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06.04.2019 Feature Article

Corporate Compliance; The Cardinal Guide To Foreign Investment In The Power Industry In Ghana

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APR 6, 2019 FEATURE ARTICLE

Every company at a juncture require growth. This progressive development will require investments to either revamp or increase the company’s annual turnover. Most foreign entities prior to investing in local businesses will require some legal due diligence (“Legal DD”) to be conducted on the company in order to be convinced that their investment will yield suitable returns.

The Legal DD on any company always covers various areas which includes but not limited to a critical assessment of the Corporate Information of the entity, regulatory compliance with the Companies Act of Ghana 1963, Act 179 (“Companies Act”), Local Assembly Laws, Foreign Exchange Act, 2006 (Act 723), Energy Commission Act of Ghana, 1997, (Act 541), Environmental Protection Agency Act of Ghana, 1994 (Act 490) and Regulations, Fire Regulations of Ghana, 2002 L.I 1652, National Petroleum Act, 2005 (Act 691), Ghana Investment Protection Law and Factories and Inspectorate.

The Legal DD report also acknowledges all reviews of material business contracts executed between the company and other third parties, any earlier financial arrangements entered into by the company and any security that encumbers the company’s current assets. It further acknowledges insurance undertaken by the entity on its assets. It also covers the company’s fiscal compliance with tax regulators beside a review of the company’s employees’ profile.

Further to this, the Legal DD report will also consider whether there are any pending material litigations that are likely to affect the governing structure and operations of the company.

  • Corporate Information.
  • Incorporation Information

The review will require the production of the Certificate of Incorporation, Commencement of Business as well as the Regulations of the Company. This is necessary to verify when the company was incorporated, registered address and its approved nature of business.

The Company must also provide evidence that it has commenced and completed the re-registration process with the Companies Registry and has acquired a new Tax Identification Number (“TIN”) and corporate registration number.

  • Changes Effected

Any change of the corporate name, nature of business, directors, shareholders and secretary must be indicated by showing evidence of such changes filed at the Registrar Generals Department (RGD).

The report will require that all special resolutions passed, approving the said changes are filed at the RGD. Further to this, the schedule of shareholders from the inception of the company showing the names, number of shares, percentage of holdings and nationality of the shareholders will be required.

  • Corporate Governance

The review will further concentrate on the governance structure of the company. With respect to this, the names and profile of all the current directors of the company will be required. The report will further require production of the number and terms of reference of the committees of the board of directors. If there are any new directors appointed, their offer of appointment and acceptance letters will be required for review.

The name and profile of the auditors of the company will also be required and a copy of the ordinary resolution of directors in respect of the appointment of the auditors. The written consent of the auditors will also be required for review by the foreign entity.

  • Equity and Shareholding

The company will also be required to provide its schedule of subsidiaries and affiliates if any. This will include details of the incorporation dates, authorized business and shareholding of the company in the various subsidiaries or affiliate companies.

Further to this, a detailed equity holdings and investments of the company in other entities will also be critically assessed by the foreign entity.

  • Financial and Capital Structure

The company will be required to provide copies of all the audited financial statement since incorporation of the company for review. On capital history of the company, forms 6, 7 and 8 filed with the Companies Registry and the evidence of payment of capital duty in respect of each issue of shares and increment in stated capital will be required if any.

  • Compliance with Companies Act
  • Filing of Annual Returns

The Company will be required to provide evidence of filing of its annual returns at the office of the Companies Registry.

  • Minutes of Meetings

The company will be required to confirm that it has in accordance with the Companies Act been holding shareholders, annual general meetings as well as board of directors meeting. Evidence of that will be required to be produced by furnishing the entity with certified copies of its shareholders, board meetings and annual general meetings.

  • Register of Members, Directors and Secretary

The Company will be required to confirm that it keeps and maintain register of members, directors and secretary. A certified extract of the said registers will be required. The details of the register should include all appointments and removals with supporting documents evidencing dates of such notices. Copies of form 17 filed at the Registrar Generals Department would be required.

Again, a confirmation that the company keeps and maintain a register of directors’ holdings. Further evidence of directors written consent to their respective appointments will be required for review.

  • Compliance with Local Assembly Bye Laws
  • Business Operating Permit and Business Operating Levy

The Company will be required to obtain the business registration certificate by the relevant district assemblies within the operating area. This permit is however subject to annual renewal by the relevant assembly.

Further to this, the Company will be required to pay its annual operating levy to the relevant assemblies in the respective district where its operations are based.

  • Compliance with the Foreign Exchange Act

If the Company wants to make and receive payments in United States Dollars, it needs to provide evidence to the effect that it has applied for and obtained such approval form the Bank of Ghana to price and make payments in foreign exchange.

  • Compliance with Energy Commission Act

The company will be required to obtain an embedded electricity generation license from the Energy Commission purposely meant to locate, construct and operate thermal plants within the country.

  • Compliance with the Mining Act.

The company will need to furnish the foreign entity with evidence of registration with the Minerals Commission to provide services to a mining company. It further needs to provide evidence of having a valid a mining service operating.

  • Compliance with the EPA Laws.

The Company needs to confirm that it has registered with the EPA as well as has a valid environmental permit issued by the EPA. Again, the Company will be required to show evidence that it duly submits its annual environmental report to the EPA in accordance with the EPA Act.

  • Compliance with Ghana National Fire Service

The copy of the fire certificate issued for the companies’ operations by the Ghana National Fires Service with respect to its facilities. This is renewed annually and the company must take steps to renew the certificate. The essence of this certification is to ensure that the company is fire prepared for any eventuality that may occur in the course of its operations.

  • Compliance with the Ghana Investment Promotion Centre (GIPC)

Where the company is wholly or partially owned by a foreign entity, it will be required to produce evidence of registration with the GIPC. This is necessary to regulate the capital investments made by the entity in the country.

  • Compliance with the Factories and Inspectorate

The company will also be required among other things to register and obtain annual permit from the factories and inspectorate department.

  • Adherence to Insurance Requirements

The company will be required to obtain and maintain various insurance policies which includes but not limited to an Asset and Machinery, Workmen Compensation, marine cargo insurance, premises and removal bonds among other things.

The report will require a confirmation from the insurers or brokers that the company has paid all its premium with respect to its insurance policies an undertaken that all the various insurance policies undertaken are adequate for the operations of the company.

In conclusion, the essence of the report is basically to provide comfort to the prospective lender and give them an assurance that the entity is a going concern and is compliant with all regulatory and statutory requirements.

Onesimos Barimah Osei
Legal and Compliance Manager
Genser Energy Ghana Limited
[email protected]

Onesimos Osei
Onesimos Osei, © 2019

My name is Onesimos Barimah Osei, a legal practitioner by profession but concentrates more on regulatory compliance and structured finance in the oil and gas sector in Ghana. I am currently the legal and compliance manager for an independent power producing company, Genser Energy Ghana Limited. Author column: OnesimosOsei

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