ADEHYEMAN GARDENS LTD AND ANOTHER v ASSIBEY

[2003-2005] 1 GLR 391

Division: SUPREME COURT. ACCRA

Date: 1 December 2004
Before: ATUGUBA, AKUFFO, WOOD, DATE-BAH AND OCRAN
JJSC

Company law—Companies—Membership—Types of membership—Payment for shares not prerequisite

for membership—Respondent subscriber to regulations of company—Effect—No valid call made by
company on respondent to pay for shares—Whether respondent member and shareholder of
company—Companies Code, 1963 (Act 179), ss 30, 200 and 291.

Company law—Companies—Membership—Classes—Act 179 permitting different classes of shares

attracting different rights—Differentiation inapplicable

[p.392] of [2003-2005] 1 GLR 391

to membership—Whether “allottee” or “nominal” share-holder lawful— Respondent not fully paying for
shares subscribed—Whether respondent shareholder of company—Act 179, ss 30, 31, 46 and 130.

Company law—Companies—Membership—Share certificate—Company required to issue share

certificates to shareholders—Company failing to issue share certificate to respondent—Respondent
subscriber to regulations of company—Effect—Whether non-possession of share certificate denying
respondent membership of company—Act 179, ss 21, 30, 53 and 54.

Company law—Companies—Shares—Valuation—Subscriber to regulations of company—Financial

obligation of subscriber—Respondent subscriber contracting to pay ¢200,000 for 200,000 shares of no
par value—Whether value of assets of company relevant to amount respondent has to pay for his
shares—When value of assets relevant to value of shares—Shares of company fully subscribed—Whether
demand by appellant that respondent pays ¢47,410,258.20 for his 200,000 shares proper—Act 179, ss
22(b) and 66(1).

Company law—Companies—Director—Qualification—Respondent subscribing to regulations of

company as one of first directors—Shareholding not prerequisite to directorship—Respondent neither
vacating nor resigning office—Whether trial court justified in holding respondent ceasing to hold
office—Act 179, ss 184 and 185.
The appellants, the respondent and a third person incorporated a company as a limited liability company
with one million shares of no par value. All of them subscribed to the regulations of the company. The
second appellant subscribed to 600,000 shares valued at ¢600,000 and the respondent and the third person
subscribed to 200,000 shares valued at ¢200,000, respectively. The three subscribers and one other person
were the first directors of the company. Following differences between the appellants and the respondent
over the running of the company, the solicitors of the company wrote to inform the respondent that since
he had not paid for his shares he was only a “nominal shareholder” of the company and he was given
fourteen days within which to pay for the shares or else they would be offered to someone else.
Subsequently, the appellants wrote to inform the respondent that based on the company’s audited report
the net value of the company was ¢237,051,291 and therefore in order to become a fully-fedged
shareholder of his 200,000 shares which represented 20 per cent of the net value of the assets of the
company, he had to pay ¢47,410,258.20 The appellants also filed at the companies registry a form of
notification of change of directors and the appointment of five new directors. Dissatisfied with those
developments, the respondent brought an action against the company and the

