Company law notes
Section 13—Pre-incorporation Contracts
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Company Law Brief notes
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- Section 38—Companies Ceasing to have Members.
- Section 180—Number of Directors.
- Section 121—Publication of Name of Company.
| Section 13—Pre-incorporation Contracts.
(1) Any contract or other transaction purporting to be entered into by a company prior to its formation or by any person on behalf of the company prior to its formation may be ratified by the company after its formation; and thereupon the company shall become bound by and entitled to the benefit thereof as if it had been in existence at the date of such contract or other transaction and had been a party thereto. (2) Prior to ratification by a company the person or persons who purported to act in the name or on behalf of the company shall, in the absence of express agreement to the contrary, be personally bound by the contract or other transaction and shall be entitled to the benefit thereof. INCORPORATION VEIL The incorporators of a corporate body are distinct from the corporation they form. There is a metaphorical veil that conceals the oncorporators, members, directors or other personalities from the corporation. Once a company is incorporated it becomes a distinct legal entity from it members. There’s the rule of separate legal personality, which has found its most authoritative affirmation in the case of SALOMON v SALOMON. SALOMON v SALOMON Mr. salomon was a boot manufacturer, he formed a company to take over his boot manufacturing business. The company had 7 members(namely Mr. and Mrs. Salomon and children). The company became wound up. The value of the assets as realized was 6000 pounds, but the company owed 7773 pounds to unsecured creditors and 10000 to Mr. Salomon whose debt was secured as a debenture holder. Mr. salo was paid off for his debentures. The unsecured creditors received nothing, since the companys debts exceeded the assets. The creditors sought to impugn Mr. salomon’s right to receive payment. Held: a body corporate does not lose its individuality by issuing the bulk of its capital to one person, whether he be a subscriber to the memorandum or not. The company at law is different from it subscribers. Adams v cape industries The separate legal personality of a company is trite law in Ghana. APPENTENG and others v BANK OF WEST AFRICA The plf sued the defendants for damages they sustained when the bank gave their company, mpotimma ltd, negligent advise. Held: Ollenu J: a company is a distinct legal personality from it members. The members are not even collectively the company. OWUSU v RN THORNE ltd. Lifting the veil of incorporation In some cases the law will ignore the separate legal status of a corporation and ascribe liability to various individuals or corporate bodies related to it. Where the company carries on business for more than six months without any member, every director who carries on business after those 6 months shall be jointly and severally liable for the payment of all debts and liabilities of the company incurred during the period. Section 38—Companies Ceasing to have Members. If at any time a company ceases to have any member and it carries on business for more than six months without at least one member, every person who is a director of the company during the time that it so carries on business after those six months shall be jointly and severally liable for the payment of all the debts and liabilities of the company incurred during that period. 2. Where the company carries on business for 4 weeks after the number of directors fall below two, there shall be a penal liability for the company, every member and director in default shall be liable for fine not exceeding a prescribed amount. Furthermore the director and the member of the company who is cognizant of the fact shall have joint have joint and several liability for all debts and liabilities the company incurred. Section 180—Number of Directors. (1) Every company incorporated after the commencement of this Code shall have at least two directors. (2) Every company incorporated prior to the commencement of this Code shall, after the expiration of six months from the commencement of this Code, have at least two directors. (3) If at any time the number of directors is less than two in breach of either of the foregoing subsections of this section and the company continues to carry on business for more than four weeks thereafter, the company and every director and member of the company who is in default shall be liable to a fine not exceeding five pounds for every day during which it so carries on business after the expiration of such four weeks without having at least two directors; and every director and member of the company who is cognisant of the fact that it is carrying on business with fewer than two directors shall be jointly and severally liable for all the debts and liabilities of the company incurred during that time 3. Section 121—Publication of Name of Company. (1) Every company shall, (a) paint or affix, and keep painted or affixed, its name on the outside of its registered office and of every office or place in which its business is carried on, in a conspicuous position in letters easily legible; (b) have its name engraved in legible characters on its seal; (c) have its name accurately mentioned in legible characters at the head of all business letters, invoices, receipts, notices, or other publications of the company, and in all negotiable instruments or orders for money, goods or services purporting to be signed or endorsed by or on behalf of the company. (2) If any company makes default in complying with subsection (1) of this section the company and every officer of the company who is in default shall be liable to a fine not exceeding fifty pounds. 4. If an officer of the company or any person purporting to act on its behalf uses or authorises the use of a seal purporting to be a seal of the company whereon its name is not engraved as required by subsection (1) of this section he shall be liable to a fine not exceeding fifty pounds.121(4) 5. Held: in the circumstances envisaged under section 218 (1) (a) of Act 179, it was clear that a member or debentureholder could bring an application under the section. Also where the powers of the directors were being exercised in disregard of the interests of an officer of the company such an officer who was a member could equally proceed under section 218. Therefore a member or shareholder who was also a director or secretary or employee could bring an application under section 218 of the Code to protect his interests in the company. Download 31.01 Kb. Share with your friends:
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