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August 30, 2023 sysadmin No Comments

TIMING AN OBJECTION TO CAPACITY THROUGH THE LENSE OF ADISA BOYA VS ZENABU MOHAMMED (SUBSTITUTED BY ADAMA MOHAMMED) AND MUJEEB: WILL EQUITY PREVAIL?

Abstract

The decision of the Supreme Court in the case of Adisa Boya vs Zenabu Mohammed, among a few others, marks a seminal regime for children who commence proceedings in court to protect their interests in the properties of parents who have died intestate.

The decision appears also to herald an incision in the oft quoted proposition of law that an objection to capacity could be raised at any time in civil proceedings.

The purpose of this article is to highlight, against the decision, that there is a real likely shift in the attitude of the court toward objections to capacity, and that an objection to capacity may not always be permitted by the court at any time in civil proceedings. Considerations of justice and the Equity of a case may trump a party’s legal right to take an objection to capacity at any time.

Introduction

In civil litigation, a person who institutes an action in court in a certain capacity must show that they are indeed clothed with that capacity in order to sustain the action. For example, a person who institutes an action as administrator of the estate of a deceased person would suffer a dismissal of their case by the court if it comes to light that the person did not or has not obtained letters of Administration from a court of competent jurisdiction to administer the estate of the deceased person. Similarly, a person who sues as a member or shareholder of a company must satisfy the court of that membership or shareholding of the said company. Conversely, a person (Defendant) against whom an action is instituted in a certain capacity may deny or object to that capacity in which they are sued.

The question of capacity is soimportant that when a party’s capacity in an action is challenged, the court is enjoined to deal with that question first (as a preliminary issue) before considering the merits of the case, if capacity is established.

The traditional position of the law has been that an objection to capacity can be raised at any time in civil judicial proceedings. The Supreme Court, in the case under review, appears to have shifted from the traditional position by taking into account factors which may deny a party the advantage of taking their objection to capacity at any time in the proceedings.

This article highlights the decision of the Supreme Court and argues that the decision visualises a departure from a strict adherence to the law, and thereby makes room for equity and fairness.

When to object to capacity

Capacity is foundational to the prosecution or defence of any civil cause. The significance of capacity was stated by the Supreme Court, exercising its appellate jurisdiction, in the case of Alfa Musah v Dr. Francis Asante Appeagyei^[1] in the following terms:

“Since the issue of capacity was raised against the appellant at the High Court and the Court of Appeal, the first ground of Appeal appears to be very fundamental to the determination of this appeal and every Civil Proceedings for that matter….With the evidence conclusively pointing to lack of capacity of the appellant to institute this suit the learned trial judge proceeded to state the well-known proposition of law that when the suitor’s capacity is challenged he must prove it before he can succeed on the merits….We think the law is that, when a party lacks the capacity to prosecute an action the merits of the case should not be considered…. Even though the court may resort to taking evidence on all the issues raised by the pleadings, the court must always consider the issue of capacity first.”^[2]

The time-honoured principle is that an objection to capacity in an action could be raised at any time, including on appeal.

The supreme Court stated this position in the case of Evelyn Asiedu Offei v Yaw Asamoah^[3] as follows:

“Whether or not a party has capacity to institute an action is a question of law that could be determined after a factual evaluation of the evidence on record. As a legal question, it could be raised at any time at all by any of the parties in litigation or even by the Court suo motu when the circumstances call for its invocation.”^[4]

In the case of Standard Offshore Trust Company Ltd v National Investment Bank Ltd & Others^[5], the Appellant raised the issue of capacity of the Respondent (Plaintiff at the trial court) for the first time in the Appellant’s Written Address at the Supreme Court. In response to this challenge, the Respondent argued, among others, that the Appellant, having failed to raise the issue earlier in the proceedings, had fully appreciated the capacity of the Respondent and thereby had effectively waived any objection the Appellant had.

The Court addressed the issue as follows:

“A writ that does not meet the requirement of capacity is null and void. Nullity may be raised at any time in the course of the proceedings, even on a second or third appeal. The charge of tardiness that was raised by the respondent against the appellant is thus a red herring and does not hold water.”^[6]

In the case of Opanin Yaw Okyere v Opanin Appenteng & Anor^[7], a deceased (testatrix) by her last will gave some properties to the 2nd Defendant. The plaintiff challenged the devises on the basis that the properties in question were family properties and therefore the testatrix could not properly make a disposition of the properties to the 2nd Defendant. The 2nd Defendant counterclaimed that the properties given to her by the testatrix were the self-acquired properties of the testatrix. No Vesting Assent had been executed in favour of the 2nd Defendant. The 1st Defendant who was the sole executor of the will, neither defended the action nor did he pursue a counterclaim against the Plaintiff.

