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GSL Company & Commercial Practice study materials
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GSL Company & Commercial Practice practice questions

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Question 1Role knowledge and related same-jurisdiction law

Under Section 11 of the Companies Act, 2019 (Act 992), within what timeframe must a company ratify a pre-incorporation contract after its formation to assume rights and liabilities under it?

  1. Within 18 months Correct answer.
  2. Within 12 months
  3. Within 6 months
  4. Within 24 months

Explanation

Section 11 of the Companies Act, 2019 (Act 992) allows a company to ratify a pre-incorporation contract within 18 months after its formation. If the company ratifies the contract within this period, it becomes bound by and entitled to the benefits of that contract as if the company had been in existence at the date of the contract. If not ratified within 18 months, the contract cannot be ratified, and personal liability remains on the person who entered into it.

Question 2Role knowledge and related same-jurisdiction law

Which of the following describes the legal relationship between a promoter and the company they are engaged in forming under Ghanaian company law?

  1. A fiduciary relationship Correct answer.
  2. A relationship of principal and agent
  3. A partnership relation
  4. A simple contractual debtor-creditor relationship

Explanation

A promoter stands in a fiduciary relationship with the company they are engaged in forming, as established under Section 10 of Act 992. This fiduciary relationship requires the promoter to act in good faith, avoid conflicts of interest, account for any property received, and disclose any secret profits made. This duty continues until the company is formed and has raised its necessary working capital.

Question 3Role knowledge and related same-jurisdiction law

In the landmark Ghanaian case of Morkor v Kuma [1998-99] SCGLR 620, what guiding principle did the Supreme Court reinforce regarding the piercing of the corporate veil?

  1. The corporate veil will only be pierced where the company was used as a sham, device, or to commit fraud. Correct answer.
  2. The corporate veil can be pierced whenever it is economically convenient for the creditors.
  3. A sole shareholder is always personally liable for all the debts of the company.
  4. The court can pierce the corporate veil at any time without any proof of wrongdoing.

Explanation

In Morkor v Kuma, the Supreme Court of Ghana reinforced that the corporate veil will not be lightly pierced. It will only be lifted where the corporate personality is being used as a sham or mask to evade a legal obligation, or to commit fraud, or where the director/shareholder has treated the company's assets as their personal property, causing a failure of separate corporate identity.

Question 4Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), what is the minimum number of directors that every company registered in Ghana must have at all times?

  1. Two directors Correct answer.
  2. One director
  3. Three directors
  4. Five directors

Explanation

Section 171 of the Companies Act, 2019 (Act 992) provides that every company incorporated in Ghana must have at least two directors, one of whom must ordinarily be resident in Ghana. If the number of directors falls below two, the remaining director may act only to appoint another director or to call a general meeting for that purpose.

Question 5Role knowledge and related same-jurisdiction law

What is the minimum age requirement for a person to be appointed as a director of a company under the Companies Act, 2019 (Act 992)?

  1. 18 years Correct answer.
  2. 21 years
  3. 16 years
  4. 25 years

Explanation

Under Act 992, the minimum age to be appointed as a director of a company is 18 years. This was a reform from the previous Companies Act, 1963 (Act 179) which set the minimum age at 21 years. A director must also be a natural person of sound mind.

Question 6Role knowledge and related same-jurisdiction law

What is the maximum number of shareholders that a private company limited by shares is permitted to have in Ghana, excluding employees and former employees of the company?

  1. 50 shareholders Correct answer.
  2. 20 shareholders
  3. 100 shareholders
  4. Unlimited

Explanation

Under Section 7 of the Companies Act, 2019 (Act 992), a private company must restrict the number of its members to a maximum of 50. This limit excludes joint holders of shares (who are counted as one member) and persons who are in the employment of the company or were members while in that employment.

Question 7Role knowledge and related same-jurisdiction law

Which of the following is a key legal distinction between a private company and a public company under the Companies Act, 2019 (Act 992)?

