Starting a business in Ghana, the legal process and the pitfalls

we do wow so good evening to us so and we are grateful for your time and interest to today's program today promises to be a very interesting discussion we have in our midst a very renowned lawyer who we've been observing from afar and to us she was the best person for this job her name is gertrude amoko is a lecturer at the upsc law school and the programs coordinator for the center for practical and multidisciplinary legal education and training for upsc she obtained her first degree from the university of ghana tiata art i'm sure she's very good in accident and then proceeded to do law then she went to the law school and then a masters in corporate and commercial finance from london school of economics and political science she has taught company law international trade and investment ghana legal system legal methods among others as upsc for today um our topic as we've already indicated we'll look through started businesses in ghana she would help us understand that if i'm a ghanaian entrepreneur if i'm a foreign investor and i want to invest in ghana first of all what are some of the various companies that i need to know what are the differences between those companies why would i recommend or delve into one and not the other look at the differences between the forms of companies and then we come into the legalities as to the registration among other things on company registration doing business in ghana as well as what are some of the legal pitfalls that we are likely to encounter as investors foreign investors local investors and if we do go contrary to the law what is the compliance regime in terms of companies in ghana so get rid welcome to today's episode of the lawyers diary yes thank you so much for having me and um good evening to your wonderful audience very well so it's now 6'5 i think we can start so get you um i'm a foreign investor okay i want to invest in ghana and i come to you as a lawyer um what what are some of the companies that is readily available in ghana are there differences in them and then which one would you recommend for me okay yes thank you so much um once again i bring your greetings from the upsc law school and um i must commend you and the team for such an initiative the lawyers diary which seeks to explain certain um legal issues to the entire country as well as our audience from outside of ghana um to answer your question i think for the benefit of our audience we must first of all understand that we do not only conduct business through companies there are many other forms of what we call business organizations that can be used for the conduct of comp for the conduct of business what i'm essentially saying is that as a businessman as a businesswoman you intend to carry on some form of business there are quite a number of options that are open to you by way of the type of vehicle the type of organizational form that you would you you'd want to use to conduct your business many at times the company or the incorporated company is the most popular phone which comes to us readily but we must understand that there are so many other sorts of business organizations for example the sole proprietorship we can even talk of partnerships we can also talk of the incorporated company which is i want to believe the focus of our discussion this evening but before i move on to the incorporated company i just want to throw a little light on these other forms of business organizations that i have mentioned so that at the end of the day our audience will understand that i can do business through the use of for example a sole proprietorship i can do business through the use of a partnership or even through the use of an incorporated company but then the question that readily comes to mind is that what what will determine which form of business organization i should utilize to conduct my business a number of factors it could depend on the size of the business that you intend doing it could even depend on the nature of the business and one very important thing is what will refer to us the nature of the liability that you're going to assume yes sorry about that i was muted at a point and it could also depend on the nature of the liability that we want to assume while carrying out that business so we can briefly say when you say nature of business do you mean the purpose for which the company or what what do i want to do definitely what you want to do what is the type what is the kind of business that you want to do if for example you want to sell sacher water do i necessarily need an incorporated company to sell sacher water if i want to sell pens or pencils or stationary do i need to form an informative company to be able to do so or can i for example use a sole proprietorship which is the easiest form of business organization that can be used to conduct business so that's exactly what i mean by the nature of the business that you would want to you'd want to utilize so just in the next few minutes mention something about liability when you say liability for the general public what is liability okay now every business comes with or is likely to come with certain financial obligations please submit yourself yes i have just um done so every business is likely to come with setting financial obligations what would technically want to refer to as liability so for example in the conduct of your business your business in case a debt of let's say thousand ghana cities or two thousand ghana cities the question that you'd be interested in asking yourself as a business owner is that is that debt my personal debt is that a debt that i'm supposed to get into my personal bank account and pay for or is that that a debt of the the form of business organization that i use so for example if i'm using a limited liability company to carry out my business is the debt is the financial obligation a debt of the company as an entity or is it the debt of me as a person so that essentially is what we mean and as we go ahead in the discussion realization that it is a very essential factor to be considered in selecting the type of business organization that we want to do so for example if you don't mind bearing all the liabilities of your business if you don't mind bearing all the financial obligations and debts of your business then you could for example just use a a sole proprietorship where there's no difference between the deaths of the business you are doing and your own personalities so if you are doing that so let's let's understand let's understand it all is it your case or your point that it depends on the individual if at the end of the day there is a cost there is a debt on the company if i can buy it personally then i don't need to expand it into a big company i can just make it a small enterprise by targeting it as a sole proprietorship company to a large extent yes that is so so if you want the type of business organization that you could you are made you as an individual you are the same as your business and we'll come to explain these in the coming minutes it might seem a bit uh technical at this point but what we are essentially saying is that there are some types of business organizations where there's no difference between the business owner and the business and there are other types of business organizations where there's a difference between me as a business owner and the