Corporate forms in Ghana

Corporate environment is made up of registered companies, statutory corporations, sole proprietorships, incorporated private partnerships, cooperatives and incorporated trusts. Each is established and governed by separate legislation. Incorporated companies are registered under the provisions of the Companies Act, 1963 (Act 179); Statutory corporations are established under the Statutory Corporations Act, 1964 (Act 232);

Sole proprietorships are registered under the Registration of Business Names Act, 1962 (Act 151); Incorporated partnerships are established pursuant to the Incorporated Private Partnership Act, 1962 (Act 152); Incorporated trusts are established pursuant to the Trustee (Incorporation) Act, 1962 (Act 106).

Statutory Corperations Statutory Corporation Act, 1964 (Act 232). This law places the establishment and dissolution of a statutory corporation not in the hands of the Registrar General, but the President by way of Legislative Instrument. In 1993 a number of statutory corporations including the now ADB Bank, Bank for Housing and Construction, GCB Bank, SIC were converted into companies registered under Act 179. Government thus only retained shares in the companies.

Upon being established under the Statutory Corporation Act, it is clothed with a perpetual succession and a common seal. It may sue and be sued in its own name. Has the power for any purposes which in the opinion of its governing body is necessary for the proper exercise of its functions. Can acquire and hold any property, and enter into any transaction.

SOLE PROPRIETORSHIPS One typically registers a business and carries on business as the only owner, bearing all of the benefits, liabilities and debts, if any. Registration of Business Names Act, 1962 (Act 151) requires every business name, other than a business operating under the true personal name or surname or initials of the proprietor, to be registered. The name must not be misleading Applicant must be at least 21 years old. The registration is valid for a year and must be renewed annually else it lapses.

No perpetual succession The Act only protects the exclusive use and right of the person registering the business name. Means unlike incorporated companies, one’s personal liability in sole proprietorship is not distinct from the business liability. Consequently all of one’s personal and business assets may be attached to satisfy any liability or debt of that person. In other words, the health and life of a sole proprietorship is inevitably linked to the health and life of the sole proprietor himself.

INCORPORATED TRUSTS Trustees of an unincorporated voluntary association of persons or body established for any religious, educational, literary, scientific, sports, social or charitable purpose may be incorporated as a body corporate under the provisions of the Trustee (Incorporation) Act, 1962 (Act 106). In the case of the incorporation of a sole trustee, body corporate includes a corporation sole. The trustees shall apply, in a prescribed form to the Minister, and not the Registrar, for a Certificate of Incorporation as a body corporate.

A Certificate of Incorporation is conclusive evidence of the date of incorporation and of the fact that all preliminary requisitions required in respect of incorporation have been complied with. The Minister may accordingly grant a certificate having regard to the extent, nature, and object or other circumstance of such body or association. Minister may insert into the certificate such conditions or directions as he thinks fit. These are binding on the trustees and they are bound to perform or observe them as trusts of the body or association. Where they do not comply or activities are contrary to public order or morality, Minister may apply to the High Court for the cancellation of the certificate.

Upon the grant of the Certificate of Incorporation, the trustees become a body corporate. Can therefore sue and be sued Has the effect of vesting in the body corporate all lands of whatever nature and tenure belonging to, or held in trust for the benefit of the association. Means they can hold, acquire, or demise any land belonging to or held for the benefit of the association, or held for the benefit of that body in the same manner as the association, in accordance with the conditions and directions contained in the said Certificate.

Therefore every donation, gift, and disposition of land lawfully made by deed or will in favour of the association, or the trustees, takes effect as if the same had been made to, or in favour of the corporate body.

INCORPORATED PRIVATE PARTNERSHIPS An association of between 2 and 20 individuals carrying on business jointly for the purpose of making profits. Generally, the sharing of net profits of a business is a prima facie evidence of a partnership. But the remuneration of a servant or agent of a person engaged in business by a share of profits of the business does not of itself make the servant or agent a partner.

Similarly, a person is not considered to be a partner if it is shown that he did not participate in the carrying on of the business and was not authorized to do so. Furthermore, family ownership or co-ownership of property does not in itself create a partnership whether or not the family or co-owners share any profits made by the use of that property.

Only registration under the Incorporated Private Partnership Act, 1962 (Act 152) creates a partnership. the following are therefore not partnerships : An association of members of a company, body corporate, or unincorporated association formed under any other enactment. An association of members of a body corporate formed in accordance with the law of any foreign country whether or not carrying on business in Ghana is not a partnership.

An association of members of a joint venture without a firm name for one or more specific operations is not a partnership. Every partnership must be duly registered with the RG. Partnerships operating before the coming into force of Act 152 have three (3) months grace period after which they are required to register.

To register, one must deliver to the RG: a copy of the partnership agreement a statement in a prescribed form signed by all the partners which, among others, contains: the firm name of the partnership; the general nature of the business; The address and Post Office Box number of both the principal and other places of business of the partnership; The names including any former names, residential addresses and business occupations of the partners; The date of commencement of the partnership

Registration of a partnership confers a corporate status. However, each partner is personally liable for all the debts and liabilities of the partnership. The property and rights of the partnership vest in its members or partners. So on change in membership the partnership assets must be transferred to the new members.

Exercise Daniel trades in ATM cards as a sole proprietor. His business is growing and he has decided to incorporate a limited liability company/company limited by shares to take over his business. He has approached you for advice particularly regarding the advantages and disadvantages of a limited liability company. Advice him