ACCRA - A.D 2016

DATE:  15TH JUNE, 2016
SUIT NO:  SEC/AHC/16/2015

The appellate jurisdiction of the High Court has been invoked in the two appeals to determine the correctness of the decision of the Administrative Hearing Committee (AHC) under the Securities Industry Act, Act 333 whose decision was approved by the Securities and Exchange Commission (Commission); in respect of renounceable rights offering or rights issue by Starwin Products Ltd (SPL). Based on the rights offering Dannex Ltd. became the new majority shareholder with 75% shares in SPL. Following the approval of the decision by the Commission two separate appeals were launched before the High Court. The first appeal which was initially before the Financial Division of the High Court was by four directors of SPL against I. C. Securities, the transaction advisers and Dannex Ltd. who will be directly affected by this decision.


The second appeal by the appellant in suit number ACC/16/2015, who until the rights offering was the majority shareholder was launched before the Commercial division.


An order was made consolidating the two appeals by the honourable lady Chief Justice more so when guided by Order 31 rule 2 of the High Court (Civil Procedure Rules) of 2004, (CI 47) by which it is provided:


“Where two or more causes or matters are pending in the same Court and it appears to the Court

(a) That some common question of law or fact arises in both or all of them, or

(b) That the rights to relief claimed are in respect of or arise out of the same transaction or series of transactions or

(c) That for some other reason it is desirable to make an order under this rule……”


The common questions of law or facts from the two appeals for determination by the court are: a. whether or not I. C Securities usurped the powers of the shareholders and the directors of SPL in the allotment of shares to Dannex Ltd. and the other persons who took up shares and two, whether or not the Regulation 9 of SPL had been violated in the process of the allotment of shares.


The appellant in suit no. ACC/16/2015 aggrieved and dissatisfied with the decision of the Commission and its hearing Committee seeks the following reliefs:

i. That the decision is against the weight of evidence

ii. The administrative Hearing Committee misdirected itself in respect of the issue as to whether or not I. C. Securities (Ghana) Ltd usurped the powers of the Directors of Starwin Products Ltd when it referred and based its decision on paragraph 1.7 of the Offer Prospectus when the said paragraph referred to the process of priority allotment and not who had the power to allot.

iii. Administrative Hearing Committee (AHC) erred in law when it held that Regulation 9 of Starwin Products Ltd had not been violated and when on a true and proper interpretation of the Company regulations and the offer Prospectus, the renounceable rights issue was to be carried out subject to the provisions of the company regulations of Starwin Products Ltd

iv. Addtional grounds of appeal will be filed upon receipt of record of proceedings


The court is unaware of any further grounds of appeal subsequent to the receipt of the record of proceedings before the (AHC) that were filed by the appellant – Mirfield Properties Ltd.


The following reliefs have also been sought in suit no SEC/AHC/001/15:

a. The AHC of the Securities and Exchange Commission erred in law by holding that the 1st respondent [I.C. Securities (Gh) Ltd] did not usurp the powers of the Board of directors of Starwin Products Ltd and its shareholders when the 1st respondent unilaterally allotted extra shares to the 2nd respondent [Dannex Ltd].

b. AHC of the Securities and Exchange Commission misdirected itself in law by holding that the resolutions passed by the shareholders of SPL on 19th June, 2013 for the rights issue was in compliance with Regulations 9 of SPL and therefore same had not been violated.


It is now a hackneyed principle so notorious in respect of appeals that appeal is by way of rehearing and an appellate court ought to place itself in the same position as if it was the trial court, and in this instance the court ought to behave as if it was the AHC. See the following cases: the dictum of Dotse JSC in the case of TORBUI DZOKUI 11 v ATISE ADZAMLI (unreported) J4/36/2015 delivered on




Nonetheless the remit of how an appellate court should go about exercising its appellate function was sounded in the case of BONNEY v BONNEY [1992-93] 2 GBR 779, when the Supreme Court noted as follows:


"...The argument that an appeal is by way of rehearing and therefore the appellate court was entitled to make its own mind on the facts and draw inferences from them might well be so but an appeal court ought not under any circumstances interfere with findings of fact by the trial judge except where they were clearly shown to be wrong, or that the judge did not take all the circumstances and evidence into account, or had misapprehended some evidence or had drawn wrong inferences without any evidence in support or had not taken proper advantage of his having seen or heard in support of the witnesses".


