Corporate Governance 2020

Last Updated June 22, 2020

Ghana

Law and Practice

Authors



Addison Bright Sloane is a full-service business law firm based in Accra, Ghana, with wide-ranging expertise. The firm has provided tailored services to businesses in Ghana and from overseas requiring the expertise of a law firm that understands the global business environment. The firm's team of commercial and corporate law practitioners comes with a diverse and rich corporate law practice portfolio across various industry sectors. The firm is the partner of choice for a top-tier City of London law firm and regularly collaborates with them and other global law firms on a number of high-profile transactions. Addison Bright Sloane has carved a niche for itself in Ghana in the areas of international business transactions including projects, corporate legal support services, corporate secretarial support, negotiating, drafting and reviewing of complex contracts, private equity, banking and finance as well as corporate litigation and ADR.

The principle forms of corporate/business organisation in Ghana are the following.

Partnerships

A partnership in Ghana 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 in Ghana. Companies are governed by the provisions of the Companies Act, 2019 (Act 992). A Company in Ghana, 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 in Ghana. It requires partnerships, inter alia to keep proper books of accounts of their operations.

Industry specific legislation includes the following: 

  • Securities Industry Act 2016 (Act 929) and the Securities and Exchange Commission Regulation 2003 (LI 1728): Act 929 establishes the Securities and Exchange Commission, whereas the object of the Commission is 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), Banking Act, 2004 (673) Insurance Act, 2006 (Act 724) and their respective regulations;
  • Professional Bodies Registration Act, 1973 (NRCD 143);
  • Statutory Corporations Act 1964 (Act 232); and
  • Ghana Investment Promotion Centre Act, 2013 (Act 865)

Additionally, there are a plethora of best practices often adhered to by companies in Ghana.

In Ghana, 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 a financial year. Moreover, only a public company may invite the public to acquire or dispose of shares. A public company may only do so by 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 Securities and Exchange Commission (SEC) has issued some guidelines to aid the process of issuing securities to the public:

  • 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 Commission 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.

To enhance corporate governance in the country, directors are not only required to act in the best interest of a company as a whole to preserve the company’s assets, further the business and promote the purposes for which the company was formed, in the manner that a faithful, diligent, careful and ordinary skilful director would act in the circumstances, but are also enjoined to have regard to:

  • the likely consequence of any decision in the long term,
  • 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 their duty is liable to further sanctions:

  • compensate the company for any loss;
  • account for profits realised from the wrongful transaction;
  • the company reserves the right to rescind any contract entered into by the director in breach of their duty.

Acts pertaining to Governance

The Companies Act 2019 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.

Moreover, the central Bank in accordance with Section 56 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) published Corporate Governance Directives in March 2018:

  • 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 of their achievements in terms of corporate governance goals within 120 days at the end of the financial year; and
  • former officials of the Bank of Ghana (BOG) are prohibited from serving as directors of banks until two years have elapsed after the termination of their appointment or expiration of their contract of employment.

Additionally, the BOG has issued further Corporate Directives to operationalise relevant provisions of Act 930, prohibit persons who are not “fit and proper” from engaging in or undertaking licensed or registered activities under Act 930, and support sound corporate governance practices.

Act 992 has made some key changes and improvements to Ghana’s Company law.

An independent office, the Office of the Registrar of Companies, has been established and is responsible for the registration and regulation of all businesses. Changes have been made to the principle of ultra vires. Presently, there is no requirement for companies to file objects/areas of business of a company during registration. Previously, this requirement was mandatory and limited the operational purview of companies. Thus, once registered, a company is no longer restricted in undertaking any type of business. Where a company chooses to include objects during its registration, so that it is registered with set objects, it would be bound to do business within that purview.

Another major development  is the requirement to have a company secretary whose training and qualification meet prescribed standards specified in Act 992 (See 4.6 Legal Duties of Directors/Officers). A member in good standing of the Institute of Chartered Accountants of Ghana also qualifies.

Act 992 imposes a statutory cap of six years for an auditor to hold office. The auditor can only be re-appointed after a cooling off period of not less than six years. This periodic change is to deal with issues of familiarity between the auditor and the directors and management which may undermine the auditor’s independence and diligence.

