Norway and its Scandinavian neighbours have long been viewed as global leaders when it comes to gender parity and wider environmental, social and governance (ESG) issues. I was therefore surprised to see that the Norwegian oil fund had only recently published its position paper on board diversity (“Norway’s oil fund backs gender equality push”, Report, February 16), views that it had reportedly held since 2018.
Full Article: https://www.ft.com/content/27810b96-b69a-4732-b619-f7849e78df39
Nana Adjoa Hackman,
Managing Partner, Africa Legal Associates,
Accra, Ghana
Over the years, ALA has been approached by various groups of people wishing to incorporate their new entities with wide ranging objectives and activities. Very often, the request for these services, have come with an additional request for our company secretarial services.
It is observed that whiles a number of companies routinely engage the services of Company Secretary in satisfaction of the requirements for the incorporation of a company, a vast majority of these companies do not seem to appreciate the nature and role of the Company Secretary in the governance structure of a company. Indeed, this paucity of knowledge regarding the role of the Company Secretary in the day-to-day operation of a company also holds true as far as the nature and role of the Board of Directors (“Board”) of a company is concerned. It is envisaged that the role and legal remit of the Board will be the subject of another publication in the future.
The aim of this article is to outline the role of the Company Secretary as enshrined in the Companies Act, 2019 (Act 992) (“the Act”), which is the current legislation relating to companies. The Act was immediately preceded by the Companies Act, 1963 (Act 179) (“the previous Act”).
The Appointment of the Company Secretary
Usually, Company Secretaries are appointed by the first directors at incorporation. The appointment is done by letter, which would indicate the conditions of service, including remuneration. The candidate would then have to consent to the role in writing and the written consent must be filed at the Registrar Generals Department (“RGD”). The requirement to consent in writing is a requirement imposed by Act 992; which is perhaps a reflection of the gravity of the task the Secretary is required to perform under the Act.
The Company Secretary can be changed subsequently by the passing of a resolution by the Board.
Who qualifies to become a Company Secretary?
In terms of qualification, it can be observed that Act 992 departs radically from the repealed Act 179. The repealed Act 179 provided that all companies must have a Company Secretary (above the age of majority) without spelling out what qualifications the proposed Company Secretary should have. In contrast, Act 992 outlines various stringent requirements that a person ought to satisfy to qualify for appointment as Company Secretary.
The enhanced role of the Company Secretary under the current arrangements is a reflection of the centrality accorded to the Company Secretary in keeping the corporate governance machinery in motion. It also stems, in part, from lessons drawn from the recent corporate governance failures arising from lack of control and supervision of several financial institutions, lack of governance policies and programmes, inefficient Boards and Board Action which culminated in the collapse of several financial institutions in Ghana.
Under Act 992, the Company Secretary for any Company must have:
i. obtained a professional qualification or a Tertiary level qualification as that equips the Company Secretary to have the requisite knowledge and experience to efficiently perform the functions of a Company Secretary; or
ii. must have previously been appointed as a Company Secretary; or
iii. been practicing under the supervision of a qualified Company Secretary for a period of at least three years; or
iv. is a member in good standing of the Institute of Chartered Secretaries and Administrators; or the Institute of Chartered Accountants; or a barrister or Solicitor in good standing, or
v. by virtue of an academic qualification, or as a member of a professional body, appears to the directors as capable of performing the functions as the secretary of the company.
It is observed from the foregoing, that the qualifications for the Company Secretary are enhanced under Act 992, with the expectation that a person who occupies that position has a sufficient level of education, skill and experience to perform the now broadened functions under Act 992.
It is further explained in the Act that “a professional or tertiary level qualification is a discipline with an offering in company law practice and administration”.
The new requirements suggest that at the minimum, the Company Secretary should have a good knowledge of company law and legislation. This is critical because of the advisory role they play to the Board of Directors. In practice, the Company Secretary must also be conversant with relevant regulations governing the sector or industry to which the company belongs, in particular where they relate to corporate governance.
It must be noted that these restrictions on the appointment to the role of Company Secretary applies to both public and private companies.
What does the Company Secretary do?
Compared to the previous legislation, the Act broadens the duties of the Company Secretary and elevates the role. In addition to the traditional duties of issuing notices, recording minutes, drafting resolutions and filing statutory documents, company secretaries now play an advisory role to the shareholders and the directors of the company. The company secretary per the Act steers the affairs of the Board for the effective governance of the company.