And in respect of this appeal, the trial court, mutatis mutandis, will be the AHC of the Securities and Exchange Commission. To better appreciate and deal with the two germane grounds of appeal by all the appellants in this consolidated suits it will be useful to recount the background that has ignited this appeal before this court:


Per an annual general meeting (AGM) of shareholders of SPL held on the 19th of June 2013 the members present unanimously passed a resolution authorising the directors of SPL to issue additional shares through a renounceable rights offer to raise up to Ghc10 million in accordance with the regulations of SPL, the Companies Act, Act 179 with the prior approval of the Ghana Stock Exchange (GSE). From the minutes of the AGM it is also on record that another resolution was passed wherein the shareholders approved and authorised the directors to offer any shares that are not taken up by the shareholders under the renounceable rights issue to prospective investors as the directors deem fit. Flowing from the resolutions passed by the shareholders, the directors of SPL engaged I.C Securities as transaction advisers to help it undertake the renounceable rights issue. An Offer Circular issued by I. C Securities which spelt the terms and procedure for the renounceable rights issue and allotment of shares was approved by the directors of the company in a Resolution passed on the 21st of May, 2014 when it fully endorsed the Offer Circular issued by I.C Securities.


There were two separate challenges regarding the meetings and processes undertaken in the allotment of shares but they were all dismissed by the High Court. A subsequent complaint lodged before the Director General of the SEC was similarly dismissed as unmeritorious. Aggrieved by the opinion of the Director – General the appellants invoked their rights under the PNDCL 333 and requested for a hearing before the AHC set under the said law.


The AHC dismissed the three grounds of complaint filed before it as it found that I. C Securities did not usurp the powers of the Board of Directors of SPL in the rights issue process, neither did I. C Securities breach or violate Regulation 9 of the Regulations of SPL nor did the AHC find any evidence in support of the averments of the appellants regarding a charge of insider trading in the allotment of shares.


Piqued by the said ruling the appellants have exercised their right of appeal conferred by the law in launching these appeals before the High Court, which appeals have duly been consolidated.


I cannot proceed to examine the substance of the appeal, without determining a point of law raised by the learned counsel for Dannex Ltd. that this appeal ought to be dismissed in limine for being brought out of time. According to the submission of counsel the appeal in Suit No SEC/AHC/001/15 was filed on the 19th of August against the ruling of the AHC of SEC which to him the appeal must be brought within one month of the delivery of the decision of the quasi-judicial body.




It is provided for under sections 8F and 8G of the Securities Industry Act, PNDCL 333 as inserted by the Securities Industry (Amendment) Act, Act 590 that:

(1) Every decision of the Hearings Committee on any matter submitted to it for determination shall be referred to the Commission.

(2) The Commission upon receipt of the decision may—

(a) approve of the decision;

(b) remit the issue to the Hearings Committee for further consideration; or

(c) modify the decision.[As inserted by Securities Industry (Amendment) Act, 2000 (Act 590) s.9]


Section 8G—Appeals from Decision of Hearings Committee.

A person dissatisfied with a decision of the Hearings Committee under this Part confirmed by the Commission may appeal to the High Court. [As inserted by Securities Industry (Amendment) Act, 2000 (Act 590) s. 9].


It is my understanding of the law that there is no inherent right in a litigant to appeal as appeal is a creature of statute. See IN RE YENDI SKIN DISPUTE; YAKUBU II v ABDULLAI [1984-86] 2 GLR 226; NYE v NYE [1967] GLR 76. Indeed in the case of FRIMPONG Vs. POKU [1963] 2 GLR 1 the Supreme Court speaking through Akufo Addo JSC (as he then was) described appeal as follows: -


“A right of appeal is always conferred by statute, and when the statute conferring the right lays down conditions precedent to the vesting of that right in a litigant. It is essential that those conditions must be strictly performed otherwise the right does not become vested.”


