This is the second part of the major changes to company law in Ghana
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.
Ghana’s 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.
6. Stringent Requirement for Directors
Ghana’s Companies Act 2019, imposes enhanced corporate governance requirements for directors. The Act criminalizes the situation where persons previously disqualified from acting as directors act in that capacity. The same sanction regime applies to a person who does not qualify to be a director of a company in the first place. The Act also imposes a reporting obligation on the previously disqualified directors to disclose the fact of their disqualification. The qualification and disqualification criteria for directors is spelt in the Act.
A person is disqualified from holding the position of director of a company if;
- the person is convicted of an offence involving fraud or dishonesty;
- it appears that the person may have been guilty of a criminal offence whether they were convicted or not;
- the person commits or is convicted of an offence related to insider dealing or any other offence which is not a misdemeanor;
- a person is adjudged bankrupt;
- the person has been disbarred from being part of a recognized professional body as a result of a disciplinary action;
- there is an ongoing criminal investigation in which the person is involved.
A person may also be automatically disqualified from acting as a director where the individual;
- has been convicted within the last 5 years of an offence involving dishonesty, fraud or relating to the promotion, formation and running of a company;
- has been the director or a senior executive of a company that became insolvent within the past five (5) years;
- has been disqualified to act as Company Secretary, receiver, manager or liquidator of a company.
The person is automatically disqualified to act or be appointed as a director of a company for five (5) years. Upon a second conviction, the person is automatically disqualified for ten (10) years. A third conviction would render the person permanently disqualified from acting as a director.
It is important to note that a person previously disqualified from acting as a director may apply to a court for reinstatement before the expiration of the five (5) year disqualification period
A person who is disqualified from acting as a director has to disclose his disqualification or may be liable on summary conviction to a fine that is presently not less than six thousand (6000) Ghana Cedis and not more than 12,000 Ghana Cedis or a term of imprisonment of not less than two (2) years.
Directors are also required to keep an Interests Register which records all directors’ interests. The Interests Register is to be available for inspection by members and also during company meetings.
7. Approval Processes for Major Transactions
The New Companies Act does not allow a Company to enter into a major transaction unless the transaction is approved by special resolution. Major transactions include;
- The acquisition of or an agreement to purchase assets the value of which is more than seventy-five (75) per cent of the value of the company’s assets before the transaction;
- The disposal of or an agreement to dispose of assets of the Company valued at more than seventy-five (75) per cent of the value of the company’s assets before disposal;
- A transaction likely to have the effect of the company acquiring rights or interests valued at seventy-five (75) per cent of the company’s assets before the transaction.
- A transaction likely to incur liabilities including contingent liabilities the value of which is seventy-five (75) per cent of the company’s assets before the transaction
8. Options available to unhappy shareholders
Ghana’s Companies Act 2019 includes a “Buy-out” remedy for dissenting minority shareholders. This is a remedy against minority oppression. Should a dissenting minority shareholder be outvoted on a matter involving the amendment of the constitution of the company, the amendment or dispensation of the registered objects or business activities of the company, the approval of a major transactions, the variation of class rights or the approval of an arrangement, merger or both, that member may require the company to purchase his shares.
To qualify for this relief, the member must have disapproved of this transaction and voted wholly against the resolution to be entitled to have their shares bought by other members or by the company itself subject to restrictions on the company purchasing its shares as stated in the Act. The Act further sets out the procedure for the determination of a fair and reasonable price for the disposal of that member’s shares.
The company may apply to the Court for an exemption to the requirement to purchase its shares in this instance if the Board resolves that the purchase of its shares by the company may result in the company becoming insolvent; and the Company has made reasonable attempts to have the shares purchased by another person but has failed to do so.
9. Insolvency Provisions
The New Act does not only cover companies which have been rendered insolvent as a result of financial difficulties and so may be liquidated by means of official liquidation via The Corporate Bodies (Official Liquidation) Act (Act 180), but also companies that may be financially viable but facing temporary hardships or merely wish to close up their affairs. This Act sees the introduction of private liquidation as an option which allows solvent companies to opt for a private liquidation or administration as a means of corporate restructuring or dissolution. The Administration provisions in the Act, which very much resembles the United States Chapter 11 Bankruptcy provisions offers companies legislative protection to enable them to resolve financial hardships through restructuring or administration rather than simply liquidating otherwise viable companies. Private liquidations may be undertaken by companies that are solvent but need to be liquidated. The Act also introduces administration as an option for relieving for distressed companies.
