Question

Acura Company Limited (Acura) is a manufacturing company with its registered office located at No. 5 Okoi Street, Community 6, Tema. The directors of the company have applied for a loan facility of GHS10million. They intend to apply the loan amount to purchase new equipment which would increase the manufacturing capacity of the company. The financial institutions that are willing to offer Acura the facility are requesting that the company increases its stated capital to a minimum of GHS100,000 as a condition precedent to the drawdown of the facility. An examination of the books of Acura revealed the following:

Authorised Shares

Issued Shares

Stated Capital

Treasury Shares

Unpaid Liability on Issued Shares

= 1,000,000. = 100,000

=GHS20,000 = 30,000

=GHS50,000

The directors of the Company have approached you to advise them on the various ways the company can increase its stated capital.

With the aid of appropriate authorities;

I. Advise Acura Company Limited on the various options in the Companies Act, 2019 (Act 992) for increasing the stated capital of the company. For the purposes of your discussion and advise, assume that the market value of a share of the company is GHS1.

II. The regulatory obligations Acura must satisfy after increasing its stated capital.

Answer 1

The various options in the Companies Act, 2019 (Act 992) for increasing the stated capital of the company.

On 2 August 2019, the President of the Republic of Ghana – Nana Addo Dankwa-Akufo-Addo announced that the long awaited Ghana Companies Act, 2019 had been assented into substantive law.

The Companies Act, 2019 (Act 992) has been in the works since 2018 and replaces the Companies Act, 1963 (Act 179). At a very high level, the new Act seeks to introduce improved corporate governance standards for companies operating in Ghana. The Act draws on the experience of more developed Jurisdiction and specifically incudes international best practices from jurisdictions such as the United Kingdom, New Zealand, South Africa and Mauritius.

Under the new regime created by the Companies Act 2019, Act 992, the only capital requirements pertain to foreign companies or ventures, which provision is captured under the Ghana Investment Promotion Centre Act (GIPC) 2013, (Act 865) as follows:

i. In a joint enterprise with a Ghanaian partner, the minimum capital requirement is US$200,000.00 or its equivalent in capital goods;

ii. In a wholly foreign owned enterprise, the minimum capital requirement is US$500,000.00 or its equivalent worth in capital goods;

iii. In the case of a trading enterprise irrespective of whether it is wholly or partly owned by a non-Ghanaian the minimum capital requirement is US$1,000,000.00 and the enterprise shall be required to employ at least 20 skilled Ghanaians

Previously the old Companies Act 1963 placed a minimum capital requirement of GHC500 for Ghanaian-owned private companies limited by shares and GHC1000 for public companies, however, this requirement has been removed by the Companies Act 2019, Act 992 and as such the only capital requirements that exist, are in respect of foreign enterprises as stated above.

Regulatory obligations satisfy after increasing its stated capital.

1. Creation of the Office of the Registrar of Companies

The Companies Act, 2019 establishes “the Office of the Registrar of Companies” which is an autonomous governmental body with perpetual succession. It set up to register and regulate businesses and corporate bodies operating in the country and is similar in operation and function to the United Kingdom Companies House.

The Registrar of Companies is to be appointed by the President of Ghana and shall be separate from the Registrar General. This office which shall be run by a governing board with full financial autonomy and full control over the use of internally generated funds (IGFs). Its sole purpose is the registration and regulation of companies in Ghana. To this end, the Office of the Registrar would carry out the below functions:

• Register and regulate of all types of businesses;
• Registration of business names, companies and partnerships;
• Appointment and regulation of company inspectors;
• Act as the Official Liquidator of Companies; and
• Manage the finances and fixed assets of the Office of the Registrar.

• Register and regulate of all types of businesses;
• Registration of business names, companies and partnerships;
• Appointment and regulation of company inspectors;
• Act as the Official Liquidator of Companies; and
• Manage the finances and fixed assets of the Office of the Registrar.

The Registrar of Companies shall have a governing board comprising:

• a Chairperson nominated by the President
• the Registrar of Companies
• one representative from the Office of the Attorney General not below the rank of Principal State Attorney
• one representative of the Ministry of Trade and Industry not below the rank of Director
• one representative of the Private Enterprises Foundation (PEF)
• one lawyer with at least ten (10) years experience and nominated by the Ghana Bar Association
• one person from business academia
• one person from the Ghana Association of Restructuring and Insolvency Advisors (GARIA)
• one person from the Institute of Chartered Accountant (ICAG)

Members of the Board (except for the Registrar of Companies) cannot hold office for more than ten (10) years. Also, the members of the Board may not be appointed for more than two (2) terms.

