Corporate Governance 2023 Comparisons

The principal forms of corporate/business organisations in Ghana are the following.

Partnerships

A partnership is an association of two or more individuals incorporated to carry on business jointly for the purpose of making profits. Partnerships are governed by the Incorporated Private Partnership Act, 1962 (Act 152).

Companies

One or more persons may form a company. Companies are governed by the provisions of the Companies Act, 2019 (Act 992). A company may be limited by shares, limited by guarantee or unlimited. It could be public, private or an external company.

Unincorporated Association

This is a registered association under the Companies Act, 2019 of individuals that have come together for a common purpose. Unlike companies, unincorporated associations lack a distinct separate existence.

The principal legislation in this area is the Companies Act, 2019 (Act 992). This new Act, replacing the Companies Act, 1963, represents a significant step forward in corporate governance standards for companies operating in Ghana. The Incorporated Private Partnership Act, 1962 (Act 152) (as amended) provides for the incorporation and registration of partnerships. It requires partnerships, inter alia, to keep proper books of accounts of their operations. The Corporate Insolvency and Restructuring Act, 2020 (Act 1015) provides the regulatory framework for distressed companies through stipulated systems for temporary management and restructuring of the otherwise distressed outfit.

More industry specific legislation includes: 

• the Securities Industry Act, 2016 (Act 929) and the Securities and Exchange Commission Regulation, 2003 (LI 1728) (Act 929): the Act establishes the Securities and Exchange Commission (SEC), with its mandate to regulate, innovate and promote the growth and development of an efficient, fair and transparent securities market;
• the Banks and Specialised Deposit-taking Institutions Act, 2016 (Act 930) and the Insurance Act, 2021 (Act 1061), and their respective regulations;
• the Professional Bodies Registration Act, 1973 (NRCD 143);
• the Statutory Corporations Act, 1964 (Act 232);
• the Ghana Investment Promotion Centre Act, 2013 (Act 865); and
• the Stock Exchange (Ghana Stock Exchange) Listing Regulations, 1990 (LI 1509).

Additionally, there are a plethora of best practices often adhered to by companies that have been embedded into Ghana’s corporate governance system over the years. For instance, internal auditors play a vital role in the corporate governance process even though companies are not required by law to hire them. Most of these best practices crystalised into statute when the new Companies Act, 2019 was passed. Internal audits serve as internal checks of a company, including its management and accountability procedures.

Similarly, the Companies Act, 2019 specifies a range of persons that qualify to act as a company secretary. However, most companies prefer qualified lawyers in good standing with the Ghana Bar Association to act as such. These practices help to ensure adherence to existing legislation and regulations.

Public companies are required to publish their audited financial statements, depicting the fiscal performance of the company and listing its majority shareholders at the end of each financial year. Only a public company may invite the public to acquire shares. A public company may only do so after filing its prospectus with the Registrar.

This requirement is strict, and consequently, any invitation made to the public in violation thereof constitutes an offence and offending persons could be criminally liable. In addition, the SEC has issued some guidelines to aid the process of issuing securities to the public, including that:

• the proceeds of any public offer/rights issue are to be used in strict accordance with the purpose(s) indicated in the offer document;
• the SEC will continue to undertake post-IPO/post-rights issue inspections to ascertain whether proceeds of the IPO/rights issue have been/are being utilised as indicated in the offer document; and
• issuers are required to disclose all fees to be paid out to persons or bodies in pursuance of the IPO/rights issue.

Further to this, characteristically, directors of public companies are voted or elected into office at a general meeting of the company. At the first annual general meeting (AGM) of a public company, by law, all directors save an executive director) must retire. Following this, at all subsequent general meetings of the company, one third of the directors must retire on a first-come, first-go basis.

Public companies are also prohibited from extending loans, granting guarantees or providing security for loans to directors of the company or a director of an associated company.

Corporate governance rules and regulations are mainly contained in the Companies Act, 2019 (Act 992), which vests in the Registrar of Companies the power to ensure compliance with its provisions. First and foremost, every entity must be registered with the Registrar of Companies to be a legitimate corporate entity. The proposed name of the Company must not be misleading or undesirable and must include either of the following suffixes: limited company (ltd), public limited company (plc), limited by guarantee (lbg), public unlimited company (pub), private unlimited company (purc).

