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• Who are Directors? – S.179

• They are persons by whatever name called, who
are appointed to direct and run the business of the
• Any person who though not appointed yet,
• Represent or hold themselves out as Directors;
• Knowingly allow themselves to be held out as
Directors; or
Issue directives and instructions the duly
appointed Directors are accustomed to acting upon
shall be saddled with the duties and liabilities of
Every Company must have at least two (2)
Carrying on business with less than two (2)
Directors for more than four (4) weeks attracts a
fine per day of such non-compliance against the
remaining Director, Members and the Company.
There is also joint and several liability of the
Director and Members cognisant of the non-
compliance for the debts and liabilities of the
Company during the period of default – S.180
At any point in time, there should be at least
one (1) Director of the Company in Ghana –
A Director who renders professional services
to the Company, except as Auditor, needs to be
paid for his services as would have been paid
were he not a Director – S.208
Appointment – S.181
A Director is appointed by an Ordinary
Resolution of shareholders at an Annual
General Meeting.
A person’s prior written consent in writing is
required before his appointment as a Director.
Types of Directors
Substitute Director – S.187
He is appointed to act as deputy for another
named Director, and as the substitute in the
absence of that Director
He is not counted as a Director for purposes of
determining the minimum number of Directors
but is counted for purposes of a quorum for a
He is not entitled to vote at a meeting or
Directors or Committee of Directors where the
Director he represents is present.
In all other respects, he is a full Director
appointed in the same manner as any other
Director and does not cease to be a Director by
reason that the person he represents ceases to
be a Director.
Alternate Director – S.188
Appointed by a Director to act in his stead,
subject to the approval of the Board of
Directors, by a resolution where the substantive
Director would be absent from Ghana or would
for a reason be unable to act as a Director for a
period not exceeding six (6) months.
The appointment must be in writing, signed by
the appointor and the appointee, and lodged
with the Company.
He is for the period deemed to be a Director
and Officer of the Company and not an agent
of the appointor.
Where the Regulations of the Company
require a Director to hold shares, it does not
apply to the Alternate Director.
He cannot appoint another as Alternate
Director, and though not counted as a Director
in determining the minimum number of
Directors, he is counted as a Director for
purposes of a quorum.
He is entitled to the remuneration of the
Director that appointed him from the Company,
else that Director pays him.
Where he is a Director too, he shall have an
additional vote, that is, as a Director and as an
Alternate Director.
The appointment of an Alternate Director
ceases upon;
 Expiration of the term.
 Written notice of termination by the appointor.
 Cessation of the appointor as a Director.
 Resignation by the appointor.
Until the cessation of the appointment, the
Alternate Director cannot attend and vote at
any meeting that the Appointor is present
Executive Director – S.192
 A Director who holds an office or a place of
profit under the Company other than the office
of an Auditor in addition to his position as a
 He thus earns a salary, commission, share of
profits, pension schemes and generally all
benefits due employees of the Company.
Managing Director – S.193
 A Director to whom the other Directors have
entrusted to and conferred on any or all
powers exercisable by the Directors with
such terms and restrictions as the Board of
Directors deem fit.
 The Managing Director thus has power to
represent the company in commercial

 An acting Managing Director has all the

powers of a substantive Managing
Qualification for Directorship
A person shall not be qualified to act as a Director
if he is
 An infant.
 Found by a competent Court to be of unsound
 A Company.
 Convicted on indictment anywhere of any offence
involving fraud or dishonesty or any offence in
connection with the promotion, formation or
management of a company
 Where a Court has ordered that, without its leave
or permission a person cannot be a Director or be
concerned in anyway or partake of the
management of a Company, or act as Auditor,
Receiver or Liquidator of a Company for a period
that the Court shall specify.
There are prescribed penalties for a breach of the
qualification benchmarks;
 The disqualified person can be jailed upto five (5)
years and or a fine.
 The Company itself can also be slapped with a
 The Directors themselves can also be
slapped with a fine.
Duties of Directors – S.203
 The Director owes the following duties to
the Company;
 Duty of utmost good faith in a transaction
with or on behalf of the Company.
 Duty to act in the best interest of the
Company to preserve its assets, further its
business and promote the purpose for which
the Company was formed in faithful, diligent,
careful and ordinarily skillful manner.

