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- 10 Marks
Question
Kwame Akoto holds 15% share in Sikem Investment Ltd, a brokerage firm, which by the regulations of the company, entitled him to appoint a director. To avoid the strict and high standards of banking, the Regulations of Sikem Investment prohibits banking and savings and loan schemes. Kwame Akoto received a letter from Mr. Pinkrah, Managing Director and 55% shareholder, that the company has merged with Sikaman Group owned 100% by Mr. Pinkrah. The merged company will upgrade into a full bank within the next three months. The shares of Kwame Akoto and all minority shareholders with Sikem Investment Ltd will be converted into a loan at 10% per annum interest with principal repayment schedule over the next five years. Mr. Pinkrah took all decisions alone without consulting the seven members on the board. All attempts to hold a board meeting to discuss the issues have been thwarted by Mr. Pinkrah.
Required:
i) State THREE (3) options open to Kwame Akoto in the circumstance of this case. (6 marks)
ii) State FOUR (4) likely reliefs the court may grant. (4 marks)
Answer
i) Options available to Kwame Akoto:
- Court Order: Kwame Akoto can seek a court order as a member, or through his appointed director.
- Petition to the Registrar: He can file a petition to the Registrar to hold an Annual General Meeting (AGM). With 15% shareholding, he can request an Extraordinary General Meeting (EGM) under Section 271 of Act 179.
- Challenge of Ultra Vires Actions: Kwame Akoto can challenge the actions of the Managing Director (MD) as ultra vires, depending on the allocation of powers among members at general meetings. The MD cannot decide on mergers, class rights, share conversions, business objects, etc., without the Board of Directors (BOD) or members at general meetings.
(3 points @ 2 marks each = 6 marks)
ii) Likely reliefs the court may grant:
- Lift the corporate veil: The court may lift the veil to hold Mr. Pinkrah liable for any fraud.
- Civil and criminal liabilities: Imposing civil and criminal liabilities for any breach of fiduciary duties.
- Injunction: The court may secure an injunction against illegal or irregular activities under Sections 217 and 218.
- Cancel or vary the merger: The court may cancel or vary the merger and other transactions or resolutions.
- Protect shareholder rights: The court may maintain the rights of Kwame Akoto and other affected members.
- Purchase of shares: The court may provide for the purchase of the shares of affected members.
- Appointment of an inspector: The court may appoint an inspector or order the Registrar to investigate the operations/affairs of the company.
(4 points @ 1 mark each = 4 marks)
- Tags: Company Law, Legal Remedies, Minority Protection, Shareholder Rights
- Level: Level 1
- Topic: Company directors and other officers
- Series: NOV 2019
- Uploader: Dotse