MANAGEMENT OF A COMPANY

Who has the power to manage a company?

• a company shall be managed by the Board of Directors (Article 142).
• Transferring the powers of the company:
• The Board of Directors may delegate its powers (Art. 144).
• The Board shall be responsible for powers exercised by the delegate.
Management of a company (Art.142)
The business and affairs of a company are managed by the direction
of the Board of Directors
will have all powers necessary for the management.
 However, the company's incorporation documents or company law
may expressly reserve those powers to the shareholders or any other
person.
Management of a company
Where a private company has one director, he/she exercises the
powers and carries out the duties of a Board of Directors provided for
in company law.
A private company shall have at least one director and a public
company shall have at least two (2) directors.
Board of Directors
• Definition of a director: “any person occupying
the position of a director by whatever name
called.”
• A person who has control over the direction,
governance, policies or superintendence of
affairs of a company
• Collectively known as board of directors:
Supreme policy framing and decision making
organ of a company.
• Non-executive director” is a director who is not
involved in the day to day management of the
company;
Appointment (Art. 152)

Incorporation documents name the first

director(s).
 If not determined in Articles of association,
subsequent directors to be appointed by ordinary
resolution.
Choice of Directors
• ONLY a natural person can be director with the
following requirement Art. 154:
• Not less than 16yrs;
• in case of a public limited company, not over 75yrs;
• An undischarged bankrupt;
• Not disqualified from being a director, promoter or
being concerned or taking part in the management of
a company;
• Not of unsound mind certified by a board of
recognized medical doctors.
 Is it a acquirement by a
company to have a director who
resides in the country?
Yes, any company is required to have at least o

ne director who shall be ordinarily resident in Rwanda.

Independent and non-executive Directors
(Art. 156)

In a public company a majority of the

directors shall be non-executive directors;
and
 At least one-third (1/3) of the directors
shall be independent directors
A non-executive director is a person who:
 does not form part of the management
team of the company;
 and who is not an employee or affiliated,
but can own shares in the company
Persons prohibited from managing a
company-Art. 372-373:
• A person convicted of an offence in connection with the promotion,
formation or management of a company;
• A person convicted of an offence involving fraud;
• A person convicted of the breach of professional secrecy
Directors Duties-Article 145
Fundamental duties:
Duty to exercise their power in good faith and for the benefit of the
company as a whole;
Use reasonable diligence in the discharge of the duties of his/her
office
Director’s fiduciary duties
A director of a company, when exercising powers is required to
exercise:
care, diligence and skills reasonably to be expected of a director
acting in like circumstances and the power for a proper purpose.
Director’s duties
A director cannot (Art 146&147):
Act in a manner that unfairly prejudices or unfairly discriminates
against any existing shareholder, except when the director believes
on reasonable grounds that his/her duty as a director requires
him/her to do so.
Act in a manner that contravenes incorporation documents or
company law.
Director’s duties
A director cannot:
Agree to enter into a contract that involves unreasonable risk of
causing the company to fail the solvency test.
Incur an obligation that the company will not be able to perform.
Director duties
• Duty not to allot shares until minimum subscription is raised;
• Duty to sign annual returns;
• Duty to send statutory reports to every member of the company;
• Duty to call AGM every year;
• Duty to call a mtg for liquidation;
Validity of acts of directors
• The acts of a director are valid irrespective of any defect that may
afterwards be discovered in his/her appointment or qualification;
Rights of a director
• Indemnification of cost incurred while discharging duties or
• Liability for any act or omission
• Subscribing for insurance for liability other than criminal
• Refund of costs incurred in defending a company
 Directors Powers

• Power to issue debentures

• The power to invest company’s funds
• The power to take loans
• The power to award loans
Remuneration, Art.162)
Remuneration, benefits payable to directors and any allowances to
be approved by ordinary resolution.
Travel, accommodation and other expenses properly incurred in
discharging company’s duties.
End to Directorship

