the
shares of its holding company;
acquire, by way of purchase or otherwise, any of its
issued shares or any shares of its holding company.
DAD/GIMPA/CL/NOTES/16 26
Altering of the amount remaining payable on
shares and releasing a shareholder or former
shareholder from any liability on the shares
are not negotiable. These are total prohibited
transactions in shares
There are however some transactions in
shares which are partially prohibited.

DAD/GIMPA/CL/NOTES/16 27
These partially prohibited transactions are:
Altering the number of a companys shares S
57
Providing financial assistance for the
acquisition of shares S 58
Acquisition by a company of its own shares S
59

DAD/GIMPA/CL/NOTES/16 28
Share deals account
Refer to Bondzi-Simpson

DAD/GIMPA/CL/NOTES/16 29
VARIATION OF CLASS RIGHTS- Ss 46,
47, 231
The nature of shares is such that they are an
interest in a company with a bundle of rights
A companys Regulations may also provide for
different classes of shares (Section 46) with
accompanying rights as to voting, payment,
dividend, among other things.
According to Bondzi, a variation of class rights is
defined to mean any change or attempted
purported change in the incidence of
shareholding
DAD/GIMPA/CL/NOTES/16 30
WHAT AMOUNTS TO VARIATION
47(6))
A resolution of a company is a variation of the
rights of a class where the implementation of the
resolution would have the effect of :
a. Diminishing the proportion of the total votes
exercisable at a general meeting of the company
by the holders of the existing shares of a class
(Greenhalgh v Ardenne [1946] 1 All ER 512); or
b. Reducing the proportion of the dividends or
distributions payable at any time to the holders
of the existing shares of a class. (Re Mackenzie
[1916] 2 Ch 450)

DAD/GIMPA/CL/NOTES/16 31
According to Section 47, variation must be
provided for by the Regulation or be
permitted with the sanction of the court by a
scheme arrangement (Section 231)
Where the Regulation of a company does not
forbid alteration or the alteration of the
provisions on variation, the company may
alter its Regulations by SPECIAL RESOLUTION
to include provisions on variation.

DAD/GIMPA/CL/NOTES/16 32
For such alteration to take place, the written
consent of the holders of at least 75% of the
issued shares of each class or the sanction of a
special resolution of the members attending a
class meeting is needed.
Notwithstanding the alteration by the requisite
percentage, the holders of at least 15% of the
issued shares of the class whose rights are varied
may apply to court to have the variation
cancelled (47(7))

DAD/GIMPA/CL/NOTES/16 33
Where the application is made to the court, the
variration shall not have effect unless it is
confirmed by the Court
The application to have the variation cancelled
must be made within 60 days of the date on
which the variation was effected.
This application may be made on behalf of the
shareholders entitled to make the application by
one or more of the members of the applicants as
they may appoint in writing
DAD/GIMPA/CL/NOTES/16 34
The Court shall either CANCEL the variation where it is
satisfied that the variation would unfairly prejudice the
shareholders of any class or if not so satisfied confirm
the variation.
Whatever order the court makes, the company must
within 28 days deliver a copy of the order to the
Registrar for registration.
Default in delivering the order to the Registrar comes
with sanctions (subsection 12)
Other than this mode of variation sanctioned by the
Court, variation of the rights may also occur under S
231 where creditors and the Registrar are involved.

DAD/GIMPA/CL/NOTES/16 35
CANONS OF CONSTRUCTION- 51
Canons of construction simply refers to the
interpretation to be given to the provisions of
a companys Regulations in respect of the
rights attached to shares where there is no
express contrary intention.
They include the following:

DAD/GIMPA/CL/NOTES/16 36
a. Dividend is only payable where declared. (Dupaul v
Asare, supra) (2006)
This presumption even applies to preference
shareholders. This can however be rebutted by stating
for instance that preferential shareholders are entitled
to dividend so long as there is surplus. Evling v. Israel
[1918] 1 CH 101
Declaration of dividend lies within the discretion of
directors.
It is the exercise of the powers of directors under S 137.
One cannot compel directors to declare dividend.
DAD/GIMPA/CL/NOTES/16 37
However, with private companies, a member
may bring an action under S 218 claiming that
non-declaration of dividend is unfairly
prejudicial to his interest as a member where
there is increase of remuneration of directors
fees for a considerable period of time and no
payment of dividend. Re Sam Weller & Sons
Ltd [1990] Ch 682 where the company had
paid the same dividend for 37 years though it
could pay more.
DAD/GIMPA/CL/NOTES/16 38
SECTIONS 72& 73
By Section 73, a company needs an ORDINARY
RESOLUTION to declare dividends in respect of
any year or other specified period
The dividend declared and paid must not exceed
the amount recommended by the directors.
A company shall not pay dividend unless it is
able, after the payment to pay its debts as they
fall due
The amount paid should not exceed the income
surplus immediately prior to the making of the
payment. See S 71
DAD/GIMPA/CL/NOTES/16 39
Where payment of dividend is made in contravention
of the Act, every director of the company who is in
default is jointly and severally liable to restore to the
company the total amount by which the payment
contravenes with interest on that amount at the yearly
rate of 5%
Where the directors make the restoration to the
company, they are entitled to be indemnified by a
shareholder who has received an amount knowing that
it contravenes the Act to the extent of the amount
received with interest at 5% per annum

DAD/GIMPA/CL/NOTES/16 40
If the director defaults within 12months after the
date of the payment, the total amount with
interest on the payment shall be restored by the
shareholders, with each shareholder restoring
the amount she received in contravention of the
Act.
A shareholder, an officer or a creditor of the
company may bring an injunction application to
restrain a company from paying a dividend in
contravention of this Section or for restoration to
the company

DAD/GIMPA/CL/NOTES/16 41
Such action must be brought in a representative
capacity on behalf of the shareholder or the
creditor and all other shareholders or creditors of
the company and S 324 applies.
For public companies where unlawful dividend
has been paid, the shareholder is not liable to
restore the dividend if he can show ignorance of
the unlawful payment. S 292. The onus of
showing ignorance lies with the shareholder. See
Gowers commentary.

DAD/GIMPA/CL/NOTES/16 42
Note however that a company limited by
guarantee shall not at any time pay a dividend
or make a distribution or return its assets to
its members. 72
Also, Interim dividends are allowed for public
companies, i.e. dividends paid on account
before the main dividends are to be declared.
See S 293. Interim dividends must still comply
with S71

DAD/GIMPA/CL/NOTES/16 43
b. Unless the contrary intention appears, a preference
share has no further right to participate in dividends
i.e. where the preferential shareholder gets paid his
specified dividends for the periods when dividend was
declared, such preferential shareholder cannot
participate in any excess profits that are being
distributed as dividends to the other shareholders.
c. Unless the contrary intention appears dividend shall
not be payable on any shares ranking subsequent to
that class of shares until all arrears of the fixed
dividend have been paid.

DAD/GIMPA/CL/NOTES/16 44
There is a presumption that fixed preferential
dividends are cumulative and all arrears will be
paid when dividends are declared. The
presumption of a cumulative dividend is rebutted
if it is provided, for instance, that the preferential
dividend shall be paid out of profit for each year.
When it comes to winding up and there is
distribution, there is no distinction between
accumulated profits and surplus. These are all
available for distribution to all involved parties.
See 51(f)

DAD/GIMPA/CL/NOTES/16 45
Another presumption is that unless the contrary
intention appears, in a winding up arrears of any
cumulative preferential dividend whether or not
earned or declared shall be payable up to the
date of actual payment in the winding up.

This reverses the common law presumption that


in the absence of a contrary intention, cumulative
dividends were not payable on winding up. The
opposite is the case in Ghana.
DAD/GIMPA/CL/NOTES/16 46
DIFFERENCE BETWEEN ALLOTMENT
AND ISSUANCE
Allotment refers to the offer of shares to a person
with certain conditions.
Upon acceptance of the offer, fulfilment of those
conditions and the payment of shares, then
shares are issued to the person and his name is
registered in the register of members
An allotment of shares itself does not amount to
the issuance of shares
See:
Conte v Kpeglo [1964] GLR 311
Adehyeman case
Christopher Mensah v Obiri(unreported)
DAD/GIMPA/CL/NOTES/16 47
Halsburys Laws of England Vol. 7, 4th Edtn.
Par 368 (reflects Ghanaian law):
A resolution to allot shares is not necessarily
the issue of them. The term (issue of shares)
seems to me allotment followed by
registration or possibly some other act distinct
from allotment whereby the title of the
allotee becomes complete.