  1. A public company may invite the public to acquire its shares or debentures, whereas a private company is prohibited from doing so. Correct answer.
  2. A public company must have at least three directors, while a private company only needs one.
  3. A private company does not require a company secretary, whereas a public company does.
  4. Only public companies are corporate bodies with separate legal personalities.

Explanation

Under Section 7 of Act 992, a private company's constitution must restrict the transfer of its shares and prohibit the company from making an invitation to the public to acquire shares or debentures. Public companies, on the other hand, are permitted to make public invitations and list their shares on a stock exchange.

Question 8Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), when an application for name reservation is made, for how long is the approved name reserved by the Registrar?

  1. 30 days
  2. 60 days Correct answer.
  3. 90 days
  4. 180 days

Explanation

Section 22(3) of Act 992 provides that a reservation of a company name 'shall not exceed two months' (approximately 60 days) and may be renewed for a further period of two months. While the reservation subsists, no other company can be registered under that reserved name or a name the Registrar considers similar to it.

Question 9Role knowledge and related same-jurisdiction law

Which of the following is a mandatory restriction governing a company limited by guarantee under Section 8 of the Companies Act, 2019 (Act 992)?

  1. It cannot pay dividends or make distributions of profit to its members. Correct answer.
  2. It must have a share capital of no par value shares.
  3. It is exempt from the requirement of appointing an auditor.
  4. Its membership is restricted to a maximum of 20 persons.

Explanation

Under Section 8 of Act 992, a company limited by guarantee is not incorporated for the purpose of making profits for its members. The Act strictly prohibits the payment of dividends or return of capital to its members. All profits and property must be applied solely to the promotion of the objects of the company.

Question 10Role knowledge and related same-jurisdiction law

What statutory declaration is required from the directors and promoters of a company during the application for incorporation under Section 13 of the Companies Act, 2019 (Act 992)?

  1. A statutory declaration that they have not been convicted of an offence involving dishonesty, fraud, or company management in the preceding five years. Correct answer.
  2. A statutory declaration that the company will guarantee a minimum profit in its first year.
  3. A declaration confirming that the company holds land in Ghana.
  4. A declaration that the company has a minimum of 50 shareholders.

Explanation

Under Section 13 of Act 992, applicants for incorporation must submit a statutory declaration by each proposed director and promoter stating that they have not, within the preceding five years, been convicted of an offence involving dishonesty, fraud, or in connection with the promotion or management of a body corporate, or been declared insolvent.

Question 11Role knowledge and related same-jurisdiction law

What is the legal effect of an act done by a company in Ghana that exceeds the capacity or powers of the company as stated in its constitution under Section 18 of the Companies Act, 2019 (Act 992)?

  1. The act is not invalid merely because it is contrary to or beyond its constitution or objects. Correct answer.
  2. The act is automatically void and unenforceable under the ultra vires doctrine.
  3. The directors are criminally liable and the contract is cancelled.
  4. The Registrar will dissolve the company immediately.

Explanation

Section 18 of Act 992 largely abrogates the ultra vires doctrine in relation to third parties. It states that an act of a company or a transfer of property to or by a company is not invalid by reason only of the fact that the act or transfer was not done or made for the furtherance of the objects of the company or that the company was otherwise exceeding its capacity or powers.

Question 12Role knowledge and related same-jurisdiction law

Before a pre-incorporation contract is ratified by a newly formed company, who bears legal liability on the contract under Section 11 of the Companies Act, 2019 (Act 992)?

  1. The promoter who entered into the contract on behalf of the company is personally liable. Correct answer.
  2. Nobody is liable as the company did not exist.
  3. The company is automatically liable from the moment of its registration.
  4. The other party is liable to perform, but cannot enforce the contract.

Explanation

Under Section 11 of Act 992, prior to ratification, the promoter who entered into a pre-incorporation contract on behalf of the company is personally bound by the contract and is entitled to the benefits under it, unless there is an express agreement to the contrary. Once the company ratifies the contract, the promoter is discharged from liability.