The trial High Court entered judgment for the 2nd Defendant on her counterclaim (i.e. declaring that the properties in dispute were the testatrix’s self-acquired properties). On the Plaintiff’s appeal to the Court of Appeal, the Court of Appeal upheld the decision of the trial High Court.

The Plaintiff further appealed to the Supreme Court on grounds, among others, that;

“The Court of Appeal erred in law when it failed to address the locus standi of 2nd Defendant to Counter-claim in view of the fact that no Assent had been vested in her by 1st Defendant executor.”

The Plaintiff argued in the Supreme Court that the 2nd Defendant had no locus standi to defend a title suit against her (2nd Defendant) until a Vesting Assent had been executed in 2nd Defendant’s favour by the 1st Defendant.

The Court held that, in the absence of a vesting assent executed in favour of the 2nd Defendant, 2nd Defendant could neither sue nor be sued on her devise under the will of the deceased(testatrix). The Plaintiff/Appellant’s argument on appeal was, therefore, upheld. The Court went ahead to explain that the action against the 2nd Defendant was dismissed as 2nd Defendant lacked the capacity to be sued in relation to her devise. The 2nd Defendant’s counterclaim was, accordingly, dismissed on the basis that 2nd Defendant had no standing to pursue a counterclaim in relation to 2nd Defendant’s devise in the will of the deceased.

The decision in Opanin Yaw Okyere above resonates the relevance of capacity in civil proceedings and affirms that the question of capacity is one of law, almost of pure law. Otherwise, one would reasonably argue that once the 2nd Defendant herself had not objected to the suit, but had rather responded to the plaintiff’s case and counterclaimed against the Plaintiff, the Plaintiff should not be able to turn around to now say that she had no capacity to counterclaim which essentially means that the Plaintiff could not have even sued her in the first place. Being a matter of law however, these conjectures were immaterial. What mattered was whether or not she possessed capacity as prescribed under law.

Notwithstanding the legal essence of capacity in civil proceedings as observed above, this was a clear case in which the Plaintiff had occasion to approve and disapprove of the capacity of 2nd Defendant for Plaintiff’s benefit at different times in the same suit. If the Plaintiff had won against the 2nd Defendant at the trial High Court, Plaintiff most likely would not have appealed to raise questions regarding the capacity of the 2nd Defendant to be sued. The Plaintiff would have gone away with the joy and benefits of the judgment, unless the court’s attention was drawn to raise the question of capacity suo motu.

The Decision in Adisa Boya v Zenabu Mohammed (Substituted by Adama Mohammed) and Mujeeb^[8]

Facts:

In an action for declaration of title to land, the Plaintiff argued that the land in dispute was granted to the Plaintiff by the Hia-Topre stool of Ayigya. The Defendant also claimed title through the same Hia-Topre stool of Ayigya. While the Plaintiff contended that Plaintiff obtained Plaintiff’s grant in the 1990s and perfected it with a deed of lease from the stool, the Defendants claimed through Defendant’s deceased father and alleged that Defendants’ father took his grant in or about January 1970 and followed the grant with an entry upon the land and the erection of a residential dwelling thereon. As expected, the Defendants counterclaimed for a declaration of title to the land.

The trial High Court judge declared title in favour of the Plaintiff. On appeal by the Defendants, the Court of Appeal overturned the decision of the trial High Court and declared title in favour of the Defendants. Dissatisfied with the decision of the Court of Appeal, the Plaintiff appealed to the Supreme Court.

At the Supreme Court, the Plaintiff argued, among others, that the Defendants had no capacity to make a counterclaim in respect of their deceased father’s property because the property had not been vested in the Defendants by an assent. The Plaintiff, therefore, submitted that the Court of Appeal erred in declaring title in favour of the Defendants on the Defendants’ counterclaim. The Plaintiffs cited and relied on the case of Okyere (Deceased) v Appenteng & Anor.^[9]

The Court rejected the Plaintiff’s argument on capacity observing that while the Okyere case was decided in respect of property that was being claimed under a will, the present case related to properties in intestacy.

The Court went further to hold as follows:

“Further, in the instant case, the defendants who were peacefully on their property were sued by the plaintiff who sought to have title declared in his favour against them and as by the nature of the controversy, title was necessarily put in issue by either party, it is important that the question as to which party owned the disputed property be put to rest once and for all in order that the matter may not be litigated in the future. Accordingly, no injustice was occasioned to the parties by the determination of the question of title to the land by the Court of Appeal. Indeed, we are enjoined … to avoid multiplicity of actions by the very clear words of Order 1 rule 2 of the High Court (Civil Procedure) Rules, 2004, CL 47 which is as follows: [the Court reproduced the provision]….The legislative wisdom contained in the above provision which is the overriding principle in civil procedural rules in the High Court cannot be overridden by slavish adherence to mere technicality; our primary concern…being to do substantive justice….The plaintiff who has urged this point before us took part in the proceedings before the trial court without raising a finger and we are firmly of the opinion that it is too late in the day to do that which would have the effect of escaping through the back door after much time and expense has been incurred in the action herein. The matter having been fought to this stage, the parties are entitled to have the issues determined finally between them.” (Emphasis)

The immediately preceding dictum could reasonably be argued to suggest that the Plaintiff could not properly now challenge the capacity of the Defendants in the action because of the time that had been expended in the proceedings, and the conduct of the Plaintiff in suing the Defendant in the first place. Moreover, the Plaintiff’s objection to the Defendant’s capacity was too late in the day.

