Directors Under Ghana’s Companies Act 2019: Appointment, Duties, Responsibilities and Liabilities

By  SETH DOE ESQ AND PHILIPA HAGAN MENSAH

1. Introduction

Directors stand at the apex of corporate governance in Ghana. They are the human agents responsible for directing and administering the business of the company. The company, being a distinct legal person, requires directors to think, act, decide, evaluate risk, and ensure compliance with the law. The Companies Act 2019 Act 992 reflects this reality by providing a detailed statutory code that defines the role and responsibilities of directors and supplies mechanisms through which directors may be held accountable.

Directors exercise substantial powers, yet these powers exist within a carefully constructed legal framework. They must act in utmost good faith, avoid conflicts of interest, exercise proper purpose, diligence, care, independent judgment and loyalty. The Act, together with judicial principles developed in both Ghanaian and English cases, sets out strong fiduciary obligations. Enforcement mechanisms, including derivative actions, personal actions, oppression proceedings and the statutory power to remove directors, ensure accountability.

This article analyses in full the roles, responsibilities and liabilities of directors under Ghanaian law. It integrates every case in your material, with full factual narratives and holdings for all classical authorities, and embeds all statutory provisions directly into the text. It concludes with a complete review of how shareholders can enforce directors’ duties using various common law and statutory remedies.

2. Definition and Scope

Directors as “those persons, by whatever name called, who are appointed to direct and administer the business of the company.” [1]This functional definition focuses on conduct rather than title. A person may be labelled coordinator, manager or adviser, yet if he exercises the authority and functions of a director, he will be treated as such.

Directors are not trustees in the strict sense of trust law. Trustees preserve property. Directors run a business. Directors, therefore, take commercial decisions, carry risk and owe fiduciary duties derived from equity. They act as agents of the company and must advance the best interests of the corporate entity. They take risks to promote the commercial interests of the company and its shareholders. Unlike directors, trustees avoid risky undertakings and are to exercise caution in the management of the assets under their trust.

Promoters select the first directors and name them in the incorporation document. They assume office upon incorporation. Later, directors are appointed by the members in a general meeting or as specified in the constitution. The decision in Dolphin v Speedline confirms that the constitution governs the validity of director appointments. Written consent is always required.

3. Appointment and Qualifications of Directors

3.1 Minimum Number and Qualification

Act 992 requires every company to appoint at least two directors, with one being ordinarily resident in Ghana[2]. It says that the first directors of a company must be named in the application for incorporation. The members may appoint other directors in a general meeting. The Constitution of a company may also provide for the appointment of directors by classes of members or by persons who are not members of the company. This was reiterated in Dolphyne v. Speedline[3]. Directors must provide written consent to serve, and must not fall within any statutory disqualification categories, including bankruptcy, convictions involving fraud or dishonesty, or a court-imposed disqualification order.[4]

3.2 Modes of Appointment

Directors may be appointed:

• At incorporation, by the first subscribers;
• By members at a general meeting; or
• By the board, to fill a casual vacancy, if permitted by the company’s constitution.[5]

3.3 Removal of Directors

Members may remove a director by ordinary resolution at a general meeting, regardless of provisions in the constitution or a service contract.[6] It follows that, subject to the constitution of the company, it is the shareholders or members of a company who, by ordinary resolution in a general meeting, can remove a director from office. Shareholders or members are not to interfere whilst the directors manage the company, except to ask them to stop and get out by not re-electing them.

Removal as a director does not automatically terminate any employment or managerial position unless contractually provided. The director must be given notice about the removal, and if such notice is not given, the removal will then be considered invalid.[7] The removed director has the right to be heard before the resolution is voted on.

3.3.1 Procedure for the Removal of Directors

When a company receives the notice of the intention to remove a director, it is required to give him a copy of the notice immediately. The affected director is entitled to be heard at the meeting and to send a written statement to the company. This statement is required to be circulated to the members.

