Topic: Legal implications relating to companies in difficulty or in crisis

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
  • 3 Marks

BCL – Nov 2020 – L1 – Q3c – Legal Implications Relating to Companies in Difficulty or in Crisis

Briefly explain the concept of a takeover in relation to a company.

Briefly explain take-over in relation to a company. (3 marks)

A take-over occurs when all or the majority of shares of a company are acquired by another natural or corporate person. The natural person or corporate entity that acquires the shares then has control over appointments to the Board of Directors and to management positions.

Instances of take-overs in Ghana include the transfer of majority shares and control of 70% of Ghana Telecom Ltd to Vodafone Ltd of the UK, and Total Ghana Ltd acquiring controlling interest in Mobil Ghana Ltd and taking over its assets including the Mobil House in Accra. (3 marks)

  • 3 Marks

BCL – Nov 2020 – L1 – Q3b – Legal Implications Relating to Companies in Difficulty or in Crisis

Explain the term "amalgamation" as used in company law.

Explain the term amalgamation as used in company law.

(3 marks)

Amalgamation means a merger of the undertakings or a part of the undertakings of two or more companies or of the undertakings or part of the undertakings of one or more companies and one or more bodies corporate. (3 marks)

  • 10 Marks

BCL – Nov 2020 – L1 – Q2a – Legal Implications Relating to Companies in Difficulty or in Crisis

Analyze the liability of officers and the company for changing the business object and the likely actions by the Registrar-General.

P&Q Company, an incorporated non-governmental organization has been formed with the object of greening the environment and sponsoring deprived children to go to school up to Junior High School level. In the course of operation, the key officers of the company took a decision that the company goes into salt mining without reference to the office of the Registrar-General.

Under this new arrangement, huge profits were made, the Board of Directors was reconstituted, and unexpected debts were incurred. In doing so, the 17-year-old daughter of the Executive Director known as the whiz-kid in financial matters became a Board member. The Registrar of Companies has been alerted on the happenings at the company.

Required:
i) Analyze the new arrangement and give reasons if any, why the officers and P&Q Company will be liable. (5 marks)
ii) What are the likely actions to be taken by the Registrar-General in the circumstance of this case? (5 marks)

i) Reasons the officers and P&Q Company should be punished.

Sections 10 and 182 of the Companies Act, 1963 ACT 179 provide the sources for answering the question.

  • The first part of the case is applicable to an incorporated company limited by guarantee.              (1 mark)
  • Section 10 of ACT 179 provides that a company limited by guarantee shall not be incorporated with the object of carrying on business for the purpose of making profits. (1 mark)
  • Where a company limited by guarantee carries on business of making profit, the officers and members of the company who are cognizant of the fact that it is so carrying on business are jointly and severally liable for the payment and discharge of the debts and liabilities of the company incurred in carrying on that business and the company and those officers are each liable to a fine. Thus, the company and their key officers will be subject to a fine with the key officers additionally bearing the debts incurred. (3 marks)

ii) Likely actions to be taken by the Registrar-General.

  • Section 182 of ACT 179 provides for certain categories of persons who are incompetent to serve on Board of incorporated. One of such persons is a minor. Any of such persons caught in violation of the section is liable on conviction to a fine or imprisonment. (2 marks)
  • The 17 years old daughter is a minor under the laws of Ghana. She is therefore, caught under section 182 and is incompetent to serve on the Board. The Registrar of Companies will proceed on criminal matter against the 17 year old. The company and every director will be also subject to be fined.            (3 marks)
  • 10 Marks

BCL – May 2021 – L1 – Q4a – Legal Implications Relating to Companies in Difficulty or in Crisis

Explanation of when a company is deemed dissolved and whether it can be resuscitated.

When is a company deemed to be finally dissolved? Explain whether the company can ever be resuscitated. (10 marks)

A company is deemed to be finally dissolved when the registrar strikes out the name of a company off the register after satisfying himself that the winding up of the company is complete, and he notifies the same in the Gazette. The company is thereupon deemed to be dissolved as at the date of the publication of the Notification in the Gazette.