• Disqualification (Art.159)
• Removal (by shareholders ordinary resolution, Art. 158)
• Retirement
• Death (Art.159)
• Resignation (Art. 159)
Can resignation of a director be rejected?
Art.160)
• In case a company has only one director, shall not resign until:
• The director calls a meeting of shareholders to receive notice of the
resignation and;
• until one or more new directors are appointed.
Resolutions (Art. 1)

• Special resolution: a resolution approved by a

majority of seventy five per cent (75%) of the
voters present, unless decided in the articles of
association;
• Ordinary resolution: a resolution approved by a
simple majority of the voters present.
• Unanimous resolution: a resolution which has the
assent of every shareholder entitled to vote on the
matter or a resolution made in accordance with
this Law (Art 141).
Company secretary

Appointment of a Secretary (Art. 170):

A public company must have a secretary;
A private company may have a secretary.
A secretary is appointed and removed by the directors.
Duties of Company Secretary (Article 171)

• Any company, except a small private company shall

have a Company Secretary.
• Duties:
• to advise members of the Board
• inform members of the Board on regulations or
reports and submission of documents where
required.
• Prepare minutes of meeting; prepare and submit
annual balance sheet to RG or any other
destinations.
Auditors-Article 130
• The appointment of a particular auditor shall be authorized by the
shareholders by ordinary resolution.
• The first auditor of the company may be appointed by the Board of
Directors without the approval required as above.
• In case no auditor is appointed, the Registrar General has the powers
to direct the company to appoint its auditor within thirty (30) days.
Auditors remuneration-Art. 130
• The salary and other expenses for the auditor are determined by the
meeting of shareholders or the Board of Directors
Who can be appointed as auditors (Art.131)

• Any person possessing qualifications of, or equivalent to those of any

institution or association of chartered accountants.
• auditing firm
Disqualified auditors

•a director or employee of the company;

•2° a person who is a partner of or in the employment of a

director or employee of the company;

•3° a person who, by virtue of either points 1o or 2o of this

article is disqualified for appointment as auditor of a related
company.
 Auditor's report Art.132
• the scope and limitations of the audit;
• 2° whether the auditor has obtained all information and explanations that
he/she has required;
• 3° whether proper accounting records have been kept by the company;
• 4° that the auditor has no relationship, interests and debt in the company;
• 5° whether the financial statements complies with the international accounting
standards;
• 6° the auditor’s opinion and problems that are linked with the company’s
management;
• 7° the auditor recommends actions to correct problems identified during the
audit;
• 8° whether, in the auditor's opinion, according to the best of their information
and the explanations given to them as shown by the accounting and
 Rights of auditors-Art. 133-134
• To call for information & explanation
• To access books of accounts
• To attend meetings and to receive notices
• Inspection of articles other than books of accounts
Duties of auditors
• To scrutinize:
• Loans & advances
• Entries
• Investment
• Expenses
Removal of an auditor
• An auditor may be removed from office at any time by an ordinary
resolution passed at a shareholders' meeting.
INVESTIGATION INTO COMPANIES
BUSINESS
• Mandatory investigation may be authorized by the Minister in charge
of companies to the RG:
• For the protection of the public
• In the public interest
• Requested by a foreign country
 Major transaction Art. 197
• the acquisition of assets equivalent in value to ten (10%) per cent or
more of the value of the company’s assets before the acquisition;
• the disposition of assets of the company the value of which is more
than half the value of the company’s assets before disposition;
• transaction which is likely to have the effect of the company acquiring
rights or interests or incurring obligations the value of which is more
than half the value of the company’s assets before the transaction.
AMALGAMATION-Art. 199
• Two (2) or more companies may amalgamate
• To be approved by the shareholders of each amalgamating company
and any other interested parties by special resolution.
• Duty to give written notice of the proposed amalgamation to every
creditor of the company in 30 days prior.
Certificate of amalgamation
• Registrar General shall:
• issue a certificate of amalgamation
• issue a certificate of incorporation
Effect of certificate of amalgamation
• An amalgamation shall be effective on the date shown in the
certificate of amalgamation.
Change of status to public or private
company
• a proposal to change status shall be authorized by a shareholders'
special resolution.
Conversion of company Ltd by shares to
company Ltd by guarantee
• A company limited by shares may be converted to a company limited
by guarantee where:
• there is no unpaid shares
• all its members agree in writing
• new articles of association appropriate to a company limited by
guarantee is filed.
Requirement as to converting a company