It is important to note that Section 176 (2) doesn’t expressly require that the notice of the intention to remove a director should state the reasons for his proposed removal. However, the common law rules and the rules of equity principles, which include the rules of natural justice, particularly the Audi Alteram Partem rule, indirectly make room for a director to be provided with reasons for their removal[8]. It therefore follows that, reasons for the removal of the director from his office should be stated in the notice of intention to remove him. This will enable the director to prepare adequately to defend himself. There is a judicial pronouncement on whether or not a director must be given reasons for his removal in the case of Heinrich Koch v. Horteng Limited[9]. The Court held inter alia that, “The notice of an intention to remove a director must specify that a director is going to be removed and it is necessary to state the grounds for his removal. The director concerned must then be given a right to be heard in his defence to any charges that may be preferred against him.” Take note that, if the removal of a director will constitute a breach of his service agreement, then such a director will be entitled to damages and compensation based on that service agreement.

Adams v Tandoh provides a significant exception. The director had engaged in conduct involving fraud and serious misconduct. The court ruled that summary removal without strict compliance with section 176 was justified to prevent ongoing harm to the company.

Montero v Redco Limited shows that minor procedural defects may be overlooked in urgent circumstances.

4. Types of Directors

The manual for company and commercial practice cited only two types of directors: Substitute and Alternate Directors. I will, however, explore other types such as Executive Directors, Managing Directors, Shadow Directors and De Facto Directors.

4.1 Substitute Directors

A substitute director is appointed to act as a deputy for another named director and as the substitute in the absence of that director. It follows that a substitute director is a director who has been appointed by the company itself as a deputy to a substantive director so that he can act in his absence.

A substitute director is appointed in the same manner as the substantive director and is therefore deemed to be a full director and may be appointed and removed in the same way as directors are required to be appointed and removed.

However, a substitute director is not part of the required number where a quorum is needed for directors’ meetings. The point is that a substitute director is allowed to attend meetings even if his superior (substantive director) is also there, but he or she is not allowed to vote. This means that a substitute director cannot vote when the substantive director is present.

 A substitute director does not cease to be a director by virtue of the fact that the substantive director is no longer a director.

4.2 Alternate Directors

A director can neither assign his office to another person nor merely give a proxy or a power of Attorney to another director or a stranger to enter a boardroom in his name.

A director can, however, appoint another director or a total stranger as an alternate director. This appointment must be made in writing and should be signed by both the one who appoints and the appointee and lodged with the company. If the appointee is a person other than a director, the appointment should be approved by a resolution of the Board of Directors. The term of office of the alternate director should not exceed six months at a time. An alternate director is appointed by a substantive director to act in his stead when he is away from Ghana, not exceeding 6 months or when he is unable to act as director. The Companies Act provides that an existing director or any other person (a non-director) can be appointed to act as an alternate director[10].

The appointment of an alternate director must be in writing, signed by both parties and lodged with the company. Okudzeto v Irani Brothers[11] confirms this. The alternate director cannot delegate or appoint another director due to the principle of Delegatus Non Potest Delegare.

4.3 Executive Directors

An Executive Director is a director who holds a professional position in the company. E.g. Director and lawyer, accountant, etc. Executive Directors are technocrats and work for the company full-time (they are employees). They are in charge of the day-to-day administration of the company[12].

4.4 Managing Directors

The Board of Directors are given the power to appoint one of themselves to the office of Managing Director, who has the delegated power of all the members of the Board[13].

A Managing Director is the only director who has the power to bind the company in the same manner as the Board.  A Managing Director has the power to take decisions by himself (suo mutu) but on behalf of the board. His powers may be all the powers of the board or limited powersThere can be several Managing Directors in a company. The overall head is called the Chief Executive Officer or President, as the Americans will call it.

4.5 De Facto Directors

A De Facto Director is defined as a person who, though not duly appointed as a director of a company, holds himself out or knowingly allows himself to be held out as a director of that company.[14] Chief Executive Officers (CEOs) are usually not part of the Board of Directors but report to the Board of Directors. They are de facto directors because of the level at which they act in the governance structure of the company.

