OHENE LTD is a private company. Three quarters of the stated capital is held by the directors or members of their families. The company's draft Statement of Financial Position as at the end of 2020 was as follows:

Statement of Financial Position at 31st December, 2020 

Non-current assets                                                  GHC                                                          GHC 

Intangible assets: Development costs                                                                                   85,000 

                               Goodwill                                                                                                     60,000

Tangible assets: Land and buildings                                                                                    270,000

                             Plant and machinery                                                                                 326,000

                                                                                                                                                 741,000

Current Assets

Inventories                                                             426,000

Receivables                                                            531,000

                                                                                957,000 

Payables falling due within one year

Payables                                                               393,000

Bank loans and overdrafts                                 687,000

                                                                             1,080,000

Net current liabilities                                                                                                               (123,000)

Total assets less current liabilities                                                                                          618,000

Financed by 

Stated capital(800,000 shares of GHC1 each)                                                                   800,000

Capital Surplus                                                                                                                           50,000

Retained Earnings [Accumulated Deficit]                                                                            (232,000)

                                                                                                                                                    618,000

 i) Bank loans and overdrafts consist of a 10% loan of GHC400,000 repayable in 2021 carrying a fixed charge on the company's land and buildings, and an unsecured overdraft of GHC287,000. 

ii) The demand for the company's products fell drastically in recent years owing to the import of high quality and cheaper products from Togo. The development costs appearing in the Statement of Financial Position above relate to a new product which has been perfected to a marketable stage, and for which there is believed to be a strong demand. The costs have been properly capitalized in accordance with the provisions of relevant accounting standards. The company is in urgent need of capital to meet existing liabilities and the necessary new investment in plant and working capital. 

A scheme for financial reorganization has been drawn up for the consideration of shareholders and payables. The terms are as follows: 

(i) The shares of GHC1.00 each are to be written down to GHC0. 20 per share and subsequently every five shares of GHC0. 20 each are to be consolidated into one fully paid share of GHC1.00.

(ii) The existing shareholders are to subscribe for a rights issue of two new ordinary shares, issued at GHC1.00 per share, for every share held after the proposed reduction and consolidation.

(iii) In full satisfaction of the GHC687,000 owing, the bank agrees to accept an immediate payment of GHC87,000 and to consolidate the balance of GHC600,000 into a loan, carrying interest of 20% per annum, repayable in year 2020. The loan is to be secured by a fixed charge on the land and buildings and a floating charge on the company's remaining assets.

(iv) The credit balance on capital surplus account and debit balances on the Income surplus loss account and goodwill, considered valueless, are to be written off.

(v) The assets listed below are to be restated at the following amounts: 

                                                                                                                                                                                    GHC

Plant and Machinery                                                                                                                                              125,000

Inventory                                                                                                                                                                  210,000

Receivables                                                                                                                                                             500,000

Land and Buildings                                                                                                                                                 320,000

A group of dissatisfied shareholders plan to oppose the scheme on the following grounds: We have to bear the wholes burden of the reorganization whereas the bank loses nothing.'

The company has received a cash offer of GHC1,120,000 for its non-current and current assets.

You are required to:

I) Provide a revised Statement of the Financial Position of OHENE LTD at 1st January 2021 giving effect to the proposed scheme for reorganizing the company.

II)  Write a report to the group of dissatisfied shareholders explaining whether they should accept or oppose the scheme.