AGYARKO-MINTAH EMMANUEL

APPOINTMENT AND REMOVAL OF DIRECTORS

Act 992 and case law provides three methods for the removal of directors. To fully appreciate
how these methods are being exercised, one has to take cognizance of how directors are being
appointed to gain a full appreciation of their removal method. As the presentation goes on, it is
important to draw the distinction between termination and removal. So as not to be confused by
any of the two.

Removal is one of the methods of terminating the appointment of a director but more often than
not, termination is as a consequence of the actions, character or attribute of a director. Removal
is more of the powers of a certain class of people who exercise them because they have been
given that power either by the constitution of a company or statute. For example, a director’s
office will be terminated where he is adjudged to be of unsound mind according to Section 173
and he becomes incompetent to act or where the director resigns by notice in writing to the
company, on the death of the director or any other additional grounds provided by the company

Four categories of persons under the companies act 992 can appoint a director.

Firstly, the promoters or subscribers. Section 10 prescribes that promoters are interested persons
in the formation of the company. According to the case of Twycross v Grant, the promoters or
subscribers determines the qualification of a director and he appoints them. The implication of
this in Dolphyne v Speedline is that the first directors are appointed by the promoters of the
company. Section 172(1) prescribes that the first directors of a company shall be named in an
application for incorporation

Secondly, the appointment of directors can be done by a class of shareholders if the constitution
states so or any other person named in the constitution, but where the constitution is totally silent
on who should appoint the director, the default position in Section 300 for a private company
shall apply and Section 325 of a public company shall come into play. This position allows the
members acting in a general meeting to appoint or remove old director or any other person
named in the constitution.
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The continuing director(s) have the power of appointing new directors in two scenarios, where
powers have been conferred on them by the constitution to appoint a director under 29(2) and
172(4). Continuing directors under 172(5) can appoint another director in the event of a casual
vacancy. A casual vacancy according to Politis v Plastico is a vacancy not occurring by effluxion
of time; any vacancy occurring by death, resignation or bankruptcy. Note that the power to
appoint under Section 300 and 325 of the Companies Act can vitiated by the constitution of the
company but the constitution of the company cannot take away the powers of the directors to
appoint under Section 172(5).

The court also under Article 172(8) can appoint directors in very limited scenarios. Firstly, where
there are no directors of a company or number of directors is less than the quorum required for a
meeting. Secondly, where it is not possible or practicable to appoint directors in accordance to
the constitution. A shareholder/creditor of a company may apply to the court to appoint one or
more persons as directors of the company. Finally, the court may make appointments where it
considers that it is in the interest of the company to do so.

Removal of directors are addressed in Section 176, 29(2) and to an extent 219 as explained by
your Lordships in the case of Pinamang v Abrokwa.

Section 176 prescribes that members always retain the power to remove a company director
notwithstanding anything in the constitution or agreement. The power to remove a member is by
an ordinary resolution at a general meeting. The member who intends to remove the director
from the company must give notice to the company at least 35 days before the meeting. If after
the notice, the company sets a general meeting for 35days or less, then notice is deemed to be
properly given. Notice shall be given to the director affected and also all members of the
company. According to the case of Heinrich Koch v Horteng, the reason why notice of intention
to remove a director is given to the director is so that the director can respond to the notice and
when he comes to the General meeting, the director can defend himself and his position as to
why he should not be removed. The audi-alteram partem rule comes to play here.

The effect of giving notice was discussed in the case of Serbeh-Yiadom v Stanbic Bank, the
court averred that It is a salutary and well-known principle of law that a person should be given
the opportunity of being heard when he is accused of any wrong doing before any action is taken
against him. Where notice is not given to a director for his removal and the removal is done via
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the provisions of Section 176, that removal will be considered null and void. The court asserted
that in an extraordinary general meeting held to remove a director, if the director does not attend
and a resolution is passed to remove him care must be taken to ascertain that he has in fact been
properly made aware of the meeting. This is so because to enable him defend himself the law
stipulates that even where the director to be removed is not a member or shareholder of the
company he shall nevertheless “be entitled” to be heard at the meeting. This provision may be
contrasted with section 153(1) of Act 179 which requires that “The notice of a meeting shall
specify the place, date and hour of the meeting, and the general nature of the business to be
transacted thereat in sufficient detail to enable those to whom it is given to decide whether to
attend or not;. . .” (The emphasis is mine.)
The affected director can provide a written statement in response to the notice and the response
must be circulated to all members according to Section 176 (5(b). the director has the right to be
heard. However, the written statement won’t be sent or circulated if it is received by the
company less than 7 days before the meeting or the court makes an order that because the
statement is unreasonably long or the notice is to defame.