In Re Hydrodam (Corby) Limited,[15] the court was of the view thata de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director although never actually or validly appointed as such. To establish that a person is a de facto director of a company, it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of the company’s concern or undertook a task in relation to his business which can properly be performed by a manager below board level.

4.6 Shadow Directors

A Shadow Director is a person whose directions and instructions the duly appointed directors are accustomed to act.[16] They are subject to the same duties and liabilities as if they were duly appointed as a director of a company.

In Re Unisoft Group Limited[17], the Court held that the shadow director must be in effect a puppet-master, controlling the actions of the board. There must be people who act on the directions or instructions of the shadow director.

5. Powers of Directors

Directors exercise broad powers to manage the company. They oversee strategic planning, financial oversight, risk management, appointment of executives and supervision of operations.

Section 189 of Act 992 restricts certain actions unless members approve. These include disposal of major assets, issuing new shares except in accordance with preemptive rights, issuing shares to themselves, donations beyond statutory limits and giving financial assistance for the purchase of shares except where permitted.

These restrictions reflect the principle that decisions affecting ownership, capital structure and major corporate assets require shareholder approval.

6. Fiduciary and Statutory Duties of Directors

6.1 Duty of utmost good faith

Sections 190 and 191 of Act 992 govern the duties and the exercise of powers of directors.

Directors stand in a fiduciary relationship to the company and must exercise utmost good faith. In Percival v Wright[18], the shareholders of a company sold their shares to the directors. The shareholders later alleged that the directors had breached their fiduciary duty by failing to disclose that they were negotiating a potential sale of the company at a higher price than the one paid to the shareholders. The court held in favour of the Directors, stating that directors owe fiduciary duties to the company as a whole, not to individual shareholders. Therefore, when directors purchase shares from shareholders, they are not under a fiduciary obligation to disclose internal negotiations or information unless a special relationship of trust exists. The case establishes the foundational principle that directors must act honestly toward the corporate entity, not individual members.

6.2 Duty to act in the best interest of the company

Directors must act in the best interest of the company as a whole. Their decisions must be guided by a genuine belief that the action promotes corporate welfare.

6.3 Duty of care, diligence and skill

This ties in with the duty to act in the best interest of the company.

In Re City Equitable Fire Insurance Company[19],a director attended board meetings only occasionally, signed documents without reading them and failed to supervise management. The court set a low historical standard by holding that directors need not exhibit extraordinary skill and could rely on others.

In Dorchester Finance v Stebbing,[20] however, the court imposed a stricter modern standard, holding that directors must exercise reasonable care, skill and diligence and cannot abdicate responsibilities. Three directors signed blank cheques and failed to supervise loans. They were held personally liable. This case represents the modern expectation of active and continuous oversight.

6.4 Duty to obey the Constitution

In PS Investment v Ceradec[21], the Supreme Court held that directors must follow the constitution and cannot override or ignore it. This aligns with section 190, which requires obedience to constitutional provisions.

6.5 Duty to exercise proper purpose

The directors must not, unless authorised by an ordinary resolution of the company, act beyond the powers granted to them under the company’s constitution, nor may they use those powers for any purpose other than that for which they were given, even if they believe their actions serve the company’s best interests.

In Howard Smith v Ampol[22], the directors issued new shares not for capital raising but to dilute the holding of Ampol and change control. The Privy Council held that even where directors believe an action benefits the company, issuing shares for an improper purpose is invalid.

6.6 Duty to avoid conflicts of interest

In Industrial Development Consultants v Cooley[23], the managing director misled the company by claiming ill health so he could personally secure a contract that the company was negotiating for. The court held that he breached fiduciary duty even though the company could not itself have obtained the contract.

Again, in Cook v Deeks[24], three directors diverted a lucrative contract from the company to themselves and passed a resolution excluding the company. The Privy Council held that directors cannot use their control to obtain corporate property for themselves.

