Company Law in Ghana: Beyond the Template

In 1958, a year after the attainment of independence from British colonial rule, the Government of Ghana set up a Commission of Enquiry, “to enquire into the working and administration of the present company law of Ghana ... and ... to make recommendations for the amendment and alteration of the Companies Ordinance...” of 1907.

The Commission was expected “to take into account the need for encouraging African enterprise in Ghana and the encouragement of foreign investment therein ...”

Prof. Laurence Cecil Bartlett Gower (Sir Ernest Cassel, Professor of Commercial Law at the University of London) was appointed to serve as the Commissioner. Prof. Gower graduated with first class honours in 1933 (LLB) from the University College, London, obtained an LLM in 1934 from the same institution and became a solicitor in 1937. He was a visiting professor at Harvard Law School from 1954 to 55, the dean of the law faculty at the University of Lagos from 1962 to 65, a Holmes Scholar at Harvard Law School in 1966 and the vice-chancellor of the University of Southampton from 1971 to 1979. He died on Christmas Day in 1997 four days shy of his 84th birthday. 

Prof. Gower’s observation/contribution

In the year of his appointment, Prof. Gower “observed that the current English companies legislation is unsuitable for Ghana, though the Ghana law must adhere to the familiar English model more or less”. This viewpoint gave credence to the notion that “... in British African territories at any rate, all roads lead back to the United Kingdom as far as companies legislation is concerned”.

Prof. Gower further observed: “My mind is moving in the direction of suggesting a comprehensive code rather than a mere amendment”. In the end, the Companies Code, 1963 (Act 179), now referred to as the Companies Act, owing to the provisions of the Laws of Ghana (Revised Edition) Act, 1998 (Act 562), was passed. In his final report, Prof. Gower said of the Companies Ordinance: “it was nearly 50 years behind the times when enacted; it is now out-of-date”.

Predictably, the 1963 legislation followed the English model although it gave some consideration of sorts to Ghanaian circumstances. As an example, Prof. Gower preferred that a company should have a minimum of two rather than one director. He perceived that to be a bulwark against family “ownership and inheritance” practices under which family members, in the absence of a second surviving director, were likely to fritter away the stock-in-trade of the incorporated business.

In his article, “Revitalising Gower’s Legacy: Reforming Company Law In Ghana”, Justice Date-Bah notes that the innovations that Prof. Gower introduced into the Company Law of Ghana included “the law stated as a Code, restating much of the case-law; introduction of the single-document constitution to replace the traditional memorandum and articles; abolition of the ultra vires doctrine (at least of its worst aspects); the single-member company; compulsory no-par value shares and the abolition of authorised capital; rationalisation of the law on pre-incorporation contracts; authorisation of the repurchase of shares; abolition of the doctrine of constructive notice of registered documents; a statutory statement of directors’ duties; and dissolution without going through the full winding-up procedure”.

Business Law Review committee

In 2008, the Attorney-General set up the Business Law Review Committee of Experts “to offer independent advice on the reform of the business law of Ghana” on the theme, “Improving the Ease of Doing Business”. The members of the Committee came to the job with backgrounds that cut across law, economics, accountancy and business. Peter Mckenzie QC of New Zealand was their external consultant.

At the end of its work, the Committee made 10 proposals for reform: change from Regulations to Constitution and abolition of the need to file a constitution as part of the incorporation process; full abolition of the doctrine of ultra vires; proposed suffixes to company names; the requirement for major transactions to receive the authorization of shareholders; “buy-out” remedy for dissenting minority shareholders; creation of the office of the Registrar of Companies; electronic or digital means of registration, communication and service; updating the accounting terminology and the requirement to include a statement of cash flows in financial statements; retention of the prospectus provisions pending their inclusion in a separate Securities Industries statute; and additional to the representative action provided for in Gower’s original proposals, new provisions enabling shareholders to enforce the rights of their company through derivative actions.    

As the Companies Bill goes through the Parliamentary process, it must benefit from a carefully weighted mix of received and domestic path dependence. 

Our company law is in a different milieu from Gower’s day. Back then, Ghana neither had a Securities and Exchange Commission (SEC), a stock exchange nor a Commercial Court. In fact, the SEC and the GSE became functional in the 1990’s and the Commercial Court was established only as recently as 2005. One can thus understand why the Gower Commission could not find widespread indigenously regulated corporate law content to rely on.

Theoretical underpinning

The theoretical underpinnings of our Company Law must give vent to sound policy considerations. Our understanding of the corporate form and what we seek to achieve with it must shine through ever so brightly. Rather than reproduce sections in the Acts of other jurisdictions, we must craft ours to evince our reasoned stance on principles such as stakeholder/shareholder primacy, agency cost, the business judgement rule, the free-rider problem, corporate governance and share ownership patterns. 

Most of the sections in the companies acts of many jurisdictions are based on the position of the law as espoused by outstanding specialist practitioners, jurists and ground-breaking court decisions. When we copy them blindly, we justify the description of us in the academic literature as mere “imitators”. 

After all is said and done, Ghana’s new Companies Act will not by itself transform Ghana’s business landscape. It would merely set the stage for the attainment of this ideal. The buoyant practice of company law would depend largely on what we make of the institutions of corporate law and the extent to which we facilitate the ease of doing business. The tax regime must be constructed in a manner as to make it a selling point of our company law practice. We must also aggressively pursue well-thought-out infrastructural development.

Commercial court

The Commercial Court must be empowered to become to us what the Delaware Courts have remained to the entire United States of America after New Jersey lost the plot. The Acts and Regulations specifically dealing with the stock exchange and the securities industry must create an incentive for vibrant corporate law activity in Ghana. The stipulated percentage of float for listed companies must be carefully re-evaluated and enforced in a manner that encourages diffused ownership of shares on the stock market. The current picture of large controlling blocks and the unimpressively low number of listed firms may account in part for the apathetic shareholder participation on the local bourse. 

To attract and sustain African enterprise and general foreign investment, Ghana must consciously engineer a corporate law and governance culture that would transform our country into a business haven. 

• The writer is a co-founder of the Law & Business Advocates and the Managing Partner at Clegg & Everett. He holds a Master of Laws (LL.M.) degree in Corporate Law, Finance & Governance Concentration from Harvard Law School with cross-registration in Boards of Directors & Corporate Governance at Harvard Business School. His email address is rclegg@cleggandeverett.com