Ghana is well endowed with gold deposits and is one of the most attractive business markets in West Africa. Ghana's wealth of resources, democratic political system, and dynamic economy makes it undoubtedly one of Africa's leading and stable economy, more conducive to do business than expected. Ghana's gold deposit is evident in the gold reserves, which, according to the US Geological Survey, is estimated to be 50 million ounces (1,600 tons).
Ghana requires a particular method of setting up a mineral purchasing and export company with a license from the minerals commission to deal in gold trading and export.
The Minerals and Mining Act, 2006, as amended by the Minerals and Mining (Amendment) Act, 2015 (Act 900) provides succinctly that a person shall not export or sell or otherwise dispose of a mineral unless that person holds a license granted by the Minister responsible for Mines and Natural Resources. A person here refers to a corporate entity established under the laws of the Republic of Ghana.
Incorporating a company means establishing a corporate legal entity that is distinct and separate from the legal identity of its directors and shareholders. It means that the business entity can transact in its corporate name, sue, and be sued. Also, the liabilities of its members are limited to the amount on the unpaid shares if it's a company limited by shares.
The Companies Act, 2019 (Act 992), governs the organization of companies in Ghana.
An incorporated company may either be
- A company limited by shares;
- A company limited by guarantee;
- An unlimited company; and
- External company
A company limited by shares: - a company limited by shares is a company that has the liability of its members limited to the amount unpaid on the shares respectively held by them. The company cannot offer its shares to the general public. It is a popular form of company structure in Ghana limiting the day to day running of the company to the company's board of directors;
A company limited by guarantee: - a company limited by guarantee is a company that has the liability of its members limited to an amount that the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. It is an incorporated company without share capital. It is not in the business for profit, and as such, its object must exclude profit-seeking ventures.
Unlimited company: - an unlimited company is a company that does not have a limit on the liability of its members.
External company: - an external or a foreign company is a company formed outside the Republic of Ghana, which has an established place of business in Ghana. The expression of an established place of business means a branch, management, share, transfer, or registration office, factory, mine, or any other fixed place of business. Still, it does not include an agency unless the agent has. It habitually exercises, a general authority to negotiate and conclude contracts on behalf of the body corporate or maintains a stock of merchandise belonging to that body corporate from which the agent regularly fills orders on behalf of the entity corporate.
For our discussions on general trading (gold purchase and export) in Ghana, the particular purpose vehicle, that is, the type of business structure required shall be that of an incorporated company limited by shares (private limited liability company).
Processes for Setting Up A Company Limited by Shares.
The following basic steps must be followed to have a company limited by shares incorporated in Ghana.
First and foremost, the promoters must decide who will act as the company's first directors. A company incorporated and registered in Ghana must have a minimum of two directors, both natural persons over 18 years, one being ordinarily resident in Ghana. By virtue of section 173 of the Companies Act, 2019 (Act 992), the following persons are excluded to be appointed as a company director in Ghana.
- An infant
- A person adjudged to be of unsound mind
- A body corporate
- A person convicted for fraudulent offences, including persons convicted for offences involving fraud or dishonesty and any other stipulations under section 177 of the Companies Act, 2019 (Act 992)
The directors also appoint the company secretary, who may be a natural person or a body corporate. As part of the new prescription by the companies act, among the persons qualified to be appointed a company secretary is a barrister or solicitor in good standing in the Republic of Ghana.
The directors are also mandated to appoint the first auditors of the company.
The company must choose a business name and must confirm whether the business name is available for use by the company.
The company must as well register with the Ghana Revenue Authority for the issuance of tax identification number (TIN) for its members if they don't have them already.
The Constitution of the company must be prepared. The Constitution of the company once prepared must be signed by one or more of the initial subscribers in the presence of an independent adult witness and must state:
- The name of the company
- The company's objects or authorized business
- That the company can enter into a legally binding agreement
- The name of the first directors of the company
- That the powers of the directors are limited under the law
- The number of shares in which the company is registered
- The number of shares each subscriber will own on incorporation and the amount payable for the shares.
- A declaration that the liability of the members of the company is limited
Where the Registrar is satisfied that the application for incorporation of a company complies with this Act, the Registrar shall, after payment of the prescribed fee, certify under the seal of the Registrar that the company is incorporated and, in the case of a limited liability company, that the liability of the members is limited. From the date of incorporation, the company becomes a body corporate by the name contained in the application for the formation of the company, and capable of performing the functions incidental to registered companies.
