UNIVERSITY OF THE GAMBIA

SCHOOL OF BUSINESS AND PUBLIC ADMINISTRATION

CHAPTER 1 INTRODUCTION
What is business law?
Business activities are not conducted in vacuo. Rather, they are carried on
within certain established principles and rules of law, which are binding on the
parties and enforced by the law courts in cases of dispute. Business law is the
body of enforceable principles, rules, regulations, and practices governing the
various interactions between parties to a commercial transaction. In other
words, business law is the legal framework through which economic and
business activities are conducted and regulated.

Functions of business law

The principles and rules of business law have been developed over the years
to achieve certain objectives this includes but is
not limited to the following:
(a) Law and order: The primary aim of business law is not different from that
of law in general - maintenance of order. Business law, therefore, aims at
ensuring orderliness in the various interactions and dealings between parties
to commercial contracts. Hence, rules have been developed on how
commercial relationships are created and the respective rights and obligations
of parties are protected and enforced.
(b) Justice: The primary aim of the law is or ought to be the attainment of
justice. Hence, the aim of business law is not only to maintain order but also to
promote justice in commercial transactions. Justice in this context involves the
balancing of the interests of all the parties to commercial contracts. There are
cases where the courts have refused to adhere to the strict principles of law
and applied the doctrines of equity.3
(c) Remedies: Business law seeks to provide appropriate remedies where a
party has suffered an injury due to the action or inaction of the other. For
instance, the law provides a civilized method of obtaining remedy where there
is a breach of the obligation in any aspect of business law. The remedies for a
breach of contract may be damages, specific performance, injunction
rescission, indemnity, etc. depending on the facts of each case.
(d) Legal protection: Certain rules of contract have been developed basically
to ensure that a group of people is not exploited or defrauded in a contractual
relationship because of their circumstances. This protected group includes
companies, illiterates, infants, drunkards, etc. Therefore, agreements involving
any of such persons may not be enforceable even when they contain all the
elements of a contract.
(e) Promotion of trade and commerce: Ultimately, business law aims or
should aim at promoting trade and commerce within a particular society. For
instance, without the development of Company Law, the undertaking of
commercial transactions on a wide or international dimension may have been
impossible. Since the development of this important branch of Law, new rules
have been developed from time to time to promote efficiency in the
management of the affairs of companies. Also, when a court is faced with
different options in the application of a principle or rule of law, it may choose to
apply the one that will best promote trade and commerce

1.1 THE LAWS GOVERNING BUSINESS IN THE GAMBIA

There are several laws that govern business in the Gambia; this includes but
not limited to the followings.
i) Law of contract: This is the branch of business law regulating the
formation, terms, performance, discharge and remedies for breach of
an enforceable agreement (contract) between parties;

ii) Law of agency: It may not be possible or even expedient for a party
to a contract to undertake or discharge all the actions or obligations
required of him either in the formation or performance of a contract.
Hence, he (the Principal) may appoint somebody (an Agent) and
authorise the Agent to do certain things on the Principal's behalf in
his dealings with the other party to the contract. The relationship
between the Agent and the Principal on one hand and the
relationship of both the agent and the Principal with the other party
on the other hand are regulated by the Law of the Agency.
iii) Sale of goods: Most commercial transactions are in form of the sale
or purchase of a particular item, such as a pen or pencil, food, car,
computer, clothes, everyday needs airplanes, ships, and other
multifarious items which are capable of being sold or purchased.
While some people may never be involved in the sale of landed
property, virtually everyone is daily involved in the sale of goods,
either as a Principal or Agent. This branch of law comes into play
when the subject matter of a contract comes within the definition of
"goods" under section 2 of Sale of Goods Act,

iv) Law of partnership: Two or more persons may decide to come

together and form a business with a view to making profit. The Law of
Partnership is the branch of business law that regulates the rights
and liabilities of the partners among themselves and their rights and
liabilities in their dealings with third parties;

v) Company law: Two or more persons may decide to run their

business as a separate legal entity by registering the business. A
registered company has some advantages over a partnership. Here,
Company Law comes to play in the regulation of the process of
incorporation, management and financing of the company, the extent
of the powers of the company and its officials, among other things,
etc.;

vi) Labour law: This branch of business law governs the relationship
between employer and employees and the regulation of their rights
and liabilities. Industrial Law also covers the formation and regulation
of the activities of trade and employers’ unions and their members in
order to achieve industrial peace and harmony.
 CHAPTER 2 BUSINESSES IN THE GAMBIA
Businesses in The Gambia may be registered as a company, a sole
proprietorship, a partnership, or other forms of business (namely co-
operatives, and subsidiaries of other companies). The three major forms of
Business in the Gambia are the sole tradership/proprietorship, the
partnership, and the company.

