09 Dec Renewed Focus on Corporate Governance in Ghana
In recent times, a number of efforts to clean up Ghana’s banking industry have impacted the approach to corporate governance within organizations, and have emphasized the importance of a well-structured and effective governance regime for businesses. In this installment of our blog series, we discuss the improved legislative and policy framework for corporate governance in Ghana.
The Companies Act 2019
The Companies Act 2019 (Act 992) has enhanced the ease of doing business in Ghana and promoted a transparent and competitive business environment. In furtherance of the Act, the Registrar-General’s Department has introduced a new electronic system for business registration and filing amendments. The new electronic system, which includes revised online forms, generally allows a company to be registered without stating its objects, except for businesses operating within specific industries. Companies are additionally required to provide information on Politically Exposed Persons who could be beneficial owners or members of the company. A major highlight of the reform is the introduction of the Central Beneficial Ownership Register for all companies in Ghana, especially for those in high-risk sectors such as the extractive sector. Disclosure of such information reduces the risk of corruption, money laundering and terrorism financing. The law mandates the rotation of auditors for private companies. Private companies are to replace their auditors who have served for six years or more. The said auditors can be reappointed after a six-year cooling off period. In this regard, the deadline for compliance for all affected companies, is August 2022.
Corporate Insolvency and Restructuring Act 2020
The Corporate Insolvency and Restructuring Act, 2020 (Act 1015) (“CIRA”) provides an avenue to help resuscitate temporarily distressed but viable businesses, and a framework to govern liquidation and insolvency. CIRA introduces administration and restructuring as rescue options and recognizes liquidation as a last resort. It creates a new insolvency division which will operate under the Office of the Registrar of Companies (as introduced by the Companies Act, 2020 (Act 992)), to regulate Insolvency Practitioners (“IP”). An IP, who must be a chartered accountant, a lawyer or a banker in good standing with their professional association, can be appointed by a company faced with liquidity problems as an Administrator. The law places personal liability and criminal sanctions on directors and officers of companies who knowingly trade while the company is insolvent and on directors, who knew or ought to have known that the company was trading with creditors while insolvent. CIRA introduces post commencement financing to provide funding to distressed companies by financial institutions to enable them to re-organize their affairs.
Cybersecurity Act 2020 (Act 1038)
Prior to the enactment of the new Cybersecurity law , matters relating to cybersecurity were partly dealt with under the Electronic Transactions Act, 2008 (Act 772) and the Data Protection Act, 2012, (Act 843). A consolidated cybersecurity legislation is relevant and timely, amidst the recent global surge in the use of information technology. When enacted, the new law will establish the Cybersecurity Authority to advise the government and public institutions on cybersecurity matters. The new Authority will be empowered to introduce codes of practice and standards to regulate owners of critical information infrastructure in both private and public sectors. Additionally, the Authority will provide reporting mechanisms and penalties for non-compliance with an obligation to report a cybersecurity incident.
Bank of Ghana Corporate Governance Code 2018
The Bank of Ghana’s Directive on corporate governance followed closely on the heels of the banking reforms of 2018. The central bank upholds the importance of confidence in the banking sector with a view to promoting investor participation in the sector. The aim of the directive is to assist financial institutions to adopt sound corporate governance practices. Banks are mandated to involve the central bank in all due diligence procedures in the appointment of key management personnel such as Managing Directors and Chief Executives. Board of directors are required to exercise a ‘duty of care’ and a ‘duty of loyalty’ to the financial institutions they preside over. The directive emphasizes separation of powers to ensure an efficient and effective board. The Bank of Ghana sets out fines, and in some cases, imprisonment for non-compliance with the directives.
Securities and Exchange Commission Corporate Governance Code 2020
The Securities and Exchange Commission (“SEC”) of Ghana was established by the Securities Industry Act 2016 (Act 929) to regulate the securities market. The new SEC Corporate Governance Code of 2020 (“the Code”) binds all companies listed on the Ghana Stock Exchange. The underlying principles for the Code are Integrity and Transparency. The Corporate Governance Code mandates the governing board of securities companies to formulate a number of policies. For example, a related party transaction policy will identify related parties, transactions with such related parties and outline the procedures to be adopted that will mitigate possible risk from such transactions. It must allow board members to declare any interest in such transactions.
The board must also adopt a gender-balance policy which is to ensure the appropriate gender balance on the board within a specified time, and an appointment policy outlining the procedure for appointing a director. In accordance with the Code, the board must be constituted of 5 to 13 members composed of people of top-notch skills and integrity, with emphasis on non-executive independent members in leadership. The SEC may however, waive some or all the provisions of the Code, if it is satisfied that a listed company is incorporated or trades its stock on a stock market outside Ghana and is subject to corporate governance requirements in that country of incorporation or trading.
The Anti-Money Laundering Act, 2020
The new Anti-Money Laundering Act, 2020 (Act 1044) which repeals the Anti-Money Laundering Act, 2008 (Act 749), among other things, sets out functions for the Financial Intelligence Centre (“FIC”). Notable among these functions, is the duty to disseminate and enforce the United Nations Consolidated List, third party list and domestic list of persons and entities related to terrorism and/or the financing of terrorism.[1] The Act also widens the responsibilities of supervisory bodies to include supervision and enforcement of the Act, with powers to impose administrative penalties such as revocation of licences.[2]
Furthermore, the definition of accountable companies, under the new Act, has been broadened to include company service providers who act as trustees, nominee directors and shareholders, virtual office providers, nominees and virtual asset providers.[3] These accountable companies are obliged to formulate and implement internal rules on anti-money laundering and anti-terrorism as well as train their employees on the provisions of the rules for the maintenance of compliance. Such internal rules are to be made available to the FIC and any supervisory body upon request. The procedure for reporting suspicious transactions to the FIC must also be addressed clearly in all internal rules.[4]
The law provides an extensive and robust guide on customer due diligence which accountable companies must comply with.[5]
It is expected that this comprehensive piece of legislation will modernize and streamline Ghana’s Anti Money Laundering process in line with international regulations and standards.
[1] ibid, section 8(1) b and c.
[2] ibid, sections 52 and 53
[3] Anti-Money Laundering Act 2020, (Act 1044), first schedule paragraphs j, k and l
[4] Ibid, at section 49
[5] Ibid, at section 30