Assessing the Dividing Line Between Tax Law and Company Law Principles on Pre-Incorporation and Ultra Vires Contracts in Ghana

In this article, the authors discuss the common law principles governing pre-incorporation and ultra vires contracts and the statutory modifications made to these principles in Ghana. The Ghanaian tax law and company law principles on recognition of pre-incorporation and ultra vires contracts are also discussed to determine the points of convergence or divergence between them. The authors conclude that there is a divergence in the rules for recognising pre-incorporation contracts under the Income Tax Act and the Companies Act in Ghana. Also, Ghana's tax and company law rules diverge on who should bear liability under a pre-incorporation contract where a company fails to ratify a pre-incorporation contract. Furthermore, even though Ghanaian company law and tax law rules converge on recognising ultra vires contracts, they diverge on the proper person to compensate the company for liability, such as a surcharge of withholding taxes arising out of an ultra vires contract. The authors recommend that the relevant legislation be reviewed to empower the company to maintain an action against identifiable persons for financial exposures such as a surcharge for withholding taxes and pecuniary interests which the company may be saddled with due to the actions or inactions of these identified persons.