Securitisation 2025 Comparisons

Securitisation in Ghana still remains largely unexplored. However, in the few instances where it has been explored, the assets utilised included future receivables, tax receipts, and consumer loans. Currently, the Securities and Exchange Commission (SEC) has approved three primary securitisation transactions. In these transactions, the financial assets are categorised as follows.

• Cash flows – levies paid to the government, such as the GetFund and Energy Sector Levy.
• Consumer loans – loans issued to public sector employees, as seen in the Controller ABS PLC transaction.

The most common form of securitisation in Ghana is Future Flow Securitisation (FFS) – a traditional structure that is based on the government’s future levies and tax revenues. Here, the originator, the government of Ghana, transfers its right to these cash flows to a Special Purpose Entity (SPE). This SPE, established as an independent public liability company, then issues bonds backed by these cash flows. Investors purchase the bonds, providing upfront capital to the originator, and the subsequent cash flows are used to service the bond payments.

Ghana does not have a particular piece of legislation that specifically governs securitisation. However, the securities industry in Ghana is generally governed by the Securities Industry Act, 2016 (Act 929) and its regulations, with the Securities Exchange Commission (SEC) being the industry regulator that regulates and promotes the growth and development of the securities market. Additionally, the following laws and regulations are relevant to securitisation transactions in Ghana.

• Companies Act, 2019 (Act 992).
• Securities Industry Act, 2016 (Act 929), as amended.
• SEC Regulations, 2003 (LI 1728).
• Securities and Exchange Commission (Amendment) Regulations, 2019 (LI 2387).
• Energy Sector Levy Act, 2015 (Act 899).
• Ghana Education Trust Fund (GetFund) Act, 2000 (Act 581), as amended.
• Listing Rules of the Ghana Stock Exchange.
• Securities Industry (Over-The-Counter Market) Guidelines, 2022.
• Corporate Governance Code of the Securities and Exchange Commission.

Although securitisation transactions are rare in Ghana, there are no specific legal restrictions preventing Special Purpose Entities (SPEs) incorporated in other jurisdictions from participating in the Ghanaian market. Therefore, the choice of jurisdiction for incorporating SPEs depends on the objectives of the originator.

Generally, SPEs are often established to capitalise on specific benefits offered by the host jurisdiction. One of the most desirable characteristics of an SPE in a securitisation transaction is its degree of bankruptcy remoteness. Countries with more favourable insolvency laws may be particularly attractive for establishing an SPE to facilitate securitisation transactions.

As mentioned, securitisation transactions in Ghana are rare. However, in instances where such transactions do take place, over-collateralisation is the most frequently employed method of credit enhancement.

The term “issuer” refers to an entity established, typically by a financial institution, for the specific purpose of acquiring assets and achieving off-balance-sheet treatment for both legal and accounting purposes. In securitisation, the issuer typically refers to the Special Purpose Entity (SPE) created for the securitisation process. The issuer’s main role is to create securities and offer them to the public. When issuing securities to the public, the issuer is responsible for adhering to all applicable regulatory requirements.

The sponsor plays an essential role in a securitisation transaction. The sponsor, typically a major financial institution, is often the originator or an affiliate of the originator. More precisely, the sponsor is often the parent company or a related arranger of the loan-originating subsidiary that serves as the primary originator for the specific asset-backed securities (ABS) transaction being executed. In most securitisation transactions that have taken place in Ghana, this role has primarily been undertaken by the government of Ghana.

The originator is the entity that initially pools the assets to be securitised, and transfers them to the Special Purpose Entity (SPE), or alternatively, acquires the exposures of other entities with the objective of securitising them. The originator is usually a financial institution, such as a bank, that provides credit. However, other types of originators can include large commercial enterprises, utility companies, or specialised entities created specifically for securitisation. The originator often engages an arranger – usually an affiliate – to structure the transaction. In the context of securitisation in Ghana, the originator is often the government.

Underwriters are corporate entities that purchase securities directly from an issuer and then sell them to open-market investors (see Section 109 of Act 929). An underwriter may be an investment bank; when the underwriter is a bank, it is commonly referred to as an issuing house.