[p.393] of [2003-2005] 1 GLR 391

second appellant for, inter alia, a declaration that he was a fully paid-up member-shareholder and a
director of the company. The trial judge however dismissed the action on the ground that even though the
respondent was a subscriber to the regulations of the company, he had failed to produce sufficient
evidence that he had paid for the shares. On appeal by the respondent to the Court of Appeal against that
judgment, the court by a majority decision held that the respondent was a shareholder and member of the
company and that the demand made on him by the company to pay ¢47,410,258.20 for his shares was
wrong. Aggrieved by that decision, the appellants appealed from it to the Supreme Court.
Held, dismissing the appeal: (1) under section 30 of the Companies Code, 1963 (Act 179) there were two
kinds of members of a company: those who became members at the inception of the company by
subscribing to its regulations; and those who after the company came into existence, agreed to become
members. The membership of a subscriber was by legal prescription and in the absence of a valid
forfeiture, was not predicated on full or partial payment of the consideration for the shares taken.
Consequently, since the respondent was a subscriber to the regulations of the company, he pursuant to
section 30(1) of Act 179 became a member of the company right from the date of its incorporation,
holding 200,000 shares as indicated against his name in the regulations. As a member he also became a
shareholder pursuant to section 30(4) of Act 179 and, in the circumstances, he could lose his membership
under section 30(5) of Act 179 only if all his shares had been forfeited for non-payment of a validly made
call. However, contrary to section 201 of Act 179 and regulations 15-27 of the company’s regulations
there had been no agreement between the appellants and the respondent requiring the respondent to pay
for his shares on any fixed date. Moreover, contrary to sections 200 and 201 of Act 179 there was no
evidence of minutes of a directors’ meeting or a signed resolution of the directors calling on the
respondent to pay for the shares and therefore there had been no formal call on the respondent to pay for
those shares. Since the letters from the company’s solicitors could not constitute valid calls or effectively
result in valid forfeiture of any shares, even though the respondent had not paid for the shares in law he
had not ceased to be a member of the company. Accordingly, he remained a shareholder thereof.
(2) Although section 46 of Act 179 and regulation 9 of the company’s regulations made it possible for
the regulations to make provision for

[p.394] of [2003-2005] 1 GLR 391

different classes of shares, such differentiation did not relate to membership, but rather to the rights and
liabilities to been joyed by members. Thus, under sections 31 and 130 of Act 179, a shareholder’s right to
attend and vote at meetings of a company might be affected by his paid-up status. However, Act 179 did
not create any class of members known as “allottee” or “nominal” shareholders, and in view of the clear
provisions of section 30 of Act 179, it was doubtful whether the regulations of the company could create
such borderline memberships. Accordingly, in the instant case, it was not anomalous for the respondent to
be considered a shareholder of the company even though he had not fully paid for his shares.
(3) The issue of a share certificate was not a precondition to membership in a company. Section 53 of
Act 179 required every company to deliver a share certificate to the registered member within two months
of the issue of shares or registration of transfer of shares. That was the company’s obligation, and by
virtue of section 53(3) of Act 179, the company and any defaulting officer of the company was liable to a
penalty in the event of non-compliance. Accordingly, the fact that the respondent had not been issued
with a share certificate could not be a valid ground for challenging his membership of the company since
a share certificate was not material to that person’s legal status as a member and shareholder. In any case,
under section 54 of Act 179, a share certificate served as “prima facie evidence of the title to the shares of
the person named therein.” Accordingly, other evidence might be adduced by a person claiming to be a
shareholder to establish his shareholding. Accordingly, in the instant case, by the combined effect of
sections 21 and 30 of Act 179, the respondent’s subscription to the regulations of the company served as
evidence of his membership and a shareholder of the company, because the regulations had, inter alia, the
effect of a contract under seal between (i) the company and its members; (ii) the company and its officers;
and (iii) the members and officers of the company; the members of the company inter se; and the officers
of the company inter se. Accordingly, as a subscriber, the respondent’s shareholding, as well as the
consideration payable by him therefor was contractual. Accordingly, he did not need to be issued with a
certificate for his membership to take legal effect.
(4) When a person agreed to subscribe to the regulations of a company or become a member of an
existing company, he undertook to contribute to the

[p.395] of [2003-2005] 1 GLR 391

stated capital, in cash or in kind, the amount agreed to be the value of the number of shares he had agreed
to take as provided by section 66(1) of Act 179. Accordingly, in the instant case, the respondent by
subscribing to the regulations of the company, contracted to pay in consideration of his 200,000 shares,
an amount of ¢200,000. Since there had been no other agreement under which the respondent had agreed
to pay any other amount in consideration for his shares, that was the extent of his liability. The value of
the company’s fixed assets was therefore irrelevant to the ascertainment of the consideration payable by
the respondent, or any of the other subscribers for that matter, for his shares in the company since that
was fixed in the regulations and there was no evidence that any part of the shares were to be paid
otherwise than in cash. In any case, the value of such assets would be relevant only if the company were
to issue additional shares to the existing members or new shareholders when such value might be taken
into account to determine the price at which the new shares would be issued. However, on the evidence,
all the authorised shares stipulated in regulation 7 of the company’s regulations were fully subscribed
upon incorporation and the company had not altered its regulations in accordance with section 22(b) of
Act 179 to issue new shares. In the circumstances, there was no legal justification for the amount of
¢47,410,258.20 the appellant demanded from the respondent as consideration for his shares.
(5) It was clear from regulation 4 of the company’s regulations that the respondent was one of the first
directors of the company. Under regulation 61 a director did not need to be a shareholder. Thus, there was
no nexus between shareholding and directorship. Moreover, by virtue of regulation 62, a director might
cease to hold office only in accordance with section 184 or 185 of Act 179, ie either by vacation (by
operation of law or resignation) or by removal (pursuant to a resolution of the members) in general
meeting. Since on the evidence the respondent had neither vacated his office nor been validly removed as
a director, the trial judge was wrong in holding that the respondent had ceased to hold the office of a
director in the company.