Even though it is noteworthy that the argument of a party’s tardiness to raise an objection to another’s capacity was rejected in the subsequent decision of the Court in the Standard Offshore Trust case, it featured prominently in the case of Adisa Boya. It is also, however, worth noting that while the Court in the Standard Offshore Trust and the Okyerecases found that the Respondent had no capacity to sue, the Court found in Adisa Boya that the Defendants were clothed with capacity to make a counterclaim.

Will Equity Prevail against the Law?

The question of whether a party has capacity to institute an action is a question of law.^[10] The decision in Adisa Boyaseems to suggest that there may be an instance where an objection to capacity may be treated as one of mere technicality in the face of the justice and equity of a particular case. It, however, remains doubtful that the dictates of equity and fairness could successfully assert itself on the subject and refuse to follow the law. This doubt is further anchored by the fact that the objection to capacity in the Adisa Boya case was addressed by the Court in three stages. The Court held that:

The Okyere case which was relied on by the plaintiff was not applicable to the circumstances of Adisa Boya. That is, whilst the Okyere case was decided on the facts of a Defendant, not a child of the testatrix, based on dispositions made to the Defendant in a will, Adisa Boya was a case of a deceased who had died intestate whose children were the Defendants (Emphasis);
The Plaintiff took part in the proceedings in the trial court without raising an objection. Therefore, it was too late in the day to object to Defendants’ capacity. The Plaintiff could not escape the consequence of the proceedings through the back door;
By virtue of the rules on intestacy contained in PNDC Law 111, following the death of the father and the mother of the Defendants, the property devolved upon the children (Defendants) and as such they had an immediate legal interest in the property that they were competent to defend and or sue in respect of the property.

The holding observed in (c) above was that the Defendants had the capacity to sue and or be sued in the matter. As a result, the question whether equity (i.e. the holding observed in (b) above) would have sufficed as the sole basis to rule out the question of capacity at that stage of the proceedings appears to be a crucial question worth noting.

Conclusion

The holding in Adisa Boya suggests that there may be instances where a party’s legal right to raise an objection to capacity at any time in civil proceedings would be clogged by considerations of equity and fairness. It presents a scene where equity may admit its place to follow the law, yet not slavishly. It is respectfully submitted that justice would be done in accordance with the law when the Court has the discretion to take or refuse parties the right to take objections to capacity at any time in the proceedings. Timeliness, fairness and good faith should have a prominent place against technicalities of the law.

^[1] [2018] DLSC 475

^[2] Yeboah CJ (as he later became), p. 3, 4 & 5

^[3] [2018]DLSC151

^[4] Appau JSC, p. 4

^[5] [2017]DLSC 2989

^[6] Benin JSC at 10

^[7] [2011]DLSC 2664

^[8] [2018]DLSC 4225

^[9] Ibid n 7

^[10] Ibid n

Nartey Law Firm is a leading corporate and commercial law firm in Ghana providing legal services to individuals, domestic and international businesses. Ensuring the success of our clients’ objectives is at the core of what we do. Comprised of a dedicated team of lawyers with extensive experience in corporate, commercial and international law and litigation, we pride ourselves with the diligent execution of all client matters, whilst guaranteeing an uncompromising standard with respect to excellence in service delivery. Some of our focus areas are Real Estate, Trade and Commerce, Banking and Finance, Regulatory Advisory, Capital Markets and Mergers and Acquisitions.

CONTACT:

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Email:info@narteylaw.com

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September 20, 2021 sysadmin No Comments

Penalty and Interest Waiver Act 2021 (ACT 1065)

Introduction

Have you or your business been unable to pay your taxes in the past year and beyond? You are far from alone. The spread of the global COVID 19 pandemic worsened challenges people faced and crippled financially successful businesses and people. A survey by the Statistical Service of Ghana in collaboration with the World Bank reports that in Ghana, 35.7% of business establishments had to close during the partial lockdown in 2020, with 16.1% continuing to be closed after the easing of the lockdown, with establishments in the hospitality being the most affected (24.0 percent had to close)^[1]. Individuals have equally been affected, with a total number of 118,266 confirmed cases of the virus in Ghana, and 1,017 deaths as at the date of this article^[2].

In spite of this, the obligation to pay taxes still remains, and people who fail to pay their taxes are subject to penalties and interest on taxes. This article aims to bring awareness of the Penalty and Interest Waiver Act 2021 (Act 1065), a law that was passed to help tax defaulters to make arrangements to pay their taxes without the usual penalties.

