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BUSINESS ORGANISATIONS

How are business activities in Ghana organised?

What kinds of companies may be formed in Ghana?

Company Limited By Shares
Company Limited By Guarantee
Unlimited Company
Public and Private Companies
External Company

Are there special kinds of companies?

Banks
Insurance Companies
Non-Banking Financial Institutions (NBFIs)
Finance Lease Companies
GIPC-Registered Companies

What are the other forms of business that exist?

Unincorporated Businesses/Sole Proprietorships
Partnerships
Voluntary Associations
Statutory Corporations
Co-operative Societies
Building Societies
Unit Trusts
Joint Venture
Franchise Agreements

How are companies incorporated in Ghana?

Mechanics
Certificate of Incorporation
Certificate to Commence Business

How are partnerships incorporated in Ghana?

What rules apply to the establishment of agencies, branches and subsidiaries in Ghana?

Agency
Branch
Subsidiary

How are business activities in Ghana organised?

The organisation of business activity in Ghana takes several forms, including unincorporated businesses, incorporated businesses, non-Ghanaian companies registered in Ghana as external companies and state-owned enterprises created by statutes. The relevant laws that govern the formation of entities that carry on business in the country are the Companies Code, 1963 (Act 179) ("Companies Code"), with regard to companies, the Incorporated Private Partnerships Act, 1962 (Act 152) ("IPPA"), with regard to partnerships, the Statutory Corporations Act, 1964 (Act 232), with regard to statutory corporations, and the Registration of Business Names Act, 1962 (Act 151), with regard to unincorporated business. The Registrar-General's Department is the government agency responsible for registration and regulation of business entities, except statutory corporations.
 

What kinds of companies may be formed in Ghana?

 The various kinds of companies are as follows:

Company Limited By Shares.
In a company limited by shares, the shareholder need not pay the whole amount of his shares to the company at once when acquiring the shares. The usual practice is that shareholders make payments when the directors make "calls" upon them to pay. The shareholder's liabilities are therefore limited to any amounts unpaid on the shares, and once a shareholder has fully paid for his shares, he is not to incur any further liabilities in respect of the company. Thus no contribution is required from any member, exceeding any amount unpaid on his shares, where the company is being wound up. However, the company may decide, by special resolution, to reserve any unpaid liability on shares until the company is being wound up.

The Regulations of a company limited by shares must expressly state the fact of the limited liability of members. The last word of the name of a company limited by shares shall be "limited", or its abbreviation "ltd."
 

Company Limited By Guarantee

This is a company having the liability of its members limited to amounts that they respectively undertake or guarantee to contribute to the assets of the company in case of liquidation. Unlike companies limited by shares where the liability of the member may have to be implemented at any time during the existence of the company, that is, during the active life as well as during winding up, in the guarantee company, that liability need only be implemented after the commencement of the winding up of the company. The Companies Code provides for the total liability of members, and no further contribution shall be required from any member.

A guarantee company is not registered with shares and is not permitted to create any shares. This type of company is therefore only suitable if no initial funds are required or those funds are obtained from other sources, e.g. endowments and donations. The company is also not permitted to engage in trading. The company is not permitted to pay dividends or distribute/return any assets to members.

Whilst other companies may operate on a "one share, one vote" principle, the operating principle in respect of guarantee companies is "one member, one vote".

The Regulations of a guarantee company must contain the following mandatory provisions:

• That the liabilities of the members are limited
• That the income and property of the company shall be applied solely towards the promotion of its objects

•That no portion of the income and property shall be paid or transferred in any manner to the members, except payments is permitted by the Regulations, such as the payment of reasonable and proper remuneration to officers in return for services actually rendered, out-of-pocket expenses, interest not exceeding 6% on money lent to the company, and reasonable and proper rent for premises let to the company. Further, no director is to be appointed to any salaried office. These may be modified only with the approval of the Registrar

• That each member will contribute to the assets of the company in the event of its being wound up, to cater for the payment of the company's debts and obligations, costs of liquidation and other amounts required, up to whatever limit is prescribed by the Regulations. In respect of members, this liability extinguishes only where a person has ceased to be a member for more than a year. Note that membership of a guarantee company may end only by death, valid retirement or any other manner prescribed in the Regulations

• That upon winding up, the residue of the property shall not be distributed to members, but shall be either given to some other guarantee company with similar objects or applied to some charitable purpose. Members before the dissolution of the company shall determine the beneficiary.

Unlimited Company

This company is also registered with shares, and, there is no limit on the liability of the members. There are not too many of such companies in Ghana. The few that exist are mostly law firms and other professional establishments who may be prevented from operating as limited liability companies by professional ethics.

Public and Private Companies

Each of the above types of companies may be "private" or "public".

A company is a private company if by its Regulations, it fulfills the following conditions:

• Where it is a company registered with shares, there is a restriction of the right to transfer shares

• The total number of members and debentureholders do not exceed 50. This number excludes genuine employees and ex-employees of the company who became members or debentureholders during their employment, and continued to be so after their employment. The exclusion of employees is designed to enable companies to institute co-partnerships schemes without forfeiting their private status

• The company is prohibited from making of any public invitations for the acquisition of its shares and debentures

• The company is prohibited from making an invitation to the public to deposit money for fixed periods or payable at call, whether interest-bearing or not.