As regards the issue of the possibility of a company that has been dissolved in the way described above to be restored to life, it can be done at any time within two(2) years by order of the court made on the application for reinstatement by the registrar or the liquidator of the company or by any former officer, member or creditor of the company, or any person claiming through or under him. The court order may contain such terms as the court thinks fit and will declare the dissolution to have been void and order the name of the company to be restored to the register.

The registrar must be furnished with an official copy of the court order for the registration and shall then cause the name to be published in the Gazette. Thereupon the name of the company shall be restored to the register as if it had not been dissolved.

(10 marks)

  • 2 Marks

BCL – Mar 2024 – L1 – Q5e – Legal Implications Relating to Companies in Difficulty or in Crisis

Explain the concept of a Declaration of Insolvency in the context of company law.

What is a Declaration of Insolvency? (2 marks)

Insolvency is a state of financial distress in which a person or company is unable to pay their debts. Insolvency occurs when liabilities exceed the value of the company, or when a debtor cannot pay the debts they owe.

A Declaration of Insolvency suggests a company in receivership. The appointment of a receiver-manager implies a shift in control from the existing directors to the receiver-manager. The directors are required to present a written report of the state of affairs of the company to the receiver-manager. This statement must be filed by the directors with the receiver-manager within 14 days or such longer period that the receiver-manager may allow in writing, verified by an affidavit.

(2 marks)

  • 3 Marks

BCL – Mar 2024 – L1 – Q5d – Legal Implications Relating to Companies in Difficulty or in Crisis

Distinguish between "Arrangement" and "Amalgamation" in company law.

Distinguish between “Arrangement” and “Amalgamation” in Company Law. (3 marks)

Arrangement includes a re-organization of the authorized shares of a company by:

  • Consolidation of shares of different classes;
  • Division of shares into shares of different classes; or
  • Combination of the methods referred to in paragraphs (a) and (b).

Arrangement may involve:

  • Simple arrangements;
  • Arrangement by sale of undertaking for securities to be distributed; or
  • Arrangement with the sanction of the court.

Amalgamation:

Amalgamation, commonly known as a merger, refers to:

  • Absorption: This is where the undertaking, property, and liabilities of one or more companies, including the company in respect of which a scheme is proposed, are transferred to another existing company; or
  • Formation of a New Company: This is where the undertaking, property, and liabilities of two or more companies, including the company in respect of which the scheme is proposed, are transferred to a new company. The consideration for the transfer is typically shares in the transferee company receivable by a member of the transferor company, with or without any cash payment to that member.

(1.5 marks each = 3 marks)

  • 5 Marks

BCL – Mar 2024 – L1 – Q5c – Legal Implications Relating to Companies in Difficulty or in Crisis

List and explain grounds for winding up a company under the Bodies Corporate (Official Liquidations) Act, 1963, Act 180.

State FIVE (5) grounds that may lead to the winding up of a company pursuant to the provisions of Bodies Corporate (Official Liquidation Act, 1963, Act 180). (5 marks)

The following are grounds that may lead to the winding up of a company under the Bodies Corporate (Official Liquidations) Act, 1963, Act 180:

  • Failure to Commence Business: Within one year from the date of incorporation, the company fails to carry on all of its authorized business.
  • Suspension of Business: The company suspends any of its authorized business for a whole year.
  • Lack of Members: The company has no members.
  • Unlawful Business: The business or objects of the company are unlawful.
  • Illegal Operation: The company is being operated for an illegal purpose. When a company carries on illegal activities, it is sometimes said to be engaged in fraudulent trading. A company formed or operating to defraud others may be wound up.
  • Unauthorized Business: The business being carried on by the company is not authorized by its Regulations.
  • Inability to Pay Debts: The company is unable to pay its debts. However, if the debt is genuinely disputed, the company may not be wound up.
  • Just and Equitable Grounds: Finally, the court may issue a winding-up order if it is of the opinion that it is just and equitable that the company be wound up.