All companies must have at least one shareholder and not more than 50 shareholders for private companies. The biodata of beneficial owners of all registered companies must be provided to the Registrar of Companies (see the Ghana Trends and Developments chapter on the subject of beneficial ownership in this guide).Every company is required to have at least two directors who must qualify to be directors and consent in writing to act as such before their appointment (see 4.1 Board Structure for more on directors).

To enhance corporate governance in the country, directors are required to act in the best interest of a company as a whole, function to preserve the company’s assets, and generally act to further the business and promote the purposes for which the company was formed. The law enjoins them to do this in a faithful, diligent, careful manner such as is expected from an ordinary skilful director in given circumstances.

From Act 992, directors are further enjoined to have regard to:

• the likely long-term consequence of any decision they make;
• the impact of the operations of the company on the community and the environment; and
• the desirability of the company maintaining a reputation for high standards of business conduct.

A director who commits a breach of any of these duties is liable to some form of sanction, including:

• compensating the company for any loss resulting from the breach;
• accounting for profits realised from the wrongful transaction; and
• the recession of the offending contract.

In addition to directors, the rules require every registered company to have other officers, such as an suditor, secretary, and also provides mechanisms for ensuring that officers and directors are accountable to shareholders, for example through the holding of AGMs (see 4. Directors and Officers).

Acts Pertaining to Governance

Act 992 prescribes that companies should file annual returns once every year with the Registrar of Companies. Companies must maintain audited accounts, financial statements and reports (see 6.1 Financial Reporting). With a view to preserving and maintaining the stated capital of the company, the Act further characterises certain transactions as major transactions (see 3.2 Decisions Made by Particular Bodies). A special resolution by the members of the company is required to authorise such transactions.

Additionally, the central bank in accordance with Section 56 of the Banks and Specialised Deposit-taking Institutions Act, 2016 (Act 930) published additional corporate governance directives in March 2018, establishing that:

• the term of office of a managing director or chief executive officer (MD/CEO) of a regulated financial institution shall not be more than four years and may only be renewed for an additional two terms;
• financial institutions are required to give an indication to the Bank of Ghana (BOG) of their achievements in terms of corporate governance goals within 120 days of the end of a financial year; and
• former officials of theBOG are prohibited from serving as directors of banks until the expiration of two years from their departure from the central bank.

The BOG also promulgated rules relating to persons who are not “fit and proper”. Persons deemed so are proscribed corporate governance involvement.

There is no obligation on companies to routinely report on environmental or social issues.

The Environmental Protection Agency Act, 1994 (Act 409) does, however, require a company to submit an environmental impact assessment report to the Agency, reporting on activities that might negatively impact the environment.

In addition, the Ghana Carbon Registry has recently been set up to receive, process, record and store data to be utilised for a range of purposes, including collecting and tracking transactions from mitigation activities at various levels.

The eligibility criteria for a project at the Ghana Carbon Registry establishes that:

• the project should be in the Nationally Determined Contributions (NDCs) programmes of action;
• the project should be part of the conditional NDCs programmes of action;
• the project should be in the whitelist (the whitelist contains eligible automatically additional technologies that are available for internationally transferred mitigation outcomes (ITMOs)) transactions at any given time; and
• the project should meet the criteria of the buyer.

The NDCs are programmes of actions which focus on minimising emissions, conserving the forest and dealing with climate change issues.

Regarding harmful emissions, the requirements are that any mitigation activity employed by a company that falls outside the scope of Ghana’s NDCs programme may still be eligible to participate in the programme if:

• the related activity is covered by the latest National Greenhouse Gas Inventory prepared under the applicable Intergovernmental Panel on Climate Change (IPCC) Guidelines; and
• the activity is agreed upon by the participating acquiring party.

Finally, under Section 128 of Act 992, directors are also required to circulate to the members of the company the company’s financial statements, a report by the directors and a report by the auditors. The financial report must include the emoluments of the directors and pensions of present and past directors. The directors’ report must contain certain details such as the state of affairs of the company and corporate social responsibility.

The law provides that a company shall act through its shareholders in a general meeting or its board or through officers or agents appointed by either the board or the shareholders as per Section 144 of the Companies Act, 2019 (Act 992).

Members (Shareholders)

A person can become a member of a company by subscription, agreement, transfer of shares and by operation of law. Members of a company need not necessarily be natural persons. A member’s right may be personal or collective.