The Ghana Revenue Authority

The Ghana Revenue Authority (GRA) was founded in 2009 to administer various taxes and tax-related laws. Its function is also to assess, collect, administer, and account for Fiscal and Customs revenue collected by the Ghanaian government through the Ministry of Finance, in accordance with established laws and procedures.

GRA has the authority to prosecute tax evaders. This is because its mission is to guarantee that taxpayers properly comply with their tax duties and that money is correctly assessed and collected by enforcing compliance with the legislation it administers.

Individual And Corporate Taxation

Individuals who are Ghanaians are currently taxed on a graduated scale whereas non-residents are taxed at a flat rate of 25%. For employees, the tax payable on employment income must be withheld at the source (ie. by the employer), and remitted to the GRA by the 15th of the following month.

Individuals are required to keep detailed records of their income and expenses on a cash basis. As a result, when calculating their taxable income for each calendar year, individuals must include both income received and expenses paid for.

Companies and other corporate bodies, unlike individuals, are required to account for income and expenses on an accrual basis for each accounting year, rather than a calendar year. Most businesses in Ghana are taxed at a rate of 25%, while those in the extractive sector (Mining sector) are taxed at a rate of 35%. Companies can, however, take advantage of varying concessionary tax rates based on the nature of their business, industry, and location.

On 31^st March 2021, in its 2021 Budget (the 2021 Budget), the Government of Ghana passed three new tax laws and amended two old ones, which are to take effect in 2021. These laws were passed as part of the government’s Budget Statement and Economic Policy, which included a variety of tax initiatives.

One of these laws passed by Parliament on March 31, 2021 was the Penalty and Interest Waiver Act 2021 (Act 1065).

The Penalty And Interest Waiver Act

The Penalty and Interest Waiver Act exempts people from fines and interest on accumulated tax arrears until December 2020.

This means that people and companies that have tax arrears or unfiled returns up to 31st December 2020 will not pay any interest or penalty on such arrears – as long as they pay these taxes on or before December 31, 2021.

Apart from all interest and penalties accrued in tax years up to December 31, 2020 being waived by the GRA, there will be no prosecution or enforcement action against any person who has been granted the waiver.

Scope of the Waiver

The Act applies to the following:

Persons who have not previously registered with the GRA.
Persons who have registered with GRA but:
have not submitted their returns; or
are in arrears for the submission of returns;or

iii. are in arrears for payment of tax payments.

The waiver does not apply to the following:

Payments or returns due or after January 1, 2021.
Persons who fail to comply with the provisions of an enactment administered by the Commissioner General that relates to the furnishing of a return or payment of a tax due from 1st January 2021.

How To Apply For The Waiver

Submit a written application requesting for the waiver at GRA. In the application, you must include your company or individual taxpayer’s details, the time period during which the liability occurred, and outstanding taxes.
Submit prior year’s returns until December 31, 2020.

All this must be done before September 30, 2021. The Commissioner-General shall serve a notice of his decision within thirty days of receipt of the application. Should the Commissioner-General decide to not grant the waiver, the Commissioner-General is required to specify in writing the reason for the refusal.

An applicant who is dissatisfied with the Commissioner General’s decision, may file a written complaint with the Commissioner General within 30 days of receiving the decision. the Commissioner-General will make a final decision within thirty days of receiving the complaint and notify the applicant. The applicant may pursue the matter in court if dissatisfied with the Commissioner General’s final decision.

Conclusion

It is hoped that many individuals and companies will take advantage of the law in order to meet their tax obligation.

Update:

Act 1065 has been amended by the Penalty and Interest Waiver (Amendment) Act 2021 (Act 1073). Act 1073, which was passed into law on 30th December 2021, has changed the deadline for applying for the waiver to 30th June 2022. It is hoped that this amendment will enable a greater number of people to take advantage of the waiver.

CONTACT:

NARTEY LAW FIRM

TEL: +233 (0)553508582

Email:info@narteylaw.com

Disclaimer: This publication is for information purposes only and is not intended to constitute legal advice. If you require information on any matter discussed in this article, kindly reach out to the firm directly.

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August 30, 2021 sysadmin No Comments

A Guide for the Conduct of Directors in Ghana

Author: Barbara Ewoenam A. Kukah

Introduction

Every year, several businesses are registered in Ghana. According to a report, a total of 92,455 businesses were registered in Ghana in 2019. Many of these registered businesses are companies which require a board of directors such as companies limited by shares, companies limited by guarantee and unlimited companies. However, many directors, especially first-time directors, are unfamiliar with their duties and the legal requirements placed on them.

Being a director of a business entity is more than simply being named in company registration documents or attending board meetings. The Companies Act 2019, (Act 992) serves as the foremost statutory authority to assist both new and experienced directors in the course of the performance of their duties. This article examines, simplifies and explains the general provisions of the law on the appointment, duties and liabilities of directors and how this applies to them.

