For many people, being appointed a director of a company is regarded as a mark of status and professional achievement. In family businesses and start-ups, a person may be asked to become a director simply because the person registering the business needs another name for incorporation. I consult for clients in the process of business registration. In the process, I have come across people who want to list friends and relatives for the role of Director and these friends and relatives do not have an idea about what the company does, how it is managed or what the law expects of them.

That approach is risky. Company directorship is not ceremonial, and it is not merely permission for one’s name to appear on the incorporation documents. A director participates in directing and administering the business of a separate legal entity and assumes duties that may carry serious financial, regulatory and reputational implications.

The Companies Act, 2019 (Act 992) provides the principal legal framework for company directorship in Ghana. It explains who may be treated as a director, how directors are appointed, the standards expected of them and the consequences of breaching their duties. Anyone who serves or is considering serving as a director should understand these obligations before accepting the office.

Who is a director?

Section 170 of Act 992 defines directors as persons, by whatever name called, who are appointed to direct and administer the business of a company. The substance of a person’s role therefore matters more than the title used.

The Act also recognises that a person who has not been formally appointed may still attract the responsibilities and liabilities of a director. This may occur where the person holds himself or herself out as a director, knowingly allows the company to present the person as one, or where the duly appointed directors are accustomed to act on that person’s instructions or directions.

This is particularly important in owner-managed businesses. A controlling shareholder, founder or influential adviser cannot necessarily avoid responsibility merely by remaining outside the formal list of directors while continuing to direct the board from behind the scenes. It is worth noting that in many Ghanaian owned SME’s the shareholders are equally directors.

Appointment is not a favour

Under section 171, a company incorporated in Ghana must have at least two directors. Section 172 requires a person appointed as a director to consent in writing, with the consent filed within the prescribed period. At least one director must ordinarily reside in Ghana, as required by section 182.

The law also places limits on who may act. Section 173 disqualifies, among others, an infant, a body corporate, an undischarged bankrupt who has not obtained the required leave, and a person prohibited by a court order from participating in company management. A company’s constitution may impose additional eligibility requirements.

Before accepting an appointment as a director, you should request and review the company’s constitution, ownership structure, financial statements, tax status, regulatory licences, major contracts, outstanding litigation and existing liabilities if the company is already in existence. For a company that is in the process of being incorporated, you should verify that the shareholder(s) is/are people of integrity, you should understand the objects of the company and your legal obligations as a director of the company. You should also understand why the appointment is being offered and whether the company has adequate governance and reporting systems.

A responsible prospective director should be prepared to decline the appointment if access to relevant information is refused. Lending one’s name to a company without participating in its governance does not remove the obligations attached to the office.

The director owes duties to the company

A common misconception is that a director appointed by a particular shareholder must always act according to that shareholder’s wishes. Although a shareholder may influence the appointment, the director’s legal duties are owed to the company. The company is a separate legal entity.

Section 190 establishes a fiduciary relationship between a director and the company. In practical terms, the director must act honestly, in good faith and in what the director considers to be the best interests of the company as a whole. The director must preserve the company’s assets, advance its business and avoid using the position or company information for an improper personal benefit.

Act 992 allows directors, when considering the company’s best interests, to take account of the interests of employees, members and the wider consequences of corporate activity. However, personal loyalty to the person who nominated the director should not override independent judgment or the interests of the company.

Powers must be used for the proper purpose

Directors are entrusted with substantial powers. Depending on the company’s constitution, they may approve borrowing, investments, contracts, appointments, asset purchases and major operational decisions. Those powers are not personal privileges.

Section 191 requires directors to act in accordance with the company’s constitution and to exercise their powers for the purposes for which they were conferred. It also requires the degree of care, skill and diligence that would reasonably be expected in the circumstances.

A director cannot therefore defend a poor decision simply by saying, “I did not understand the financial statement,” or “I relied completely on management.” Directors may seek professional advice and delegate appropriate functions, but they must remain informed, ask questions, evaluate the information presented and monitor the company’s affairs.

Conflicts of interest must be managed

Conflicts of interest commonly arise in closely held and family businesses. A director may own another company that supplies goods to the business, have a relative seeking employment, or stand to benefit personally from a transaction under consideration.

Sections 192 and 194 address these situations. A director should avoid circumstances in which personal interests conflict or may conflict with duties to the company. Where a director is directly or indirectly interested in a contract or proposed contract, the nature and extent of that interest must be disclosed in accordance with the Act. The interest should also be properly recorded, including in the company’s Interests Register where required.

