A 2019 World Bank Report revealed that Ghana’s economy grew significantly in 2019 as the first quarter gross domestic product (GDP) growth was estimated at 6.7%, compared with 5.4% in the same period of the previous year. Non-oil growth was also strong at 6.0%. The relatively high quarterly growth was driven by a strong recovery in the services sector which grew by 7.2% compared with 1.2% in 2018.These kinds of reports are those that tickle investors to want to invest in a particular country. Over the years, Ghana has been described as possessing an investment-friendly environment and as such most investors find it more comfortable to invest in the country than in other African Countries. One of the factors that have usually been attributed to this assertion is the fact that Ghana is a relatively politically stable country and has enjoyed democratic rule for almost three (3) decades.
Before a foreign company or a foreigner can get off to a flying start in any kind of business in Ghana, it is expedient for that entity to apprise themselves of the legal regime for the type of business that entity so wishes to engage in. The procedures for setting up a business in Ghana are regulated mainly by the Companies Act, the Ghana Investment Promotion Centre Act, the Revenue. According to Section 1 of the Ghana Investment Promotion Centre Act (GIPC), 2013 (Act 865), the Act is applicable to enterprises in Ghana. The Act sets up the Ghana Investment Promotion Centre better known as GIPC and the main objects of the Centre is to create an enhanced, transparent and responsive environment for investment and the development of the Ghanaian economy through investment and encourage, promote and facilitate investment in the country.
What is an enterprise and what is the procedure for registering an enterprise with the Ghana Investment Promotion Centre?
The Ghana Investment Promotion Centre Act was promulgated in 2013 to apply to all enterprises in Ghana. An enterprise according to the Act is an industry, project, undertaking or business or an expansion of that industry, undertaking, project or business or any part of that industry, undertaking, project or business. If a person wishes to set up an enterprise for the purpose of investing in the country, that person would be required to incorporate or register that company in accordance with the Companies Act and other laws such as the Income Tax Act, 2015 (Act 896) and its various amendments as well as the Value Added Tax, 2013 (Act 870) depending on the type of enterprise that the person is desirous of setting up.
Any person of the age of eighteen years and above may apply for the incorporation of a company under the Companies Act, 2019 (Act 992). In applying for the incorporation of a company, an applicant is obliged to comply with the prescribed form. In addition to the application, the applicant is required under section 13 of Act 992 to include a number of items which is mandatory depending on the type of proposed company. Once an applicant has satisfied all the requirement under section 13, the company would be issued with a certificate of incorporation and becomes a body corporate by the name contained in the application for incorporation and, subject to section 13, is capable of performing the functions of an incorporated company from the date of incorporation.
This procedure of formation of companies is applicable to only Ghanaian companies. With regards to external companies however, the procedure is different as it does not require incorporation but only registration of the company. An external company is defined by section 329 of Act 992 as a body corporate formed outside the Republic which, at or subsequently to, the commencement of Act 179 has an established place of business in Ghana. An established place of business means a branch, management, share, transfer, or registration office, factory, mine, or any other fixed place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of the body corporate or maintains a stock of merchandise belonging to that body corporate from which the agent regularly fills orders on behalf of the body corporate.
It must be noted here that the GIPC is not meant for only foreign companies or external companies. A wholly owned Ghanaian enterprise may after incorporation register with the Centre and once registered, that company would be entitled to an array of benefits and incentives.
By law, an external company which establishes a place of business in the country has a maximum of one month from the date of the establishment within which to deliver the required documents to the Registrar for registration. The documents required for registration includes a copy of the certificate of incorporation and where applicable, a copy of the constitution, charter, statutes, regulations, memorandum and articles, or any other instrument constituting or defining the constitution of the company in a language acceptable to the Registrar.
Another required document for registration is a statement duly notarized in the jurisdiction of origin of the company giving the name, nature of business or business or other main objects of the company, if any, the present forename and surname and a former forename or surname, and the address and business occupation of one person or more persons, in Act 992 as a local manager, authorized to manage the business of the company in the Republic, the number and nominal value of the authorized and issued shares, the amount paid up on the shares and the amount remaining payable on the shares distinguishing between the amounts paid and payable in case the amounts paid and payable otherwise than in cash where the company has shares, the address of the registered or principal office or website in the country of incorporation, the address of the principal place of business in Ghana including an electronic mail address, digital address, the post office box number and the telephone contact and the name and address in Ghana of a person, in this Act referred to as a process agent, authorized by the company to accept service of process and other documents on behalf of the company.
In addition to the above, the applicant shall furnish the registrar with a statement duly notarized in the jurisdiction of origin of the company giving certain particulars regarding the beneficial owners of the company. These particulars include the full name and any former or alternate name, the date and place of birth, the telephone number, the nationality and national identity number or passport number or any other appropriate identification, the residential and postal address, the nature of the interest including the details of any legal, financial, security, debenture or informal arrangement giving rise to the beneficial ownership and a confirmation as to whether the beneficial owner is a politically exposed person.
Finally, the applicant would have to deposit the particulars, and copies, of the charges on the property of the company that required to be delivered for registration in accordance with section 337 of Act 992, or, if there are no charges, a statement in the prescribed form to that effect. Once an applicant has complied with all the necessary pre-requisites, the Registrar would then register the documents in the register of external companies and publish the particulars relating to the external company in the Companies Bulletin.