Who Are Directors?

Directors are persons who are appointed to administer the business of a company (Section 170 of the Companies Act, 2019 (Act 992)). It does not matter by what name they are called. Whether they are called a governing council, board of directors, council of elders, etc, as long as they are appointed to administer the business of a company, they are regarded as directors by the Companies Act.

Even if a person was not formally appointed as a director but the directors of the company are accustomed to act on that person’s instructions, that person will be subject to the same liabilities as the directors. This applies to persons who hold themselves out as directors of a company or allow themselves to be held out as directors of a company when they have not been duly appointed as such.

In the case of Commodore v. Fruit Supply (Ghana) Ltd [1977] 1 GLR 241, one Attoh Quarshie, although not appointed as a director of a company, used to act and conduct business on behalf of the company. His name was also on the company’s letterhead, and he was held out as a director by the company. In a dispute over money in which the Defendant claimed she had paid some of money to Attoh Quarshie on behalf of the company, the company denied that he was a director and averred that he was not authorized to receive payment on behalf of the company. The Court of Appeal however held that the company was estopped from denying him as a director since it had held him out as such. It also held that as a director, Attoh Quarshie owed a fiduciary duty to the company and as such had to account for all monies he received on its behalf.

Number of Directors

The minimum number of directors a company can have is two (Section 171 of Act 992). The actual number of directors a company can have is usually determined by the constitution of the company.

Appointment, Qualification and Removal of Directors

Qualification of Directors

Per section 173 of Act 992, any person is qualified to act as a director of a company except the following:

An infant;
A person adjudged to be of unsound mind;
a body corporate;
a person who is prohibited from being a director or promoter of, or being concerned or taking part in the management of a company as a result of an order made under section 177 so long as the order remains in force unless leave to act as director has been granted by the court in accordance with that section;
an undischarged bankrupt, unless that bankrupt has been granted leave to act as director by the Court by which that person was adjudged bankrupt.

Section 177 of Act 992 restrains persons who have been convicted of an offense involving fraud or dishonesty, insider dealing, an offense in connection with the promotion, formation or management of a body corporate or any offense which is not a misdemeanor whether in or out of this country from managing companies except with leave of a court.

Again, section 177 provides that a person is automatically disqualified for appointment to as director of a company for five years if that person has:

been convicted within the last five years of an offence involving fraud or dishonesty, or relating to the promotion, formation or running of a company;
been a director or senior executive of a company that has become insolvent within the last five years on account of or partly as a result of the culpable activities of that director; or
has been disqualified to act as Company Secretary, receiver, manager or liquidator of a company.

Where this person is subsequently subject to a second conviction, that person shall be automatically disqualified for a period of ten years and shall be permanently disqualified as a director if convicted for the third time.

Should you as directors appoint a person who is not qualified to act as a director to the board of a company, you have committed an offence and shall be liable to on summary conviction a fine of not less than five hundred penalty units and not more than a one thousand penalty units or to a to a term of imprisonment not less than two years and not more than five years. (One penalty unit currently amounts to twelve cedis)

Appointment of a Director (Sections 172, 300)

Any person who is appointed as a director must consent in writing to be appointed as a director. This consent must be filed with the Registrar of Companies within 28 days.

Before the appointment, the person must make a statutory declaration and submit it to the company and subsequently to the Registrar of Companies declaring that within the past five years, that person has not:

been charged with or convicted of a criminal offence involving fraud or dishonesty;
been charged with or convicted of a criminal offence relating to the promotion, incorporation or management of a company; or

been a director or senior manager of a company that has become insolvent or if the person has been, the date of the insolvency and he particular company.

The Registrar of Companies must be notified of the appointment of a new director within twenty-eight (28) days of the appointment.

Casual Vacancy

Ordinarily, a director should serve as director till his/her term of office expires. However, in due to various circumstances, the office of a director may become vacant before the expiry of the term of his/her office. This is known as casual vacancy. It can occur when any of the following happens:

when a director dies
when a director resigns
when a director becomes incompetent to as a director by reason of being convicted for a crime involving fraud, dishonesty or in connection with the management of a company.
When a director ceases to hold office by virtue of not holding the specified share qualification of a company.
When a director is removed from office.

When a director’s term of office ends, it is not classified as a casual vacancy.

The remaining director(s) may fill the vacancy by an ordinary resolution of the company in a general meeting or by the continuing director(s). A shareholder or creditor of the company may also apply to the court to appoint a director in the event that there are no directors, or that the number of remaining directors is less than the quorum or in the event that it is not possible or practicable to appoint directors in accordance with the company’s constitution.

Duties of Directors

The duties of directors in general are regulated by section 190 of Act 992. They include the following:

1.1 Fiduciary Duties

A director of a company stands in a fiduciary relationship towards the company and shall observe the utmost good faith towards the company in any transaction with or on behalf of the company. (Section 190(1).