The underwriter is responsible for facilitating the sale of the issuer’s securities to initial investors, acting as an intermediary between the issuer (SPE) and the investors. It assesses investor demand and, in collaboration with the Credit Rating Agency, provides strategic guidance on structuring the transaction in an efficient and cost-effective way.

To function as an underwriter, a company must be duly licensed by the Securities and Exchange Commission (SEC). Underwriters may operate as Licensed Dealing Members (LDM) who conduct transactions through Authorised Dealing Officers.

When issuing a bond on the Ghana Stock Exchange (GSE), the issuer must appoint an LDM to sponsor its listing application. The LDM is responsible for submitting all required application documents to the GSE, in accordance with GSE Listing Rules 20.

Servicers are typically appointed as the originator’s representative to ensure that the Special Purpose Entity (SPE) remains in compliance. While this role has not been specifically defined within the structures explored in Ghana, it can be argued that aspects of the servicer’s responsibilities are shared among the following parties working collaboratively.

• Lead managers/arrangers – these parties structure the transaction and ensure that all participants fulfil their respective roles.
• Debt-service bank – this bank provides banking services to the SPE and must adhere to the regulations set forth in the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). In the securitisation transactions that have occurred in Ghana, the debt-service bank has also been responsible for collecting and distributing cash flows appropriately, due to the nature of the underlying financial assets.
• Manager of the SPE – typically, a corporate entity, the manager is responsible for overseeing the day-to-day operations of the SPE. They ensure that all roles and obligations of the SPE in relation to both sides of the transaction are met.

Investors play a critical role in securitisation transactions. They purchase the securities issued, and when the security is a bond, they receive coupon payments as well as the bond’s face value upon maturity. An investor generally does not have obligations beyond the payment for the security. However, investors may possess certain rights or obligations under the trust deed associated with the bonds being issued. Typical investors in securitisation transactions include financial institutions, insurance companies, pension funds, hedge funds, corporations, and high-net-worth individuals.

The bond trustee serves as the representative of the investors in the transaction. The primary responsibility of the trustee is to safeguard the interests of the bondholders/investors. The specific duties of the trustee may vary and are largely determined by the terms of a separate trust agreement. It is important to note that, with the exception of government debt securities, all other debt securities must be issued in accordance with a trust deed that has been approved by the SEC, as stipulated in the GSE Listing Rules (Rule 7).

A security trustee or agent is responsible for holding various security interests in trust on behalf of creditors, which may include banks or bondholders. This arrangement eliminates the need to provide individual security for each creditor, a process that would be both costly and unmanageable. Security interests held by a security trustee are enforceable in Ghana. A security trustee may be appointed to hold security in trust for, or on behalf of, multiple lenders or other secured parties, as long as any security interests granted to the trustee are properly perfected.

The agreements relevant to a bankruptcy-remote transfer primarily depend on the type of underlying asset; however, an Asset Purchase Agreement may be considered in this context. To avoid transfer pricing issues, the consideration for the asset must be adequate and reflect its true value in accordance with the arm’s length principle. In other words, the transfer must reflect a true sale such that the prices of the assets should be similar to what that would have been agreed upon by unrelated parties under similar circumstances. For example, in a valid asset transfer, the originator must not retain control over the asset as if they were still the owner. In the absence of specific legislation, the SEC is open to accepting customised terms that effectively express the concept of securitisation.

The principal warranties that may be included in securitisation documentation are as follows.

• A warranty that the originator holds perfect title to the asset and has the legal capacity to transfer it.
• A warranty of full compliance with regulatory requirements and that the assets are not subject to any tax claims, penalties, or regulatory fines that could arise after the sale.
• A warranty that the originator is not insolvent or in danger of insolvency proceedings that could affect the validity of the asset transfer to the Special Purpose Entity (SPE).
• A warranty that the asset is free from any encumbrances.
• Any other specific warranties that the parties may wish to include.

To address the enforcement of these warranties, parties may incorporate a clause that allows the SPE to be indemnified in the event of a breach. Typically, the parties also include a dispute resolution clause, providing the aggrieved party with a mechanism to remedy any breach of the agreement’s terms.

Perfection is dependent on the nature of the asset being transferred. Generally, key perfection provisions that may be included include the delivery of title documents to the transferee, as well as provisions for filing changes in title with the relevant regulatory authorities.

