“It should be valuable from an educational stand-point by making it clear to the directors that forming a limited liability company and becoming directors of it is an important step and not just something that they can perfunctorily leave to be done for them in lawyer’s or accountant’s office.” (Page 46 of Prof. L.C.B. Gower’s Final Report of the Commission of Enquiry into the Working and Administration of the present Company Law of Ghana)
It is a notorious fact that promoters of companies in Ghana usually use one of three main types of service providers in registering companies. These are: lawyers, other consultants and the employees of the Registrar of Companies.
Irrespective of the type of service provider that is consulted, the commonest procedure is for the promoters to be asked to give limited information like the name of the company, the nature of business among others. The regulations adopted by most promoters do not depart from the standard regulations (Table A). The persons interested in taking shares in the company (the subscribers) whether they are the same as the promoters or not, are made to sign the last page (subscription page) of the Regulations. Some subscribers may include the names of other persons and sign for them sometimes without these persons knowing, especially when spouses, children and friends are involved.
Power of company
The promoter may insist on having a wide field of business activity as the nature of business. Some even go to the extent of having a general statement such as “to own and dispose of property and to do anything incidental to the nature of business of the company.”
Such a provision is useless .What is required is a simple statement of the general nature of the business. “To own and dispose of property and to do anything incidental to the nature of business of the company” is a power and not business.
Ghana’s Companies Act 1963, (Act 179) draws a distinction between nature of business and power. By Act 179, upon incorporation the company acquires all the powers of a natural person of full capacity unless restrictions are imposed by the regulations. This means that the company can do whatever a natural person of full capacity can do in furtherance of his business. If the company wants to acquire property, take legal action or do anything incidental to its nature of business it automatically has the power to do so. Consequently nothing is gained by stating such power as nature of business in the regulations. Normally if the Registrar of companies finds this in the regulations he is supposed to request the promoter to delete it.
Contract – Section 21 of Act 179
It appears that one thing which is often overlooked is the nature of the company’s regulations as a contract under seal between the subscribers and other members of the company, between the directors and the company and members themselves. One wonders how many service providers tell their clients that what they sign as company regulations is a very important contract which must be gone through painstakingly.
One of the reasons why for many years many people in the business community prefer to register a business name (sole proprietorship) to the incorporation of companies is that the registration of a business name requires little or no formalities. It is therefore doubtful whether there would be so many limited liability companies as we have them today if the subscribers and directors were made aware that they were entering into a contract. In any case, the subscribers and the directors ought to be told from the inception that the regulations constitute their contract. Perhaps if they were told, the blunders in corporate governance could be far less than we have them today.
Some promoters and subscribers to the Regulations and directors see the Regulations simply as forms meant for completion and may even purchase Table A and the standard forms from the Companies Registry before going to see the service provider.
For various reasons the promoters are often in a hurry and all they are looking for are the certificate of incorporation and certificate to commence business.
Consequently, the services of the employees of the Registrar of Companies seem to be the most favoured. However, the snag here is that it is usually the messengers, clerks and generally junior employees who deal directly with the public who may provide the service. These employees have their limitations in terms of their appreciation of the law. They also have no time or conducive atmosphere for questions and answers. The subscribers and directors will simply be asked to sign here and there.
Whereas promoters and directors who go to professionals are likely to have the benefit of professional advice, many promoters and directors would like to spend limited time with the professional either because of the same need for speed or the desire to avoid the payment for long hours spent with the professional.
Judging from the kind of issues that crop up in companies and some of which end up in the court, it seems clear that the promoters, subscribers and directors often do not have the benefit of professional advice as to the import of signing the Regulations and the forms. The bitter lessons are often learnt when it is already too late.