• Duty not to exceed powers – S.204

• Duty to avoid conflict of interest situations –
A Director must not let his personal interest
conflict with that of the Company. He can
therefore not without the consent of the
Company place himself in a position where his
duty as Director would conflict with his
personal interest or the duties to other persons.
To this end, a Director may not without the
consent of the Company:
• Use any money or property of the Company for
his own advantage or any confidential information
or special knowledge obtained by virtue of the
• Be directly or indirectly interested in any business
which competes with that of the Company.
• Be interested in any contract or transaction with
the Company unless in compliance with S.207
• Duty not to make secret profits
Directors’ Meetings – S.200
 Directors may meet in Ghana or elsewhere and
may delegate any of their powers to Committees
of Directors.
 Directors Meeting may be summoned by a
Director, or the Secretary upon requisition.
 Directors who are not in Ghana are not required to
be served with notices.
 Quorum for Directors Meeting is two (2) unless
the Regulations provide otherwise, and must
remain as such from commencement to closing.
 The Directors may elect one among them as
Chairman for such period as they shall
determine. If no Chairman is appointed or the
Chairman so appointed is late for a meeting for
more than five (5) minutes, the Directors
present shall appoint one amongst them to
chair the meeting.
 Attendance and Voting by Proxy are not
allowed in Directors’ Meeting. A Director who
is unable to attend a meeting can decide on a
matter by writing a Resolution and signing
same to the Directors.
 Matters are decided at Meetings by Majority Vote
and where there is a tie, the Chairman then has a
casting vote.
Vacation of Directors
 A Vacancy may occur in the office of a Director
 Expiry of the term to which he is appointed.
 Death.
 Resignation.
 Disqualification.
 Removal - by Ordinary Resolution – S.185
Any Vacancy which occurs other than the
expiration of term is called “Casual Vacancy” and
may be filled by either the continuing Directors or
by an Ordinary Resolution of the Company in
General Meeting.
Limitation on powers of Directors – S.202
 The Companies Act, 1963, Act 179, places some
limitations on the powers of a Director of a
Company. Thus, Directors are not to;
 Sell, Lease or otherwise dispose of the whole or
substantially the whole of a Company’s
undertaking or assets.
 Issue any new or unused shares, other than
Treasury shares in the Company.
 Make voluntary contributions to any charitable
or other fund (other than pension fund for the
benefit of employees) of any amounts the total
of which in any financial year will exceed the
greater of;
• a prescribed amount or
• two percent (2%) of the Income Surplus of
the Company for the previous year.
 Issue 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.
 Exercise the Company’s power to borrow money,
(apart from temporary loans from bankers in the
ordinary course of business), in excess of the
stated capital of the Company.
 The Company may however do the above by an
Ordinary Resolution at a General Meeting, and
complying with specific requirements of the
Companies Act – S.204
 Breach of Director’s Duties – S.209
 Where a Director commits a breach of any of his
 He is liable to compensate the Company for any
losses incurred as a result of the breach.
 He shall account or return to the Company any
profits made by him thereby.
 Rescission of the Contract by the Company if the
breach relates to a Contract.
Legal Proceedings to enforce liabilities – S.210
 Three categories of persons may bring an action to
enforce Director’s liabilities for breach of duties;

 The Company itself.

 Any Member of the Company

 The Registrar
The Secretary is usually appointed by the
Directors even though the Regulations may
vest that power in Members or any other.
Every Company must have a Secretary, and
where a Company carries on business for more
than Six (6) months without a Secretary, the
Company and every officer shall be liable to a
fine per day of default – S.190(1)
The Secretary may be an Individual or a
corporate entity.
The Secretary may also be a Director, however
where the Companies Act requires an act to be
done by a Director and a Secretary, the same
person cannot act in the respective capacities –
The Secretary is an Administrative Officer of
the Company and without the Directors’
consent by Resolution, cannot make
commercial decisions for the Company;
borrow funds in the name of the Company;
conclude contracts; register transfer of shares
or call meetings.
The Secretary however can bind the Company in
Administrative matters.

