GHANA Law and Practice Contributed by: Victoria Bright and Justice Oteng, Addison Bright Sloane
8.5 Conflicts of Interest The courts have considered cases where minority shareholders allege unfair prejudice arising from direc - tor self-interest or related-party pricing in takeovers. In the Republic Bank and HFC Bank squeeze out case, the High Court affirmed the right of a 90% majority shareholder to compulsorily acquire the shares of a minority holdout. However, the value attributed to those shares must be based on a fair valuation and must be free from any conflict of interest. There is no express legal prohibition against hostile tender offers. In fact, the Securities Industry Act (Act 929) and the SEC takeovers and Mergers Code permit an acquiring company to make a direct offer to share - holders without the support or recommendation of the target board. However, hostile bids are rare in Ghana. 9.2 Directors’ Use of Defensive Measures Directors may resort to defensive measures to resist hostile takeovers, but only within the confines of their fiduciary duties and applicable regulatory restric - tions. In practice, the ability of directors to adopt such measures is significantly curtailed once a takeover offer is imminent or has commenced. This is because the board’s duty to act in the best interests of the company and its shareholders, and not to frustrate a bona fide offer, precludes it from taking actions that could block or undermine the offer without sharehold - er approval. As a result, traditional “poison pill” type defences may only be implemented with the consent of shareholders. By contrast, defensive measures that are passive in nature are generally permissible. 9.3 Common Defensive Measures Some of the common defensive strategies that direc - tors may adopt to protect the company and its inter - ests include the following. 9. Defensive Measures 9.1 Hostile Tender Offers • White knight – a friendly company, invited by the target company’s board, acquires the target instead of the hostile bidder.
The principal duties of directors are owed to the company itself. However, in promoting the success of the business, directors may be required to take into account the interests of other stakeholders, including employees, creditors, the wider community, and the environment. 8.2 Special or Ad Hoc Committees Boards of directors may lawfully establish special or ad hoc committees to deal with complex and/or technical matters and in situations where the stand - ing committee is conflicted or implicated in a matter of interest to the company. 8.3 Business Judgement Rule Unlike other jurisdictions, the business judgement rule is not codified in the Companies Act. However, in practice, the courts may defer to the decisions of directors in a takeover situation where they act in good faith, on an informed basis, and in the best interests of the company. Accordingly, the courts may shield directors from liability for breach of the duty of care in a takeover where it is proven that the directors acted reasonably on the basis of credible information and had no personal interest in the decision-making process. 8.4 Independent Outside Advice In Ghana, it is not uncommon for directors to seek independent advice in an M&A transaction in fulfil - ment of their fiduciary duties to the company. Such independent external advice typically covers legal opinions on the transaction, fairness opinions, and financial valuations. For public companies, the Takeovers and Mergers Code provides that the boards of directors of both the target company and the purchaser are required to appoint an independent external adviser. These inde - pendent advisers typically provide guidance in areas such as legal, financial, and tax compliance. An independent adviser advises the purchaser in cases of reverse takeovers or where the purchaser is faced with potential conflicts of interest. They also provide advice in situations where the purchaser has outstanding convertible securities.
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