business that i'm doing so it is up to you as a business owner to choose the type of business organization that you think you are comfortable with in order for you to conduct your business through but of course you would also come to the realization that one of the things we mentioned was the nature of the business so if you want to carry out banking business for example you cannot say that i want to do banking but in order to open a bank i think i just want to be a sole proprietor no that is contrary to law so aside the fact that you as an individual as a business owner or as a potential business owner you have the choice to decide the type of business organization that you want to use we must also realize that by law they are setting businesses that can only be carried out through a particular form of business organization so for example you can't say that you want to operate a bank by able to raise the bank as a sole proprietor definitely not yes so i was just making the preliminary observation that the operation of a business can be done through several mediums or can be done through quite a number of mediums you can either have the usual one business one man or one woman type of business what we refer to as a sole proprietorship so a coffee menu enterprises uh or adorama benches where you have some stationery in your container or your kiosk that you are operating for such that type of business you have the option of registering the business name that you are using so for example if you decide to open a small container somewhere and call it amazing grace or god is good enterprise or god is good ventures by law it is possible for you to register that name the amazing grace limited or the god is good vengeance you can register it by law at the office of the registry of companies once you register that name mind you it is the name of the business that we are registering so the benefit that comes with that is that that name becomes exclusively for your use so once you register the name amazing grace enterprise or amazing grace benches or amazing grace [Applause] victrons or what have you that name becomes exclusively for your use many at times this form of business organization is so proprietary it's very easy to begin and it's also quite easy and convenient to run but of course the the difficulty like i mentioned earlier is the fact that you cannot use that to carry out every type of business especially more complex or more highly regulated businesses cannot be carried out through that medium now we also have what we call a partnership many at times you look at them professional persons who are professionals for example accountable before we go to the partnership you mentioned something about the name of the company the exclusivity where if i choose or say bury my enterprise nobody can use a server enterprise um is that not quite unfair because if i bear the same name the fact that you are there earlier why should i be restricted from not being allowed to use the same name okay now when you look at the the law under which you can do the registration of your business name which is what we call the registration of business names act 1962 the act 151 the aim of the law is to allow for persons who carry out business through the use of sole proprietorships to be able to for such people to get the exclusive use of the names of the business but one thing you even need to note is that if you are carrying out the business the sole proprietorship with your own name for example or say verima then you need not register that name for obvious reasons but if you are carrying out the sole proprietor business with the name which is other than your own name so for example like i cited amazing grace enterprise legally nice enterprise and so on and so forth that is in that case then you can register that name now as to whether it is unfair or not in my opinion i wouldn't necessarily say that it is unfair because as a business owner the the law wants to give you the opportunity to enjoy some exclusivity with respect to the business name that we are using as a social writer and i think it's fair enough because we don't want the situation where the same sort of proprietorship name is being used by so many others because that can potentially cause confusion in the system so i wouldn't necessarily say that it is unfair to to provide for such a regime and that they i then add some abbreviations see or say bear in mind to market ob enterprise or the fact that that name have been used kind of sets apart from any person bringing a similar name you see once that name has been registered under the law i am referring to then no other person can register her sole proprietorship using that same name now let us be mindful of the fact that for example if you decide to use ob enterprise if that is satisfactory to the registrar that name could be registered and no other person will be allowed to register under at 151 with that same name ob enterprises maybe if that person can add obe or obwh or what have you to bring some difference between his and yours then that would be acceptable but under no circumstances can two of two two names two of the same names be registered under this regime that i am referring to i get it we can move into the partnership right so very briefly so that we don't spend too much time but before we thought before that uh on the sole proprietorship is there a financial cap on how much i should get before i started sole proprietorship or for that it doesn't really matter not at all it doesn't matter that is entirely up to you looking at your strength and looking at the nature of your business and that is essentially one of the advantages of such a business there's no uh limit or there's no requirement for you to have a particular amount of money before you can start that business so with five cities with 10 cities 20 cities 100 cities thousand cities you can begin your full proprietorship business yes may i proceed yes yes please go ahead great so i'm very briefly i also mentioned a partnership now when we talk about partnership it is merely an association of um two or more individuals who come together to carry on business jointly so that they can make some profit out of the business they are carrying out now by law the maximum number of persons that can form a partnership is 20. so we are looking at between two and twenty individual guns coming together so that they can carry on business jointly so that they can also make profit out of that business once again they say a legal regime so i was just making the point that can you hear me please yes i can hear you i'll plead that if you join in kindly mute yourself right yes go ahead once again if you decide to conduct business through a partnership there's a legal regime that you have to abide by and that legal regime or the name that the statutes the law that provides for all matters relating to partnerships is what we call the incorporated private partnership act 1962 the act 152 so in my earlier comments i was saying that when you look at many professional professionals architects accountants lawyers it is very common to find them carrying out their business through the use of what we call a partnership now there's a document that is very important or that is very key to the formation of a partnership and that is what we call a partnership agreement so essentially before you can form a partnership by