The new Companies Act and the beneficial ownership of a company.

Introduction

The concept of Beneficial Owners has attained much prominence in the global space of business and has been accepted by economies such as Armenia, Denmark, Indonesia, Mexico, Nigeria, and Kenya amongst others. With the incorporation of the Companies Act, 2019 (Act 992) it has become imperative for companies to disclose their respective Beneficial Owners.  As a global concept, it seeks to improve financial transparency, promote compliance and help achieve the ultimate aim of greater corporate accountability.

This article will thus, discuss the Beneficial Ownership of a Company in Ghana under the regime of Act 992 under the following headings:

• Legal Owner versus Beneficial Owner
• Who Can Be a Beneficial Owner
• How to Register as a Beneficial Owner
• Who is a Politically Exposed Person
• Who is to Provide the Beneficial Ownership Information to Registrar General’s Department (RGD)
• What Happens to the Information presented on Beneficial Owners
• Is there a penalty for failing to register beneficial ownership

Legal Owner versus Beneficial Owner?

A legal owner is a person or entity that is registered as the owner or holder of shares. Thus, a person who is listed in the Application Form as a subscriber holding several shares upon incorporation will be deemed as the legal owner of the shares.[1] However, the legal owner may be holding the said shares on behalf of or in trust for another person or entity.  That entity or person is what the law refers to as a Beneficial Owner. Thus, a Beneficial Owner of a company refers to an individual or natural person who ultimately owns, controls, and has an interest in, or exercises influence over the legal person or receives substantial benefits from the Company.[1]

Who Can Be a Beneficial Owner of a Company?

A perusal of the various laws, regulations in respect of Companies and circulars issued by the Registrar General’s Department reveal that three (3) categories of persons or entities qualify as beneficial owners: Natural Persons (either Ghanaian or Foreign), Publicly Listed Companies on a recognized Stock Exchange and a Government Owned Entity.

In respect of each of these categories, a special form, BO2, BO3, or BO4 would have to be filled in addition to BO1 (which is the Beneficial Ownership Declaration Form) all of which are available on the website of the Registrar-General’s Department (RGD).

There are four (4)  broad categorizations of Beneficial Owners. These include:

1. an individual who directly or indirectly ultimately owns and exercises substantial control over a person or company;
2. an individual who has a substantial economic interest in or receives substantial economic benefits from a company whether acting alone or together with other persons;
3. an individual on whose behalf a transaction is conducted who exercises significant control or influence over a legal person or legal arrangement through a formal or informal agreement; and
4. a company with the aforementioned interest and benefits.[2]

How is a Beneficial Owner Registered?

Section 13 of Act 992 provides a detailed list of particulars that needs to be submitted to the Registrar-General as part of the registration process. It provides that where there are beneficial owners in respect of a proposed company, the following particulars in respect of those persons must be provided as part of the application for incorporation:

1. Full name (including other names and former names)
2. Date and place of birth
3. Telephone number
4. The nationality, National Identification(ID) number, Passport number, or other appropriate identification and proof of identity;
5. Residential, postal, or email address, if any;
6. Place of work and position held.
7. The nature of the interest including the details of the legal, financial, security, debenture, or informal arrangement giving rise to the beneficial ownership; and
8. Confirmation as to whether the beneficial owner is a politically exposed person.[1]

Where the persons who are recorded as shareholders of the company are not the beneficial owners of their respective shares, the law requires the said shareholder to provide the company with the particulars of the beneficial owner. The company shall record the particulars of the beneficial owners of the shares (as provided above) in the Register of Members and furnish the Registrar of companies with these particulars within twenty-eight (28) days after being entered in the Register of Members.[2]

It should be noted that the company is mandated to continually provide the details of these beneficial owners on an annual basis in its annual returns filed with the Registrar General.[3]

This then suggests that at incorporation, the Beneficial owner, if any exists, must be disclosed and the requisite forms filled and submitted as part of the documents for incorporation or registration. Subsequent beneficial owners will have to be disclosed during the filing of the annual returns.

A promoter of the proposed company or one who files the annual returns is also required to state whether these beneficial owners are Politically Exposed Persons.

‌

Who is a Politically Exposed Person?