But where the statute quoted supra did not specify the period within which such an appeal should be launched; can one authoritatively claim that it is the practice that such appeals ought to be brought within a period of one month? Order 54 Rule 2(1) of the High Court (Civil Procedure) Rules, C. I 47 spells out a thirty day period within which appeal against a decision of the Tax Commissioner could be filed before the High Court. This with respect, cannot be stretched to be a general rule of practice for all appeals emanating from quasi-judicial bodies to be brought within one month. For instance, appeals emanating from Adjudication Committee of the Land Title Registration Law, 1986, PNDCL 152 provides a period of three months to appeal against any decision to the High Court under Rule 7 of Order 53 of the High Court (Civil Procedure) Rules, CI 47. By this it is apparent that there is even no uniform rule as to the time specified for appeals from quasi- judicial bodies. As section 8G of Act 333 failed to spell out the period within which appeals must be filed, I think that in such circumstance the appeal ought to be brought within what would be termed as a reasonable time. Reasonableness may depend on the circumstance of the case. Here the filing of an appeal a little over two months cannot be said to be unreasonable and is well within time for the consideration of the appeal on its merit. Filing of an appeal within three months or seeking leave within three months after the expiration of the first three months in bringing an appeal may well be the acceptable practice in the absence of a specific time period stated by the law. The preliminary objection is accordingly dismissed.


In evaluating the substance of the grounds of appeal; the court will examine the two main grounds which the appellants argued in their written submissions to the court as well as their viva voce submissions.


There was no additional grounds filed as indicated in Mirfield’s fourth ground of appeal and seems not to have touched on the first ground of appeal that the decision of AHC was against the weight of evidence; nonetheless, it is trite as held in the case of DJIN vs. MUSAH BAAKO[2007-2008]1 SCGLR 686, that when a ground of appeal is couched in such an omnibus manner the appellant is simply inviting the court to review the entire record of appeal to ascertain whether the evidence adduced before the trial tribunal was properly considered. This court will therefore review the evidence on record and satisfy itself as to whether the decision of the AHC was right or not as part of the determination of the substantive two main grounds of appeal.


I start with ground B of appeal as stated by Mirfiled as follows:


“The AHC misdirected itself in respect of the issue as to whether or not the IC Securities (Gh) Ltd usurped the powers of the Directors of SPL when it referred to and based its decision on paragraph 1:7 of the offer prospectus when the said paragraph referred to the process or priority of allotment and not who had the power to allot”


In arguing this ground of appeal both appellants in the two consolidated suits have urged the court to construe the documents in accordance with the acceptable principles of interpretation or construction of a statute or document by embarking on a journey to discover the intent of the makers of the document. There is no gainsaying in this invitation by the appellants to the court that the better way of constructing instruments is to interpret it as whole in a journey of discovering the intent of the makers of the instruments. Indeed Chitty on Contract at note 18 of page 611 states as follows:


“it is true of construction that the sense and meaning of the parties in any particular part of an instrument may be collected ex ante cedentibus et consequentibus: every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that may be done”.


One can say that in interpreting a Judge ought to view the document as a whole and it is out of this holistic appreciation that the necessary connections and inferences could be drawn from the various parts, provisions, clauses, words, phrases etc in an attempt to discover the intent and purpose of the makers of the documents. This has been echoed time and again and in the words of Viscount Simmonds that:


“the elementary rule must be observed that no one should profess to understand any part of ... any document before he had read it as a whole”.


See ATTORNEY GENERAL v AUGUSTUS OF HANOVER [1957] AC 436; see also OSEI v GHANAIAN AUSTRILIAN GOLDFILEDS LTD [2003-2004] SCGLR 69. The rule of how to proceed has amply been set out as rightly pointed out by Counsel for Mirfield, Owusu Gyan, Esq in the case of BINEY v BINEY [1974] 1 GLR 318. And in embarking on this exercise any construction that makes the meaning of the document unreasonable, absurd, unintelligible, incongruous or that may tend to create undue hardship for the parties and third parties may be said not to be closer to the intention and purpose of the makers of the document as in the view of Hart and Sachs,


“an author of a document must be presumed by the Judge to be a reasonable person”.


Having fully accepted this invitation to interpret as a whole I first proceed with the resolution that authorised the renounceable right issue by the shareholders on the 19th of June, 2013. The two main resolutions were:

a. To authorise the directors to raise additional shares through a renounceable right issue to raise up to Ten Million Ghana Cedis (Ghc 10,000.000.00) in accordance with the Regulations of the Company, the Companies Act, Act 179 and other relevant laws and Regulations and subject to the prior approval of the Ghana Stock Exchange.


To authorise the directors to offer any shares that are not taken up by the shareholders under the renounceable right issue to prospective investors as the directors may deem fit.


