- 10 Marks
Question
Darkoa lives in the United States of America (USA) and asked his long-time friend, Gyankoroma, to register a company for her in Ghana. Gyankoroma spent GH¢20,000 on documentation, filing, and processing (with the issuance of receipts being in Gyankoroma’s name). Upon the request of Darkoa, Gyankoroma rented an office premises for one year at GH¢40,000 with the receipt in the name of the newly formed company.
Darkoa just returned from the USA to start operations. Darkoa discovered that the rental agent gave GH¢4,000 to Gyankoroma as inducement for the office deal. Darkoa appointed Gyankoroma as head of operations and refused to pay the registration expenses on the basis that Gyankoroma’s monthly salary as head of operations is more than GH¢20,000 and those expenses should be borne from the secret profits Gyankoroma had earlier enjoyed.
Required:
Based on your knowledge in pre-incorporation contracts, advise the parties.
Answer
Gyankoroma and Darkoa could be deemed promoters. They owe the company a fiduciary duty and must act in good faith.
- All transactions entered into prior to formation must be ratified by the company upon full disclosure to take the benefits. Until ratification or any agreement to the contrary, the person is bound by the transaction/benefits. The company can rescind such transactions or sue to recover any loss or damage.
- The documentation receipts should have been in the company name or at least in Darkoa’s name. All documents/transactions should have been signed for and on behalf of or executed in the name of the company.
- Gyankoroma is entitled to reimbursement of the GH¢20,000 documentation expenses. Unless by mutual agreement, employment or monthly salary is not considered payment for legitimate incorporation expenses.
- The company can recover the GH¢4,000 paid to Gyankoroma by the rental agent. It is a secret benefit and a breach of fiduciary duty. Gyankoroma should have made a full disclosure to the company for an independent board to allow her to keep it.
- The rental was done after incorporation, hence it is not a pre-incorporation contract, but it could be rescinded based on Gyankoroma’s inducement fee/profit.
- Topic: Formation and constitution of organisations
- Series: Nov 2024
- Uploader: Salamat Hamid