(Any 5 points @ 1 mark each = 5 marks)

  • 6 Marks

BCL – Nov 2018 – L1 – Q7a – Legal Implications Relating to Companies in Difficulty or in Crisis

State the procedures to convert a private liquidation into an official liquidation.

State THREE (3) procedures to adopt in converting private liquidation to official liquidation. (6 marks)

  • On notice being given by the liquidator under private liquidation to the Registrar (of Companies) that the company may not be able to pay its debts and liabilities in full within the period stated in the declaration of insolvency, the Registrar may make a winding-up order converting the private liquidation into an official winding-up.
  • The allegation that the Company is unable to pay its debts in full within the stated period shall be accompanied by a statement in the prescribed form of the company’s assets and liabilities.
  • On the commencement of winding-up proceedings against a company, civil proceedings against the company shall be stayed, and a transfer of shares of the company is void.
    (Section 5 of the Bodies Corporate (Official Liquidations) Act, 1963 ACT 180)
    (3 points @ 2 marks each = 6 marks)
  • 12 Marks

BCL – May 2018 – L1 – Q7c – Legal Implications Relating to Companies in Difficulty or Crisis

Identify conditions to restrain fraudulent persons from managing companies and actions the Registrar-General may take.

c) Kum is the Executive Director of Okitimiw Company Limited. Kum ordered that three-fourths of monies received weekly by the Company should be paid into the Company’s account and the remaining into his personal account for his travels, boarding, and lodging within and outside the country. Auditing of the accounts of the Company revealed that the lodging of the monies in the personal account of the executive director was not only unlawful but was done to perpetuate fraud.

On the official winding up of the Company, it was revealed that the business was carried out for fraudulent purpose and the directors and other officers of the Company were aware of what went on.

Required:
i) Identify TWO conditions that can be used to restrain fraudulent persons from managing companies. (6 marks)

ii) State TWO actions the Registrar-General will take where the process of inspection reveals criminal liability of the Executive Director.

(6 marks)

i) Conditions to Restrain Fraudulent Persons from Managing Companies:
Section – 186 of the Companies Act restrains fraudulent persons from managing companies where:

  • A person is convicted on indictment, whether in Ghana or elsewhere, of any offence involving fraud or dishonesty or any offence in connection with the promotion, formation, or management of a body corporate.
  • A person is adjudicated bankrupt, whether in Ghana or elsewhere.
  • It appears that a person has been guilty of any criminal offence, whether convicted or not, in relation to any body corporate, or of any fraud or breach of duty in relation to a body corporate.
    (3 points for 6 marks)

ii) Actions by the Registrar-General:
In the keeping of the books and accounts of a company, where it appears to the Registrar of Companies that there are circumstances suggesting that the business of the company is being conducted for a fraudulent or unlawful purpose among other things (section 219 of ACT 179), the Registrar of Companies, after completion of the process of inspection of the books of accounts, and if it appears to him that a person may have committed an offence for which that person is criminally liable, the Registrar shall refer the matter to the Attorney-General. If the Attorney-General considers that the case is one in which a prosecution ought to be instituted, he shall institute proceedings (section 225 of ACT 179).
(6 marks)

  • 4 Marks

BCL – May 2018 – L1 – Q7a – Legal Implications Relating to Companies in Difficulty or Crisis

State four persons who are incompetent to be appointed liquidators.

a) State FOUR persons who are incompetent to be appointed liquidators. (4 marks)

Section 252 of ACT 179 lists out the following persons as being incompetent to be liquidators:

  • An infant.
  • A person found by a court of competent jurisdiction to be a person of unsound mind.
  • A body corporate.
  • A person convicted on indictment, whether in the Republic or elsewhere, of an offence involving fraud or dishonesty or of an offence in connection with the promotion or management of a body corporate.
  • An undischarged bankrupt or any other person subject to insolvency proceedings under the Insolvency Act, 1962 ACT 153.
  • A director of a company is not qualified for appointment as a liquidator of that company.
  • An auditor of a company shall not be appointed as liquidator in a private liquidation unless on the appointment, a special resolution is duly passed dispensing with the auditing of the accounts of that auditor.
    (1 point each for 4 marks)

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