Question 13Role knowledge and related same-jurisdiction law

Which body is established as a separate autonomous public agency to administer the registration of companies and businesses in Ghana under Act 992?

  1. Office of the Registrar of Companies (ORC) Correct answer.
  2. Registrar-General's Department (RGD)
  3. Ghana Investment Promotion Centre (GIPC)
  4. Ministry of Justice and Attorney-General's Department

Explanation

The Companies Act, 2019 (Act 992) established the Office of the Registrar of Companies (ORC) as a separate autonomous body to take over the administration of company and business registrations. Previously, this function was performed by the Registrar-General's Department (RGD).

Question 14Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), within what timeframe must a company notify the Registrar of Companies of any change in the address of its registered office?

  1. Within 28 days Correct answer.
  2. Within 14 days
  3. Within 7 days
  4. Within 45 days

Explanation

Under Act 992, every company must have a registered office in Ghana. If there is any change in the address of the registered office, the company must file notice of the change with the Registrar of Companies within 28 days of the change. Failure to do so constitutes an offence.

Question 15Role knowledge and related same-jurisdiction law

Which of the following is true regarding an unlimited liability company registered under the Companies Act, 2019 (Act 992)?

  1. It has separate legal personality, but its members have no limit on their liability on winding up. Correct answer.
  2. It lacks separate legal personality, behaving exactly like a partnership.
  3. It is prohibited from carrying on any business for commercial profit.
  4. It cannot appoint directors and must be managed directly by all members.

Explanation

An unlimited liability company is a company where the liability of its members on winding up is not limited. However, like any company registered under Act 992, it possesses a separate legal personality distinct from its members from the date of incorporation.

Question 16Role knowledge and related same-jurisdiction law

Under Section 15 of the Companies Act, 2019 (Act 992), what is the evidentiary value of the Certificate of Incorporation issued by the Registrar of Companies?

  1. It is conclusive evidence that all requirements of the Act for registration have been complied with and that the company is duly incorporated. Correct answer.
  2. It is prima facie evidence only, and can be challenged without court proceedings.
  3. It only certifies the name of the company, not its corporate existence.
  4. It is temporary evidence that must be renewed by the company every calendar year.

Explanation

Section 15 of Act 992 states that the Certificate of Incorporation is conclusive evidence that the company is duly registered under the Act. Once issued, it cannot be challenged on the grounds of pre-incorporation irregularities except through formal judicial review or liquidation proceedings.

Question 17Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), which of the following is true regarding the requirement of a common seal for executing contracts?

  1. A common seal is no longer mandatory; a company may execute a document by the signatures of two directors or a director and the secretary. Correct answer.
  2. All contracts entered into by a company must be under the company's common seal to be valid.
  3. Only contracts involving the purchase of land require a common seal.
  4. Private companies must have a seal, but public companies are exempt.

Explanation

Act 992 abolished the mandatory requirement of a common seal. A company may execute a document as a deed by having it signed by two directors, or a director and the company secretary, or a director (for a single-director company if permitted, though Ghana requires two directors). The document must express that it is executed by the company.

Question 18Role knowledge and related same-jurisdiction law

According to the naming conventions in the Companies Act, 2019 (Act 992), what suffix must a public company limited by shares have at the end of its name?

  1. Public Limited Company or PLC Correct answer.
  2. Limited or LTD
  3. Company Limited by Guarantee or LBG
  4. Partnership

Explanation

Section 21 of Act 992 requires that the name of a public company limited by shares must end with the words 'Public Limited Company' or the abbreviation 'PLC'. This serves to immediately alert the public of the company's public status.

Question 19Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), which of the following persons is excluded from being considered a promoter of a company?

  1. A person acting in a professional capacity on behalf of a promoter (such as a lawyer drafting incorporation documents). Correct answer.
  2. A person who conceives the idea of forming the company.
  3. A person who negotiates contracts for the acquisition of assets for the proposed company.
  4. A person who prepares the company's constitution for submission to the Registrar.

