Setting up a company in Ghana requires a business entity to register their company in accordance with Ghanaian law. In this extensive three-part article series, we discuss the full process of incorporation in Ghana to help you understand the requirements, steps and costs involved.
This article series is divided into the pre-incorporation stage, the incorporation stage, and the post-incorporation stage of registering a company limited by shares. While the knowledge we share in this article is firmly rooted in the prescriptions of the Companies Act, 2019 (Act 992), it is also based on the knowledge that can only be gained through practical experience that we have acquired in handling many incorporations.
In this first part of the series, we provide an overview of the business landscape in Ghana and go on to discuss the pre-incorporation stage of registering a company limited by shares. We address the following:
• What is incorporation?
• What are the different types of companies in Ghana?
• What must be done in the pre-incorporation stage of a company limited by shares? That is, what must a company do before it sets out to fill and submit official paperwork to the Registrar- General’s Department?
WHAT IS INCORPORATION?
Incorporation is the legal process used to form a corporate body. It is essentially the process of establishing and registering an identity for a company that is separate from that of its owners or shareholders. In Ghana, the institution that handles this process is the Registrar-General’s Department (RGD). All submissions and payments must be made to the RGD. In our experience, the RGD typically takes about fourteen days to process incorporation applications.
DIFFERENT TYPES OF COMPANIES IN GHANA
There are six general categories of companies in Ghana. The specific requirements and processes involved in a company’s registration is determined by the category it falls into. Although this article focuses on the incorporation of companies limited by shares, we set out all six categories, their definitions, and their suffixes below.
The Companies Act, 2019 (Act 992) mandates every registered company, except sole proprietorships, partnerships and external companies, to append a suffix to their name in order to easily identify the type of company it is. The suffix a company must use is based on the category the company falls into and whether it is a public or private entity. In her recent interviews, the Registrar-General Mrs. Jemima Oware has stressed the need for companies to adopt these suffixes. Readers should therefore recognize the importance of these suffixes and note that even if a company is already registered, it must go through a “change of name” process to adopt the correct suffix. A company may change its name by a written special resolution and with the written approval of the Registrar. The categories of companies are as follows:
Sole Proprietorship: This is an unincorporated business owned by a single person. The liability of a sole proprietor is unlimited; the owner bears full liability for all business matters. There is no legal separation between the individual owner and the business and thus, should the business get into financial trouble, the personal assets of the owner can be seized to pay off debts. If a sole proprietorship is operating under the name of its owner, it is not obligated to register with the RGD. However, if it is operating under a trade name, it must be registered at RGD through the “Business Name Registration” process.
Partnership: This is an association of a minimum of 2 and a maximum of 20 individuals doing business together. The members of the association are “partners” and the terms and conditions of their arrangement must be documented in a Partnership Agreement.
Company Limited by Shares: In a company limited by shares, the liability of its members is limited to the amount unpaid on the shares respectively held by them. This essentially means that if the business gets into trouble, a shareholder has to meet the debts of the company only to the extent that is unpaid on her shares and none of their separate personal assets can be used to meet the debt. The day-to-day running of a company limited by shares is managed by a board of directors. Companies limited by shares are further sub-categorized as follows:
• Private company limited by shares: this is a company with shares that are not offered to the public. In Ghana, the total number of shareholders and debenture holders of a private company limited by shares cannot exceed fifty; this number does not include current employees who hold shares or debentures, or former employees who held shares or debentures during their employment and continue to do so after the end of that employment. The name of a private company limited by shares must have the suffix “Limited Company” or its abbreviation “LTD”.
• Public company limited by shares: this is a company with shares that are offered to the public. The name of a public company limited by shares must have the suffix “Public Limited Company” or its abbreviation “PLC”.
Company Limited by Guarantee: This is a company without any shares or shareholders. Its members act as guarantors of the company’s liabilities. Members pledge funds not as working capital for the company but as a contribution towards meeting any debts in the event that the company becomes insolvent or has to wind up. This means that the liability of individual members is limited to the amount that the members may respectively contribute to the assets of the company. Any profits generated from the company’s operations must be reinvested in the company. This company type is primarily used for non-profit organizations.
• A company limited by guarantee must have the suffix “Limited By Guarantee” or “LBG”.