Legalstone Solicitors LLP would be responsible for ensuring that your organization meets the above-stated requirements for the registration of the Company at the Registrar General's Department.
For incorporation of the company to be completed, a fee (capital duty) charged at the rate of 0.5% of the company's stated share capital, and the registration fee must be submitted to the Registrar of Companies.
The estimated processing time for the completion of the above processes will be three weeks, and they must happen concurrently.
Registration of the company with the Ghana Investment Promotion Centre (GIPC)
The Ghana Investment Promotion Centre Act, 2013 (Act 865), prescribes the minimum capital threshold for non-Ghanaians for the setting up of companies with the ultimate object of being licensed or certified by the Minerals Commission to undertake the export of Gold in Ghana. The nature of the business that is the purchase and export of gold in Ghana is classified as "trading" under the GIPC Act.
The law provides, that where the foreign investor intends to engage in the business of trading and the said foreign investor has a Ghanaian partner, the foreign investor is required to invest a foreign capital of NOT less than ONE MILLION UNITED STATES DOLLARS (US$1,000,000.00) in cash or capital good relevant to the investment or a combination of both by way of equity participation.
Presently the minimum foreign capital requirement is as follows for the category of business indicated:
Wholly owned foreign business (Services):
General trading company:
The applicable fees for registration of the business are as follows:
Joint venture (i.e US$200,000.00 minimum foreign equity):
Wholly foreign (i.e US$500,000.00 minimum foreign capital):
General trading company (i.e US$1,000,000 minimum foreign capital):
Incentives and Benefits Under the GIPC Act
The GIPC Act provides for substantive protection and benefits including the following:
- Customs Import Duty Exemptions (There are custom duties exemption for Plant, Machinery, Equipment, and parts thereof).
- Various Tax benefits (Subject to some conditions)
- Investment Guarantees (Free Transferability of Capital, Profits and Dividends and immigrant quotas depending on the amount of paid-up capital of the enterprise
- Automatic expatriate quotas (subject to some conditions). For instance, a company with a paid-up capital of up to $200,000 shall be entitled to one (1) automatic work quota, whiles a company with a paid-up capital of up to $500,000 shall be entitled to two (2) automatic work quota.
- Registration with the GIPC entitles a corporate entity to cafeteria Dispute Resolution Mechanism, including arbitration under UNCITRAL arbitration rules. Also, where there is any bilateral and multilateral investment protection agreement to which Ghana and the investor's home country are parties, the established dispute resolution mechanism shall be available to the investment. The dispute mechanism could include Investor Treaty Arbitration under ICSID Convention. The GIPC Act also afford parties recourse to any other national or international machinery for the settlement of investment dispute agreed to by the parties.
The Minerals Commission is responsible for the regulation and management of the development of mineral resources of Ghana. It is also responsible for coordinating and implementing policies related to mining in Ghana. It is also responsible for the grant of licenses to corporate entities to undertake the business of purchase and export of gold in Ghana. All applications for permits, including the permission to trade in gold, shall be made to the Minerals Commission for approval.
Before applying for a license to engage in gold trading and export, the entity must satisfy the following if it is wholly owned (all equity is held by foreigners) by the foreigner:
- Must be an incorporated company with a minimum capital of US$1,000,000.00.
- Must have been registered with Ghana Investment Promotion Center.
- Registered with the Ghana Revenue Authority.
- Register with Social Security and National Insurance Trust (SSNIT).
- Must have a registered office.
Application for License to Export Gold by an Established Entity
The Minerals and Mining (General) Regulations, 2012 (L.I 2173) provides that a corporate body seeking to apply for a license to engage in the export of gold must be prepared to provide the following:
- Particulars of financial and technical resources available to the applicant.
- An estimate of the amount of money proposed to be spent.
- A business plan or details of the program of the proposed operations; and
- A localization program in accordance with these Regulations L.I 2173.
The Minister of Mines upon receipt of these particulars and forms may grant a license to an applicant where the Minister is satisfied that, the business plan or details of the program of the proposed operations include:
- The refining or polishing of the minerals in Ghana before export.
