By the book: Regulations that support business development

The 1992 Ghanaian constitution (the “Constitution”), approved by referendum, establishes the multi-party system of Ghana’s democracy. The Constitution is the fourth republican constitution since Ghana gained independence in 1957. Accordingly, the era under the Constitution is described as the “Fourth Republic”. Ghana’s legal system comprises the Constitution, which is the supreme law of the land, as well as:

• Statutes passed by the parliament of Ghana (“Parliament”);

• Subsidiary legislation, which includes constitutional instruments, legislative instruments, executive instruments and other orders, rules and regulations made by a person or authority under a power granted by the Constitution;

• Existing laws, which consist of all the written and unwritten laws of Ghana that existed before the Constitution came into force; and

• Common law, consisting of the rules of English common law, the doctrines of equity and the rules of applicable Ghanaian customary law.

STAYING IN CHECK: The underlying principles of the legal system are fundamental human rights and freedoms, justice, probity, accountability, universal adult suffrage, rule of law and separation of powers. The Constitution vests the sovereignty of Ghana in the people and requires that the powers of government be within the limits of the Constitution. In that regard, the Constitution gives the Supreme Court of Ghana the power to declare as unconstitutional any law, act or omission of a person that is inconsistent with the Constitution. Any citizen of Ghana may bring such an action before the Supreme Court for determination. There have been numerous instances wherein the Supreme Court has annulled laws or portions of laws on the basis of unconstitutionality. The most recent case is the Monarh v. Attorney General delivered in April 2013 in which the Supreme Court, at the instance of a citizen, annulled portions of the Supreme Court (Amendment) Rules, 2012 (C.I. 74), which was passed to regulate petitions involving presidential elections. The key annulment was the portion that disallowed a party from applying for a review of a decision of the Supreme Court in an election dispute. The argument, upheld by the Supreme Court, was that such a bar was an infringement of the right to apply for a review as is enshrined in the Constitution.

KEY LEGISLATIVE CHANGES: Important legislative changes include: Re-registration of companies: Under Ghana’s e-Government project, the Companies Registry and the Ghana Revenue Authority (GRA) have jointly embarked on registration and re-registration of taxpayers and businesses with effect from October 2011. The GRA is registering all taxpayers on its total revenue integrated processing system (TRIPS), while the Companies Registry is registering new businesses and re-registering existing ones via its e-Registration system.

The collaborative registration and re-registration is intended to improve the quality of taxpayer and business records, as well as service delivery in respect to filing returns and payments. As part of the re-registration, tax identification numbers (TIN) will be issued to the directors, shareholders and the secretary of each re-registered firm. Re-registered companies will also receive new certificates of incorporation, certificates to commence business, TINs and TIN certificates.

The Companies Registry has not yet set any deadline for the re-registration. When it does set one, among the penalties for non-registration would be cancelling a defaulting firm from the register. Re-introduction and amendment of tax laws: In July 2013 Parliament re-introduced the National Fiscal Stabilisation Levy Act, which imposes a 5% levy on the profits before tax of banks (with the exception of rural and community banks), non-bank financial institutions, insurance companies, telecommunications companies and breweries operating in Ghana. The levy is payable in respect of only the profits before tax for the years 2013 and 2014 of the assessment.

The Communication Service Tax Act, 2008 (Act 754) was also amended by the Communications Service Tax (Amendment) Act, 2013 (Act 864) to clarify the scope and coverage of the levy. The law was passed in 2008 to levy a 6% tax on communication service usage. The telecommunication companies in Ghana and the government have had a protracted dispute since the passage of the law in 2008 over whether “communication service usage” includes interconnection services provided between the telecommunication firms. The original law did not expressly define communication service usage to include interconnection services. The government held the view that interconnection service was within the scope of the law, but the telecommunication companies disagreed. The amendment now expressly makes interconnection services taxable under the law. Ghana’s main law on investment, the Ghana Investment Promotion Centre (GIPC) Act, 1994 (Act 478), was also overhauled in July 2013 after almost two decades in existence. The details of the changes are discussed below.

CORPORATE LAW: Corporate law in Ghana is regulated by the Companies Act, 1963 (Act 179) and in some areas by applicable principles of common law and equity consistent with the Companies Act.

