disposal of ‘significant shares’ in a licensed bank, i.e.
Lawfields Business
Law Bulletin ® exercise a significant influence over the management of
Issue No. 7
(October-December 2006)
Regulatory Action ……………………………………….. 1
Business Standards …………………………………….. 2 Prince Al Waleed (16.73% and 10.80%) respectively) in
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
info@lawfieldsconsulting.com.
1. Regulatory Action
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.
The Market for Corporate Control: Banks and Hostile Take-
Overs –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
10% or more of the capital or voting rights of a bank, or
a level of shareholding which makes it possible to
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
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!
2. 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
1
economic responsibilities. Awards and other self-enforcing
mechanisms are envisaged. Benefits of compliance may
include a strong ethical brand, improved long-term
sustainability, and improved ability to attract and retain
investors and employees.
Ghana Adopts International Financial Reporting Standards
With effect from January 1, 2007, Ghana will adopt the
International Financial Reporting Standards (IFRS) to
replace the Ghana National Accounting Standards (GNAS).
Work in this regard has been carried out by the Institute
of Chartered Accountants, Ghana, in collaboration with
regulatory bodies such as the Bank of Ghana, the National
Insurance Commission, and the Securities and Exchange
Commission. The new standards are applicable to
companies whose securities are held by the public, banks,
and insurance companies. Private enterprises and State-
Owned Enterprises are also expected to apply IFRS to
enhance public confidence in their financial reporting.
Small and medium-sized enterprises as well as Ministries,
Departments and Agencies in the public sector are
expected to continue to use the Ghana National
Accounting Standards until January 1, 2009 when the IFRS
and the International Public Sector Accounting Standards
becomes mandatory.
Adoption of the IFRS makes Ghana compliant with global
standards of financial reporting and promises to promote
investor confidence in Ghana.
Legislative Developments
Parliament passed the following bills into law in the last
quarter of the year 2006:
Whistle Blowers Act 2006 (Act 720)
The Whistle Blowers Act 2006 (Act 720) provides for the
manner in which individuals may, in the public interest,
disclose information relating to illegal conduct or corrupt
practices, and provides for the protection and reward of
such individuals against victimization.
The Act is expected to promote higher standards of
governance in public and private organizations.
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. Key changes introduced include:
higher minimum capital requirements;
the requirement for separation of life and non-life
insurance business;
abolition of the requirement for insurance companies
to seek prior approval from the National Insurance
Commission before investing in non-government
securities.
Foreign Exchange Bill
The Foreign Exchange Bill replaces the Exchange Control
Act of 1961 (Act 71). 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;
Residents investing offshore;
Residents issuing or transferring securities registered
in Ghana to non-residents.
Under the old regime, Ghanaian companies had to
obtain Bank of Ghana approval before procuring debt
and other forms of capital from non-residents. Non-
resident foreigners could invest in companies listed on
the Ghana Stock Exchange without prior approval from
the Bank of Ghana, subject to restrictions such as a 10%
limit for a non-resident foreigner in a single issuer’s
securities, and a 74% limit for total non-resident foreign
interest in a single issuer’s securities. All these
restrictions are expected to be a thing of the past with
the coming into force of the Foreign Exchange Act.
Credit Reporting Bill
The Credit Reporting Bill provides, for the first time in
Ghana, a legal and regulatory framework for the
formation, storage, and sharing of credit information.
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. The Bill contains detailed data
protection provisions to avoid undue interference with
the rights of information subjects. The implementation
of the Act is expected to improve credit risk
management by credit providers, improve access to
credit, and help customers with good credit histories to
benefit from relatively lower interest rates.
Government Budget Statement 2007
Government’s 2007 Budget and Policy Statement was
read in Parliament on 17th November 2006. The theme
for the Budget was “Growth with Stability”. It made
proposals for improving the business environment for
private sector-led growth through tax incentives, a more
effective public sector, and improved access to finance,
among other things. Highlights of proposed policy
initiatives are attached to this Bulletin.
2
Key Market Indicators

INDICATOR 3rd OCT NOV DEC

Quarter Ending Ending Ending
2006
Inflation (%)
10.80 10.50 10.3 10.50
91-day T-Bill (%)
10.37 10.38 10.35 9.96
182-day T-Bill (%)
10.81 10.73 10.72 10.49
1-year T-Bill (%)
15.50 15.50 15.50 13.00
B o G Prime Rate (%)
14.50 14.50 14.5 12.50
Average Bank Lending
Rate (%) 21.10 21.00 20.85 20.85

GSE All-share Index (%

change to date) 3.66 4.28 4.70 4.97

Source: Bank of Ghana, Ghana Stock Exchange, Ghana Statistical Service

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