law you need to register what we call the partnership agreement like the name suggests it is this document that will tell us all the things that relate to the business you are about to conduct the partnership so in that partnership agreement which is a legally binding document you need to be able to tell us the name of the partnership the type of business that the partnership wants to carry out what the the rights and duties of the various partners are and so on and so forth so for example if myself mr eubank and then uh madame agua decide to come together to form a partnership so that we can provide accounting services maybe we are chartered accountants and we decide that the best business vehicle or the best vehicle we can use to conduct our business as a partnership there will be a need for us to have a partnership agreement which would tell us all the rules that should regulate the the business that we are we are going into now there are certain consequences or there are certain things that happen once we register a partnership but uh because these are merely introductory matters i would not want to go too much into that but rather to focus on the question that i was initially asked and which has led me on this long uh journey and rather move on it's been very informative it's been very very informative yes what we call the the company or the incorporated company the incorporated company now when we talk of an incorporated company which i get a sense will be the the focus the actual focus of today's discussion we are simply referring to a body which is formed and registered and in ghana what we call the the companies act so when you form a body or you register a body and that the company is act 2019 at 9 19 what you have just formed will be referred to as a company so this is my copy of the companies act 2019 at 992 which i'm just showing to you so by now my good friends you would have noticed that depending on the type of business organization that you want to use for your business or to run your business there's a different law that governs it remember we said that if you want to register a partnership that will be governed by the incorporated private partnership at 152. if you want to have a sole proprietorship and register the name that's the name of your business you can do that registration and that month but if you want to use a company for your business then you must be able to do that registration and follow the requirements of the companies act 2019 at 992.

now um i remember if i remember correctly the question that was initially posed to me was what are the types of companies that one can register in ghana yes there are a number of types of companies but before i go ahead to make that point let me just give out this information and it's very important for our audience who may be joining us from outside ghana we need to understand that when it comes to the formation and administration of a company it is the law of a particular country that determines how it should be done so if you come to ghana and you want to form a company in ghana you have to abide and follow the law in ghana that provides for those things so the point i'm essentially making is that the formation and administration of a company depends on the law of the particular country in which you are in so if you are coming from the uk you cannot come into ghana with the view that oh in the uk these are the types of companies you can register in the uk so in ghana too it is the same thing no it may not be the case or if you are coming from the netherlands or from togo or where wherever you may be coming from know that you have to follow the law in ghana that provides for how companies should be formed and how companies should be registered so in ghana you want to ask yourself what are the types of companies that are law which is the companies act allows us to register i hope i'm not muted okay so in ghana we can refer to what we refer what we what is known as a company limited by shapes that's one of the one of the companies the types of companies that can be formed here in ghana a company limited by ships we can also look at what we call a company limited by guarantee we can also look at what we call an unlimited company and then we can also look at an external company and all of these different types of companies can either fall under or can either be private companies or public companies so if you want to register a company in ghana you are either registering a company limited by chess a company limited by guarantee an unlimited company or an external company and all these four you know different types of companies can either be what we call a private company or a public company so with that background maybe we can then move in or move on to look at these various types of companies that i've mentioned with the permission of our moderator of course okay so when we when we say a company limited by guarantee what what is a guarantee company what goes into it and why would someone want to do a guaranteed company okay very well now when we talk of companies limited by guarantee which is essentially one of the types of companies that can be registered in ghana we are looking at the type of companies that are usually formed to pursue charitable activities or non-profit activities so you realize that with these types of companies the the purpose of forming them is not to make money it is actually an offense for a company limited by guarantee to carry on business for the purpose of making profit so because companies limited by guarantee are formed so that they can pursue charitable purposes or non-profit activities they are not allowed to what pursue business for the purpose of making profit but in spite of this is interesting to note that this does not mean you know this this restriction it does not mean that they are actually prohibited from making profit from their activities it is possible that in the course of the activities of a company limited by guarantee they would make some profit but we must note that that profit that they make it must not be distributed amongst those that came together to form that company but that profit must normally be invested in the activities of the company so let me give it more it's more or less like if you make any money from a guarantee company yes you have to plow back the profits into the activities of the company absolutely the reason i'm asking is that you know that we we we have a lot of ngos around that uses the name for foreign foreign donors right some donors make um investments into them and sometimes reports are that some of the monies are siphoned into various activities are we now saying that one they are going contrary to the purpose for which they were formed and if that is so what what what has the law done to ensure that this thing doesn't happen yes thank you i mean what you have said is exactly what the case is that for companies limited by guarantees if although they are not formed to make profit if in the course of the activities they make some profit that profit must be plowed back into the business so with the kind of scenario that you have just described it is actually contrary to law to form a company limited by guarantee and siphon or use any profits that are made in the course of its activities for the personal gain of the members of that company now when you look at the law you realize that any time that the