As mentioned, the nature of the agreement largely depends on the type of financial asset involved. However, with regard to covenants, the parties will include provisions outlining each party’s obligations. These provisions typically address payment obligations, delivery mechanisms, required notices, reporting duties, collateral obligations (if applicable), and any other covenants permitted by the SEC.

In terms of enforcement, the dispute resolution clause will outline the agreed-upon process for making claims.

These provisions outline the servicer’s obligations, including reporting requirements, notices, and the information to be provided. It may also specify timelines for the delivery of the required reports.

Defaults in securitisation documentation may manifest in the following forms.

• General defaults by parties – this occurs when there is a breach of the agreement or a violation of specific events of default, such as the insolvency of the SPE. This may trigger a series of actions for seeking remedies from the defaulting party.
• Early amortisation – certain events may prompt investors to claim a payout, regardless of the bond’s maturity date. Examples of such events include a decline in the underlying assets, such as cash flows, or an increase in defaults by debtors when the underlying asset consists of loans.

In the case of general defaults, the primary course of action would likely involve utilising the dispute resolution clause for enforcement. Regarding early amortisation, investors would have the right to make claims. However, due to the liquidity challenges this could present to the SPE and the potential for some investors to incur losses, SEC may need to be involved in the process.

The parties may include indemnity clauses to address defaults resulting from the actions or negligence of any party. In the absence of specific laws and regulations, the parties have the flexibility to structure these clauses according to their preferences.

The primary transaction documents in a securitisation include the following.

• securitisation agreement;
• offering memorandum;
• trust deed;
• paying agency agreement;
• subscription agreement;
• servicing agreement;
• asset purchase agreement;
• security agreement;
• investment or collateral management agreement;
• post-enforcement call option agreement;
• swap contracts;
• due diligence reports;
• tax opinions; and
• legal opinions.

Ghana’s financial system has not yet developed to support the widespread use of derivatives. However, the SEC and the GSE are presently working on a comprehensive legal and regulatory framework to facilitate the development of a derivatives market in the near future, in order to diversify the markets on the GSE.

An offering memorandum is primarily a legal and regulatory disclosure document. It is typically required when an issuer, particularly a new issuer or one with weaker creditworthiness, seeks to raise capital through debt securities in the capital markets. It may also be referred to as a prospectus, offering circular, information memorandum, or listing particulars. In Ghana, it is most commonly known as the prospectus.

Regarding specific regulations, there are no laws or regulations specifically tailored to securitisation disclosures. However, the SEC Regulations 2003 (LI 1728) (see Sections 50–62) provide general disclosure requirements for issuers. These regulations are further incorporated into the GSE Listing Rules.

Currently, Ghana has no securitisation-specific disclosure laws or regulations.

Disclosure by the SPE

The SEC Regulations 2003 (LI 1728) (Regulations 50–62), along with the GSE Listing Rules, specify disclosure obligations for issuers. As an issuer, the SPE is required to:

• maintain high disclosure standards of disclosure;
• fully disclose information essential for investors to make informed decisions;
• immediately release any material information likely to impact market activity or the price of its listed securities;
• ensure fair and orderly market conditions for its securities; and
• guarantee simultaneous and equal information access for all investors.

The SPE is not obligated to disclose internal earnings projections. However, should it choose to do so, the information must be accurate, realistic, and fully qualified, with updates on material changes and reasons for variances provided promptly.

Additionally, the SPE must announce specific events, including:

• missed payments on interest or capital for debt securities at maturity or due dates;
• major corporate actions, such as mergers, acquisitions, joint ventures, or takeovers;
• dividend declarations;
• adjustments to capital structure, such as rights or bonus issues;
• changes in company officers or control of the business;
• updates to the registered office address or records locations;
• securities redemption calls;
• penalties imposed on the SPE by a regulatory authority;
• significant events impacting business operations, revenue, or profits, including mitigation efforts;
• alterations of the rights or privileges of any unlisted securities issued by the SPE;
• additional public or private securities sales;
• new products, discoveries, or a tender offer for another entity’s securities;
• a change in capital investment plans; and
• any notable labour or supplier disputes.