6.7 Duty to exercise independent judgment

The duty to exercise independent judgment requires directors to make decisions based on their own honest and unbiased assessment of what is in the best interests of the company. This duty prevents directors from simply following the will of others, delegating their decision-making without oversight, or allowing personal relationships or external influences to shape their decisions improperly. They must avoid influences that compromise their judgment.

7. Board Meetings and Decision Making

Section 188 of Act 992  requires that directors meet at least once every six months, either in Ghana or anywhere, to consider the financial and operational affairs of the company, and they may also regulate the Board Meeting as they deem fit. Any director may summon a meeting or direct the company secretary to do so.

The case of Luguterah v Northern Engineering Company Limited throws more light on who can convene a Board Meeting. The secretary convened a board meeting without authority. The court held that the secretary cannot convene meetings unless properly instructed.

7.1 Notice of Board Meetings

The notice of a Board of Directors Meeting must state the place, time, date and agenda for the meeting. The meeting can take place anywhere, anytime. When it comes to meetings, directors must be given advance notice. It is, however, not necessary to give notice for a Board of Directors Meeting to any director who is, for the time being, absent from the country[25].

7.2 Quorum for a Board Meeting

The Board of Directors Meetings, like any other meeting, require a quorum. A quorum refers to the minimum number of directors who must be present at the beginning of the meeting and throughout the meeting for the meeting to be valid, and sometimes for resolutions passed at the meeting to be valid. The Act says that a quorum for a Board Meeting cannot be one (1) except for a one-person committee. However, if the constitution of the company states that one (1) director can form a quorum, it shall stand[26]. If, in respect of a particular resolution, a member is disqualified from voting, resulting in the absence of a quorum, no business should be transacted[27].

7.3 Chairing the Board Meeting

Board Meetings are to be chaired by a chairman appointed by the directors from amongst their members, normally appointed for a fixed period[28]. If there is a meeting and the chairman does not show up five (5) minutes after the time appointed for the meeting, directors present are to choose a chairman from amongst themselves to chair the meeting. The role of the chairman, who is in charge of the meeting, manages and controls discussions, voting, recording of the votes, and controls the agenda at the meeting.

7.4 Voting at the Board Meeting

Decisions of the Board of Directors are arrived at on a show of hands by majority votes of members present.The majority vote binds all the directors, including those who voted against the decision and also binds members and the company itself. However, on non-controversial issues, decisions are often made by consensus. Where the votes or views are equally divided, the chairman has a second or casting vote. The company may, however, by its constitution, deny a chairman the right of a second or casting vote[29].

By section 188 (2) (i) of at 992, attendance and voting by proxy is not permitted at Board Meetings or meetings of committees of directors.

7.5 Written Resolutions of Directors Outside Board Meetings

A written resolution is a decision in writing, signed by the directors for the time being entitled to receive notice of a directors’ meeting, that they agree to the resolution passed outside the board meeting.

Section 188 (2) (j) of Act 992 says that a board meeting is not always necessary. Directors can exercise their collective powers without necessarily holding a meeting if they choose to do so. One way of doing that is by passing a written resolution. A written resolution is as valid and effectual as if it had been passed at a meeting of the directors or a committee of directors duly convened and held. This is because such written resolutions carry the signatures of all directors who are entitled to vote at the Board Meeting. However, it does not usually dismiss a director or auditor of the company.

From the foregoing, directors are allowed to lawfully and conveniently sign written resolutions without the formalities of a board meeting. Such written resolutions are as valid as the minutes of a meeting duly convened, provided they are signed by all the directors for the time being entitled to receive notice of directors’ meetings. The procedure for written resolution of directors is particularly useful in small companies because of the size or number of directors.

7.6 Minutes of a Board of Directors Meeting

Section 188 (3) of Act 992 states that the minutes of both the directors’ and general meetings are to be entered in a book or books kept by the company for that purpose. The directors normally make the company secretary responsible for taking the minutes of meetings. The drafting of minutes after the meeting is influenced by many factors, including the secretary’s own skills. The directors expect the minutes to be concise. The minutes are not the same as a report, which may be detailed.