Case referred to:

Luguterah v Northern Engineering Co Ltd [1979] GLR 477.
[p.396] of [2003-2005] 1 GLR 391

APPEAL by the appellant company to the Supreme Court from the majority judgment of the Court of
Appeal allowing the respondent’s appeal from the decision of the trial High Court wherein the majority
held that the respondent was a member, shareholder and a director of the appellant company even though
the respondent had not fully paid for the shares he had subscribed to in the regulations of the company.
The facts are sufficiently stated in the judgment of the court delivered by Akuffo JSC.
Tanko Amadu for the defendant-respondent-appellant.
Frank Yankey for the plaintiff-appellant-respondent.

Akuffo JSC delivered the unanimous judgment of the court. In this judgment the
plaintiff-appellant-respondent herein will be referred to as the respondent, and the
defendants-respondents-appellants herein will be referred to as the appellants. The first appellant will also
be referred to as the company.
The brief facts underlying this appeal are that the company was incorporated sometime in April 1991 as a
limited liability company with one million shares of no par value. Exhibit 1, the regulations of the
company, shows that the subscribers to the company were the second appellant, who subscribed to
600,000 shares for which the consideration payable in cash was ¢600,000, and Nana Osei Afriyie and the
respondent, each of whom subscribed to 200,000 shares for which the consideration payable in cash, in
each case, was ¢200,000. According to exhibit 1, the first directors of the company were the three
subscribers and one D Patrick Ewusi Sekyi.
Sometime after the company commenced its operations, problems developed between the second
appellant and the respondent the nub of which was that, whilst the respondent claimed that he was a fully
paid-up member of the company and entitled to participate in the day to day running of the company, the
second appellant insisted that the respondent had not paid for any of his shares. Matters came to a head
when, by a letter dated 1 November 1995 (exhibit Q), the solicitors for the company informed the
respondent that he (the respondent) was only a

[p.397] of [2003-2005] 1 GLR 391

“nominal shareholder” of the company. The letter also purported to offer to the respondent twenty per
cent shares in the company, in consideration of which he must pay an unspecified sum of money that he
was to ascertain by contacting the office of the managing director within fourteen days, failing which the
shares would be offered to someone else. This letter was immediately followed by another
communication from the second appellant, dated 3 November 1995 (exhibit R), referring to the solicitors’
letter and informing the respondent that, according to the company’s auditor’s report, the net value of the
company’s assets was ¢237,051,291. The letter also informed the respondent that, “as a nominal
shareholder”, he must pay an amount of ¢47,410,258.20, being twenty per cent of the current net value of
the company’s assets. The respondent referred the matter to his solicitors.
The record shows further, per exhibit 3, that on 31 October 1995 the second appellant filed at the
companies registry a form of notification of change of directors which notified the registrar of companies
of the appointment of five new directors. No shareholders’ resolution was exhibited and there is no other
evidence that these appointments were made by the shareholders in a general meeting, as required by
sections 181 and 272 of the Companies Code, 1963 (Act 179) and regulation 59 of the company’s
regulations.
On 10 June 1996 the respondent issued a writ of summons in the High Court against the appellants,
claiming the following reliefs:
“(a) a declaration that the plaintiff is a paid-up member or shareholder of the said limited liability company
and holds twenty per cent of the total shares of the said company for which shares the plaintiff has
more than fully paid for;
(b) a declaration that the call or demand by the defendants that the plaintiff pay the further sum of
¢47,410,258.20 for the plaintiff’s said shares is totally illegal and has no legal or other justification or
foundation whatsoever;