DAD/GIMPA/CL/NOTES/16 48
TRANSFER OF SHARES (Ss 95,98, 294)
The general rule is that shares are transferable
without restrictions except as expressly
provided in the Regulations
The transfer must be in written form
For private companies, the Regulations may
give pre-emption rights to existing
shareholders and directors in this case have
power to refuse to register a transfer (95(2)
Directors of private companies also have
power to refuse a transfer to an infant or a
person of unsound mind
DAD/GIMPA/CL/NOTES/16 49
For public companies, any restriction on the
right to transfer shares of the company shall
be ineffective (294(1)
There are two situations in which the directors
may however refuse the transfer:
a. Where the person is an infant or of unsound
mind.
b. Where there are unpaid liability on the shares
which is to be transferred.
DAD/GIMPA/CL/NOTES/16 50
REGISTRATION OF TRANSFERS- 98
The company is only obliged to register
absolute interest in shares.
Trust relationships and nominee shareholders
are not recognized under the Register of the
company or the regulations. This means a
beneficiary of a trustee cannot demand to be
recognized as a member of the company.
The trustee on the other hand is a member of
the company. This is because the shares are
registered in his name.
DAD/GIMPA/CL/NOTES/16 51
The company shall not register a transfer
unless a proper instrument of transfer duly
stamped has been delivered to the company.

DAD/GIMPA/CL/NOTES/16 52
TRANSMISSION OF SHARES BY
OPERATION OF LAW-99
The survivor of the joint holder of a share or
the legal personal representatives of a
deceased shall be the only persons recognised
by the company as shareholders. (Politis No 2)
Ownership of a share may also devolve by
reason of a person being the receiver or
trustee in bankruptcy of a shareholder or by
operation of law and upon evidence being
provided, such person may properly require to
be registered personally as the holder of the
shares or transfer the same to another person
DAD/GIMPA/CL/NOTES/16 53
Subsection 4 of 99 provides that such person
on whom ownership of share devolves by
reason of him being a legal representative,
receiver or trustee in bankruptcy or operation
of law, shall prior to registration as a holder of
the shares be entitled to the same dividends ,
interest and other advantages as if that person
were the registered holder of the share except
that such person, prior to registration, shall
not be entitled to attend and vote at a
DAD/GIMPA/CL/NOTES/16 54
REGULATOTRY RESTRICTIONS ONF
TRANSFER OF SHARES
Other Statutes may provide for restriction on
the transfer of shares such as
Section 13 of the Exchange Control Act
Minerals and mining law

DAD/GIMPA/CL/NOTES/16 55
SHARE DEALS ACCOUNT-63
This account is kept by the company and it is from
this account that purchases and redemption of
shares are made (other than redemption of
redeemable preference shares out of the
proceeds of a fresh issue of shares)
The funds in this account come from the income
surplus account to redeem or purchase shares
and the net price of the value of the
consideration received by the company on the re-
issue of any of its treasure shares (Subsection 2)
Refer to Gowers commentary on the share deals
DAD/GIMPA/CL/NOTES/16 56
CASES ON SHARES(FOR YOUR
READING PLEASURE)
Politis v Plastico (No. 1 & 2)
Asafu Adjaye v Agyekum
Conte v Kpeglo
Christopher Mensah v G K Obiri
(unreported??)
Natwest bank v. IRC [1994] 3 AER 1.
Howard Smith v Ampol Petroleum [1974] AC
821.
Evling v. Israel [1918] 1 CH 101
DAD/GIMPA/CL/NOTES/16 57
White v Bristol Aeroplane Co (1953) Ch 65
Greenhalgh v Arderne Cinemas Ltd (No 2)
[1946] 1 All ER 512
Re Mackenzie [1916] 2 Ch 450
Okudzeto v Irani Brothers, supra
Ethelburga (W.A.) Ltd. v Lutterodt [1962] 1GLR
23

DAD/GIMPA/CL/NOTES/16 58
TRIVIA
Guys always think tears are a sign of
weakness. Theyre a sign of
FRUSTRATION. Shes only crying so
she wont cut your throat in your
sleep. So make nice and be grateful.
---Donna Barr

DAD/GIMPA/CL/NOTES/16 59

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