Introduction.
Ranked as the most stable political environment within the West African sub-region, Ghana is a viable place for doing business and the fastest growing economy in the world. Coupled with its sound and stable political system, Ghana has become a linchpin for individuals seeking to launch their business into the West African sub-region.
With the above opening obvious remarks, Ghana has become an attractive country for investment through established corporate entities. To that extent, individuals seeking to start a company in Ghana need to be abreast with the processes and procedures. Starting a business in Ghana requires undertaking a meticulous step coupled with sound legal advice from a knowledgeable corporate attorney in the industry.
This article, therefore, seeks to examine the various stages involved in establishing a company in Ghana, particularly a private limited liability company.
Incorporating a company with the relevant statutory body, in this case, the Registrar of Companies is the first step to acquiring the status of an artificial person, a corporate entity with the capacity to transact in its corporate name, and to sue and be sued, among others.
Therefore, it is worth noting that the acquisition of a corporate legal status demands fulfilling the framework established by law and under the direct supervision of the Registrar Generals Department.
Aside from meeting the demands above, it is incumbent for established entities to meet other regulatory and institutional requirements, including the following:
- Registration of the business with the Ghana Investment Promotion Centre (GIPC)
- The acquisition of permits and other licenses from other established regulatory institutions in case the corporate entity seeks to undertake the regulated activity.
- Acquisition of local and municipal permits as per the Local Government Act.
An incorporated company may either be
- A company limited by shares
- A company limited by guarantee
- An unlimited company, and
- External company
A company limited by shares: – a company limited by shares is a company that has the liability of its members limited to the amount unpaid on the shares respectively held by them. The company cannot offer its shares to the general public. It is a popular form of company structure in Ghana limiting the day to day running of the company to the company’s board of directors.
A company limited by guarantee: – a company limited by guarantee is a company that has the liability of its members limited to an amount that the members may respectively undertake to contribute to the company’s assets in the event of its being wound up. It is an incorporated company without share capital. It is not in the business for profit, and as such, its object must exclude profit-seeking ventures.
Unlimited company: – an unlimited company is a company that does not have a limit on the liability of its members.
External company: – an external or a foreign company is a company formed outside the Republic of Ghana, which has an established place of business in Ghana. The expression of an established place of business means a branch, management, share, transfer, or registration office, factory, mine, or any other fixed place of business. Still, it does not include an agency unless the agent has. It 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 entity corporate.
Processes for Incorporating a company (Private Limited Liability).
The following conditions must be met to incorporate a company (Private Limited Liability Company) in Ghana.
First and foremost, the promoters must decide who will act as the company’s first directors. A company incorporated and registered in Ghana must have a minimum of two directors, both natural persons over 18 years, one being ordinarily resident in Ghana. By virtue of section 173 of the Companies Act, 2019 (Act 992), the following persons are excluded to be appointed as a company director in Ghana.
- An infant
- A person adjudged to be of unsound mind
- A body corporate
- A person convicted for fraudulent offences, including persons convicted for offences involving fraud or dishonesty and any other stipulations under section 177 of the Companies Act, 2019 (Act 992)
The directors also appoint the company secretary, who may be a natural person or a body corporate. As part of the new prescription by the company’s act, among the persons qualified to be appointed a company secretary is a barrister or solicitor in good standing in the Republic of Ghana.
The directors are also mandated to appoint the first auditors of the company.
The company must choose a business name and confirm whether the company’s business name is available for use.
The company must register with the Ghana Revenue Authority for the issuance of tax identification number (TIN) for its members if they don’t have them already. It is an essential prerequisite for individuals to apply for and obtain TIN before registering the business.
The regulation of the company must be prepared. The regulation of the company must be signed by one or more of the initial subscribers in the presence of an independent adult witness and must state:
- The name of the company
- The company’s objects or authorized business
- That the company can enter into a legally binding agreement
- The name of the first directors of the company
- That the powers of the directors are limited under the law
- The number of shares in which the company is registered
- The number of shares each subscriber will own on incorporation and the amount payable for the shares.
- A declaration that the liability of the members of the company is limited
Where the Registrar is satisfied that the application for incorporation of a company complies with this Act, the Registrar shall, after payment of the prescribed fee, certify under the seal of the Registrar that the company is incorporated and, in the case of a limited liability company, that the liability of the members is limited. From the date of incorporation, the company becomes a body corporate by the name contained in the application for inclusion. It is capable of performing the functions of an incorporated company.
Registration fees
For incorporation of the company to be completed, a fee (capital duty) charged at the rate of 0.5% of the company’s stated share capital, and the registration fee must be submitted to the Registrar of Companies.