In order to carry out the mandate provided the directors as per the resolutions of the shareholders of SPL supra, engaged I. C Securities as transaction advisers and sponsoring broker. The terms of engagement encompassed a lot more even beyond the seventeen areas of assistance that were listed. For it states:


“During the terms of this engagement in connection with the rights offering, we shall provide the Company certain services and assistance customarily provided by financial advisers and sponsoring brokers in connection with structuring and execution of rights offerings in Ghana, including but not necessarily limited to ...”


It then proceeded to lists areas of assistance which in a way was not exhaustive. Among these were structuring and pricing of the transaction in conjunction with SPL, organisation and co-ordination of the road shows, where necessary, advise and assistance in the allocation of shares, in conjunction with SPL etc. Towards the fulfilment of its mandate I.C Securities issued the Offer Prospectus. Before dealing with the contents of the Offer Circular and interpret it as a whole it is worthwhile to note that the Board of Directors per its meeting on 21st May, 2014 passed four resolutions, two of which are germane for the determination of this issue:


“Subject to the approval of the SEC, the Offer Circular prepared by the professional advisors in respect of the renounceable right issue is hereby approved and


The management of the Company is authorised to take all steps, including Board approved appointment of all necessary professional advisers to ensure compliance with all applicable legal and other requirements for the renounceable right issue and additional listing”.


It cannot be controverted that the Offer Circular or the Prospectus issued by I.C Securities had the unanimous endorsement of the SPL. There are two clauses in the Offer Circular that needs careful examination and these are clause 1:7 and     7:1. The Clause 1:7 on allotment states as follows:




The allotment of shares to applicants will be:

a. First to satisfy all duly completed applications from Qualifying shareholders and their renounces as pertains to qualifying shareholders’ rights in the offer; and

b. To satisfy all duly completed applications from qualifying shareholders and renounces for extra, pro rating where necessary.


To the extent that applications for extra shares received are more than the available number of unsubscribed rights under the offer, the directors of the company will allot fewer extra shares than applied for. The company and its Advisors will allocate the extra shares on a pro rata basis to existing shareholders.


Moreover, if qualifying shareholders and renouncees do not fully subscribe to the new shares being offered, the company and its advisers will allot the unsubscribed shares to new investors”.


From clause 1:7 it is clear that the allotment of shares per the formulae spelt out and endorsed by the directors themselves, I. C Securities was accepted as partner in the allotment process of shares. Nonetheless guided by the caveat set out supra that one cannot claim to understand a document unless read as whole it is necessary that clause 1:7 is read together with clause 7:1 that details the procedure of the allotment of the shares. There is the scheme of qualifying shareholders subscribing to their rights under the offer, two qualifying shareholders subscribing for their rights and applying for extra shares outside what such a shareholder would be entitled to under the offer, three a qualifying shareholder partially subscribing to his rights under the offer making it possible for the directors to allot the remaining shares as they deem fit, four a shareholders subscribing partly to their rights and renouncing their unsubscribed rights in favour of a qualifying third party. The final option available was for a qualifying shareholder not to take any action by failing to apply for shares or make payment and in such a situation the directors were empowered “to allot such unsubscribed rights as the directors deem fit”.


So much weight had been placed on this phrase by the appellants that it could only mean one thing the exclusive right of the directors to allot the shares and no other entity. I cannot acquit myself in resolving this issue without taking time to make bear the law on invitation to the public with respect to rights issue. There appears to me from the Companies Act, Act 179, that generally there are two invitations to the public known to the law. That is general invitation and restricted invitation. If the invitation meet the criteria set down under section 266 of Act 179 then it is an invitation to the public. Section 266 of the Companies Act states as follows:

(1) For the purposes of this Code an invitation shall be deemed to be made to the public if an offer or invitation to make an offer is,

(a) published, advertised or disseminated in Ghana by newspaper, broadcasting, cinematograph, or any other means whatsoever;

(b) made to or circulated among any persons whether selected as members or debentureholders of the company concerned or as clients of the persons making or circulating the invitation or in any other manner;

(c) made to any one or more persons upon the terms that the persons to whom it is made may renounce or assign the benefit thereof or of any shares or debentures to be obtained thereunder in favour of any other person;

(d) made to any one or more persons to acquire any shares or debentures dealt in upon any stock exchange or in respect of which the invitation states that application has been or will be made for permission to deal in those shares or debentures upon any stock exchange:


Provided that,

(a) nothing herein contained shall be taken as requiring any invitation to be treated as made to the public if it can properly be regarded in all the circumstances as being a domestic concern of the persons making and receiving it;

(b) an invitation made by or on behalf of a private company exclusively to its existing shareholders and debentureholders, not being greater in number than is prescribed by subsection (3) of section 9 of this Code, and its existing employees shall not be deemed to be an invitation to the public unless the invitation is of the type referred to in paragraph (c) or (d) of this subsection’.


