UGBS 401: COMPANY LAW

INTRODUCTION
The argument of blaming either the government or the directors of the collapsed banks is an
issue which cannot be fully exhausted. This is because there are some failures on the side of both
parties. We believe that, though the government specifically the Bank of Ghana had a weak
regulation system in relating to the banking sector because, it had its regulatory requirement in
place but they did not make sure that they were strictly complied. This brought about the
improper acts on the side of the directors or owners as in poor management practices, regulatory
non-compliance, and poor risk management practices etc. These improper acts led to the collapse
of the banks, the directors should be blamed and not the government.
Corporate veil is a legal concept that separate the personality or actions of a corporation
from the personalities of its shareholders and protects them from being personally liable for the
company’s debt and other obligation. The protection is not always in place because a court can
also determine whether they hold shareholders responsible for a corporation’s actions or not.
This is when the lifting of corporate veil comes, which simply means that the corporate should
be treated as a single entity with human attributes instead of corporate attributes. It can also be
termed as piercing the corporate veil, is also a legal decision to treat the rights or duties of a
corporation as the rights or liabilities of its shareholders. It may occur that the corporate
personality of the company is used to commit frauds or illegal acts. Since an artificial person is
not capable of indulging in any improper acts, therefore the appearance of corporate personality
might have to be stripped off to identify the persons who are actually at fault. This can be
discussed under two main headings; 1.) Where there are express statutory provision under,
Companies Code Act 9 and other statutory provision.
2.) Key Judicial Decisions on lifting the corporate veil (Fraud cases): a.The relevant provisions
under the code; Misdescription, Breach of minimum number of directors, Failure to satisfy the
minimum capital requirements, Breach of prescribed minimum members. There are 101 of such
statutory provisions. In Mortar v. Kuma: Akuffo JSC reviewed some of the leading cases on
lifting the veil. (1998-1999) SCGLR 620. This case had to with whether the corporate veil
should be lifted in order to make a CEO of a company personally liable. Below are some banks
and why they were collapsed.
1. Sovereign Bank Limited (SBL): It was incorporated on the 9 th of October 2015 in Accra,
Ghana and it was granted a universal banking license by the Bank of Ghana under the new
Banking Act 2004(Act 673) on 21st January 2016. The bank provides a corporate, commercial,
retail banking, wealth management and global trade management solution to meet the needs and
wants of value customers. The bank was chaired by Dr. Kwame Acheampong Kyei and the other
directors are Dr. Tetteh Nettey, Abdulai Abukari, Afotey Odanteifo and Johan Rheeder. William
Ato Essien was the largest shareholder in sovereign bank. Insolvency on the part of SBL was a
cause for the collapse of the bank. Insolvency talks about when there is deterioration in the
capital of a bank due to its inability to recover investments placed with financial institutions and
as well as impairments to its loan book. The SBL was not able to meet daily liquidity obligations
and was falling due. The Capital Adequacy Ratio was -11. The bank’s situation resulted in
continuous breaches of key regulatory requirements and prudential limits. This is an instance for
the lifting of the corporate veil. Act, C. (2019). Companies Act, Act 992 Section 29 (1) The Bank
of Ghana shall, by a directive, prescribe a risk-based capital adequacy requirement, which may
be measured as a percentage of the capital of the bank, specialised deposit-taking institution or
financial holding company to its assets.
(2) The minimum capital adequacy ratio shall be at least ten percent.
Another cause for the collapse of the bank was falsification of license. Falsification of
documents deals with the illegalities of obtaining banking documents which appears to be
authorized or created by the regulatory bodies of banking. It emerged that SBL license was
obtained by false pretence through the use of suspicious and non- existent capital. In the case of
M/S. Minar Exports vs. Enforcement Committee & Ors on 4th October 2011. This is a fraudulent
act in the case of law and it stipulate that corporate veil of SBL be lifted.
2. Royal Bank Limited: The Royal Bank is a banking and financial institution headquartered at
Legon, Ghana. It was established in 2012 and had several branches all over the country. Mr. Osei
Asafo-Adjei was the Managing Director or Chief Executive Officer and Mr. John Ackom was
the Deputy Managing Director. The bank deals in savings and loans, consumer asset finance,
royal child account, salary overdraft, etc. The license of the bank was revoked because it violated
a provision of the banking law or regulations. When this happens the corporate veil of Royal
Bank would be lifted. Act, C. (2019). Companies Act, Act 992 Section 16 (1) The Bank of
Ghana may revoke a licence issued under section 12, where (a) the Bank of Ghana is satisfied
that an applicant provided false, misleading or inaccurate information in connection with the
application for a licence or suppressed material information;
(c) The bank or specialised deposit-taking institution fails to fulfill or comply with the terms and
conditions stipulated in the licence.