Explanation

Section 10 of Act 992 explicitly states that a person who acts in a professional capacity for persons engaged in procuring the formation of the company (such as a lawyer, accountant, or registration agent) is not considered a promoter of that company.

Question 20Role knowledge and related same-jurisdiction law

What document replaces the former 'Regulations' as the primary governing document regulating the internal affairs of a company in Ghana under Act 992?

  1. The Constitution Correct answer.
  2. The Articles of Association
  3. The Memorandum of Association
  4. The Shareholder Agreement

Explanation

The Companies Act, 2019 (Act 992) replaced the term 'Regulations' with 'Constitution'. A company may register a custom constitution or adopt any of the Model Constitutions provided in the Second, Third, or Fourth Schedules of Act 992.

Question 21Role knowledge and related same-jurisdiction law

Which section of the Companies Act, 2019 (Act 992) defines the general fiduciary duties of directors, requiring them to act in good faith and in the best interests of the company?

  1. Section 190 Correct answer.
  2. Section 172
  3. Section 212
  4. Section 137

Explanation

Section 190 of Act 992 defines the fiduciary relationship of directors. It explicitly states that a director stands in a fiduciary relationship toward the company and must act in the utmost good faith in what the director believes to be the best interests of the company.

Question 22Role knowledge and related same-jurisdiction law

Under Section 190 of the Companies Act, 2019 (Act 992), when determining if a director has exercised the required duty of care, skill, and diligence, what standard is applied?

  1. A mixed objective and subjective standard (the standard of a reasonably diligent person in that position, combined with the director's actual knowledge/skill). Correct answer.
  2. A purely subjective standard (whether the director did their personal best).
  3. A purely objective standard (the standard of an average reasonable person in the street).
  4. A standard determined solely by the company's annual profit margins.

Explanation

Section 190 applies a mixed objective and subjective standard. A director must exercise the degree of care, diligence, and skill that would be exercised by a reasonably diligent person with both: (a) the general knowledge, skill, and experience that may reasonably be expected of a person carrying out the functions (objective), and (b) the actual knowledge, skill, and experience that the director has (subjective).

Question 23Role knowledge and related same-jurisdiction law

Under Ghanaian company law, which of the following defines a 'de facto' director?

  1. A person who is not formally appointed as a director but acts as a director and is held out by the company as such. Correct answer.
  2. A director who is appointed only for a fixed term of six months.
  3. A director who is appointed by a court to resolve a board deadlock.
  4. A director who holds no shares in the company.

Explanation

A de facto director is a person who functions as a director and is held out by the company as a director, despite not being formally or validly appointed. They are subject to the same duties and liabilities as formally appointed directors under Act 992.

Question 24Role knowledge and related same-jurisdiction law

Under Ghanaian corporate governance, what is a 'shadow director'?

  1. A person in accordance with whose directions or instructions the directors of the company are accustomed to act. Correct answer.
  2. A director who attends board meetings but has no voting rights.
  3. A director who acts as the alternate for another director.
  4. A director who has been disqualified by a court but continues to sign contracts in secret.

Explanation

Under Act 992, a shadow director is an individual who is not on the formal board of directors but whose instructions or directions the appointed board is accustomed to follow. The law treats shadow directors as directors for the purposes of duties and liability.

Question 25Role knowledge and related same-jurisdiction law

Which of the following is a key statutory requirement for the appointment of an alternate director under Ghanaian company law?

  1. The appointment must be approved by the board of directors and is subject to any provisions in the constitution. Correct answer.
  2. An alternate director must be a shareholder of the company.
  3. An alternate director can only be appointed by a court order.
  4. The alternate director is always personally liable for all actions of the principal director.