The duties of the Company Secretary as provided for by Section 212 of the Act include the following: -
a) assisting the Board to comply with the constitution of the company and with any relevant enactment;
b) keeping the books and records of the company;
c) ensuring that the minutes of the meetings of the shareholders and the directors are properly recorded in the form required by the Act;
d) preparing and issuing out notices in the name of the company;
e) ensuring that the annual financial statements of the company are despatched to every person entitled to the statements as required by the Act;
f) ensuring that all statutory forms and returns are duly filed with the Registrar;
g) maintaining the statutory registers of the company;
h) providing the Board with guidance as to the duties, responsibilities and powers of the Board and on the changes and development in the laws affecting the operation of companies;
i) informing the Board of legislation relevant to or affecting meetings of shareholders and directors, and their failure to comply with the legislation and reporting accordingly at any meeting; and
j) advising the directors on their responsibilities as directors.
How important is the role of the Company Secretary?
The importance of the company secretary’s role has thus far merely been seen to be akin to the role of an office secretary, which is a very flawed perception of who a company secretary is.
The current as well as the previous Act makes it mandatory for every company to have a company secretary – which may be either an individual or a corporate body. Section 211(6) of the Act provides that “where a company carries on business for more than six months without a Company Secretary, the company and every officer of the company that is in default is liable to pay to the Registrar an administrative penalty of twenty-five penalty units (GHC300.00) for each day that the company continues to carry on business without a Company Secretary after the expiration of the period of six months”.
Where the position of the Company Secretary becomes vacant, the Act provides that “an act required or authorised to be done by or to the Company Secretary may, if the office is vacant or there is not for any other reason, a person capable of acting as Company Secretary, be done by or to an assistant or a deputy Company Secretary or any other officer of the company appointed by the directors to be acting Company Secretary”.
The foregoing is a depiction of the importance of the role of the Company Secretary. The role is indispensable and is the fulcrum that underpins the effective management of any corporate entity.
Although there is still the traditional “secretary” aspect of the role of a Company Secretary, this aspect is no longer the most relevant. The role of the Company Secretary has evolved from merely being an administrative assistant to the Board, to one which embodies a wider role of guiding and advising the Board and being at the helm of affairs where corporate governance is concerned. As stated above, the Board depends on the Company Secretary to guide and advise them not only on their statutory duties but also on corporate requirements and changes to the law.
Conclusion
In Ghana, we have in recent years come to learn the importance of maintaining governance structures that work for the effective running of our companies. The recent banking sector clean up clearly highlights the lapses in our governance structures and/or the flagrant disregard for corporate governance. Act 992 strengthens our corporate governance systems in many ways that would go a long way to ensuring the right checks and balances are in place for our companies to succeed. The role of the Company Secretary has no doubt grown in importance.
This specialised role of the Company Secretary in the Act requires the services of a qualified and competent individual or organisation to ensure compliance with the laid down requirements. The effective functioning of the Board, no doubt depends on the competence of the Company Secretary. The Company Secretary can be seen as the guardian of the company’s proper compliance with the law and best practice.
By Mansa Williams
Associate | Africa Legal Associates
Energy: Oil & Gas 2020 features 19 jurisdictions. The guide provides expert legal commentary on private investment in upstream, midstream and downstream petroleum operations; foreign investment; environmental, health and safety (EHS) requirements; and liquefied natural gas (LNG) projects.
https://practiceguides.chambers.com/practice-guides/energy-oil-gas-2020
The Managing Partner of Africa Legal Associates, Nana Adjoa Hackman, has been awarded by Imperial College Business School in partnership with the 30% Club, an Inspiring Women – Executive MBA Scholarship.
Ghana will be the fastest-growing economy in the world this year, according to the International Monetary Fund. The lender’s growth forecast of 8.8 percent for the producer of cocoa, gold and oil dwarfs the 6.6 percent median in a Bloomberg survey. The IMF’s projection in its latest World Economic Outlook published Tuesday is “way too generous,” Neville Mandimika, an analyst at FirstRand Group Ltd.’s Rand Merchant Bank, said on Twitter.
Ghana's central bank left its policy rate steady at 16.0 percent but said it would not "hesitate to take immediate and decisive policy actions including on a tighter monetary policy stance, should these risks materialize and threaten to dislodge the disinflation process."
The Bank of Ghana (BOG), which has been in a monetary easing cycle since November 2016, said its monetary policy stance is still relatively tight and real interest rates in Ghana are comparatively high but there are risks to its outlook for inflation from the depreciation of the cedi.