Each disclosure must be reported to the SEC in writing.

In certain cases, an SPE may defer disclosure if immediate release could undermine its business goals; however, in cases of uncertainty, disclosure is generally advised.

Before listing, the SPE must submit the Trust Deed associated with the securities for SEC approval. It must also register the securities with the SEC, which then issues a certificate of registration for any public issuance, excluding securities maturing within a year. The SPE is additionally required to notify the SEC within 21 days of any securities cancellation or redemption, (Section 145 of the Securities Industry Act, 2016 (Act 929).

Disclosure by the Originator

An originator is required to submit its audited financial statements annually to the Registrar of Companies and must also report any updates to the company’s registered details, as specified in the Companies Act, 2019 (Act 992). The audited financial statement must include proper accounting records of assets acquired whether for resale or for use by the company.

Beyond these, special disclosure obligations may be outlined within the securitisation transaction documents.

There are currently no credit-risk retention specific laws in Ghana. However, in order to tackle credit risk, the SPE may mark to market to assess the current financial situation of the SPE. This is especially important where the SPE explores innovative measures such as the use of derivatives in its dealings with the originator to promote bankruptcy remoteness.

Annual Reporting

In Ghana, there are no specific laws or regulations regarding periodic reporting for securitisation transactions. However, general disclosure and reporting requirements are mandated under Act 929 and Act 992, enforced by the SEC and the Registrar of Companies respectively.

All companies are required under Sections 126 (6) and 298 (2)(a) of the Companies Act, 2019 to file their financial statement as part of their annual returns with the Registrar of Companies. Also, an SPE with public securities must submit an annual report with audited financial statements to the SEC, GSE, shareholders, and bondholders within three months of the close of each financial year. The financial statements must be prepared in accordance with the Ghana National Accounting Standards issued by the Institute of Chartered Accountants, Ghana (Regulation 54, LI 1728).

Quarterly Reporting

The SPE is required to provide quarterly financial statements to the SEC, shareholders, bondholders, and the relevant stock exchange within one month of the completion of each quarter. However, if the issuer circulates its annual report within two months of the end of the financial year, it is exempt from distributing the fourth-quarter financial statements (Regulation 55, LI1728). An SPE who fails to comply shall be liable to pay a penalty of GHS200 for each day the default continues (Regulation 60, LI 1728).

Under Act 929, a credit rating agency (RA) is a company that assesses the financial strength of issuers of debt securities, particularly their ability to meet the interest and principal payments and assign ratings to them. In Ghana, RAs are regulated by the SEC and shall not carry on business without a valid licence issued by the SEC in accordance with the Act. The licence is valid for a period of one year, and renewable on an annual basis. The SEC maintains a register of the holders of current licences, which specifies the particulars of the RAs (Section 121, Act 929). RAs are also required to meet the minimum financial requirements determined by the SEC, before a licence is granted or renewed (Section 112(3), Act 929).

Where a RA carries on business without a licence, the SEC is empowered to reprimand or disqualify that RA. With regards to reprimands, the SEC may issue a private warning, issue a public censure, or simply disqualify the RA from holding a licence or a licence of a specified kind for a specified period. Where the SEC is satisfied that a RA has obtained moneys without a licence or contrary to the terms of the licence of the person, the SEC has the power to instruct that RA to:

• repay all the moneys obtained and the profits accruing to that person;
• return assets acquired as a result of the illegally obtained moneys or deposits; or
• pay any interest or other amounts which may be owed by that person in respect of those moneys, to the respective persons from whom the moneys were obtained.

The SEC may also impose an administrative penalty of GHS6,000 (Section 209, Act 929) on any RA that operates without a licence or acts in violation of the restrictions in the licence.

In Ghana, financial entities are highly regulated. Apart from the generally applicable security industry laws, institutions in the financial sector of Ghana may be subject to Banks, the Bank of Ghana in accordance with the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), Non-Bank Financial Institutions Act, 2008 (Act 774), Payment Systems and Services Act, 2019 (Act 987), the Borrowers and Lenders Act, 2020 (Act 773), Foreign Exchange Act, 2006 (Act 723), the Development Finance Institutions Act, 2020 (Act 1032), Insurance Act, 2021 (Act 1061) and/or the National Pensions Act, 2008 (Act 766) as amended.