Section 188 (4) of Act 992 goes ahead to say that a minute kept under subsection (1), if purporting to be signed by the chairperson of the meeting at which the proceedings took place or of the next succeeding meeting, is prima facie evidence of the proceedings.

Section 188 (5) of Act 992 says that, where minutes have been kept in accordance with this section, until the contrary is proved, the meeting is duly convened, held and conducted, and the appointments of directors are valid.

Section 188 (6) of Act 992 also says that, where a company fails to comply with subsection (1), the company and every officer of the company that is in default are liable to pay to the Registrar an administrative penalty of five hundred penalty units.

7.7 The Board Chairperson

The Chairperson of the Board of Directors is elected by the Directors. The main business of the chairperson is to preside at both directors’ and general meetings so as to direct affairs. A non-executive chairperson has no direct involvement with the day-to-day administration of the company. The non-executive chairperson must not micro-manage.

7.8 The Company Secretary at the Board Meeting

At the directors’ meeting, there must be a company secretary, and their role is to take minutes of the directors’ meeting. The fundamental role of the company’s secretary is to convene the directors’ meetings with the authority of the directors. See Luguterah V. Northern Engineering Company Limited[30]. He calls the meeting, organises, coordinates and gives notice of the meeting to all the directors. A director can also convene a meeting through requisition of the company secretary. Thus, a director can requisition the company secretary to convene a meeting.

8. Liability of Directors for Breach of Duty

By virtue of Section 199 of Act 992, a director who commits a breach of duty under Section 190 of Act 992 is not only liable to compensate the company for the loss it suffers but must also account for the profit he or she has made. The company may rescind a contract concluded by a director where he is found to be in breach of duty.

9. Enforcement of Directors’ Duties by Members and Shareholders

9.1The rule in Foss against Harbottle

Majority Rule is an established principle of company law whereby the majority shareholders or those with the majority of shares hold the decision-making power of the company.

By this rule, the decision of the majority binds the company and the minority even if they disagree with the decision. Sometimes, this dominant position of the majority can be abusive, irrational, discriminatory, and capricious. This may lead to an oppression of the minority shareholders’ interests, which usually takes the form of blocking minority shareholders from the decision-making processes.

As a general rule, individual members of a company do not have the right to sue to compel a company to conform to its constitution or enforce a claim belonging to the company. This is because the majority of members can, by ordinary resolution, remedy any breach of the company.  Thus, the limitation on a member’s right is the rule in Foss V. Harbottle[31]. In Foss v Harbottle, two minority shareholders sued the directors for allegedly misusing company property. The court held that the claim could not proceed because the alleged wrong was a wrong to the company, not to individual shareholders.

1. The first rule to be formulated here is “the proper plaintiff rule”, which is to the effect that the wrong done to the company may be vindicated by the company alone. That is, for any wrong done to the company, it is only the company that can bring an action against the wrongdoer.
2. The second rule to be formulated is the indoor/internal management rule, which is to the effect that, if the alleged wrong can be confirmed or ratified by a simple majority of members in a general meeting, then the court will not interfere. This is otherwise known as the majority rule.

In the Court’s view, the Board of Directors was in existence, and it was still possible to call a general meeting of the company to decide whether or not to bring an action. Therefore, the members could not bring an action on behalf of the company. Consequently, the rule in Foss v. Harbottle states as follows: “as a general rule, a shareholder cannot sue on behalf of the company. The court will not ordinarily intervene in a matter which is competent for the company to settle by itself or, in the case of an irregularity, to ratify or condone by its own internal procedure. Where it is alleged that a wrong has been done to a company, prima facie, the only proper claimant is the company itself”

In Appenteng v Bank of West Africa Ltd[32], the plaintiff, Appenteng, deposited his title deeds with the bank as security for a company loan, but after the loan was repaid, the bank wrongfully retained the deeds and even granted a further loan to the company without his knowledge. He sued for negligence, wrongful detention of the documents, and defamation after the bank communicated that he was “not known” to a third party. The Court held that a company is a distinct personality having an existence separate from its shareholders. The case illustrates that a director or shareholder may sue a third party where the wrong affects them personally, and it affirms that the bank’s continued retention of the deeds after repayment amounted to wrongful detention.