Roles of the Secretary:

 To the Board of Directors:
Arranges for Board Meetings on
requisition and takes minutes.
Co-sign documents with the Directors
Serves as a bridge of communication
between the Board and Management.
 To the Members:
Sets Meeting process in motion by circulating
Notices and relevant documents and takes
down Minutes.
Sees to the transfer of Certificates and sealing
of documents.
 To the Registrar:
Responsible for filing various documents and
the Annual Returns with the Registrar.
 He is the Custodian of the records of the
Company and keeper of the seal.
The Auditor is not an officer or agent of the
Company but stands in a fiduciary relationship
to Members of the Company and shall act in a
faithful, diligent, careful and ordinarily skillful
manner consistent with the standards of the
 The person to be appointed must give his prior
consent in writing.
 The appointment is by an Ordinary Resolution of
Members, even though Directors may appoint the
first Auditors within three (3) months of
incorporation; fill any vacancy; and the Registrar
may also appoint if the Company has been without
an Auditor for three (3) months
Qualification – S.270
 Must be a member of the Institute of Chartered
Accountants (Ghana) or a practicing Accountant
within the meaning of the Chartered Accountants
Act, 1963 (Act 170) – Private Companies.
The following do not qualify for appointment as
Auditor of a Company;
 An Infant
 A person declared by a Court to be of unsound mind.
 A Company (excluding incorporated partnership)
 Undischarged bankrupt.
 An officer of the Company.
 A person convicted on indictment for any offence
involving fraud; dishonesty or any offence in
connection with the formation or management of a
 A person ordered by a Court that he cannot be
a Director unless with the leave (permission) of
the Court.
 A person disqualified from acting as Company
Auditor by the order of the Registrar.

“The Corporate Veil is sacrosanct”. Discuss the

foregoing statement with the aid of decided cases
where possible.
Rights of the Auditor – S.136
The Auditor in the performance of his duties
has the following rights;
 Right to access at all times to the Books,
Accounts and Vouchers of the Company, and to
demand explanations on matters deemed
 Right to attend any General Meeting of the
Company and to receive Notices and related
documents to that effect.
 Right to be heard at any General Meeting on
matters concerning Auditors.
 Right to apply to Court for directions on
matters arising out of the performance of his
 Before he accepts the appointment, to
communicate with the retiring Auditor to invite
representation and supply information about
the Company.
Duties of the Auditor – 5th Schedule of the Act

 Obtain the information and explanations which to

the best of his knowledge and belief is necessary
for the purposes of the audit and indicate so, if
same was not obtained.
 To express an opinion whether from his
examination of the books, proper books of
Account have been kept by the Company.
 To confirm whether the Company’s balance sheet
and profit and loss Account (financial statements)
contained in the Report are in agreement with the
books of Account and returns.
 To express an opinion whether the Accounts, to
the best of his information and the explanation
received, gives the information required by the
Act, and in the manner so required, and give a
true and fair view.

 To express an opinion, in the case of a holding

company whether the Group Accounts have
been properly prepared and represent a true and
fair view of affairs.
Remuneration of Auditors – S.134
If the Auditor is appointed by the Directors to
fill a Casual Vacancy, his remuneration may be
fixed by the Directors.

If appointed by the Registrar, his remuneration

may be fixed by the Registrar.

In all other instances, the remuneration of the

Auditor shall be fixed by Ordinary Resolution
of the Company or in such manner as the
Company in an Ordinary Resolution may
Termination – S.134(6)
 An Auditor’s position may become vacant
through a Casual Vacancy – ceases to qualify;
resigns by notice in writing; death; or by
removal by an Ordinary Resolution at a
General Meeting.
 A Resolution to remove the Auditor must be
presented with thirty-five (35) days’ notice or
fourteen (14) days notice where the Auditor
was appointed by the Directors or Registrar.
 The Company is an amalgamation of
individuals with divergent views and opinion.
To ensure that such divergent views do not
affect the operations of the Company, the law
recognizes the democratic principle of Majority
Rule. In effect, a Member’s opposing divergent
view, once it does not find favour with the
Majority of Members in a vote, becomes
subsumed into the Majority View and ends
 To that extent the law places limitations on the
rights of an Individual to bring an action
against the Company to conform to its
Regulation or to bring an action to enforce a
claim of the Company.