[p.398] of [2003-2005] 1 GLR 391

(c) a declaration that the purported treatment or declaration of the plaintiff as an alleged nominal member
or shareholder of the company by the defendants and the defendants’ threat to exclude or expel the
plaintiff from the said company on the aforesaid score or grounds is illegal, oppressive and without
any legal or other justification whatsoever.
(d) an order of injunction restraining the defendants from carrying out their said illegal or oppressive
action against the plaintiff; and
(e) any further or other reliefs or orders as shall be just in the circumstances of this case, and in terms of
Order 63, r 6 of the High Court (Civil Procedure) Rules.”

In view of the rather narrow scope of the issues arising in this appeal, we do not deem it necessary to set
out the details of the pleadings; suffice it to say that although, in the summons for directions, six issues
we set down for trial, the parties, during the course of the trial, focused on issue (4) and, therefore, the
learned High Court judge, in his judgment concentrated (correctly in our view) primarily on this issue.
Issue (4), as set down, was as follows: “Whether or not the plaintiff is a fully paid-up member/shareholder
of the first defendant company and also a director of the first defendant company.”
In a judgment delivered on 2 September 2002 the trial judge concluded that:
“On a careful perusal and scrutiny of the entire evidence on the record, and the documents tendered herein, I
am satisfied that the plaintiff has failed to produce sufficient evidence to prove that he has fully paid for his
twenty per cent shares in the first defendant company. I am satisfied that the plaintiff has failed to discharge
his burden of persuasion by a preponderance of probabilities. He has failed to prove by evidence ... to
convince me that he is a fully paid-up member or shareholder of the first defendant company. In conclusion,
I hold that the plaintiff is not a fully paid-up member or

[p.399] of [2003-2005] 1 GLR 391

shareholder of the first defendant company... I find and hold that the plaintiff is not a shareholder and
director of the first defendant company.”

Dissatisfied with this decision, the respondent appealed to the Court of Appeal on the grounds that the
trial judge erred in law when he held that, despite the respondent being a subscriber to the regulations of
the company, he is not a member or shareholder of the company. He also added the usual portmanteau
ground that the judgment was against the weight of the evidence.
This appeal is against the majority decision (Gbadegbe and Addo JJA; Asiamah JA dissenting) delivered
by the Court of Appeal on 10 April 2003, whereby the court upheld the respondent’s appeal against the
judgment of the High Court, and granted him the following reliefs: “(a) a declaration that the respondent
herein is a shareholder and member of the company; and (b) a declaration that the demand made on him
by the company is wrong.”
In their appeal herein, the appellants filed no additional grounds and, as a result, the only grounds before
us are those set out in the notice of appeal filed on 23 May 2003 as follows:
“(a) The majority erred by holding that the plaintiff-appellant-respondent is a shareholder in the first
defendant-appellant company even though it is clear from the record that he did not pay for the shares
allotted to him and was also not issued with any share certificate.
(b) The majority erred by holding that the appellant-respondent became a member of the first defendant
company upon subscription despite the evidence to the effect that the alleged expenses which the
plaintiff-appellant-respondent claimed to have incurred at the formation stage of the company was not
ratified by the company after its formation.
(c) The judgment is against the weight of the evidence.”

[p.400] of [2003-2005] 1 GLR 391

In his statement of case herein, counsel for the appellants made the following submissions:
“(a) In the absence of the payment of any consideration in cash, or a contract in writing evidencing any
payment in kind, for his shares, or otherwise satisfying the relevant provisions of the Companies
Code, 1963 (Act 179), in respect of payment for shares, the respondent is, at best, only a promoter of
the company and cannot be deemed to be a shareholder ‘whether ordinary or fully paid.’
(b) The respondent is at best an allotee and not a shareholder, since he has not fully paid for his allotted
shares.
(c) Furthermore, the mere fact that his name appears in the regulations as a subscriber and member of the
company does not make the respondent a fully paid-up member or shareholder. Therefore, he is not
entitled to relief (b) that was granted to him by the Court of Appeal.
(d) Since the Court of Appeal indorsed the High Court’s evaluation of the evidence and application of the
law, there is no legal basis for upholding any of the respondent’s claims.”