Also the bank could not recapitalise in time, as in the bank could not restructure its debt and
equity mixture to stabilize its capital structure. According to the Royal Bank, though it had
secured support to the tune of 270 million cedis from the central bank, it was in the process of
injecting some 300 million cedis which would have turned around the fortunes of the bank.
3. Unibank Bank limited: Is commonly known as Unibank is a private ownership company that
was incorporated in the year 1997. It was founded by the former governor of the Bank of Ghana
and was one of the thirty five commercials licensed in Ghana. It has its headquarters at the World
Trade Centre Greater Accra region. Opoku Gyamfi-Boateng and Dr. Kwabena Duffuor II are the
chairman and chief executive officer respectively. Unibank deals in loans, investments, checking
accounts or transactional account and debit cards. The collapse of Unibank was a result of
trading with insolvency and 5 billion into illegal acquisition of assets by the directors and
shareholders. Professor John Agatsi the dean of university of cape coast said in his perspective
the collapse of the bank was executed by the people in power. He also said that the central bank
could have saved the bank if the government had honoured its debt obligations to the local bank.
Act, C. (2019). Companies Act, Act 992 Section 123. (1) Where the Bank of Ghana determines
that the bank or specialised deposit-taking institution is insolvent or is likely to become insolvent
within the next sixty days, the Bank of Ghana shall revoke the licence of that bank or specialised
deposit-taking institution.
(4) For the purpose of this section, “insolvent” means the inability of a bank or specialised
deposit-taking institution to pay its obligations as they fall due or the circumstance where the
value of the liabilities of a bank or specialised deposit-taking institution exceeds the value of its
assets.
(5) The value of the assets, liabilities and regulatory capital of a bank or specialised deposit-
taking institution shall be determined in accordance with valuation standards and procedures
prescribed by the Bank of Ghana.
4. The Beige Bank LTD: It commenced banking operations in December 2017 after operating as
Savings and Loans Company. Founder and CEO at time was Mr. Michael Nyinaku. Beige Bank
was granted provisional license in 2016 and a launched in 2017. Subsequent investigations
conducted by the Bank of Ghana, revealed that the bank obtained their banking license under
false pretences through the use of suspicious and non-existing capital, which has resulted in a
situation where their reported capital was inaccessible to them for their operations. Funds
purportedly used by the bank’s parent company to recapitalize were sourced from the bank
through an affiliate company and in violation with regulatory requirement for bank capital. The
bank was not able to recover these funds for its operations. The bank persistently breached the
cash reserve requirement , the quality of the bank’s loan portfolio had seriously deteriorated and
the bank’s capital Adequacy Ratio was assessed to be negative 17.18% as against the regulatory
minimum of 10% thus, recording a capital deficit of GHC 159,162,557.64, rendering the bank
insolvent. Act, C. (2019). Companies Act, Act 992 Section 28. (1) A bank or specialised deposit-
taking institution shall ensure that while in operation, it maintains in the country a minimum
paid-up capital, unimpaired by losses including accumulated losses or other adjustments, as may
be prescribed by the Bank of Ghana for banks and specialised deposit taking institutions.
(2) The Bank of Ghana may prescribe different requirements under this section for different
classes of specialised deposit-taking institutions.
(3) For the purpose of calculating impairment of paid-up capital, losses shall be set off in the
following order: (a) against income surplus and other distributable reserves excluding
revaluation reserves; and (b) against the Reserve Fund established under section 34.
(4) A financial holding company shall maintain at all times a minimum paid up capital,
unimpaired by losses or other adjustments, as may be prescribed by the Bank of Ghana.
The Beige Bank (under the receivership of Nii Amanor Dodoo), dragged Nyinaku and 112
subsidiaries of the Beige group to court for the alleged roles they played leading to the collapse
of the bank. The writ, filed at the Accra high court, accuses the former CEO of breaching his
duties as a director of the bank and engaging in unlawful activities which led to massive losses at
the Beige Bank. According to the writ, Nyinaku allegedly supervised and unlawfully instructed
the payment of hundreds of millions of Ghana cedi’s to his cronies and subsidiary companies
without due diligence. RESPSONSE: “Lawyer for the Beige bank (under the receivership of Nii
Amanor Dodoo), Mr. Ace Ankomah, disagreed with Nyinaku’s lawyers and submitted that
nothing under Act 930 took away the powers of a company in receivership. He argued that a
receiver only assumes the rights and powers of the shareholders of the company and not the
rights and powers of the company, including the right to initiate legal action. Counsel therefore
argued that the suit filed by a plaintiff named The Beige Bank LTD (under the receivership of
Nii Amanor Dodoo) was not in contravention of any statutory provision.”
RULING: In her ruling, Justice Amoah upheld the arguments of Mr. Ankomah and subsequently
dismissed Nyinaku’s application. “Upon a careful reading of Acts 992 and 930 together and
separately, I am unable to find any provision(s) that takes away the right or power of a company
under receivership to institute an action in its name.