These laws provide for respective capital and liquidity requirements. In the absence of any direct law on securitisations, the general rules apply and there is no special treatment or concession for securitisation transactions on the backdrop of the peculiar sector rules.

Ghana’s financial system is yet to evolve to incorporate the extensive use of derivatives. The SEC and the GSE are currently working on a comprehensive legal and regulatory framework that would make the development of a derivatives market possible.

The general laws that protect investors within the context of issued securities are the Companies Act, 2019, (Act 992), Securities Industry Act, 2016 (Act 929) as amended, SEC Regulations, 2003 (LI 1728) and the GSE Listing Rules.

In Ghana, investors have the right to be informed of the material facts, risks and costs associated with any investment recommended or sold by the market operator, a representative, or an investment adviser. The primary investor protection provisions are found in Act 929 and other relevant SEC regulations and directives. The penalties for non-compliance generally include the imposition of restrictions, imposition of administrative penalty units, or the suspension or revocation of a market operator’s licence by the SEC. Additionally, transactions that violate Act 929 may be declared by the courts to be void or voidable, and may give rise to both private and public enforcement.

Ghana has no specific laws directly governing banks that securitise financial assets. However, the Bank of Ghana regulates banks under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). Banks participating in Ghana’s securities sector are also regulated by the Securities Industry Act, 2016 (Act 929), as amended, and the SEC Regulations, 2003 (LI 1728).

Depending on a bank’s role in securitisation, specific licences or approvals may be required. For instance, acting as an originator requires SEC approval. Additionally, any bank seeking to engage in capital market activities beyond roles like trustee, custodian, primary dealer, nominee, registrar, issuing house, or underwriter must incorporate a subsidiary and obtain a licence from the SEC, as stipulated in Section 114 of Act 929.

The form of SPEs or other entities used in securitisation in Ghana is flexible due to the absence of specific securitisation laws. However, for listing on the Ghana Stock Exchange (GSE), SPEs must be incorporated as Public Liability Companies (PLCs) under the Companies Act, 2019 (Act 992), as stipulated by the GSE Listing Rules 4(6)(a).

In securitisation transactions, SPEs are often set up as “orphan” entities, meaning they are structured independently of the corporate group involved in the transaction. To achieve this, ownership of the SPE is typically vested in a charitable trust.

In settling on the ideal form of the SPE, it is important to consider the fact that the corporate veil may be pierced pursuant to the provisions of legislation or under equitable grounds as decided by the Supreme Court in Morkor v Kuma [1999–2000] 1 GLR 72. Therefore, the court may disregard the separate legal personality principle where the distinctness of the SPE and its holding company has not been sufficiently established or where their affairs are so entangled that upholding the separate personality principle would cause injustice to all creditors. Being a discretionary remedy, some factors that guide the court in applying this remedy include, inter alia, the following:

• the parent company and the SPE have common directors or officers;
• the parent corporation finances the SPE;
• the directors or executives of the SPE are subject to the control of the parent corporation;
• the formal legal requirements of the subsidiary as a separate and independent corporation are not observed; and
• there is a commingling of assets and business functions.

If the veil is pierced, the originator and SPE may be treated as a single unit, raising transfer pricing issues concerning the asset transfer, as per Section 31 of Act 896.

In Ghana, SPEs engaged in securitisation must be cautious with public offerings of securities, as such invitations bring them under the oversight of the SEC. It is challenging for these entities to avoid SEC regulation when they invite public investment, as the SEC has regulatory authority over public securities offerings.

The SEC is responsible for determining whether an SPE has complied with regulations governing public securities issuance. If an SPE issues securities publicly without securing necessary approvals, it faces significant penalties, including an administrative fine of GHS12,000, per Section 206(2)(b) of Act 929.

In Ghana, two known government-sponsored SPEs are known to be engaged in securitisation.