Board of Directors

Being the body to whom the members (shareholders) of the company have entrusted the affairs of the company, the board constitutes the overarching team charged with ensuring the overall health and success of the company. Directors are appointed to direct and administer the business of the company. Unless a company’s constitution stipulates otherwise, the business of a company is managed by its directors or their delegates.

Officers

Act 992 defines an officer in relation to a body corporate to include any director, secretary, or employee of that body corporate, receivers and managers whose appointment is authorised by the company and duly appointed liquidators.

Shareholders

A company acts through its members at a general meeting. The meeting may be an AGM or an extraordinary general meeting. Members in a general meeting are responsible for:

• the declaration of dividends recommended by directors;
• the appointment and removal of directors;
• effecting alterations to a company’s constitution;
• fixing remuneration of auditors; and
• the appointment and removal of auditors.

In addition, “major transactions” require shareholder approval. Major transactions, as characterised by Act 992, are:

• the acquisition of, or an agreement to acquire, whether contingent or otherwise, assets, the value of which is more than 75% of the value of the assets of the company before the acquisition;
• the disposition of, or an agreement to dispose of, whether contingent or otherwise, assets of the company the value of which is more than 75% of the value of the assets of the company before the disposition; or
• a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities, including contingent liabilities, the value of which is 75% of the value of the assets of the company before the transaction.

Board of Directors

The following decisions are taken by the board:

• deciding the company’s major policies;
• ensuring and monitoring the financial integrity of the company;
• determining the company’s capital structure;
• setting compensation for management; and
• proposing dividends payable per share.

These duties are to be performed by all or some of the directors on behalf of the entire board and for the company. Act 992 stipulates that the board acting within its powers is not bound by the instructions of the members in a general meeting. Minutes of its meetings are to be taken and kept and must be signed by the chairperson of the board.

The rules regulating decisions made by directors are usually found in a company’s constitution and these include the requirements for meeting and voting, and the stipulated quorum for a directors’ meeting. Decisions of the board are made at meetings by majority vote. Act 992 allows decisions to be made by directors without the necessity of attending a board meeting. In such instances, a written resolution signed by all directors shall be valid and effectual as if same was made at a duly convened meeting.

Decisions (crystallised into a resolution) are taken by members of a company at general meetings and all members are eligible to attend general meetings and vote at such meetings. Resolutions passed at general meetings are binding on all members as well as the company itself. General meetings may be convened by directors, members or the Registrar. A member is entitled, upon notice to the company, to appoint a proxy to attend and vote on their behalf at a meeting.

In contrast to some jurisdictions that have a supervisory board as well as a management board, boards in Ghana are based on a single-tier structure. A board may consist of both executive and non-executive directors who manage the business of the company and are appointed for a fixed term. The minimum number of directors in any company, whether public or private, is two with no maximum specified.

In the case of a vacancy (that is, a director is absent and cannot fulfil their duties), the remaining directors can continue to act, except where their number is reduced to one (or below the minimum number required by the company’s constitution).

It is not mandatory for directors to hold company shares unless the constitution of the company specifies otherwise. Directors may appoint substitute and alternate directors, who must abide by the requirements set out in Act 992 and the company’s constitution, and at least one director must be ordinarily resident in Ghana at all times.

Board members are not given specific roles, however, in practice, directors could take on specific tasks. For example, they could serve on sub-committees of the board, as these are designated committees (handling specific issues such as audit, risk and governance), directors would be functioning within the role assigned to them in that committee.

The Companies Act, 2019 (Act 992) requires that each board has a minimum of two directors. The Act recognises various categories of directors, including substitute directors, alternate directors, executive directors and managing directors. The board must have a company secretary who, though not a director (excepting cases where a director doubles up on the role), works with the board to navigate the corporate governance framework and ensure the company adheres to it.

Finally, the board includes a chairperson. This is a director who is appointed by the other directors to lead the board and preside over meetings.

It is a worthwhile recommendation to maintain a mix of professionals in the board’s composition. For instance, accountants/financial types, lawyers, at least one relevant industry specialist, and those with experience in the human resources or IT sectors. For efficiency and attention to detail, board committees are useful. Another recommendation is for the board to have an uneven number to avoid a gridlock. Where an even number exists, the chairperson is usually given a casting vote.