The Companies Registry is in charge of incorporation or registration of all companies in Ghana. A company may be registered in Ghana within a period of three to four weeks. Under the new registration system, all shareholders/members and officers of the intended company (i.e. directors, secretary and auditors) must obtain a TIN before incorporation. Possible names for the company may also be reserved at the Companies Registry for a maximum period of two months after a search for availability and the name has been accepted.

The minimum capital requirement is generally GHS500 ($257) for the incorporation of a private company and GHS2000 ($1028) for incorporation of a public company. However, certain regulated sectors, such as banking and insurance, have higher minimum capital requirements.

Under the Companies Act, a company may be incorporated as a company limited by shares. In this case, the liability of members is limited to the unpaid amount on the shares held by the members in the event of closure. The name of such a firm limited by shares must always end with “Limited”. Companies limited by shares are the most common form of company in Ghana.

A company may also be incorporated as a company limited by guarantee. A company limited by guarantee has the liability of its members limited to the amount that the members undertake to contribute to the assets of the firm in the event of a wind up. Such a set up is exclusively for non-profit activities. Where profit is made, profits cannot be distributed to members to be used for a purpose other than its authorised objects.

Another structure is an unlimited company, which places no limit on the liability of its members. Such groups are mainly law firms or other professional organisations that may be prevented from operating as limited liability companies by professional rules.

Companies incorporated outside Ghana are permitted to operate branch offices in Ghana by registering as external companies.

DEFINING CLASS: Under the Companies Act, a firm may be either public or private. A private company is one whose regulations:

• Limit it to a maximum of 50 members and debenture holders (excluding current and former employees who continue to be members or debenture holders of the company);

• Restrict the right to transfer its shares (where it is limited by shares);

• Prohibit it from making invitations to the public to acquire shares or debentures of the company; and

• Prohibit it from making an invitation to the public to deposit money for fixed periods or payable at call, whether bearing or not bearing interest. Any other company is public. Only public companies are listed on the Ghana Stock Exchange (GSE).

CORPORATE GOVERNANCE: A company must have a minimum of one member and a minimum of two directors. At least one director must, at all times, be present in Ghana. A company is also required to have a secretary (appointed by the directors) and auditors (appointed by the members). The powers of a company are exercised via its members in a general meeting or its board of directors, or through its officers or agents appointed or authorised by the board of directors or members in a general meeting.

Subject to the regulations of a company, the business of a firm is managed by the board of directors. The directors have fiduciary duties towards the company and also are required to always act in the best interests of the company and in a diligent manner. The directors cannot, without the consent of the company, put themselves in any position where their duties towards the company conflict with their personal interests. There is no consent without a disclosure of all material facts including the nature and extent of interest. Directors are liable for any breach of their duties and, where appropriate, are liable to compensate the firm for any loss resulting from the breach.

Any member of the company may obtain a court order to either prevent or set aside an act of the company that is beyond the powers of the company, breaches company regulations, or compels the company to act upon a resolution not properly passed in accordance with the Companies Act. Minority shareholders may also have a cause of action against the board of directors and the majority shareholders if they can show that the business of the company is being managed in a manner oppressive to their interest or in disregard of their proper interest as shareholders. A cause of action may also lie against the board of directors and the majority shareholders if it can be shown that some act has been done or is threatened to be done that is unfairly prejudicial to the interest of the minority shareholders.

ACQUISITION OF SHARES: Regarding companies limited by shares, shares in Ghana are of no par value, i.e. they have no value assigned to them in the regulations of the company. The Companies Act permits the regulations of a company to be classified into either ordinary shares or preference shares. The board of directors has the power to issue the shares of the company subject to the pre-emption rights of the shareholders and any other restrictions in the regulations of the company.

