Question Tag: Ultra vires transactions

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]