Setting Up A Private Company Limited By Shares For Business In Ghana
By Eric Adjei-Laryea
Posted: 6th July 2016 08:37
Ghanaian law provides various vehicles by which a person may set up and conduct a business or commercial activity in Ghana. Thus, for example, a person may conduct business under a sole proprietorship. A business may also be conducted under a partnership arrangement. There is also the “Company Limited by Guarantee” which is the vehicle commonly used by not-for-profit organisations to conduct their business in Ghana. In view of my reference to “Company Limited by Guarantee”, may I add that under Ghanaian law, limited liability companies are of three main types: company limited by shares, company limited by guarantee and unlimited liability company. Any of these three types of companies may either be private or public. Yet, another vehicle recognised by Ghanaian law is an “external company”. An external company is a body corporate incorporated outside Ghana but which has an established place in Ghana (see Section 302(2) of the Companies Act, 1963 (Act 179)). This piece would be limited to private companies limited by shares and would consider the general regulatory requirements and procedures that attend same.
Incorporation at Registrar-General’s Department
One has to first conduct a search at the Registrar-General’s Department (the Registrar of Companies/the Registrar) to ascertain whether the name intended name for the company is available for use. It would be advisable to thus submit at least three names for the purpose. It could take about 30 days to obtain an official search result. However, a non-official search result may be obtained within a few days. Where the Registrar confirms that the intended name is available for use, the incorporators/promoters may in writing request that the Registrar reserve the name for a fee while they make preparations to register the company. It needs adding that no such reservation shall subsist beyond two months during which period, no other company shall be registered with the reserved name. This reservation system is not foolproof hence it would be advisable to proceed with the incorporation process as soon as the Registrar passes the intended name.
Tax Identification Numbers (TIN) are required for all persons to be named directors, company secretary, shareholder or auditor of the proposed company. This is a requirement for tax purposes in terms of Sections 4, 5 and 8 of the Taxpayers Identification Numbering System Act, 2002 (Act 632).
Completed Incorporation forms must then be submitted to the Registrar-General’s Department. A limited liability company is required to have at least one shareholder and at least two directors one of who must be present in Ghana at all times. In practice, this requirement is satisfied if a local address is provided for one of the directors named in the incorporation application forms. In terms of capital requirements (“stated capital”), generally, a wholly foreign-owned non-trading company is required to have a minimum foreign equity capital of $500,000.00. A non-trading company with Ghanaian partnership must have a minimum foreign equity capital of $200,000.00 and the Ghanaian partner shall have at least 10% equity participation in the joint enterprise. A trading company, whether wholly foreign-owned or a joint enterprise with a Ghanaian, is required to have a minimum foreign equity capital of $1million. The minimum foreign equity capital may be in cash or capital goods.
Again, it is important to note that while a company may carry on all kinds of businesses, a company which is wholly foreign-owned or jointly owned with a Ghanaian may not engage in certain activities reserved for only citizens of Ghana.
Beyond successfully incorporating a limited liability company (i.e. limited by shares), a company must undertake a number of further registrations so as to make its operations lawful or compliant with applicable law. These include the following:
Registration with the Ghana Investment Promotion Centre (“GIPC”)
All enterprises operating in Ghana are required to register with the GIPC. This requirement is particularly mandatory for enterprises with foreign participation and no such enterprise can lawfully commence operations unless it has first registered with the GIPC. Generally, the procedure is as follows:
- A bank account must be opened in the name of the incorporated company.
- The available foreign equity must be transferred into a bank account with written confirmation thereof from Ghana’s central bank. The conversion into local currency of such funds is a condition precedent for a company with foreign participation being able to take advantage of its entitlement to automatic immigrant quota.
- The company must then submit to the GIPC completed forms together with, among others, copies of the applicant company’s constitutional/incorporation documents/certificates and the written confirmation of equity transfer issued by the Bank of Ghana. The appropriate application fee must be paid to the GIPC. Where non-cash equity (e.g. equipment) is the case, the appropriate customs documents must be submitted to the GIPC.
Registration with the Ghana Revenue Authority (“GRA”)
This enables a company satisfy its tax obligations. As part of the registration process, the GRA may raise a provisional tax assessment on the applicant. The process is, substantially, the same for VAT registration.
Registration with the Social Security and National Insurance Trust (“SSNIT”)
Every company having employees must register with SSNIT. Thus as soon as a company commences recruitment of employees, it would be required to register with SSNIT so as to enable it to pay the relevant social security contributions of its employees. The employer is required to pay a total of 18.5% (to SSNIT by the 14th day of the month following the month of payment of the relevant salary.)
It must be noted that Ghana has a 3-tier pension system. Tiers 1 and 2 are compulsory while Tier 3 is voluntary.
Registration with Local Government Authority
Companies are required to register with the relevant local government authority in whose jurisdiction the company operates or is located and to obtain from the said authority a Business Operating Permit. The Business Operating Permit is valid for one year. To register, the applicant must complete the relevant application forms and submit same to the relevant authority together with copies of its constitutional documents. It will then pay the relevant fee and then the Business Operating Permit will be issued.
It must be noted that in addition to the above compliance requirements, there are other registrations which a company may be required by law to undertake. These would usually be industry specific registrations. Thus, for example, a telecom company may also be required to register with the National Communications Authority.
Eric Adjei-Laryea, the author is a Partner at Glory Law Firm and is team lead for the corporate and commercial work of the firm. He has been involved with the setting up of countless number of companies for foreign investors in Ghana. He has significant experience in a wide range of regulatory matters concerning corporate entities. He routinely advises various corporate entities across various industry sectors, particularly foreign companies on wide ranging matters, including immigration, employment, company formation and allied setting up arrangements, corporate governance, company secretarial, regulatory compliance, foreign investment and real estate.
Eric may be contacted at +233 30 224 5631 or by email at email@example.com.