- The purchase of only refined or polished minerals for export; or
- The supply of a percentage of the minerals determined by the Minister to lead refineries to ensure regular supply to local users; and
- The applicant can demonstrate that it has access to adequate financial resources, technical competence, and experience to carry out the operations effectively.
Once the license is granted, the holder is required to submit monthly and annual returns to the Minerals Commission on all exports of minerals made. The holder is also expected to comply with the conditions specified in the license and any other terms that the Minister may determine.
Application for Export License by Holder of Mining Lease
Different sets of rules apply to holders of mining leases that intend to apply for a license to engage in the export, sale, and disposal of minerals in Ghana.
An application by a holder of a mining lease for a license to export, sell or dispose of gold or other precious minerals produced by the holder shall be submitted to the Minister responsible for Mines and Natural Resources. The application shall be accompanied by the following:
- A refining contract and
- Sales and marketing agreement.
Once the Minister is satisfied, the license shall be granted to the applicant. The license holder is however required to notify the Minerals Commission of particulars of shipment of minerals, details of the quantity and grade of the minerals to be shipped and access for samples to be taken by a government-designated laboratory for assaying purposes.
Duration of License
A license granted shall be for an initial period of 3 years and subject to renewal for a further three (3) years.
There are associated fees for incorporation of the business as well as payments for various stages leading to the grant of the licence.
Other Mandatory Institutions
Once a business successfully undertakes the above-stipulated steps, it acquires the legal status to operate as a corporate entity in Ghana. Be it as it may be, the established corporate entity is by law mandated to register with other institutions.
These institutions include the following:
A. The Ghana Revenue Authority
All incorporated companies are by law demanded to register with the Ghana Revenue Authority. The registration is essential for the payment of taxes. On registration and the payment of the initial tax assessment, the company shall be issued with a tax clearance certificate.
B. Register with Social Security and National Insurance Trust (SSNIT)
The Social Security and National Insurance Trust (SSNIT) is a statutory public Trust charged under the National Pensions Act, 2008 Act 766 with the administration of Ghana's Basic National Social Security Scheme. Its mandate is to cater for the First Tier of the Three-Tier Pension Scheme. The Trust is currently the largest non-bank financial institution in Ghana. The law demands all incorporated entities to register and make a contribution for their employees towards their retirement. It is a mandatory act.
An entity seeking to register with SSNIT must provide the institution with the following information.
- Tax Identification Number for the company/ business entities
- Profile of Directors or Local Managers
- Copies of the Directors' or Local Manager's valid ID (e.g. Voter's ID, passport, driver's license)
- Directions to Taxpayer's Premises using the Ghana Post (GPS).
- List of employees with their SSNIT numbers, basic salaries, and contributions.
Once satisfied, SSNIT will issue a confirmation letter with the company's registration number and a certificate of membership to signify registration.
C. Register with Environmental Protection Agency (EPA) for Environmental Impact Assessment Certificate.
The law demands entities whose activities have adverse environmental effects must apply for an environmental impact assessment certificate from the Environmental Protection Agency (EPA). For instance, in the Mining Industry, the Environmental Protection Agency (EPA) is responsible for ensuring that mineral rights holders observe environmental safety precautions during the mining phase. The EPA was established under the EPA Act. In accordance with Section 18 of the Minerals and Mining Act and the Environmental Assessment Regulations 1999 (LI 1652), the holder of a mineral right requires an environmental permit from the EPA in order to undertake any mineral operations. The Environmental Assessment Regulation sets out the main legal framework used by the EPA to regulate and monitor mineral operations.
The regulation requires the applicant to prepare a scoping report setting out the scope or extent of the environmental impact assessment to be carried out and includes a draft term of reference that indicates the essential issues to be addressed in the environmental impact statement. The holder of a mineral right granted an environmental permit must submit an annual environmental report in respect of the mineral operations to the EPA.
D. Apply for Business Operating Permit from the Metropolitan, Municipal or District Assembly
The law demands incorporated companies to pay and obtain permits from the District, Municipal or Metropolitan Assembly where the activity of the corporate entity is centered or situated. This is a mandatory act.
The processes for registration with the Metropolitan, Municipal or District Assembly include the following.
- Purchase of application form from the Cash Offices of the Metropolitan, Municipal or District Assembly
- Completion of the application form and submitting it to the Revenue Mobilization Officer (RMO) at the Assembly.