2. Introduction of the Constitution

Unlike Companies Act, 1963 (Act 179) , the Companies Act 2019 grants companies the option to file a registered constitution upon registration with the Registrar of Companies. The constitution would be signed by one or more members or the Company Secretary and may either be delivered to the Registrar before incorporation or filed after incorporation. The constitution contains the specific objects and regulations of the company as well as matters specific to the company and its operations. Should a company fail to file a constitution with the Registrar of Companies, the standard constitution contained in the Schedule to the Bill would be applied to that company. Companies formed for special purposes or that operate in highly regulated industries such as telecommunications, oil and gas and financial services and banking are required to file written copies of their constitution with the Registrar of Companies which would restrict their objects specific to the compliance requirements for the specific industries in which they operate.

Should a company fail to file a registered constitution, the standard constitution contained in the schedule to the Bill would become automatically applicable to that company.

• Register and regulate of all types of businesses;
• Registration of business names, companies and partnerships;
• Appointment and regulation of company inspectors;
• Act as the Official Liquidator of Companies; and
• Manage the finances and fixed assets of the Office of the Registrar.

The Registrar of Companies shall have a governing board comprising:

• a Chairperson nominated by the President
• the Registrar of Companies
• one representative from the Office of the Attorney General not below the rank of Principal State Attorney
• one representative of the Ministry of Trade and Industry not below the rank of Director
• one representative of the Private Enterprises Foundation (PEF)
• one lawyer with at least ten (10) years experience and nominated by the Ghana Bar Association
• one person from business academia
• one person from the Ghana Association of Restructuring and Insolvency Advisors (GARIA)
• one person from the Institute of Chartered Accountant (ICAG)

Members of the Board (except for the Registrar of Companies) cannot hold office for more than ten (10) years. Also, the members of the Board may not be appointed for more than two (2) terms.

2. Introduction of the Constitution

Unlike Companies Act, 1963 (Act 179) , the Companies Act 2019 grants companies the option to file a registered constitution upon registration with the Registrar of Companies. The constitution would be signed by one or more members or the Company Secretary and may either be delivered to the Registrar before incorporation or filed after incorporation. The constitution contains the specific objects and regulations of the company as well as matters specific to the company and its operations. Should a company fail to file a constitution with the Registrar of Companies, the standard constitution contained in the Schedule to the Bill would be applied to that company. Companies formed for special purposes or that operate in highly regulated industries such as telecommunications, oil and gas and financial services and banking are required to file written copies of their constitution with the Registrar of Companies which would restrict their objects specific to the compliance requirements for the specific industries in which they operate.

Should a company fail to file a registered constitution, the standard constitution contained in the schedule to the Bill would become automatically applicable to that company.

3. Goodbye to the “Ultra Vires” Rule

Companies Act, 2019 does away with the Ultra Vires Rule. The Ultra Vires Rule is the rule that requires Companies to stick strictly to the category of businesses stated in their regulations. The new Companies Act does not require Companies to file an objects clause with the Registrar of Companies limiting the objects of the Company or the various activities the Company can engage. Companies set up for special purposes or operating in regulated industries however have the option to limit their objects.

What this means is that Companies, like natural persons, can now engage in any activity that they wish to and unlike the previous regime, are not limited to only activities stated in their regulations. That said, it is important to note that regulatory restrictions will continue to apply to companies operating in restricted areas such as oil and gas, banking, insurance or telecommunications where special licenses are required. Such companies may file a constitution stating clearly the objects of the company and thus restrict their operations to those sectors alone.

4. Additional Suffixes to Names of Companies

To ensure easy identification of the actual legal form of a registered company, companies will be required to add the following suffixes as identifiers;

- Private Company limited by shares shall be “Limited Company “or “LTD”
- Public Company limited by shares shall be “Public Limited Company” of “PLC”
- Company Limited by Guarantee shall be “Limited by Guarantee” or “LBG”
- Public Company Unlimited by Shares shall be Public Unlimited Company or “PUC”

This would ensure that third parties and stakeholders would have clarity on the legal form of the company with which they are dealing.

5. Qualification and Regulations for the Company Secretary: No longer vague

To further enhance corporate governance in Ghana, companies are now required to appoint a Company Secretary duly qualified under the Act to perform the duties of a company secretary. This is a direct contrast to the old regime where anyone above the age of majority could be appointed as a company secretary. Under the new Act, a person may not be appointed as a Company Secretary unless that person;

- has obtained a professional qualification or tertiary level qualification with an offering in company law practice and administration that enables the person to have the knowledge and perform the functions of a company secretary;

- has held office under a qualified company secretary for at least three (3) years; or

- is a member in good standing of the Institute of Chartered Secretaries (Ghana); the Institute of Chartered
Accountants (Ghana); or has been enrolled to practice as a solicitor or barrister in Ghana.