Registration of the company with the Ghana Investment Promotion Centre (GIPC)
The Ghana Investment Promotion Centre Act, 2013 (Act 865) prescribes the minimum capital threshold for companies with foreign equity participation.
Under Act 865, foreign investors are required to comply with the minimum equity requirements. This can be either in cash or in capital goods relevant to the investment; or a combination of both.
The minimum foreign equity requirement is as follows:
-US$200,000 for Joint Venture with a Ghanaian partner having not less than 10% equity participation
-US$500,000 for 100% foreign ownership
-US$1,000,000 for Trading Activity with a minimum of 20 skilled Ghanaians employed by such an enterprise.
Exceptions to the Minimum Capital Requirement:
- Manufacturing, export trading (locally manufactured goods) and portfolio investment businesses are exempted from meeting the minimum capital requirement.
- Foreign spouses and Ghanaians with dual nationality are also exempt from the minimum equity requirement.
Incentives and Benefits Under the GIPC Act
The GIPC Act provides for automatic incentives and benefits as follows:
- Customs Import Duty Exemptions (There are custom duties exemption for plant, machinery, equipment, and parts thereof)
- Various Tax benefits (Subject to some conditions)
- Investment Guarantees(Free Transferability of Capital, Profits and Dividends and immigrant quotas depending on the amount of paid-up capital of the enterprise
- Automatic expatriate quotas(subject to some conditions). For instance, a company with a paid-up capital of up to $200,000 shall be entitled to one (1) automatic work quota, whiles a company with a paid-up capital of up to $500,000 shall be entitled to two (2) automatic work quota.
- Registration with the GIPC entitles a corporate entity to cafeteria Dispute Resolution Mechanism, including arbitration under UNCITRAL arbitration rules.Also, where there is any bilateral and multilateral investment protection agreement to which Ghana and the investor’s home country are parties, the established dispute resolution mechanism shall be available to the investment. The dispute mechanism could include Investor Treaty Arbitration under ICSID Convention. The GIPC Act also afford parties recourse to any other national or international machinery for the settlement of investment dispute agreed to by the parties.
Other Mandatory Institutions
Once a business successfully undertakes the above-stipulated steps, it acquires the legal status to operate as a corporate entity in Ghana. Be it as it may be, the established corporate entity is by law mandated to register with other institutions.
These institutions include the following:
A. The Ghana Revenue Authority
All incorporated companies are by law demanded to register with the Ghana Revenue Authority. The registration is essential for the payment of taxes. On registration, the company shall be issued with a tax clearance certificate.
B. Register with Social Security and National Insurance Trust (SSNIT)
The Social Security and National Insurance Trust (SSNIT) is a statutory public Trust charged under the National Pensions Act, 2008 Act 766 with the administration of Ghana’s Basic National Social Security Scheme. Its mandate is to cater for the First Tier of the Three-Tier Pension Scheme. The Trust is currently the largest non-bank financial institution in Ghana. The law demands all incorporated entities to register and make a contribution for their employees towards their retirement. It is a mandatory act.
An entity seeking to register with SSNIT must provide the institution with the following information.
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- Tax Identification Number for the company/ business entities
- Profile of Directors or Local Managers
- Copies of the Directors’ or Local Manager’s valid ID (e.g. Voter’s ID, passport, driver’s license)
- Directions to Taxpayer’s Premises using the Ghana Post (GPS).
- List of employees with their SSNIT numbers, basic salaries, and contributions.
Once satisfied, SSNIT will issue a confirmation letter with the company’s registration number and a certificate of membership to signify registration.
C. Register with Environmental Protection Agency (EPA) for Environmental Impact Assessment Certificate.
The law demands entities whose activities have adverse environmental effects must apply for an environmental impact assessment certificate from the Environmental Protection Agency (EPA). For instance, in the Mining Industry, the Environmental Protection Agency (EPA) is responsible for ensuring that mineral rights holders observe environmental safety precautions during the mining phase. The EPA was established under the EPA Act. In accordance with Section 18 of the Minerals and Mining Act and the Environmental Assessment Regulations 1999 (LI 1652), the holder of a mineral right requires an environmental permit from the EPA in order to undertake any mineral operations. The Environmental Assessment Regulation sets out the main legal framework used by the EPA to regulate and monitor mineral operations.
The regulation requires the applicant to prepare a scoping report setting out the scope or extent of the environmental impact assessment to be carried out and includes a draft term of reference that indicates the essential issues to be addressed in the environmental impact statement. The holder of a mineral right granted an environmental permit must submit an annual environmental report in respect of the mineral operations to the EPA.
D. Apply for Business Operating Permit from the Metropolitan, Municipal or District Assembly
The law demands incorporated companies to pay and obtain permits from the District, Municipal or Metropolitan Assembly where the activity of the corporate entity is centered or situated. This is a mandatory act.