• every member who has not agreed to contribute to the share capital
of the company shall cease to be a member;
•not affect any right or obligation of the company.
Conversion of a limited company into
unlimited companies
• It requires passing a special resolution
• Making amendments to its constitution and filing with the RG a copy
of the resolution
Conversion of unlimited company into a
limited company
• Requires passing a unanimous resolution and;
• Filing with the RG a copy of the resolution.
FOREIGN COMPANIES Art.132-237
• A foreign company that establishes a place of business within Rwanda
shall apply for registration within ten (10) working days of
establishing a place of business.
 DORMANT COMPANY Art.244-249
• A company is a dormant company for any period during which no
significant accounting transaction occurs in relation to the company.
• A company must not declare itself to be a dormant company where it
is a company formed for the business of banking or insurance.
• a dormant company, is exempted from the requirement of having its
accounts audited and from the payment of any prescribed fee as is
relevant to its situation.
Winding up /
Dissolution of
Companies
SCOPE
• 1. DEFINITION
• 2. CAUSES OF WINDING UP
• 3. LIQUIDATION
• 4. LIQUIDATOR
• 5. CONSEQUENCES OF LIQUIDATION
• 6. DOCUMENTS FOR LIQUIDATION
• 7. ALTERNATIVES TO LIQUIDATION
• 8. SHAREHOLDERS RIGHTS
• 9. CREDITORS RIGHTS
Removal of solvent company from register
• made on the prescribed form and shareholders entitled to vote
on the question, by special resolution.
• The grounds:
• the company has ceased to carry on business
• has discharged its liabilities to all its known creditors
• has distributed its surplus assets in accordance with its
incorporation documents or the law
• the company has no surplus assets after paying its debts
Effect of removal from register

• A company ceases to exist (Art.256)

 1. WINDING UP OF A
COMPANY
Definition:
 The term ‘winding up’ of a company may be defined as
the proceedings by which a company is dissolved (i.e. the
life of a company is put to an end).
• The winding up is the process of putting an end to the
life of the company. During this process, the assets of the
company are disposed of, the debts of the company are
paid off out of the realized assets or from the
contributories and if any surplus is left, it is distributed
among the members in proportion to their shareholders
Winding up contin…..
• The winding up of the company is also called the
‘liquidation’ of the company.
• The process of winding up begins in two ways:
1. After the Court passes the order for winding
up or; 2. A resolution is passed for voluntary winding
up.
• Thus, the company is dissolved after completion of the
winding up proceedings and on the dissolution, the
company ceases to exist. So, the legal procedure by
which the existence of an incorporated company is
brought to an end is known as winding up
2. CAUSES OF WINDING UP

a) General Causes
There are four general causes:
1.A commercial company established for a certain
period of time dissolves at the end of that period in
the absence of a resolution extending its life.
2. A decision taken by the shareholders to dissolve the
company under conditions provided for by the
Articles of Association:
3.Loss of the object or impossibility of performance
4. Upon a decision of the court
3. LIQUIDATION OF COMPANIES

• Liquidation of a company is the process whereby its life is ended and

its property administered for the benefit of its creditors and
members. Upon liquidation of a company, a liquidator is appointed
and he takes control of the company.
 4. LIQUIDATOR
 
