IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT(COMMERCIAL DIVISION)
ACCRA - A.D 2016
EDEM AFFRAM - (Plaintiff)
BERNARD OWUSU-TWUMASI AND OTHERS - (Defendant)
DATE: 30TH NOVEMBER, 2016
SUIT NO: ACC/44/2015
JUDGES: HIS LORDSHIP ERIC KYEI BAFFOUR JUSTICE OF THE HIGH COURT
This is the ruling of the court in respect of the application filed by the Applicant seeking an order of the court to be joined to the action as 2nd plaintiff under Order 4 Rule 5 of the High Court (Civil Procedure) Rules, C.I 47.
In the affidavit in support of the application, the Applicant deposed to the fact that he and the 1st Defendant/Respondent together incorporated the 2nd Defendant Company. He averred that he subscribed to twenty five million shares (25,000,000) in the 2nd Defendant Company and he was also named director at the incorporation of the 2nd Defendant Company. He avers that he is a member of the 2nd Defendant Company as he has never transferred his interest in the company. And hence his prayer to be joined to the suit as 2nd Plaintiff.
The Court by an Order dated 26th July, 2016 granted the application. The Defendants/Respondents applied to set aside the Order of the Court joining the Applicant as 2nd Plaintiff on the ground that the affidavit in opposition filed by the Defendants/Respondents was not brought to the attention of the Court to aid the Court to come to a decision on the ascertained facts from both sides.
In this application, the Defendants/Respondents in an affidavit deposed to by their counsel claim that
Applicant is not a shareholder of the 2nd Defendant company as by a letter dated the 28th September, 2007 he requested a refund of his capital contribution and same has been given him. Defendant/Respondents say that the Applicant had also voluntarily resigned from his directorship of the company. It is therefore their contention that since the Applicant is neither a Director of the 2nd Defendant company by virtue of his voluntary resignation and had also recovered all the equity he had contributed as a subscriber, he is not a proper party to be joined to the action.
Order 4 rule 5(2) of the High Court (Civil Procedure) Rules states as follows:
At any stage of proceedings the Court may on such terms as it thinks just either of its own motion or on application
(a) order any person who has been improperly or unnecessarily made a party or who for any reason is no longer a party or a necessary party to cease to be a party;
(b) order any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the proceedings are effectively and completely determined and adjudicated upon to be added as a party”.
This principle has received judicial blessings in many cases. In COLEMAN v SHANG  GLR 390-409 the court in deciding an application for joinder under the old civil procedure rules held that:
“The purpose of Order 16 rule 11 is to secure the determination of all disputes relating to the same subject matter without delay, and without expenses of separate actions.”
VAN LARE J.A. AS C.J. cited with approval the dictum of Lord Esher thus;
"I can find no case which decides that we cannot construe the rule as enabling the Court under such circumstances to effectuate what was one of the great objects of the Judicature Acts, namely, that, where there is one subject-matter out of which several disputes arise, all parties may be brought before the Court, and all those disputes may be determined at the same time without the delay and expenses of several actions and trials. It appears to me that the words of the rule are large enough to allow of the joinder of the British Saw Mills Company as defendants in this case. I think the question arising between them and the plaintiff is a ‘question involved in the same cause or matter' within the meaning of the rule."
So, too, in BENTLEY MOTORS (1931) LTD. V. LAGONDA LTD. ((1945) 14 L.J.R. CH. 208 it was held that one of the main objects of the rules on joinder is to enable the Court:
"effectually and completely to adjudicate upon and settle all questions involved so as to render unnecessary multiplicity of proceedings”.
In the result, the applicant must be a necessary party whose presence before the Court is a sine qua non for effective determination of all matters in controversy before the court.
The rule further enjoins a person applying under the Order to be joined as a party to show his interest in the matter in dispute. The Applicant avers that he is a shareholder and director of the 2nd Defendant company. The Defendant/Respondents contention is that the Applicant has ceased to be a member of the 2nd Defendant company because his equity contribution has been refunded to him.
