Viewpoint: Vish Ashiagbor
After more than half a century Ghana passed the Companies Act, 2019 (Act 992), which replaces the Companies Act, 1963 (Act 179). The new act aims to amend and consolidate the law relating to companies, and provide for related matters, among other things. It was preceded by a number of taxation law reforms: the Value-Added Tax Law revision in 2013, the Excise Law revision in 2014, and the Customs Law and Income Tax Law revisions in 2015.
The Companies Law reform saw years of stakeholder consultations and lobbying by the business community. The new act comes at a time when the government, through its various agencies, has been actively restructuring the financial sector while trying to attract foreign investors into the country.
It is therefore not surprising that the Companies Act, 2019 appears to place such emphasis on stricter regulation of companies as well as on corporate governance. A special office separate from the Registrar General’s Department is to be set up to oversee the registration and regulation of companies, and elaborate provisions have been made with respect to the funding and administration of the office. It is anticipated that this will allow for more effective regulation of companies.
There also appears to be a genuine attempt at improving the ease of doing business. The minimum age at which a person may incorporate a company has been reduced from 21 to 18. It is no longer mandatory that a constitution be registered as part of the company incorporation process. Upon incorporation companies are no longer required to subsequently obtain a certificate to conduct business before they are able to commence operations. The implementation of these amendments should make incorporating a company much easier for people, and could encourage many small and/or informal businesses to register, thereby expanding the formal sector of the economy – and naturally broaden the tax bracket.
The government’s commitment to fighting corruption is also reflected in the requirement that companies keep registers of beneficial owners of the company. While this provision is not entirely new, the definition of beneficial owner has been modified so that it also includes any person who exercises significant control or influence over a legal arrangement through a formal or informal agreement. Companies are also obliged to disclose whether the beneficial owner is a politically exposed person. Whether this provision will produce the intended result remains to be seen; even though the act prescribes some penalties for non-compliance, it does not say whether the regulator or any other agency has the power to verify the information provided by the companies. In the absence of possible verification of information provided, companies may very well get away with entirely withholding this information or providing inaccurate information.
The good intentions of the government and the business community, as reflected in the new Companies Act, are commendable. However, there is now a need for funding and commitment from all actors to ensure that the act succeeds in bringing positive change to the business landscape.
Considering that there are new requirements to comply with, old procedures to phase out and transitional requirements that the business community and other stakeholders of companies as well as the regulator must navigate, it is expected that there will be some challenges. However, I am optimistic that by 2021 or 2022 the government and its regulators would have found their feet and succeeded in seamlessly transitioning to the new tax regime. Hopefully, after the business community, stakeholders and the country move past the initial implementation challenges and resolve all issues identified, we should be able to confidently say that Ghana is ready to conduct corporate business with greater transparency.
Read More from OBG
