Ghana’s legal system is premised on English Common Law. The laws of the country comprise: the constitution; statutes enacted by Parliament; orders, rules and regulations made by any person or authority under a power conferred by the constitution; the existing law; and the common law, which is made up of the rules of law generally known as doctrines of equity and the rules of customary law, such as rules of law which by custom are applicable to particular communities in Ghana, including those determined by the Superior Courts of Judicature.
General Framework For Investment
The Directive Principles of State Policy, prescribed under the constitution of Ghana, emphasises the encouragement of foreign investment, subject to any law in force at a given time regulating investment in Ghana. The Ghana Investment Promotion Centre (GIPC) Act 2013 (Act 865) and the Free Zones Act 1995 (Act 504), promote economic development and regulate the activities of investors, respectively. The GIPC Law regulates companies in all sectors of the economy.
The Ghana Free Zones Board (GFZB) has the mandate to regulate businesses – excluding those in banking and insurance – classified as free zone companies which export at least 70% of their products and services. There is also sectoral legislation that regulates specific industries. Investment guarantees include:
• Non-discriminatory application of rights and obligations under investment laws;
• Safeguards against expropriation;
• Guaranteed transferability of capital, profits, proceeds derived from sale and liquidation, interest and dividends, and personal remittances attributable to the investments – net of all taxes and other obligations – subject to directives that the Bank of Ghana (BoG) may issue on foreign exchange (forex) transactions;
• Application of the framework of the bilateral or multilateral agreements on investment protection to which the government and the country of which the foreign investor is a national are parties;
• Payments in respect of foreign loan servicing; and
• Application of any other national or international mechanisms for the settlement of investment disputes agreed to by the parties. In addition to these guarantees free zone companies enjoy exemptions with respect to:
• Direct and indirect taxes;
• Income tax on profits for the first 10 years from the date of commencement of the operation, with a subsequent income tax rate of 15%; and
• Payment of withholding tax by shareholders on dividends. As of December 2017 there is a proposal for the review of the Free Zones Act to enhance the relevance of business activities in the sector to ensure greater emphasis is placed on manufacturing and value addition.
Choosing The Corporate Vehicle
Under the Companies Act 1963 (Act 179), as amended, the types of corporate vehicles available are:
• The incorporation of a private or public company limited or unlimited by shares (for profit) or by guarantee (not for profit); or
• Registration of an external company i.e. a branch of a company (for profit or not for profit) incorporated outside Ghana.
The minimum capitalisation requirement of a local entity set out in the GIPC Act 2013 is determined by the nationality of the shareholders and the nature of the business in question. The capital can comprise either cash or capital goods relevant to the investment, or a combination of the two. The minimum capitalisation requirements are as follows:
• A joint venture company made up of Ghanaian and foreign shareholders requires minimum foreign capital of $200,000, with the Ghanaian partner having at least 10% equity participation;
• Where the company is wholly foreign owned, the minimum foreign capital is $500,000; and
• For trading, minimum foreign capital of $1m should be invested. Additionally, the company is required to employ at least 20 skilled Ghanaians.
Gipc Registration/ Evidence Of Transfer
In accordance with the GIPC Act, companies with foreign participation are required to register with the GIPC after incorporation and prior to the commencement of operations. Although the evidence of the fulfilment of the stated capital requirement is not required at incorporation, it is a mandatory requirement that the company show evidence of the transfer of capital into Ghana in the form of either cash or capital goods relevant to the investment to be registered with the GIPC.
To ensure transparency in the running of companies, Parliament passed the Companies (Amendment) Act 2016 (Act 920) to provide for the inclusion of the names and particulars of beneficial owners of companies in the register of members. The amendment to the Companies Act puts it in compliance with international protocols covering transparency measures to combat illicit activities, such as tax evasion, corruption and organised crime.
Banking & Financial Services
The BoG must approve any agreement or arrangement that would result in a change in the control of all banks and non-banking financial institutions or their holding companies. Consequently, the sale, disposal or transfer of between 5% and 75% or more of the capital or voting rights of a company (significant Interest), an amalgamation or a merger requires BoG approval.
Ghana’s capital markets are regulated by the Securities and Exchange Commission (SEC) and the Ghana Stock Exchange (GSE), which has the mandate to protect investors and maintain the integrity of the securities market. The Takeover and Mergers Code governs mergers, substantial acquisitions, takeovers and schemes of arrangement.
Acquisitions of 30% or more of the shares of a publicly listed company or its holding company trigger a mandatory takeover offer and require the approval of the SEC. There is also the Ghana Alternative Market (GAX), which is a parallel market to the GSE and focuses on small and medium-sized businesses with potential, including start-ups. The GAX affords companies the opportunity to secure long-term capital, broaden their investor base, and provide liquidity for their shareholders and investors.
