Shareholders' Rights & Shareholder Activism 2023 Comparisons

The main types of companies are as follows:

• a company limited by shares;
• a company limited by guarantee;
• an unlimited company; and
• an external company.

The aforementioned companies can either be public or private companies.

Foreigner investors generally incorporate companies limited by shares. This is more attractive and suitable for business because of the benefit of the concepts of limited liability and separate corporate personality. These concepts operate, generally, to limit the liabilities of the company to the company alone and not to the shareholder.

Where very limited presence in the country is intended, an external company is used. 

The main types or classes of shares issued by companies in Ghana are equity/ordinary shares and preference shares.

Equity/ordinary shareholders have the right to:

• appoint remove directors;
• attend, speak and vote at a general meeting;
• participate in dividends;
• requisition a meeting;
• inspect registers and books of the company;
• receive copies of financial statements and reports;
• take legal action against directors and on behalf of the company; and
• the return of capital upon winding-up or reduction in capital after preference shareholders have been settled.

Preference shareholders have the right to:

• receive a fixed amount of dividends yearly;
• cumulative dividends unless otherwise agreed;
• arrears of cumulative dividends, whether earned or not payable up to the date of actual payment when winding up, unless agreed otherwise;
• convert to equity shares, if allowed;
• attend and vote at general meetings – this right could be suspended under certain conditions; and
• appoint directors.

The rights attaching to shares are usually set out in the Companies Act, 2019, Act 992, regarding the constitution of the company and any shareholders’ agreement that may exist.

The procedure for varying shareholders’ rights is dependent on:

• whether the constitution of the company expressly forbids variation of class rights or alteration of the provisions relating to variation of class rights; and
• whether the constitution of the company provides for variation of class rights.

Where the constitution of the company expressly forbids variation of class rights or alteration of the provision relating to variation of class rights, variation can only be made with the approval of the court under a special arrangement.

Where the constitution of the company provides for variation of class rights, the company may, by special resolution, alter its constitution by inserting into it a provision regarding the variations of the rights of any class of shares or by modifying the terms of any such provisions. For such a resolution to be effective, it must have:

• the prior written consent of the holders of at least three quarters of the issued shares of that class; or
• the votes of a special resolution by the holders of the shares of that class. 

There are no minimum share capital requirements for the incorporation of the types of companies listed under the Companies Act. However, it should be noted that under local content rules in specific industries, certain minimum levels of local equity participation are required by law. Also, under the Ghana Investment Promotion Centre (GIPC) Act, 2013, Act 865, there are minimum foreign capital requirements for enterprises eligible for foreign participation. Such local equity participation or minimum foreign capital investment requirement will impact on the share capital requirement.

The minimum number of shareholders required is one, and there is no requirement for any shareholder to be resident in Ghana. 

Shareholders’ agreements and joint venture agreements are quite common. Their use is largely dependent on the needs of the parties. Joint venture agreements are commonly used in the oil and gas sector.

Typical provisions included in shareholders’ agreements and joint venture agreements include:

• conditions;
• period to completion;
• completion arrangements;
• director appointments;
• director interests;
• proceedings of directors;
• reserved matters;
• finance;
• issuance of new shares;
• issuance of loan notes;
• restrictions on the parties;
• the business plan;
• access to accounting and other information;
• dividends policy;
• deadlocks;
• restriction on transfer of shares;
• pre-emption rights;
• transfer events;
• fair value determination of shares;
• termination and liquidation;
• completion of share transfers;
• deed of adherence;
• company warranties;
• conflicts with the constitution;
• announcements;
• assignment;
• agreement for the sale of shares;
• further assurance;
• enforcement of company rights; and
• the usual boilerplates. 

Shareholders’ agreements are enforceable. Usually, the company is made a party to the agreement to make it easily enforceable against the company.

Shareholders’ agreements are usually confidential documents and therefore are not made public. In the oil and gas sector, copies of the joint venture agreement must be submitted to the Petroleum Commission.

