- 18 Marks
Question
In 2015, BIGO Ltd, which carries on the business of exporting yam and pineapple from Ghana to Europe, opened an account with Cal Bank at the Osu Branch. In 2016, the Finance Manager, who is the sole accounts officer of the company, forged the signature of the Managing Director (who was also the sole signatory to the bank account of the company) and made several withdrawals from the company to the tune of GH¢550,000. The bank, in that same year, requested that the Managing Director should, within two weeks of the letter, confirm the credit balance on the account which at the time stood at GH¢2,200,000. The Managing Director, without any further checks, signed the document, thus confirming the credit balance presented by the bank. In 2017, the auditors raised queries on some of the fictitious withdrawals. The Chairman of the Board ordered the Human Resource Manager to dismiss both the Managing Director and the Finance Manager with immediate effect.
Required:
i) Explain FOUR (4) issues in the case relating to governance and duties of directors.
(12 marks)
ii) Explain THREE (3) factors that disqualify a person from being appointed as a director.
(6 marks)
Answer
- Duties of Directors: Directors have a duty to act in good faith, represent the company, and uphold their fiduciary duties.
- Procedure for Termination: The case shows how the dismissal process for key company officers should be handled, especially in cases of fraud.
- Board’s Authority and Involvement: The board’s responsibility in operational activities is highlighted, especially regarding oversight and the verification of financial transactions.
- Fiduciary Duty of the Finance Manager: The Finance Manager’s actions breached their fiduciary duties, leading to significant financial loss.
- Fraud and Criminal Implications: The fraud perpetrated by the Finance Manager, along with the failure of the Managing Director to properly verify financial documents, led to significant legal and ethical consequences for the company. (4 issues well explained @ 3 marks each = 12 marks)
aii)
- Infants: Persons who are not of legal adult age cannot be appointed as directors.
- Persons found by a competent court to be of unsound mind: Individuals who are legally determined to lack mental capacity are disqualified.
- Companies: A company, as a legal entity, cannot be appointed as a director.
- Undischarged Bankrupt: Individuals who have not been discharged from bankruptcy are disqualified from being directors.
- Court Order: Individuals disqualified by a court order cannot be appointed as directors unless the period specified by the court has expired or the court grants leave. (3 points @ 2 marks each = 6 marks)
- Tags: Corporate Governance, Director Duties, Ethical Issues, Financial Mismanagement, Fraud
- Level: Level 1
- Topic: Governance and Ethical Issues Relating to Business
- Series: NOV 2018
- Uploader: Dotse