Explanation

Under Ghanaian company law, a director may appoint another person as an alternate director to act in their place. This appointment must be approved by the board of directors and is subject to the company's constitution. The alternate director acts in their own right as a director when replacing the principal.

Question 26Role knowledge and related same-jurisdiction law

What is the primary difference in status between an executive director and a non-executive director under corporate practice in Ghana?

  1. An executive director is an employee of the company with management duties, while a non-executive director does not hold an employment contract with the company. Correct answer.
  2. Only executive directors have voting rights at board meetings.
  3. Only non-executive directors are subject to fiduciary duties.
  4. Executive directors are appointed by shareholders, whereas non-executive directors are appointed by the Registrar.

Explanation

An executive director is employed by the company (e.g., as CEO, CFO) and is involved in the day-to-day management of the business. A non-executive director is not an employee, does not manage day-to-day operations, and is expected to provide independent oversight on the board.

Question 27Role knowledge and related same-jurisdiction law

Under Section 176 of the Companies Act, 2019 (Act 992), what resolution and notice are required to remove a director from office before the expiration of their term?

  1. An ordinary resolution in a general meeting, with notice of intention to move the resolution given to the company at least 35 days before the meeting. Correct answer.
  2. A special resolution in a general meeting, requiring 14 days' notice.
  3. A unanimous board resolution, requiring 7 days' notice.
  4. A court order only; shareholders cannot remove a director.

Explanation

Section 176 of Act 992 provides that a company may by ordinary resolution remove a director before the expiration of their term of office. Under Section 176(2), notice of the intention to move the resolution must be given to the company not less than 35 days before the meeting. The director has a statutory right to make representations and to be heard at the meeting.

Question 28Role knowledge and related same-jurisdiction law

Under Section 177 of the Companies Act, 2019 (Act 992), which of the following is a ground for the automatic disqualification of a person from acting as a director?

  1. If the person has been convicted of an offence involving fraud or dishonesty in the preceding five years. Correct answer.
  2. If the person does not reside in the city where the registered office is located.
  3. If the person is also a director of another competing company.
  4. If the person fails to attend two consecutive board meetings.

Explanation

Under Section 177, a person is automatically disqualified from being appointed or acting as a director if they have been convicted of an offence involving fraud or dishonesty, or in connection with the promotion, formation, or management of a body corporate in the preceding five years.

Question 29Role knowledge and related same-jurisdiction law

Which of the following meets the statutory qualification criteria to be appointed as a Company Secretary under Section 211 of the Companies Act, 2019 (Act 992)?

  1. An enrolled barrister-at-law in Ghana, a chartered accountant, or a person who has held office as an assistant secretary for at least three of the last five years. Correct answer.
  2. Any shareholder who holds at least 10% of the voting shares of the company.
  3. Any natural person over the age of 18, regardless of educational or professional background.
  4. Only a corporate body licensed by the Registrar of Companies.

Explanation

Section 211 of Act 992 introduced professional standards for company secretaries. A person qualifies if they are a lawyer, a member of a chartered professional body (like ICA Ghana or ICS), or have held office as an assistant company secretary or worked under a qualified secretary for at least three of the preceding five years.

Question 30Role knowledge and related same-jurisdiction law

Under Section 212 of the Companies Act, 2019 (Act 992), which of the following is a statutory duty of the Company Secretary?

  1. Maintaining the statutory registers, recording meeting minutes, and ensuring statutory forms are filed with the Registrar. Correct answer.
  2. Making final executive decisions on the purchase of company real estate.
  3. Signing the company's financial statements in place of the directors.
  4. Providing legal representation for the company in civil litigation.

Explanation

Section 212 outlines the duties of a company secretary, focusing on administrative compliance. This includes keeping statutory registers, preparing board and shareholder meeting notices and minutes, ensuring the dispatch of financial statements, and filing returns with the ORC.

Question 31Role knowledge and related same-jurisdiction law

Under Section 213 of the Companies Act, 2019 (Act 992), what is the restriction on a person acting in a dual capacity as both director and company secretary?