Companies are required to hold an AGM at least once every year, but not more than 15 months apart. For a newly incorporated company, its first AGM could be held anytime within 18 months of its incorporation. It need not be held in the year of incorporation. 

Notice of an AGM must be written and served either personally, by post or by electronic means. It must contain the place, date and hour of the meeting and must give sufficient details of the nature of business to be transacted.

The notice period is a minimum of 21days. This may be shortened if all members entitled to attend and vote at the meeting ratify the short notice.

Typical issues discussed and approved at an AGM include:

• declaration of dividends;
• consideration of financial statements and reports by directors and auditors;
• appointment of directors;
• fixing of remuneration of directors and auditors; and
• the appointment and removal of directors and auditors.

Beside the mandatory AGM, a company may convene other meetings called extraordinary general meetings (EGM). An EGM may be convened by directors of the company whenever they deem it fit. Shareholders may requisition the directors to call an EGM as well. EGMs may be convened to enable the company to deal with urgent matters that may have come up. 

Generally, 21 days’ notice must be given before a meeting is held. The constitution of the company may provide for longer notice periods. For an EGM, the notice period may be shortened by a majority of shareholders holding at least 95% of the shares of the company agreeing to waive the short notice.

As a rule, general meetings are convened by directors of the company. Therefore, when a shareholder or shareholders need a meeting to be convened, they must requisition the directors to call such a meeting. The requisition must state the nature of the business to be transacted at the meeting and be signed by the shareholder or shareholders requisitioning the meeting. The requisition must be sent to the registered office of the company. 

By procedure, AGMs are convened by the directors who send out a notice of the meeting to shareholders entitled to receive notice of the meeting, at least 21 days prior to the meeting. The notice must provide:

• sufficient details of the place, date and hour of the meeting;
• the general nature of the business to be transacted; and
• other necessary pieces of information.

Other salient reports and documents would be circulated together with the notice.

For an EGM, the procedure is as follows.

• For a private company, two or more shareholders or a single shareholder holding not less than one tenth of the shares (or voting rights for a company limited by guarantee) of the company may requisition the directors to convene an EGM. The directors must, within seven days of receipt of the requisition, convene a meeting for a date not later than 28 days.
• For a public company, shareholders holding a minimum of one twentieth of the shares (or voting rights for a company limited by guarantee) of the company may requisition the directors to convene an EGM. The directors must, within 28 days of receipt of the requisition, convene a meeting for a date not later than 28 days.

If the directors fail to convene the meeting within the stipulated time, the requisitionists may convene the meeting, and the reasonable expenses incurred to convene the meeting will be paid by the company.

Barring any exceptions imposed by the constitution of the company, all shareholders are entitled to receive notice of a general meeting, and to attend, speak and vote at a general meeting.

Within the limits of the law, shareholders generally have the right to request information about the company. Shareholders may request to inspect and even to take copies of registers kept with the company, as well as financial statements and other documents of the company. Where necessary, the shareholders might pay a fee for the copies.

Although not expressly provided for in the Companies Act, it has long been understood that meetings may be held virtually and remotely where instantaneous communication can be achieved. More recent shareholders’ agreements and constitutions are making provision for virtual meetings.

Following the outbreak of COVID-19, the Registrar of Companies issued a communique on 14 May 2020 permitting meetings to be held virtually on online meeting platforms such as Zoom, Microsoft Teams, etc. However, the communique stipulated that:

• the Registrar General must be notified before a virtual meeting is held;
• the notification to the Registrar General should describe the electronic system to be used, to be fair to all members; and
• the notice of the meeting should be sent to every member electronically in accordance with notice provisions of the company’s constitution.

Unless the constitution of the company provides otherwise, quorum is constituted as follows:

• if the company has only one shareholder, that shareholder alone being present in person or by proxy where proxies are allowed; or
• in any other case, by two members or their proxies present in person where proxies are allowed, or by one member who holds shares representing more than 50% of the total voting rights of the shareholders having the right to vote at the meeting at which they are present. 