The Companies Act 2019, defines a Politically Exposed Person (PEP) to include:

1. a person who is or has been entrusted with a prominent public function in Ghana, a foreign country, or an international organization including senior political party official, government, judicial or military official;
2. a person who is or has been an executive of a State-owned company;
3. a senior political party official in a foreign country;[1]

An immediate family member of a PEP is also a PEP. The description “an immediate family member” includes a spouse or civil partner, children, parents, siblings, grandparents, and grandchildren and is also considered as a Politically Exposed Person. Close Associates of PEPs are also PEPs and this category will usually include individuals known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relationship with a person entrusted in a prominent public position or an individual who has sole beneficial ownership of a legal entity or a legal arrangement that is known to have been set up for the benefit of a person entrusted in a prominent public position.[2]

Who is to Provide the Beneficial Ownership Information To RGD?

The company can authorize an officer of the company or its legal representative to be responsible for collecting, checking, and providing beneficial ownership information to the RGD.[3]

What Happens to the Information Presented on Beneficial Owners?

Section 373 of Act 992[4] establishes a Central Register to capture the beneficial ownership data of legal persons, including companies limited by shares, companies limited by guarantee, unlimited companies, and external companies.

Limited information contained in the Register will be made available to the general public to enable an introductory identification of the beneficial owners of the company

However, where a competent Government Authority makes a lawful request, all the particulars of beneficial owners contained in the Central Register named in the request will be shared with that Authority.[1]

A beneficial owner may apply to the Registrar to have their information in respect of a particular company withheld from the Central Register if they can provide evidence that as a result of that information being disclosed, there is an immediate threat of physical harm to themselves or any member of their family, an attack against their home or place of work, kidnap, blackmail, extortion or substantial financial loss as a result of criminal activity.

Any of the following will suffice as sufficient evidence for withholding one’s information:

• Documented actual threats or incidents
• Police Reports of previous threats or incidents
• Police assessment of the level of threat
• Public statements by violent groups specifically mentioning the natural person and/or the type of business in which they are involved
• Previous attacks on individuals operating in similar business sectors
• Court Order

It should however, be noted that one’s public position, job title, the extent of their wealth whether available in the public domain or not; or information which is held by any other Government or Corporate Register, whether public or not would not be sufficient evidence for which one’s information may be withheld.

What is the threshold for beneficial ownership?

To prevent a clutter of the Beneficial Owner’s Register, persons must meet the following specific thresholds, which is a minimum percentage of interest or control in a company, to require their particulars to be entered unto the register:

1. Any person who has a direct or indirect interest of ten percent (10%) or greater in a company must be registered as a Beneficial Owner.
2. Any person who has at least five percent (5%) beneficial ownership in companies in the extractive sector, real estate, used car dealerships, financial sector, and gaming industry must be registered as a Beneficial Owner.
3. Any foreign PEP who has at least five percent (5%) interest in any company regardless of the sector, must be registered as a Beneficial Owner.
4. Any domestic PEP who has any shares, or any form of control over a business in ANY sector must be registered as a Beneficial Owner.

Is there a penalty for failing to register beneficial ownership?

Section 345(1) of Act 992 makes it an offense to willfully make a false statement in any returns, report, certificate, account, or other document required under the Act.  A person who commits this offense will be liable to a fine not exceeding Six Thousand Ghana Cedis (GH¢6,000) or a term of imprisonment not exceeding two (2) years, or both.

Conclusion

In summary, the Companies Act, 2019, Act 992 establishes a procedural and substantive mechanism in all matters concerning Beneficial Ownership in Ghana and mandates all companies to register or disclose the said beneficial owners.  Further, the concept of Beneficial Ownership and the requirement to disclose improves financial transparency and promotes corporate accountability.

Co-authored by: Abdal-Sulleyman Hafiz & Brown Lois-Annie

HAFIZ is a Barrister and Solicitor of the Supreme Court of Ghana and is currently a pupil at Zoe, Akyea & Co Law Firm.  His legal interests include, but are not limited to, Corporate and Commercial Practice, Family Law, Intellectual Property, and Dispute Resolution.

LOIS-ANNIE is a Barrister and Solicitor of the Supreme Court of Ghana who is currently undertaking her pupillage with the firm.  Her recent work focuses on corporate and commercial law and general litigation where she advises and represents the firm’s diverse clientele base.