Insolvency and Restructuring provisions may be found in the Corporate Restructuring and Insolvency Bill which is currently before parliament and would repeal the Bodies Corporate (Official Liquidation) Act (Act 180).
10. Beneficial Ownership and the Central Register
The New Companies Act has an improved beneficial ownership tracking regime. The Act requires the identification of members and beneficial owners of companies who are politically exposed persons and the registration of these relationships in the Central Register kept by the Registrar of Companies.
The Central Register is a database maintained in both Electronic and Manual formats by the Registrar of Companies. The Central Register is available for general viewing of the public. Politically exposed persons include persons entrusted with prominent public functions in Ghana, a foreign country or an international organization. Particulars to be filed in respect of beneficial ownership of a company includes the full name, address and contact details of the beneficial owner, place of work and position held, The nature of the interest including the details of the legal, financial, security, debenture or informal arrangement giving rise to the beneficial ownership; and confirmation as to whether the beneficial owner is a politically exposed person and basically, any other information as may be determined by the Registrar
11. Rotation of Auditors
Under the New Companies Bill, there is a requirement for mandatory rotation of auditors of companies. Auditors of public and private companies shall be compulsorily rotated after a six (6) year term with a cooling-off period of six (6) years. This provision would help avoid conflicts of interest which may arise out of familiarity due to excessively long standing audit relationships.
12. Derivative Actions
The New Companies Act enables companies to enforce the rights of the Company through derivative actions. Shareholders may apply to the Court for leave to bring an action in the name and on behalf of the Company to enforce the rights or recover assets belonging to the Company. This strengthens the capacity of shareholders to hold directors accountable for their actions. This rule is a revolutionary development in the protection of minority and shareholder rights. A derivative action enforces the company’s rights separate from the rights of the shareholders and may prevent the directors from abusing their fiduciary responsibilities to the Company in favour of one or more majority shareholders. It provides a remedy to shareholders who wish to hold the directors of the company to account but may otherwise be unable to bring proceedings because the directors refuse to bring or maintain such proceedings on behalf of the company.
13. The Companies Bulletin
The Ghana’s Companies Act 2019, introduces a publication to be known as the Companies Bulletin. The Companies Bulletin is a publication made by the Registrar of Companies similar to the Gazette, but solely managed and published by the Registrar of Companies. The Report would be maintained as a secured electronic database and made accessible in hard and electronic copies.
The Bulletin would contain notifications in respect of companies such as;
- Publication of fees for the Registrar of Companies
- Change of name
- Court orders in respect of stay of proceedings concerning insolvency proceedings
- Notices striking company names off the register of companies
- Notice of appointment or removal of liquidators
- Notice of official liquidation proceedings in respect of companies
- Notice of conversion of a private company to a public company
- Particulars of documents to be filed with the Registrar by external companies including the name, nature of the business, details of share capital, address of foreign principal office/branch, address of the local branch, name and address of local manager etc
- Notice of winding up of external companies
- Resolutions of companies in respect of private liquidations
- Court orders in respect of persons disqualified from acting as company secretaries, directors or in senior management roles
- Details of unclaimed dividends of companies transferred to the Registrar of Companies for safekeeping
- Notices in respect of companies that have filed annual returns
The Registrar of Companies may by regulation provide for the payment of fees in respect of matters to be published in the Companies’ Bulletin and may alter those fees when necessary.
14. Registration, Communication and Service by Electronic or Digital Means
Ghana’s Companies Act 2019 gives the Registrar of Companies the power to authorize the following transactions electronically or digitally, through an electronic system approved by the Registrar;
- the incorporation or registration of a company
- the reservation of a company name
- the filing of particulars
- the conversion of a company
- the filing of annual returns and financial statements
- the keeping and maintenance of a register
- arrangements, mergers, amalgamations and sale of undertakings
- the removal of a company’s name from the register upon cessation, dissolution and liquidation
- reports on statistical data on companies
- the inspection of a register
- the registration of debentures
- the transfer of debentures
- the registration of a contract or agreement for the allotment of shares;
- the registration of charges;
- keeping of books of accounts;
- the service of a notice of the document;
- the dissolution of a company;
- searches on a company register;
- an offer to be made to the public or an invitation to make an offer to the public;
- payment of fees;
- the filing of notice or document; and
- the performance of any act or thing required to be done concerning all the services above listed
Also read the Part one of the New Companies Act
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. An earlier version of this publication was published on www.ghanatalksbusiness.com
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. 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