Disclosure is not an empty formality. A materially interested director will generally be restricted from being present, voting or being counted in the quorum for the relevant business, subject to the statutory exceptions. Transparent disclosure protects the company, the board and the director from later allegations that a private interest was concealed.

Attendance and active participation matter

A director who never attends meetings, never reads board papers or asks questions is not protected by inactivity. Section 188 requires directors to meet at least once every six months in each year to consider the financial and operational affairs of the company.

Effective directorship requires more than signing resolutions after decisions have already been taken. Directors should receive timely financial and operational information, ensure that proper minutes are kept, review material risks and insist that significant decisions are supported by appropriate analysis.

Where a director disagrees with a proposed course of action, the concern should be raised clearly and accurately reflected in the minutes. Silence may later make it difficult to demonstrate that the director exercised independent judgment and reasonable care.

Can a director become personally liable?

The fact that a company is a separate legal entity generally means that a director is not automatically responsible for every debt or failure of the company. Directorship does not, by itself, make the director a guarantor of the company’s obligations.

However, the corporate structure does not shield a director from the consequences of the director’s own misconduct. Section 199 provides that where a director breaches the duties in sections 190 to 192, the director and a person who knowingly participated in the breach may be required to compensate the company for the resulting loss. The director may also have to account to the company for profit made from the breach, while an affected transaction may be rescinded.

Proceedings may be brought to enforce these liabilities, restrain a threatened breach or recover company property. Depending on the conduct involved, other provisions of Act 992 and sector-specific laws may also impose administrative, civil or criminal consequences. A director may separately become liable under a personal guarantee or another obligation voluntarily undertaken.

The practical lesson is not that every unsuccessful business decision creates personal liability. Business involves risk, and decisions do not always produce the expected results. The real danger arises where directors act dishonestly, for improper purposes, with undisclosed conflicts, outside their powers or without the care and diligence reasonably expected of them.

In one engagement, I advised a client who had accepted an appointment as a director of a company but was not actively involved in its operations. Unknown to him, his co-director allegedly used the company’s name and documents to obtain money from members of the public through fraudulent representations. When complaints were made, the police invited both directors for questioning because their names appeared in the company’s official records. Although my client maintained that he had no knowledge of or involvement in the alleged transactions, he still had to explain his role, provide supporting evidence and endure the financial and reputational consequences of the investigation.

Resignation does not erase the past

A director may resign by giving written notice to the company, and the company should ensure that the change is properly recorded and filed with the Office of the Registrar of Companies. Resignation, however, does not cancel responsibility for acts or omissions that occurred while the person held office.

A departing director should therefore confirm the effective date of resignation, retain appropriate evidence that notice was given, ensure that company property and records are returned and seek professional advice where unresolved breaches or regulatory issues exist. Merely stopping attendance at meetings is not the same as formally resigning. If the company is found to be engaged in an illegal activity, you may be held liable even though you may claim to have ‘resigned’. Resignation should be formal and properly documented.

A practical checklist before accepting directorship

Before saying yes to a Director appointment, a prospective director should ask:

• What business does the company conduct, and is it properly licensed and compliant?
• Who are the shareholders, beneficial owners and other directors?
• What is the company’s present financial, tax and legal position?
• Are reliable accounting records, audited financial statements and management reports available?
• What major loans, guarantees, contracts, disputes and contingent liabilities exist?
• What exactly will be expected of me, and do I have enough time and competence to perform the role?
• Does the board meet regularly, receive adequate information and record its decisions properly?
• Are there governance policies for conflicts of interest, related-party transactions and approval limits?
• Is directors’ and officers’ liability insurance available, and what protection does it actually provide?
• Can I exercise independent judgment, or am I being appointed merely to endorse another person’s decisions?

Directorship must be treated as a professional responsibility

Good directors do not need to manage every daily activity of a company. They do, however, need to understand the business, provide oversight, challenge management constructively and ensure that the company is governed lawfully and responsibly.

For companies, the quality of the board can determine whether risks are identified early, resources are protected and growth is sustainable. For individuals, the decision to become a director should be based on informed consent and a genuine willingness to discharge the duties of the office, not prestige, friendship or convenience.

Company directorship in Ghana is therefore far more than a name on paper. It is a position of trust, judgment and accountability. Anyone who accepts it should do so with open eyes, adequate information and a clear appreciation of the legal and practical implications.

About the author
Samuel Osae Ansah is a Licensed Audit Practitioner, Chartered Accountant and Chief Finance Officer (CFO) with over a decade of experience in accounting, taxation, auditing and business advisory. He is passionate about helping businesses achieve growth through sound financial management, regulatory compliance and good corporate governance.

E-mail: [email protected]/[email protected]

Tel: +233 598632806