Any other company is a public company.
 

External Company

Corporate bodies formed outside Ghana that seek to operate in Ghana need not automatically incorporate subsidiaries in Ghana. Such a corporate body is allowed to established a place of business in Ghana after it has registered with the Companies Registry as an "external company". "Established place of business" means a fixed place of business such as a branch, registration office, factory or mine. The following are not considered as established place of business:

• An agency through which the external company makes purchases, except where the agency does more than mere purchases, for instance, exercising general authority to negotiate and conclude contracts on behalf of the body corporate outside Ghana

• Bona fide brokers
• General commission agents
• The established place of business of a subsidiary

An external company must appoint a local manager as its representative in Ghana. The local manager must have the qualifications required of a director of a Ghanaian company, i.e., he must not be an infant, lunatic, corporation, undischarged bankrupt or a fraudulent person. Persons dealing with a local manager are entitled to assume that he has authority to carry on the business in Ghana. This protection does not cover persons who know or ought to have known that the local manager is acting in excess of his authority. The names of local managers must be published in all trade circulars and letterheads of the external company. There must also be adequate publication in English its name, country of incorporation and, if it exists, limited liability status at the place of business and on letterheads.

External companies are required to file yearly accounts with the Companies Registry. Where the external company is wound up, is dissolved or has ceased to exist in accordance with the law of its home country, the local manager must within 28 days, cause a notice to that effect to be delivered to the Companies
Registry for registration and publication in the Gazette.

Are there special kinds of companies?

Yes. The Companies Code permits the formation of special purpose companies that are regulated by special legislation. Some of these are:

Banks
Banks are regulated by the Banking Law, 1989 (PNDCL 225). Banks in Ghana operate under the supervision of the Bank of Ghana. No person is allowed to carry on the business of banking in Ghana unless that person:

• is a body corporate
• has obtained a licence from the Bank of Ghana

• maintains the minimum paid-up capital prescribed by the law, the quantum of which differs, depending on whether it is a Ghanaian banking business, foreign banking business, development banking business or a rural bank.

The Banking Law provides that no person other than a bank shall use or assume the word "bank" or any of its derivatives of the work in whatever language, indicating the carrying on of the business of banking.

Insurance Companies

Insurance companies in Ghana operate under the supervision of the National Insurance Commission, established under the Insurance Law, 1989 (PNDCL 227). No person is allowed to carry on insurance business in Ghana unless:

• that person is a body corporate
• the Government of Ghana has an automatic 20% interest in the capital in that business, and at least another 40% of the capital is owned by a Ghanaian

• that person maintains a prescribed minimum paid-up share capital, part of which should be in Government securities and deposited as security deposit with the Bank of Ghana. The amount of minimum paid up capital varies, depending on whether the company is involved in life insurance, non-life insurance, composite (that is both life and non-life insurance),
or re-insurance. 

Non-Banking Financial Institutions (NBFIs)

NBFIs operate in Ghana under the Financial Institution (Non-Banking) Law, 1993 (PNDCL 328). The businesses affected by the provisions of this law are the taking of deposits, financing by way of loans or advances, dealing in securities without being licensed under the Securities Industry Law, leasing, letting or hire-purchase, or where an insurance company carries on any business other than insurance. The following are however specifically classified as NBFIs under the schedule to the Financial Institution (Non-Banking) Law: Discount companies, finance houses, acceptance houses, building societies, leasing and hire-purchase companies, venture capital funding companies, mortgage financing companies, savings and loan companies and credit unions.

NBFIs operate under the supervision of the Bank of Ghana, and no person is allowed to carry on the activities of a non-banking financial institution unless it:

• is incorporated in Ghana
• has obtained a licence from the Bank of Ghana
• maintains a prescribed minimum paid-up capital.

Finance Lease Companies

A finance lease is defined by the Finance Lease Law, 1993 (PNDCL 331) as an arrangement by which a Lessor leases to a Lessee, either the lessor's own already acquired assets or an asset that the lessor agrees to acquire from a third party, for the Lessee's use only and against payment of mutually agreed lease rentals over a specified non-cancellable period and under which the Lessee may exercise an option to purchase the asset outright after the period of the lease at an agreed price, subject to the agreement of the Lessor. Under the Finance Lease Law, a person is not allowed to become a lessor under a finance lease agreement unless that person.

• is incorporated as a company
• is specifically licensed to engage in finance leasing
• complies with guidelines prescribed by the Bank of Ghana, including any prescriptions relating to minimum paid-up capital requirements. 

GIPC-Registered Companies

Under the Ghana Investment Promotion Centre Act, 1994 (Act 478) non-Ghanaians may to invest and participate in the operation of any enterprises in Ghana, except petty trading, operation of taxi or car hire services (except he has a minimum of ten new vehicles), lotteries, beauty salons and barber shops.

However, such an enterprise must be incorporated or registered under the Companies Code and registered with the Ghana Investment Promotion Centre (GIPC). A non-Ghanaian engaged in an enterprise in Ghana must invest certain prescribed sums of money in dollars, depending on whether the enterprise is a joint venture, wholly foreign owned, or engaged in purchasing and selling goods. These minimum capital requirements do not apply to portfolio investments and enterprises set up solely for export trading.