New Companies Act recognizes persons who hold themselves as directors without appointment

A private legal practitioner and Council Member of the Institute of Directors-Ghana, Mr. Kwame Amoako has revealed that individuals who hold themselves as directors without being duly appointed by the board of a company will be duly recognized as directors under the new Companies Act, 2019 (Act 992).

According to him, any employee of a company who arrogates functions of the Director of the company to him or herself and duly caries it out, will be deemed to be the Director of the company and will be responsible for every obligations and liabilities that are reserved for the Director of the company.

“The change here is that the definition has been extended to persons who carry themselves out as Directors, although not duly appointed by the board of the company, but who then carry out functions reserved for directors of the company.”

Mr. Amoako made these remarks at the Ghana Corporate Law and Governance Seminar held virtually by Edfields Attorneys on Tuesday, 9th November, 2021. He was speaking on the “Director’s Responsibilities under the new Companies’ Act, 2019 (Act 992)”.

Section 170 (2) of the Companies Act, 2019 indicates that “a person, not duly appointed director of a company, who holds out as a director or knowingly allows to be held out as a director of that company or on whose directions or instructions the duly appointed directors are accustomed to act is subject to the same duties and liabilities as if that person were a duly appointed director of the company”

However subsection 4 of section 170 of the Act holds that if a person who is not a duly appointed director of a company holds himself as such or allows himself to be held as such, or if the company holds that person or knowingly allows that person to hold out as a director of the company, “that person or the company is liable to pay to the Registrar, an administrative penalty of two hundred and fifty penalty units,” the equivalent of GHS 3000.

There is nonetheless, a further provision in section 173 (2) of the Companies Act that indicates that if a person who is disqualified to be a director because he or she is an infant, adjudged to be of unsound mind, a body corporate, a person who is prohibited from being a director as a result of an offence involving fraud or dishonesty, an offence in connection with the promotion, formation or management of a body corporate, an offence involving insider dealing and any other criminal offence which is not a misdemeanor etc, continues to hold him or herself as a director, the person commits an offence and could be liable to a term of imprisonment not less than two years and not more than five years, or a fine or both.

Mr. Amoako noted that it is important for persons who are to be appointed as directors to make disclosures on if they have been disqualified from being directors in the past, as part of a crucial difference the new Companies Act has introduced.

“You have to have a statutory declaration that will confirm that you have not been convicted of any criminal offence or that you have not been disqualified from holding office as a director. You have to make this disclosure. These are the differences between the new Act and the old Act.”