10. Statutory Derivative Actions

Derivative actions may be considered as exceptions to the rule in Foss v. Harbottle. These actions are governed by sections 201- 204 of Act 992. There is no clear definition of what a derivative action is under the Companies Act, 2019 (Act 992).

However, by virtue of section 201 (1) of Act 992, an action may be considered to be a derivative action: if a director or member of a company sues in the name of a company or a subsidiary of the company or if a director or member of a company intervenes in proceedings to which the company or a related company is a party to to continue, defend, or discontinue the proceedings on behalf of the company or the related company.

1. Prerequisites for Derivative Actions: Section 201 Of Act 992
2. The member or director must apply for leave of the Court to sue or intervene.
3. The application for leave must be on notice to the company or its subsidiary.
4. To succeed, the member or director must prove that (a) the company or the related does not intend to sue, continue or diligently defend the suit, (b) it is in the interest of the company or a subsidiary of the company that the decision to sue is not left to its directors.

10.2 Uses of Derivative Actions

Derivative actions may be commenced in all situations where the company has a right to sue. They also have the advantage of entitling members or directors of companies to protect the interests of related or subsidiary companies.A specific provision doesn’t need to entitle the member or director to sue.

Nonetheless, derivative actions may be brought in: proceedings to enforce liabilities for a director’s breach of duty, proceedings to restrain a threatened breach of duty, proceedings to recover company property from a director.

11. Representative Actions: Section 205 Of Act 992

Like Derivate Actions, Representative actions may be considered as exceptions to the rule in Foss V. Harbottle. Representative actions are commenced by a member where the Companies Act, 2010 (Act 992) creates a cause of action in the member (s) but requires or permits the member/plaintiff to sue not just for himself but also on behalf of the members of a relevant class.

It therefore follows that, even though the company is the proper plaintiff per the Foss v. Harbottle Rule when a wrong is done against the company, a member or shareholder may sue to enforce directors’ liability, not just in his capacity as an individual member but also on behalf of the members of a relevant class.

However, under the Companies Act, 2019 (Act 992), “no representative action can be properly commenced if Act 992 does not authorise the commencement of a suit in a representative capacity on behalf of the plaintiff and other persons.” The point is that, for a representative action to be valid, it is necessary to ensure that there is a specific provision which entitles the plaintiff to sue in a representative capacity.

Section 200 (1) (a)-(c) provides as follows: “proceedings may be instituted by the company or by a member of the company to (a) enforce the liabilities referred to in section 199; (b) restrain a threatened breach of a duty under sections 190 to 192; or (c) recover from a director of the company a property of the company.”

1. Uses of Representative Actions

Representative actions serve numerous purposes. They include: proceedings to challenge the legality of dividend payments under Section 72 (3) & (4) of Act 992, proceedings by a debenture holder to enforce the security of a series of debentures which the debenture holder does not entirely hold under Sections 89 (4) of Act 992, proceedings to enforce liabilities for director’s breach of duty pursuant to Section 199 and 201 (a) of Act 992, proceedings to restrain a threatened breach of duty under Sections 190 & 192 of Act 992 pursuant to Section 200 (b) of Act 992 and in proceedings to recover company property from a director pursuant to Section 200 (b) of Act 992.

12. Oppression

Section 219 of Act 992 provides members or debenture holders of a company with remedies to oppressive conduct against them in the name of the company. These remedies may include: mandatory and prohibitory orders, orders for the cancellation or variation of a transaction or resolution, orders regulating the future conduct of the company’s affairs, and orders for the purchase of shares or debentures of aggrieved persons.