Shares are also freely transferable, except that private firms may impose restrictions on transferability, and the directors of private companies also retain the power to refuse to register a transfer of shares. Public companies can only restrict the transfer of unpaid shares and shares extended to infants or persons of an unsound mind. The issue or transfer of shares may also be restricted by sector-specific regulations or requirements as stipulated by law. The following regulatory approvals apply:

• Under the Insurance Act, 2006 (Act 724), the prior approval of the National Insurance Commission is required for any acquisition of 10% or more of the shares of an insurance company;

• Under the Banking Act, 2004 (Act 673), the prior approval of the Bank of Ghana is required for the acquisition of 10% or more of the shares of a bank;

• Under the Minerals and Mining Act, 2006 (Act 724), the prior notification of the minister in charge of mines is required for any acquisition of 20% or more of the shares of a mining firm by a new person; and

• Under the Fisheries Act, 2002 (Act 625), the prior approval of the Fisheries Commission and the minister in charge of fisheries is required for any transfer of shares that will result in a change of ownership of a licensed fishing vessel. An acquisition of 30% or more of the shares of a public company or its parent company will also trigger a mandatory takeover offer and compliance with such takeover process under the Securities and Exchange Commission Code on Takeovers and Mergers, 2008.

CORPORATE FINANCING: Under the Companies Act, the board of directors has the power to procure financing for the company, charge the property of the firm and issue debentures on behalf of the company. However, subject to the regulations of a company, the board of directors require shareholder approval for any financing or charge which, together with the company’s outstanding indebtedness or existing secured liabilities (excluding temporary loans obtained from its bankers in the ordinary course of business), will exceed the company’s stated capital.

Financing agreements are generally governed by the Contracts Act, 1960 (Act 25), the Borrowers and Lenders Act, 2008 (Act 773) and applicable principles of common law. There are no specified legal requirements in respect of the terms of a financing agreement. Most financing agreements specify the facility amount, the purpose of the facility, the interest rate payable, repayment provisions and dispute resolution clauses.

There is no requirement under Ghanaian law for the registration or recording of a financing, loan or credit agreement with any statutory or regulatory authority. These agreements, however, need to be stamped as required by the Stamp Duty Act, 2005 (Act 689).

Regarding secured financing, where the subject matter of the security is an immovable property, the Mortgages Act, 1972 (NRCD 96), the Home Mortgage Finance Act, 2008 (Act 770) and the Borrowers and Lenders Act regulate the creation of the security and its enforcement. A mortgage created over land must be registered with the Land Title Registry as required by the Land Registry Act, 1962 (Act 122) and the Land Title Registration Act, 1986 (PNDCL 152).

Where the subject matter of the security belongs to a company, then the Companies Act requires that the particulars of the security should be filed at the Companies Registry within 28 days of the creation of the security. An extension of time to register the security may be granted by the High Court. A security is invalid if it is not duly registered.

Under the Borrowers and Lenders Act, all types of security created in Ghana, whether over movables or immovable property, are required to be registered at the Collateral Registry within 28 days of the creation of the security. However, only security documents executed on or after February 1, 2010 are accepted for registration at the Collateral Registry.

GUARANTEES: The Contracts Act also regulates guarantees. The key requirement is that guarantees should be in writing and signed by the surety or guarantor. There is no requirement for the registration of guarantees at any statutory registry. All security documents require stamping under the Stamp Duty Act, 2005 (Act 689) for the purpose of enforcement in Ghanaian courts. In the case of a primary security, the duty chargeable is 0.5% of the secured amount. In the case of an auxiliary security, the duty chargeable is 0.25% of the secured amount.

The penalty for late stamping is GHS30 ($15.42). Where the unpaid duty is higher than the equivalent in value of GHS30 ($15.42), there is an additional penalty by way of interest on the unpaid duty at 5% per annum from the day on which the agreement was first executed up to the time when the interest is equal in amount to the unpaid duty.

LABOUR LAW: Employment in Ghana is mainly regulated by the Labour Act, 2004 (Act 651) and the Labour Regulations Act, 2007 (LI 1833). The Labour Act and the Labour Regulations Act apply to all employers and employees in Ghana except employees of the various state security agencies and institutions. The National Labour Commission (NLC) is the administrative body responsible for the settlement of labour disputes and the administration of the provisions of the Labour Act and the Labour Regulations. A specialised division of the High Court has also been set up to hear and try labour cases. There has been no amendment to the Labour Act since its first enactment in 2004. However, a few proposals have been made in the form of a draft amendment bill to amend portions of the Labour Act.