In summary, a company secretary is at the very basic level required to have a comprehensive knowledge of company law and legislation and have the ability to guide the Board of Directors and the Company in their decision making. In more specific terms, the Company Secretary is required to effectively navigate the complex corporate governance framework and ensure that the companies they work for are abreast and compliant with their obligations under the law.

6. No Longer at Ease: Enhanced Corporate Governance Requirements for Directors

The new Companies Act imposes enhanced corporate governance requirements for directors. The Act criminalizes the situation where persons previously disqualified from acting as directors act in that capacity. The same sanction regime applies to a person who does not qualify to be a director of a company in the first place. The Act also imposes a reporting obligation on the previously disqualified directors to disclose the fact of their disqualification. The qualification and disqualification criteria for directors is spelt in the Act.

A person is disqualified from holding the position of director of a company if:

- the person is convicted of an offence involving fraud or dishonesty;

- it appears that the person may have been guilty of a criminal offence whether they were convicted or not;

- the person commits or is convicted of an offence related to insider dealing or any other offence which is not a misdemeanor;

- a person is adjudged bankrupt;

- the person has been disbarred from being part of a recognized professional body as a result of a disciplinary action;

- there is an ongoing criminal investigation in which the person is involved.

A person may also be automatically disqualified from acting as a director where the individual:

- has been convicted within the last 5 years of an offence involving dishonesty, fraud or relating to the promotion, formation and running of a company;

- has been the director or a senior executive of a company that became insolvent within the past five (5) years;

- has been disqualified to act as Company Secretary, receiver, manager or liquidator of a company.

The person is automatically disqualified to act or be appointed as a director of a company for five (5) years. Upon a second conviction, the person is automatically disqualified for ten (10) years. A third conviction would render the person permanently disqualified from acting as a director.

It is important to note that a person previously disqualified from acting as a director may apply to a court for reinstatement before the expiration of the five (5) year disqualification period

A person who is disqualified from acting as a director has to disclose his disqualification or may be liable on summary conviction to a fine that is presently not less than six thousand (6000) Ghana Cedis and not more than 12,000 Ghana Cedis or a term of imprisonment of not less than two (2) years.

Directors are also required to keep an Interests Register which records all directors’ interests. The Interests Register is to be available for inspection by members and also during company meetings.

7. Winter Has Come: Approval for Major Transactions

The New Companies Act does not allow a Company to enter into a major transaction unless the transaction is approved by special resolution. Major transactions include;

• The acquisition of or an agreement to purchase assets the value of which is more than seventy-five (75) per cent of the value of the company’s assets before the transaction;

• The disposal of or an agreement to dispose of assets of the Company valued at more than seventy-five (75) per cent of the value of the company’s assets before disposal;

• A transaction likely to have the effect of the company acquiring rights or interests valued at seventy-five (75) per cent of the company’s assets before the transaction.

• A transaction likely to incur liabilities including contingent liabilities the value of which is seventy-five (75) per cent of the company’s assets before the transaction

8. Time to Exhale: Remedy against Oppression

The new Companies Act includes a “Buy-out” remedy for dissenting minority shareholders. This is a remedy against minority oppression. Should a dissenting minority shareholder be outvoted on a matter involving the amendment of the constitution of the company, the amendment or dispensation of the registered objects or business activities of the company, the approval of a major transactions, the variation of class rights or the approval of an arrangement, merger or both, that member may require the company to purchase his shares.

To qualify for this relief, the member must have disapproved of this transaction and voted wholly against the resolution to be entitled to have their shares bought by other members or by the company itself subject to restrictions on the company purchasing its shares as stated in the Act. The Act further sets out the procedure for the determination of a fair and reasonable price for the disposal of that member's shares.

The company may apply to the Court for an exemption to the requirement to purchase its shares in this instance if the Board resolves that the purchase of its shares by the company may result in the company becoming insolvent; and the Company has made reasonable attempts to have the shares purchased by another person but has failed to do so.

9. From Cradle to the Grave: Insolvency

The New Act does not only cover companies which have been rendered insolvent as a result of financial difficulties and so may be liquidated by means of official liquidation via The Corporate Bodies (Official Liquidation) Act (Act 180), but also companies that may be financially viable but facing temporary hardships or merely wish to close up their affairs. This Act sees the introduction of private liquidation as an option which allows solvent companies to opt for a private liquidation or administration as a means of corporate restructuring or dissolution. The Administration provisions in the Act, which very much resembles the United States Chapter 11 Bankruptcy provisions offers companies legislative protection to enable them to resolve financial hardships through restructuring or administration rather than simply liquidating otherwise viable companies. Private liquidations may be undertaken by companies that are solvent but need to be liquidated. The Act also introduces administration as an option for relieving for distressed companies.