THE SOLE TRADER/PROPRIETOR

This is the most dominant form of business organization in the Gambia. It is a
very simple form of business, and as the name suggests, is a one-person
business. Most shops selling goods in the markets, internet cafes, restaurants,
and even some major businesses in The Gambia operate in the form of a sole
tradership
ADVANTAGES
1. The sole tradership offers the option of simplicity and less burdensome
requirements.
2. The registration process is less burdensome. There are no legal filing
requirements or fees, and no professional advice is needed in setting it
up.
3. Simplicity- one person does not need a complex organizational
structure.
4. You are your own boss and can make any decisions you want.

DISADVANTAGES
1. The unlimited liability of the sole trader, as both the losses and profits of
the business belong to him. He has personal liability for all the debts of
the business. If the business collapses the creditors can go after the
personal assets of the sole trader.
2. In terms of raising capital (money), it might not be a particularly useful
business form as the capital is usually provided by personal savings of
the sole trader or a bank loan.

The requirement for the registration of a Sole Proprietorship/

Trader
1. Photocopy of the National Identity Card, Passport or Driving
License of a proprietor or the Owner.
 2. The Copy of the Tin Card of the proprietor/owner
3. Fill out the Application form.
4. Registration Fee of D500

PARTNERSHIP
The Partnership Act contained in Volume 15 Cap 94 Revised Laws of the
Gambia Defines partnership in section 3(1) as “the relation which subsists
between persons carrying on a business in common with a view to profit”.
The Act provides for two kinds of partnerships, the general partnership, and
the limited partnership.
GENERAL PARTNERSHIPS

Section 53 of the Partnership Act provides that a partnership not formed and
registered as a limited partnership in accordance with the Act is deemed to be
a general partnership and every partner is deemed to be a general partner.

ADVANTAGES

1. Partnership can facilitate investment as there can be several members

of the partnership, all of whom could pool their investment within the
partnership.
2. There is no legal filing requirement or fees involved in becoming a
partnership beyond the minimum requirement that there be two
members of the partnership.
3. Parties can draft partnership agreement and provide a true reflection of
the parties when entering into the partnership agreement. Therefore,
partnership agreement can very the term of the partnership act.

DISADVANTAGES

1. The partners are jointly and severally liable for the debts or liabilities
of the partnership. This means that each partner can be sued for the
total debts of the partnership. In essence, partnerships are founded on
relationships of trust. If that trust is breached, then the remaining
partner or partners can pay a heavy price as the remaining partner must
pay all the debts owed see (Sections 11- 14 PA)

2. A partnership will end on the death of a partner. If you are unaware of

this when the partnership is formed, the rigidity of the Act may not reflect
the intention of the partners.
 3. The Partnership Act can be a danger to the unwary. The broad
definition of a partnership is a particular problem. For example
three people going into business together without forming a
company will be partners whether they know it or not (section 4
PA). This can cause problems, as the Partnership Act imposes
certain conditions for the continued existence of the partnership. If
one of three unknowing partners dies, becomes bankrupt,
incapacitated, retires or becomes insolvent the partnership Act will
deem the partnership (even though the participants did not know
they were partners) to have ended unless the conditions of section
35 PA are fulfilled. This is the case even where a successful
business is being conducted through the partnership. As a result of
these types of problems those who choose to be partners will
usually draft a more formal arrangement called a partnership
agreement specifying the terms and conditions of the
partnership
LIMITED PARTNERSHIP

Section 47 of the Partnership Act defines a limited partnership as the

kind of partnership the word “limited” connotes shares several
characteristics with the company as a business organization. It indicates
that the limited partner is separate from the partnership. He or she will
not be personally liable for the debts of the partnership. He or she is
liable only to the extent of his unpaid contribution (section 68 PA).
ADVANTAGES
1. like the general partnership, this form of partnership can also
facilitate investment as there can be several members of the
partnership, all of whom could pool their investment within the
partnership.

