Ghana: Setting Up Of Mining Support Service Company In Ghana

Introduction

Large-scale mining in Ghana

Large-scale mining is particularly visible in Ghana. Large-scale gold mining is hugely capital intensive requiring high levels of mechanization and expertise. Responsible large-scale gold mining is the bedrock of Ghana's mining Laws and Regulations. Responsible mining has a significant positive impact, both on the macro-economy of Ghana and the lives of the citizens within the catchment areas where this mining takes place. Many multinational companies which undertake large-scale responsible mining in Ghana depend on the services of a license Mining Support Service Companies to thrive.

To ensure responsible mining, the Laws and Regulations of Ghana are so well-tailored or structured that mining support service companies have a significant all-important role to play. A license Mining Support Service Company is by law mandated to provide the large-scale mining companies with a high level of mechanization (industry tools, equipment, and expertise) needed for the mining activity.

To this end, the purpose of this article critically examines the laid down processes needed for the setting up of mining support service company in Ghana.

Mining support service company

Ghana requires a particular method of setting up a mining support service company with a license from the Minerals Commission to provide mineral rights companies with the support services needed. To obtain a permit in Ghana for the provision of mining support services in the mining sector, an applicant has to go through a three-pronged process.

These are as follows:

1. Incorporation of the business with the Registrar Generals Department
2. Registration of the company with the Ghana Investment Promotion Centre (GIPC)
3. Application of the Licence from the Minerals Commission

Incorporation of the business with the Registrar Generals Department

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. On the other hand, if it is a company limited by guarantee, the liability of its members is limited to the amount that the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.

The Companies Act, 2019 (Act 992), governs the organization of companies in Ghana.

An incorporated company may either be

1. A company limited by shares.
2. A company limited by guarantee.
3. An unlimited company, and
4. 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.

To secure a licence or certificate for the business of engaging in mining support services 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 conditions must be met to incorporate a private limited liability company by shares.

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.

1. An infant
2. A person adjudged to be of unsound mind
3. A body corporate
4. 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 company is mandated to register with GRA for purposes of tax payments. On registration, the company shall be issued with a tax clearance certificate. The issuance of the tax clearance certificate is essential to aid in the process of certification with the Minerals Commission.

The Constitution of the company must be prepared. The Constitution, once prepared must be signed by one or more of the initial subscribers in the presence of an independent adult witness and must state:

1. The name of the company
2. The company's objects or authorized business
3. That the company can enter into a legally binding agreement
4. The name of the first directors of the company
5. That the powers of the directors are limited under the law
6. The number of shares in which the company is registered
7. The number of shares each subscriber will own on incorporation and the amount payable for the shares
8. 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.

Registration fees

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.

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 mining support services in Ghana. The nature of the business that is the offer of mining support services is classified as "services" under the GIPC Act.

The law provides, that where the foreign investor intends to engage in the business of services and the said foreign investor has a Ghanaian partner, the foreign investor is required to invest a foreign capital of NOT less than Two Hundred Thousand United States Dollars (US$200,000.00) in cash or capital good relevant to the investment or a combination of both by way of equity participation and the person who is a citizen must hold not less than 10% of the equity.

However, where the foreign investor wholly holds all the equity of the company, the GIPC Act, as stated, provides that the investor must invest a minimum of not less than Five Hundred Thousand United States Dollars (US$500,000.00) to have the company licensed by the Minerals Commission.

A foreign investor must take note that under the mining laws of Ghana, he or she is not mandated to have a local Ghanaian partner before the Minerals Commission shall grant a license to engage in mining support services.

Presently the minimum foreign capital requirement is as follows for the category of business indicated:

The applicable fees for registration of the business are as follows:

Exceptions to the Minimum Capital Requirement:

• Manufacturing, export trading (locally manufactured goods) and portfolio investment businesses are exempted from meeting the minimum capital requirement.
• Foreign spouses and Ghanaians with dual nationality are also exempt from the minimum equity requirement.

Incentives and Benefits Under the GIPC Act

The GIPC Act provides for automatic incentives and benefits as follows:

1. Customs Import Duty Exemptions (There are custom duties exemption for plant, machinery, equipment, and parts thereof)
2. Various Tax benefits (Subject to some conditions)
3. Investment Guarantees (Free Transferability of Capital, Profits and Dividends and immigrant quotas depending on the amount of paid-up capital of the enterprise
4. 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.
5. 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.