Insolvency and Restructuring provisions may be found in the Corporate Restructuring and Insolvency Bill which is currently before parliament and would repeal the Bodies Corporate (Official Liquidation) Act (Act 180).

10. Beneficial Ownership and the Central Register

The New Companies Act has improved beneficial ownership requirements. The Act requires the identification of members and beneficial owners of companies who are politically exposed persons and the registration of these relationships in the Central Register kept by the Registrar of Companies.

The Central Register is a database maintained in both Electronic and Manual formats by the Registrar of Companies. The Central Register is available for general viewing of the public persons. Politically exposed persons include persons entrusted with prominent public functions in Ghana, a foreign country or an international organization. Particulars to be filed in respect of beneficial ownership of a company includes the full name, address and contact details of the beneficial owner, place of work and position held, The nature of the interest including the details of the legal, financial, security, debenture or informal arrangement giving rise to the beneficial ownership; and Confirmation as to whether the beneficial owner is a politically exposed person and basically, any other information as may be determined by the Registrar

11. Rotation of Auditors

Under the New Companies Bill, there is a requirement for mandatory rotation of auditors of companies. Auditors of public companies shall be compulsorily rotated after a seven (7) year term with a cooling-off period of three (3) years while auditors of private companies shall be compulsorily rotated after a ten (10) year term with a cooling-off period of five (5) years after which they may be re-appointed. This provision would help avoid conflicts of interest which may arise out of familiarity due to excessively long audit relationships.

12. Derivative Actions

The New Companies Act enables companies to enforce the rights of the Company through derivative actions. Shareholders may apply to the Court for leave to bring an action in the name and on behalf of the Company to enforce the rights or recover assets belonging to the Company. This strengthens the capacity of shareholders to hold directors accountable for their actions. This rule is a revolutionary development in the protection of minority and shareholder rights. A derivative action enforces the company’s rights separate from the rights of the shareholders and may prevent the directors from abusing their fiduciary responsibilities to the Company in favour of one or more majority shareholders. It provides a remedy to shareholders who wish to hold the directors of the company to account but may otherwise be unable to bring proceedings because the directors refuse to bring or maintain such proceedings on behalf of the company.

13. The Companies Bulletin

The New Act introduces a publication to be known as the Companies Bulletin. The Companies Bulletin is a publication made by the Registrar of Companies similar to the Gazette, but solely managed and published by the Registrar of Companies. The Report would be maintained as a secured electronic database and made accessible in hard and electronic copies.

The Bulletin would contain notifications in respect of companies such as:

• Publication of fees for the Registrar of Companies
• Change of name
• Court orders in respect of stay of proceedings concerning insolvency proceedings
• Notices striking company names off the register of companies
• Notice of appointment or removal of liquidators
• Notice of official liquidation proceedings in respect of companies
• Notice of conversion of a private company to a public company
• Particulars of documents to be filed with the Registrar by external companies including the name, nature of the business, details of share capital, address of foreign principal office/branch, address of the local branch, name and address of local manager etc
• Notice of winding up of external companies
• Resolutions of companies in respect of private liquidations
• Court orders in respect of persons disqualified from acting as company secretaries, directors or in senior management roles
• Details of unclaimed dividends of companies transferred to the Registrar of Companies for safekeeping
• Notices in respect of companies that have filed annual returns

The Registrar of Companies may by regulation provide for the payment of fees in respect of matters to be published in the Companies’ Bulletin and may alter those fees when necessary.

14. Registration, Communication and Service by Electronic or Digital Means

The New Companies Act gives the Registrar of Companies the power to authorize the following transactions electronically or digitally, through an electronic system approved by the Registrar:

• the incorporation or registration of a company
• the reservation of a company name
• the filing of particulars
• the conversion of a company
• the filing of annual returns and financial statements
• the keeping and maintenance of a register
• arrangements, mergers, amalgamations and sale of undertakings
• the removal of a company’s name from the register upon cessation, dissolution and liquidation
• reports on statistical data on companies
• the inspection of a register
• the registration of debentures
• the transfer of debentures
• the registration of a contract or agreement for the allotment of shares;
• the registration of charges;
• keeping of books of accounts;
• the service of a notice of the document;
• the dissolution of a company;
• searches on a company register;
• an offer to be made to the public or an invitation to make an offer to the public;
• payment of fees;
• the filing of notice or document; and
• the performance of any act or thing required to be done concerning all the services above listed