The applicable provision of the Companies Act, Act 179 is section 30 which provides as follows:
(1) The subscribers to the Regulations shall be deemed to be members of the company and on its registration shall be entered as members in the register of members referred to in section 32 of this Code.
(2) Every other person who agrees with the company to become a member of the company and whose name is entered in the register of members shall be a member of the company”.
From the Companies Act 1963 (Act 179) and on the case law, there are two modes of constituting membership of a company; one is those persons who subscribe to the regulations of the company for registration and incorporation, and second is those persons who, subsequent to the incorporation of the company acquire shares from the company. See PETER OSEI ASSIBEY v ADEHYEMAN GARDENS LTD & ORS. [2003-2005] 1 GLR 391.
The Applicant having subscribed to the Regulations of the 2nd Defendant company is a member of it. His membership is by prescription of law, in that respect once he subscribed to the Regulations he became a shareholder upon the incorporation of the company. The membership continues until any of the eventualities in S.30 (5) occurs. The provision states that:
“Membership of a company with shares shall continue until a valid transfer of all the shares held by the member is registered by the company, or until all such shares are transmitted by operation of law to another person or forfeited for non-payment of calls under a provision in the Regulations, or until the member dies”.
Thus the membership of a shareholder can be brought to an end on the occurrence of any of the events stated in S. 30(5) of the Companies Act.
A valid transfer of shares must be done in accordance with the Companies Act and the company’s Regulations and must be registered by the company in order to end the membership of the shareholder transferring his shares.
What are the applicable provisions under the Companies Act on the transfer and registration of shares?
The Companies Act allows for company Regulations to provide for the restrictions on transfer of shares of that company. The Act however provides that the transfer shall be by a written transfer in common form- S.95(1) of Companies Act. Thus, there must be an instrument evidencing the transfer.
The point is buttressed by S. 98(2) which provides that-
(2) Notwithstanding anything contained in the Regulations of a company or in any contract, it shall not be lawful for the company to register a transfer of shares or debentures unless a proper instrument of transfer duly stamped, if chargeable to stamp duty, has been delivered to the company:
Provided that nothing herein contained shall prejudice any power of the company to register any person to whom the right to any shares or debentures has been transmitted by operation of law.
From the sections, it is clear that the Act does not endorse transfer of shares by the means which the Defendants/Respondents are urging on this court. The Defendants/Respondents say that by a letter dated the 28th day of September, 2007 (Exhibit OHC 3), the Applicant demanded a refund of his equity contribution and that by a cheque dated the 16th day of October, 2007 (Exhibit OHC 5) the Applicant was paid. They did not execute any instrument of transfer. Consequently, whatever purported transfer was made is contrary to the Companies Act.
More so, the Companies Act provides clearly that except in a capitalisation issue, all shares issued or taken up must be issued for valuable consideration and that where the shares are given in consideration for services provided S. 42 must be complied with.
The Applicant subscribed to twenty-five million shares; five million shares of which was given to him in consideration of his services during the formation of the company and twenty million shares for which he paid. In the light of S.42, having subscribed to take up twenty-five million shares, his liability to the company is for the value of entire twenty-five million shares and a purported refund of twenty-million cannot end his membership in the absence of a valid transfer all of his shares and registration of same.
In the result, the refund made to the Applicant cannot constitute a valid transfer of shares under the Companies Act. It cannot operate to bring an end to the membership of the Applicant. Defendants/ Respondents contention that by virtue of the refund to the Applicant of his contribution in the company, the applicant’s membership was effectively extinguished is untenable.
An important issue has also been raised in the substantive suit and that is the alleged fraudulent change in the shareholding structure of the 2nd Defendant company by the 1st Defendant/Respondent. The Applicant having shown an interest in the shares as a shareholder or otherwise becomes a necessary party for the effective determination of that issue before the court.
On that score, I think the applicant has demonstrated sufficient interest in the suit and his presence as a party is necessary for the determination of all the issues in controversy. In will order that the writ and statement of claim is amend to capture the presence of the applicant in the action. I make no order to cost.