The invitation could mean, among others, offer for subscription, invitation to the public to make an offer, placement of the companies securities with a financial adviser with intent to sell them by the adviser, renounceable rights issue, non-renounceable rights issue etc. where does the present offer of SPL fall? There is little controversy that this was a rights issue which meant that SPL was to offer the new shares to existing shareholders in proportion to their existing shareholdings. As the existing shareholders had the option to dispose their shares to even non securities holders, the rights issue was a veritable renounceable rights issue. First by means of a pre-emption rights by the members (that is members invited to subscribe for new shares in proportion to their existing shareholding) failing which there will then be an open rights offer. When it is an open rights issue it simply means securities that still remains after shareholders have exercised their pre-emption rights and some of the shareholders did not fully exercise their rights, leaving some securities still not allotted, an existing shareholder is perfectly entitled to acquire these surplus securities. From the resolutions passed by the shareholders on the 19th of June, 2013 that is what they precisely they meant. And in that respect where existing shareholders fail to take up their rights and it moves to an open rights offer, it has the potential to alter the pre-existing proportion of shareholding as even members of the public have the right to hold shares.


This then set the stage for determination as to the usurpation of the powers of the directors by I. C Securities in the allotment of shares.


The presence of I. C. Securities in the whole transaction became possible by virtue of the resolution of 21st May, 2014 and the terms of engagement of I. C. Securities. In a nutshell, the renounceable rights offer was to be undertaken through what is termed in the securities industry as placing. Placing was not done through a bought deal. Going through the document that engaged I.C. Securities as transaction adviser it was to be done in what is termed in the industry, as the best endeavour deal (though it is not stated on the face of the document); that is for the transaction adviser to act as an agent of SPL to use its best endeavour to have shareholders and subsequently members of the public to take up shares. So the issue was to be undertaken through flotation by the transaction adviser. And where the rights issue is done through such an intermediary, within the terms of section 267 of Act 179, it is deemed to be the act of the company. Gower’s Report, commentary to section 267 of Act 179, specifically paragraph 10 at page 192 notes that if the flotation is done, then the invitation is deemed to be made by the company as well as the issuing house and the company and its officers are accordingly liable.


I have taken this road of being pedagogical in this judgment with intent to dissolve doubts and illuminate the path of a purely technical area of law that seldom confronts the courts. With the greatest respect to the views of the appellants, I think it would not be a holistic appreciation of the entire documents of the Offer Circular, the role of transaction advisers who play the best endeavour deal role, the Companies Act, The Securities Industry Act, Act 333; if the interpretation as to who could allot shares was solely to rest on just clause 7:1(f). Such an appreciation is pedantic and patchy. To narrowly limit the power of allotment of shares to only the directors without taking into consideration Clause 1:7 and the role of such intermediaries in the industry misses the point.


Indeed per the terms of engagement referred to supra, I. C. Securities were to have powers of allotment with the directors more so when regard is had to the reference of I.C Securities who were invited to provide the kind of ‘services and assistance customarily provided by financial advisors and sponsoring brokers’. Some of the services and assistance customarily provided by such financial advisers is what I have taken pains to detail supra.


The submissions as to the meaning of allotment is apt when the flotation has to do more with an offer for subscription or invitation to the public to make an offer or application for shares and debentures or forms to be completed upon deposit of money, generally associated with unrestricted invitation to the public but not necessarily when the flotation has to do with renounceable rights issue or non-renounceable right issue or the placing of the companies securities with a financial intermediary or broker with a view to selling them in a restricted invitation to the public.


Again recourse must be had to section 137(1) of the Companies Act, Act 179 which states as follows:


“A company shall act through its members in general meeting or board of directors or through officers or agents appointed by, or under authority derived from the members in general meetings or the board of directors”.