company limited by guarantees was contrary to this purpose which they have the law prescribes that there's a punishment that must be given to those who came together to form that company or the members of that company so you realize that the officers and members of that company will be liable to pay to the register of companies an administrative penalty of 25 penalty units for every day that the company carries on business typical example many of our old school associations so ghana senior high school old student association um sent sent whatever old girls association and so on and so forth or even some churches are registered as what companies limited by guaranteed guarantee and the reason is that they are formed not so that they can go ahead and pursue any business but rather so that they can pursue charitable activities so for example if your old boys association or your old girls association they decide to produce some watches or some books or some jewelry or what have you for purposes of selling it to the members whatever profits may be made out of that that activity is not supposed to be distributed amongst those who came together to form that association but rather it's supposed to be plowed back into their business very well yes so we can continue okay good so um that is a portion for those of us who have registered businesses as companies limited by guarantee but um i think we can also look at companies limited by shares which is also another type of company that you can register or phone under the company's act of ghana now when we talk about company limited by share it's it's that type of company which is formed for purposes of carrying on business so that the members or the shareholders of the company can make what profit so unlike the company limited by guarantee which is not formed to carry on business for purposes of profit making the company limited by shares is formed just for that purpose so that business can be carried on and so that profit will be made for the members or the shareholders of that company now the the if at the end of the financial year or the activities of a company limited by shares in a particular year the company realizes that it has made some profit from its operations so maybe you have you have registered a company limited by shares which is into the production of mobile phones or which is the in the production of um air conditioners and so on and so forth and at the end of the year you realize that you have made some profit it is possible you might want to plow back a portion of that profit into the business but it would also be the case that once profit has been made you would want to distribute a portion of that profit so those who contributed capital for the administration of the business of that company so as a shareholder of a company limited by chess you notice that at the end of the financial year of the company when profits are made and their profits are to be distributed what we call dividends when we talk of dividends we are simply looking at the the portion of the company's profit that can legally be distributed amongst the shareholders you realize that at the end of the financial year dividends will be declared and you'll be paid some dividends so for example our good friends who hold or who purchased some shares in a company like mtn you realize that once in a while you'll be there and then you'll be sent a notice or what have you show me that a dividend of this amount has been paid into your account and those are some of the benefits that you get by being a shareholder in the company limited by shares now if you recall when we started our discussion one of the things that i mentioned should help you in deciding the type of company that you want to form is liability and a moderator even went on to ask what do we mean by liability this is where the discussion on liability becomes very very important if you are a member of a company limited by chase the the position of the law is that your liability in terms of your financial obligation to the company once there's for example a debt your liability is is restricted or is is limited to an amount of money that you have not paid on the shares that you hold would explain that i would explain that in very very simple language first of all when we talk of a limited liability company when we say a company is a limited liability company what we are essentially saying is that the liabilities of the company does not extend to the shareholders of the company or even to the offices of the company those who work in that company so if you belong to a company limited by by by shares or if you belong to generally a limited liability company if there's a liability that liability is the liability of the company as an entity and not your personal liability maybe even before i explain that let us look at this and maybe i can do this with the with the aid of a topical issue which is happening or which has been happening around us in the last few years so i wouldn't mention the specific company but a few months ago there was a statement by one business owner who had formed a company and that company had run into certain difficulties which led to many people who had invested in that company having their investments locked into the company then we hear that the person who formed that company says that look if your money is locked up in that business you are not to come to me as a person for that money you are supposed to go to the company to take that money from the company and then one may want to ask what what does that mean so yes go ahead please do you have a question please hello hello yes okay uh so in conclusion that ask for the company please is that a moderator i i can hardly hear you hello yes please can you hear me now yes please yeah i i want you i want to uh i wanted to declare this com a misconception concern the company limited by liability uh so meaning that company limited by uh liability the members of the company are not alive are not liable for in case the company runs into laws or run into bankruptcy yes please go on yeah so i i want to know i want to know is that a case or yes so we are saying that generally the members of a company limited by chefs or the members of a limited liability company whenever there's some liability that liability is the liability of the company and not the liability of the individual shareholders okay but in the case of a company limited by shares your liability as a shareholder is limited to any amount that you have not paid on the shares that you hold let me explain that with the aid of an illustration for example mr bedu you purchased shares from mtn somewhere last year and the total cost of your shares was 1 000 ghana series however at the time that you bought the shares you did not have all the one thousand galaxies so you paid 500 cities half of it uh that means that you are indebted to the company to the tune of how much 500 gunners because this company is a company limited by chess their your your obligation or your liability to that company is only with the amount that you have not paid on the shares that you hold so it's available in your case for example remember you still owe 500 ghana cities from the shares that you you you purchase from that company if the company makes a call on you or if the company requests that look come and make good your liability your liability is only limited to that 500 ghana