<p></p>



<p>In my ;most ;recent ;article, ;I discussed the duties of ;directors ;of ;private companies ;under ;the Companies Act, 2019 (Act 992). ;However, directors are not the only officers or persons ;with duties imposed by ;Act 992 ;&#8211; ;mandatory or permissive. Act ;992 ;also ;imposes duties on ;a ;company itself, ;members, ;officers and ;other ;persons ;concerning ;the formation, management and winding up/liquidation ;of ;private companies.</p>



<p>As a ;regulatory ;framework, Act 992 provides ;for ;some ;standard ;obligations ;all persons ;who act ;for ;a company ;must ;perform ;at all times ;regardless of the size ;of the company – big or small. ;</p>



<p>To ensure compliance with ;these standard ;regulatory ;obligations ;either ;as pertains ;to ;statutory ;reportingrequirements ;and/or ;company ;management ;practices, Act ;992 provides for sanctions and liabilities in the event of ;the ;failure(s) to ;comply with duties imposedunder the Act.</p>



<p>Generally, the sanctions and liabilities ;regimes ;of Act 992 ;can be ;categorised ;into civil and criminal liabilities. ;One can anticipate the ;primary purpose ofsanctions or liabilities under Act 992 is to punish the affected person for the failure to perform a duty imposed or for acting in ways not permitted by the Act – although the ;existence ;of sanctions/liabilities ;provisions ;may serve ;other ;preventive purposes. ;</p>



<p>The ;severity of ;a ;sanction/liability ;highlights ;the ;impact of ;its ;non-compliance on the general ;management of companies in Ghana. ;</p>



<p>In this article, I shall ;discuss ;some of ;thesesanctions/liabilities ;and ;demonstrate ;how they relateto ;a ;company ;itself, ;members, ;officers ;and otherpersons.</p>



<p><strong>WHO IS LIABLE UNDER THE SANCTIONS/LIABILITIES REGIME</strong><strong>S</strong><strong>?</strong></p>



<p>Mostly, ;officers owe ;the ;primary ;obligation for the performance of duties imposed ;on a company. ;Nonetheless, Act 992 ;provides for ;other persons, ;to perform certain duties ;on behalf of a company. ;It is ;key ;to understand ;the extent of liability for these persons ;where there is ;the failure of performance of obligations imposed ;by Act 992 ;or ;the registered constitution of ;a company.a. ;<strong>P</strong><strong>ROMOTERS</strong></p>



<p>A company ;before incorporation has ;no existence. Persons responsible for bringing ;it ;into existence are called Promoters. ;Act 992 defines ;a ;promoter as ;a ;person who is or has been engaged or interested in the formation of a company ;except for persons acting in their professional capacities. ;A promoter is mandated to perform all acts incidental to the incorporation process including ;the ;acquisition of properties, ;help in raising working capital, ;running of errands ;among others. ;A ;promoter ;stands in a fiduciary relationship to ;a ;company and ;alwaysexpected to observe the ;utmost good faith ;towards the company in all transactions with the company or on its behalf. ;</p>



<p>In instances where a promoter fails ;on this obligation, ;such ;promoter ;becomes ;personally liable to compensate the company for any loss suffered. ;Also, ;a ;promoter ;is ;to account for ;any ;profit ;he/shemay have made from the use of properties or information in circumstances where it was ;his/her ;duty as a fiduciary to acquire the property or information on behalf of the company. ;</p>



<p>A ;company ;has ;the right to rescind ;any transaction between ;a ;promoter and ;itself ;unless ;the transaction has been entered into or ratified on behalf of the company by the ;board of directors independent of the promoter, all members and the company at a general meeting ;in line with the provisions of Act 992. ;Unless ;ratified, ;a ;promoter in the absence of an express agreement shall be personally ;liable for ;the contract(s)/transaction(s) ;as well as its benefits. ;</p>



<p>Also, a ;company ;has the ;right to bring ;an action to enforce ;any ;civil ;liability ;against ;a promoter and such actions shall ;not be affected by any period of limitation (6 years as in civil matters). ;b. ;<strong>COMPANY ITSELF</strong></p>



<p>A ;private ;company is a body formed and registeredper ;the provisions of Act 992. ;On incorporation, ;itacquires the full capacity to carry on or undertake any business or activity, do any act, or enter into any transaction. ;Also, ;a company ;secures ;full rights,power and privileges ;to perform any ;such ;transaction, business or activity. ;However, ;it ;may ;be restricted ;by its registered constitution. ;Nonetheless,such restrictions ;do not limit ;the capacity and power of ;a ;company ;or that ;an act is not or would not be, in the best interest of the company. ;</p>