This means that a director is to act in the best interest of the company. Section 190(2) of Act 992 provides as follows:

A director shall always act in what he believes to be the best interests of the company as a whole so as to preserve the assets, further the business, and promote the purposes for which the company was formed, in such manner that a faithful, diligent, careful and ordinarily skillful director would act in the circumstances and in doing so shall have regard to

the likely consequences of any decision in the long term,
the impact of the operations of the company on the community and the environment, and the desirability of the company maintaining a reputation for high standards of business conduct.

In considering whether a particular transaction or course of action is in the best interest of the company as a whole, a director may consider the interests of the employees, as well as the members, of the company. If the director was appointed by, or is a representative of, a special class of members, employees, or creditors may give special, but not exclusive, consideration to the interests of that class. (Section 190(4)).

Exercise of Powers

Directors are required to act in accordance with the constitution of a company, and only exercise powers for the purposes for which the powers are conferred (Section 190(3)).

It must be noted that nothing in the company constitution or a contract can relieve a director from their duty to act in the best interest of a company. Similarly, directors cannot be relieved from any liability they incur as a result of breaching the provisions of Act 992 in respect of fiduciary duties.

Directors are also required to exercise independent judgment in performing their duties.

Directors can only exceed the powers conferred on them by the company constitution with the approval of an ordinary resolution of the company. Should a director fail to obtain such approval, that director will be personally liable to pay the company or any other person the amount of money lost or the monetary value of damage caused to the company or that person as a result of the director’s action.

Conflicts of Duty and Interest

Part of the fiduciary duties of a director is the duty to avoid conflict of duty and conflict of interest. As a director of any company, you are to avoid placing yourself in a position where your duties to the company conflict with or may conflict with your personal interests or duties to other people. Section 192 of Act 992 provides that as a director you are to avoid the following:

Using the company’s money, property or confidential information (which was obtained in your capacity as a director) to your advantage.
Having a direct or indirect interest in a business which directly competes with the company unless it is a public company in which you are a shareholder or debenture holder.
Having a personal interest whether directly or indirectly in a contract or transaction, which the company enters into.

What Constitutes Material Interest?

Holding two (2) percent or less of the shares or a class of shares in a public company or being a debenture holder of a public company does not constitute material interest. Likewise, holding debentures in a company does not constitute material interest.

For interest to be considered material, it must be more than two (2) percent of the shares if held in a public company or must be shares held in a private company. Every material interest must be disclosed in order to avoid conflict of interest.

Full Disclosure

As a director, you can however proceed with potential conflict of interest situations when the company gives its consent. This is done when the following is fulfilled:

You make full disclosure by giving notice in writing to the directors at a board meeting (Section 194(4). This notice must state the nature and extent of your interest.
The directors have a general meeting and pass an ordinary resolution to proceed or to authorize the transaction. (The interest holding director cannot vote on this resolution).
You cause your interest to be registered in the company’s Interest Register (Section 195(1)).

Once this is done, you are entitled to enter into contracts with the company and are not required to account for any profit made from it (Section 194(1)).

Interest Register

The company is required by Act 992 to maintain an Interest Register which is to be kept at the same place as the Register of Members. When a director has an interest that is likely to create a conflict of interest, apart from disclosing this interest, the director is also to cause that interest to be entered into the Interest Register.

Professional Services To The Company

As a director, you or your firm may render professional services to the company and receive remuneration for it – provided full disclosure is made. You or your firm can however not act as the company’s auditor.

Company Information (Section 198 of Act 992)

In the course of your duties, you may have access to company information that would not have been available to you had you not been a director. The law stipulates that you are not to disclose this information to anyone or make use of that information except in the following circumstances:

For the purposes of the company.
As required by the law.
When it is authorized by the Company’s constitution.
When it is approved by a written resolution of the company which has been signed by three fourths of all members who are entitled to attend and vote at meetings.
On receiving approval from the company at a general meeting by an ordinary resolution (You cannot vote on this. Neither can any person who holds shares in which you have a direct or indirect beneficial interest.) This approval can be given either before or after your action or transaction.

The Board of directors may also authorize you to disclose or act upon such information where they are satisfied that doing so is not likely to affect the company. However, you are accountable to the company for any profit you make from using this information.

In all these, you must act in utmost good faith and in the best interest of the company.

Acting As Company Secretary

As a director, you can also act as company secretary. However, where a legal provision requires an act to be done by both a director and a secretary, you cannot perform the act in both capacities. You can only act as either director or secretary in respect of that act. (Section 213).

Breach Of Fiduciary Duties

Should you breach your fiduciary duties to the company,

You and any other person who knowingly participated in the breach are liable to compensate the company for the loss the company suffers as a result of the breach.
You are also liable to account to the company for any profit you make as a result of the breach.
The company can also rescind any contract or transaction between you and the company that was done in breach of your fiduciary duties to the company.
The company can also bring legal action against you to restrain any threatened breach of your duties, enforce any liabilities you owe it or recover any of its property that is in your possession.