cities that you owe nothing more nothing less that means that if at the time that you purchased your shares you paid all your thousand ghana cities that would mean that you do not have any obligation to the company you don't have any financial obligation to the company and that is why i was saying that in this um scenario or in this case which happened in this country the business owner can say that look the company that i formed was a limited liability company as a matter of fact it's a company limited by ships so me as the business owner i am different from the business or i'm different from the company that i phone and that is one of the defining things about an incorporated company when we say that a company is incorporated or company is registered in the eyes of the law that thing that has been formed that that company it becomes an entity in law it becomes a person in law and that entity or that person that has been formed in the form of a company it is different it is separate it is not the same as me the person who from the company so it doesn't matter whether i'm the managing director i'm the chief executive officer i'm the majority shareholder of that company in so far as it is an incorporated company the business has a personality of its own the business is different it is separate it is distinct from those who formed it or even from those who administer it what is what if what if um we all see that even though the company is separated from the people who formed it but they were using the money for their personal gains yeah they were buying big cars buying big houses without investments okay in that case why should i change the company and not the person i saw using my money absolutely so what you need to note is that the description or the illustration or the position i have just stated is the general position of the law that once you form a company an incorporated company that company becomes an entity on its own a personality on its own a person on its own which is different from those who formed it or even those who managed to not miss that administration but there is an exception so there are limited cases or there are limited grounds on which the law would come in and say that look although the company is different from those who formed it because these defined clearly limited exceptions are present the law is going to throw away is going to disregard the principle i have just described to you what the lawyers will tell you is called the principle of separate legal personality there are cases in which the law would disregard that and say that look in this particular case because for example the the the operations of the company were being done to perpetrate some fraudulent activities the law is going to disregard this principle of a separate legal personality and say that we are going to treat you you the the business owner and the company as one and the same so that the liabilities of the business owner will become sorry the liabilities of the company will become the liabilities of the business owner but that is usually a tall order what the lawyers would once again tell you is called piercing the corporate bill piercing the corporate will simply means that the law is going to disregard the fact that generally the business and the owners are separate and the law is going to treat the business and the owners as one and the same there are defined circumstances in which that can happen so it might not be enough to say that oh the business owner was riding in a rolls-royce or i saw him riding in the phantom whatever or i saw him buy a three-bedroom house that is levon that alone may not mean that the the the law would be ready to combine the company's liability with his personal um liability it's a moderator can you hear me please yes yes i can hear you so in that case how do um the investors know that the person was taking such monies and not using it for the purpose for which it was established you mentioned something about fraud and you said lifting the view if my money is slopped how do i get my money back well that is a very reason why uh when things like this happen you may want to seek illegal advice that is the very reason why the lawyers are there so that you want to find out from your lawyers that this is what i have noticed i have this amount of money logged up in this particular company however the company is telling me that is a limited liability company so it's not as if the money is with they're the ones of the company loosely speaking the shareholders of the company or even those who administer the company and that i should go after the company as an entity for the for the money that is locked up in there however i've also had something called lifting the corporate bill but how would i be able to determine that my particular situation is a situation in which the court would lift the bill and disregard the supposed veil that exists between the company and those who own it or those who even administer it so my question is that these are things that when they come up it it requires rigorous um investigation and studying to determine whether a case has been made for the listing of the corporate girl anything that it would have to be subjected to the courts who would ultimately have to decide whether you have made a case for that or otherwise um very well thank you very much we'll go to the liability regime that if i am a limited liability company and then i fail to go in accordance with other what the law says is there some kind of liabilities that will be associated with it but before then our this program is funded by enos travel and toll we have the ceo of enos travel and talk dennis please you have about five minutes to tell us about what inu does before we go to our next segment thank you enough travel you can take over thank you very much thank you very much thank this conversation i've been very enlightening i've learned a lot and i know a lot of the participants have also learned a lot thank you very much ma'am oklahoma i think i know how to probably deal with a news can't finish this at the moment basically deals with anything that comes with troubles if you want to travel outside the country you do everything with regards [Music] what we do now currently as we organize tours dubai we back and it was a successful one we have another tour coming up in november which is also from ghana to kenya to dubai and it's going to be a rich it's going to be a week's event now this tour actually includes your flight your hotel all the talk is that you are going to do in kenya and in dubai and it's going to cost 6 000. 