AGRICARE COMPANY LIMITED v. CHICKS & CHICKEN SERVICES LIMITED & ANOR
2019
HIGH COURT
GHANA
CORAM
- DR. RICHMOND OSEI-HWERE, J
Areas of Law
- Corporate Law
2019
HIGH COURT
GHANA
CORAM
AI Generated Summary
The court examined whether the Managing Director (2nd defendant) of a company (1st defendant) could be personally liable for actions undertaken on behalf of the company. It reaffirmed the principle that a company is a distinct legal entity separate from its shareholders and directors. Therefore, actions by the Managing Director are considered actions by the company itself. The court found no evidence of fraudulent or improper conduct by the Managing Director that would justify piercing the corporate veil. Consequently, the court granted the application to remove the Managing Director as a defendant, maintaining that only the company should be sued for the debt in question.
RULING
The incorporation of a company has many advantages, chiefly among them is the separate legal entity status bestowed upon the company. This advantage is a creation of law and has limited the liability of those who incorporate and manage the company’s affairs. It is, therefore, axiomatic to state that a company is a legal entity distinct from its members. Hence it is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members i.e. the shareholders, directors and officers of the company. This fundamental principle of corporate personality and its distinctiveness from its members was first espoused in the celebrated case of Salomon v Salomon [1897] AC 22 where Lord Macnaghten held:
"The company is at law a different person altogether from the [shareholders]...; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands received the profits, the company is not in law the agent of the [shareholders] or trustees for them. Nor are the [shareholders], as members liable in any shape or form, except to the extent and in the manner provided by the Act."
This position of the law is captured in section 24 of the Companies Act, 1963 (Act 179) which provides as follows:
‘‘Except to the extent that a Company's Regulations otherwise provide, a company registered after the commencement of this Act and an existing company which, pursuant to section 19, adopts Regulations in lieu of its memorandum and articles of association shall have, for the furtherance of its objects and of a business carried on by it and authorised in its Regulations, all the powers of a natural person of full capacity.’’
The provisions of Section 24 of the Companies Act have been applied in numerous cases including Morkor v Kuma [1998 - 99] SCGLR 620 where the Supreme Court held at page 632 per Sophia Akuffo JSC (as she then was) as follows:
"Save as otherwise restricted by its regulations, a company, after its registration, has all the powers of a natural person of full capacity to pursue its authorised business. In this capacity, a company is a corporate being, which, within the bounds of the Companies Code, 1963 (Act 179) and the regulations of the Company, may do everything that a natural person might do. In its own name, it can sue and be sued and it can owe and be owed legal liabilities. A company is, thus, a legal entity