The point is that the condition for invoking section 219 of Act 992 is different from that of section 218 of Act 992. Under section 218, the act complained of must be an illegal act, whilst under section 219, a member or a debenture-holder can bring an action against an act which is legal but oppressive. Section 219 of Act 992 is therefore available to a shareholder, a debenture-holder and the Registrar of Companies.

1. Prerequisites for Instituting an Action Under Section 219 of Act 992

To successfully apply for the remedies against oppression, the Applicant must be a member or debenture holder of the Company; and the Company must be run in a manner oppressive to or in disregard of the proper interests of the members, debenture holders, or officers of the company; or there must be an actual or threatened unfair discrimination or prejudice to members or debenture holders from the company or through a resolution from the members or debenture holders or a class of the members or debenture holders.

In In Pinamang v Abrokwa[33], the petitioner, a shareholder and director, alleged that the respondent—also a director and majority shareholder—had conducted the affairs of the company in a manner that was oppressive and unfairly prejudicial to him. The respondent had effectively excluded the petitioner from participation in management, withheld information, and run the company as if it were his personal business.

The court held that the respondent’s conduct constituted oppression under company law because:

1. The petitioner’s legitimate expectations, including participation in management, had been disregarded.
2. The majority shareholder used his control to frustrate the rights and interestsof the minority.
3. The affairs of the company were being conducted in a way that was burdensome, harsh, and wrongfulto the petitioner.

The court granted relief, affirming that oppression occurs when majority power is exercised in a manner that unfairly prejudices or marginalises a minority shareholder.

13. Ultra Vires Proceedings

At common law, one of the accepted exceptions to the majority rule principle was where the act was ultra vires the company. This is because, even if shareholders of the company purport to be acting unanimously, they cannot ratify an ultra vires transaction by the company.

It therefore follows that the principle that the company can ratify what had been done, converting an initial wrong into a legitimate action, could not apply to ultra vires activities at common law. Thus, where there is an ultra vires act, the majority of the company cannot purport to correct it under the internal management rule.

In Re Jon Beauforte Limited (1953), the Court held that a Company cannot ratify an ultra vires transaction. The common law accepted that an individual member was allowed to maintain an action against the company in respect of acts ultra vires the company. It must be noted that it is not in all circumstances that individual members can challenge an ultra vires act. In Ghanaian law, Sections 19 and 218 of Act 992 make provisions for what to do in the event of ultra vires acts. See also Sections 147-151 of the same Act.

Under the repealed Companies Act, 1963 (Act 179), a company was incorporated only after filing its particulars and regulations, which stated its objects. The new Companies Act, 2019 (Act 992), however, makes filing a constitution optional. If none is filed, a company automatically adopts the default constitution in the Second or Third Schedule.

Section 18(1) of Act 992 gives companies full capacity to undertake any lawful business. This means a company without a registered constitution cannot be accused of acting ultra vires simply because it engages in activities different from those initially contemplated.

However, Section 19(1) restricts companies that register a constitution with stated objects: once objects are specified, the company is not permitted to act outside them. In practice, even without a constitution, Form 3—required at incorporation—still asks for the company’s principal objects. This creates an implied restriction, meaning activities inconsistent with the objects stated in Form 3 may be treated as ultra vires.

Despite this, Sections 19(2) and 19(4) provide that a company’s capacity is not affected by such restrictions, and an act is not invalid merely because it contravenes them. Therefore, although Section 19(1) appears to maintain the ultra vires doctrine, the combined effect of Sections 19(2) and (4) is that an ultra vires act is not invalid so long as it is an act of the company.

Section 147(1) of the Companies Act, 2019 (Act 992) defines an act of a company as any act done by:
(a) the members in the general meeting,
(b) the board of directors, or
(c) The managing director acting in the ordinary course of business.
Any such act is treated as the company’s own act, attracting full civil and criminal liability.

