It is uncertain how long the process will take to execute but it is expected to be done gradually – starting with the enterprises that have not renewed their registration the longest – in order to give the ones that have not renewed over relatively shorter durations the opportunity to bring their registration up to date.
This is in line with the implementation of the new Companies Act of 2019, Act 992, and to bring sanity to Ghana’s, improve corporate governance, and clean up the companies register.
She says the exercise had become necessary because the department’s database was inflated with names of dormant and non-compliant firms. According to her, these firms were registered since 2011 but over the years they have failed to file their annual returns, in compliance with the Companies Act 2019 (Act 992).
Indeed it is a common practice, particularly among small sized, sole proprietorships not to proceed with actual business activities after registering their enterprises or to fail to renew their enterprises annually, either out of negligence or to deliberately evade payment of annual registration renewal fees.
“We started the exercise with a sample of about 50,000 companies on the register which failed to file their annual returns in compliance with the law. We gave them three-month notices and now we have gone past seven months, yet they have still not updated us with their records. So, in compliance with the law, we are striking out their names from the register by first putting them in a state of inactiveness,” she says.
Actually many of the enterprises no longer exist either having gone under due to poor business performance or the death or incapacitation of their owners with no proper succession plan put in place. However many others are still operating, albeit illegally since they have not renewed their registration, and these are the ones who stand to lose if they do not comply before the RGD gets around to their situation.
According to Jemima Oware, once a company is put in a state of inactivity, only a court can direct for the names of those companies to be restored to the register. She, however, notes that the court process could be avoided if the affected firms will pay the required annual return fee of GH¢50, in addition to a yearly penalty of GH¢450, to file their returns.
“In that state, only a court can direct that the names of those companies be restored to the register,” she said.
“When you file an annual return, you are updating the Registrar-General on changes that have taken place in your company, whether you have carried out any business or not. It is just GH¢50,” she further said.
Once a business has been deemed inactive by the office of the Registrar General, it will be illegal for said businesses to operate within the country. Hence affected businesses risk losing their brand identity and operational activity in the country. This may have an overall dwindling effect. Affected businesses may lose sales and revenue. They may eventually shut down which implies job losses.
The latest move by the Register General’s Department is part of a wider initiative by several stakeholder groups working in collaboration to ensure that the new Companies Act is enforced to the benefit of the economy as a whole. The new law which replaces the original version enacted in 1963, makes sweeping changes to the legal framework in which companies operate in Ghana, with the ultimate aim of improving the quality of corporate governance. `
The CEO of the Association of Ghana Industries (AGI), Seth Twum-Akwaboah, speaking on the wider impacts of the new companies Act explains that the Association is currently embarking on a sensitization program is to help its members improve their corporate governance practices, and align with the new provisions of the Companies Act 2019 (Act 992).
“The Act, as it is, promotes good business practices, and it is important for all firms registered in Ghana to operate within the law. Today, trading within the African Continental Free Trade Area has begun, and for local businesses which may require foreign partnerships to augment production capacity, good governance practices could be one of the criteria in forging such partnerships,” he says.
“Our local businesses will also be better placed to integrate into the global economy if corporate governance standards are upheld. I urge AGI member-companies incorporated before 2012 and which have still not complied with the re-registration directive to quickly do so, before the deadline elapses,” he further said.
But it is the RGD that remains at the centre of the changes in how companies operate.
Some of the changes to company registration, introduced by the new law include:
• hiring qualified company secretaries and a reduction in the age of starting a company from 21 to 18.
• the simplification of registering a company and filing returns by visiting the Registrar General’s website.
• companies to bear new suffixes at the end of their names such as limited company (Ltd.) and public limited company (PLC).
• all companies must have a constitution.
The law spells out the responsibilities and obligations of corporate Boards and how they must be constituted as well as the relationship between board and management.