Under the Labour Act, an employer is entitled to employ, discipline, transfer or promote an employee, as well as terminate the employment of an employee. Labourers are also entitled to work under satisfactory, safe and healthy conditions; receive equal pay for equal work; have rest, leisure and holiday with pay; join or form a union; be trained and retrained for the development of skills; and receive information relevant to their employment. The Labour Act ensures that any employee who is employed for a period of at least six months, or for a number of working days equivalent to at least six months, within a year is given a written contract of employment.

The maximum working hours for employees in Ghana is 40 hours a week. Employees are also entitled to an annual leave of at least 15 working days with full pay. Any agreement to forgo annual leave is void. Pregnant employees are, in addition to any accrued annual leave, entitled to maternity leave of at least 12 weeks with full pay, and, in the event of any complications or the birth of two or more babies, an extension of two weeks with full pay. A nursing mother is also entitled to an hour’s break each day to nurse her baby. A novel proposal regarding the amendment of the Labour Act is to grant working fathers five working days as paternity leave with full pay. It is also proposed that the minimum maternity leave period be increased from 12 weeks to 16 weeks.

LABOUR PROTECTION: One of the highlights of the Labour Act is the protection of persons with disability. To encourage the employment of persons with disabilities, special incentives (including tax rebates) are provided to employers who engage such individuals. Employees who suffer disability due to employment may not be disengaged if they can be re-assigned to corresponding work and if they have a residual capacity for such work.

A contract of employment of three years or more may be terminated by one month’s notice or one month’s salary, whereas a contract of employment of less than three years may be terminated by two weeks’ notice or two weeks’ salary. Employees are entitled to redress for any unfair termination of employment.

In terms of settlement of labour disputes, the Labour Act adopts a combination of mechanisms ranging from negotiation, to mediation, to voluntary arbitration to compulsory arbitration. Although the NLC is cloaked with the powers of the High Court in respect to its proceedings, it has no power to enforce its orders or directives and is required to obtain an order from the High Court in order to enforce its directives.

Regarding the employment of children and young persons, the Labour Act prohibits the employment of persons under 21 years for underground mine work and any other employment that has exposure to physical or moral hazards. The Children’s Act, 1998 (Act 560) also sets 15 years as the minimum age for employment and 13 years as the minimum age for light work. The Labour Regulations also prohibits the employment of trafficked persons and a breach of the prohibition attracts a minimum term of five years imprisonment.

WORKMEN’S COMPENSATION: The Workmen’s Compensation Act, 1987 (PNDCL 187) provides for the payment of compensation by employers to employees who sustain injury or die from accidents or diseases caused by, or in the course of, their employment. The statute also requires employers to report deaths and incapacitations caused by accidents or diseases in the course of work. In addition, employees are entitled to free medical examinations and treatment of any injuries suffered in the course of work. Pensions: Regarding pensions, the National Pensions Act, 2008 (Act 766) has introduced a contributory three-tier pension scheme. The first tier pension scheme (Tier 1) and the second tier pension scheme (Tier 2) are mandatory schemes for all employers, while the third tier scheme (Tier 3) is a voluntary pension scheme for employers.

Tier 1 and Tier 2 are funded by monthly remittances from the mandatory pension contributions. The mandatory pension contributions are made up of monthly deductions from the salaries of employees (5.5% of each employee’s monthly salary) and matching monthly contributions from each employer (13% of each employee’s monthly salary). An employer’s obligation towards Tier 1 is to make a monthly remittance for each employee of 13.5% of the total mandatory pension contributions of 18.5% to the Social Security and National Insurance Trust.

Regarding Tier 2, an employer is required to establish an occupational pension scheme for the benefit of its employees. Under this scheme, the employer is required to appoint a pension trustee who is approved and licensed by the National Pensions Regulatory Authority (NPRA), for the purpose of managing such occupational pension scheme. The occupational pension plan may be a stand-alone or multi-employer scheme. The duties of a pension trustee, appointed by an employer, include securing the registration of the employer’s occupational pension scheme with the NPRA, appointing a fund manager registered by the NPRA to manage the investment of the funds of the scheme and appointing a pension custodian registered by the NPRA. An employer will then make a monthly remittance of the remaining 5% of the total mandatory pension contributions of 18.5% to the occupational pension scheme.