Daakye Trust PLC

This SPE securitises cash flows from the Ghana Education Trust Fund (GETFund) levies, which are funds collected specifically for educational purposes. Daakye Trust benefits from legislative backing, as the GETFund levy law ensures that these levies are channelled into a dedicated collection account for debt servicing on Daakye’s bonds. This legislative support guarantees a steady cash flow, making the bonds attractive to investors. Additional credit enhancement is provided through guarantees by the Ministry of Finance, and while general transaction approvals were secured, no rating was required due to the originator being the government of Ghana. Investors perceive this securitisation as having a low risk similar to government securities.

ESLA PLC

The underlying asset in this transaction is the Energy Sector levies. This SPE was established to address energy sector debts owed to banks and trade creditors. The Energy Debt Recovery Levy, a tax imposed on petroleum products, provides a stable revenue stream, securing ESLA’s bond issuances. Additionally, the Ministry of Finance offers a capped cash commitment of up to GHS600 million to cover any shortfall in the Debt Service Reserve Account. This backstop further bolsters investor confidence by securing debt repayment even in the event of significant underperformance.

Generally, institutions involved in the financial sector invest in securitisations: pensions, banking, insurance and the securities sector. Specifically, banks, insurance companies, pension companies, mutual funds, unit trusts and the like are the kinds of entities that undertake such investments. Beyond these entities, there may be some high-net-worth individuals that explore investment in securitisation.

Material Rules for Pension Scheme Investments

The National Pension Regulatory Authority (NPRA) Investment Guidelines for Pension schemes provide for limits that are designed to protect pension funds and ensure that portfolios remain well-diversified, thereby safeguarding the returns promised to pension beneficiaries. The rules are as follows.

• A 35% total allocation cap on investments in corporate debt securities within a pension scheme’s portfolio.
• A 5% maximum per issuer and 5% per issue limitation to promote diversification and reduce concentration risk.

Listing Rules of the Ghana Stock Exchange

The GSE may consider the admission of debt securities of the SPE if the security concerned has a total issue amount of not less than GHS1 million face value and the SPE has at least 50 holders of such securities. Government securities are exempt from these requirements. The debt security the SPE seeks to admit must have been created and issued under a Trust Deed duly approved by the SEC.

The Corporate Governance Code of the Securities and Exchange Commission

Every SPE that has its securities admitted to trading on the GSE must comply with the Corporate Governance Code for Listed Companies 2020. The SEC may waive some or all of the provisions of this Code if it is satisfied that the SPE:

• has its securities listed on a stock exchange outside Ghana;
• is incorporated outside Ghana; and
• is subject to corporate governance requirements in the country where its securities are traded or where it is incorporated.

Synthetic securitisation has not been attempted or regularised in Ghana. Accordingly, there is no express indication of whether or not it would be permitted. However, the position of the SEC is flexible, led by the dictates of the sector participants and the market.

The Corporate Insolvency and Restructuring Act (CIRA), 2020 (Act 1015), regulates insolvency in Ghana. Generally, the CIRA does not apply to companies carrying on the business of banking, insurance or any other business which is subject to special legislation, except where the special legislation does not provide for a rescue provision. Although the securities industry is subject to Act 929, there are no specific provisions for insolvency. Accordingly, by necessary implication, the general insolvency laws contained in the CIRA would apply to insolvent companies in the securities industry – and by extension companies engaged in securitisation.

Under the CIRA, when insolvency occurs, the company shall be placed under administration and restructuring, before liquidation. During the business rescue stage, the property and affairs of the distressed company would be managed and restructured by an appointed administrator, in a manner that provides an opportunity for the company to as much as possible continue in existence as a going concern. It is only when administration and restructuring fail that the company is placed in official liquidation and wound up in order to pay its creditors. This statutory structure affords financially distressed companies an opportunity to recover and continue their operations into the foreseeable future.

Stay of Proceedings

During administration, a creditor is not permitted to start or continue legal proceedings or an enforcement process against the company and its property. This may extend the timeframe within which a creditor may retrieve, claim or access any property or collateral. In restructuring, the restructuring agreement may provide a moratorium period during which creditors cannot sue the company. If liquidation is explored, there is a stay of legal proceedings (see CIRA, Section 32, Section 33 and Section 87). The stay of proceedings may protect an originator in a securitisation transaction or an insolvent SPE from overwhelming creditor claims or enforcements.