Directors are appointed by members at a meeting (except where there is a single member situation) and are removed at the AGM. Act 992 states that directors are appointed by shareholders and also stipulates that “the constitution of a company may also provide for the appointment of a director/directors by a class of shareholders, debenture holders, creditors, employees or any other person”. Prior to their appointment, prospective directors must declare:

• that within the preceding five years, they have not been charged with or convicted of an offence involving dishonesty or fraud;
• that they have not been a director or senior manager of a company that has become insolvent; and
• that they have not been charged with or convicted of a criminal offence relating to the incorporation and promotion of a company.

A company can remove any or all directors from the board if they have been disqualified from acting in that capacity. Directors are removed by ordinary resolution at a general meeting by the shareholders. Regarding public companies, the law requires a mandatory retirement of one third of the board annually on a first-come, first-go basis.

Act 992 stipulates that a “resolution to remove the director shall not be moved at a general meeting unless notice of this resolution has been given to the company a minimum of 35 days before the meeting at which the resolution is to be moved” (Section 176, Act 992). The board may remove the company secretary, without prejudice to the secretary’s right to damages where a breach of contract is occasioned in so doing.

Directors must disclose to the company any potential conflict of interest between themselves and the company. Such information, disclosed in writing or at a meeting of the board, will be recorded in the Interests Register. Failure to make this disclosure attracts a fine of 250 to 500 penalty units (one penalty unit is equal to USD1.1/GHS12 at time of writing). Act 992 further requires directors to exercise independent judgement. In addition, they are precluded from use of their positions or company’s money/property except for the prescribed usage listed in Act 992 or the company’s constitution.

Further, directors may not utilise confidential information obtained in their capacity for personal gain, and must not be (in)directly beneficially interested in a business which competes with that of the company, nor have personal (in)direct interests in any contract or transaction other than those provided for in the Act 992.

Accordingly, unless a company consents (and superseding any company constitution that so allows), a director shall not place themselves in a position in which their duty to the company potentially conflicts with their personal interest(s) or duties to other persons. The law makes exceptions: the duty of a director to avoid conflict is not infringed if they have the board’s consent, have fully disclosed their interests early on, and not voted in any board meetings pertaining to the decision in which the director does have an interest. Provided they have the company’s consent, a director may enter into a potential conflict of interest relationship to the company, notwithstanding potential legal fallouts, for example a derivative action.

Regardless of its public or private status, consent by the company is mandatory in this context. In private companies, this can be done when there are no provisions in the company’s constitution prohibiting authorisation. For public companies, authorisation can be given if the company’s constitution permits the board to authorise the action.

Directors

Directors stand in a fiduciary relationship towards the company. As they hold a position of trust, directors are expected to act in good faith and in the best interest of the company at all times. This involves preserving the company’s assets as well as furthering the company’s business interests. For instance, they are prohibited from taking the company’s assets for personal benefit.

The standard expected of directors encompass the necessity to consider the consequences of any actions they take, and maintain high standards and a good brand reputation. According to the Second and Third Schedules of the Companies Act, 2019 the directors shall manage the business of the company. During the pre-incorporation stage, they are authorised to make payments from the company’s coffers for all expenses incidental to promoting and registering the company.

Directors exercise the powers of the company, including borrowing money, charging property and the issuance of debentures. Directors are entitled to enter into a contract with the company, notwithstanding the need to maintain independence as provided in Section 192 of Act 992. The Act further states that such contracts cannot be avoided nor shall a director be made to account for profit from it, merely for the director being in a fiduciary relationship with the company.

The board may appoint one among them to any other office in the company, including that of managing director, save the office of auditor. The directors can also revoke that appointment.

Secretaries

To qualify as a company secretary, an appointee should have obtained a professional qualification that provides them the relevant experience and knowledge to execute their duties. Such an appointee should either be enrolled to practice and be in good standing as a barrister or solicitor in Ghana, be a member of a professional body or have the requisite academic qualifications necessary for the role. Alternatively, they should have held office prior to the appointment, as a company secretary trainee or have worked under the supervision of a qualified company secretary for at least three years.

Moreover, an appointee in good standing of either the Institute of Chartered Accountants Ghana, the Institute of Chartered Secretaries and Administrators qualifies to be a company secretary. Unless the company’s constitution provides otherwise, the company secretary shall be appointed by the directors. The statutory duties of the company secretary include:

• assisting the board to comply with the constitution of the company; and
• keeping the books and records, ensuring the meeting minutes are properly recorded as required by the Act, prepares and issues notices in the name of the company.