For his part, counsel for the respondent in his statement of case submitted that:
“(a) The appellants have taken a very narrow view of the import of the legal effect of sections 21,
30(1)—(3) and (5) of Act 179.
(b) Since the evidence showed that the respondent is an original subscriber to the regulations of the
company, he is by such subscription, a member and shareholder.
(c) Under Act 179, there are two kinds of members, ie members who were original subscribers to the
regulations of the company, and members who later acquire shares in the company. Hence, as a
subscriber, the respondent belongs to the first category of

[p.401] of [2003-2005] 1 GLR 391

shareholders, and is by operation of law a member of the company.
(d) The Court of Appeal, having competently and fully considered whether or not there had been
compliance with section 30 of Act 179, was correct in holding that there had been no lawful or valid
forfeiture of the respondent’s shares and, therefore, correct in granting relief (b) of the respondent’s
claims.”

It is important at this juncture to emphasise that the respondent’s appeal before the Court of Appeal was
not against the High Court’s finding that he is not a paid-up (fully or otherwise) shareholder of the
company; rather, it was against the court’s conclusion that, in spite of the respondent being a subscriber to
the company’s regulations, he is not a shareholder. This was the crux of the respondent’s appeal.
Therefore, the issue of whether or not the respondent is a paid-up member did not arise before the Court
of Appeal and also does not arise in the instant appeal. It must be taken as settled by the trial court and no
longer in dispute amongst the parties herein.
Thus, the only issue properly arising herein is whether, given the evidence on the record and the
applicable provisions of Act 179 and the regulations of the company, the Court of Appeal was correct in
granting to the respondent the reliefs that it did. To resolve this issue, there is, in our view, the need to
determine the following matters: (a) in accordance with Act 179, did the respondent, by reason of his
subscription to the regulations, become a member and shareholder of the company? If so, (b) has he,
legally ceased to be a member of the company? These are purely questions of law governed by Act 179
and the regulations of the company.
In arriving at their decision, the majority of the Court of Appeal indorsed the trial judge’s evaluation of
the evidence before him. They, however, faulted the learned judge’s conclusion that, because he had not
paid anything for his shares, the respondent was not a shareholder or director of the company. Addo JA in
his learned opinion expressed himself thus:

[p.402] of [2003-2005] 1 GLR 391

“In my respectful view, the trial judge came to the right conclusion when he held that the plaintiff (the
respondent herein) is not a fully paid-up member or shareholder of the first defendant (the first appellant
herein) company. But he fell into grave error when he held that the plaintiff is not a shareholder and director
of the first defendant company. In the court below, the question whether the plaintiff is a shareholder and
director of the first defendant company did not arise at all.”

The learned trial judge, in the course of his judgment, noted the submission by counsel for the appellants
that his clients did not deny that the respondent is a shareholder-director of the company. Thus, although,
as hereinbefore mentioned, the trial focused on issue (4), by the conclusion of the trial proceedings, the
issue before the High Court had been further whittled down to the more narrow one of whether the
respondent was a paid-up member shareholder of the company. Therefore, beside his other error in
equating paid-up status with membership and directorship status (for reasons hereinafter discussed), the
learned trial judge also erred in making any pronouncement on the status of the respondent’s shareholding
and directorship. Addo JA was right in faulting him for this.
For the purpose of this appeal, our starting point must be section 30(1)—(5) of Act 179, which deals with
the constitution of membership of a company and provides as follows:
“30. (1) The subscribers to the Regulations shall be deemed to be members of the company and on its
registration shall be entered as members in the register of members referred to in section 32 of
this Code.
(2) Every other person who agrees with the company to become a member of the company and
whose name is entered in the register of members shall be a member of the company.
(3) Every member shall have such rights, duties and liabilities as are by this Code and the
Regulations of the company conferred and imposed upon members.