- A copy of the certificate of incorporation must be attached.
- Registration Certificate from other recognized bodies as may be applicable.
- Tax clearance certificate from Ghana Revenue Authority (GRA).
Once the completed forms are submitted, a joint team from Finance Department, Environmental Health Division and City Engineer's outfit will inspect the premises of the applicant within 5 business days of submission of application. The inspection team shall subsequently make recommendations to the Assembly within 2 business days from the day of their inspection. Upon approval by the Assembly, the license shall be issued to the applicant at a prescribed fee.
Open a Business Account
An incorporated entity that has to meet the minimum capital requirement and issued with the GIPC Certificate shall have the right to operate a corporate account and enjoy all the benefits that come with it, including transfer of funds out of the jurisdiction. The opening of the accounts requires completing the accounts opening pack and attaching to it the registered documents of the company including the GIPC Certificate.
Register with the Data Protection Commission
The Data Protection Commission (DPC) is an independent statutory body established under the Data Protection Act, 2012 (Act 843) to protect individual and personal data privacy by regulating the processing of personal information. The Commission provides for the process to obtain, hold, use, or disclose personal information and other related issues bordering on personal data protection. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them. The Data Protection Act 2012 established the Data Protection Commission (DPC) to protect individual and personal data privacy. The DPC's statutory powers, functions and duties derive from the Data Protection Act 2012 (Act 843) and the Constitution of Ghana 1992. All organizations that collect personal data from individuals must register with the Commission to have a license to collect such information and know-how to use them.
Tax Liabilities for Doing Business in Ghana.
It is crucial for every start-up business to understand Ghana's tax structure to aid them in fulfilling their obligation to the government.
The Ghana Revenue Authority (GRA) is the mandatory and regulatory body for assessing and collecting taxes on behalf of the Government. The Ministry of Finance (MOF) oversee the activities of GRA.
A start-up business, either a sole proprietorship, partnership or a limited liability company, should bear in mind that there are taxes on what you earn, taxes on what you buy, and taxes on what you own. In Ghana, taxes consist of Direct and Indirect Taxes. An example of direct tax is the income tax, and an example of indirect taxes are the consumption taxes/goods and service, customs and excise duties.
Direct Taxes are the taxes on what you earn which comprises the examples below.
- Individual/Personal Income Taxes: This is levied on the wages, salaries, investments or other forms of income an individual earns. Example include Pay As You Earn (PAYE) tax.
- Company/Corporate Tax: A corporate income tax (CIT) is levied on business profits unless exempted explicitly in the law, companies (both resident and non-resident) are required to pay tax on income relating to business and investment, derived from, accrued in, brought into or received in Ghana after the necessary adjustment are made.
In Ghana, companies have to file returns four months after their accounting year, and it is also required that they make quarterly tax payment on the current year's income based on provisional assessment.
Depending on the sector, the following corporate tax are imposed by the government on some sectors.
General Corporate Business: 25%
- Capital Gains Taxes: This is a tax on the profit or gains realized on the sale or disposal of an asset either than trading inventory. Companies are required to pay tax on gains made on the realization of chargeable assets. Chargeable assets include land (which is not for agriculture in Ghana), buildings, shares, goodwill, and business assets.
Indirect Taxes are taxes levied on goods and services rather than on income or profit.
- Goods & Services/Consumption Taxes are taxes on what you buy, or services rendered to you and are taxes levied on retail sales of goods and services. It is known as the Value Added Tax (VAT), which are indirect taxes paid by consumers on some goods and services to the state through registered individuals or businesses. The current rate is 12.5%, excluding the National Health Insurance Levy (NHIL) of 2.5%, Ghana Education Trust Fund (GETFUND) levy of 2.5% and Covid – 19 Health Recovery Levies of 1%.
- Customs and Excise Duties are imposed on the importation of goods at the port of entry and certain manufactured goods produced or imported into Ghana.
Local Legal Representatives (LLR)
It is advisable for a foreign entity, be it an individual or corporate body seeking to set up a wholly-owned or subsidiary mineral purchasing and export company in Ghana to have access to legal representation for timely advice and completion of documentation. The legal representative must a lawyer with in-depth knowledge and workings of mineral and mining law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.