Other Things To Note

Act 992 requires that at least one director of a company shall at all times be resident in the country. Should there be a willful breach of this provision, the Company and every director that is in default shall be liable to pay the Registrar an administrative penalty of twenty-five penalty units for each day during which the default continues. (Section 182)
Directors are required to meet at least once in every six months in each year to consider the financial and operational affairs of the company. They may meet in the country or elsewhere. (Section 188).
A director may summon a meeting of directors at any time. (Section 188(2)(b)).
A director who becomes disqualified to act as a director is under a duty to report it to the Board and the Company Secretary in writing immediately. Failure to report within twenty-one (21) days of the qualification is an offence and on summary conviction the director shall be liable to a fine of not less than five hundred penalty units and not more than one thousand penalty unit or to a term of imprisonment of not less than two years and not more than five years or both a fine and imprisonment. (Section 178)
The fees and other remuneration of directors shall be determined from time to time by an ordinary resolution and not by a provision in an agreement or in any other way. The company’s constitution may however make provision for benefits payable to the directors. (Section 185)
A director who is also employed by the company may have their remuneration fixed by the terms of employment, but the person shall not receive any remuneration in addition to the fees which they are entitled to as a director of the company. (Section 185)

Conclusion

In all things directors are to be guided by the constitution of the company and by the Companies Act. They must always keep in mind that they are to act in utmost good faith and in what they believe to be the best interest of the company.

CONTACT:

NARTEY LAW FIRM

TEL: +233 (0)553508582

Email:info@narteylaw.com

Article

August 5, 2021 sysadmin No Comments

Starting a Business in Ghana: Structuring the Entity

Author: Barbara Ewoenam A. Kukah

The aim of this article is to provide entrepreneurs with relevant information on the various types of business entities and associated legal structures to be considered when establishing a business in Ghana.

The body responsible for business entity registration in Ghana is known as the Registrar General’s Department

There are 6 main types of business entities in Ghana that you can choose from.

Sole Proprietorship

This is very common in Ghana. Sole proprietorship consists of registering a business name under which a person’s business is to be run. It is governed by the Registration of Business Names Act, 1962 (Act 151). A sole proprietor cannot carry any business with respect to banking and communications industries. A significant amount of capital is not required to start a sole proprietorship. It is cheap and simple to form and operate, and may enjoy greater flexibility of management, fewer legal controls, and fewer taxes. The down side is that the business owner is personally liable for all debts incurred by the business. This means if you incur any loss in running the business, your personal items can be sold to pay the debt.

You can register your business name at the Registrar-General’s Department (RGD) by purchasing or downloading forms, filling them and submitting to the RGD with the prescribed fee. After you are given the business registration certificate, you have to renew it every year at a fee.

Partnership

This is made up of at least two (2) and at most twenty (20) people who agree to contribute money, labor, or skill to operate a business. Each partner shares the profits, losses, and management of the business, and each partner is personally and equally liable for debts of the partnership. Partnership is regulated by the Incorporated Private Partnerships Act, 1962 (Act 152) and the Incorporated Private Partnerships (Amendment) Act, 2012 (Act 839). Formal terms of the partnership are usually contained in a written partnership agreement or deed. This form of business entity is usually used by lawyers, accountants, and other professionals.

Registration is done at the RGD by buying, filling, and submitting the forms together with the prescribed fees and a partnership deed/ agreement.

Once registrations is completed, it is generally implied that each partner has the authority to legally transact the partnership authorized business as an agent of the partnership so that partners are generally bound by any actions and decisions taken by another partner in the name of the partnership once it falls within the partnership agreement.

Companies

The laws of Ghana, particularly the Companies Act, 2019 (Act 992), recognize four kinds of companies- companies limited by shares, companies limited by guarantee, unlimited liability companies, and external companies.

Company limited by shares: The company raises money by issuing shares. A person can buy shares without paying the full cost of the shares immediately. Should the company run into debt or be wound down (liquidated), the only money the shareholder is liable to pay is the remaining price of the shares (if any). That is why it is known as limited liability company. To form this, you need at least one shareholder, two directors, a company secretary and an auditor. You can register your company at the Registrar-General’s Department by filling the prescribed forms and submitting them with the prescribed fee. You are also required to pay the value of 0.5% stamp duty on your stated capital (the capital you use to start the business). The name of the company must end in “LTD” or “company limited”. A public limited company’s name shall end with “public limited company” or PLC”. Letters must be submitted by the directors, company secretary and auditor indicating their consent to the appointment. The directors must also submit a statutory declaration stating whether they have been, among others, convicted of offences involving fraud or dishonesty, in the last five (5) years. The advantage of this type of company is that the company is a completely separate legal person from the shareholders. The company can do business in its own name, sue, and be sued, and continue operating even after the original owners are dead or are no longer interested in running it and have sold their shares. As an officer of the company, you cannot be held personally responsible for your actions in an official capacity (except in exceptional circumstances). However, a company is more expensive to register than a sole proprietorship or a partnership. The process of running it is also more relatively more cumbersome, as you are required to file various documents within a business year to notify the RGD of changes, meetings, and decisions.