2. Also, if one is aware of the problems the Partnership Act can

cause, then one can draft a partnership agreement to vary these
terms of the Act and provide an accurate reflection of one’s own
intentions when entering the partnership.

3. Like the company, limited liability minimizes the risk for investors
and is said to encourage investment. It is also said to allow
managers to take greater risk in the knowledge that the
contributors to the partnership will not lose everything.
DISADVANTAGES
The same disadvantages as the General Partnership also apply to the
Limited Partnership. For Limited Partnerships also:
1. Legal filing requirements might prove to be expensive and time-
consuming compared to the general partnership.
Right of A Partner

The PA (Section 26) also entitles each partner:

1. To participate in management (26(e));

2. To an equal share of profit ((26(a));
3. To an indemnity in respect of liabilities assumed in the course
of the partnership business (26(b));
4. Not to be expelled by the other partners unless a power to do
so has been conferred by express agreement between the
partners (section 27).

The requirement for the registration of a Partnership Business.

1. apply for name reservation…………………D50
2. a copy of the registered partnership deed/agreement
3. A Photocopy of the National Identity Card, Passport, or Driving
License of the partners
4. The Copy of the Tin Card of the Partnership
5. Fill out the Application form.
6. Registration Fee of D1000
7. Incorporation fee of D5000 for a General Partnership
D10, 000 for Limited Partnership.
 COMPANY LAW AND PRACTICE

Company Formation

A Company is defined under S.2 of the Companies Act as a body

corporate incorporated or continued under the Companies Act of the
Gambia 2013. Pursuant to section 5 of the Companies Act, a company
may be formed by at least two persons or more persons by complying
with the registration requirements of the Act. Therefore, the minimum
number for the formation or registration of a company is two persons,
and the maximum is fifty in the case of private companies. Section 4
prohibits an association consisting of more than 20 persons from
carrying on business for gain unless it is incorporated. However, there
are several exceptions, especially for professionals like legal
practitioners and accountants.

TYPES OF COMPANIES
Broadly speaking, there are two types of companies, i.e. a company
may either be a private company or a public company. Such a company
can be:

1. A company limited by shares

2. A company limited by guarantee
3. An unlimited company

CHARACTERISTICS OF A PRIVATE COMPANY

Section 8 CA defines a private company to mean a company which, by
its incorporation documents:

1. Limits membership to 50 persons. This, however, excludes those who

are in employment by the company and those who acquire shares while
in employment, and who continue to hold shares after ceasing to be
employees.
2. Cannot offer its shares or debentures to the public for subscription.
3. States specifically that it is a private company.
4. The Articles of Association must restrict the transfer of its shares.
5. It cannot invite the public to deposit money for fixed periods or payable
at call whether or not bearing interest.

PUBLIC COMPANY SECTION 10 CA

A public company is defined as any company other than a private
company and which is so stated by its Memorandum of Association that
it is a public company.

LIMITED LIABILITY COMPANY

This is the most common form of a company seen around. By limited
liability, it is meant that the liability of members or shareholders is limited
to the amount if any unpaid on the shares of the company.

COMPANY LIMITED BY GUARANTEE

This type of company is formed for the purpose of promoting charitable
or other similar objectives and does not carry on business for profit.
They are formed to promote for instance commerce, art, science,
religion, sports, culture, etc.

THE UNLIMITED LIABILITY COMPANY

This again is not common. An unlimited liability company is a company
that does not have any limit on the liability of its members.

WAYS OF BECOMING A MEMBER/SHAREHOLDER

There are two main ways of becoming a member of a company:
1. By subscribing to the memo of association:
On registration, the subscribers of the memo of a company shall be
deemed to have agreed to become members and shall be entered as
members into the register of members.
2. By agreeing in writing to become a member:
This can be done in the following ways:
(a) By allotment: a prospective member applies to the company for a
number of shares. This constitutes an offer. The company may
accept the offer by obliging the prospective member with the number
of shares applied for. Once this is done, that prospective member
becomes a fully-fledged member, and his name shall be entered in
the register of members.