7 000 everything is included now if you want to join this trip all you need to do is go to instagram and search for enos travels the idea is inno dot travels and then on twitter is travels you know energy travels our motto is taking you into the world and beyond so basically as i said if you have any question or if you want any information about any other country abroad if you have interest in studying uh studying abroad if you have an interest in traveling for fun or for leisure to any of the other countries or even if you're interested in having a local talk enos travels is there to help you out so as i said you can find us on instagram in other travels and i will actually put our contact information in a chat so if anybody wants to reach out to us you can actually do thank you very much uh loyal said very much and we are happy to sponsor this program and i know as we go on we have a lot of uh other professionals to share other information with us as well thank you very much thank you very much dennis and and thank you for also being our main sponsor since the time we started so now let's go on on our discussion the next phase was on the liability regime are there any liabilities when you are into limited liability companies and what is the position of the law on these matters okay well um first of all let me say that on a much lighter note clearly all roads are leading to enos travel and thoughts for those of us who want to visit kenya and dubai in the coming months so um they can expect a form from me on making me making arrangements to visit um kenya particularly and the truth of the matter is that any lawyer that comes on this show also has a discount within those travel so you are sorted on that oh even better even better even better all right so all thanks to endless travel and toss anyway so with respect to um liabilities the the this this is quite a broad question that you have asked because liability can arise from quite a number of areas so we haven't had a chance to go through the formation process or the registration process of companies limited by chess yet but there are some liabilities that arise in there by virtue of you not complying with the regime that is provided for the registration of a company limited by share so in fact for any other company now you'd also realize that in the course of the administration of a company there are certain things that a company is required to do so if a company fails to do any of these things there are number of liabilities that can arise so for example if you look at the law in ghana the the position of the law is that when it comes to the directness of a company every company that is incorporated in this country must have at least um two directors and out of that to at least one of them must be ordinarily resident in ghana that is the position of the law so if at any point in time it turns out that a company is being administered or is being run without the use of without having at least two directors one of whom is ordinary resident in ghana there are some liabilities that arise with respect to the the payment of penalties by the company itself and whichever director is cognizant of the fact that this is being done uh without following due process now even still on the on the issue of those who administer and control the company those who call the directors of the company you realize that there are certain duties that the law imposes on you if you're a director of a company so for example you are expected to act in at most good faith towards a company you are not supposed to um use the the the you know the profits or the capital of the company for your own personal gain you are not supposed to use the information you get from the company for your own personality if you breach any of these duties that are imposed on you by law there are liabilities that also arise mainly by way of the payment of fines and these are liabilities that can be enforced by particular people who work within the company so yes on the issue of liabilities liabilities can arise even at the point of the formation of a company and also in the course of the administration of the company on so many issues a thousand and one issues some of which i have just mentioned so um drawing down the kitchen we've talked about sole proprietorship we've talked about partnership we've talked about the limited liability company by shares by guarantee and then unlimited and then um we also talked about one other thing which of course external companies we mentioned that yeah external companies maybe we are here to talk about this in our company but in terms of corporate finance which of these companies is best suited for investors and why well one once again my primary comments on the purpose or the reason why you are forming the company ranks as an investor depending on the type of business that you want to do the 10 depending on the nature of liability that you want to k you want to choose one of these companies but you see the advantages of a company limited by shares seem to far outweigh the advantages of the other types of companies that can be formed so when you look at the records the data um possibly from the office or the register of companies i wouldn't i'm hoping i wouldn't be far from right if i should say that more often than not companies limited by ships are the preferred choice for business men and women even for investors and this is clearly as a result of the numerous advantages that come with that type of company particularly with respect to the kind of liability that is it liability is everything when it comes to the formation of companies liability is everything and you see that can also be a danger and that is why many times people have said how do we guarantee that people don't use the corporate form as a shum you know just as a cover-up and then they incur all sorts of liabilities they just wind down close down the company and run away because they know that oh at the end of the day generally the general position is that if i form a company limited by shares my liability is limited to a certain amount that i owe the company because it's a limited liability company the debts of the company are not my debts so to answer your question i think it appears the most preferred type of company is the company limited by shares but let's also note that particularly with these types of companies that have some foreign participation there are other laws that relate to companies with foreign participation so our friends who might be coming into the country as investors from other countries as foreign investors they need to also look at the provisions of the dmpc the gipc act the ghana investment promotion center act to know the additional requirements that come with operating a business or forming a business here in ghana that has some foreign participation but i think generally the company limited by shares appears to be the most preferred um type of company for for all okay okay okay that's a good one um i know our time is fast spent we are almost into an hour of our discussion there may be some questions there about five questions that we may want to let everyone know so the first one is from rudolph he says that a company limited by guarantees are not for the purpose of incorporation trying to read just just a minute so i'll read about if anyone has a question the person can raise us and chairman safa please go ahead and ask your question okay all right thank you very much bob for the opportunity and thank you gertrude for your recent submissions so my to my question in terms of company limited by liability whereby um or limited by shares whatever liability of directors are to to um assets were limited to the shares or whatever investment they have in the company i i would like to know in the case of probably um negligence from one of their employees that affects a customer and the customer seeks to see who ordinarily might be held responsible or who who might be in the suit i should say so so just to put an example for instance i walk into a hospital negligence of one doctor and um i i encounter any issue [Music] not not uh to be expected and i want to see the hospital who do i put in my suit or who should be held