LECTURE NOTES ON NATURE AND SCOPE OF COMPANY LAW BY HOLY KPORTORGBI (SIRHOLY)

UNIT 1: NATURE AND SCOPE OF COMPANY LAW SESSION 1: SUBJECT MATTER OF THE COMPANY LAW SESSION 2: IMPORTANCE OF COMPANY LAW SESSION 3: CONSTITUTIONAL ARRANGEMENT AND COMPANY LAW SESSION 4: FIDUCIARY DUTIES IN COMPANY LAW SESSION 5: FINANCIAL RESPONSIBILITIES IN COMPANY LAW SESSION 6: ACCOUNTS AND AUDITING IN COMPANY LAW SIRHOLY

SESSION 1: SUBJECT MATTER OF THE COMPANY LAW Features of a corporate Body A corporate being is considered to be a person in law As a person, companies have name Right to own property and enter into contract Right to sue and be sued Suffer liabilities Pay tax Prosecuted for criminal liability SIRHOLY

A company is however an artificial entity, a creature of law Its status is conferred by law, duties defined by law and right and responsibilities prescribed by law SIRHOLY

Subject matter of company law Company law deals with with Formation of companies Governance Financing Regulation dissolution SIRHOLY

Session 2:Importance of company law Why should an accountant study company law? Company law is important because it is a practical specialised area of law By studying company law, you are equipped with the following skills Draft Regulation, comprehend fiduciary duties, conduct meetings, maintain sound secretarial practice, ensure financial responsibility, keep and interpret companies account, know the requirement of audit SIRHOLY

The corporate persona Incorporated companies are artificial Artificial legal persons are creatures of law Artificial legal persons have capacity to enter contracts, own property, sue and be sued, permanent sucession (unless formally wounded up) Companies are not the only artificial persons Statutory corporations Incorporated partnerships Incorporated trusts The principles of company law, however apply to all artificial legal entities SIRHOLY

Artificial legal persons act through human beings Company law sets out the duties imposed on the officers, the limit of their business or objects, powers etc Not that by law, certain businesses can only be conducted by incorporated bodies Insurance, banking, stockbroking and those those entities that fall under the purview of Ghana investment promotion Act, 1994 (Act 478) SIRHOLY

Session 3: Constitutional arrangement of company law Constitutional arrangements cover structures, powers, procedures, and check and balances So too does company law The Regulation of the company is its constitution Companies are incorporated to carry specified businesses or objects, have various organs (BOD and general meetings) It reminds us of importance of check and balances SIRHOLY

Companies account must show directors emolument and allowances Company law has its counterpart of asset declaration by politicians and high public officers Declaration of directors holding (shares, debentures, asset buying options etc) Companies account must show directors emolument and allowances Retirement and pension benefits must be disclosed SIRHOLY

There is a check against promoters too Fiduciary duties of utmost good faith, and compensation of the company they form, etc keep promoters in check Auditors are also kept in check must be faithful, diligent, careful and act in skillful manner The registrar and the high courts also provide enomous checks SIRHOLY

Session 4: Fiduciary duties in company law To act in the best interest of the company To avoid conflict of interest To make timely and full disclosure of all material facts Not make secret profits To account for his/her stewardship These fiduciary duties are imposed on director, secretary or employee, receiver and manager, liquidator SIRHOLY

Section 136(2) imposes fiduciary duties on auditors of the company Section 216 of the act provides that the rights, duties and liabilities of officers and agents of companies shall continue to be governed by rules of the common law, equity relating to principal and agent, master and servant save in so far as such rules are inconsistent with the express provision of the act Section 136(2) imposes fiduciary duties on auditors of the company Section 12 provides for the duties of promoters pending formation of companies. SIRHOLY

Duties of the promoters are To stand in a fiduciary relationship to the company To observe good faith towards the company To compensate the company for any loss suffered by reason of any promoters’ failing To account for property or information in circumstances where acquisition should have been for the company and not for the promotor SIRHOLY

Law and procedures of meeting Company law also teaches how meetings are organised in company Quorum and what constitute quorum Quorum as a basis for adjourning meetings Materials to be circulated before and during meetings Who are eligible to attend meetings Proxy and proxy instruments SIRHOLY

Session 5: Financial responsibility in company law Company law stresses importance of two financial responsibilities Minimum capital requirement Minimum subscription The minimum capital requirement is intended to ensure that a company is not to transact business, exercise borrowing right, incur any debt if it does not have minimum amount of capital prescribed by law SIRHOLY

All amounts so raised must be returned in 8 days Minimum subscription The companies Act provides that if an invitation is made to the public to subscribe for shares in a company or buy debentures, the minimum amount that is required for the project to take effect shall be raised within 28 days after the waiting period or the invitation lapses All amounts so raised must be returned in 8 days SIRHOLY

The minimum subscription applies to only public companies There are differences between the minimum capital requirement and minimum subscription The minimum capital requirement applies to both private and public companies The minimum subscription applies to only public companies SIRHOLY

Financial responsibility of company law Company law instills financial responsibility It teaches when a company pays dividend After paying the dividend, the company can pay its debts as they fall due The payment shall not exceed its income surplus Financial responsibility is reflected in limitations imposed on directors (S202) Directors shall not dispose off substantially or the whole of the company’s undertaking or assets Directors shall not make voluntary donation or contributions exceeding greater of 2% of income surplus or a specified amount Directors shall not issue new new or unissued shares (excluding treasury shares) SIRHOLY

Session 6: Accounts and auditing in company law SIRHOLY