The acquisition or sale of a significant interest in an insurance company also requires the prior written approval of the National Insurance Commission (NIC). A significant interest is any holding in a company that provides 10% or more of the voting rights or dividends. The NIC will grant approval upon satisfaction that the acquirer is qualified to have an interest in the insurance company.
The acquisition of a stake in a mining company which vests in a person – either alone or with an associate or associates – control of more than 20% of the voting power at any general meeting of a mining company or its holding company requires the approval of the minister for mines. The Mining Act is being reviewed in order to tighten regulations covering revenue, licensing and protection of the environment.
There is a local content requirement for a non-transferable minimum of 5% shareholding by Ghanaian firms operating in the upstream sector. This requirement can only be waived on the authority of the minister for lands and natural resources. Companies in the downstream sector allow a non-Ghanaian to acquire a maximum stake of 50%.
In the communications sector, the National Communications Authority must approve the transfer of shares in a licensee company if the transfer would result in a change of control of that company and cause that company to breach licence terms relating to its ownership structure.
Under the Fisheries Act 2002 (Act 625) fishing vessels are required to procure a licence for their activities. Licences granted under the act are not transferable to another person without the permission of the Fisheries Commission.
Consequently, where a merger or an acquisition leads to the formation of a new company, a licence granted to a fishing vessel owned by the old company cannot be transferred to the new company unless the permission of the Fisheries Commission has been obtained. There are also nationality restrictions that may affect an acquisition transaction in this sector.
For example, the owner of a licensed local industrial or semi-industrial fishing vessel is required to employ a master, officers and crew of whom no less than 75% are Ghanaian citizens.
Labour & Immigration
The Labour Act 2004 (Act 654) governs the rights and obligations of employers and employees, excluding the employees of the security and intelligence agencies.
The National Labour Commission (NLC) is the administrative body responsible for the administration of the Labour Act and the settlement of disputes between employers and employees.
The NLC employs negotiation, mediation and voluntary or compulsory arbitration in the exercise of its mandate. The orders of the NLC are enforceable only on the orders of the High Court.
The labour law regulates three categories of workers: permanent, casual and temporary. The law makes it mandatory that a person who is employed for a period exceeding six months – either in a single stretch or a cumulative number of days within a year – is deemed to be in permanent employment, and an employer is thus required to secure the terms and conditions by means of a contract. A person engaged on a seasonal basis for a period of less than six months is categorised as a seasonal worker. A temporary worker, on the other hand, is a person who is employed continuously for a minimum of one month, but is neither a permanent nor a seasonal worker. No formal contract is required for temporary or casual workers, and remuneration is calculated on a daily basis. A contract of employment must contain the following mandatory provisions:
• Name of employer/employee;
• Job title or grade;
• Rate, method and intervals of pay;
• Hours of work;
• Compensated annual leave;
• Conditions relating to incapacity to work due to sickness or injury and the details of related remuneration;
• Details of social security or pension scheme;
• Notice period for termination for employees and employer; and
• Disciplinary rules.
Ghana’s Protection against Unfair Competition Act 2000 (Act 589) codifies the common law tort of passing off. The act sets out the various practices deemed as unfair competition, defines these practices and outlines the extent of protection provided under Ghanaian law.
Major practices considered as unfair under the law include causing confusion with respect to another’s enterprise or its activities, damaging another person’s goodwill or reputation, misleading the public, discrediting another person’s enterprise or its activities, and unfair competition in respect of national and international obligations.
Termination Of Employment
The Labour Act gives the employer the right to terminate the employment of an employee. However, the act provides the boundaries within which an employer can exercise their discretion. A termination, except for redundancy or causes prescribed by the employer, is deemed to be fair in the following circumstances:
• By mutual agreement;
• Incompetence or lack of qualification;
• Legal restrictions prohibiting the worker from performing the work for which he or she was employed; and
• The inability of the employee to carry out his or her duties due to a medical condition, sickness or an accident.
Termination is deemed to be unfair in the following circumstances, and the law puts the onus of proof of the fairness of the termination on the employer:
• Involvement by the employee in trade union activities (this will apply only to unionised workers) or seeking office as a workers’ representative;
• Victimisation as a result of a worker’s complaint;
• Race, gender, colour, ethnicity, religion, creed, social, economic or political status;
• Where the qualification required is different from what was required at the time of employment; and
• Ill treatment by the employer or failure by the employer to take action on repeated complaints of sexual harassment that compels the employee to leave his or her employment.
Remedies For Unfair Termination
The employee would be entitled to the following benefits upon the termination of appointment:
• Remuneration earned prior to the termination;
• Deferred salary due to the termination, if any;
• Grants and awards;
• Compensation in respect to sickness or accident; and
• Where the employee is employed under a foreign contract, i.e. a contract where the employee is recruited outside of Ghana to work in the country, the employer is also required to pay – in addition to the above – the costs incurred by the employee and his or her dependants for repatriation to his or her home country.