If I.C. Securities had so acted in the allotment of shares based on their appointment as transaction advisers to be allotters of shares with the directors, then one cannot say that such advisers had usurped the powers of allotment of shares by the directors. I could have rested the disposal of the first main ground of appeal here; nonetheless, ex abundanti cautela, I think a clearer appreciation of the law of agency will throw a searching light and further lay this matter to rest.


BOWSTEAD AND REYNOLDS on Agency defines agency as


“a fiduciary relationship which exist between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of who similarly consents so to act or so acts”.


In the case of POLE v LEASK [1863] 33 LJ Ch 155; Lord Cranworth said of agency relationship as:


‘‘no one can become the agent of another person except by the will of that person. His will may be manifested in writing orally or simply by placing another in a situation in which according to ordinary rules of law, or perhaps it would be more correct to say, according to ordinary usage’s of mankind, that other is understood to represent and act for the person who has so placed him; but in every case it is only by the will of the employer that an agency can be created’’.


In the Ghanaian case of THE STATE v ASANTEHENE’S DIVISIONAL COURT; EXPARTE KUSADA [1963] GLR 238; Korsah CJ defined agency as:


‘‘where one has so acted as from his conduct to lead another to believe that he has appointed someone to act as his agent, and knows that other person is about to act on that other person’s behalf, then unless he interposes, he will, in general be estopped from disputing the agency, though in fact no agency really existed’’.


There are a number of ways agency can come into play including express or implied authority given by the principal to the agent to act. It is also trite that agency could also come into play by virtue of the agent doing what is customary or usual in a particular trade or business. Agency may also be operational by virtue of ratification by the principal and also by the operation of agency by estoppel under section 26 of the Evidence Act NRCD 323. See the case of WATTEAU v FENWICK [1893] 1 Q.B. 346 at 348; in respect of agency by an agent doing what is customary for the fulfilment of his mandate in a particular trade or business. In this case Wills J. said the principal is liable for all acts of the agent which are within the authority usually confided to an agent of that character. See also HELY-HUTCHINSON v BRAYHEAD LTD.[1968] 1 Q.B. 573; BAAH LTD v SALEH BROTHERS [1971] 1 G.L.R. 119;


Whatever allotment of shares done by I. C Securities had not been done in any naked usurpation of the powers of the directors of SPL as I.C. Securities had a clear mandate to undertake that exercise either by operation of section of 26 of the Evidence Act, or an act that is customary within the trade of brokers and financial advisers in rights offering. The ruling of AHC of SEC on this ground is hereby affirmed as right. I C Securities did not exceed their mandate nor sin against their mandate as transaction advisers. That ground of appeal alleging the usurpation by I. C Securities of the powers of the directors in the allotment of shares is dismissed as unmeritorious.


Now to the ground of appeal that alleges a breach of the Regulations of the SPL. This is how Mirfield put it:


“The Administrative Hearing Committee erred in law when it held that Regulation 9 of the Starwin Products Limited had not been violated when on a true and proper legal interpretation of the Company Regulations and the Offer Prospectus, the renounceable rights issue was to be carried out subject to the provisions of the company’s Regulations of Starwin Products Limited”


The Regulation 9 of SPL simply states that:


“The Company shall not issue shares to transfer controlling interest without the prior approval of shareholders at a general meeting”.


It has been the case of all the appellants both at the AHC of the SEC and before this court that when it was realised that allotment of shares to Dannex Ltd. would result in a transfer of controlling interest in SPL, there ought to have been a reversal of the directors to the shareholders for an approval to be given before any attempt at seeking to transfer the shares to Dannex Ltd. was done.


In its ruling the AHC found no merits in this contention by the appellants when it held, inter alia, that:


“...the shareholders in this meeting knew that rights issue may lead to a change in the shareholding structure of SPL and yet approved that the rights issue should proceed. Indeed the essence of the rights issue is to allow existing shareholders the opportunity of maintaining their current shareholding. It is therefore implied that when shareholders renounce their rights and same are acquired by others, their shareholding necessarily will change and they have to live with the consequences of the dilution of their shares. This is a basic principle in Company Law ... the argument put up by the Complainants that IC Securities should have reverted to the directors when it realised that Dannex was going to acquire controlling interest is untenable. This is because under Regulation 9 of SPL, it is the shareholders and not the directors that have authority to sanction any controlling interest which the shareholders granted on the 19th of June, 2013 assuming without admitting that the argument of the Complainant is right...”