The directors are accountable to various stakeholders, namely, the company as an entity, the shareholders, and the Registrar General. The Companies Act, 2019 (Act 992), provides that directors hold a fiduciary relationship with the company and are mandated to act in the company’s best interest. They must also consider the impact of their actions on the shareholders, the employees of the company, the community at large and the environment.

When appointed by a special class of members, employees or creditors, directors may “give special but not exclusive consideration” to their interests as well (Section 190.) Directors are also accountable to the Registrar General’s Department, as they can be penalised for misrepresenting themselves or for providing false information. Finally, they can also be prosecuted for criminal offences they either were responsible for, had knowledge of or were complicit in.

When a director breaches their duties, the director and any other person who knowingly committed the breach must compensate the company for any loss the company suffers as a result. The director shall also disclose any profits made from the wrongful transaction. Finally, the company reserves the right to terminate any transaction or contract entered into between the director and the company, in breach.

Where there has been a breach, the company or member of a company (ie, shareholders) can institute legal proceedings to enforce liabilities, restrain a threatened breach or by recovering property from the director. A company can do the above on the authority of the board of directors, a receiver and manager or liquidator, or via an ordinary resolution of the company which has been agreed to by the members. A legal challenge can also be brought in the form of a representative action by a class of shareholders with leave of court.

Another legal option open to shareholders and directors is a derivative action. After seeking leave from the court, any of the above parties can bring a derivative action in the name of the company against any party (including another director of the company). Wilfully providing a false statement to the Registrar General is an offence liable to a fine.

The enforcer of these sanctions is the Registrar of Companies.

A director’s liability for their actions can be limited to the extent they comply with the company’s constitution, the Companies Act, 2019 and by generally performing their duties to the best of their ability.

A director’s failure to live up to their responsibilities may open them to legal liabilities. The following are some basis for a directors’ liability:

• breaching of fiduciary interest;
• failing to act in the company’s best interest;
• failure to adhere to the company’s constitution;
• acting outside the limits of their power;
• making biased decisions;
• failing to disclose potential conflicts of interests or placing themselves in potentially conflicting positions without the company’s consent; and
• making false declarations to the Registrar General.

Subject to the above, shareholders, other directors (via derivative action) or the company itself can institute legal proceedings against directors.

Shareholders fix the remuneration for directors. Aside from their allowances, directors are entitled to be reimbursed for expenses incurred in the process of executing their duty as directors (attending meetings on the company’s behalf or other company related business). Furthermore, a company’s constitution may cater for compensation, including insurance benefits, where the tenure of a director is terminated.

In the case of a director losing their office, compensation must first be approved by the shareholders.

In the event of a takeover, if a director (who owns shares) is offered a higher price for their shares than other shareholders, the director must ensure that this fact is included in the notification sent to other shareholders.

Finally, compensation for directors is subject to income tax.

Companies must issue financial statements, which include an auditor’s report. Amongst other things, the financial statements must disclose information on how much the directors are paid, along with any pension entitlements, and the emoluments of past and present directors in respect of loss of office.

Directors’ fees must also be disclosed to the tax authorities (the Ghana Revenue Authority) as an income.

Act 992 specifies that a shareholder is a member of the company. As a result, shareholders collectively own the company, which confers on them the right to appoint directors. Membership of a company registered with shares continues until a valid transfer of the shares held by the specific member is registered by the company. Shares are transferred by operation of law to another person or forfeited for non-payment of calls, or on death of a member.

Shareholders have the right to attend and vote at AGMs. Subject to the company’s constitution, the right to vote may depend on whether members have paid any sums of money required in respect of the shares allocated to them. Companies are also required to keep a register of members within the jurisdiction; this will be managed by the company secretary and includes the names, addresses and, where relevant, a statement of shares held by each member.

Shareholders can act for the company through general meetings, alongside the board of directors, officers and agents. Notably, unless the constitution of a company provides otherwise, the board of directors is not bound to comply with the directions of the shareholders. Furthermore, shareholders may act in a matter if the members of the board are disqualified, stuck in a deadlock, or otherwise. They may institute legal proceedings in the name of the company if the board of directors neglects to do so, can ratify or confirm an action taken by the board of directors, and can make recommendations to the board of directors.

Shareholders may exercise the powers given to them in the company’s constitution with regard to company management. However, except as specified in the company’s constitution, the board of directors largely manages the business of the company. Shareholders have the right to attend the company’s general meeting and speak and vote on resolutions at the meeting; they also have the power to appoint and remove auditors and directors. In the event of a company winding up, shareholders must pay the balance of the shares they hold in accordance with the terms of the agreement under which the shares were issued.