Ghana’s labour laws allow employees – with the exception of those responsible for policy decisions and management or performing duties that are highly confidential – to form or join trade unions of their choice for the promotion and protection of their economic and social rights. The terms and conditions of unionised workers are negotiated between the union and their employers, and are prescribed within collective bargaining agreements.
Working Conditions Of Staff
Under the Factories, Offices and Shops Act 1970 (Act 328), an employer is required to provide the workforce with a healthy and safe working environment, and is required to report any accident, dangerous occurrences or incidence of industrial diseases.
Employment Of Expatriates
An application for a work permit for expatriate staff may be made directly to the Ghana Immigration Service (GIS) or through selected sector regulators to the GIS. These work permits are generally short term, may be renewed and are not transferable. The number of automatic immigrant quotas allowed by law is dependent on the capital investment made by the company. These quotas have an indefinite duration and can be transferred by a company to expatriate employees.
Payment Of Pensions
Ghana operates a three-tier social security system. The first two tiers are mandatory, while the third is voluntary. All businesses registered in the country are required to contribute to the first and second tiers irrespective of the number of employees that they hire or whether the company contributes to another scheme for its employees, locally or internationally.
Employers are required to contribute 13% and each employee contributes an amount equal to 5.5% (deducted at the source by the employer) of the employee’s basic salary to the Social Security and National Insurance Trust (SSNIT). This money is to be invested for the employee’s pension. Of the 18.5%, the employer will remit 13.5% to the Tier-1 Basic Social Security Scheme and the remaining 5% to a Tier-2 privately managed pension scheme.
These social security contributions are portable and can be transferred from one scheme in one country to that in another country, and are to be paid in respect of both local and expatriate staff. The guidelines issued by the SSNIT exempt the following categories of expatriates from contributing to a Tier-1 scheme:
• Expatriate workers engaged on a short-term assignment; and
• Expatriate workers who contribute to a pension scheme in their home country, evidence to be provided in the form of pay slips showing deductions to the scheme. Additionally, a non-Ghanaian member of the scheme, who satisfies the SSNIT that the member is emigrating or has emigrated permanently from Ghana, shall be paid a lump-sum benefit.
Capital & Profit Transfer
Investments registered with the GIPC and the GFZB are guaranteed unconditional transfer of dividends or net profits attributable to the investment made in the enterprise, payments in servicing foreign loans, fees and charges arising from technology transfer agreements registered under the GIPC Act, and remittance of proceeds, net of all taxes and other obligations from the sale or liquidation of the enterprise or any interest attributable to the investment in the enterprise.
Ghana’s forex regime is governed by the Foreign Exchange Act 2006 (Act 723). The BoG regulates forex business and transfers between residents and non-residents. Payments to or from Ghana between residents and or non-residents must be made through a bank. However, transfers to or from Ghana must be made through a bank, a dealer or person licensed to carry out the business of money transfers. The BoG periodically issues directives on forex transactions.
Foreign Currency Accounts
Both residents and non-residents are allowed to maintain foreign currency accounts. The accounts may be credited with transfers in foreign currency or other foreign currency accounts. Balances are freely transferable, and may be debited for payment of transfers to other foreign accounts and for the purchase of external currency.
Residents are permitted to maintain forex accounts. These can be credited with forex earnings that are not converted into Ghanaian cedi balances. Generally, balances on these accounts can be transferred with the necessary supporting documentation.
Pursuant to the Anti-Money Laundering Act 2008 (Act 749) the Financial Intelligence Centre has been established to provide assistance in the identification of proceeds of unlawful activities and to combat money laundering in Ghana. Banks are required under the law to apply comprehensive Know Your Customer due diligence on existing and potential clients in respect to financial transactions.
Land Acquisition, Planning & Use
The ownership of land is prescribed by the constitution and related statutes. The legal regime distinguishes between the rights of ownership and use. The constitution provides three categories of land ownership:
• Public/vested lands: public lands are lands that belong to the state, whereas vested lands are lands in which the state takes over ownership and the right to transfer from the customary landowners, and holds it in trust for the community. The landowners retain the equitable interest in the land, and these lands are managed by the Public and Vested Lands Management Division (PVLMD) of the Lands Commission;
• Stool/skin lands: these are community lands vested in a traditional council or community leaders on behalf of and in trust for the subjects of the stool, traditional leaders, in accordance with customary law and usage. Transactions in connection with these lands must receive the approval of the PVLMD to make the grant valid; and
• Private and family/clan lands: this refers to lands owned by individuals, families and clans.