 It is this limitation on the Member or

Minority’s right to sue that is known as the
Justification for the Rule
 Corporate Status Concept

 Majority Rule Justification

 Internal Management Principle

 Rectification Principle

 Prevents multiplicity of suits

Exceptions to the Rule
 Illegal or Ultra Vires acts by the Company – S.217
 Invasion or violation of Personal Rights
 Unconscionable conduct by the Majority at the
expense of the Minority – Fraud or oppression.
 Derivative Claim – a claim by a shareholder in
respect of a cause of action vested in the
Company, and where the shareholder seeks relief
on behalf of the Company.
 Where for instance the Company has a right of action
against a person who uses his position in the
Company to prevent the Company taking action
against him, a Member would be allowed to bring an
action on behalf of the Company.
 The benefits of the action go to the Company.
 The Minority Shareholder can be indemnified for his
cost on condition that he acts in good faith and on
reasonable grounds in bringing the derivation action.
Generally, the Company is financed from two (2)
main sources; Equity and Debt.
Equity relates to funding from the owners or
Members for that matter;
 whereas Debt is funding from external parties
In a narrower sense, the Company is financed
through the issue of;
 Shares – Equity, and
 Debentures – Debt

The interests of members of a body

corporate who are entitled to share in the
capital or income of such body corporate.
It is the interest of a Shareholder in a
Company and usually measured by a sum of
 The unit of capital invested in a Company.
Features of a Share
 It is a personal estate
 It is transferable
 It confers certain Rights on the Shareholder –
Dividend; attendance and voting at meetings;
return of capital upon winding up.
 It imposes a liability on the Shareholder – loss of
capital contributed upon winding up.
Types of Shares
Ordinary Shares
 They are also known as Equity Shares.
 They carry no fixed rate of return. Dividend depends
on how much the Company has resolved to distribute.
 Holders bear the risk of the business.
 Holders have the greatest say in the management of
the Company.
 They are the last to be paid Dividend.
 They are entitled to attend and vote at General
Preference Shares
 They have a fixed rate of return.
 They are the first to be paid Dividend.
 They are the first to receive a return of capital
upon winding up.
 Their participation in the Company is limited
– they may be prevented from attending and
voting at General Meetings.
 Types of Preference Shares
 Cumulative Preference Shares:- unpaid dividends
are to be paid first before current dividends are paid.
 Non-Cumulative Preference Shares:- unpaid
dividends are not carried forward.
 Redeemable Preference Shares:- these are
preference shares that can be acquired back by the
Company that issued them on the occurrence of an
event specified in the Regulations.
 Irredeemable Preference Shares:- these are
preference shares that cannot be acquired back by
the Company that issued them.
Shares of whatever type can be categorised into
Classes with corresponding rights usually relating
 Dividends to be paid out of profit
 Voting Rights
 Distribution of assets during winding up or capital
The Code allows for the variation of Class Rights
either in accordance with the Regulations of the
Company or with the sanction of the Court.
Floatation of Shares
The Company mobilizes funds through the floatation
of shares. This can be undertaken by any of the
following methods;
 Direct Offers to the Public:- The Company makes a
direct offer to the public by issuing a prospectus to the
public inviting subscriptions for shares of the
 Offer for Sale:- The Company transfers all the new
shares to an Issuing House, usually a Bank, which in
turn publishes a prospectus inviting the public to
purchase the Shares at a higher price. The Issuing
house usually underwrites the Shares.
 Placing: - The Company arranges with an Issuing
house to purchase the Shares, and then “place”
them privately instead of a general offer to the
 Listing on the Stock Exchange: - this is a variant
of a Direct Offer to the public, except that in this
instance the Shares of the Company are traded on
the Stock market.
 Rights Issues: - The Company issues new Shares
for cash to existing shareholders in proportion to
their existing holdings. The Shares are usually
offered at a price lower than the current value.
Rights Issue; Bonus Issues; and Conversion
Rights Issues:- already discussed above
Bonus Issues:- it is also known as a
Capitalisation Issue, and it involves the
Company distributing the shares from the
unissued shares to existing shareholders and
paying for same from the Company’s Capital
Reserve without taking any new cash from the
beneficiary shareholders.
Conversion Issues: - this is where the holders
of a type of redeemable securities such as
Debenture holders are offered the right to
convert to securities of another type such as
Ordinary Shares.
Prospectus:- it is any circular, notice, newspaper
advertisement or other invitation to the public for
subscription or purchase of any shares of a
 Only a public company can issue a prospectus.
 A copy of the prospectus must be filed with the
Registrar at least six (6) months to the invitation,
 and when the Company’s shares will be listed on
the Stock Market, the Prospectus must be lodged
with the Ghana Stock Exchange for approval by
the Council of the Stock Exchange
The Prospectus must contain the following
 Names and Addresses of the Directors.
 The number of Shares fixed by the Regulations as
the qualification for Directorship.
 Particulars of minimum subscription.
 The time of opening the subscription list.
 The amount payable on application and allotment
of shares.
 Names and Addresses of the Auditors.
 Authorised Shares: - It is the number of
Shares that a Company is authorized to create
by its Regulations.
 Issued Shares:- It is the number of Shares out
of the Authorised Shares that have actually
been issued or subscribed regardless whether it
is fully paid for or not.
 Paid Up Shares: - this represents Shares
issued to subscribers and for which payments
have been made by the subscribers for the
 Uncalled up Shares: - this refers to Shares that
have been issued and subscribed to by
Shareholders but for which payments have not
been made by the subscribers. The Company can a
make a call on those Shares for the Subscribers to
pay up.
 Reserved Shares:- It is the part of Shares that