  1. An act required to be done by both a director and the secretary cannot be done by the same person acting in both capacities. Correct answer.
  2. A person cannot legally hold both offices at the same time in any company.
  3. The person cannot receive remuneration for more than one of the offices.
  4. The company must double its minimum stated capital if a director acts as secretary.

Explanation

Section 213 provides that where the Act or the constitution requires an act to be done by or to a director and the company secretary, it cannot be satisfied by the same person acting in both capacities. This ensures an internal check and balance for key corporate acts.

Question 32Role knowledge and related same-jurisdiction law

Within what period must a company hold its first Annual General Meeting (AGM) after incorporation under the Companies Act, 2019 (Act 992)?

  1. Within 18 months Correct answer.
  2. Within 12 months
  3. Within 6 months
  4. Within 24 months

Explanation

Under Ghanaian company law, a company must hold its first AGM within 18 months of its incorporation. Thereafter, an AGM must be held once in every calendar year, and not more than 15 months may elapse between the date of one AGM and the next.

Question 33Role knowledge and related same-jurisdiction law

What is the minimum voting shareholding required for members of a company to requisition an Extraordinary General Meeting (EGM) under Act 992?

  1. Not less than 10% of the total voting rights of all members. Correct answer.
  2. Not less than 5% of the total voting rights.
  3. Not less than 25% of the total voting rights.
  4. Not less than 50% of the total voting rights.

Explanation

Under Section 299 of the Companies Act, 2019 (Act 992), members holding not less than one-tenth (10%) of the shares (or 10% of the voting rights in a company limited by guarantee) may requisition an Extraordinary General Meeting. If the directors do not, within seven days of the requisition, proceed to convene a meeting for a date not later than 28 days after receipt, the requisitionists may convene the meeting themselves.

Question 34Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), what is the default minimum notice period required for calling an Annual General Meeting (AGM)?

  1. 21 days' written notice Correct answer.
  2. 14 days' written notice
  3. 7 days' written notice
  4. 28 days' written notice

Explanation

Act 992 requires a default minimum notice period of 21 days' written notice for calling an Annual General Meeting. This notice must be given to all members, directors, and the auditor of the company.

Question 35Role knowledge and related same-jurisdiction law

What notice period is required for an Extraordinary General Meeting (EGM) at which a special resolution is to be proposed under Ghanaian company law?

  1. 21 days' written notice Correct answer.
  2. 14 days' written notice
  3. 28 days' written notice
  4. 7 days' written notice

Explanation

Under the Eighth Schedule to Act 992, the default notice for a general meeting at which a special resolution is to be proposed is at least 21 days' written notice. The single exception is a special resolution for winding up under the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180), which may be passed on 7 days' notice.

Question 36Role knowledge and related same-jurisdiction law

Unless the constitution provides otherwise, what is the default quorum for a general meeting of a company under the Companies Act, 2019 (Act 992)?

  1. At least two members present in person or by proxy (or one member present holding more than 50% of the total voting rights). Correct answer.
  2. At least five members present in person.
  3. A simple majority of all shareholders present in person.
  4. One member present in person representing exactly 50% of the shares.

Explanation

Under paragraph 7 of the Eighth Schedule to Act 992, unless the constitution provides otherwise, a quorum for a general meeting is constituted by two members present in person or by proxy, or by one member present holding shares representing more than 50% of the total voting rights. A single-member company has a quorum of that one member.

Question 37Role knowledge and related same-jurisdiction law

What is the statutory requirement to pass a 'special resolution' in a general meeting under the Companies Act, 2019 (Act 992)?

  1. A majority of not less than 75% of the votes cast by members entitled to vote. Correct answer.
  2. A simple majority (more than 50%) of the votes cast.
  3. A unanimous vote of all members present.
  4. A majority of 66% of all members on the register.

