10 May Essential Reading: Our Top 10 Picks of the New Law Governing Companies in Ghana
The much debated Companies Bill 2018, was passed by the Parliament of Ghana on 2nd May 2019 introducing new and amended provisions of the corporate legislative framework in Ghana. The new law seeks to enhance transparency and shareholder engagement and promote a friendly business climate in Ghana. The following summary highlights our ‘top picks’ of the new Act and what we deem of real importance to both the local and international business community.
In this Blog post, we will refer to the newly passed Bill as “the Companies Act”.[1]
Creation of the Office of the Registrar of Companies
The Companies Act introduces the Office of the Registrar of Companies established to aid the registration and regulation of businesses in Ghana, akin to other jurisdictions, such as the United Kingdom’s Companies House. The Office of the Registrar will also be responsible for the appointment of company inspectors and will assume the role of official liquidator.
Abolition of the need to file a Constitution
The ‘Regulations’ of a Company will now be referred to as the ‘Constitution’ of the Company. Unlike the Companies Code 1963 (Act 179), which required every company to file or register the Company’s Constitution as part of the incorporation process, it is no longer a mandatory requirement under the new Act to do so.
A company may be registered without stating its objects
The Companies Act abolishes the “Ultra Vires” Rule, that is, a company need not state its objects or nature of business at incorporation. The implication of this amendment is that, companies who opt not to state their objects in their Constitution will have no restrictions imposed on them and can engage in any legitimate business. It is important to note however that, where the objects are clearly stated in the Constitution, the Company will be restricted to operate within the stated scope of their objects.
Certificate to Commence Business
The Companies Act also abolishes the practice of issuing a Certificate to Commence Business. The issuance of this Certificate is no longer a pre-requisite to commence business operations in Ghana. It is envisaged that the removal of this regulatory hurdle will expedite the company registration process.
E-Filing
The Companies Act makes provision for electronic or digital means of registration of the main processes in the life of a company, facilitation of communication and service. Filing of incorporation documents and annual returns for example, can now be effected electronically.
Buy-Out remedy for dissenting Shareholders
Pursuant to the Companies Act, the Shareholders of a company who oppose a particular transaction on behalf of the company, have the right to demand that their shares are bought out at a fair value in so far as it is just and equitable for the company to do so. Where the transaction has been passed by a Special Resolution over a period of one year, but the Company has been unable to carry out the proposed business transaction, Shareholders may have their shares reinstated and will be entitled in those circumstances, to receive any dividend payments made during the relevant one year period.
Enforcement of Shareholder rights through a derivative action
A Shareholder is authorised under the Companies Act, to institute proceedings in the name of the company and its affiliated entities to enforce the rights of the company.
Authorisation by Shareholders
Major transactions, defined as transactions which are more than seventy-five (75%) of the value of assets of the Company, are required to receive the authorisation of Shareholders by way of a Special Resolution.
Qualifications and Regulations for Company Secretaries
The Companies Act notably specifies the qualifications of a Company Secretary as either a person who:
- has obtained a professional or a tertiary level qualification, and is qualified to perform the functions of a Company Secretary or;
- has been an apprentice or has been articled under the supervision of a qualified Company Secretary for a period of at least three (3) years or;
- is a lawyer or an accountant in good standing in the Republic, or a Member of the Institute of Chartered Secretaries and Administrators.
Establishment of a framework for handling insolvency issues
For the first time, the Companies Act creates a framework for resolving issues of insolvency affecting businesses in Ghana. It creates an Insolvency Division with the dual aim of saving viable businesses and ensuring that non-viable businesses can efficiently exit the market. The Companies Act also introduces licensing requirements for insolvency practitioners which will be regulated by the new Insolvency Division.
[1] The Companies Bill was passed by the Parliament of Ghana on the 2nd day of May 2019. The Bill received Assent by the President of the Fourth Republic of Ghana on the 2nd of August 2019 to become the new Companies Act 2019.
To further discuss this blog post or related matters, visit our office at House No. F106/54th Soula Street, Peter Ala Adjetey Avenue, Labone – Accra or contact us on 0307001566 or info@bpaghana.com and a member of the B & P ASSOCIATES legal team will be happy to provide further insight.