There are two main types of resolutions: ordinary resolutions and special resolutions.

Ordinary resolutions are passed by a simple majority of votes cast by the members of the company who, being entitled to do so, vote in person or by their proxies (where proxies are allowed at a general meeting).

Special resolutions are passed by not less than three quarters of the votes cast by the members of the company who, being entitled to do so, vote in person or by their proxies (where proxies are allowed at a general meeting).

The requirement of a special resolution would be expressly stated in the Companies Act and in the constitution of the company.

Although directors are responsible for directing the affairs of the company, they require the approval of shareholders in specified matters under the Companies Act and the constitution of the company. A simple majority – ordinary resolution – is required for the following matters:

• appointment and removal of directors;
• appointment of auditors;
• approving the remuneration and other benefits of directors and auditors;
• issuance of new or unissued shares, other than treasury shares;
• making voluntary contributions to a charitable or any other fund (besides pension funds) for the benefit of employees of the company;
• approval for directors to exceed the powers conferred on them by the Companies Act or the constitution of the company; and
• dispensing with the provision requiring directors to maintain an Interests Register.

75% approval – a special resolution – is required for the following matters:

• at incorporation, indicating an intention to have a registered constitution;
• regarding the total amount to transfer from reserves to stated capital;
• amending the constitution of the company to change the business activities or objects of the company;
• approval of a major transaction (transactions valued at more than 50% of the value of the assets of the company);
• variation of class rights;
• arrangement, compromise, merger or division of the company;
• voluntary winding-up by the shareholders of the company; and
• increasing or decreasing the number of shares.

Where the constitution of the company so allows, a shareholder entitled to attend and vote at a meeting can appoint a proxy to attend and vote at the meeting for and on behalf of that shareholder. The proxy need not be a shareholder of the company.

As previously stated, unless the constitution of the company provides otherwise, voting is by show of hands. In a vote by show of hands, each shareholder is only entitled to one vote regardless of the number of shares that the shareholder holds. Before or on the declaration of the results of a vote by show of hands, a poll may be demanded by the chairperson, or by at least three shareholders present in person or by proxy and representing not less than 5% of the total voting rights of all the shareholders having the right to attend and vote on the resolution.

In virtual meetings, shareholders vote electronically.

Shareholders have the right to require that a specific issue be considered or that a resolution be put forward at a general meeting. The request together with any supporting statement must be sent to the directors of the company. The company at its own cost will include such a resolution in the notice of the general meeting and circulate this together with the supporting statement, just as the notice of the meeting is circulated.

A shareholder may also request in writing that a statement regarding the business to be conducted at a meeting be circulated to the shareholders. Such statement would be circulated by the directors while the notice of the meeting is being served. This will, however, be at the expense of the shareholder. Also, the statement must be received at the registered office of the company at least ten days before the meeting, and a reasonable amount of time must be added for the circulation.

A shareholder may, in their own capacity or in a representative capacity, institute an action in a court of competent jurisdiction to challenge a resolution passed at a general meeting. The grounds may include an allegation that the act authorised by the resolution is ultra vires of the company, or that the resolution was not passed in accordance with the Companies Act or the constitution of the company.

The shareholder may make an application, in a court of competent jurisdiction, for an injunction to restrain the company.        

Shareholders generally influence company actions by the appointments they can make to the board of directors, where they have the power to attend and vote at general meetings on resolutions put forward. Shareholders may also put forward resolutions themselves to be passed at general meetings. Additionally, they may circulate statements on any business to be transacted at a general meeting. 

Shareholders may monitor the company’s actions by exercising their rights to inspect and obtain copies of registers kept by the company, as well as other reports and statements of the company.

Institutional shareholders and shareholder groups may use any of the methods stated above. They may also exert their influence by demanding a poll during voting at general meetings. 