(b) By transfer or transmission: Shares can be transferred from one

person to another. This is followed by registration. The transfer of an
existing member’s share to another may be by sale, gift or some
other transaction. Transmission on the other hand is an involuntary
transfer occurring on the death or bankruptcy of a member. On the
occurrence of any of these events, ownership and the rights of the
shares will automatically vest in the personal representatives in the
 case of a dead member and trustee in bankruptcy in the case of a
bankrupt member respectively.
(c) By operation of the law of estoppels: When a person’s name is
inadvertently placed on the register of members and he knows and
assents to it, he will be stopped from denying that he is a member.

RIGHTS OF A MEMBER

1. A right to attend any general meetings of the company and to speak and
vote on any resolution before the meeting. Every member is also entitled
to be given notice of all the company meetings.

2. A member has a right to dividends where such has been declared. The
general principle governing dividends is that they are payable out of
profits. A dividend, when due and unpaid, is seen as a special debt due
to and recoverable by a shareholder and thus gives him the right to sue
for dividends only when declared.

3. A member is entitled to a share certificate which is prima facie evidence

that he is entitled to the number of shares contained in the share
certificate.

4. A member has a right to receive copies of balance sheets and auditors’

report which is to be laid before a company in a general meeting not
less than 21 days before such a meeting.

5. Right to inspect without any charge the minute books of the Company.

6. Right to inspect without charge but with reasonable restriction the

register and index of names of members of the Company.

7. Right to inspect, without charge but with reasonable restriction, copies of

instruments creating mortgages and other charges and the company’s
register of charges.

Capacity to form a company (sections 6 and 59)

Section 6 provides that an individual is prohibited from joining in the
formation of a company if he is a minor, of unsound mind, an
undischarged bankrupt, or disqualified from acting as a company
director. However a minor may be allowed to join in the formation of a
company if there are at least two other persons involved who are not
disqualified.

Participation of foreigners in a company

There is no legal prohibition or restriction on the participation of a
foreigner in company formation in The Gambia. Section 50 of The
Gambia Investment and Export Promotion Agency Act 2010 restricts the
employment of foreign nationals to a maximum of twenty percent of the
total workforce. Moreover, foreign employees of a business resident in
The Gambia are subject to the payment of payroll tax. ECOWAS
nationals pay D10,000 and non ECOWAS nationals pay D40,000.

Steps in the formation of a company

The practice in this jurisdiction is that the responsibility for formation of
companies is vested exclusively in legal practitioners and it involves the
following basic steps-

1. Taking instructions from the promoters i.e. any people who

undertake to form a company and take care of all the registration
procedures, purchasing property for the company, issuing prospectus
etc.

2. Name search at the company registry or apply for name

reservation.

Rules on the choice of the Name (sections 15 and 16)

Pursuant to S.18, each company is required to reserve the name it
intends to use in accordance with the Single Window Business
Registration Act. The following rules regulate the choice of name-

1) The Registrar will not allow the registration of a name which –

a) is identical with a name in existence and already registered

or strikingly similar to it so as to be capable of deceiving the public
NIGER CITY CHEMISTS Ltd v NIGERIA CHEMISTS 1961 1 ALL
ER NLR 117;
 b) contains the words “national”, “Gambia”, “state” or any other
word suggesting Government ownership or patronage unless
permission is granted by the Government;

c) is undesirable, offensive or contrary to public policy;

d) contains the words “bank” in relation to a non-banking

institution; or

e) would violate an existing trademark or business name

unless the consent of the owner is obtained.

2) The name must end with the words “limited” in the case of a
company limited by shares or guarantee, “Public Limited Company”,
“Limited by Guarantee” or “Unlimited” or their abbreviations.

3) The name of the company must be adequately publicised outside

the registered office and on business letters as well as on its seal
(S.105)

3. Preparing the incorporation documents i.e. memo and articles;

The Memorandum of Association is the constitution of the company. It is a
primary document which must be registered to incorporation. The memo
determines the scope and extent of the company’s power.
The memo essentially governs the external relationship of a company. From the
memo, one will be able to find out the following, as outlined under S4 of CA:

1. The name of the company

2. The situation of the registered office which must be in The Gambia.
3. The nature of business or businesses it is authorised to carry on or the
objective of the company.
4. The restrictions, if any, on the powers of the company.
5. That the company is a private or public company.
6. The nature of the liability of the members, that is limited by shares or by
guarantee or unlimited.
7. The amount of authorised share capital of the company.

