Nov 2019 Q2 d.
Kwame Akoto holds 15% share in Sikem Investment Ltd, a brokerage firm, which by the regulations of the company, entitled him to appoint a director. To avoid the strict and high standards of banking, the Regulations of Sikem Investment prohibits banking and savings and loan schemes. Kwame Akoto received a letter from Mr. Pinkrah, Managing Director and 55% shareholder that the company has merged with Sikaman Group owned 100% by Mr. Pinkrah. The merged company will upgrade into a full bank within the next three months. The shares of Kwame Akoto and all minority shareholders with Sikem Investment Ltd will be converted into a loan at 10% per annum interest with principal repayment schedule over the next five years. Mr. Pinkrah took all decisions alone without consulting the seven members on the board. All attempts to hold a board meeting to discuss the issues have been thwarted by Mr. Pinkrah.
Required:
i) State THREE (3) options open to Kwame Akoto in the circumstance of this case. (6 marks)
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- Kwame Akoto can seek a court order as a member, or through his appointed director.
- By a petition to the Registrar to hold AGM. Importantly with 15% shareholding he can request extra- ordinary general meeting under section 271 of Act 179.
- Kwame Akoto can seek a court order as a member, or through his appointed director, or by a petition to the Registrar to hold AGM. Importantly, with 15% shareholding, he can request for extra-ordinary general meeting (EGM) under sec 271 of Act 179.
- That the actions of the MD are ultra vires, depending on the allocation of powers among members at general meeting. By the BOD and the MD by the company regulations, Mr Pinkrah alone cannot decide on mergers, class rights, share conversions, business objects etc without the BOD/members at general meetings.
Breach of other fiduciary duties- e.g. full disclosure and conflict of interest. - Note that due to Mr. Pinkrah’s 55% shares, AGM and EGM would not amount to much because Mr. Pinkrah cannot be removed as MD/director or his actions declared null and void, reverse the merger etc by resolutions.
- The best choice is to seek remedy against oppression under sec 218 of Act 179, which provides that:
Where the affairs of the company, or the powers of the MD are being exercised in a manner oppressive to one or more of the members, or in disregard to the interest to their interest as members, officers, debenture holders etc.
Certain acts taken or threatened, or resolutions passed, proposed unfairly discriminates against and prejudicial to one or more of members or debenture holders.
ii) State FOUR (4) likely reliefs the court may grant. (4 marks)
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- Lift the veil for Mr. Pinkrah to be held liable for any fraud
- Civil and criminal liabilities for any breach of fiduciary duties
- If convicted, prohibit him from being a director, promoter, etc of a company
- Secure injunction for illegal or irregular activity-sec 217& 218
- Cancel or vary the merger and other transactions/resolutions
- Regulate the future conduct of the company’s affairs
- Maintain the rights of Kwame Akoto and other members
- Provide for the purchase of the shares of affected members.
- The court can appoint an inspector or order the Registrar to investigate the operations/affairs of the company.