Tier 3 covers any voluntary provident fund and personal pension scheme set up by an employer for employees. Such funds and personal pension schemes must be managed by pension trustees appointed by the employers and licensed by the NPRA. The pension trustees are also required to appoint fund managers and pension custodians for the schemes.

FOREIGN INVESTMENT LAW: The main laws for the regulation of foreign investments in Ghana are the GIPC Act regulations and the Free Zone Act, 1995 (Act 504). The Foreign Exchange Act, 2006 (Act 723) and other sector-specific laws also apply to foreign investment. In July 2013, the current GIPC Act replaced an earlier version that had been in existence since 1994. The GIPC is the statutory body administering the GIPC Act. The Act, which is designed to promote and encourage foreign investment in Ghana, applies to all forms of investment in the country except investment in the mining and petroleum sectors. The exclusion does not apply to the business of provision of services in the mining and petroleum sectors. Investments regulated under the Free Zone Act are exempt.

It is a requirement under the GIPC Act to register with the GIPC any enterprise that has foreign participation. The registration is subject to renewal every two years. One of the key changes introduced under the current GIPC Act is the provision of sanctions for non-registration or non-renewal.

The sanctions include a fine ranging from GHS2400 ($1234) to GHS6000 ($3084), suspension of remittance and suspension or cancellation of registration of the defaulting enterprise. Another overhaul under the GIPC Act is in respect of the increment in the minimum foreign capital requirement and the introduction of local participation requirements.

FOREIGN OWNERSHIP: In the case of a joint venture with a Ghanaian partner, the foreign partner must invest a minimum equity capital of $50,000 in cash and/or capital goods. The GIPC Act now requires a minimum of 30% equity participation for the Ghanaian partner in such a joint venture.

A foreigner investor may fully own a business upon investing a minimum equity capital of $200,000 in cash and/or capital goods by way of equity capital. However, an enterprise set up mainly for the purchase and sale of goods or provision of services cannot be fully owned by a foreign investor. Such an enterprise must be a joint venture between the foreign investor and a Ghanaian partner. The Ghanaian partner must have a minimum of 30% equity participation in the joint enterprise and cannot transfer the same to any foreigner. The foreign partner must also invest a minimum equity capital of $1m in cash and/or capital goods. Such an enterprise is also required to employ a minimum of 10 skilled Ghanaians.

The minimum capital requirements do not apply to portfolio investments and enterprises set up solely for export trading and manufacturing. Existing enterprises affected by the new minimum foreign capital requirements and the local participation requirements are required to comply within three years of the enactment of the current GIPC Act, or cease operations. Investments wholly reserved for Ghanaians are:

• The operation of taxi or car hire service with a fleet of less than 25 vehicles;

• The operation of beauty salons or barber shops;

• The sale of goods or provision of services in market, petty trading, hawking or selling in stalls at any place; and

• The printing of mobile telecommunication services recharge scratch cards. The benefits and incentives in the GIPC Act include:

• An immigration quota limited to the amount of the paid-up capital of the company;

• Personal remittance of wages through authorised dealer banks;

• Free transferability of dividends and profits;

• Exemption from import duties and related charges on plants, machinery or equipment;

• Guarantee from expropriation (in line with the Constitution, expropriation is allowed only in the national interest and must be accompanied by fair and adequate compensation); and

• Other special incentives may be negotiated with the GIPC to promote certain priority areas.

FREE ZONE ACT: The Free Zone Authority (FZA) was set up under the Free Zone Act to, among other things, license entities seeking to operate as free zone enterprises and to assist such applicants in obtaining other relevant permits and licenses to operate in Ghana. A free zone enterprise is required to produce goods and services primarily for the export market. A maximum of 30% of the annual production of goods and services may be sold in the domestic market.