5. UT Bank Limited: it was founded by Joseph Nsonamoa and Prince Kofi Amoabeng in the
year 2010 through a reverse listings, formerly known as UT Holdings Ltd. In 2015, UT bank
recorded a very low Capital Adequacy Ratio and it was in the negative also. Therefore there was
no capital to cushion depositor’s funds, a major determinant for the failure if the bank. The
license of UT Bank was revoked in the year 2017 by the central bank, Bank of Ghana. The
reasons given by the central bank were primarily based on the fact that UT Bank had severe
capital impairment. Act, C. (2019). Companies Act, Act 992 Section 28 (3) For the purpose of
calculating impairment of paid-up capital, losses shall be set off in the following order: (a)
against income surplus and other distributable reserves excluding revaluation reserves; and (b)
against the Reserve Fund established under section 34.
(4) A financial holding company shall maintain at all times a minimum paid up capital,
unimpaired by losses or other adjustments, as may be prescribed by the Bank of Ghana.
Section 16: (3) Where the Bank of Ghana proposes to revoke the licence of a bank or specialised
deposit-taking institution under subsection (1), the Bank of Ghana shall (a) give notice in writing
to the bank or specialised deposit taking institution, (b) specify the proposed action and the
grounds on which the action is proposed to be taken, and (c) give the bank or specialised deposit-
taking institution an opportunity to make a written representation within thirty days of the service
of the notice.
(4) After the expiry of the notice period and considering any representations made by the bank or
specialised deposit-taking institution, the Bank of Ghana may (a) decide whether to take the
proposed action; or (b) vary the proposed action as the Bank of Ghana considers appropriate; and
(c) communicate the decision of the Bank of Ghana to the bank or specialised deposit-taking
institution.
(5) Where the Bank of Ghana revokes the licence of a bank or specialised deposit-taking
institution, that bank or specialised deposit taking institution shall cease to carry on the deposit-
taking business if the bank or specialised deposit-taking institution has already commenced
business and shall surrender the licence. (6) A revocation of the licence of a bank or specialised
deposit taking institution shall have immediate effect. (7) Despite subsections (3) and (4), the
Bank of Ghana may in cases of emergency, or in the public interest revoke the licence of a bank
or specialised deposit-taking institution without notice. (8) Where a licence is revoked under this
section, the Bank of Ghana shall immediately initiate a receivership as provided in sections 123
to 139 and notify the institution responsible for deposit protection.
The Commercial Division of the Accra High Court ordered the Attorney-General Department
(A-G’s) to serve former Managing Director of UT Bank, Prince Kofi Amoabeng and four others
who were standing trail for the collapse of the bank with all the document it intended to rely on
for the trial. Justice Philip Bright Mensah, of the Court of Appeal sitting as a High Court judge,
gave the A-G up to June 22,201 to file the disclosures and served same on the defence team. In
court on Thursday, Chief State Attorney, Frances Mullen Ansah, indicated to the court that the
initial return date of the case was June 23, 2020 but they had a notice that the time had been
abridged to today. She however told the court that they were working to have the trail documents
filed and served on the accused persons with the June 23 date in mind. The court, after listening
to the prosecution, ordered the AG’s Department to file all the necessary trail documents it
would rely in this trial by June 22 and serve same on the defence lawyers. The case has been
adjourned to June 25, 2020, five persons have been hauled before the court for the collapse of
UT bank. They were Dr. Johnson Paundit Asiama, a Deputy BoG Governor, Prince Kofi
Amoabeng, the Founder of UT Bank; Raymond Amanfu, a former Head of the Banking
Supervision Department of the BoG, and two others Catherine Johnson, Head of Treasury, and
Robert Kwesi Armah, the General Manager of Corporate Banking, both of UT bank. UT
Holdings, the parent company of UT bank, which is said to be controlled by Amoabeng, was also
charged with the collapse of the bank. It is the case of the A-G that Amoabeng “dishonestly
appropriated more than GHC 100 million of depositors” funds that were invested in the defunct
UT Bank. The A-G accused Dr. Asiama and Amanfu of also acted unlawfully and caused
financial loss to the state. The two have been charged with wilfully causing financial loss to the
state for allegedly approving GHC 460 million in liquidity support, without following prescribed
mandatory conditions. “No payment was made for liquid support by the BoG,” the A-G stated in
the facts accompanying the charge sheet. The accused person in that case have also pleaded not
guilty to all the charges.

REFERENCE
LinkedIn, Acts 992, En.m.wikipedia.org, Ghana yello, amrbcom.gh,gbcghana.com/1.11713044,
http://www.businessworldghana.com/govt-fintrades-gh Hawkson Ebo Emmanuel (February
2020) Graphic Online. Category: General News, citiroom, Wikipedia, Starr Fm. Banks and
specialized deposit Acts 2016. Pdf.