<p>Therefore, ;acts of ;a ;company, a contract or ;other obligations entered into, ;shall not be invalid by reason only of the fact that it was done in contravention of restrictions on ;a company. ;To this extent, ;conveyance or transfer of property to or by a company can also not be invalidated ;by reason of the fact that the act, ;conveyance or transfer was not done or made for the furtherance ;of any of the authorised businesses or the company was otherwise exceeding its objects or powers. ;</p>



<p>The ;consequence ;is that ;a ;company ;may ;by ;its ;actsbecome ;liable ;for acting in excess of ;its objects, powers or capacity. ;Where this occurs, the extent of liability will be dependent on the nature of transaction, ;act, conveyance or transfer undertaken by the company.</p>



<p>Contracting ;3<sup>rd</sup> ;parties are the beneficiaries ;in such circumstances as they are ;still ;able to ;enforce legal remedies ;against the company ;&#8211; ;payments for due liabilities, ;specific performance or ;any other ;transactional ;remedy.</p>



<p>Additionally, ;the Act prohibits ;a private ;company from making an invitation to the public to acquire ;itsshares or debentures and also to ;deposit money for fixed periods or payable at a call whether bearing ;interest or not. ;The Registrar ;will sanction any ;private ;company for the ;breach of these provisions although ;the specific ;sanction(s) ;have ;not been expressly provided for under the Act.</p>



<p>Further, the Registrar ;may ;levy ;the payment of ;an administrative penalty ;by a company ;jointly with ;other ;persons ;in ;the following circumstances –- ;on the ;detection ;of errors or omissions ;in documents containing particulars ;for ;incorporation, ;&#8211; ;on the ;failure to give notice on the alteration of objects or business ;within the specified period of the Act, ;&#8211; ;on the failure to change a misleading name within the time specified by the Act, ;&#8211; ;on the failure of payment ;for ;shares ;and return of issues, ;&#8211; ;on the failure of issuance of share certificates, ;&#8211; ;on the refusal of inspection of a true copy of a share deals account,- ;on the failure to ;return to ;the Registrar in a prescribed form the amount of money ;raised in respect of stated capital, ;&#8211; ;on the failure to file annual returns ;among others. ;</p>



<p>The above ;is ;not ;an ;exhaustive ;list ;of obligations ;on a company ;for which ;the Registrar ;could ;sanctionadministrative penalty ;for ;failures. ;</p>



<p>The ;payment of ;administrative penalties ;could ;be ;fixed in penalty units ;or ;requires ;the payment of ;the penalty for the ;continuous period ;of ;the ;defaulting obligation.</p>



<p>Civil liabilities are not the ;only type of ;sanctionsavailable ;against ;a defaulting company. Also, ;Act 992 ;provides for criminal liabilities in some circumstances. ;Criminal liability ;implies ;the prosecution ;and conviction ;of a company howeverpunishable by a fine ;– due ;to ;the artificial person nature of ;a company.</p>



<p>A ;company ;may become ;vicariously ;liable ;for ;criminal ;acts of members in a general meeting, of the board of directors or its managing director whilst carrying ;on ;business ;in their ;usual way(s). ;Likewise, a ;company ;may ;become liable on summary conviction to a fine ;(varying penalty units) ;where it fails to keep copies of instruments creating a charge ;requiring registration in Ghana ;at its ;registered office or any other office in Ghana ;among others. ;c. ;<strong>M</strong><strong>EMBERS</strong><strong>/</strong><strong>SHAREHOLDERS</strong></p>



<p>Membership of a private company ;includes ;signedsubscribers to ;its ;documents ;at incorporation ;and persons ;whose names are entered in the register of members and ;shareholders. ;Nonetheless, membership is not ;only ;limited to natural persons ;–an artificial person could also become ;a member/shareholder.</p>



<p>The nature of ;an ;incorporated private company determines the extent of ;civil ;liabilities for its members. ;A limited liability company ;offers its shareholders ;protection against personal ;responsibilities ;for company liabilities. Members liabilities are ;only ;to the ;extent of ;loss ;of capital contributed ;or unpaid ;amount ;on their shares. ;</p>



<p>On ;the other hand, ;an ;unlimited liability company ;offers no protection against personal liabilities of its members. ;All ;liabilities of an unlimited liability company ;are ;potentially the ;personal ;liabilities ;of ;its members, where ;liabilities ;cannot be honoured by the company.</p>