Rights attendant with ownership of shares are generally attached to the shares themselves and not to the holder of the shares per se. Therefore, if the shares carry with them a right or an entitlement to receive notices of meetings, and to attend, speak and vote at general meetings, those rights shall be exercised by the holder of the shares, whether the holder is a nominee shareholder or the actual shareholder.

It should be noted, however, that the law requires beneficial owners of shares in a company to be declared.

Shareholders can pass a written resolution without holding a meeting.

A written resolution must be signed by all the shareholders currently entitled to attend and vote at the meeting of the company. Written resolutions cannot be used to remove a director or an auditor of the company.

For the issue of any new shares (other than treasury shares), the directors of the company must first offer the shares on the same terms and conditions to all the existing shareholders. Where the shares belong to a particular class, they must first be offered to all the holders of the shares of the class, in proportion (as near as possible) to their existing holdings, before offering the shares to any other persons. 

Shares, being personal property, are transferrable assets – and are transferrable by a written transfer unless the transfer is expressly restricted by the constitution of the company. The law, however, prohibits the transfer of shares to infants and persons found to be of unsound mind by a court of competent jurisdiction in Ghana.

Unless restricted by the company’s constitution, shareholders are entitled to grant security interests over their shares.

There is no requirement for shareholders to disclose their interests in other companies formed in Ghana. Rather, disclosure of interests in other companies is a requirement for the directors of a company. The company is required to maintain an Interests Register to record the disclosed interests of directors. However, shareholders may by ordinary resolution dispense with the requirement of the company to maintain the Interests Register.   

Shares can be cancelled after their issuance. If a shareholder fails to make payment for the shares issued to the shareholder after a valid call has been made for this, the shares issued to that shareholder may be cancelled.

Also, in the conversion of a company limited by shares to a company limited by guarantee, shareholders voluntarily surrender their shares to the company for cancellation immediately before the conversion.

A company may buy back its shares if the constitution of the company so allows. The buy-back of shares by a company is very restricted, and even where it is allowed by the constitution of the company, it must be done only under the following circumstances.

• Where the shares are only purchased out of a credit balance on the share deals account or out of transfers to that account from retained earnings as allowed under the law.
• Where redeemable preference shares are not purchased at a price greater than the lowest price at which they are then redeemable or will be redeemable at the next date on which they are due or liable to be redeemed.
• Where the purchase is not made in breach of the law – the company may not buy back its shares such that the total number of its shares, or of its shares of any one class, held by persons other than the company or its nominees becomes less than 85% of the total number of shares, or of shares of that class, which have been issued. Redeemable preference shares are not counted under this provision.

A company may not pay a dividend to the shareholders unless the company has complied with the distribution test. The distribution test demands that the amount to be paid as a dividend must not exceed the retained earnings of the company immediately before the making of the payment. Also, the company must be able to pay its debts as they fall due.

Subject to the dictates of the constitution of the company, the company may, by ordinary resolution, declare dividends in respect of a year or any other specified period. The dividend to be declared may not exceed the amount recommended by the directors of the company, and must be paid within 60 days after the resolution of the shareholders confirming payments or after the dividends have become payable.

The first directors of the company are named in the incorporation application. Subsequently, shareholders of the company appoint directors of the company at a general meeting of the company by an ordinary resolution. The constitution of the company may provide that a director or directors shall be appointed by a class of shareholders, debenture holders, creditors, employees or any other person.

The person to be appointed as director must, prior to the appointment, make a statutory declaration to be filed with the Registrar of Companies to the effect that:

• the person has not within the preceding five years of the application for incorporation been charged with or convicted of a criminal offence involving fraud or dishonesty, relating to the promotion, incorporation or management of a company; and
• the person has not been a director or senior manager of a company that has become insolvent or, if the person has been, the date of the insolvency and the particular company.

