In Ghanaian corporate and banking law, understanding distinctions in shares, company types, charges, and insolvency practices is essential for risk management in lending and investments. These concepts are governed by the Companies Act, 2019 (Act 992), which replaced the Companies Code, 1963 (Act 179), and intersect with banking regulations under Act 930. Below, I explain each pair of differences, drawing on practical implications for banks like Ecobank Ghana in assessing collateral or during recoveries post-2019 banking cleanup.

(a) Preference Shares vs. Equity Shares

• Preference Shares: These are shares that confer priority rights over equity shares, typically in dividends (fixed rate, paid before equity dividends) and capital repayment on winding up (after debts but before equity). They do not usually carry voting rights, making them akin to debt instruments. In Ghana, under Act 992, preference shares are redeemable or irredeemable, often used in recapitalization (e.g., BoG’s Notice No. BG/GOV/SEC/2023/05 post-DDEP) to attract conservative investors. Banks favor them as security due to predictable returns.
• Equity Shares (Ordinary Shares): These represent ownership with residual rights—dividends only after preferences are paid, and capital last on liquidation. They carry voting rights, influencing company control. Riskier but with unlimited upside potential. In practice, during the 2017-2019 cleanup, equity shareholders in failed banks like Capital Bank bore heavy losses, unlike preference holders.

Key Difference: Preference shares prioritize fixed returns and security, while equity shares offer control and variable returns, impacting bank lending decisions on shareholder structures.

(b) Public Limited Liability Companies vs. Private Limited Liability Companies

• Public Limited Liability Companies: These can offer shares to the public, must have “PLC” in their name, and are listed on exchanges like the Ghana Stock Exchange (GSE). They require a minimum of two directors, audited accounts publication, and compliance with stricter disclosure under Act 992 and Securities and Exchange Commission (SEC) rules. Suitable for large-scale funding, e.g., GSE-listed banks like GCB Bank PLC.
• Private Limited Liability Companies: Restricted to inviting shares from members only (up to 50 shareholders), denoted by “Ltd.”, with fewer disclosure requirements—no public accounts or stock exchange listing. Easier to form and manage, common for SMEs in Ghana, but limited capital-raising ability.

Key Difference: Public companies enable broad capital access with heavy regulation, while private ones offer privacy and simplicity but cap growth potential. Banks assess this in KYC and lending, as public companies provide more transparency under BoG’s Corporate Governance Directive 2018.

(c) Fixed Charge vs. Floating Charge

• Fixed Charge: A security interest over specific, identifiable assets (e.g., land, machinery), preventing the company from dealing with the asset without lender consent. On default, the charge crystallizes immediately, giving the bank priority. Under Act 992, fixed charges must be registered with the Registrar of Companies within 28 days. Practical in Ghana: Banks like Stanbic use them for high-value assets in project finance, ensuring direct control.
• Floating Charge: Covers a class of assets (e.g., stock-in-trade) that fluctuate, allowing the company to trade them until crystallization (on default or specified events). It ranks below fixed charges and preferential creditors on insolvency. Registration is required, but it’s flexible for working capital loans. During the DDEP, floating charges on government bonds helped banks like Access Bank manage liquidity risks.

Key Difference: Fixed charges lock specific assets for security, while floating allow business continuity until enforcement, balancing operational needs with creditor protection in Ghanaian lending.

(d) Fraudulent Trading vs. Preferences

• Fraudulent Trading: Under Act 992 (Sections 327-328), this occurs when a company carries on business with intent to defraud creditors or for fraudulent purposes, leading to personal liability for directors (e.g., fines or disqualification). Proved in winding up, as in Re William C Leitch Bros Ltd (1932) (English case applicable via common law), where directors knowingly incurred debts without repayment prospects. In Ghana, this was evident in the UT Bank collapse, where governance failures led to BoG revocations.
• Preferences: These are unfair transactions favoring one creditor over others within six months before insolvency (Act 992, Section 131), voidable if they put the recipient in a better position (e.g., repaying a connected party). Unlike fraudulent trading, no intent to defraud is needed—mere effect suffices. Banks must avoid receiving preferences to prevent clawbacks in recoveries.

Key Difference: Fraudulent trading involves deliberate fraud with personal consequences, while preferences are voidable unfair advantages without requiring intent, both critical for banks in insolvency proceedings under BoG oversight for ethical recoveries.

These distinctions guide banks in structuring facilities, mitigating risks, and ensuring compliance, enhancing profitability and resilience in Ghana’s post-cleanup era.