liable thank you okay yes um i think i understand your question and then i'd rather want to approach it from the general first because issues of medical negligence might have um different rules regarding who ought to be sued but you see one of the things i may have failed to say is that with the corp with a company once you successfully incorporate a company through registration there are certain things that follow one of the the most basic one is what we have already mentioned the fact that the company becomes a separate legal entity which is different from those who work there or even the shareholders who came together to form the company the other thing is that because the company is a person in law it's an entity on its own the company consume and the company can also be sued so if there's some wrongdoing and the wrongdoing for example is caused by someone who was acting on behalf and for the company that wrongdoing becomes the wrongdoing of the company and not he or she the officer who may have occasioned that wrongdoing so when it comes to the appropriate person to sue once there's an infraction by a company the position of the law is that because it is an incorporated company the company consumes so the company as an entity consume you my good friend who just spoke maybe you owe the company the company let's say the companies call them ob limited company that company can bring an action against you my good friend to recover the amount that you owe to it at the same time if you enter the premises of the company and let's say the floor was wet and you fall and you suffer a broken head a hip the appropriate person to sue is the company as an entity because that company has a capacity to what sue and the suit yes can we thank you very much carefully so the next question is from coffee here that my my fiance has a sole proprietorship company once we get married do i automatically become liable for whatever happens in the company what happens during spousal property distributions and divorce i think this question should be restricted to the finance aspect of the sole supervisor okay um divorce divorce property things is too too broad for today's discussion right so please can you please repeat the first part of the question then that i'm supposed to my fiance has a sole proprietorship company once we get married why automatically become liable for whatever happens in the company okay so i think let's try and then do a brief correction let's rather say your fiance has a sole proprietorship street simply put or your fiance has a sole proprietorship business because once you talk of a company that a company is a different form of business organization from a sole proprietorship so if your fiance has a sole proprietorship business that she's running she is a proprietor she is the owner of that business the debts of uh that business are her debts which she has to take care of now if you get married to hey i i don't think there's any requirement anyway that you automatically also become level for the debts of of of that business such that if your fiance has borrowed an amount of thousand cities from a supplier and that supplier is coming after her for the money and she comes to find you at home the question then becomes can she insist on taking that money from you well i guess it will be a matter of the arrangement or the agreement between you and your fiance but mind you even the fact of marriage does not um of itself make you an automatic uh proprietor as well it's fine you can administer the sole proprietorship jointly in which case you could say that well you share the liabilities of that business with it but in the absence of any such um agreement i wouldn't say that you have to share the liabilities of the business with it okay max is also asking can a guarantee company be converted to limited liability company by shares if no what are the alternatives available yes the answer there is no companies can be converted so for example a company limited by chefs can be converted to a company limited by guarantee but in the wisdom of the law you cannot convert a company limited by guarantee into a company limited by chase and i think there's sound reasoning for that a company that was primarily formed to carry out you know charitable activities it it may not in terms of public policy it may not be very sound to allow such a company to all of a sudden be converted into a company limited by shares but rather you can convert you can convert your company limited by shares into one limited by guarantee um okay is mr moderator there please other than that i'll look at some of the i can see some questions in the um the chat box okay he's back he's gone and then and danny obey i see your hands up you can ask a question okay please uh my question is regarding to a company limited by guarantee i think that one is before agreed upon that that one hasn't been registered in order to make a profit but here is the case it profits must be retained for veterans or activities or the day to day activities of the company but i'm i'm here to ask what what if maybe the company decides one day to distribute some portion of their profit to eight members is there any legal consequence that a company might face or the companies uh the company is not going to face any liga consequence okay thank you so i'm isabel like we said in the course of the discussion the profits of a company limited by guarantee are not to be distributed they are not to be distributed is a is a no no no it is simply not acceptable it is unlawful illegal to do so yes and one that is found out there are sanctions that arise out of that uh you can look at the probations of the companies act but primarily there are penalties that can be paid or that can be um imposed on the members of that company because of the fact that they have decided to distribute any profits that have come to the company all right i think um is there any other hand jake jake you can go ahead and ask your question okay thank you so much thank you for the opportunity good evening uh madame thank you thank you for the insights you have given us all uh your your explanation and your your education was mostly jetta was upon incorporation of a company that i mean the liability of the uh uh that occluded the company is limited to only the shareholders who are uh yet to pay or the the amount is unpaid on the assessor and all that my question i mean as a layman and to the benefit of other limb and also on the page my question is what about liability which accrues to offices of the company what is yet to be incorporated so if a company is yet to be incorporated any liability which are close to these offices or these uh either direct whatever whoever plays a role before a company is incorporated if a liability accrues to them what will be the position of the law thank you um okay jake now i'm you cannot you cannot deceive me by passing off as a layman you are one of my students you're a law student and um as a matter of fact this is a question that i even reserve the rights to refuse to answer and rather ask you um to answer because typical of law students before they ask a question they even know the answer they just want to run it by the speaker to see whether what they are thinking is right or not so you have to desist from deceiving us that you are a lay person anyway so with that being said maybe you see prior to the formation of a company