The processes for registration with the Metropolitan, Municipal or District Assembly include the following.
- Purchase of application form from the Cash Offices of the Metropolitan, Municipal or District Assembly
- Completion of the application form and submitting it to the Revenue Mobilization Officer (RMO) at the Assembly.
- A copy of the certificate of incorporation must be attached.
- Registration Certificate from other recognized bodies as may be applicable.
- Tax clearance certificate from Ghana Revenue Authority (GRA).
Once the completed forms are submitted, a joint team from Finance Department, Environmental Health Division and City Engineer’s outfit will inspect the premises of the applicant within 5 business days of submission of application. The inspection team shall subsequently make recommendations to the Assembly within 2 business days from the day of their inspection. Upon approval by the Assembly, the license shall be issued to the applicant at a prescribed fee.
E. Special licenses
The corporate entity shall be required to apply and obtain a license from the regulatory authority in that field where the corporate entity seeks to undertake regulated activity. For instance, if a corporate entity undertakes to pursue the business of banking, it shall be mandated to obtain a banking license from the Bank of Ghana. The entity shall be mandated to fulfil other requirements aside from meeting the established laid down needs herein in that vein. It is, therefore, advisable to have industry knowledge in the specific sector you want to operate before the commencement of the registration of the corporate entity.
F. Open a Business Account
An incorporated entity that has to meet the minimum capital requirement and issued with the GIPC Certificate shall have the right to operate a corporate account and enjoy all the benefits that come with it, including transfer of funds out of the jurisdiction. The opening of the accounts requires completing the accounts opening pack and attaching to it the registered documents of the company including the GIPC Certificate.
G. Register with the Data Protection Commission
The Data Protection Commission (DPC) is an independent statutory body established under the Data Protection Act, 2012 (Act 843) to protect individual and personal data privacy by regulating the processing of personal information. The Commission provides for the process to obtain, hold, use, or disclose personal information and other related issues bordering on personal data protection. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them. The Data Protection Act 2012 established the Data Protection Commission (DPC) to protect individual and personal data privacy. The DPC’s statutory powers, functions and duties derive from the Data Protection Act 2012 (Act 843) and the Constitution of Ghana 1992. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them.
H. Tax Liabilities for Doing Business in Ghana.
It is crucial for every start-up business to understand Ghana’s tax structure to aid them in fulfilling their obligation to the government.
The Ghana Revenue Authority (GRA) is the mandatory and regulatory body for assessing and collecting taxes on behalf of the Government. The Ministry of Finance (MOF) oversee the activities of GRA.
A start-up business, either a sole proprietorship, partnership or a limited liability company, should bear in mind that there are taxes on what you earn, taxes on what you buy, and taxes on what you own. In Ghana, taxes consist of Direct and Indirect Taxes. An example of direct tax is the income tax, and an example of indirect taxes are the consumption taxes/goods and service, customs and excise duties.
Direct Taxes are the taxes on what you earn which comprises the examples below.
- Individual/Personal Income Taxes: This is levied on the wages, salaries, investments or other forms of income an individual earns. Example include Pay As You Earn (PAYE) tax.
- Company/Corporate Tax: A corporate income tax (CIT) is levied on business profits unless exempted explicitly in the law, companies (both resident and non-resident) are required to pay tax on income relating to business and investment, derived from, accrued in, brought into or received in Ghana after the necessary adjustment are made.
In Ghana, companies have to file returns four months after their accounting year, and it is also required that they make quarterly tax payment on the current year’s income based on provisional assessment.
Depending on the sector, the following corporate tax are imposed by the government on some sectors.
Mining: 35%
Petroleum: 35%
Hospitality: 22%
General Corporate Business: 25%
- Capital Gains Taxes: This is a tax on the profit or gains realized on the sale or disposal of an asset either than trading inventory. Companies are required to pay tax on gains made on the realization of chargeable assets. Chargeable assets include land (which is not for agriculture in Ghana), buildings, shares, goodwill, and business assets.
Indirect Taxes are taxes levied on goods and services rather than on income or profit.
- Goods & Services/Consumption Taxes are taxes on what you buy, or services rendered to you and are taxes levied on retail sales of goods and services. It is known as the Value Added Tax (VAT), which are indirect taxes paid by consumers on some goods and services to the state through registered individuals or businesses. The current rate is 12.5%, excluding the National Health Insurance Levy (NHIL) of 2.5%, Ghana Education Trust Fund (GETFUND) levy of 2.5% and Covid – 19 Health Recovery Levies of 1%.
- Customs and Excise Duties are imposed on the importation of goods at the port of entry and certain manufactured goods produced or imported into Ghana.
Legal notice
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your particular circumstances should always be sought separately before taking any action based on this publication.
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