Explanation

Under Ghanaian company law, a special resolution is a resolution passed by a majority of not less than 75% (three-fourths) of the votes cast by members who are entitled to vote and do vote in person or by proxy at a general meeting of which notice has been given.

Question 38Role knowledge and related same-jurisdiction law

Which of the following is true regarding written resolutions of a private company under the Companies Act, 2019 (Act 992)?

  1. A written resolution is valid if signed by all members who would be entitled to vote at a general meeting. Correct answer.
  2. Written resolutions are strictly prohibited; all decisions must be taken in physical meetings.
  3. A written resolution only requires a simple majority of signatures to be valid.
  4. Written resolutions must be registered with the court to take effect.

Explanation

Act 992 allows private companies to pass resolutions in writing instead of holding a meeting. However, to be valid, a written resolution must be signed by all the members who would be entitled to attend and vote at a general meeting. This means it requires 100% unanimity among voting members.

Question 39Role knowledge and related same-jurisdiction law

What notice is required for convening a meeting of the Board of Directors of a company in Ghana under Act 992?

  1. Reasonable notice must be given to every director who is in Ghana. Correct answer.
  2. At least 14 days' written notice must be given.
  3. At least 21 days' written notice is required.
  4. No notice is required; meetings can be held at any time without warning.

Explanation

Unless the constitution provides otherwise, reasonable notice of a board meeting must be given to every director. There is no specific statutory number of days required, unlike shareholder meetings, but the notice must be fair under the circumstances.

Question 40Role knowledge and related same-jurisdiction law

Which of the following persons is disqualified from being appointed as an auditor of a company in Ghana?

  1. An officer or employee of the company or of an associated company. Correct answer.
  2. A person who is not a shareholder of the company.
  3. A person who has less than 10 years of audit experience.
  4. A legal practitioner who does not practice corporate law.

Explanation

Under the Companies Act, 2019 (Act 992), an auditor must be independent. A person is disqualified from being appointed as an auditor if they are an officer or employee of the company or of any associated company, or if they are a partner or employee of such an officer or employee.

Question 41Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), what is the statutory requirement regarding the par value of shares issued by a company in Ghana?

  1. All shares must be issued as shares of no par value. Correct answer.
  2. Shares can have a par value if authorized by the constitution.
  3. Only public companies can issue shares of no par value.
  4. All shares must have a minimum par value of 1 GHS.

Explanation

One of the key features of Ghanaian company law is that all shares must be of 'no par value'. Act 992 prohibits the issuance of shares with a nominal or par value. This means shares are issued for whatever consideration the directors determine is fair.

Question 42Role knowledge and related same-jurisdiction law

Who has the primary authority to allot new shares in a company under the Companies Act, 2019 (Act 992)?

  1. The Board of Directors, provided they are authorized by the company's constitution or an ordinary resolution of the shareholders. Correct answer.
  2. The Company Secretary, at their sole discretion.
  3. The Registrar of Companies, upon application.
  4. The Managing Director, without needing board or shareholder approval.

Explanation

Under Ghanaian company law, the power to allot shares is vested in the board of directors. However, they can only exercise this power if they are authorized to do so by the company's constitution or by an ordinary resolution of the shareholders. This prevents directors from diluting shareholding without consent.

Question 43Role knowledge and related same-jurisdiction law

Within what period must a company file a return of allotment of shares with the Registrar of Companies under Act 992?

  1. Within 28 days of the allotment Correct answer.
  2. Within 14 days of the allotment
  3. Within 7 days of the allotment
  4. Within 45 days of the allotment

Explanation

Whenever a company makes an allotment of shares, it must file a return of the allotment with the Office of the Registrar of Companies (ORC) within 28 days of the allotment. This ensures the public record of members and share capital is kept up to date.

Question 44Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), within what period after an allotment or transfer of shares must the company prepare and deliver the share certificates to the member?

  1. Within 2 months Correct answer.
  2. Within 1 month
  3. Within 14 days
  4. Within 6 months

Explanation

Unless the conditions of issue of the shares otherwise provide, every company must, within two months after the allotment or registration of the transfer of any shares, complete and have ready for delivery the share certificates to the member.