Application of certification or license from the Minerals Commission

The Minerals Commission of Ghana is responsible for the certification of mining support service companies in Ghana. Under the 2012 Regulations L.I 2174, a person on meeting certain laid down conditions may be registered by the Minerals Commission to provide support services under the Laws and Regulations.

An application for mining support services shall be accompanied by the following:

1. A profile of the applicant.
2. Particulars of incorporation in Ghana.
3. The annual reports of the applicant, if the applicant is an existing company.
4. A business plan of the applicant.
5. Curriculum vitae of key personnel available to the applicant.
6. A copy of the applicant's contract with the mineral right holder.
7. The particulars of machinery and equipment to be used by the applicant.
8. Evidence of the applicant's financial resources.
9. The tax clearance certificate of the applicant.
10. The Social Security and National insurance Trust (SSNIT) Clearance Certificate).
11. The applicant's program for the employment and training of Ghanaians under the Minerals and Mining Regulations L.I 2173.

Upon satisfactory review of an applicant's application, an applicant shall be registered and issued with a certification as either "Class A" or "Class B" support service provider in Ghana. A foreigner shall be entitled to apply for a Class A support license, whereas a Class B support license is issued to a person who is a Ghanaian.

A "Class A" support service provider means a person who provides the following:

1. Contract mining services which include topsoil and waste removal, drilling, and blasting, excavating and haulage of ore to plant on a turnkey basis.
2. Mining and ancillary construction services or works which are provided expressly and exclusively for the mining industry, which includes:
   
   1. Civil works.
   2. Topsoil and waste removal.
   3. Construction and heap leach pad.
   4. Construction of haulage roads.
   5. Construction of tailings storage facility, and
   6. Installation of the water storage facility.
3. Assay laboratory services.
4. Drilling and blasting services.
5. Mining consultancy services.
6. Mineral exploration services for a mineral right holder.
7. Supply of mineral equipment and spare parts.
8. Fabrications of equipment and manufacturing of components and consumables specifically and exclusively for the mining industry, which include manufacturing of explosives and hydraulic components, and production of activated carbon, sodium cyanide and lime; and
9. Any other service that is specifically and exclusively related to mining, which the Commission considers necessary for the effective and sustainable development of the mining industry.

A certificate issued by the Minerals Commission is valid for one year from the date of issue. It is, therefore, subject to yearly renewal subject to the compliance and the terms and conditions of the certificate and the Laws and Regulations of Ghana.

A Class B support service provider means a person who is a Ghanaian and provides services specifically and exclusively to a mineral license holder:

1. Contract mining services for small scale mining, which include mining and processing of ore, reclamation revegetation, and management of mining operations,
2. Haulage services to and from mine sites, including transportation of personnel, and
3. Any other service that is specifically and exclusively related to mining, which the Commission considers necessary for the effective and sustainable development of the mining industry.

From the preceding, a Class A support service provider can, therefore, not provide services for small scale and artisanal mineral rights holders. That will be an infringement on the Laws and Regulations of Ghana.

Benefits

In respect of a Class A support service provider, the following benefits are granted

1. Concessionary rates of customs import duties in respect of plant, machinery, equipment, and accessories as provided in the Mining List, imported specifically and exclusively for mining-related activities as stated in Regulations L.I 2174.
2. immigration quota in respect of the approved number of expatriates personnel.
3. receipt of part of the payment for that person's services in foreign currency from that person's mining sector customers, to acquire machinery, equipment, spare parts and mining supplies for services specifically and exclusively provided to a mineral right holder or for servicing debts or paying dividends as approved by the Bank of Ghana on the recommendation of the Minerals Commission of Ghana.

The Minerals List is a catalogue of mining machinery, equipment, and consumables agreed upon by the Minerals Commission, Ghana Revenue Authority, Value Added Tax Service and the Ghana Chamber of Mines to be exempted or charged the concessionary rate for customs import duties and value-added tax.

Domestic partner requirement

There is no requirement that a foreign party should have a domestic partner before been granted a license to offer mining support services in Ghana.

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.

E. 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.

F. 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.

G. 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.

Mining: 35%
Petroleum: 35%
Hospitality: 22%
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.

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.