In the event of a winding up, shareholders are required to contribute funds sufficient for the payment of debts and liabilities of the company and for the expenses of winding up. According to Section 40 of Act 992, past members are not liable to contribute to the latter unless a court finds that the existing members are unable to satisfy the required contributions.

In the general management of the enterprise, shareholders have the power to approve “major transactions” (see 3.2 Decisions Made by Particular Bodies). Companies can only enter these transactions if approved by special resolution of the shareholders. Should any shareholder vote wholly against the transaction, that shareholder is entitled to have their shares bought, if they elect to sell. Shareholders can also approve compensation and retirement packages for auditors and directors.

AGMs are mandatory. Companies must hold an AGM each year, and designate it as such, so as to distinguish it from any other meetings held that year. AGMs must be held each year and not more than 15 months apart. However, if the company’s auditors and members (those entitled to attend and vote) agree in writing that the AGM shall be dispensed with in a given year, the company is allowed to waive the meeting for that year; if the meeting is not held due to the above reason, the Registrar of Companies may give directions as they deem fit.

Where meetings are called, 21 days prior notice must be given. The business of a meeting must be stated in the notice. Unless a company’s constitution says otherwise, shareholders are entitled to attend and vote at general meetings. 

New Companies

A newly incorporated company has up to 18 months within which to hold the first AGM. Such AGM must be held at least 21 days after the company’s financial statements and the reports of the directors and auditors on the financial statements of the company have been sent to members and debenture holders of the company. These financial statements and reports shall be presented at the meeting.

When a company passes a resolution postponing the date of the AGM, a copy of said resolution must be forwarded to the Registrar. If an AGM is not held in accordance with the aforementioned conditions, the company is liable to pay an administrative penalty of 150 penalty units to the Registrar. Further, unless a company’s constitution states otherwise, members are entitled to vote by proxy. If it is unfeasible to conduct or call a meeting in the manner prescribed by the company’s constitution, either a director, member or the Registrar may apply to the court to conduct the meeting in a manner the court considers fit.

Shareholders

Shareholders are also entitled to attend extraordinary general meetings. Extraordinary meetings are convened at the board’s discretion, as well as when there are not enough directors within the jurisdiction capable of acting to form a quorum. Unless a company’s constitution states otherwise, these meetings will be held in Ghana.

Minutes and Electronic Meetings

Section 166 of Act 992 provides that the minutes of general meetings shall be recorded in a book reserved specifically for that purpose. Minutes should be signed by the chairperson of the meeting (where a company defaults in this directive, the company and each officer therein is liable to pay the Registrar a penalty of 250 units).

A company shall circulate meeting resolutions and supporting circulars to members. The proceedings at these meetings are governed by the Companies Act, 2019 except for those sections in which provisions are made for governance by the company’s constitution.

All meetings of the company can be conducted electronically. Similarly, the books and registers subject to inspection can be maintained in either electronic or manual format. The Registrar General has provided guidelines for the conduct of virtual AGMs of companies of which notice must be submitted to the head office in Accra or any of the regional offices. Notices of such meetings must be sent to every member electronically in accordance with the provisions of each company’s constitution.

A director’s failure to live up to their responsibilities establishes a basis for claims against them. The basis for claims include:

• breaching their fiduciary interest;
• failing to act in the company’s best interest;
• failing to adhere to the company’s constitution;
• acting outside the limits of their power;
• making biased decisions;
• failing to disclose potential conflicts of interests or placing themselves in potentially conflicting positions without the company’s consent; and
• making false declarations to the Registrar General.

Subject to the above, shareholders can institute legal proceedings against the directors. They can also bring a representative action against the directors or apply for the leave of court to bring a derivative action.

Shareholders are not obliged to make general public disclosures of their holdings. However, they are required by tax laws to make disclosures of their earnings from investments in companies to the Ghana Revenue Authority for taxation purposes. Shareholders typically pay 8% income tax on their dividends.

Foreign directors are required to pay this too, unless their country has a dual-tax treaty with Ghana, in which case they may pay a reduced level of income tax. If the shares of a shareholder (or a group thereof) in a publicly traded company amounts to 35% or more of the total shares, they must disclose this to the remaining shareholders. It should also be noted that the names of majority shareholders are usually included in the mandatory publication of the notes to the audited financial statements of public companies.

