{"id":416,"date":"2019-10-11T15:35:35","date_gmt":"2019-10-11T15:35:35","guid":{"rendered":"https:\/\/theworkspacetest.com\/audreygrey\/2019\/10\/11\/double-tax-treaties-2\/"},"modified":"2019-10-11T15:35:35","modified_gmt":"2019-10-11T15:35:35","slug":"double-tax-treaties-2","status":"publish","type":"post","link":"https:\/\/theworkspacetest.com\/audreygrey\/2019\/10\/11\/double-tax-treaties-2\/","title":{"rendered":"Director\u2019s Liability in Insolvency, Receivership and Corporate Collapse"},"content":{"rendered":"

Director\u2019s Liability in Insolvency, Receivership and Corporate Collapse<\/b><\/h4>\n

In recent times, Ghanaians have regrettably seen huge corporate institutions (particularly those within the Banking Sector) suddenly become the subject of receivership or liquidation. The irony is that these troubled corporate institutions appeared to be making waves and experiencing tremendous corporate growth.<\/span><\/p>\n

Within the blink of an eye everything goes haywire. Companies that had been trading with these institutions face the sad reality of loosing a \u2018seemingly viable\u2019 trade partner or client.\u00a0 Families who depend on these companies for their livelihood are suddenly faced with the reality of loss of income. The risk of impending poverty from job losses suddenly becomes a reality. Then there is the probability of extended unemployment as a result of previous associations with the defunct company.\u00a0<\/span><\/p>\n

Company directors are not exempted from the heat of company failures. This week, we have seen charge sheets levelling various charges against some of the Directors of the defunct Capital Bank. In sum, these directors have been charged with stealing, money laundering and similar activities contrary to the Criminal Offences Act.\u00a0<\/span><\/p>\n

For these directors, criminal sanctions for acts (and omissions) during their time as directors is just the tip of the iceberg. The new Companies Act, 2019 (Act 992) also brings a different and somewhat heavy burden to the conversation. Under Act 992 the following persons are disqualified from acting as directors;\u00a0<\/span><\/p>\n

    \n
  1. a person convicted of an offence involving fraud or dishonesty;<\/span><\/li>\n
  2. a person convicted of an offense in connection with the promotion, formation or management of a body corporate\u00a0<\/span><\/li>\n
  3. where a person has been committed of a criminal offence whether they were convicted of one or not in relation to a body corporate or of fraud or breach of duty;<\/span><\/li>\n
  4. where person commits or is convicted of an offence related to insider dealing or any other offence which is not a misdemeanor;<\/span><\/li>\n
  5. where a person is adjudged bankrupt;<\/span><\/li>\n
  6. where a person has been disbarred from being part of a recognized professional body as a result of a disciplinary action;\u00a0<\/span><\/li>\n
  7. where there is an ongoing criminal investigation in which the person is involved<\/span><\/li>\n<\/ol>\n

     <\/p>\n

    Note that with the criteria under (c), does not require that the person be actually convicted of a criminal offense. The mere implication or appearance of a person committing an offence (irrespective of the outcome of a criminal trial) is enough to disqualify a person from acting as a director. Upon application to a court of competent jurisdiction by an interested party, a director may be so disqualified and such a person would have to proceed to Court to show cause why he should not be disqualified from not only acting as a director, but in any senior management role in a company.\u00a0<\/span><\/p>\n

     <\/p>\n

    The most interesting thing about this provision is that an application for disqualification by the courts may be made by a shareholder of the company, the Registrar of Companies or the Official Trustee, the trustee in bankruptcy of the person, by the liquidator of a corporate body or basically any person who can demonstrate interest in the case. If found to be of merit, the director would be disqualified from holding a senior management position or a position as a director of\u00a0 any company in Ghana including even a company where the person is the majority shareholder.\u00a0<\/span><\/p>\n

     <\/p>\n

    It doesn\u2019t end there, Act 992 goes further to state that an individual is also AUTOMATICALLY disqualified from acting as a director where the individual;<\/span><\/p>\n

      \n
    1. has been convicted within the last five (5) years of an offence involving dishonesty, fraud or relating to the promotion, formation and running of a company;<\/span><\/li>\n
    2. has been the director or a senior executive of a company that became insolvent within the past five (5) years on account of or partly as a result of the culpable activities of that director; or\u00a0<\/span><\/li>\n
    3. has been disqualified to act as Company Secretary, receiver, manager or liquidator of a company.<\/span><\/li>\n<\/ol>\n

       <\/p>\n

      As you can see, the directors of Capital Bank who have been dragged before court risk being automatically disqualified from acting as directors or serving in senior management positions in any company registered in Ghana for minimum a period of five (5) years unless cleared by a Court to do so.\u00a0<\/span><\/p>\n

      Should a person decide to flout the rules and\u00a0 act as a director or in a senior management role contrary to their disqualification, the person may face a term of imprisonment of up to two years, a fine, or both.\u00a0<\/span><\/p>\n

      So why this steep disqualification criteria and why does disqualification as a director affect your ability to act in a senior management role?\u00a0 Directors are deemed to be people of high moral character and fibre who are capable of steering companies successfully to achieve sustainable growth. If a person is found guilty or suspected of any of the infractions above stated, the integrity of the person comes into question as well as their ability to bring value to the boards on which they serve. There is also the high risk of repetition of acts that may have lead to the insolvency of the defunct company therefore placing the success of subsequent entities in which they may be involved at risk.\u00a0<\/span><\/p>\n

      The Companies Act, 2019 places a huge burden on directors. A duty to uphold their fiduciary duties to the company and increased accountability for acts (or omissions) committed in that position.\u00a0 Persons taking up this role, should not take this lightly. The question for your reflection and thought is: As a director, are you doing everything you can to ensure that your duty of care to the Board and company is being met? Are you qualified to act as a director on the boards on which you sit? Do you possess the necessary skills and expertise to steer your company onto the right path? And for those sitting on board as a favour to friends and loved ones \u2013 beware. The law does not discriminate. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

      Director\u2019s Liability in Insolvency, Receivership and Corporate Collapse In recent times, Ghanaians have regrettably seen huge corporate institutions (particularly those within the Banking Sector) suddenly become the subject of receivership…<\/p>\n","protected":false},"author":1,"featured_media":417,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,5],"tags":[],"class_list":{"0":"post-416","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-corporate","8":"category-legal"},"_links":{"self":[{"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/posts\/416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/comments?post=416"}],"version-history":[{"count":0,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/posts\/416\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/media\/417"}],"wp:attachment":[{"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/media?parent=416"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/categories?post=416"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/theworkspacetest.com\/audreygrey\/wp-json\/wp\/v2\/tags?post=416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}