Only companies incorporated under the Companies Act or partnerships registered under the Incorporated Private Partnerships Act, 1962 (Act 152) may be licensed by the FZA as free zone enterprises. Foreign investors may wholly own free zone enterprises. The incentives under the Free Zones Act for a free zone enterprise include the following:

• Exemption from payment of import and export duties (the exemption does not apply to any sales in the domestic market);

• Exemption from payment of direct and indirect taxes and duties (but subject to parliamentary approval);

• Exemption from payment of income tax on profits for the first 10 years with effect from the date of commencement of business (but subject to parliamentary approval). After the 10 years, the applicable income tax rate shall not exceed 8% of profit;

• Exemption from the payment of withholding taxes on dividends paid to its shareholders;

• Unconditional transfer of profits, dividends, loan repayments and other remittances through an authorised bank in free convertible currency;

• Guarantees against expropriation; and

• Facilitation by the FZA of work and residence permit applications for expatriate employees.

PROPERTY LAW: Ghana’s Constitution guarantees the right to own property and is subject only to compulsory acquisition by the government in the public interest and on justifiable reasons. A person whose property is compulsorily acquired is also entitled to prompt payment of fair and adequate compensation and a right to seek redress in court.

The transfer of certain property in Ghana attracts a capital gains tax (currently at the rate of 15%). Taxable property include interests in and rights over a business and business assets, land and shares of companies resident in Ghana. Exemptions from capital gains tax include shares that are listed on the GSE; agricultural land; gains below GHS50 ($26); gains from a merger, amalgamation or re-organisation if there is a continuing underlying ownership of at least 25%; and transfer from a spouse or a former spouse (as part of a divorce settlement or a genuine separation agreement), a child, a parent or a relative. Foreigners can freely acquire and dispose of property subject to the constitutional limitations in respect of land.

The Constitution and various statutes govern the acquisition, use and transfer of land in Ghana. The legal regime on land has remained largely unchanged for the past two decades. There is an on-going review process aimed at consolidating all the laws on ownership and use of land.

CATEGORIES OF LAND: There are three categories of land in Ghana, namely customary lands, private lands and public lands. Customary lands consist of the absolute or allodial titles held by the various traditional authorities (and in some few cases, families) over large portions of land in Ghana. Available statistics indicate that customary lands constitute 80% of Ghana’s total land area of approximately 238,535 sq km. The Constitution vests the customary lands in the respective traditional authorities and in trust for the subjects of those traditional authorities in accordance with customary law and usage. The traditional authorities have the power to grant interests in customary lands in accordance with the relevant customary laws. However, the revenue from such grants is administered by the Administrator of Stool Lands in accordance with the Constitution, the Office of the Administrator of Stool Lands Act, 1994 (Act 481) and the Administration of Lands Act, 1962 (Act 123).

Private lands are made up of the freeholds acquired by persons from traditional authorities before the coming into force of the Constitution. Public lands also consist of lands belonging to certain traditional authorities but vested in the state (prior to the Constitution) in trust for the subjects of those traditional authorities and lands compulsorily acquired by the government in the public interest. All public lands are vested in the president in trust for the people of Ghana and managed by the Lands Commission.

FORMS OF INTEREST IN LAND: Ghanaian law allows persons to acquire various interests in land subject to the restrictions set out below. The freehold is the highest form of interest in land that a person may acquire. However, the Constitution bars foreigners from acquiring freeholds. The Constitution also prohibits the acquisition of freeholds over customary land by either a Ghanaian or a foreigner. Accordingly, a freehold may only be acquired over public lands and private lands, and only by Ghanaians.

Another form of interest in land in Ghana is the leasehold. Foreigners are, however, not permitted to acquire a lease for more than 50 years at any one time. Leases in Ghana are typically granted for a period of 50 to 60 years and are renewable. Tenancies may also be acquired for residential and commercial purposes. Tenancies are primarily regulated by the Rent Act, 1963 (Act 220) and Rent Control Act, 1986 (PNDCL 138). The current rent laws regulate issues ranging from the payment of rent to the ejection of tenants. Contracts over land transactions: The Conveyancing Act stipulates that a transfer of title or interest in land in Ghana is not valid unless it is evidenced in writing and signed by the transferor or the transferor’s authorised representative. This requirement does not apply to certain categories of transfers, such as a transfer under a will or intestacy, by an order of a court, by operation of law or an oral grant under customary law. The document in respect of the transfer must also be stamped in accordance with the Stamp Duty Act. Any transfer of interest in public land or customary land requires acquisition of the prior written consent of the Lands Commission and the relevant traditional authority, respectively.