they are certain activities that happen because you don't just get up and then boom a company is formed we have what we call some three incorporation activities so before a company is formed is incorporated the people who take steps towards this formation in law we call them the promoters of that company and they are taking steps towards ensuring that the company is formed even as promoters they have certain responsibilities in law the law expects them to act in a certain way so as a promoter as someone who is working towards the formation of a company you are not supposed to for example um use um the the monies being used towards the formation of the company for your own personal benefit if some information comes to you in the course of the the the your work as a promoter you're not supposed to use that information for your personal benefit so for example you are working towards the formation of a company that uses a secret ingredient in a product that it produces because you're a promoter you get to know audacity ingredient and then immediately you run to go and set up a rival company using that same secret ingredient so i want to look at your question in the context of pre-incorporation activities and promoters and say that yes if you are someone who is working towards the formation of a company the law imposes setting obligations on you and if you breach or if you if you break those duties that are placed on you as a promoter there are liabilities that follow because once the company is formed the company can come after you so if you have made setting profits as a promoter the company can come after you for retrieval of those profits if you have used setting confidential information for your um personal purposes the company can come after you for compensation for that so that that really will be my response to your question thank you madam jacob what kind uh see your house is raised we take one or two more questions and we've got to cut them down on today's discussion jacob you can go ahead and ask your question thank you very much um good evening yes sir i'm here can you hear me yes go ahead hello okay thank you very much madam um i am um my question is on this issue of um lifting of the corporate view so that you go after directors who have engaged engaging any fraud that has led to the liquidation or the running up of the company um i think the law has made it so open today in my in my opinion so open to the extent that uh there's there is no unlimited time to make sure that these issues are located into so that these perpetrators are brought to book so that um those who have suffered uh in terms of monies invested in the company so that they will be made better off in the casino they were before the company go into into liquidation so um i'm asking if there is there could be a situation where there would be a time limit so that um those who are all who gets into that fraud activity uh as soon as possible brought to a book because there could be situations where people will be chasing their money here and there going for lawyers and carrying some costs and then there's some weaving gets costs that are even beyond the amount that they've invested some even die in the course of it so i'm asking this humble question that would there be satisfaction or is there anything like that well um thank you for your question well you see one thing we need to understand is that um as someone who wants to indulge in some form of litigation there's a requirement for you to act timelessly and for you to act diligently now um in law we have what we call the the statute of limitations so depending on the type of case that you have the courts are open to you or you are allowed to bring an action import within a particular period so for example if someone owes you an amount of money and you want to recover that date you might have within um six years to bring that debt other than that we say that your action becomes tattooed bad and you cannot go to court now when it comes to the kind of issues that you are describing of course as as someone who is affected by the activities of a particular company and who is seeking to proceed for the court to possibly lift the corporate veil um the caution always is that immediately you detect that you need to act timelessly but the other thing we need to understand is that our judicial system has its own processes which a litigant is required to follow so in as much as as much as litigants will be happy if their cases will be dealt with expeditiously sometimes we also need to understand that litigation requires that particular steps are followed and sometimes in the course of that time you know elapses but that also does not mean that the courts should not do their best to try and deal with some of these situations um in an expedited manner especially because of the reason you have given for people for some people or their fans may be locked up in such cases for others they might be suffering from conditions that will not allow them to actively pursue the process or somebody even die in the process so the point is that let us understand that litigation in itself the judicial system has certain processes that must be following which we cannot rush but at the same time we also know that the cops also tried to do their best to be able to handle these matters expeditiously thank you very much [Music] all right so madame gertrude we are extremely grateful for your time your knowledge your insights and all that you've shared with us today i know that time you gave us an hour but you've extended it to an eye in 15 minutes we are sorry for delaying you for 15 more minutes and i'm sure there were a lot of discussions which we didn't even delve into the registration processes the timeline for registration and then others and then uh very soon we'll come back to your doorstep to please that you give us your time again so we are grateful for your time and we thank you for making the time to join us now the diary is also back we went off for some time and we had several calls to come back and we are back and today's program i think has been one of the highly attended programs we had over 95 participants online and then and even on facebook and then the other networks to there are a lot of people who are joining us live so we are grateful madam and thank you for your time as well yes um thank you so much um lawyer for having me i think you guys are doing a great job and you must all be encouraged i'm also grateful to all our friends who have joined us particularly my students i can see a large number of them in the audience for those who have taken company already those who are yet to take company law i'm hoping that you have learned one or two things um which would be to your benefit so i'm happy i came thank you and then we've also displayed our social media handles on twitter we are at diaries global instagram live global facebook closed diary and then youtube please subscribe to our youtube channel we have a lot of legal topics which you've already done and then today's discussion will also be uploaded there as well so thank you and then next two weeks we'll be having something on decreasing the cases of suicide that is also going to be a very good discussion that i would play that everyone also makes their time to join so thank you and hope to see you next two weeks friday thank you thank you you

2021-09-05 04:46

Other news