A person appointed to carry out the
winding up of a company is called
liquidator.
If the winding up is through Court, the
term used for such person is official
liquidator .
The official liquidator acts under the
supervision of the Court, through a
recognized reporting system.
 A. The duties of liquidator
The duties of liquidator include:
a.To realise the property of the company;
b.To Determine the cause of the Company’s
failure.
c.Sell the Company’s assets;
d.To pay its debts, and to distribute the surplus
(if any) among the members.
e.To pay dividends to creditors if any
f.To report to creditors
B. Powers of liquidator(s):
a. To institute or defend any suit, action, prosecution
or other legal proceeding, civil or criminal on behalf
of the company;
b. To carry on the business of the company so far as
may be necessary for its benefits;  
c. To pay to the creditors;  
d. To make any compromise or arrangement with
creditors.
e. To sell the movable and immovable property and
things in action of the company by public auction or
private contract, with power to transfer to any
person;
Powers of liquidator cont….
 
f. To do all acts and to execute all deeds, receipts and other
documents in the name and on behalf of the company
and for that purpose to use in the company’s seal when
necessary.
g. To prove, rank and claim in the bankruptcy, insolvency or
sequestration of any contributory for any balance agains
and to receive dividends as a separate debt due from the
bankrupt or insolvent in the bankruptcy.
h. To draw, accept, make and endorse any bill of exchange
or promissory note in the name and on behalf of the
company.
i. To raise on the security of the assets of the company any
money.
5. Consequences of winding up
Some important consequences of winding up of company are:
1. As regards the company itself:
 winding up does not mean that the company has ceased to exist.
The company exists as a corporate entity with all the rights of such
entity, with only change that its management and administration is to
be carried on through liquidator / liquidators till the final dissolution of
the company.
2. As regards the shareholders :
 A new statutory liability as contributories comes into existence. Every
transfer of shares or alteration in the status of a shareholder, after the
winding up has commenced by the order of the Court , shall unless
approved by the liquidator , be void.
Consequences of winding up
3. As regards the creditors:
• They cannot file or continue suits against the company, except with the
permission of the Court.
• They cannot proceed with the execution, if they have obtained
announcements already.
• They must lodge their claim and prove their debt before the liquidator.
4. As regards the management:
• on appointment of liquidator, all the powers of the directors, chief
executive and other officers, shall cease, except for the purpose of giving
notice of resolution to wind up and appointment of liquidator and filing
of consent of liquidator etc.
5. As regards the disposition of company’s property:
• all such dispositions are void unless with the leave of the Court or the
liquidator.
6. DOCUMENTS REQUIRED FOR
VOLUNTARILY WINDING UP BY
MEMBERS
• A copy of Notice for appointment of liquidator;
• A copy of Preliminary report prepared by the
liquidator.
• Final report and accounts of the company prepared by
liquidator presented in General meeting of
shareholders after finalization of winding up.
• Notice of final meeting.
• Return containing final report and accounts along with
minutes of meeting to be filed with the concerned
Company Registration Office.
7. Alternatives to Winding Up
A. Reconstruction

B. Amalgamation, Mergers and Take-overs

C. Schemes of Arrangement
8. RIGHTS OF SHAREHOLDERS

• The rights of shareholders are safeguarded through Article 142 which

states that a major transaction of amalgamation can only be
approved by a special resolution at a meeting of the shareholders.

• A special resolution can only be approved by a majority of 75% of the

votes of those shareholders entitled to vote and who have voted on
the issue under consideration.
9. RIGHTS OF CREDITORS

• Transformation does not destroy the rights of creditors of the

company Accordingly creditors shall maintain their rights over the
company prior to such transformation.

