Company Law in Ghana – Recent Developments
On 2 August 2019, the President of the Republic of Ghana – Nana Addo Dankwa-Akufo-Addo announced that the long awaited Ghana Companies Act, 2019 had been assented into law.
The Companies Act, 2019 has been in the works since 2018 and replaces the Companies Act, 1963 (Act 179). At a very high level, the new Act seeks to introduce improved corporate governance standards for companies operating in Ghana. The Act draws on the experience of more developed Jurisdiction and specifically incudes international best practices from jurisdictions such as the United Kingdom, New Zealand, South Africa and Mauritius.
The impact of the legislation will be felt most in corporate administration with the creation of the Office of Registrar of Companies, an autonomous governmental body similar to the United Kingdom’s Companies House. The Registrar of Companies would operate separately from the Registrar Generals Department and will be solely responsible for the registration, regulation and winding up of corporate bodies in the country. The new Act introduces reforms to company registration and regulation with the overall aim of simplifying the regulatory framework surrounding the incorporation and operation of companies while improving existing corporate governance standards that exist in the country.
This publication aims to highlight some of the major changes to expect from the passage of the Ghana Companies Act, 2019.
MAJOR CHANGES TO COMPANY LAW IN GHANA
1. Creation of the Office of the Registrar of Companies
The Companies Act, 2019 establishes “the Office of the Registrar of Companies” which is an autonomous governmental body with perpetual succession. It set up to register and regulate businesses and corporate bodies operating in the country and is similar in operation and function to the United Kingdom Companies House.
The Registrar of Companies is to be appointed by the President of Ghana and shall be separate from the Registrar General. This office which shall be run by a governing board with full financial autonomy and full control over the use of internally generated funds (IGFs). Its sole purpose is the registration and regulation of companies in Ghana. To this end, the Office of the Registrar would carry out the below functions; –
- Register and regulate of all types of businesses;
- Registration of business names, companies and partnerships;
- Appointment and regulation of company inspectors;
- Act as the Official Liquidator of Companies; and
- Manage the finances and fixed assets of the Office of the Registrar.
The Registrar of Companies shall have a governing board comprising:
- a Chairperson nominated by the President
- the Registrar of Companies
- one representative from the Office of the Attorney General not below the rank of Principal State Attorney
- one representative of the Ministry of Trade and Industry not below the rank of Director
- one representative of the Private Enterprises Foundation (PEF)
- one lawyer with at least ten (10) years experience and nominated by the Ghana Bar Association
- one person from business academia
- one person from the Ghana Association of Restructuring and Insolvency Advisors (GARIA)
- one person from the Institute of Chartered Accountant (ICAG)
Members of the Board (except for the Registrar of Companies) cannot hold office for more than ten (10) years. Also, the members of the Board may not be appointed for more than two (2) terms.
2. Introduction of the Constitution
Unlike Companies Act, 1963 (Act 179) , the Companies Act 2019 grants companies the option to file a registered constitution upon registration with the Registrar of Companies. The constitution would be signed by one or more members or the Company Secretary and may either be delivered to the Registrar before incorporation or filed after incorporation. The constitution contains the specific objects and regulations of the company as well as matters specific to the company and its operations. Should a company fail to file a constitution with the Registrar of Companies, the standard constitution contained in the Schedule to the Act would be applied to that company. Companies formed for special purposes or that operate in highly regulated industries such as telecommunications, oil and gas and financial services and banking are required to file written copies of their constitution with the Registrar of Companies which would restrict their objects specific to the compliance requirements for the specific industries in which they operate.
Should a company fail to file a registered constitution, the standard constitution contained in the schedule to the Act would become automatically applicable to that company.
3. Companies no longer bound by their stated objects
Ghana’s New Companies Act, 2019 does away with the Ultra Vires Rule, which requires Companies to stick strictly to the category of businesses stated in their regulations. The new Companies Act does not require Companies to file an objects clause with the Registrar of Companies limiting the objects of the Company or the various activities the Company can engage. Companies set up for special purposes or operating in regulated industries however have the option to limit their objects.
What this means is that Companies, like natural persons, can now engage in any activity that they wish to and unlike the previous regime, are not limited to only activities stated in their regulations. That said, it is important to note that regulatory restrictions will continue to apply to companies operating in restricted areas such as oil and gas, banking, insurance or telecommunications where special licenses are required. Such companies may file a constitution stating clearly the objects of the company and thus restrict their operations to those sectors alone.
4. Introduction of LTD, PLC, LBG, and PUC.
To ensure easy identification of the actual legal form of a registered company, companies will be required to add the following suffixes as identifiers;
- Private Company limited by shares shall be “Limited Company “or “LTD”
- Public Company limited by shares shall be “Public Limited Company” of “PLC”
- Company Limited by Guarantee shall be “Limited by Guarantee” or “LBG”
- Public Company Unlimited by Shares shall be Public Unlimited Company or “PUC”
This would ensure that third parties and stakeholders would have clarity on the legal form of the company with which they are dealing.
5. Qualifications for Company Secretaries
To further enhance corporate governance in Ghana, companies are now required to appoint a Company Secretary duly qualified under the Act to perform the duties of a company secretary. This is a direct contrast to the old regime where anyone above the age of majority could be appointed as a company secretary. Under the Ghana’s New Companies Act, a person may not be appointed as a Company Secretary unless that person;
- has obtained a professional qualification or tertiary level qualification with an offering in company law practice and administration that enables the person to have the knowledge and perform the functions of a company secretary;
- has held office under a qualified company secretary for at least three (3) years; or
- is a member in good standing of the Institute of Chartered Secretaries (Ghana); the Institute of Chartered Accountants (Ghana); or has been enrolled to practice as a solicitor or barrister in Ghana.
In summary, a company secretary is at the very basic level required to have a comprehensive knowledge of company law and legislation and have the ability to guide the Board of Directors and the Company in their decision making. In more specific terms, the Company Secretary is required to effectively navigate the complex corporate governance framework and ensure that the companies they work for are abreast and compliant with their obligations under the law.
Audrey is a qualified lawyer, and the managing partner of AudreyGrey, a legal, tax and compliance firm in Accra. A member of the Ghana Bar Association, her areas of expertise are corporate and commercial law, taxation, labour and insolvency law. She has previously worked as an associate at PricewaterhouseCoopers (Gh) Ltd and a law firm N Dowuona and Co in Accra. She is a member of and serves as the legal advisor to the Ghana Association of Restructuring and Insolvency Advisors (GARIA) where she assisted with drafting and policy formulation for the new Companies Act and Corporate Insolvency Bill. She is also an experienced Chartered Accountant and a member of the Association of Chartered Certified Accountants, ACCA (UK) and the Institute of Chartered Accountants, Ghana (ICAG). She is currently pursuing the Chartered Institute of Taxation (CIT) certification.
Contact : Tel: 0302913994, 0244631938, Email : firstname.lastname@example.org
Web : www.audreygrey.co