- 15 Marks
Question
Atibie family owned an enterprise devoted to the supply of plumbing materials. A business adviser working with H&H Bank advised the family to convert from an enterprise to a limited liability company to qualify for a discounted interest loan facility. The head of Atibie family stated as follows: “Any member of the family can be appointed as a board member of the new company.”
The head of Atibie family reasons that the company can make use of a Substitute Director in case they have no one to appoint as a substantive Director.
Required:
i) Explain FIVE (5) factors that could disqualify a member of Atibie family from being appointed a member of the board. (10 marks)
ii) Explain why the head of Atibie family is right or wrong on the use of a Substitute Director. (5 marks)
Answer
i) Factors that could disqualify a member of the Atibie family from being a director include:
- An infant
- A person adjudged to be of unsound mind
- A body corporate
- A person who, in the opinion of Bank of Ghana, is not fit and proper, which includes issues of competence, honesty, and insolvency.
- A person convicted of fraud or dishonesty or any offense in connection with the promotion, formation, or management of a company.
- A person that is said to be bankrupt
(Any 5 points @ 2 marks each = 10 marks)
ii) A Substitute Director is one who is appointed to act as a deputy for another named director and as the substitute in the absence of that director. Per section 180 of the Companies Act, 2019 (Act 992), a company may appoint a Substitute Director, and he/she shall not be counted as a director for the purpose of the prescribed minimum or maximum number of directors, other than a provision relating to a quorum, and is not entitled to vote at a meeting of directors at which the director for whom that person is a substitute is present.
A Substitute Director shall be deemed to be a full director of the company for all purposes and shall be appointed and may be removed in the same way as directors are required to be appointed and removed, and shall not cease to be a director by reason of the fact that the director for whom that person is a substitute ceases to be a director.
The Head of the Atibie family is legally wrong to appoint a Substitute Director from the outset for reasons stated above.
(5 marks)
- Tags: Companies Act, Company Directors, Disqualification, Substitute Director
- Level: Level 1
- Topic: Company directors and other officers
- Series: JULY 2023
- Uploader: Dotse