Company Unlimited by Shares: In a company unlimited by shares, there is no limit to the liability of the shareholders. That is, its shareholders are personally liable for the shortfalls of the company and can have their personal property used to settle the company’s debts should it become necessary. This type of company is further sub-categorized into:
• Private company unlimited by shares: this is an unlimited company with shares that are not offered to the public. In Ghana, the total number of shareholders and debenture holders of a private company unlimited by shares cannot exceed fifty; this number does not include current employees who hold shares or debentures, or former employees who held shares or debentures during their employment and continue to do so after the end of that employment. The name of a private company unlimited by shares must have the suffix “Private Unlimited Company” or its abbreviation “PRUC”.
• Public company unlimited by shares: this is an unlimited company with shares that are offered to the public. The name of a public company unlimited by shares must have the suffix “Public Unlimited Company” or its abbreviation “PUC”.
External Company: This is a corporate body formed outside Ghana that has a presence, in the form of a branch, management, factory, etc., in Ghana.
PRE-INCORPORATION STAGE OF A COMPANY LIMITED BY SHARES
Before filling out and submitting any documents to the RGD, a company limited by shares must take the following actions:
Appointment of Directors: At least two directors, one of whom must be ordinarily resident in Ghana, must be appointed by the shareholders of the company. Directors must be individuals of 18 years and above. The directors will be responsible for the day-to-day management of the company and can be liable if the company fails to comply with certain legal requirements. The shareholders should therefore endeavour to appoint people who can competently fulfil the directorship role.
Appointment of Company Secretary: The directors of the company must appoint a company secretary who will oversee the legal compliance of the company. As discussed in our last article, in which we extensively discuss the company secretary role, a company secretary must meet at least one of the following criteria:
• Professional Qualification: Has obtained a professional qualification with an offering in company law practice and administration that affords them the knowledge and experience to successfully perform the duties of a company secretary.
• Tertiary-level Qualification: Has obtained a tertiary level qualification with an offering in company law practice and administration that affords them the knowledge and experience to successfully perform the duties of a company secretary.
• Company Secretary Trainee: Has been a company secretary trainee or articled under the supervision of a qualified company secretary for at least three years.
• Barrister and Solicitor in the Republic: Is a lawyer in good standing in the Republic of Ghana.
• Institute of Chartered Accountants: Is a member in good standing of the Institute of Chartered Accountants, Ghana.
• Institute of Chartered Secretaries and Administrators: Is a member in good standing of the Institute of Chartered Secretaries and Administrators, Ghana.
• Appointment at the reasonable discretion of the Board: By virtue of an academic qualification or member of a professional body, appears to the directors as capable of performing the functions of secretary of the company. Please note our specific use of the term “reasonable discretion”. This means that the discretion exercised by the directors is constricted by the law in that the appointed person must still have an academic or professional background that would enable them to successfully perform the duties of a company secretary.
Appointment of Auditor: The directors must also appoint an auditor. The auditor must be certified by the Institute of Chartered Accountants, Ghana and must be independent from the company; that is, they cannot be an employee or member of the company. An auditor’s tenure cannot exceed 6 years. After those 6 years, there must be a cooling off period of not less than 6 years for that auditor and a new auditor must be appointed in that period.
Name Search: The company must run a search at RGD on the company name they intend to use. This is to make sure that the name is available and is not already in use. The search can be conducted at the RGD office or using the online name search portal on their website. The proposed company name must be unique and not misleading. Also note that names cannot begin with “Ghana” unless they are owned by the government of Ghana. If the name is available, the company can reserve the name by paying the prescribed fee. This reservation is valid for 2 months, but can be extended for an additional 2-month period if need be.
Acquisition of TIN: The company must acquire a company TIN from GRA by filling out the appropriate paperwork. If any of the directors or company secretary does not have a TIN, it can also be acquired for them at this stage.
Company Constitution: A company’s constitution lays out the rules and regulations of the company’s operations. The RGD has standard constitutions based on company type that a company can adopt as its constitution. These standard constitutions can be downloaded from the RGD website. Alternatively, a company can create its own curated constitution but must include certain mandatory regulations, as set out in the Companies Act.
Once the above actions have been taken, the company will be ready to begin filling out application paperwork to be submitted to the RGD. In the next part of this series, we continue this discussion by addressing questions concerning the specific forms to be submitted and costs involved. The final part of the series will cover the post-incorporation stage and will provide you with invaluable information about SSNIT, GRA, Ghana Investment Property Centre (GIPC), District Assembly, and Data Protection registrations.
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Source: Ghana Web