REGISTRATION OF LAND: Ghanaian law operates two regimes for land registration transactions. The first regime is the deeds registry system introduced in 1962 under the Land Registry Act. Under this regime, all documents affecting land in Ghana must be registered with the Deeds Registry. In this case, only the transaction document is registered, and such registration gives validity to the document. Registration under this system only proves the fact of registration of the transaction document and not that the person who registered the document actually owns the land. There is, therefore, no warranty of title or interest. This system has led to inaccurate mapping, multiple sales of the same land, haphazard development and numerous protracted litigations over land.

As a result of the difficulties with the first regime, the land title registration system was introduced in 1986 under the Land Title Registration Act. This was aimed to promote warranty of security by registering title or interest in land as opposed to merely registering transaction documents. This was started in the Greater Accra Region and the Kumasi metropolis and is to be expanded to all regions of Ghana. However, implementation has been slow and so title registration still applies only to lands in Greater Accra and Kumasi. In effect, this system has not been able to effectively cure the mischief it was intended to.

The government introduced the land administration project (LAP) in 2003 to, among other functions, facilitate equitable access to land, ensure security of tenure, minimise protracted land disputes and litigation and create and maintain institutional capacity. The first phase of the LAP, which ended in 2011, resulted in the introduction of the Lands Commission Act, 2008 (Act 767) which brought four land sector agencies (Survey and Mapping, Land Registration, Land Valuation and Public Lands) as division under the Lands Commission. It also merged the Deeds Registry and Land Title Registry into the Land Registry division of the Lands Commission. The first phase of LAP also resulted in the management of records of land transactions involving customary lands.

The second phase of LAP started in 2011 and is intended, among other functions, to consolidate the laws on ownership and use of land. In this regard, a draft Land and Land Use and Planning Bill is being worked on. This phase also seeks to strengthen the court system by providing judges training automation for effective land dispute resolution, as well as implement improved mapping, street addressing and property identification systems.

CHARGES OVER LAND: A mortgage or any other charge may be created over land in Ghana. Any such charge must be duly stamped and then registered with the Land Title Registry and the Collateral Registry. Where the land belongs to a company incorporated under the Companies Act, the charge must also be registered with the Companies Registry. Levies and rates over land: Annual property rates are levied on all immovable property in Ghana by the respective local assemblies. In addition to any negotiated purchase price or rental fees, annual ground rents are charged by the Lands Commission and the relevant traditional authorities for public lands and customary lands, respectively. Building and other permits: Under the National Building Regulations, 1996 (L.I. 1630), a building permit is required from the relevant local assembly ahead of any construction of a building or any structural alteration or installation of fittings to any building, on land in Ghana. Further, an environmental permit from the Environmental Protection Agency is required for any construction that is likely to have an adverse effect on the environment, ambient or public health, as required by the Environmental Assessment Regulations, 1999 (L.I. 1652).

GHANA ALTERNATIVE MARKET (GAX): Among the key developments in 2013 that will have potential effects on Ghana’s investment climate is the GAX, which was launched in June 2013. The GAX is the GSE’s alternative market for small and medium-sized enterprises (SMEs) and start-up companies that have been in existence for at least a year and have filed their first annual return.

An SME applying for listing on the GAX must have a minimum capital of GHS250,000 ($128,525) as opposed to the requirement of the GSE of GHS1m ($514,100). An SME must also have a minimum of 20 public shareholders at the time of the public float as opposed to 100 for the GSE. The maintenance of the public float of 25% applicable to GSE-listed companies is also applicable to the SMEs.

A key point of the GAX is that the SMEs will have access to funding from the listing fund set up with contributions from the GSE, the African Development Bank and the Venture Capital Trust Fund. Other incentives include waiver of listing and application fees (excluding annual fees and delisting fees) and mandatory underwriting for the minimum offer by the sponsor. GAX-listed companies will have access to funding from the funds to lower the costs of listing.