have been issued and subscribed, and though not
fully paid for the Company has by a special
resolution determined should not be the subject of
a call by the Company unless during the winding
up of the Company.
 Treasury Shares:- they are Shares which though
issued, are still held by the Company because they
have been redeemed, purchased, forfeited or
voluntarily transferred to the Company.
 Shares of no par value: - they are Shares of no fixed
value. The value is determined by the worth of the
Company or how much investors are willing to pay
for based on the inter play of demand and supply.
 Shares at a Premium: - where shares are issued at a
price that is above the nominal value.
 Shares at a Discount: - where Shares are issued at a
price that is below the nominal value of the Shares.
 Call: - It is the demand made by the Company on
subscribers of Shares who have not fully paid up to pay
for the Shares. A Subscriber, who fails to pay following a
Call, shall forfeit the Shares.
 Share Certificates: - It is a written document signed on
behalf of the Company, and serves as a legal proof of
ownership of the Shares indicated.
 Share Warrants:-It is a document issued by the Company
under its seal that the bearer is entitled to the Shares
specified in the document. It is issued only when the
shares have been fully paid up.
 Dividends: - It is a portion of the Company’s profits that
are paid to Shareholders as returns on their investments.
Prohibited Transactions in Shares – S.56
The Companies Code prohibits the Company
from engaging in certain transactions in
relation to Shares.
This prohibition can be categorized into two;
(i) total prohibition and (ii) partial prohibition.
Total Prohibition
 The Company is prohibited from altering the
amount remaining payable on its Shares.
 The Company is prohibited from releasing
any shareholder or former shareholder
from any liability on its shares.
Partial Prohibition
Even though the Companies Act prohibits
the Company from engaging in the
following types of transactions, it however
provides exceptions in certain portions of
the Companies Act;
 Altering the number of Shares of the
Company:- even though the Companies Act
prohibits the Company from altering its Shares,
the Companies in S.57(1) allows the Company
to alter the number of its Shares by first
altering its Regulations to allow it to alter its
The Company may alter its Shares by either
increasing or reducing the number of shares.
The Company may increase the shares by
creating new shares.
and reduce its shares by cancelling shares
which have not been taken or by consolidating
its shares into a smaller number of shares.
 Providing financial assistance, directly or
indirectly for the purchase of its own shares
or that of its holding Company:-even though
the Companies Act forbids the Company from
providing financial assistance for the purchase
of its own shares, it allows the Company to do
so under the following circumstances;
The payment of commission or brokerage to a
person in consideration of his agreeing to
subscribe, or agreeing to procure subscription
for any shares in the Company;
oIt must be allowed by the Regulations and not
more than ten percent (10%) of the price at
which the shares are issued or any lesser sum.
Where lending of money is part of the
authorized business of the Company and it
lends money which is used to buy its shares.
Where the money is provided for the purchase
of its shares through a Scheme that allows
shares to be held for the benefit of employees
of the Company.
 Company acquiring any of its issued shares
or of its holding Company:- even though the
Act forbids the Company from purchasing its
own Shares, however S.59-63, where the
Regulations permits, allows Redemption,
Purchase, Voluntary transfer and forfeiture of
Accounts referable to Shares
Share Deals Account: It is an Account
established to keep financial record of the
Company’s dealings with its Treasury Shares.
 The sources of funds for this Account comes
(a) Income Surplus Account for the payment
of Redeemed Shares;
(b) net gains on the price of Treasury Shares
 Funds in this Account are used to purchase
and redeem Shares.
 A Credit Balance of this Account may also be
transferred to the Stated Capital Account
pursuant to a Special Resolution or Court
Order to that effect
Stated Capital Account: It is the total paid
up value (both Cash and Kind) of a
Company’s Issued Shares. It is made up of;
(a) Total proceeds of every issue of Shares for Cash
including cash proceeds received pursuant on
calls for shares with unpaid liability but does not
include proceeds from the re-issue of Treasury
(b)Total value of consideration received for the
issue of Shares otherwise than for cash; and
(c) Total amount for which the Company may by
Special Resolution transfer to the Stated Capital
Account from Surplus, which might include the
credit balance on the Share Deals Account
Income Surplus Account – S.70: Surplus
less the amounts attributable to;
(a)any unrealised appreciation in the value of
any asset (other than such an appreciation as
would under normal accounting principles
would be credited to the profit and loss
account, unless transferred to stated capital);
(b)any balance standing to the credit of the
Share Deals Account.
S.69 of the Act defines Surplus as the amount
by which the Company’s assets, other than
unpaid calls and other sums payable in respect
of its Shares, and not including treasury shares,
less its liabilities as shown in its audited
accounts, exceeds its Stated Capital.
 It is a written acknowledgment of indebtedness by
the Company setting out the terms and conditions
of the loan.
 There may be a single Debenture or a Debenture
 A Debenture Stock is created by a Deed under the
Seal of the Company and holders, represented by
Trustees are issued with Debenture Stock
 Where there is a Debenture Stock, there is Trust
Differences between Debenture and Shares
 Shareholders are owners of the Company whereas
Debenture holders are Creditors to the Company.
 Whereas a Company is prohibited from
purchasing its own Shares, there is no prohibition
on a Company from purchasing its Debentures.
 Income on Debentures is fixed and payable
whether the Company makes profits or not;
Dividends are only paid out to Shareholders when
the Company makes profit and declares Dividend.
 Interest on Debentures is charged before
determining a Company’s profit in preparing
the Accounts of the Company; Dividends are
paid out of profits after taxes have been