In the case of Pinamang v Abrokwa, where certain shareholders sort to remove a director from
office via Section 218 of Act 179 and now Section 219 of 992, the court was of the opinion that
to remove a director one has to first attempt to resort to the procedure set out by now section 176
and it is when it fails, that a party can seek relief under section 219 as a last resort. Since there
was no evidence to show that the respondents had unsuccessfully attempted to remove the
appellant pursuant to then section 185 now Section 176, that complaint should have been refused
and dismissed in limine by the trial judge.

In the case of Adehyeman Gardens v Assibey, where the shareholders sort to remove one
director because the said director had unpaid liabilities on the shares to which he owns. The
courts averred that according to 179, a company director may cease to hold office either by
resignation, operation of law or removal pursuant to a general resolution of the members in
general meeting. The provisions for this judgment are however saved in Act 992.

In Adams v Tandoh, the court held a contrary opinion, in this particular case, the appellant, as
found by the learned trial judge, had not only breached his fiduciary obligation towards the
company as required by section 203 of the Code (duties of directors, now Section 190), but had
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also committed acts of serious fraud and criminal misconduct in his dealings with the company.
It was disclosed by the evidence that the appellant had been guilty of immoral and untrustworthy
conduct and it would have been highly prejudicial to the interests of the West Coast Group of
Companies to keep him in his position. Prompt and swift action was therefore absolutely
necessary to safeguard the interests of the Group. In the court’s view, immediate summary
dismissal was the right answer and that was justified under the common law. It would seem from
the views expressed by the court that the serious nature of the misconduct of the dismissed
director and its potential impact on the interest of the company justified his summary dismissal.
Under the then 216, saved as 217 of Act 992, a director could be summarily dismissed without
resort to the procedure under section 185. The appellant was an officer of the company. That is,
he was the managing director of Solid Construction Co. Ltd. and a director of the other three
sister companies; and his relationship with those companies continued to be governed by the
common law rules of master and servant, irrespective of then section 185 (now 176) whose
provisions are not in conflict with the common law rules. There was therefore no obligation
whatsoever on the part of the company to resort to the procedure under section 176 of the Code
before the appellant could be dismissed from his office as a director or as a managing director.
The company may choose either to adopt the procedure under the said section 176 or may
proceed in accordance with the principles of common law and equity as provided by section 216,
depending on the circumstances of each case.
The primary position of the law under Section 176 is further complicated by Section 29(2) and
the understanding of Section 219 by the courts. Section 29(2) prescribes that where the
constitution of a company empowers a person to appoint or remove a director or any officer of
the company, that power is enforceable by that person although that person is not a member of
the company. this means that a member or someone who is not a member can be given the
powers to appoint and remove a director. One should be reminded of the fact that Sections
174(4) provides for the appointment of a director by a person or a class of shareholders,
debenture holders and creditors. A combined effect of 174(4) and 29(2) would mean that aside
members acting in a general meeting by an ordinary resolution, any other person named in the
constitution as having the powers to appoint and remove the directors can do so.

Also, in the case of Pinamang v Abrokwa, the court seemed to suggest that a director can be
removed via Section 219. The court suggested that a party must attempt to remove a director via
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the procedure set out in Section 176 and when that fails, the party can seek relief under 219.
Section 219 posits that a member or debenture holder of a company or, in a case falling within
section 234, the registrar may apply to the court for an order under this section on the grounds
that

“(a) the affairs of the company are being conducted or the powers of the directors are being
exercised in a manner oppressive to one or more of the members or debenture holders or in
disregard of the proper interests of those members, shareholders, officers, or debenture holders of
the company;

(2) Where on the application, the Court is of opinion that either of the grounds set out in
subsection (1) is established, the Court may, with a view to bringing to an end or remedying the
matters complained of, make an appropriate order; and, without limiting the effect of this
subsection, the Court may by order, (a) direct or prohibit an act or cancel or vary a transaction or
resolution; (b) regulate the conduct of the affairs of the company in future”

The court could deem it appropriate in this scenario to remove a director from the inference of
your lordship in the case of Pinamang v Abrokwa especially if it is the last resort of members or
a debenture holder or the registrar of companies. Section 170 (1) defines a director as a person,
by whatever name called, who are appointed to direct and administer the business of the
company. In regulating the conduct of the business in the future, the court could remove the
person who directs and administers the business of the company.

In the final event of a scenario where a casual vacancy is filled by continuing directors, the
person who is appointed as a director is subject to the unexpired term of the director, he replaces
but such director shall seize to hold office as a director when the one who is meant to make the
appointment of director makes it.

From the above presentation, we suggest that three bodies have the powers to remove the
director and their powers are exercised independently as conferred on them either by statute of
the constitution. Members acting in a general assembly, any person given the person to remove
or appoint a director and the court through an application by members of the company, debenture
holders or the registrar.