Lawfields Business Law Bulletin


Issue No. 7 (October-December 2006)
Regulatory Action ……………………………………….. 1 2

Business Standards ……………………………………..

Legislative Developments……………………………….. 2 Market Statistics…………………………………………….. 3 Editorial Lawfields Consulting is pleased to present the 7th issue of its Lawfields Business Law Bulletin®, a quarterly brief that reviews the most recent business law developments in Ghana. We trust you will find this issue of the Lawfields Business Law Bulletin® informative and relevant. We appreciate any suggestions you might have for future publications. Please feel to email us at


Regulatory Action

disposal of ‘significant shares’ in a licensed bank, i.e. 10% or more of the capital or voting rights of a bank, or a level of shareholding which makes it possible to exercise a significant influence over the management of the bank. The Bank of Ghana must be given notice of the impending transaction within three months of the intended transaction, and its prior approval must be obtained. The objective of this power is to preserve the interest of sound and prudent management of banks. In the particular matter, the First City Monument Bank of Nigeria sought to acquire through its stockbrokers, the shares of the International Finance Corporation and Prince Al Waleed (16.73% and 10.80%) respectively) in CAL Bank whose shares have been trading on the Ghana Stock Exchange since 2004. The foreign bank had previously acquired 8.16% of CAL Bank shares. Acquisition of the additional shares would have resulted in First City Monument Bank of Nigeria becoming the single largest shareholder in CAL Bank. BoG chose to exercise its discretion to disapprove the intended purchase. In a fledging stock market like Ghana’s, market participants are waking up to the legal reality that unlike with other companies listed on the stock exchange, a hostile take over of a bank in Ghana appears not to be an option. In the case of an intended take over of a bank, the management of the target bank itself is required under section 34 of Act 673 to notify and obtain approval from the Bank of Ghana! Bank executives can drink to that!

Environmental Protection
The Environmental Protection Agency (EPA) closed down Aluminum Enterprise Limited (AEL), an aluminum smelting company at Kpone, Tema for operating without an environmental permit, and for failing to submit annual environmental reports since 2000. It was also reported to have failed to abide by pollution control measures, leading to the emission of fumes. The EPA indicated that AEL would also face prosecution for these violations. In the same quarter, the EPA also issued a Notice to Ferro Fabriks, a steel company, to upgrade its environmental pollution control technology to reduce fumes from its smelter. The year 2006 generally saw the EPA step up its monitoring and enforcement activities in relation to businesses.


Business Standards

Ghana Business Code: Doing Business Right!
The ‘Ghana Business Code’ was launched in the last quarter of 2006. The Code contains ten simple principles based on the UN Global Compact’s universal principles. Its introduction was championed by the Association of Ghana Industries (AGI), Ghana National Chamber on Commerce and Industries (GNCCI) and Ghana Employers Association (GEA). It embodies principles and standards relating to human rights, labour relations, the environment, anti-corruption, and transparency in business operations. The Code reflects best practice in business standards and seeks to guide business behaviour. Its provisions are meant to supplement legislative requirements pertaining to business operations in Ghana, and in many cases, impose requirements that go beyond core legal prescriptions. Annual revisions of the Code are expected. While the Code’s prescriptions are voluntary, businesses operating in Ghana are encouraged to abide by it, to the benefit of their stakeholders. The Code could soon become the standard for assessing corporate performance and achievement in terms of the so-called ‘triple bottom line’ of social, environmental and

The Market for Corporate Control: Banks and Hostile TakeOvers –Buyer Beware!
A failed attempt at a take over of CAL Bank brought to the fore, the effect of sections 34 and 35 of the Banking Act, 2004 (Act 673). The Bank of Ghana (BoG) is empowered to give prior approval of an intended acquisition or


The implementation of the Act is expected to improve credit risk management by credit providers. Credit Reporting Bill The Credit Reporting Bill provides. The theme for the Budget was “Growth with Stability”. Ghana. and improved ability to attract and retain investors and employees. and sharing of credit information. in collaboration with regulatory bodies such as the Bank of Ghana. and provides for the protection and reward of such individuals against victimization. and insurance companies. and help customers with good credit histories to benefit from relatively lower interest rates. a more effective public sector. Highlights of proposed policy initiatives are attached to this Bulletin. banks. Whistle Blowers Act 2006 (Act 720) The Whistle Blowers Act 2006 (Act 720) provides for the manner in which individuals may. disclose information relating to illegal conduct or corrupt practices. for the first time in Ghana. in the public interest. Departments and Agencies in the public sector are expected to continue to use the Ghana National Accounting Standards until January 1. Residents issuing or transferring securities registered in Ghana to non-residents. abolition of the requirement for insurance companies to seek prior approval from the National Insurance Commission before investing in non-government securities. Ghanaian companies had to obtain Bank of Ghana approval before procuring debt and other forms of capital from non-residents. Awards and other self-enforcing mechanisms are envisaged. Government Budget Statement 2007 Government’s 2007 Budget and Policy Statement was read in Parliament on 17th November 2006. National Insurance Bill The National Insurance Bill seeks among other things to replace the current Insurance Law of 1989 (PNDCL 227) in order to provide for more effective supervision of the industry. It made proposals for improving the business environment for private sector-led growth through tax incentives. improve access to credit. Under the old regime. improved long-term sustainability. Private enterprises and StateOwned Enterprises are also expected to apply IFRS to enhance public confidence in their financial reporting. and the Securities and Exchange Commission. Ghana Adopts International Financial Reporting Standards With effect from January 1. All these restrictions are expected to be a thing of the past with the coming into force of the Foreign Exchange Act. The Bill contains detailed data protection provisions to avoid undue interference with the rights of information subjects. 2 . Residents investing offshore. the National Insurance Commission. 2007. the requirement for separation of life and non-life insurance business. Adoption of the IFRS makes Ghana compliant with global standards of financial reporting and promises to promote investor confidence in Ghana. Key changes introduced include: higher minimum capital requirements. among other things. Small and medium-sized enterprises as well as Ministries. Work in this regard has been carried out by the Institute of Chartered Accountants. The fundamental import of the Bill is to remove existing restrictions to Ghana’s capital account and to liberalise the environment for: Non-residents investing in Ghana. Legislative Developments Parliament passed the following bills into law in the last quarter of the year 2006: Foreign Exchange Bill The Foreign Exchange Bill replaces the Exchange Control Act of 1961 (Act 71). The Act is expected to promote higher standards of governance in public and private organizations. and improved access to finance. Nonresident foreigners could invest in companies listed on the Ghana Stock Exchange without prior approval from the Bank of Ghana. storage. The Bill mandates every financial institution to submit credit data to credit bureaus licensed by the Bank of Ghana under the Bill and to obtain credit information from such bureau on credit applicants as part of the credit evaluation process. 2009 when the IFRS and the International Public Sector Accounting Standards becomes mandatory. The new standards are applicable to companies whose securities are held by the public. subject to restrictions such as a 10% limit for a non-resident foreigner in a single issuer’s securities. Ghana will adopt the International Financial Reporting Standards (IFRS) to replace the Ghana National Accounting Standards (GNAS).economic responsibilities. Benefits of compliance may include a strong ethical brand. and a 74% limit for total non-resident foreign interest in a single issuer’s securities. a legal and regulatory framework for the formation.

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