Introduction
This essay examines the legal options available to Scientific Innovations LBG, a company incorporated under the Companies Act, 2019 (Act 992) in Ghana, in light of its current challenges. Established in 2020 to research infant mortality in the Bukom area of Accra, the company faces a tax liability dispute with the Ghana Revenue Authority (GRA), alongside internal governance issues involving misuse of assets and funds by its members. Using the AIRAC (Application, Issue, Rule, Application, Conclusion) framework, this essay explores the company’s potential remedies under Ghanaian company law, focusing on tax liability challenges and breaches of fiduciary duties by members. The analysis draws on relevant statutes and case law, providing a structured evaluation of the legal avenues open to Scientific Innovations LBG to address these complex issues.
Issue: Tax Liability Dispute with GRA
The primary issue is the GRA’s assessment of a GHS 1.2 million tax liability for the period 2021–2024. Scientific Innovations LBG argues that its research, provided gratis to health institutions and pharmaceutical companies, should exempt it from taxation despite not being government-owned.
Under Section 97 of the Income Tax Act, 2015 (Act 896) of Ghana, exemptions may apply to organisations engaged in charitable or public benefit activities. However, as a company limited by guarantee, Scientific Innovations LBG must demonstrate that its activities align strictly with charitable purposes and that no profit is distributed to members (Companies Act, 2019, Act 992, s.10). The GRA may argue that the company’s funding from UK philanthropists constitutes taxable income if not exclusively used for exempt purposes.
Applying this rule, the company could challenge the assessment by filing an appeal with the Commissioner-General of GRA under Section 42 of the Revenue Administration Act, 2016 (Act 915). If unsuccessful, further recourse lies with the High Court. However, success depends on proving the charitable nature of its operations, which may be complicated by internal governance issues discussed below. Case law, such as Commissioner of Income Tax v. Pemsel (1891), supports a broad interpretation of charitable purposes, including public health advancements, potentially strengthening the company’s position (Pemsel, 1891).
Conclusively, challenging the tax liability through administrative and judicial processes is viable, provided the company substantiates its charitable status.
Issue: Misuse of Company Assets and Funds
A secondary issue concerns breaches of fiduciary duty by members Odo Broni and Kwamena Fosu. Odo Broni has retained a donated Toyota Prado for personal use by her husband, while Kwamena Fosu has failed to disclose or transfer a GHS 1.0 million donation into the company’s accounts.
Under Section 143 of the Companies Act, 2019 (Act 992), directors and members of a company limited by guarantee owe fiduciary duties to act in the company’s best interests, including safeguarding assets. Misappropriation of assets, as seen with Odo Broni’s use of the vehicle, constitutes a breach. Similarly, Kwamena Fosu’s withholding of funds violates the duty of accountability and transparency. Relevant case law, such as Aberdeen Railway Co v. Blaikie Brothers (1854), underscores that directors must avoid conflicts of interest and personal gain from company resources (Aberdeen, 1854).
Scientific Innovations LBG can apply these principles by initiating internal disciplinary actions or seeking legal remedies. The company may demand restitution of the vehicle and funds, and if unsuccessful, pursue civil action for recovery under Section 144 of Act 992, which allows for remedies against erring members. Furthermore, the company could report Kwamena Fosu’s actions as potential fraud under Ghanaian criminal law, though this requires collaboration with law enforcement.
In conclusion, the company has clear legal grounds to recover misappropriated assets and funds through internal mechanisms and court action, provided it can evidence the breaches.
Conclusion
In summary, Scientific Innovations LBG has viable legal options to address both its tax dispute with GRA and internal governance failures. Regarding taxation, appealing the liability through administrative channels and potentially the High Court, supported by evidence of charitable purpose, offers a pathway to contest the GHS 1.2 million assessment. Simultaneously, the company must tackle breaches of fiduciary duty by Odo Broni and Kwamena Fosu by demanding restitution and, if necessary, pursuing civil remedies under the Companies Act, 2019. These actions, though complex, are critical to safeguarding the company’s mission and resources. The implications of unresolved issues could undermine donor confidence and the company’s ability to fulfill its public health objectives in Bukom, Accra. Therefore, prompt and decisive legal action is essential.
References
- Aberdeen Railway Co v. Blaikie Brothers (1854) 1 Macq 461.
- Commissioner of Income Tax v. Pemsel [1891] AC 531.
- Government of Ghana (2015) Income Tax Act, 2015 (Act 896). Accra: Government Printer.
- Government of Ghana (2016) Revenue Administration Act, 2016 (Act 915). Accra: Government Printer.
- Government of Ghana (2019) Companies Act, 2019 (Act 992). Accra: Government Printer.