 During winding up of the Company, Debenture

holders are paid first; Shareholders are the last
to be paid, if at all.
Types of Debentures
 Perpetual (Irredeemable)/ Redeemable
Perpetual Debentures are the type of
Debentures that cannot be redeemed or
acquired back by the Company.
Redeemable Debentures on the other hand,
are Debentures that can bee redeemed by the
 Convertible/ Non-Convertible Debentures
Convertible Debentures are Debentures that
contain terms which allow the Debenture to be
converted into Shares.
Non-Convertible Debentures do not contain an
option to convert the Debentures.
 A Charge is an encumbrance over the property of
a Company to secure a Debenture.
 There are two (2) types of Charges; (i) Fixed
Charge and (ii) Floating Charge.
 Secured/ Unsecured (naked) Debentures
Secured Debenture is one that creates a Charge
over the property of the Company to secure the
Unsecured Debenture does not create any
charge on the property of the Company to secure
the Loan.
Fixed Charge
 It is a Charge that is created over a particular,
identifiable property of the Company as
Security for the repayment of the loan.
 Once properly created, it attaches immediately
and the Company cannot deal with the property
without the consent of the Debenture holder –
the Lender.
 The Debenture holder with a fixed Charge has
a prior claim to the property against other, and
subsequent claimants.
Floating Charge
 This Charge does not attach to a particular
property of the Company, rather the general
assets of the Company, both present and future
come under an equitable Charge.
 This type of Charge attaches only upon
crystallization, and until then the Company is
free to deal with the property, and even dispose
of it.
The characteristics of a Floating Charge have been
summed up as follows;
 It is a Charge on a class of assets of a Company
present and future;
 The class of assets are those which change from time
to time in the ordinary course of business of the
 Until some future step is taken (crystallization) by
those interested in the Debenture, the Company can
deal with the property in the usual way of it business.
 Crystallisation:- it refers to the events which trigger
a Floating Charge to become a Fixed Charge.
Crystallization occurs when;
 The Debenture holder appoints a Receiver or Manager
or enters into possession of the assets;
 The Court appoints a Receiver or Manager upon the
application of the Debenture holder.
 The Company goes into liquidation.
 An event which has been specified in the Debenture
as constituting crystallization occurs.
It is the process of formally bringing the life or
existence of the Company to an end.
It can done in one of two ways;

 Official Liquidation (under the Bodies Corporate

Official Liquidation Act, 1963);

 Private Liquidation.

