Question Tag: Business Formation

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 8 Marks

BCL – Mar 2024 – L1 – Q4b – Alternative Forms and Constitutions of Business Organisations

Discuss the existence of a partnership in the provided scenario and the liabilities associated with partnership actions.

Three persons, Booker, Weah, and Makafui agreed to set up a restaurant. The finance was provided almost entirely by one of them, Booker. Before the restaurant opened, furniture and equipment were purchased and a laundry contract was entered into. Advertisements were placed in the newspapers and on television, apart from the fact that premises were acquired by the person who supplied the money. The parties then fell out and the business did not proceed as planned.

Required:

i) Explain whether in the circumstances of the facts, there is a Partnership in terms of the provisions of the Incorporated Private Partnership Act, 1962 (Act 152). (5 marks)

ii) State TWO (2) liabilities of Partnership for action or transaction done in the course of a Partnership business.

(3 marks)

i) Existence of a Partnership:

Section 1 of the Incorporated Private Partnerships Act, 1962 (Act 152) defines a partnership as the association of two or more individuals carrying on business jointly for the purpose of making profits.

Section 3(1) of Act 152 requires a copy of the partnership agreement to be submitted to the Registrar upon registration of the partnership.

Based on the facts provided, there was an association of two or more individuals who agreed to set up a restaurant. The individuals agreed on the kind of business they intended to carry on. Implied in the facts is that there was a partnership agreement, with each partner contributing financially or in kind. However, from the facts, only one of them, Booker, contributed substantially, and the parties fell out before the business could proceed as planned.

The substantive requirement of a partnership under Section 1 is the carrying on of business jointly for the purpose of profit. Since the business did not proceed as planned, one cannot conclusively say that the parties were in a partnership for business.

(5 marks)

ii) Liabilities of Partnership for Actions or Transactions Done in the Course of Partnership Business:

Section 12 of the Incorporated Private Partnerships Act, 1962 (Act 152) provides that a partner is an agent of the firm for the purposes of the business of the firm. The acts of the partners bind the firm if:

  • The acts were authorized, expressly or impliedly, by the other partners or were subsequently ratified by them;
  • The acts were done for carrying on in the usual way business of the kind carried by the firm.

Where the acts of a partner are for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound unless the partner is in fact authorized by other partners or the act is subsequently ratified by them.

When a tort is committed by a partner in the course of business approved by the partners, all the partners become jointly and severally liable to the person who has suffered a loss as a result.

(Any 2 points @ 1.5 marks each = 3 marks)

  • 4 Marks

BCL – Nov 2019 – L1 – Q2b – Alternative forms and constitutions of business organisations

Advantages and disadvantages of forming a sole proprietorship.

It appears that many Ghanaians prefer to own their businesses without going through the cumbersome details of forming an incorporated company limited by shares.

Required:
State TWO (2) advantages and TWO (2) disadvantages of forming sole proprietorship. (4 marks)

Advantages of forming a sole proprietorship:

  • Simplicity: It is simple, inexpensive, and allows the business to legally commence operations before the business name is registered.
  • Flexible working time: The proprietor has the flexibility of working time.
  • Profit retention: The proprietor enjoys all the profits generated by the business.
  • Business transfer: The proprietor can purchase or sell a business, including its assets such as inventory, plant machinery, and landed property.

(2 points @ 1 mark each = 2 marks)

Disadvantages:

  • Limited access to credit: Obtaining loans and credit to run the business is more difficult for a sole proprietorship.
  • Personal liability: The owner’s personal liabilities are not distinct from the business liabilities.
  • Business continuity: Sole proprietorships hardly survive the death of the proprietor.
  • Health and life dependency: The health and life of a sole proprietorship business are inevitably linked to that of the proprietor.

(2 points @ 1 mark each = 2 marks)

  • 10 Marks

BCL – Dec2022 – Q4b – Alternative forms and constitutions of business organisations

Discuss the requirements for incorporating a company and the implications of unpaid shares.

Lucy Kondomire and Adele Amaney have been engaged in the formation of a private company limited by shares to engage in a curtain business. They are very eager to win a contract to supply the new Parliament House with 3,000 yards of curtains as part of a planned refurbishment of the Chamber of Parliament. They are optimistic of being awarded the contract in view of the President’s campaign to promote locally produced and manufactured goods. They have already proposed the name of the company to be “Nyamenehene Curtains Plaza.” The company is to be registered with 1,000,000 ordinary shares of no-par value and fully subscribed 600,000 and 400,000 shares respectively. In view of this, they have approached you as a Consultant to take over the process of incorporating their company as quickly as possible to enable them to win the contract. They have expressed their desire to pay any fee possible if the process is completed within five days.

Required:
i) State EIGHT (8) requirements for the incorporation of a company to Lucy Kondomire and Adele Amaney. (6 marks)
ii) If it turned out later that Adele Amaney did not pay fully for the shares she subscribed to, and have not been issued with a share certificate, what would be the implication of this occurrence? (4 marks)

i) Requirements for Incorporation:
Section 13 of the Companies Act, 2019 (Act 992) outlines the requirements for incorporating a company in Ghana. The eight key requirements include:

  1. Company Name: The name of the company as proposed (e.g., “Nyamenehene Curtains Plaza”).
  2. Type of Company: Indication of the type of company (e.g., private company limited by shares).
  3. Nature of Business: The nature of the proposed business (e.g., curtain manufacturing and supply).
  4. Registered Office: Address of the proposed registered office and principal place of business in Ghana.
  5. Details of Subscribers: Particulars of each subscriber, including full name, date and place of birth, residential address, occupation, and nationality.
  6. Details of Directors: Particulars of each proposed director, including full name, former names, residential address, occupation, and other directorships held.
  7. Statutory Declaration: A statutory declaration by each proposed director indicating that they have not been convicted of fraud or dishonesty, and have not been declared insolvent.
  8. Shareholding: The amount of proposed stated capital, number of authorized shares, and subscription details (e.g., 1,000,000 ordinary shares with 600,000 and 400,000 shares fully subscribed).

ii) Implications of Unpaid Shares:
If Adele Amaney did not fully pay for the shares she subscribed to and has not been issued with a share certificate, she would not have the status of a shareholder/member. This would imply that she does not have the rights associated with shareholding, such as voting rights, entitlement to dividends, or the ability to transfer shares. Furthermore, she may not be recognized as a legal member of the company until full payment is made and the share certificate is issued. This could affect her ability to influence company decisions and participate in the company’s management.

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope