Understanding Shares and Shareholder Rights in Ghana: Rights, Duties, and How to Become a Shareholder

Understanding Shares and Shareholder Rights in Ghana: Rights, Duties, and How to Become a Shareholder

Shares represent ownership stakes in companies, granting rights like dividends and voting. Shareholders must follow company rules, pay for shares, and aid during winding-up

Shares are a fundamental aspect of a company’s structure representing ownership and providing shareholders with rights and responsibilities within the business. Financially, shares represent the amount a member must pay or has paid for the shares, and they serve as the basis for calculating and distributing dividends.

In Ghana, shares not only offer a way for individuals to invest in companies but also play a critical role in raising capital. Understanding the nature of shares, the rights and duties of shareholders, and how one can become a shareholder is essential for anyone looking to engage in the corporate world.

This article explores these key concepts, shedding light on the legal framework outlined in the Companies Act, 2019 (Act 992).

RIGHTS OF SHAREHOLDERS IN GHANA AND THE NATURE OF SHARES

1.  Dividends: Shareholders are entitled to receive dividends whenever declared by the company. By owning shares shareholders have undertaken to contribute to the company’s capital if needed, and once the company becomes profitable, shareholders are entitled to share in the profits when dividends are distributed.

2.  Meetings: Every member of a company has the right to attend general meetings and to speak and vote on resolutions, subject to some restrictions. This right can be exercised without any restrictions unless such restrictions are stated in the constitution of the company. However, generally, shareholders who have not paid for their shares after calls have been made, or when the amount due on the share is payable may be restricted from attending and voting during meetings

3.  Inclusion of name in Register: Shareholders have the right to have their names and other particulars entered into the register of members. An aggrieved shareholder may make an application to the court to have the register rectified if their name has been omitted without just cause.

4.  Access to Register: Shareholders have the right to inspect the register of members and to request for copies of the register subject to the payment of prescribed fees. Access to the register of members allows shareholders to ensure transparency and engage effectively in corporate governance.

5.  Appointment of Directors: Shareholders are entitled to appoint directors who oversee the operations of the company.

6.  Winding Up: In the event of a company’s winding up or closure, shareholders are paid only after all creditors have been satisfied. As they are last in line for payment, shareholders may receive less than what they originally invested in their shares.

7.  Nature of Shares: Shares are intangible assets, meaning they cannot be physically touched or handled like physical objects. Instead, they are considered personal property similar to money or goods and can be bought, sold, transferred, or mortgaged, subject to the Act and the company’s constitution.

8.  No Ownership of Assets: Shareholders do not own the company’s assets. Though they are members, the assets belong to the company, not the shareholders. Consequently, no individual shareholder has the authority to unilaterally sell the assets of the company

DUTIES OF A SHAREHOLDER

1.  Shareholders have an obligation to observe and abide by the company’s constitution, which becomes binding on all members and officers of the company. In effect, shareholders are obligated to perform all duties stated in the company’s constitution and the Companies Act.

2.  Shareholders are obliged to pay for the shares of the company based on the terms under which they were issued or the agreement through which they were acquired.

3.  Shareholders are required to contribute to the assets of the company during its winding up to assist the company in discharging its liabilities.

HOW TO BECOME A SHAREHOLDER IN GHANA

1.  Subscription:  A person can become a shareholder of a company by subscribing to the company’s constitution at the time of incorporation. Subscribers are the company’s initial shareholders.

2.  Agreement: A person can become a shareholder of a company through an agreement, like a share purchase agreement.

3.    Transfer: A person can become a shareholder of a company through the transfer of shares, which is generally unrestricted unless the company’s constitution specifies otherwise.

4.  Transmission: A person can also become a shareholder of a company through transmission, which involves acquiring shares by operation of law. For instance, in the event of a shareholder’s death, their shares may be transmitted to the surviving shareholders in the case of joint ownership of shares or to the deceased’s legal representatives.

5.  Conversion: A convertible debenture holder has the option to convert the debt owed by the company into shares, which would then be held by them. A debenture holder is essentially a lender to the company. If the holder of a convertible debenture chooses to exercise the right to convert the debenture into shares, they become a shareholder.

Shares are vital components of a company’s structure, and the issuance of shares is the most effective way of raising capital. Understanding what shares are, the rights and duties of shareholders, and how to become a shareholder are crucial for investors and companies alike.

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