DOING BUSINESS IN GHANA

Requirements for registering a business in Ghana

This Memorandum sets out the legal regime and requirements governing companies and investments in Ghana.

1. Requirements:

The Companies Code 1963 (Act 179), as amended governs the organization of companies in Ghana. Companies in Ghana may be either public or private (not more than 50 members or debenture holders) and unlimited, limited by shares or limited by guarantee. With regard to companies limited by shares, the Code sets down the following minimum requirements:

• Minimum of 1 shareholder
• Minimum of 2 directors
• 1 auditor
• 1 Company Secretary
• Submission of proposed Regulations.

The Regulations would only be accepted if in the opinion of the Registrar the objects for which the company is being formed are not illegal, the name is acceptable to the Registrar and the subscribers are neither minors nor persons of unsound mind.

The Regulations must contain the following:

1. The name of the company with “Limited” as the last word of the name of company (unless it is not a company limited by shares).
2. The nature of the business or businesses which is to be carried out by the company.
3. It must state that the company has all the full capacity of a mature person except where the power is expressly excluded by the Regulations.
4. The names of the first directors of the company (at least 2).
5. An indication in the Regulations that the powers of the directors are limited in accordance with the law.
6. The number of shares with which the company is registered.
7. A declaration that the liability of its members is limited.

(2) The Regulations must be signed by the subscribers. The subscribers must indicate the number of shares they have agreed to take and the consideration in cash that they have agreed to pay.

The directors of the Company also must be natural persons of sound mind, not minors.

A company is required under the law to appoint a Company Secretary. In fact, a company cannot commence business unless a secretary, 2 directors and an auditor have been appointed. A company cannot also carry on business for more than 6 months without a secretary (otherwise officers of the company would be liable to pay a fine for each day of default).

In Ghana, a secretary can be either a natural or artificial person. It is the duty of the directors to appoint a secretary and fix the remuneration of the secretary (section 190-3).
A letter should also be obtained from the prospective auditors, indicating their willingness to act as auditors to the Company.

Upon submission and acceptance of the regulations by the Registrar, the company is duly registered and the Registrar issues a certificate of incorporation to the Company.

The Directors and Secretary of the Company are then required to file additional forms stating their full names and addresses, particulars of other directorships held, and the principal or registered office of the company.

The following information must be filed:

• The name of the company;
• The objects of the company;
• The name and address of the Secretary;
• The name and address of Auditor
• Stated Capital
• Number of shares issued
• Registered Office

Upon submission of the relevant forms, and payment of a commencement tax (0.2% of the stated capital), a certificate to commence business and a tax identity number are issued to the company.

It is to be noted that when the particulars are submitted, the Registrar is obliged by law to register the returns and cause a copy to be published in the Gazette. The publication in the Gazette is notification to the general public that the company has been incorporated and ready to carry on business.

2. Stated Capital:
The minimum capital for a company registered in Ghana is GHC¢500 i.e. the equivalent of about USD500. However, for companies with foreign participation i.e. foreign shareholders, the minimum capital requirements are as follows:

Joint venture with Ghanaian participation: USD10,000
100% foreign ownership: USD50,000
Company engaged in trading activities: USD300,000.
(Regardless of whether the shares are wholly held by foreigners or not)

• Investment incentives:

a. Minimum Foreign Capital Requirement
To satisfy the minimum equity requirement, the investor must first incorporate or register a company at the Registrar General's Department and provide the minimum equity requirements either in cash or in kind (i.e. stock, equipment, vehicles etc).

The foreign shareholder is required to satisfy this minimum equity capital either in cash transferred through Ghana's banking system or its equivalent in the form of goods, plant and machinery, vehicles or other tangible assets imported specially and exclusively to establish the enterprise. Consideration for goodwill of a business or services rendered by partners cannot be used to satisfy the minimum foreign equity capital.

b. Investment Incentives, Benefits and Guarantees
The Ghana Investment Promotion Centre Act, 1994, provides for automatic incentives and benefits. A highlight of these incentives and benefits are as follows:

1 Customs Import Duty Exemptions

The following attract concessionary duty as follows:

• Import duty is imposed on vehicles depending on the type of vehicle. All motor vehicles with cylinder capacity not exceeding 1900 attract an import duty rate of 5%. Motor vehicles of cylinder capacity exceeding 1900 but not exceeding 3000 attract an import duty of 10%. Other vehicles of cylinder capacity exceeding 3000 and those designed for travelling on snow, golf cars and similar vehicles attract an import duty of 20%.
• Commercial vehicles for the transport of goods such as trucks, tippers and Lorries attract a duty of 5%.
• All the type of vehicles referred to above attract a Value Added Tax (VAT) rate of 12.5%, except ambulances, which are VAT-exempt.
• Exemptions may be granted from payment of customs import duty and other related charges for any special equipment that is not zero-rated upon application to the GIPC.

2 Tax benefits

• Tax Holiday:

For some chosen sectors e.g. Air and sea transport (non-resident): Income exempted (from start of operations).

• Capital Allowances:

Accelerated depreciation allowance is applicable to all sectors except banking, finance, commerce, insurance, mining and petroleum. The qualifying plant expenditure depreciation rate is 50 percent per annum for 2 years; the qualifying building expenditure depreciation rate is 20 percent per annum for 5 years.

• Location Incentives (tax rebate):

Manufacturing industries located in regional capitals other than Accra and Tema will enjoy a 25% rebate. All other manufacturing industries located outside regional capitals will enjoy a 50% rebate.

• Corporate Tax Rates:

The tax rate in all sectors is 25% (2008 budget) except for income from non-traditional exports, real estate companies and hotels which enjoy a lower tax rate.

• Exemption from Income Tax:

An exemption will apply for the provision of accommodation for employees on farms, as well as building, timber, mining and construction sites.

• Exemption from the Minimum Chargeable Income Tax:

There is an exemption from the minimum chargeable income of 5% of turnover during the first 5 years.

• Withholding Tax:

Withholding tax rebates are as follows: dividends 10%; royalties, management and technology transfer fees 15%; interest 10%.

• Loss Carry-over:

All sectors are allowed 5 years for loss carry-over, except for insurance business, which is unlimited.

* Please note that all income derived from, accruing in, brought into or received in Ghana by any person, whether resident in Ghana or not, and whether Ghanaian or not, is taxable. All enterprises must register with the Internal Revenue Service and the Value Added Tax (VAT) Secretariat for purposes of statutory tax, e.g. taxes, rebates and exemptions thereof.

c. Investment Guarantees

• Free Transferability of Capital, Profits and Dividends

The GIPC Act 478 provides guarantees to all enterprises, including free transferability through any authorized dealer bank in freely convertible currency of dividends or net profits attributable to the investment; payments in respect of loan servicing where a foreign loan has been obtained; remittance of proceeds (net of all taxes and other obligations) in the event of sale or liquidation of the enterprise or any interest attributable to the investment. Guarantees against expropriation of private investments provided under Act 478 are buttressed by the constitution.

• Protection regimes at the multilateral level

Ghana has signed an Investment Incentive Agreement with the Overseas Investment Corporation (OPIC) of the United States of America. OPIC offers investment insurance on a commercial basis with support of the United States government.

Ghana is also a signatory to the World Bank's Multilateral Investment Guarantee Agency (MIGA) Convention. MIGA guarantees insurance coverage against non-commercial risks such as transfer restrictions, breach of contract, expropriation, war and civil disobedience.

• Immigrant Quota:

Under the GIPC Act, enterprises benefit from the grant of an automatic maximum immigrant quota, depending on the enterprises' paid-up capital as follows:

• US $10,000.00 but less than US $100,000.00 or its equivalent in cedis, shall be entitled to an initial automatic maximum immigrant quota of one person.
• US $100,000.00 but less than US $500,000.00 or its equivalent in cedis shall be entitled to an initial automatic maximum immigrant quota of two persons.
• US $500,000.00 or more or its equivalent in cedis shall be entitled to an initial automatic maximum immigrant quota of four persons.

All other applications for Immigrant quota with respect to an investment in Ghana should be submitted to the Centre and will be dealt with by the Immigration Service in consultation with the Centre.

