A Critique of Sections 28, As Amended, and 29 of the Companies’ Act, 1963 (Act 179)

Abstract

This study critically reviewed sections 28, as amended, and 29 of the Companies Act 1963 (Act 179). Section 28 requires companies limited by shares to raise a specified minimum capital before commencing business while section 29 specifies civil and criminal sanctions for non compliance with the requirements of section 28. These sections have been enacted to implement a policy that seeks to protect corporate creditors against the adverse consequences of corporate insolvency that results from
undercapitalisation. The Study found the content of the sections under review and the institutional arrangement for their revision weak in a number of respects. This renders the sections ineffective. The study therefore calls for their review. Also, given that in practice creditors require security and guarantees from their debtors as a condition for the grant of credit, it is doubtful whether sections 28 and 29 are needed to protect creditors. It is therefore suggested that, as an alternative to reviewing the sections, they
should be expunged from the statute.