Appellants gravely disagree with this ruling contending that the Resolutions passed by the shareholders never supported the conclusion reached by AHC that the shareholders resolutions passed constituted the prior approval that Regulation 9 of SPL demands. Indeed Tony Forson, Esq. in a supplementary written submissions filed on the 18th of December, 2015 at page 8 notes that


“the resolutions authorising the rights issue whereby existing shareholders were to take up shares in proportion to their shareholding cannot amount to conclusive evidence of the shareholders approving the issue of share to transfer controlling interest to any party”.


I glean from this ground of appeal and the submissions made in respect of it that it is the claim of the appellants that the resolutions passed by the shareholders authorising the renounceable rights issue never implied or expressed or contemplated that the renounceable rights issue could result in a transfer of controlling interest in SPL and if the rights offer stood in danger of transferring a controlling interest then, there ought to have been a reversal to the shareholders to approve same.


Is that the case?


I agree that Regulations of a Company constitute a contract under seal as stated under section 21 of Act 179 and any violation must not at all be countenanced by the court. As indeed noted by the Supreme Court in the case of P.S. INVESTMENT LTD v CEREDEC & OTHERS [2012] SCGLR 611 and also LUGUTERAH v NORTEHRN ENGINEERING CO. LTD [1978] GLR 477.


It is misconceived for one to think that the resolution by the shareholders only authorised existing shareholders to take up shares in proportion to their shareholding. Prospective investors had the chance to take up shares that were not taken up by existing shareholders. And any existing shareholder who intended to increase its shares also had the chance to take more shares. The options that were available to shareholders have all been spelt out under Clause 7:1 of the Offer Circular which has been fully set out supra. The Prospectus was fully accepted. Sure if each existing shareholder was only to opt for shares in proportion to his shares then there would be no change in the percentage of shares owned. Nonetheless, there were various possibilities or scenario available which had the potential to tip the scale of the shareholding structure of SPL.


Statements made in a Prospectus which is not correct invites heavy criminal and civil sanctions. For if anything stated in a Prospectus was not well meaning and the company did not intend to comply with it, all persons making the invitation as well as the officers of the company are liable to criminal prosecution and stand in danger of incarceration to a maximum of two years in jail under section 265(2) of Act 179.


Are some of the directors who have joined forces to launch this appeal saying that the Prospectus which they passed a resolution approving and in whose terms implied that shares could potentially land in the hands of persons who could have a controlling interest, was not sincerely approved? And are they prepared for the attendant criminal consequences of being jailed for misleading the public?


I have noted supra that where rights offer move from a pre-emption rights when members of a company fail to take up their rights to an open rights offer, as it was in this case, where some of the securities holders did not take up their full rights, it is a notorious fact that existing shareholders who are desirous of acquiring more shares are entitled to acquire the surplus securities. When this is done it has the potential of changing the pre-existing shareholding structure of the company. This is a matter of law and when the shareholders passed the resolution as couched in the terms they did, even if they did not understand it that way, which is not the case anyway, it is trite that ‘ignorantia juris haud non excusat’ – and the shareholders cannot be excused for their lack of knowledge of the law.


I must confess I fail to understand how shareholders have passed resolution authorising a renounceable rights issue and when that rights issue has been done, and has led to a change in structure of share holding, the grievance is that at a point that the shareholding structure would change, the directors ought to have reverted to the shareholders again to approve the allotment of shares to Dannex Ltd. This position, with profound respect, is not a reflection of the rules and implications of renounceable rights offer within the scope of the resolutions passed by the shareholders. Interestingly enough the appellants have no problem with the other persons that have obtained shares in the company as long as they do not have the controlling interest.


It would have been superfluous for any reversal or deferral to the shareholders for another approval of the shares purchased by Dannex Ltd. when they had unequivocally approved the renounceable rights issue. AHC of SEC was again spot on in this decision.


I find no good grounds to disturb the ruling of the AHC of the SEC, the consolidated appeal is dismissed in its entirety and the decision of AHC is hereby affirmed.


In the exercise of the discretion of the court I will award cost of GHc40.000.00 against each of the two appellants in the two consolidated suits. The Ghc80.000.00 should equally be shared between the three Respondents: that is the Board of Directors of Starwin, I. C. Securities and Dannex Ltd.