The person must also consent in writing to be appointed as a director, and the consent must be filed within 28 days of being made. The director is then appointed by a simple majority vote at a general meeting of the company.

The shareholders may by ordinary resolution at a general meeting remove from office any or all the directors of the company, despite anything stated in the constitution of the company or in agreement with the director. Notice of the intention to remove the director must be sent to the company not less than 35 days before the meeting at which the resolution will be moved. The company must give the shareholders notice of the intention to move the resolution not less than 21days before the meeting in the same manner as notices of meetings are circulated.

The company is also required to give a copy of the notice of the intention to the affected director. Such a director will be entitled to be heard on the resolution. The affected director is entitled to send a written statement to all members entitled to receive notice of the meeting. The company is not required to circulate the statement from the director if the statement is received less than seven days before the meeting.

Shareholders may bring legal proceedings to enforce the civil liabilities of a director where directors commit a breach of their duties.

Shareholders may also bring legal proceedings to restrain a threatened breach of duty of a director.

Lastly, the shareholders of a company may bring legal proceedings to recover from a director a property of the company.

Shareholders of a company have the right to appoint an auditor for the company by ordinary resolution even if the constitution of the company states otherwise. At an AGM, shareholders may pass an ordinary resolution to remove an auditor or appoint a new auditor in place of an existing auditor, and such appointment or removal shall take effect from the conclusion of the AGM.

To remove an auditor, notice of the intention to remove the auditor must be sent to the company not less than 35 days before the meeting at which the resolution will be moved. The company must give shareholders notice of the intention to move the resolution not less than 21 days before the meeting in the same manner as notices of meetings are circulated.

The company is also required to give a copy of the notice of the intention to the auditor. The auditor is entitled to send a written statement to all members entitled to receive notice of the meeting. The company is not required to circulate the statement from the auditor if the statement is received less than seven days before the meeting.

Directors of a company are required to give an account of their stewardship of the company at every AGM. At least 21 days before the AGM is held, directors must circulate:

• the financial statements;
• the consolidated financial statements; and
• the reports of the directors and auditors on the financial statements of the company.

These statements are to be laid out before the AGM for consideration. Through the report of the directors, directors of the company may report to shareholders on all the company’s corporate governance arrangements.

In Ghana, a body corporate cannot be a director of a company.

Controlling shareholders (as in, majority shareholders) in a company owe a duty to other shareholders of the company to ensure that:

• the affairs of the company are not conducted in a manner that is oppressive to them;
• the affairs of the company are not conducted in a manner that disregards their proper interests;
• acts of the company are not unfairly discriminatory against them; and
• acts of the company are not unfairly prejudicial to them.

Where the insolvency leads to liquidation of the company, shareholders may be entitled to share in the distribution of the assets of the company. Preference shareholders, if they are owed any preferential dividends, are entitled to be paid after payments to unsecured creditors whose debts are not secured by any kind of charge over an asset of the company.

Equity or ordinary shareholders are the last to be paid after the preference shareholders. Equity or ordinary shareholders have an exclusive right to participate in a further share of the assets of the company if there is a surplus after all debts are paid.

Where a shareholder can establish that the affairs of the company are being conducted in a manner oppressive to that shareholder or in disregard of the proper interests of that shareholder – or that an act of the company has been done or is threatened, or that a resolution of the shareholders or a class of shareholders has been passed or is proposed, which unfairly discriminates against or is otherwise unfairly prejudicial to that shareholder – said shareholder may apply and obtain from a court of competent jurisdiction an injunction to restrain the company from the following:

• doing that act or entering that transaction which is illegal or beyond the power or capacity of the company or which infringes a provision of the constitution of the company; or
• acting on that resolution not properly passed in accordance with the Companies Act or the constitution of the company.

The court may also declare that act, transaction or resolution already done, entered or passed to be void.

Also, the court may:

• direct or prohibit an act, or cancel or vary a transaction or resolution;
• regulate the conduct of the affairs of the company in future; or
• provide for the purchase of the shares of any shareholder of the company by other shareholders or by the company itself without regard to any limitations imposed by the law.