[p.403] of [2003-2005] 1 GLR 391

(4) In the case of a company with shares each member shall be a shareholder of the company and
shall hold at least one share, and every holder of a share shall be a member of the company.
(5) Membership of a company with shares shall continue until a valid transfer of all the shares
held by the member is registered by the company, or until all such shares are transmitted by
operation of law to another person or forfeited for non-payment of calls under a provision in
the Regulations, or until the member dies.”

Accordingly, counsel for the respondent is correct in his submission that under Act 179, there are two
kinds of members of a company; those who become members at the inception of a company by
subscribing to its regulations and those who, after the company comes into existence, agree to become
members. The membership of a subscriber is, by legal prescription and, in the absence of a valid
forfeiture, is not predicated on full or partial payment of the consideration for the shares taken. Indeed,
even in the case of a non-subscribing member of a company, his membership is not dependent on whether
or not he is fully paid-up.
From his submissions, counsel for the appellant appears to be under the impression that, legally, the
company may classify its members into those whose shares have been paid for and those whose shares
have not been paid for. Thus, according to counsel, the respondent is at best an allottee of shares, since he
has not paid for any of his shares. Such an impression is entirely misguided. Although section 46 of Act
179 makes it possible for the regulations of a company to make provision for different classes of shares,
such differentiation do not relate to membership, but rather to the rights and liabilities to be enjoyed by
members holding such classified shares (see section 46 of Act 179 and regulation 9 of the regulations).
Admittedly, also, under sections 31 and 160, a shareholder’s right to attend and vote at meetings of a
company may be affected by his paid-up status, and under regulation 28 a company has a lien on unpaid
shares and dividends in respect

[p.404] of [2003-2005] 1 GLR 391

thereof. However, such limitations on rights can occur only after a valid call has been made and the
shareholder has failed to pay, or other sums presently payable by the shareholder in respect of his shares
remain unpaid. Certainly, nowhere in Act 179 or exhibit 1 is there created any class of members known as
“allottee” or “nominal” shareholders; and in view of the clear provisions of section 30, it is doubtful if a
company’s regulations could legally create such borderline memberships. Consequently, under the law,
there is nothing anomalous about a person being considered a shareholder of a company merely because
such a person has not yet fully paid for his shares.
Furthermore, contrary to what may be implied from the first ground of appeal, the issue of a share
certificate is not a precondition to membership in a company. Section 53 of Act 179 requires every
company to deliver a share certificate to the registered holder within two months of the issue of shares or
registration of transfer of shares. This is the company’s obligation, and by virtue of section 53(3) of Act
179, the company, and any defaulting officer of the company, is liable to a penalty in the event of any
non-compliance. Therefore, the fact that the respondent has not been issued with a share certificate cannot
be a valid ground for challenging his membership of the company. Rather, it is a reflection of the failure
by the company and its officers to comply with the dictates of Act 179. Moreover, under section 54 of Act
179, the function of a share certificate is to serve as “prima facie evidence of the title to the shares of the
person named therein.” This means that other evidence may be adduced by a person claiming to be a
shareholder to establish his shareholding. Therefore, the mere fact that a person claiming to be a
shareholder of a company has not been issued with any share certificate is not material to that person’s
legal status as a member and shareholder. In the case of a subscriber, by the combined effect of sections
21 and 30 of Act 179, subscription to the regulations of the company serves an identical evidentiary
purpose. In a similar vein, there is also the need to reiterate that registration of the name of a subscriber in
the company’s register of members is also not a