Restoration Rule

A creditor who received money or property regarding a debt that the company owes them may be required to pay it back to the liquidator. The creditor in this case must have received the money or property within 21 days before the winding-up petition was filed. This restoration rule does not include payments:

• made by the company if the payment is later made by the bank to meet cheques drawn by the company;
• regarding a debt incurred during the 21-day period;
• regarding a secured debt; or
• regarding the enforcement (against a third party) of a guarantee, indemnity, mortgage, charge or lien on the third-party’s property.

A liquidator is also at liberty to reverse a transaction entered into:

• in the ten years preceding the winding up order (while the company was insolvent); or
• in the two years preceding the winding up order (while the company was solvent or insolvent) (CIRA, Section 122 and Section 123).

The most desirable feature of an SPE is its bankruptcy-remoteness. Other desirable features of SPEs of this nature are highlighted as follows.

• The SPE would ordinarily be incorporated as a Public Company limited by shares under the Companies Act.
• The board shall have a majority of non-executive directors who are mostly independent. At the very least, two directors (25%) should be independent, one of whom may be the board chair.
• The minimum number of directors is two with at least one being ordinarily resident in Ghana.
• There should be independent external auditors.
• There should be no restriction on the transferability of shares or the number of shareholders and debenture holders.

Since securitisation involves the issuance of securities, SPEs are subject to various laws including the Companies Act, 2019 (Act 992), Securities Industry Act, 2016 (Act 929) as amended, Securities and Exchange Commission (SEC) Regulations, 2003 (LI 1728), Securities and Exchange Commission (Amendment) Regulations, 2019 LI 2387, the GSE listing rules and the SEC Corporate Governance Code. Therefore, the structure and legal form of an SPE must comply with the provisions set forth in these laws. SPEs in securitisation transactions that have occurred in Ghana may be listed on the Ghana Stock Exchange (GSE).

To safeguard investors from the risk of consolidation during insolvency proceedings that could jeopardise the bankruptcy remoteness of the SPE, the SEC carefully examines the proposed structure and transaction documents presented by the parties involved in the securitisation before granting approval. The SEC ensures, among other things, that the transaction is structured to clearly distinguish the originator from the SPE. Additionally, it verifies that the transaction documents include non-petition and limited recourse provisions, as well as clauses that restrict the powers of the board to initiate voluntary liquidation. Furthermore, the SEC ensures that the transfer of financial assets from the originator to the SPE is conducted at arm’s length to prevent the originator from retaining control.

Depending on the nature of the financial asset being transferred, steps must be taken to file the transfer with the relevant regulatory authority. For example, regarding share certificates, the registrar of companies may have to be notified. Where the financial asset is cash, however, possession may suffice as an indication of a valid transfer of ownership.

The records of the collateral registry must also be updated, where applicable, to reflect the change in ownership of the asset.

Some options available to effect the transfer include:

• novation – the transferee assumes the rights and obligations of the transferor regarding the financial asset;
• legal assignment – the transferor assigns its rights to the transferee; and
• declaration of trust – the transferor acts as a settlor and establishes the trust with the transferee as the beneficiary.

In Ghana, novation and legal assignment appear to be the most commonly utilised methods for transferring rights in securitisation transactions. Where the property sold is overvalued and the company becomes insolvent within the next 12 months, the liquidator would have the power to reverse the transaction (CIRA, Section 124).

The transferor must deal with the transferee at arm’s length, charging market price (Income Tax Act, 2016 (Act 896), Section 31).

It must be noted that the transaction documents would have to be duly stamped, or they may be inadmissible as evidence in court or for any purpose except in criminal proceedings (see Stamp Duty Act 2005 (Act 689), Section 32(6)).

Ultimately, the agreement and the terms stipulated may be used to determine whether a true sale is being effected. Where this is not the case, the SEC is unlikely to grant approvals to proceed with the securitisation in the interest of investors.

Beyond the construction of true sale transactions to isolate the originator’s insolvency risks from the SPE, the SEC remains optimistic that additional strategies for creating bankruptcy-remote transactions will be explored as securitisation establishes a foothold in Ghana. This may include the use of derivatives to hedge against associated with the originator’s financial stability, providing investors with an extra layer of protection.