Shareholders of the company may institute legal proceedings to enforce liabilities of directors of the company. They may proceed to:

• enforce civil liabilities for the breach of duty by directors of the company;
• restrain a threatened breach of a duty of the directors; and
• recover a property of the company from a director. 

Civil liabilities of directors for breach of duty include:

• compensating the company for the loss the company suffers as a result of the breach;
• accounting to the company for a profit made by the director for the breach; and
• the right of the company to rescind the contract or transaction that was entered into in breach of the director’s duty.

Shareholders can bring a derivative action. Shareholders may proceed to court where they are of the opinion that either:

• the company or a related company does not intend to bring, diligently continue or defend, or intends to discontinue, legal proceedings that the company may be involved in; or
• that it is in the interest of the company or a subsidiary of the company that the conduct of the legal proceedings should not be left to the directors, or that the conduct of the legal proceedings ought to be determined by the shareholders as a whole.

The court may, if satisfied, grant permission to the shareholders to:

• bring proceedings in the name and on behalf of the company or a subsidiary of the company; or
• intervene in legal proceedings to which the company or any related company is a party for the purpose of continuing, defending or discontinuing the proceedings on behalf of the company or subsidiary of the company. 

The court may direct that all or part of the reasonable costs incurred by the shareholder to bring the derivative action should be paid by the company.

The Companies Act is replete with provisions that govern/restrict shareholder activism in Ghana. Below are a few of the key provisions:

• the right of shareholders to requisition EGMs, for shareholders holding one tenth of the voting rights in a private company and one twentieth in a public company;
• the right to attend, speak and vote at general meetings;
• the right of shareholders to appoint proxies to attend and vote at meetings on their behalf;
• the right of a shareholder to request a resolution at a general meeting, with the request and statement of the shareholder to be circulated at the cost of the company; 
• limitations on the powers of directors, thus requiring directors to obtain a shareholders’ resolution to undertake certain transactions; 
• legal proceedings to enforce liabilities of directors;
• shareholders’ rights of access to certain information and documents;
• the right of shareholders to appoint and remove directors despite any provision in the constitution of the company;
• the right of shareholders to approve the remuneration of directors and auditors;
• minority rights and remedies against oppression, including the right to require the company to purchase the shares of an “oppressed” shareholder;
• injunctions or declaratory remedies in the event of illegal or irregular activity; and
• derivative actions.

The key aims of activist shareholders include:

• ensuring that the company is managed in a manner that results in the maximum returns to them;
• maximising share valuation;
• ensuring that directors are not excessively remunerated; 
• ensuring that directors are not disposing of assets of the company wantonly;
• ensuring that the affairs of the company are conducted in a manner that is aligned with their interests; and
• improving corporate governance in the company.

Strategies commonly used by activist shareholders include:

• asking questions at general meetings;
• circulating statements for or against business to be conducted at general meetings;
• voting against resolutions;
• requesting the removal of a director;
• requesting a particular resolution at a general meeting; and
• litigation.

The Ghanaian corporate front is rather quiet, and there is no visible recent trend in activist shareholder behaviour. The Companies Act contains several provisions that govern and help to manage shareholder activism quite well. However, it is interesting to note that, in the past, activist shareholder behaviour has been witnessed in the banking sector.

There is a dearth of data for determining which particular groups of shareholders are more active than others, but it is worth noting that some individual shareholders have been notoriously very active.

As previously stated, there is a lack of readily accessible data or information for ascertaining what proportion of public activist demands were met in the last year.

Strategies that a company might employ to respond to an activist shareholder include:

• good corporate governance;
• maintaining good relationships with major shareholders;
• being accessible to shareholders;
• making the registers of the company easily accessible;
• disclosing the remuneration of directors and key officers; and
• increasing share valuations and maximising the returns to shareholders.