The general threshold is that a person who has direct or indirect interest of 10% or greater in a company must be registered as a beneficial owner. For companies operating in the high-risk sectors, the threshold for reporting beneficial ownership is 5%.

Act 992 provides that every company is required to keep a register of members and beneficial owners and to furnish the Registrar General with the particulars of its members first at registration and subsequently to do so on an annual basis in its annual returns filed with the Registrar General. In the annual returns, the company is also required to indicate which of the beneficial owners are politically exposed persons.

The objective of providing particulars of beneficial owners, as well those who might be politically exposed persons, is to promote good governance and accountability in companies, to support efforts to minimise and ultimately eradicate the risk of money laundering, and consequential ills such as, financing of terrorism, financing the proliferation of weapons of mass destruction and other transnational organised crimes. The strategy also seeks to stem the flow of tainted monies into Ghanaian companies.

Section 13 of Act 992 provides that an application for incorporation of a company must include particulars of all persons who are beneficial owners. Where the persons who are recorded as shareholders of the company are not the beneficial owners of the shares, the company is required under Section 35 to also record the particulars of the beneficial owners of the shares in the Register of Members and to furnish the Registrar of Companies with these particulars within 28 days after being entered in the Register of Members. Particulars of beneficial owners are also to be provided in the company’s annual returns filed pursuant to Section 126 of Act 992.

The Ghana Stock Exchange (GSE) requires shareholders in listed companies to release information to the public relating to their stock holdings at least 48 hours after the transaction occurs. The GSE’s Listing Rule 55 stipulates:

• a person irrespective of nationality who purchases or sells shares in a listed company shall inform the market when their holding attains, exceeds or falls below each 5% threshold, starting from 10% through 15% and 20% up to 50% plus one share; and
• the disclosure shall be made in a press release to the market not later than 48 hours after the transaction.

Section 128 of Act 992 provides that directors are required to send three reports each year to members and debenture holders of the company. These reports are:

• the directors' report;
• financial statements; and
• the auditor’s report.

The Directors’ Report

This is prepared by the directors and covers principally the company’s corporate governance arrangements, the performance of the company during the year under review, and the outlook for the coming year. The corporate governance structures include organisation charts, committees of the board, profiles of board members, capacity-building initiatives for the directors and significant board decisions during the year. The business performance section covers the general economic environment, economic issues which impacted the company’s performance, the performance of the company during the year and an outlook for the coming year.

The report shall discuss any changes in the business of the company (or of its associated companies), and also list the details of any subsidiary companies of the holding company. Inversely, if the company in question is a subsidiary, the report shall state details of the holding company. The report also discusses the corporate social responsibility activities of the company and the expenditures of such programmes for the year.

The report must be approved by the board of directors and signed by two of them.

Company's Financial Statements

Directors prepare this in accordance with International Financial Reporting Standards (IFRS). These financial statements are:

• the statement of financial position; 
• the statement of comprehensive income (including profit and loss);
• the statement of changes in equity;
• the statement of cash flows; and
• the summary of significant accounting policies and other explanatory notes to the accounts.

Consolidated financial statements must also be prepared for companies with subsidiaries (Section 131 of Act 992). Consolidated financial statements include statements on the company’s financial position, consolidated comprehensive income, consolidated changes in equity, consolidated cash flows and notes about the consolidated financial statements.

The statements must give a true and fair overview of the profit and loss, comprehensive income statements and the general state of affairs within the company. Both the financial statements and the consolidated financial statements must follow the guidelines given in the Sixth Schedule of the Act.

The Auditor's Report

This is prepared by external auditors in accordance with international standards on auditing, as adopted by the Institute of Chartered Accountants, Ghana.

It is a report on the accuracy, completeness and fairness of the company’s accounting records and financial statements, and must include specified items, such as whether the auditors received the necessary information and explanations for their audit, whether in the opinion of the auditors the accounts have been prepared according to the IFRS, whether they are true and fair representations of the underlying accounting records, and whether the auditor was independent of the company under audit.

Corporate governance arrangements are disclosed as part of the regulatory reports expected from companies. See 6.1 Financial Reporting.

Companies are required to file annual returns with the Registrar of Companies. A notice that a company has filed its returns will be published in the Companies Bulletin published by the Registrar of Companies. There are no stipulations requiring the Registrar to make the returns themselves publicly available, but they are available for inspection.

Financial statements must not be published unless they have been approved by the board of directors and signed by two directors, and unless the directors' and the auditor's reports have been attached to them.