Question 45Role knowledge and related same-jurisdiction law

Which of the following is a characteristic feature of preference shares under Ghanaian company law?

  1. They carry preferential rights regarding dividends and return of capital, but typically carry restricted voting rights. Correct answer.
  2. They always carry double the voting rights of ordinary shares.
  3. They cannot be cumulative or participating.
  4. They must be issued with a fixed par value.

Explanation

Preference shares are a class of shares that carry preferential rights to dividends and return of capital on winding up over ordinary shares. However, they usually have restricted voting rights, only allowing votes on resolutions affecting their class rights or during winding up.

Question 46Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), which of the following is true regarding equity shares?

  1. Any share that is not a preference share is classified as an equity share. Correct answer.
  2. Equity shares must always be non-voting.
  3. Equity shares are guaranteed a fixed rate of dividend.
  4. Equity shares can only be held by the founders of the company.

Explanation

Act 992 defines an equity share as any share other than a preference share. Equity shares carry the residual risk and reward of the company, and they typically carry full voting rights.

Question 47Role knowledge and related same-jurisdiction law

What is the primary purpose of the capital maintenance doctrine under Ghanaian company law?

  1. To protect the company's creditors by ensuring that the share capital is not returned to shareholders except in ways allowed by the law. Correct answer.
  2. To guarantee that directors receive their salaries before any profits are paid to creditors.
  3. To ensure that the company maintains a physical safe containing cash at its registered office.
  4. To force the company to reinvest 100% of its profits back into the business.

Explanation

The capital maintenance doctrine is designed to protect creditors. Since shareholders enjoy limited liability, the company's capital is the primary fund available to pay creditors. The law therefore strictly regulates how capital can be returned to shareholders (e.g. through buybacks or capital reductions).

Question 48Role knowledge and related same-jurisdiction law

Under the Companies Act, 2019 (Act 992), out of which of the following funds may a company lawfully pay dividends to its shareholders?

  1. Out of profits (retained earnings) only, and subject to passing the solvency test. Correct answer.
  2. Out of the company's stated capital.
  3. Out of funds borrowed from banks specifically for dividends.
  4. Out of the share premium account.

Explanation

Under Ghanaian company law, dividends can only be paid out of the profits (retained earnings) of the company. Additionally, the company must pass the solvency test immediately after the payment of the dividend, meaning it can pay its debts as they fall due and its assets exceed liabilities.

Question 49Role knowledge and related same-jurisdiction law

Which of the following correctly describes the elements of the 'solvency test' under the Companies Act, 2019 (Act 992)?

  1. The company is able to pay its debts as they fall due, and the total value of its assets exceeds its total liabilities. Correct answer.
  2. The company has enough cash in its bank account to cover its next three months of operations.
  3. The company's market value on the stock exchange exceeds its stated capital.
  4. The company has never defaulted on any tax payments to the Ghana Revenue Authority.

Explanation

Under Act 992, a company passes the solvency test if: (a) it is able to pay its debts as they fall due in the normal course of business, and (b) the value of the company's assets is more than the value of its liabilities (including contingent liabilities). This test is mandatory before share buybacks, capital reductions, and dividend distributions.

Question 50Role knowledge and related same-jurisdiction law

Under what condition may a company acquire its own shares (share buyback) under the Companies Act, 2019 (Act 992)?

  1. If authorized by its constitution, approved by a special resolution, and the company passes the solvency test. Correct answer.
  2. If the directors decide to do so unilaterally to increase share value.
  3. Only if the company is in liquidation.
  4. If the Registrar of Companies orders the buyback.

Explanation

Under Act 992, a company may acquire its own shares if: (a) it is authorized by its constitution, (b) it is approved by a special resolution of shareholders, and (c) the company passes the solvency test. Shares acquired by the company are generally cancelled.