[p.405] of [2003-2005] 1 GLR 391

condition precedent to membership: see Luguterah v Northern Engineering Co Ltd [1979] GLR 477.
Section 21 of Act 179 shows that the regulations of a company is no mean document. It is the registration
of the regulations that brings the company into existence as a body corporate: see section 14 (d) of Act
179. Once registered, the regulations have, inter alia, the effect of a contract under seal between:
 (i) the company and its members;
(ii) the company and its officers;
(iii) the members and the officers of the company;
(iv) the members of the company inter se; and
(v) the officers of the company inter se.
As a subscriber, therefore, the respondent’s shareholding, as well as the consideration payable by him
therefor, is contractual. He does not need to be issued with a certificate for his membership to take legal
effect.
Consequently, there is no doubt whatsoever that since the respondent is a subscriber to the regulations of
the company (as evidenced by exhibit 1), he, pursuant to section 30(1) of Act 179, became a member of
the company right from the date of its incorporation, holding 200,000 shares as indicated against his name
in the said exhibit. As a member, he also became a shareholder pursuant to section 30(4) of Act 179, and
as such, his membership of the company may cease only upon the occurrence of one of the eventualities
stipulated in section 30(5) of Act 179.
By the terms of Act 179, until all of his shares are forfeited for non-payment of a validly made call (or
until the occurrence of any of the other said eventualities), a subscriber remains a fully-fledged member
and shareholder of the company, even if he has not paid a pesewa for his shares. Act 179 does not
prescribe any mode for forfeiture of shares and rather leaves this to be spelt out in the regulations of the
company. In respect of the company, the relevant provisions are regulations 15-27 which prescribe the
processes that must be followed. First, there must be a call on the shares. For such a call to be valid:

[p.406] of [2003-2005] 1 GLR 391

(a) The call must be authorised by a resolution of the board of directors and the date of the resolution
is deemed to be the date of the call.
(b) The shareholder must be given not less than fourteen days’ notice “specifying the time or times and
place of payment” as well as the amount called upon the shares.
(c) If the terms of allotment or issue of any shares stipulate a particular date for payment of such shares
or any part thereof, then a call is deemed to have been duly made and the payment is deemed to be
payable on such fixed date.
If the shareholder fails to pay on the due date for the shares on which a call has been made (or shares on
which a call is deemed by the regulations to have been made) then the forfeiture procedure set out in the
regulations comes into effect. Even then, there are prescribed steps the company must take before the
shares are forfeited. These are:
(a) The board of directors must serve on the defaulting shareholder a notice requiring payment of the
amount, together with any interest due thereon under regulation 18.
(b) The notice must name a date on or before which the payment must be made, which payment date
should not be less than fourteen days from the date of service of the notice.
(c) The notice must also state that, in the event of non-payment on or before the payment date, the
shares upon which the call was made will be liable to forfeiture.
(d) If no payment is made in accordance with the notice, the shares affected by the call may be
forfeited, but such forfeiture must be by a resolution of the board of directors.
There is nothing on the record to show that there was any agreement made at anytime between the first
appellant and the respondent whereby the respondent became liable to pay for his shares on any fixed
date. As a result, it is only by a formal call that

[p.407] of [2003-2005] 1 GLR 391

any amount may become due on any of his shares. However, the record is totally devoid of any evidence,
whether in the form of minutes of a directors’ meeting, or in the form of a signed resolution, that the
company went through, or even made any pretence of going through, the processes prescribed by its
regulations, before purporting to forfeit the respondent’s shares.
In the governance of a company, the best evidence of proceedings and decisions of the board of directors
is the minutes of its meetings and any resolutions reflected therein, or a signed resolution of the directors
(pursuant to section 200(j) of Act 179). Thus, regulations 66 and 67 stipulate that proceedings of the
directors of the company are regulated by section 200 of Act 179, and minutes of directors’ meetings
must be kept in accordance with section 201 of Act 179. Section 201 of Act 179 obliges the directors to
keep minutes of their meetings (including committee meetings) which, when signed by the chairman of
the proceedings, constitute prima facie evidence of the proceedings. The critical importance of this
obligation may be gleaned from section 201 (4) of Act 179 which imposes a penalty of a fine on a
company and every defaulting officer in the event of non-compliance.
There is no evidence of any such minutes or resolutions on the record before us. We only have exhibits Q
and R, whereby the company’s solicitors purported to offer the respondent twenty per cent shares in the
company for which he must pay an unnamed price within fourteen days, and the second appellant, in his
capacity as the managing director of the company, demanded, from the respondent the sum of
¢47,410,258.20. These letters, whatever their purport, cannot constitute valid calls, or effectively result in
a valid forfeiture of any shares. Clearly, therefore, at all material times, no valid calls have been made on
the respondent’s shares, and they have not been validly forfeited.
Consequently, even though the respondent had not paid for his shares nor been issued with any share
certificate, in law, he has never ceased to be a member of the company and he remains a shareholder
thereof. The Court of Appeal was therefore right in