Publicly listed companies are additionally required to file their financial statements with the SEC and publish a summary of financial performance quarterly in national newspapers.

It is mandatory for a company to have an auditor. Where a company fails to appoint an auditor and continues to operate under default for a period beyond three months, the Registrar General is mandated to appoint one for that company. An appointed auditor must expressly consent to the appointment. Such a person or corporate entity must meet a set of qualification criteria.

The relationship between an auditor and the company is set out in Act 992. Once appointed by an ordinary resolution of shareholders, the auditor can be maintained for up to six years. Once disengaged, the same auditor cannot be appointed by that company until after another six years elapses.

A duty is placed on auditors to avoid conflict of interest situations in much the same way as directors. Primarily, the auditor must ensure that in carrying out their duties, their personal judgement is not impaired by the existing relationship with or interest in the company or any subsidiary of the company.

The existence of a registered constitution with prior approved checks and balances operates to mitigate or regulate risks in the management of companies. Whilst not mandatory for a company to register a customised constitution, a company has the option to do so. However, where it chooses not to customise its constitution then the standard constitution set out in Act 992 becomes a default constitution. A constitution would ordinarily regulate such important matters as the numbers and meetings of directors, stipulate the dividend policy of the company and such other important matters.

It so often happens that a cause for division among members of a company is with the payment of dividends. The cause of the division often emanates from the dual involvement of both the directors and the shareholders in the declaration and payment of dividends. Directors make the initial determination of whether or not dividends are payable in a given financial year and shareholders approve or confirm the dividend payment by ordinary resolution.

It is also required that certain resolutions obtain the court’s blessing subsequent to having been passed by the company. Thus, for transactions such as the reduction of the stated capital of the company, or the reduction of the unpaid liability on any shares, the return to shareholders of any assets, or the cancellation of any shares (which requires altering the constitution), the resolution after being passed would have to be further confirmed by a court on application by the company.

Possible Criminal Implications

Directors have to conduct company business with the knowledge at all times that their actions could criminally implicate the company, and further, that liability can attach to the company just as much as it would to a human. The scope of this risk becomes even more compelling when one takes into account the fact that the company would not be absolved of liability on the basis that a director (or shareholder or managing director) had acted fraudulently or forged documents in furtherance of the intent on the blind side of the company. Notwithstanding, this must be juxtaposed with the related understanding that not all acts of directors can implicate the company.

Thus, only where the board, shareholders (in a meeting) or the managing director has specifically authorised the particular officer (director) so to act, would the malfeasance of that director (or officer) be attributed to the company. At a minimum, the individual director must be able to show some express communication assigning the authority to them at some point so to act, prior to undertaking the action. Consequently, it is in the interest of the board not to leave the status of any individual as to whether or not that individual is a director in limbo.

Ambivalence

By implication of this vicarious liability, any ambivalence carries with it the potential attendant risk of implicating the company. Moreover, it is a legal requirement also that a company has a minimum of two directors with at least one resident within the country at any given time. The requirement operates to preclude the volatile but plausible situation where all the directors are out of the country and the company is left to run without the proper corporate governance oversight expected from directors.

The law prescribes strict rules regarding the appointment, removal and (in the case of public companies) rotation of directors. This guards against the capricious usage of the power of appointment and removal to further selfish interests.

Company Wellbeing

The managerial and oversight powers of directors are by no means unfettered. As discussed earlier (see 3.2 Decisions Made by Particular Bodies), there is a limitation on the powers of directors in the areas of borrowing, lending and contributions, as well as with the issuance of new or unissued shares, and entering into major transactions. Directors can only get such transactions done subject to a resolution of the company.

To further buttress the elimination of potential conflict areas between the individual interests of directors and the company’s wellbeing, the law strictly prohibits advancing loans to directors of public companies. The law categorically stipulates: “A public company shall not grant a loan to a person who is a director or a director of an associated company or enter into a guarantee or provide a security in connection with a loan made to that person by any other person” (Section 328 (1) of Act 992). This restriction is somewhat relaxed for private companies which only need to specify the fact in the note to the financial statements of the company.

Certainly, the balancing act of managing risk while handling the affairs of a company can be dicey. Consequently, the courts may in given circumstances grant a reprieve. For instance, where a director has acted honestly, then despite the occurrence of a breach in the execution of their duty, the court may either partially or wholly absolve the director of liability.