In The Nick of Time: The Insolvency Law and Post-COVID Recovery in Ghana

In The Nick of Time: The Insolvency Law and Post-COVID Recovery in Ghana

Ghana’s economy is forecasted to shrink by about 5% of GDP in 2020 — this being a baseline scenario impact from the challenges of the pandemic. Businesses are facing a testing time, the like of which many would never have seen before. Owner managed businesses are particularly hard hit in these times as they often do not have cash reserves to carry them through months of potential disruption and forced closure. We are now subject to a threat nobody could have foreseen and thus the Corporate Restructuring and Insolvency Act, 2020 (Act 1015) is the need of the hour.

On 30th April 2020 the President assented to the Corporate Insolvency Bill, 2019 to bring into force a new legal framework for the regulation of insolvency practitioners as well as provide the avenue to help resuscitate temporarily distressed but viable businesses, entities and establishments from liquidation and its ramifications.

The new law provides for the timely, efficient and impartial proceedings for insolvent companies and offers restructuring and insolvency solutions including administration, receivership and liquidation. However, it does not cover companies in the financial services industry such as banks and insurance companies which have separate laws covering their restructuring and insolvency proceedings.


Key highlights of the new law include:

  1. Consensual restructuring of liabilities involving active participation of creditors in administration (watershed meeting), receivership or liquidation which will on one hand secure their investment and, on the other, allow businesses to freely re-strategize and plan their recovery from the impact of COVID-19, for example.
  2. The option of Restructuring agreements provided under the law releases the Company from a debt without affecting the liability of a guarantor of a debt.
  3. Protection of Company property provided for under the law which essentially precludes creditors from enforcement of charge orders upon the commencement of administration.
  4. Cross-border insolvency processes. Foreign insolvency proceedings are recognised under the law as well as co-operation with foreign courts on insolvency and court recognition of foreign representatives to participate in insolvency proceedings in Ghana regarding a foreign debtor.
  5. The establishment of a special division within the office of the Registrar of Companies to be known as the Insolvency Services Division which will be tasked with supervising practitioners, reviewing the law and advising the Minister on matters relating to insolvency.
  6. The Liquidation Fund. As some businesses will not have the ability to pay off or settle creditors and remain trading, a Liquidation Fund is established into which moneys received by the liquidator are to be paid and from which moneys may be disbursed by the liquidator for the beneficial administration or winding up of a company post commencement of liquidation.
  7.  The newly enacted law repeals the winding up and liquidation proceedings under the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180).

The Corporate Restructuring and Insolvency Act 2020 (Act 1015), complete with the Companies Act, 2019 (Act 992), will introduce a new era in the Ghanaian business environment in which the creditors, employees and shareholders’ interests are adequately protected and private enterprises are ensured a safe transition of the business.

Further support for the business community may be found in the Coronavirus Alleviation Programme (CAP) developed by the Minister of Finance and Economic Planning. Under the CAP, commercial banks have been engaged to provide a syndicated facility of GHS 3 billion to support

key industries; grant a six-month moratorium on principal repayments for selected businesses; reduce interest rates by 200 basis points and increase credit supply to the private sector.

Additionally, the National Board for Small Scale Industries (NBSSI) is scheduled to roll out a GHS 600 million Government Stimulus package for Micro, Small and Medium Scale Enterprises (MSMEs) in addition to a GHS 90 million Mastercard Foundation programme, also expected to come on stream, for the much-needed relief for the MSME sector. This is in addition to the International Monetary Fund (IMF) recent approval of a 1-billion-dollar Facility to Ghana for the fight against the virus and its negative ripple effect on the economy.

While profound uncertainty remains over the length of the virus pandemic period, or how quickly the recovery period will be once it arrives for Ghana, the introduction of a more robust and effective Insolvency regime (along with other efforts) is undoubtedly, a timely and necessary preparatory step for the recovery battle ahead. Hopefully, one that does not extend beyond the short-term and sets the economy in motion to normalcy.

To further discuss this blog post or related matters, visit our office at House No. 99A 4th Norla Street, Labone – Accra or contact us on 0307001566 or and a member of the B&P ASSOCIATES legal team will be happy to provide further insight.

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