Once it is commenced, the Company ceases to carry

on business save those incidentals to the winding up
process, albeit the Company retains its corporate
status until dissolution.
It may be commenced in any of the
following manner;
 Special Resolution calling for liquidation.
 Presentation of a Petition to the Court or
the Registrar to wind up the Company.
• Effect of Commencement
• Once the Liquidation is commenced, a
Liquidator is appointed, with the following
• Upon the appointment of the Liquidator, all
the powers of the Directors vest in the
Liquidator – S.254.
• The Company ceases to carry on business
save that incidental to the winding up –
 The Financial year of the Company is deemed
to have come to an end – S.249.

 Transactions within certain periods before the

commencement of the liquidation process can
be invalidated on grounds of being fraudulently
preferences or fraudulent conveyances.
 If winding up commences within twelve (12) months
of creating a Floating Charge, same shall be
invalidated, but any cash received in consideration for
the charges shall refunded with interest at 5% except
it could be proven that the Company was solvent
immediately after the creation of the charge – S.90.
• All actions against the Company, except those by a
secured creditor for the realization of the security,
shall be stayed unless the court permits
• Attachments and Executions in an official liquidation
that has not been completed are void.
 Any transfer of Shares shall be void.
 Some categories of Creditors are given
preferential rights.
Private Liquidation
Only a Solvent Company can undertake a
private liquidation.
The process involves four (4) main steps;
 Affidavit of Solvency - by the Directors.
 Special Resolution for winding up including
the appointment of the Liquidator - by
 Managing of the business, gathering assets,
paying debts, distributing any balances, and
keeping accounts – by the Liquidator
 Dissolution or Striking off of the Company’s
name from the Register – by the Registrar.
Official Liquidation
 It is regulated by the Bodies Corporate (Official
Liquidations) Act, 1963.
 Once commenced, the Directors are required to
furnish the Registrar with a Statement of Affairs
indicating the assets of the Company and the
reason for the liquidation, as well as the financial
statements of the Company for the last three (3)
years preceding the preceding the resolution or
 The Liquidator places an advert in the newspapers
inviting creditors to file proof of debt.
 Once debts are proven the Liquidator proceeds to
settle the Company’s debts employing the priority
and proportionality principles.
 Where there is a surplus after settling all debts, it
is distributed to members.
 Official Liquidation may commence in one (1)
of four (4) ways;
i. Conversion from a Private Liquidation –
where it becomes apparent that the Company
will not be able to pay its debts within the period
stated in the affidavit of solvency.
ii. Special Resolution of the Company – that
liquidation shall be by official liquidation.
iii. Petition addressed to the Registrar – by a
Contributory or Creditor to the Company.
Contributory must be a member for at least
six (6) months of the last eighteen (18)
months. Creditor must post security for cost
and establish a prima facie case for the
winding up.
iv. Petition to Court – by a Contributory,
Creditor or Attorney-General.
 The Court may order a Company to be wound
up on the following grounds;
 Where the Company fails to carry out business
within one year of incorporation.
 Where the Company suspends any of its
authorized business for a whole year.
 Where the Company has no members.
 Where the objects of the Company are unlawful.
 Where the Company is being operated for illegal
purposes, fraudulent trading or to defraud others.
 Where the Company carries on business not
authorized by its Regulations.

 The Company is unable to pay its debts.

 If the Court is of the opinion that it is just and

equitable to wind up the Company – what
constitutes “just and equitable” varies but may
include the following;
• Oppression by Majority – EBRAHIMI V

• Animosity among Directors and

• When the Company’s object no longer
• When the Company has been operating at
a loss and it is insolvent – BILLY V KUWOR