Tuesday, the Accra Fast Track Court presided over by Justice Ofoe ruled that the Bank of Ghana's continued disqualification of Afare Apeadu Donkor, Ghana's Ambassador to the People's Republic of China, as a director of any financial institution since 1996 is wrongful and void.
The Court further ruled that Mr Donkor, who has millions of dollars of investment in Cal Bank, was qualified to be a director of any financial institution. Attempts to get him nominated as a director of the bank he founded along with others was frustrated last year by the board of directors of Cal Bank.
Nana Asante Bediatuo of Ampem Chambers, the lawyers of Mr Donkor, described the landmark decision as “an important victory for the rule of law and due process.” The leading corporate lawyer adding, “After ten long years, Mr Donkor has been vindicate d and his belief in the justice system restored. I am very happy for him.”
The action was brought by Mr Donkor, the founder and main promoter of CAL Bank (then Continental Acceptances Limited), following a directive by the Bank of Ghana in 1996 to CAL Bank instructing it to remove Mr Donkor, who was then the Managing Director, from office and also strip him of his position on the company's Board.
“The notion that institutions like the Bank of Ghana can take decisions affecting lives and livelihoods without giving reasons and beyond the reach of justice have been demolished convincingly by this decision,” stated his lawyer Tuesday.
The BoG's 1996 directive stated that he, “was no longer acceptable to the Central Bank as a director of any financial institution,” based on a provision in the Banking Law 1989 which provided that a director shall be disqualified from a bank if he suspends payment to, or compounds with his creditors or is convicted by a court of competent jurisdiction of any offence involving fraud, dishonesty or moral turpitude.
The purported disqualification was based on allegations of financial impropriety brought against Mr Donkor by the Serious Fraud Office in 1996. The allegations were later dismissed by an Accra Tribunal for lack of evidence. Mr Donkor later settled all the debts on which the said disqualification was based. In September 2005, before CAL Bank was listed on the Ghana Stock Exchange, Mr Donkor, who is the largest individual shareholder of Cal Bank, sought to have his interests represented on the bank's Board but management of CAL refused, citing the BoG directive of 1996 as their reason for the refusal.
Following this rebuff, Mr Donkor enquired from the Bank of Ghana, given the lapse of almost ten years, whether he was allowed to serve as a director of a financial institution. The Bank of Ghana then stated that they still relied on the directive issued by the then Governor and therefore he was still disqualified by operation of law. It was for this reason that Mr Donkor sought to have the matter settled in Court.
The issue before the Court was whether the Bank of Ghana had acted ultra vires (boynd its powers) by disqualifying Mr Donkor without a Court Order and whether the said disqualification, if valid, could be in perpetuity. His lawyers argued had argued that the central bank had no power to direct the disqualification of Mr Donkor and sought from the court a declaration that the disqualification was of null and void.
Nana Bediatuo further argued that even if the Bank of Ghana had acted properly, the disqualification had to be time bound and that purporting to disqualify Mr Donkor indefinitely was untenable.
He saw that as “a momentous breach of Mr Donkor's constitutional rights” for the Bank of Ghana to disqualify him without giving him an opportunity to be heard contrary to the clear dictates of Article 23 of our Constitution. Nana Bediatuo argued that a unique feature of our Constitution was that a person'r right to due process under Administrative Law had been elevated to a constitutional right and a fundamental one at that.
The court's ruling was based on the Companies Code, 1960 (Act 179), which provides that any disqualification of a director should be made by a Court. The Bank of Ghana was therefore wrong in issuing the said directive for disqualification in 1996 without a Court Order and also for the continued operation of that disqualification. The Bank of Ghana's actions were therefore wrongful and void.
The court's decision sets landmark precedent for the fact that the Bank of Ghana although the regulatory body for financial institutions did not have an unfettered discretion in disqualifying persons from managing financial institutions. However, this case was based on the 1989 Banking Law and it would be interesting to see how future cases on disqualification would be handled under the new Banking Act of 2003.