<p>The liabilities of a member of a ;company limited by guarantee ;are to ;the extent of amounts guaranteed ;at registration. ;Members ;will be called upon to honour their pledges (guarantees) ;where the ;company is unable to meet ;its liabilities in the event of winding up. ;Further, ;where a company limited by guarantee carries on business for profit other than for the furtherance of its objects, ;members who are ;cognizant ;of this fact become jointly and severally liable with other officers ;for the payment and discharge of debts and liabilities incurred in carrying on such businesses. Additionally, the Registrar may levy ;administrative ;penalties.</p>



<p>Generally, ;members/shareholders play limited roles in ;the management ;of companies. ;Largely, the duties of members are restricted to the exercise of rights ;atGeneral or Extraordinary Meetings. ;At these meetings, members ;act as the final approvingauthority ;for acts of the company. ;In the exercise of their duties, members will be required to:- ;approve ;all transactions ;including major transactions, ;&#8211; ;pass resolutions authorising the doing of certain acts, ;&#8211; ;approve ;payment of recommended dividends, ;&#8211; ;approve ;strategic plans, ;&#8211; ;approve ;the ;decision of directors to ;wind up ;a solvent company- ;approve all ;dealings in shares ;&#8211; ;and other permissive approvals under Act 992 and/or the Registered Constitution of the company.</p>



<p>Members ;may ;also ;become liable ;civil or ;criminallywhere their approval power ;is exercised ;in contravention ;of ;the law ;or the registered constitution of the company.d. ;<strong>OFFICERS</strong></p>



<p>Act 992 defines officers of a company to include its directors, secretary ;or employees ;and ;a receiver and manager of a part of the undertaking of a company – appointed under ;a power contained in an instrument and a liquidator appointed in a voluntary winding up. ;Each of these officers has been given distinct or collaborative roles under the ;Act or ;as may be ;complemented ;by the registered constitution. ;</p>



<p>Equally, sanctions ;have been provided ;for ;the failure or omission to ;perform ;assigned duties. ;In some instances, officers bear liabilities jointly and ;severally ;and ;in others, personally. ;Civil liabilitiesrange ;from the payment of administrative penalties, ;liability for debts and liabilities incurred, the ;return of distribution ;with interest ;and other civil remedies as may ;be available against the officer by the company or contracting 3<sup>rd</sup> ;party.</p>



<p>Officers also bear ;criminal liabilities for their actions or inactions. ;In the performance of their duties, officers could ;be ;summarily convicted to ;fines – in penalty units or ;terms of imprisonment or both. ;Infractions involving dishonesty ;on the part of an officer in the discharge of his/her duties ;will also ;make ;him/her ;criminally liable ;under the general criminal law provisions. ;Further, ;an ;officer ;could ;bebanned ;from ;the management ;of companies ;in criminal circumstances. ;e. ;<strong>OTHER PERSONS</strong></p>



<p>Act 992 imposes duties on other persons. These persons include a receiver, a receiver and a manager appointed by ;the Court, an auditor, a registration officer and others as may be appointed by a company as its agents. ;Civil and criminal liabilities could lie against these persons for the failure of duties or things done in contravention of Act 992, the registered constitution or the general laws of Ghana.</p>



<p>Similarly, ;the Registrar could levy administrative penalties ;against these ;persons, ;or ;they ;could become liable either jointly or severally with other officers of the company ;in respect of other civil ;liabilities. ;</p>



<p>This group of persons are not excluded from criminal liabilities resulting from ;any commission of prohibited conducts whilst acting for ;a company. ;</p>



<p><strong>CONCLUSION</strong><strong> ;</strong></p>



<p>The Companies Act, 2019 (Act 992) creates ;a ;management structure ;for the administration of an artificial person – the company. ;To effectively manage the affairs of a company, Act 992 creates offices/positions with duties. ;In its bid to ensure compliance with imposed duties, ;Act 992 provides for sanctions ;and liabilities regimes ;in the nature of civil and criminal liabilities. It is imperative for each person assigned ;a ;duty under the Act to understand the extent of his or her liabilities where such duty is not performed or performed in contravention of the requirements of the Act, the registered constitution of the company or the general laws of Ghana. ;</p>



<p>The Author is Richard Nunekpeku, a lawyer ;at E.L Agbemava Law Office. He is reachable at Richard.nunekpeku@outlook.com</p>

An Assessment of Sanctions and Liabilities regimes for Private Companies under the Companies Act, 2019 (Act 992)
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