Acquisition Of Titles To Land
Land can be owned by a body corporate which may have acquired its interest either from the PVLMD, a stool or a family. The terms of the transfer of interests in land which exceeds three years must be provided in a contract. Foreigners cannot have an interest in land in excess of 50 years. The use of land is subject to a number of restrictions, which are:
• Compulsory acquisition: under the constitution, the state has authority to compulsorily acquire the rights in land for the benefit of society; and
• Disposition and development of stool lands: the constitution requires that there shall be no disposition or development unless the Regional Lands Commission of a given region has certified that the proposed disposition or development is consistent with the development plan drawn up or approved by the planning authority for the area in question.
Furthermore, stool lands must be governed by customary law.
Mitigating Land Acquisition Risks
Ghanaian law also provides for regulations that mitigate the risks related to land acquisition:
• The purchaser must request all documentation on the land in order to obtain appropriate information;
• The purchaser must conduct a search at the Lands Commission to ascertain whether the vendor is the appropriate person to transfer interest in the land;
• The purchaser must also conduct a search at the Collateral Registry and Company Registry to ascertain whether any charges have been created on the land;
• The purchaser must conduct a search at the Land Use and Spatial Planning Authority to ascertain the suitability of the land for the purpose for which it is being acquired;
• The purchaser must visit the land to ascertain if there are any physical encumbrances; and
• Ownership of land must be confirmed before any payment is made.
Land Use & Spatial Planning
The Land Use and Spatial Planning Act 2016 (Act 925) established the Land Use and Spatial Planning Authority to oversee the sustainable development and judicious use of land and human settlements through a decentralised planning system. The act regulates the use or development of any land in Ghana to conform to a zoning scheme approved by a local planning authority. It also introduces land use concepts such as development permits for various types of physical developments, change of use authentication and land use certificates.
Loan & Security Transactions
Under Ghanaian law movable and immovable property can be used as security for a loan transaction. The use of land as security is reflected by the Mortgages Law, the Land Law and also the Companies Act, under which the security is created by a company. Moveables including receivables, shares and securities may be used as security for transactions by the creation of fixed or floating charges in respect of the identified security. To assess whether a proposed security is free of liens and can be used as security for a transaction, searches must be conducted on the property at the Companies Registry and the Collateral Registry of the BoG, and at the Lands Registry in respect of landed property.
Doing Business With Government
The Public Procurement Act 2003 (Act 663), as amended by the Public Procurement (Amendment) Act 2016 (Act 914), forms an integral part of Ghana’s public finance management, and is intended to instil propriety and accountability in public sector financial management and expenditure. The law regulates the procurement of goods, works and services financed in whole or in part from public funds and the disposal of government stores. Additionally, all government agencies, institutions and establishments in which the government has a majority interest are mandated to comply with the law. Under the law, foreign firms competing to be awarded non-emergency consultancy assignments are required to include local experts and firms in their teams. The two key exceptions to the application of the law are the power vested in the minister of finance to direct the use of a different procurement procedure where the minister determines that it is in the national interest to do so. Where the minister makes such a determination the procurement method is published in the Gazette. The second exception is in respect of the procurement of goods, works and services financed by loans taken or guaranteed by the state, or aid granted under an international agreement that prescribes the procurement procedures to be employed.
Public Financial Management
The Public Financial Management Act 2016 (Act 921) seeks to ensure fiscal discipline and the efficient use of public resources for the delivery of improved public services. Additionally, the law seeks to promote discipline, transparency and accountability in the management of public funds and government property, and how to deal with the management of public debt.
Investment opportunities in Ghana may directly involve the government. Government, therefore, remains a critical party to most foreign investment arrangements. The constitution provides that “international business or economic transactions to which the government is a party shall, with necessary modification by Parliament, apply to an international business or economic transaction to which the government is a party as it applies to a loan”, that is, loan agreements require the approval of Parliament.
One concern of investors is the nature of the ultimate approval required for the validity and enforceability of such agreements. The concern has become more pervasive since the decision of the Supreme Court of Ghana in the cases of: Attorney General vs. Balkan Energy Ghana, Balkan Energy and Philip David Elders; Martin Alamisi Amidu vs. Attorney General, Waterville Holding, and Alfred Agbesi Woyome; and also the case of Martin Alamisi vs. Attorney General, Isofoton and Anane-Agyei Forson. In all these cases, agreements executed between a private party and government were held unenforceable as they were not approved by Parliament. From the decisions of the Supreme Court, the following agreements may qualify as international transactions:
• Agreement for business transactions between a foreign or non-resident company and the government of Ghana;
• Agreement for business transactions between a resident company (incorporated in Ghana) and the government of Ghana where the shareholders are non-Ghanaian; and
• Project agreements which fall under the above for which the funding or loan agreement has been approved by Parliament. There are, however, a number of exemptions. For example, where the agreement is regarded as “minor”, parliamentary approval may be dispensed with. However, the determination of what constitutes a minor agreement will be determined on a case-by-case basis.
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