The GAX will also work towards helping SMEs raise more long-term and cheaper capital through equity financing means. It will also serve as an incubator for the SMEs ahead of an eventual migration of the companies to the GSE. This will help to expand the local Ghanaian securities market, which, in spite of its outstanding performance, needs to continue growing.

THE OVERHAUL OF THE GIPC ACT: The old GIPC law did not provide any penalties for non-registration by companies with foreign participation. The default position was that, pursuant to the Foreign Exchange Act, 2006 (Act 723), the Bank of Ghana could prevent the repatriation of capital or dividends derived from an unregistered investment. Thus, there was no real disincentive for non-registration.

The new law has expressly provided for sanctions for those businesses that do not register or do not renew. These sanctions include a fine that can range from GHS2400 ($1234) to GHS6000 ($3084), suspension of remittance and even suspension or cancellation of registration of the defaulting enterprise. Under the new law, in the event that a foreign investor decides to participate in a joint venture with a Ghanaian partner, that Ghanaian partner must have a minimum of 30% equity participation in the enterprise. Foreign investors can now own up to only a maximum of 70% of trading enterprises (ventures that are set up mainly for the purchase and sale of goods or provision of services).

COMPLIANCE BY EXISTING ENTERPRISES: Existing enterprises, which are affected by the new minimum foreign capital requirements and the local participation requirements, are required to comply within three years of the coming into force of the current GIPC Act, or cease operations. Concerns have been expressed in some sections of the investor community that the new local participation requirements may in fact be detrimental to the growth of foreign direct investment in the country. The GIPC has, however, maintained that the new legislation is intended to create a fairer balance between national interest and the interest of the investor community.

A key concern for the new minimum foreign capital and other requirements involves compliance with the local participation requirement by existing trading enterprises. Existing foreign investors in the trading sector that are active in Ghana are now burdened with the task of finding suitable Ghanaian partners, an obstacle that was unforeseen at the time of entry. It has been argued that perhaps the new requirements should be applied prospectively to new market entrants rather than retrospectively and inclusive of all existing players. Indeed, it remains to be seen how the new regulations will affect the existing foreign investment in the trading sector. PROPOSED LOCAL CONTENT FOR THE PETROLEUM SECTOR: The draft Petroleum (Local Content and Local Participation) Regulations (LCR) seeks to introduce local content and local participation requirements for companies (“Petroleum Companies”) engaged in petroleum activities in Ghana. The key requirements are as follows:

• In terms of grant of petroleum agreements or licences, the LCR seeks to give priority to companies that are incorporated under the Companies Act and which have a minimum of 51% Ghanaian share holding, at least 80% Ghanaian management and 100% Ghanaian employees (“Ghanaian Company”).

• Further, a company applying for a petroleum agreement or licence must have at least 5% equity participation by a Ghanaian company. The interest of such a Ghanaian company is not transferable to a non-Ghanaian company.

• A non-Ghanaian company intending to provide goods or services to Petroleum Companies must incorporate a joint venture company with a Ghana ian company. The Ghanaian company must have a minimum of 10% stake in such a joint venture.

• All insurable risks relating to the petroleum activity in Ghana must also be insured via domestic brokers or reinsurance brokers. Offshore insurance services may only be procured upon approval of the National Insurance Commission where local capacity has been exhausted.

• Petroleum Companies may only retain the financial services of Ghanaian financial institutions or organisations. However, the services of foreign financial institutions or organisations may be used with the consent of the Petroleum Commission.

• Further, Petroleum Companies may only retain the legal services of Ghanaian legal practitioners or a firm of such practitioners located in Ghana.

• Existing Petroleum Companies would be required to comply with the provisions of the LCR within three months of it coming into force. The main concerns that have been raised in respect of the requirements under the LCR are that it appears not to have taken into consideration the accrued rights of Petroleum Companies under the various existing petroleum agreements and Ghana’s obligations under international treaties, such as the Agreement on Trade Related Investment Measures and the General Agreement on Trade and Services. These concerns have led to calls on the government to withdraw the LCR for reconsideration of its provisions.