There is no longer a requirement for registered businesses to obtain a certificate to commence business; once registered, a company can proceed to do business. Companies are also required to add suffixes to their names in order for their real legal forms to be ascertained, for instance, a private company limited by shares shall be “Limited Company” or LTD; and a public company limited by shares shall be “Public Limited Company” or PLC. And finally, prior to their appointment, a director is obligated to file a statutory declaration with the Registrar to the effect that they have not, within the preceding five years, been charged or convicted of a criminal offence involving fraud, dishonesty or any offence relating to the promotion, incorporation or management of a company.

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

The Environmental Protection Agency Act, 1994 (Act 409), does require a company to submit an environmental impact assessment report to the Agency, an activity being undertaken by that company may impact negatively on the environment.

Directors are also required under Section 128 of Act 992 to circulate to the members of the company 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 the directors or past directors. The directors’ report must contain certain details such as the state of affairs of the company and corporate social responsibility.

COVID-19 has diversely impacted businesses in Ghana, prompting adaptive reorganisations in response to the pandemic. This has included allowing employees to work from home, cancellation of important meetings including statutorily required meetings (board and shareholder’s meetings). The need to social distance has meant that important transactions which hitherto were conducted face to face must now be conducted within a virtual space.

In May 2020, the Registrar General’s Department published a bulletin, detailing guidelines for the conduct of virtual meetings. By the Guidelines, companies intending to conduct their Annual General meetings virtually must give the Registrar General’s Department prior notice of the meeting, as well as “spell out the electronic system to be used”. The Guidelines further stipulate that “the virtual AGM can be held using modalities as are fair to all their shareholders”.

Bank of Ghana's Response to COVID-19

Similarly, BOG has been responsive to the crisis. Accordingly, the Bank has issued the following measures since the outbreak:

  • lowered Monetary Policy Rate by 150 basis points to 14.5%;
  • the Primary Reserve Requirement has been reduced from 10% to 8% to provide more liquidity to banks to support critical sectors of the economy;
  • the Capital Conservation Buffer (CCB) for banks of 3.0% is reduced to 1.5%. This is to enable banks to provide much needed financial support to the economy and effectively reduces the Capital Adequacy Requirement for banks from 13% to 11.5%;
  • provisioning for Loans in the “Other Loans Especially Mentioned” (OLEM) category is reduced from 10% to 5% for all banks and Specialised Deposit-Taking Institutions (SDIs) as a policy response to loans that may experience difficulty in repayments due to the slowdown in economic activity;
  • loan repayments that are past due for Microfinance Institutions for up to 30 days shall be considered as “current” as in the case for all other SDIs; and
  • the Bank of Ghana has agreed with banks and mobile money operators on measures to facilitate more efficient payments and promote digital forms of payments for the next three months in order to minimise human contact.

BOG’s Monetary Policy Committee is scheduled to come up with additional measures to be implemented in respect of COVID-19.

The law provides that a company shall act through the shareholders in a general meeting or the Board or through officers or agents appointed by any of the two.

Members (Shareholders)

In Ghana, 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 directors or their delegates.

Officers

The First Schedule of Act 992 defines an officer in relation to 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 annual general meeting or an extraordinary general meeting. Members in a general meeting are responsible for making the following decisions:

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

The rules regulating decisions made by directors are usually found in a company’s constitution and includes the necessities 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, in Ghana, all members are eligible to attend general meetings and vote at such meetings. Resolutions passed at a general meeting are binding on all members as well as the company itself. General meetings may be convened by directors, members and 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, in Ghana they are based on a single-tier structure. These boards may consist of 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 number required by the company’s constitution).

It is not mandatory for directors to hold company shares. 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 committees of the board, as these are designated committees (handling specific issues such as audit, risk, governance, etc), 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. Act 992 recognises various categories of directors, including substitute directors, alternate directors, executive directors and managing directors. The board must also have a company secretary; though not a director (excepting cases where a director doubles up on the role), they work with the board, navigating the corporate governance framework, and ensuring the company adheres to it.

Finally, the board includes a Chairman. 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 deadlock. Where an even number exists, the Chairman is 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 annual general meeting. The Companies Act, 2019 (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 make certain declarations:

  • 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. However, Act 992 also states 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 at minimum 35 days before the meeting at which the resolution is to be moved” (Section 176 Act 992). Finally, 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 is recorded in the Interests Register. Default in this disclosure attracts a fine of 250 to 500 penalty units (one penalty unit is equal to USD2.10 at time of writing). Act 992 further requires directors to exercise independent judgment. In addition, they are precluded from use of their position 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 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 it), 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, however; 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 have 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 challenges via 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, the directors shall manage the business of the company. They are authorised to make payments from company 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. The need to maintain independence notwithstanding, Section 194 of Act 992 authorises directors to “enter into a contract with the company and the contract or any other contract of the company in which a director is in any way interested, shall not be liable to be avoided, nor shall a director be liable to account for a profit made pursuant to that contract by reason of the director holding the office of director, or of the fiduciary relationship established in respect of the contract”. The Board may appoint one of their fellow directors to any other office in the company, including that of managing director, save the office of auditor. The directors can also revoke that position.