The Article of Association on the other hand regulates the internal affairs of the
company. It is covered by S8 of CA. Some of the contents of the Article of
Association are:

A. Appointment, removals, powers and duties of Directors and other officers

of the company.
B. The seal of the company
C. Declaration and payments of dividends, Accounts, Audits, etc.

4. Payment of the required fees; and

Business Registration ………………………..D1000
Incorporation fee
The share capital of up to D500,000……………D10,000
D500,000 to D1000,000 ……………………..D15,000
D1000,000 to D10,000,000……………………D20,000
Share capital of above D10,000,000………….D25,000

For the registration of Company limited by guarantee……………..D5000

5. Filing the incorporation documents with the Registrar of

Companies and obtaining a certificate of incorporation. This includes
filling form SWR 7, presentation of Identity or Passport of the
shareholders and Tin Card of the Company.
Advantages of Incorporating a Company
Once a company is incorporated, the following incidents would normally
flow from the fact of incorporation-

1. Legal capacity an incorporated company has the capacity to

carry out the activities outlined in its memorandum of association and
enter into contractual relations.

2. Property ownership A company can also own property including

land.

3. Perpetual succession A company has perpetual succession

even if the original members are not alive unless it is wound up.

4. Legal proceedings a company ompany may sue and be sued in

its own name and it is also subject to the same rights and obligations
with regard to limitations of actions as an individual.

5. Publicity. An incorporated company is also subject to statutory

publicity requirements in running its business e.g., the memo and
articles are public documents that can be accessed by members of
the public, filing of annual accounts and returns.

6. Nationality, Domicile, and Residence

A company acquires the nationality of the country in which it is
incorporated. However, the place where the registered office of a
company is situated is its domicile. A company is a resident in the
country where it is conducting its business or a material part of it or in a
place where its central management and control are to be found.

Separate Legal Personality of a Company

As soon as a company is incorporated, it becomes a legal personality
separate from its members who formed it. It can therefore own assets,
sue and be sued in its own name, etc.

This separate legal personality of the Company also means that in the
event of a business failure, the member’s liability is only limited to the
unpaid amount of their share value. This principle was established in the
 case of - SALOMON V SALOMON AND Co Ltd 1897 AC 22 the
Claimant carried on business manufacturing boots as a sole proprietor.
He later formed a limited liability company together with his family
members, with him taking most of the shares. The company was later
wound up and the liquidator claimed that the claimant should bear
responsibility for all the company`s debts.
The court held that the company and not the claimant owned the
business and the attendant debts. Therefore, he had no obligation to
pay the debts.

The fact that the incorporation of a company establishes a separate

personality is expressed as the “veil of incorporation” i.e a veil
through which the law will not usually penetrate. This means that the
members of the company are shielded from public view by the above
concept. So one has to look up to the company for any dealings and
claims and not the individual members.

Lifting the veil of Incorporation

The principle in the case of SALOMON V SALOMON & CO LTD 1897
AC 22, state thus once a Company is incorporated, it gains a separate
legal personality from that of its members who formed it.
Notwithstanding this artificial or juristic personality attained by a
company upon incorporation, it is necessary at times in the interest of
justice to disregard the corporate entity and hold individual members
(The Alter Egos) responsible for the liabilities of the Company. (Often
referred to as: “Exceptions to the Rule in Salomon). There are both
Judicial and Statutory Authorities developed so far to expatiate on
circumstances under which the Veil of Incorporation can be pierced for
the individual Directors to be held responsible for the acts purported to
have been done by the company. Consequently, only the court can lift
the veil of incorporation in the Gambia.

The Gambia jurisprudence has stated the circumstances under which

once presented, the court may be left with little or no option but to lift the
veil of incorporation and hold individual members responsible:

1. Where the membership of a company falls below the statutory minimum

and the company carries business for six months, then, the veil can be
lifted where the need arises.

2. Where a company fails to obtain its trading certificate in addition to its

Certificate of Incorporation before trading and borrowing money, then
 the company’s directors are responsible for any obligations incurred see
Section 117(8) of the 1985 UK companies Act.

In addition to the above statutory provisions, judicial exceptions to

Salomon’s Rule have also been developed. These exceptions include:
3. Combating fraud. The courts will lift the veil to hold a director if there is
any aspect of fraud, sham, or façade. As was decided in the cases of
JONES V LIPMAN (1962) and, GILFORD MOTOR CO V HORNE
(1933).