Corporate Governance of Public Companies Grabs the Headlines - International Law Office

International Law Office

Company & Commercial - Ghana

Corporate Governance of Public Companies Grabs the Headlines

September 08 2008


In June 2008 the now famous extraordinary general meeting of CAL Bank, a public company listed on the Ghana Stock Exchange, presented a test case for corporate governance in Ghana, in the full glare of the media.

The case began to unfold at CAL Bank's annual general meeting (AGM), when the shareholders rejected resolutions by the board of directors which proposed, among other things, to:

  • increase the company's stated capital through a rights issue;
  • create a pool of shares for distribution to non-executive directors and executives; and
  • subject to the prior approval of the Ghana Stock Exchange, amend the regulations of the company.

Subsequent to the AGM, one of the major individual shareholders requisitioned an extraordinary general meeting for the removal of the managing director, on the grounds that:

  • the rejected resolutions reflected the vision of the managing director and therefore his continued role as managing director was not to the benefit of the company;
  • the managing director had a conflict of interest due to his position as chairman of the Listing Committee of the Ghana Stock Exchange; and
  • the proposed amendment to the company regulations would have removed the pre-emptive rights of existing shareholders.

In their response circulated to the shareholders, the board of directors and the managing director denied the allegations made against them. They stated that: (i) they could find no basis to remove the managing director, who had received several banking awards; and (ii) the proposed rights issue was intended to support the company's expansion programme, which was legitimate.

At the extraordinary general meeting, the resolution to increase the stated capital was accepted and the resolution for the removal of the managing director was rejected on both a show of hands and a poll.

The case has set a precedent on the exercise of shareholders' rights in public companies. The value of the case, in the words of the individual shareholder who instigated the drama, was to inform the public “that shareholders’ right must not be taken for granted”.

For further information on this topic please contact Isabel Boaten at AB & David Law Affiliates by telephone (+233 21 253 073) or by fax (+233 21 253 075) or by email (isabel@abdavid.com).


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