Under Sections 19(2) and 19(4), an act that is ultra vires the company’s stated objects—whether in a registered constitution or in Form 3—is not invalid so long as it qualifies as an act of the company under Section 147. The appropriate remedy is not invalidation but an injunction, which a member or certain debenture holders may seek under Section 19(5). Case law such as Commodore v Fruit Supply (Ghana) Ltd and Barclays Bank v Perseverance Co Ltd supports this approach.

Section 218 provides a separate injunction mechanism, but only for members, allowing the court to restrain illegal acts beyond the company’s capacity or in breach of its constitution.

The practical effect is that the ultra vires doctrine survives only for companies that choose to register a constitution. Companies without a registered constitution—relying instead on the default model—are free to engage in any lawful activity. Even where an act exceeds a company’s stated objects, it remains valid if it is an “act of the company” under Section 147.

14. Personal actions

Personal Rights of Shareholders and When They May Sue

Generally, a member cannot sue for a wrong done to the company; that claim belongs to the company (Foss v Harbottle). However, a shareholder may sue in their own right where the wrong suffered is personal and distinct from the company’s loss.

In Heron International v Lord Grade[34], the Court of Appeal held that directors owe their duties to the company, not to shareholders, even in a takeover situation. However, if directors personally undertake to advise shareholders, they assume a separate duty of care in tort, giving shareholders an individual right to sue for breach of that duty.

A shareholder also has a personal right to enforce the company’s constitution, since it operates as a contract among members. A breach of the constitution is therefore a breach of the member’s contractual rights. In Ghana, these personal rights are protected under Section 29 of Act 992.

The rule in Foss v Harbottle does not bar claims where a member’s individual rights are affected. This was affirmed in Pender v Lushington[35], where the court held that a shareholder denied his right to vote could sue personally, as voting is a fundamental individual right.

In sum, while wrongs to the company must be pursued by the company, shareholders retain a personal cause of action where their individual rights, such as voting or compliance with the constitution, are infringed.

Conclusion

Directors occupy a critical position in Ghanaian corporate governance. The Companies Act creates a detailed and rigorous framework of duties, responsibilities and liabilities. The courts have consistently upheld these duties and provided strong remedies where directors breach fiduciary principles or statutory requirements. Through extensive remedies including derivative actions, personal actions, oppression proceedings, ultra vires suits and the statutory power to remove directors, Ghanaian law ensures that directors remain accountable and that companies are governed with integrity, transparency and fidelity to their constitution and their statutory obligations.

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[1] Companies Act, 2019 (Act 992)

[2] Ibid, s. 172(1)

[3] [1993-94] 1 GLR 322

[4] Ibid., ss. 173–175

[5] Ibid., ss. 177–178

[6] Ibid., s. 176(1)

[7] Ibid., s. 176(2)

[8] Companies Act, 2019 (Act 992), s.5

[9] Suit No. FTC14/2001, 15 January 2004 (Fast Track Court / High Court)

[10] Ibid, s. 181

[11] [1975] 1 GLR 96

[12] Ibid, s. 183

[13] Ibid, s. 184

[14] Ibid, s 170(2)(a)

[15] [1994] 2 BCLC 180

[16] Ibid, s 170(2)(b)

[17] [1994] 1BCLC 609

[18] [1902] 2 Ch 421

[19] [1925] Ch 407

[20] [1989] BCLC 498

[21] [2012] GHASC 21

[22] [1974] AC 821

[23] [1972] 1 WLR 443

[24] [1916] 1 AC 554

[25] Ibid, s. 188 (2)(c)

[26] Ibid, s. 188 (2)(d)

[27] Ibid, s. 188 (2)(e)

[28] Ibid, s. 188 (2)(g)

[29] Ibid, s. 188 (2)(h)

[30] Ibid

[31] (1843) 2 Hare 461; 67 ER 189

[32] [1961] 2 GLR 81

[33] (1991) 2 GLR 384

[34] [1983] BCLC 244

[35] (1877) 6 Ch D 70