[p.408] of [2003-2005] 1 GLR 391

granting the respondent the reliefs that it did and did not commit any errors whatsoever.
Before concluding, there are a couple of other matters we need to comment upon. The first is the amount
of ¢47,410,258.20 the company purported to demand from the respondent as consideration payable for
his shares. According to exhibit R, the appellants arrived at this amount by apportioning the value of the
fixed assets, which was stated in the audited accounts (exhibit B) to be ¢237,051,291 amongst the
shareholders according to their subscribed shareholding. This is not a legal mode for ascertaining
shareholder liability on unpaid shares, which is solely referable to the subscription to the regulations, or
the agreement under which the shares are issued.
The respondent, by subscribing to the regulations of the company, contracted to pay, in consideration of
his 200,000 shares, an amount of ¢200,000. Since there was no other agreement under which the
respondent agreed to pay any other amount in consideration for his said shares, that is the extent of the
liability the respondent undertook when he subscribed to the regulations. As has already been pointed out
above, this is an agreement under seal and is binding not only as between the respondent and the
company, but also between the respondent and other members as well as between him and the officers of
the company. The value of the company’s fixed assets is irrelevant to the ascertainment of the
consideration payable by the respondent or any of the other subscribers, for that matter, for his shares in
the company, since it was fixed in the regulations and there was no evidence that any part of the shares
were to be paid otherwise than in cash. The value of such assets would be relevant only if the company
were to issue additional shares to the existing members or new shareholders. In that event, such value
may be taken into account to determine the price at which such new shares would be issued. However, in
view of the fact that all the authorised shares stipulated in regulation 7 were fully subscribed upon
incorporation, the company cannot even do this, without first altering its regulations in accordance with
section 22(b) of Act 179.

[p.409] of [2003-2005] 1 GLR 391

Now, when a person agrees to subscribe to the regulations of a company, or become a member of an
existing company, what he undertakes to do is to contribute to the stated capital, in cash or in kind, the
amount agreed to be the value of the number of shares he has agreed to take. For that reason, section
66(1) of Act 179 states that:
“66. (1) The stated capital of a company with shares shall consist of the sum of the following items,
that is to say:
(a) the total proceeds of every issue or shares for cash, including any amounts paid on calls
made on shares issued with an unpaid liability, without any deductions for expenses or
commissions;
(b) the total value of the consideration, as stated in the agreement, received for every issue
of shares otherwise than for cash;
(c) the total amount which the company by special resolution shall have resolved to transfer
to stated capital from surplus, as defined in section 69 of this Code, including the credit
balance on the share deals account ...”

Taking into account the fact that (i) according to exhibit B, the company’s stated capital continued to be
¢1 million; (ii) the shares of the company were fully subscribed from inception; and (iii) there is no
evidence that there was any increase in the authorised shares of the company in respect of which the
respondent agreed to take additional shares, there was no legal or justifiable basis whatsoever for the
amount demanded by the appellants.
It is apparent from the record that the second appellant became concerned that he had, allegedly, in the
operations of the company, utilised a significant amount of his own resources towards the operation of the
company, over and above the amount due from him by virtue of his subscription. Unfortunately for the
second appellant, this concern cannot be legally addressed by a revaluation of the subscribed shares.

[p.410] of [2003-2005] 1 GLR 391

The second matter is in respect of the question of the respondent’s directorship in the company. It is clear
from regulation 4 of exhibit 1 that the respondent was one of the first directors of the company and this
was reflected in exhibit D. It is clear from regulation 61 of exhibit 1 that a director of the company need
not be a shareholder. Thus, as far as the company is concerned, there is no nexus between shareholding
and directorship. By virtue of regulation 62, a director may cease to hold the office only in accordance
with section 184 or 185 of Act 179, ie either by vacation (by operation of law or resignation) or by
removal (pursuant to a resolution of the members in general meeting). There is nothing on the record that
establishes that the respondent has by any means vacated his office, nor is there any evidence that he has
been validly removed as a director and it is quite baffling that the trial judge held that he has ceased to
hold such office.
In conclusion, the appeal herein is without any merit whatsoever and the same is hereby dismissed.

Appeal dismissed.
DRKS