Where the enterprise sought to be registered with the GIPC is a special enterprise which has its own special regulations as in the case of Banks and Specialized Deposit Taking Institutions, the applicant would be mandated to comply with the Industry regulations. So, the Banks and Specialized Deposit-taking Institutions Act, 2016 (Act 930) provides that a person shall not accept a deposit from the general public or carry on a deposit-taking business in or from within the country without a licence issued in accordance with this Act and a person who seeks to carry on a deposit-taking business shall apply in writing to the Bank of Ghana for a licence. This means that in addition to the general requirement in respect of incorporation of companies, an applicant would have to ensure compliance with the requisite regulations regarding the peculiar industry in which he would want to be a player.
An enterprise in which foreign participation is permitted under the GIPC Act is obliged to be registered with the Centre after its incorporation or registration and before commencement of operations and such an enterprise would have to complete a registration form which is prescribed by the GIPC Act. After completing the form, the Centre shall within five working days from the date receipt of a completed registration form register the enterprise if the Centre is satisfied that all the relevant documents for registration are in order, the minimum foreign equity capital requirement has been complied with and the fees required for registration has been paid. Once registered, the enterprise is required by law to renew its registration with the Centre every two years.
Benefits of registering with the GIPC
The incentives and benefits that would be available to an enterprise registered with the Centre is immense. There are various tax incentives that are applicable to an enterprise under the Income Tax Act, 2015 (Act 896) (these would be dealt with extensively in subsequent articles)
Moreover, an enterprise whose plant, machinery, equipment or parts of the plant, machinery or equipment are not zero-rated under the Customs Harmonized Commodity and Tariff Code Schedule to the Customs, Excise and Preventive Service Management Act may submit an application for exemption from import duties and related charges on the plant, machinery or equipment or the parts of the plant, machinery or equipment to the Centre for onward submission to the Minister responsible for finance.
The Centre shall before submitting a request for exemption to the Minister responsible for Finance, determine whether the request will facilitate changes to technology and promote the specialized use of machinery, equipment or other items necessary for the establishment and operation of the enterprise.
For the purpose of promoting identified strategic or major investments, the Board may in consultation with appropriate government agencies and with the approval of the President specify priority areas of investment and their applicable benefits and incentives and negotiate specific incentive packages for strategic investments in addition to the incentives available to any enterprise under the tax, customs and other laws referred to in the Act.
Again, the Board shall publish in the Gazette and on its website the criteria for determining what constitutes strategic investments and shall designate an investment that satisfies the criteria, as strategic investment and the details of special incentives awarded through negotiation under the Act.
As a foreign investor or business seeking to invest in Ghana, certain activities have been excluded from the activities that can be engaged in as stipulated by the requirements of the law. A person who is not a citizen or an enterprise which is not wholly owned by a citizen is prohibited from investing or participating in certain activities. These activities are reserved for citizens and includes the sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place. Secondly, the operation of a taxi or car hire service in an enterprise that a fleet of less than twenty-five (25) vehicles. the operation of a beauty salon or a barber shop can only be engaged in by wholly-owned Ghanaian company. Another area of investment which has been left for the citizens of Ghana are the printing of recharge scratch cards for the use of subscribers of telecommunication services, the production of exercise books and other basic stationery. The retail of finished pharmaceutical products. A non-citizen is also barred from the production, supply and retail of sachet water; and all aspects of pool betting business and lotteries, except football pool.
Despite the above, the law makes room for non-citizens to participate in an enterprise other than those enterprises reserved for just citizens. Where a non-citizen wishes to participate in a joint enterprise with a partner who is a citizen, the person may invest a minimum amount of US$200,000.00 but where the enterprise is wholly owned by that person, the one who is participating may invest a minimum amount of US$5000,000.00.With respect to trading, a non-citizen may engage in it only if that person invests a minimum amount of US$1,000,000.00 in cash or goods and services relevant to the investments and such an enterprise must ensure that at least twenty skilled Ghanaians are employed by the enterprise.
It should be noted that the minimum capital requirement specified under the GIPC Act is inapplicable to portfolio investments or enterprises set up solely for export trading and manufacturing, that is export of goods or produce that originate from Ghana.
What are some of the assurances by the Centre upon registration of an enterprise?
Pursuant to the constitutional provision against discrimination, foreign investors, workers or employers are entitled to the same rights and subject to the same duties and obligations that citizens are entitled to and liable for. For that reason, it is incumbent on the GIPC or any of its agents or officials not to discriminate against an investor from a particular country nor give any investor some special treatment. The same laws apply to both local and foreign investors equally.
One other assurance for a foreign investor is that subject to the Constitution and any other laws, an enterprise shall not be nationalized or expropriated by Government, and a person who owns, whether wholly or in part, the capital of an enterprise shall not be compelled by law to give up that person’s capital to another person.
An enterprise shall not be acquired by the Republic unless the acquisition is in the national interest or for a public purpose and the acquisition is done under a law which makes provision for payment of fair and adequate compensation and a right of access to the High Court for the determination of the investor’s interest or right and the amount of compensation to which the investor is entitled.
Conclusion
Investors are looking to invest in an environment where they can contribute to development and still be able to maximise profit as well. Therefore, the existence of friendly laws and regulatory institutions like the GIPC is important to attract them.
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