Director Authority

PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

Question

State the legal principles you would take into consideration in resolving the following legal matters that have come to your attention.

(a) Mr. Nkumsah is majority shareholder and Chairman of the Board of Directors of Nkumsah Trading Ltd, which has an account with you for the past twenty years. The company issued debentures secured by a floating charge over the company’s assets three years ago. Mr. Nkumsah has 60% shares in the company and is also the sole signatory of the account. Nkumsah Trading Ltd. was established with a registered constitution with the objects of importing medical equipment and ancillary materials. He has applied for a loan of GHC 400,000 for the importation of baby pampers as he claims baby pampers move faster than medical equipment. In appraising the facility, your attention is drawn to the fact that since the company has incorporated with registered objects the company must amend the constitution to enable the company to undertake the new venture. In your discussion with him he asks you of advice of how he could amend the objects of the company’s constitution to enable him to enter into the new venture. He also asks you

what legal difficulties may arise if he engaged in business outside the established objects of the company. [10 Marks]

(b) Secondly Mr. Nkumsah has a cheque payable to a sister company Jamsah Ltd., in which he has shareholding of 50%. His lifelong friend owns the remaining 50%. You advise him that it is a company policy not to credit a cheque payable to a company into a personal account of a director or employee of that company. He argues with you and tells you that since he is the one of the key shareholders he has the right to do so as it is an internal arrangement for him to undertake a specified transaction for the company. [10 Marks]

[Total marks: 20]

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cheque crediting policies, Companies Act 2019, Company constitution amendment, Director Authority, Shareholder Rights, Ultra vires transactions
Level: Level 3

Topic: Ultra Vires Doctrine
Series: OCT 2022

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

Question

Prime Company Ltd, traders in frozen fish, entered into an oral agreement for the supply and sale on credit basis, of all its frozen fish to Addae Company Ltd. The affairs and the business of Prime Company Ltd were undertaken by its Managing Director and one Maxwell Mensah. Maxwell Mensah was never appointed by the Company as a director, but he transacted business on behalf of Prime Company Ltd with Addae Company Ltd, as if he were a director and the Chief Executive Officer of the Company. Maxwell Mensah acted on behalf of the Company by signing the applications for the Company to be registered as an importer, apart from financially assisting the Company to start business. The name of Maxwell Mensah also appeared on the Company’s letter-head as one of its directors.

Prime Company Ltd allowed Maxwell Mensah to share in its profits by allocating to him fifty percent (50%) of the last consignment of fish. Maxwell Mensah entrusted the sale of the consignment allocated to him for his benefit to Addae Company Ltd and directed that the proceeds of the sale should be paid by Addae Company Ltd into the account of his private firm, Asanko Ventures Ltd. In the course of the transaction, Addae Company Ltd paid various sums of money being proceeds of the sale of fish supplied to Prime Company Ltd to both the Managing Director of Prime Company Ltd and Maxwell Mensah. No valid receipts were given for those payments. At the close of business, the trading account of Prime Company Ltd showed a debit balance of over GH¢ 16,000.00 against Addae Company Ltd. Prime Company Ltd subsequently demanded that this amount be paid. Addae Company Ltd resisted settlement on the grounds that it had already accounted fully for the cost of the fish sold to it on credit.

Required:

In the light of the above facts, explain whether Prime Company Ltd would be justified in denying Maxwell Mensah as an Officer of the Company. (20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency Law, Company Law, Director Authority, Estoppel
Level: Level 1

Topic: Company directors and other officers
Series: NOV 2019

PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

Question

State the legal principles you would take into consideration in resolving the following legal matters that have come to your attention.

what legal difficulties may arise if he engaged in business outside the established objects of the company. [10 Marks]

[Total marks: 20]

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cheque crediting policies, Companies Act 2019, Company constitution amendment, Director Authority, Shareholder Rights, Ultra vires transactions
Level: Level 3

Topic: Ultra Vires Doctrine
Series: OCT 2022

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

Question

Required:

In the light of the above facts, explain whether Prime Company Ltd would be justified in denying Maxwell Mensah as an Officer of the Company. (20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency Law, Company Law, Director Authority, Estoppel
Level: Level 1

Topic: Company directors and other officers
Series: NOV 2019

Question Tag: Director Authority

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PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

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PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

You're reporting an error for "PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies"

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

You're reporting an error for "BCL – Nov 2019 – L1 – Q5 – Company directors and other officers"

PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies

Legal principles for advising on amending company objects for new business ventures and handling a cheque payable to a related company for crediting to a personal account.

You're reporting an error for "PBL – OCT 2022 – L3 – Q3 – Company Objects Amendment and Cheque Handling Policies"

BCL – Nov 2019 – L1 – Q5 – Company directors and other officers

Analysis of whether a company can deny the authority of an individual acting as a director who was not formally appointed.

You're reporting an error for "BCL – Nov 2019 – L1 – Q5 – Company directors and other officers"

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