• In addition the creditors may petition the court to nullify the

transformation if they fail to obtain sufficient guarantee from the
company.
IMPORTANT CASES

• In Hollicourt (Contracts) Ltd v Bank of Ireland [2001]

• 1 BCLC 233
• The company continued to write out cheques to third
parties
• for three months before the bank became aware that a
winding
• up petition against the company had been presented.
The
• liquidator claimed these were void dispositions of
company
• property under s 127 IA 1986.
Court ruling
• Section 127 did not apply. The bank was not liable to repay the
amount of the cheques into the company’s account. The company
(through the liquidator) could recover the amounts from the payees
of the cheques but not from the bank which honoured the cheques.
The bank is only acting as the company’s agent when it pays out
against a cheque and this is the same whether the account is in credit
or debit.
Personal liability in winding up
• Fraudulent trading under s 213 IA 1986.
• In Re Gerald Cooper (Chemicals) Ltd [1978] 2 Ch 262
• Cooper, a director of the company, accepted advance
payment from a customer in return for the supply of
some indigo. The company had no supplies of indigo
and had no intention of supplying any. Instead it used
the customer’s money to repay a loan owed to a loan
company, which was fully aware of the facts, and
then went into liquidation.
COURT RULING
• Cooper and the directors of the loan company were both liable for
fraudulent trading. It made no difference that it amounted to
defrauding only one creditor in one transaction.
Property not available to a liquidator
• In Re Kayford Ltd [1975] 1 WLR 279
• The company operated a mail order business for goods.
• Customers paid for the goods in advance and these sums were paid
into a separate bank account of the company. The company went
into liquidation without supplying the goods and the liquidator
claimed the sum in the bank account.
COURT RULING
• The amounts could not be claimed by the liquidator as the money
was held on trust for the benefit of the customers.
CORPORATE CRIME
• Offences and penalties:
• Definition of Offence: A Conduct prohibited and punishable by the
State in breach of laws.
• Penalty: A punitive measure that the law imposes for the
performance of an act that is proscribed, or for the failure to
perform a required act.
• In criminal law it means a money fine, an imprisonment or
forfeiture of property ordered by the judge after conviction for a
crime.
Administrative penalties
• Penalties for failure to comply with the law:
• A company which fails to comply with requirements to registered in
accordance with the Law is liable to a fine of five times the annual
filing fee and every director of the company is liable to a fine from
500,000 to 5,000,000 Rwandan francs (Article 284).
 Penalties for failure to keep the books
required the Law
• A company which fails to keep the books required under the Law is
liable to a fine of five times the annual filing fee. (Article 286)
• Penalties for a company which fails to provide the documents
required by the Law:
• Any company which fails or delays to provide the Registrar General
with the documents required is liable to a fine of five times the
annual filing fee.
• The same fines apply to furnishing fraudulent or misleading
documents.
Recidivism
• Recidivism to the acts in the preceding para is punished by a
fine of twice the fine that was provided for before the
recidivism (Article 287).
• False or misleading notice: Any person who commits this fault
is liable to a fine of not less than 500, 000, but not exceeding 2,
000, 000 Rwandan francs. (Article 288).
• Directors or employees of a company will be liable to a fine of
not less than 1,000,000), but not exceeding ten 10,000,000
Rwandan francs (Article 289).
Liability in relation to annual accounts
• Directors who do not comply with annual accounts regulations
under Articles 123 and 125 of the Law is liable to a fine from
1,000,000 to 10,000,000 Rwandan francs (Article 290).
• Liability is based either on intention or recklessness.
Penalty for contravening restrictions on
public offers by a private company

• A private company that issues any securities to the public is

liable to a fine from Frw 2,000,000 to Frw 5,000,000 (Article
291).
• Directors must ensure that the company delivers annual
accounts to the Registrar General not later than 7 months after
its accounting reference date for a private company and 4
months for a public company and failure to comply, the
company shall be liable to a fine between 1,000,000 and
10,000,000 Rwandan francs.
Criminal Offences and penalties

• Any insolvent business person who:

• incurs excessive expenses for personal interest;
• favors one of the creditors to the detriment of others;
• dissimulates his or her insolvency;
• does not justify all real assets commits an offence of simple
bankruptcy and is liable to imprisonment for a term of 6
months to 2 years and a fine from 500,000 to 3,000,000
Rwandan francs or one of these penalties (Article 293-294).
Grave fraudulent bankruptcy

Any act of:

Misappropriation or concealing all or part of assets;
accepting debts that he/she does not owe; or
concealing books of accounts is punished by a term of
imprisonment from 1 year to 3 years and a fine from 100,000 to
1,000,000 Rwandan francs (Article 295).
Fraudulent action by a representative of
an insolvent company

• Any director, manager or liquidator who commits fraudulent acts

such as:
 misappropriation, conceals assets of the company, ascribes debts
to the company which it does not owe, conceals records of the
company, does not provide incorporation documents or declares
information contrary incorporation documents shall be liable to
imprisonment for a term from 2 years to 3 years and a fine from
3.000.000 to 5.000.000 Rwandan francs (Article 296).
Poor book-keeping

• Any administrator, director, manager or liquidator who acts

contrary or omits to well keep books of accounts may be liable for
a term of imprisonment from six (6) months to one year and a fine
between 300,000 and 500,000 Rwandan francs or one of these
penalties (Article 297)
• Reasons to criminalise:
• Deterrence;
• crime control;
• rehabilitation/reformation;
• Stigma of conviction
• Reasons not to criminalise:
• Civil law may also deter,
rehabilitate etc.
Models of Corporate
Criminality
Aggregation
Aggregation Doctrine

Aggregation combines all “the acts and mental elements of the various
relevant persons within the company to ascertain whether in total
they would amount to a crime if they had all been committed by one
person.”

CMV Clarkson ‘Corporate Culpability’ (1998) 2 Web JCLI

Aggregation:
Approval by US Courts
• United States v Bank of New England (1987)
“A collective knowledge instruction is entirely appropriate in the
context of corporate criminal liability... Corporations
compartmentalise knowledge, subdividing the elements of specific
duties and operations into smaller components. The aggregate of
those components constitutes the corporation’s knowledge of a
particular operation. It is irrelevant whether employees
administrating one component of an operation know the specific
activities of employees administrating another aspect of the
operation...”
Models of Corporate
Criminality
Identification Doctrine
 Under the identification doctrine, “the governing
principle is that those who control or manage the
affairs of a company are regarded as embodying the
company itself.”

Law Commission, ‘Legislating the Criminal Code Involuntary Manslaughter’,

Law Com No 237 (1996), para. 6.27
Early Development of the Doctrine
• DPP v Kent and Sussex Contractors Ltd [1944]
• The intent of the company official was the intent of the company
• R v ICR Haulage [1944]
• In order to establish a company’s guilt of a crime involving MR, the state of
mind of the company’s officer could be attributed to the company
• Moore v Bresler [1944]
• Sales manager was acting within his authority, thus his deceit could be
imputed to the company
• Seaboard Offshore Ltd v Secretary of State for Transport [1994]
• Tesco v Nattrass [1972]
• Store manager was not sufficiently senior in the organisation to “represent
the directing mind and will of the company”.
Models of Corporate
Criminality
Vicarious Liability
Vicarious Liability in USA
• United States v A & P Trucking (1958)
• Company only liable if employee’s action fell within scope of employment
• Company must benefit
• Employee must act within company’s authority

• The employee’s standing within the company is irrelevant

• New York Central & Hudson River Railroad Co v US (1909)
Vicarious Liability in USA
• Company cannot avoid liability merely by it expressly forbid the act,
or the act was outside company policy
• United States v Twentieth Century Fox Corp (1989)

• Crime must have been committed with intent to benefit the

company, though this need not be the primary objective
• Coppen v Moore (No 2) [1898]
• “It cannot be doubted that [the owner] sold the ham in question, although
the transaction was carried out by his servants. In other words, he was the
seller, although not the actual salesman.”
• Vicarious liability imposed where the employee acted as an agent.

• James & Son v Smee [1955]

• Employee used non-complying vehicle in the course of employment. This
constituted use by the employer.
Imputing Mens Rea
• How can a company be said to satisfy the requisite MR of a fault-
based offence?
• Wilful blindness:
• If corp had knowledge of the activity OR consciously avoided investigating the
activity, it will be regarded as having knowledge. Thus MR is established.