Due to the emerging nature of securitisation in Ghana, insolvency opinions on bankruptcy-remote transactions are not commonly sought, though obtaining such opinions would be desirable to ensure compliance in structuring these transactions.

SEC allows flexibility in the form and structure of securitisation documents, provided they align with existing laws and best practices. To protect the SPE from bankruptcy, securitisation documents must be structured to ensure that the SPE operates independently of the originator, preventing it from being included in the originator’s estate if the originator goes bankrupt.

Accordingly, the steps that can be taken to achieve bankruptcy remoteness may include:

• ensuring the SPE is operated on a solvent basis;
• ensuring the SPE is operated separately from the originator;
• appointing one or more directors (independent of the originator) whose vote(s) is/are required to pass a board resolution to place the SPE into insolvency proceedings;
• placing restrictions on the SPE that prevent it from incurring any liabilities outside those contemplated by the securitisation;
• including non-petition clauses in agreements between the SPE and third parties that prohibit the third parties from commencing insolvency procedures against the SPE; and
• including limited recourse wording in all significant transaction documents to restrict the recourse of a counterparty who takes enforcement action in respect of the SPE’s assets, to the assets that the SPE holds and over which the counterparty has security.

In a transfer of financial assets, the primary tax that may apply is capital gains tax, which is charged on the gain made from selling or disposing of the asset. In Ghana, a person who realises an asset must submit a return to the Commissioner-General of the Ghana Revenue Authority within 30 days of the transaction.

Therefore, the tax liability falls on the originator, not the SPE, as it is the originator who realises the asset and incurs the gain. However, the SPE may be required to withhold tax on the gross amount of the payment at the rate specified by the laws (Section 116A of the Income Tax Act, Act 896 as amended by the Income Tax (Amendment) Act, 2023 (Act 1094)).

Incorporated companies are required to pay corporate income tax on the chargeable income earned from their financial assets at a rate of 25%. Additionally, for the 2023, 2024 and 2025 assessment years, SPEs would be liable to pay a Growth and Sustainability Levy on the profit before tax earned from their financial assets, at a rate of 5%.

These taxes can be mitigated by the SPE claiming capital allowances on its depreciable assets and ensuring that all other allowable expenses are deducted from its gross income, thereby reducing its taxable income.

All income generated from sources in Ghana is subject to taxation in Ghana. Additionally, the foreign-sourced income of a resident person is also subject to taxation in Ghana. An SPE is considered resident in Ghana for an assessment year if it is incorporated in Ghana or if its management and control are exercised in Ghana at any time during that assessment year. Therefore, any cross-border payment received by the SPE with a source in Ghana is subject to income tax, regardless of the place of payment. Additionally, if the cross-border payment received by the SPE is from a foreign source, it remains taxable in Ghana if the SPE qualifies as a tax resident.

A resident SPE is required to withhold tax on any interest paid to investors, as well as on any consideration paid to the originator regarding the realisation of an asset, provided the payment has a source in Ghana.

A common approach that practitioners often employ to deal with taxes include structuring the transaction to take advantage of Double Taxation Treaties (DTTs), which may reduce withholding tax rates or lower the tax liability on these transactions. Additionally, practitioners may select jurisdictions with favourable tax treatments to incorporate the SPE in as a means of minimising the impact of these taxes.

Other key taxes that may apply are payroll taxes such as:

• the Pay As You Earn (PAYE);
• Stamp Duty;
• Communication Service Tax;
• Electronic Transfer Levy (E-Levy);
• National Health Insurance Levy (NHIL);
• Ghana Education Trust Fund Levy (GETFL);
• COVID-19 Health Recovery Levy (CHRL);
• rent tax; and
• Value-Added Tax (VAT) for incidental services rendered by or to the company.

Given the novelty of securitisation transactions in Ghana, tax opinions on same are uncommon. However, it is prudent to obtain tax opinions on such transactions to ensure clarity on tax implications and compliance.

As securitisation is a relatively new area in Ghana, legal issues concerning the applicable accounting rules have not yet emerged.

Although obtaining legal opinions in these matters is not required, it is prudent for stakeholders to seek professional opinions from their lawyers since securitisation transactions can be quite complex.