When it comes to engaging in business transactions—whether you’re buying shares or lending money—one must tread carefully, for the devil, as the elders say, is always in the details. This legal drama, which unfolded in Accra’s High Court in 2024, offers a sobering reminder of how easily things can go awry when legal principles are ignored.
A Troubling Agreement
The tale began in June 2015 when Florindo Fidele Johnson, an American pensioner, entered into what seemed like a straightforward agreement with the late Mr. Alfred Essienne, then the managing director of Western Fresh Bottling Co. Ltd.
Johnson had her eyes on 20,000 shares, for which she paid $25,000, and she also extended loans amounting to GHC 109,358 and $71,900. However, trouble brewed when she realized she never received a share certificate, was excluded from shareholder meetings, and, worse, saw no dividends.
To make matters worse, during a visit to the company in Ghana, she found its assets being sold off like okro at a market stall. Her demand for repayment was met with promises that died with Essienne.
A Courtroom Showdown
When the case reached court, Johnson found herself facing an uphill battle. The company denied the loans and Johnson’s status as a shareholder, asserting that no one had the authority to accept such deals. Thus, the court was left to untangle two key questions.
Issue 1: The Matter of the Shares
On paper, it seemed like Johnson had clinched a deal. She even presented a document to prove the “Share Transfer Agreement” with Essienne. But here’s the catch: Essienne only owned 5,000 of the company’s 10,000 shares. So, how could he sell 20,000 shares when the company itself didn’t have them to offer? As the elders say, you can’t give what you don’t have.
More so, under the Companies Act, 1960 (Act 179), proper procedures—such as registering the transfer and issuing a certificate—are required to seal a share deal. Since none of these were done, the court tossed the share agreement into the bin. Johnson, unfortunately, lost this battle.
Issue 2: The Case of the Loans
Johnson’s next attempt was to recover the loans she had allegedly extended. Though she claimed to have lent more than GHC 109,358 and $71,900, her receipts only backed GHC 48,596 and the dollar amount.
Even worse, these loans hadn’t been approved by the company’s Board of Directors, as required by law for loans exceeding the company’s stated capital, which in this case stood at GHC 10,000. Without that crucial board nod, the loan deal was as shaky as a house built on sand.
The court dismissed Johnson’s claims, adding salt to the wound by ordering her to pay GHC 30,000 in costs.
Key Lessons:
As this case shows, it is not just about shaking hands and signing documents. Here are the takeaways:
1. Authority Matters: Never assume the person sitting across the table has the power to seal the deal. In this case, Essienne did not have the authority to sell those shares, and Johnson learned that lesson the hard way. As the saying goes, “If you want to catch the fish, make sure your net is strong.”
2. Follow the Law, or Lose: A share transfer is more than just an agreement. The law demands proper registration and issuance of certificates. Without them, the deal remains nothing more than words on paper.
3. Borrowing Beyond Your Limits: The law also frowns upon companies taking loans beyond their stated capital without shareholder approval. No board nod means no loan. It’s as simple as that.
4. Seek Legal Counsel: As wise as you may be, don’t go into battle without a shield. Legal advice could have saved Johnson from the fate she met. If only she had sought it earlier, her money might still be in her pocket.
Johnson v. Western Fresh Bottling Co. Ltd is a classic tale of what happens when legal corners are cut. The court’s decision serves as a warning: ensure that your dealings with companies are in line with the law, verify the authority of those you’re dealing with, and, above all, seek wise counsel.As our elders remind us, “The path to a destination is easier when you have a guide.”
David Amaara Adaawin on behalf of OSD & Partners