4. Joint venture
Where two companies propose to enter into a joint venture relationship, Ghana Law only permits them to use the vehicle of an incorporated company. This is because under Ghana law, a partnership is defined as an association between 2 or more natural persons (and not more than 20 persons) who carry on a business in common with a view to profit. Further, there is no limited liability form of Partnership in Ghana and therefore, it is not a very advisable form of business organization.

5. Costs of incorporation
The costs for incorporating a company are mainly determined by the amount of the stated capital. A commencement tax of 0.5% of the stated capital is paid at incorporation. For instance, a stated capital of USD50,000 would attract a tax of USD250. The other costs are the costs of purchasing and filing of the requisite statutory forms (USD400), registration at the Ghana Investment Promotion Centre (USD 1500) and legal fees of USD 1000.

6. External companies
Instead of incorporating a company in Ghana, the investor may register an external company. An external company is a body corporate formed outside Ghana, which has an established place of business in Ghana. The Companies Code defines an external company as a branch, management, share, transfer or registration office. A factory, mine or other fixed place of business also qualifies under the Companies Code as an external company.

Any company incorporated outside Ghana which intends to operate as an external company in Ghana must register with the Registrar of Companies. It is required to deliver to the Registrar of Companies its establishment documents from its country of origin. These documents should be certified copies of the instruments constituting or defining the constitution of the company.

In addition to its basic instruments, the external company is also required to provide further particulars. These particulars include the name and the nature of business of the company. If the company has shares, the number and nominal value of its authorised and issued shares and the amount paid for the shares and the amount yet to be paid must also be disclosed. The company is also required to provide the address of its registered or principal office in the country of incorporation and its address and principal place of business in Ghana. Should there be any change or alteration in the particulars given to the Registrar of Companies, the external company is required to notify the Registrar of Companies within two months from the time the change occurred, and deliver the new particulars for registration.

Officers of external companies

The Companies Code recognises and provides for two officers of an external company. These are described in the Code as the local manager and the process agent.

Local manager

The local manager is the person or persons appointed by the external company to manage its business in Ghana. The external company is required to supply to the Registrar of Companies the names and addresses of its local manager or managers. The local manager of a company must be a person who is competent to be appointed a director of a company in Ghana. The acts of a person registered as a local manager bind the external company as a general rule; the exception to this rule is where the local manager has no authority so to act and the person with whom the local manager was transacting business had or should have had knowledge of this absence of authority.

Process agent

An external company is also required by the Companies Code to appoint a process agent. A process agent is a person authorised by an external company to accept service of court processes and other documents on behalf of the external company. The external company is required to supply the Registrar of Companies with the name and address of the process agent. A process is deemed to be served on the company if it is served on the process agent.

7. Incorporation Steps
1 Fill out the Incorporation Questionnaire attached hereto. Note the following:

• Directors' details, including dates of birth and residential addresses. A minimum of two directors is required. At least one director is required to have Ghanaian residential address.
• Indicate stated capital. For GIPC registration (see below), the following minimum stated capital (cedi equivalent) is required for:
  • Joint venture (non-trading) companies with a Ghanaian partner, $10,000.00
  • Wholly foreign-owned (non-trading) companies, $50,000.00
  • Trading companies involved in importation (regardless of nationality of owners, $300,000.00).
• Nominate Auditors (If you do not have any in mind, we can recommend a firm of auditors)

• We will complete the appropriate forms using the information supplied on the questionnaire. We will require original signatures of all directors on all copies. If you are not in Ghana at the relevant time, we will email you the completed forms. Print out four copies and sign, and return them to us by courier.
• We will also email you
  • an invoice of the incorporation costs, which are dependent on the stated capital of the company and our agreed Company Secretarial fees; and
  • A copy of our Company Secretarial agreement, which we require you to sign to authorise our firm to register the company on your behalf as company secretaries.
• Once we receive the signed forms and the invoice amounts, we will proceed to register the company.
• Within 1-2 weeks, we will forward you the Certificate of Incorporation. The Certificate to Commence Business may take a week longer because it is sent to the Ministry for Trade and Industry for a Tax Identification Number to be assigned to the company.
• Your company can now begin operating.
• Registration with the Ghana Investment Promotion Centre (GIPC) is mandatory