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. They should either be enrolled to practice and be in good standing as a barrister or solicitor in Ghana, or 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.

They should be in good standing of either the Institute of Chartered Accountants Ghana, the Institute of Chartered Secretaries and Administrators, or the Ghana Bar. 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 will “give special 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 offenses 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 profit made. 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 of the company. 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 the leave of the 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.) The enforcer of these sanctions is the Registrar of Companies and wilfully providing a false statement to the Registrar General is an offence liable to a fine.

A director’s liability for their actions can be limited to the extent they comply with the company’s constitution, the Companies Act, 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 represents some basis for 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 his office, compensation must first be approved by the shareholders. In the event of a takeover, if a director is offered a higher price for their shares than other shareholders, the director must ensure that that 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.

The Companies Act 2019, (Act 992), specifies that a shareholder is a member of the company. As a result, they own part of the company, which allows them to appoint directors. Membership of a company with shares continues until a valid transfer of the shares held by the member is registered by the company. Shares are transferred by operation of law to another person, or forfeited for non-payment of calls; or the member of the company dies.

Shareholders have the right to attend and vote at annual general meetings. 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 (members) may exercise the powers given to them in the company’s constitution with regard to company management and, 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, and 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. 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 a shareholder vote wholly against the transaction, they are entitled to have their shares bought, should they decide to sell. Shareholders can also approve compensation and retirement packages for auditors and directors.

Annual general meetings are mandatory. Companies must hold an annual general meeting each year, and designate it as such, so as to distinguish it from any other meetings held that year. Annual general meetings 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 annual general meeting 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 new company is not required to hold an annual general meeting in its first year of incorporation or in the following year if it holds the first annual general meeting within 18 months of incorporation. Such annual general meeting 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 annual general meeting, a copy of said resolution must be forwarded to the Registrar. If an annual general meeting 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 (one penalty point is equivalent to GHS12, or USD2.10, as of June 2020). 

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

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, 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.

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

  • breaching their 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 can institute legal proceedings against the directors. They can also bring representative action against the directors or apply for 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 Ghana Stock Exchange requires shareholders in listed companies to release to the public information 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 his holding attain, exceed or fall 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.

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 Director’s 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 on such programs 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:

  • statement of financial position; 
  • statement of comprehensive income (including Profit and loss);
  • statement of changes in equity;
  • statement of cash flows; and
  • 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) 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 and comprehensive income statements and 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. 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 Auditors reports have been attached to them.

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

In Ghana, 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 reason of an 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 operate 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 an area of division among members of a company is the payment of dividends due to the dual involvement of both the directors and the shareholders in the declaration and payment of dividends. Directors make an initial determination of whether or not dividends are payable and shareholders approve or confirm the dividend payment by ordinary resolution.

It is also required in Ghana 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 said director (or shareholder or managing director) had acted fraudulently or forged documents in furtherance of the intent. 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 act 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 him 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 in Ghana 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, who 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 of duty the court may either partially or wholly absolve the director of liability.

Addison Bright Sloane

22B Akosombo Road
Ambassadorial Enclave
Airport Residential Area
Accra
Ghana

+233 0 303 971 501

info@addisonbrightsloane.com www.addisonbrightsloane.com
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Law and Practice

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Addison Bright Sloane is a full-service business law firm based in Accra, Ghana, with wide-ranging expertise. The firm has provided tailored services to businesses in Ghana and from overseas requiring the expertise of a law firm that understands the global business environment. The firm's team of commercial and corporate law practitioners comes with a diverse and rich corporate law practice portfolio across various industry sectors. The firm is the partner of choice for a top-tier City of London law firm and regularly collaborates with them and other global law firms on a number of high-profile transactions. Addison Bright Sloane has carved a niche for itself in Ghana in the areas of international business transactions including projects, corporate legal support services, corporate secretarial support, negotiating, drafting and reviewing of complex contracts, private equity, banking and finance as well as corporate litigation and ADR.

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