Company limited by guarantee: These are companies that are not formed for the purpose of making profit. It may be an NGO, a charity, a union, society, council, church, etc. Although they are not formed to make profit but to carry out some objectives, the company may undertake activities to make profit for the purpose of funding its activities. Members guarantee to pay various amounts of money should the company run at a loss or be wound up. This is the extent of their liability (i.e, the amount which they guarantee or pledge to pay in the event of a winding up). The name of the company must end in “Limited by Guarantee” or “LBG”.

To register, buy and fill the required forms, submit them to the RGD with the prescribed fees, a declaration and a consent form from qualified auditors. Renewal is to be done yearly at a fee.

An LBG helps people to carry out their objectives through a body that is separate and distinct from them, and which can live on even after they themselves are no longer present or available to personally carry out those objectives. However, it is not for the purpose of making profit. Hence if your main aim is to make profit, you will be better served by registering another type of business entity.

Unlimited Company: This kind of company also issues shares as a way of raising capital but the liability of the members is distinguished from that of a company limited by shares. The procedure for registration is similar to that of a limited liability company. Like a limited liability company (LLC), it is a body that exists on its own and can carry out business, own property, sue and be sued, and perform the functions that a legal adult can.

The name of a private unlimited company shall end in “Private Unlimited Company” or “PRUC” while a public unlimited liability company’s name shall end in “Public Unlimited Company” or “PUC”.

External Company: This is a company formed outside Ghana which has an established branch, office, or place of business of the company in Ghana. With this type of business entity, the Company must hire at least a local manager to manage the business of the company and an agent in Ghana who is authorized to accept service of documents on behalf of the company (This could be a corporate body). A notarized Power of Attorney must be executed in favor of the local manager. Also required is the filing of the articles of association of the head company duly notarized by a notary public in the country of registration and a certificate of incorporation of the head office duly notarized in the country of registration.

Ultimately, the kind of business you want to do, your objectives for that business and the amount of capital you have will help you determine which type of business entity to register. Regardless of which business entity you decide to operate, the following information will be useful and relevant to you:

THE GHANA INVESTMENT PROMOTION CENTRE (GIPC)

Companies with foreign participation (non-Ghanaian shareholders) shall after incorporation or registration and before commencement of operations be registered with GIPC. The GIPC has set out the various minimum capital requirements (least amount of money to start the business with) for businesses to be established by , namely:

Joint venture (non-Ghanaian/s and a Ghanaian with at least 10% equity participation) – USD 200,000.00 (in either caah or capital goods)
Wholly–owned foreign business: – USD 500,000.00 (in either cash or capital goods)

General trading company: USD 1,000,000.00

Registering with the GIPC comes with various benefits for companies including, an entitlement to an immigrant quota (that is, the maximum number of expatriates the foreign investor can employ), based on the company’s paid up capital.

SOCIAL SECURITY AND NATIONAL INSURANCE TRUST (SSNIT)

If your business employs people, you are required to register with SSNIT. Ghana operates a three tier system under the National Pensions Act, 2008 (Act 766), amended by the National Pensions Amendment Act, 2014 (Act 883). Under this, the employer contributes 13% of the employee’s salary, and deducts 5.5% of the employee’s salary for SSNIT contributions. Out of this 18.5%, the employer pays 13.5% under Tier 1 to be managed by SSNIT. The remaining 5% is paid to an approved Trustee to be managed under Tier 2. Tier 3 is voluntary. The employees decide the percentage to contribute and choose a private pension service provider to manage the fund.

III. CORPORATION TAX

Under the Income Tax Act 2015 (Act 896), companies are required to pay taxes. companies are therefore required to register with the Ghana Revenue Authority. Companies pay a corporate tax of 25% on their profits in the year. Self employed persons like sole proprietors are also required to pay income tax while employees have Pay As You Earn contributions withheld from their salaries as income tax.

Businesses that provide goods and taxable services are required to charge Value Added Tax (VAT) on the goods or services provided as well as National Health Insurance Levy and the Covid-19 Recovery Levy.

CONCLUSION

While this article focuses on the general scope of each of the business structures in Ghana, it is important to note that specific factors to your proposed or current business will influence your decision on a suitable legal structure for your business. It is recommended that you seek legal counsel when deciding on the structure for your business.

CONTACT:

NARTEY LAW FIRM

TEL: +233 (0)553508582

Email:info@narteylaw.com