After BOG cut its rate by another 100 basis points in late January, the cedi fell around 11 percent in February through mid-March, with BOG attributing this to seasonal pressures on the back of foreign exchange demand by importers and corporates, and sentiment over the economic outlook after the completion of the IMF-supported program and its implication for the next election cycle.
The cedi was trading at 5.35 to the U.S. dollar today, down 9 percent this year.
Although the full pass through of this depreciation to inflation has yet to be assessed, BOG noted the overshooting of the exchange rate had corrected to 5.2 percent at the end of March compared with 8 percent as of March 19, and is of the view that a slowing pace of disinflation and upside risks to the outlook for inflation are not enough to dislodge inflation expectations.
Since November 2016 BOG has cut its key rate by 10 percentage points as inflation has steadily declined.
Ghana's inflation rate rose to 9.2 percent in February from 9.0 percent in January but this is well down from over 19 percent in March 2016, helped by the tight monetary policy stance, and inflation is still within BOG's medium-term target band and inflation expectations remain well-anchored.
Ghana's economy remains relatively strong, BOG said, adding the negative output gap seems to be closing at a relatively modest pace and 2018 growth is projected at 5.6 percent after average growth of 6.1 percent in the first three quarters, with 2018 non-oil output growing at 5.8 percent.
For 2019 growth is projected to rise to 7.6 percent, with the composite index of economic activity showing growth of 3.2 percent in January, up from 2.4 percent in December.
Helped by slightly higher crude oil and gold prices amidst lower cocoa prices - Ghana's three main exports - Ghana's trade surplus improved to 1.3 percent of GDP in the first quarter from 1.1 percent in the same period last year, leading to a 0.3 percent surplus in the current account.
Together with inflows from Ghana's $3 billion Eurobond in March, the balance of payments is estimated to show a surplus of some US$3.135 billion, or 4.6 percent of GDP, for the first quarter. Excluding the Eurobond proceeds, the surplus is seen at $449 million.
The Bank of Ghana released the following statement:
- Ladies and Gentlemen, welcome to the press briefing of the 87th regular meeting of the Monetary Policy Committee (MPC). We present the highlights of recent economic developments that shaped the Committee's view of the outlook and informed its decision on the stance of monetary policy going forward.
- Global economic expansion moderated at the end of 2018, weighed down by policy uncertainty, weakening financial market sentiments and concerns about China’s growth outlook. In Emerging Markets and Frontier Economies, the growth outturn was mixed. While economic activity in China and India remained relatively strong, growth contracted in Argentina and Turkey, reflecting the adverse effects of the recent financial turmoil triggered by last year’s strengthening of the US dollar and other geo-political factors. Early indications for the first quarter of 2019 point to a further weakening of global growth, amid uncertainty about resolution of trade tensions, and lingering challenges associated with the Brexit negotiations.
- Global inflation was relatively stable in 2018. In advanced economies, headline inflation was largely contained as a result of easing energy prices, while core inflation remained subdued. Among emerging market economies, inflation was fairly anchored, partly reflecting recent declines in international crude oil prices. Looking ahead, forecasts show that inflationary pressures are expected to remain contained, influenced by moderation in wage growth and concerns about the health of the global economy.
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Monetary policy has remained broadly accommodative in advanced economies. Concerns about weakening growth in the United States, and partially muted inflation pressures, have led to a revision to the Fed’s monetary policy forward guidance, signalling a pause in further interest rate hikes. As slower growth concerns mount, other central banks have held back on further tightening of their monetary policy stance. These developments may moderate the impact of the earlier tightening of financing conditions on emerging and frontier markets, especially in those with relatively strong macro fundamentals.
- On the domestic front, growth remains relatively strong and the negative output gap seems to be closing, although at a relatively modest pace. Overall GDP growth for 2018 is projected at 5.6 percent, while non-oil GDP is projected to expand at 5.8 percent. With an average growth of 6.1 percent for the first three quarters of 2018, the broad expectation is that the annual target of 5.6 percent will be realized. For 2019, GDP growth is projected at 7.6 percent.
- The pace of economic activity, captured by the Bank’s updatedComposite Index of Economic Activity (CIEA) remained strong, recording an annual growth of 3.2 percent in January 2019, up from 2.4 percent in December 2018. In the same period of 2018, the CIEA registered a 3.6 percent growth. The increase in January was mainly driven by growth in Domestic VAT, Industrial Consumption of Electricity, Port Activity and Imports. Latest results from surveys conducted by the Bank of Ghana in February 2019 show an improvement in consumer confidence even though recent depreciation in the currency affected business sentiments.
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Two inflation readings released by the Ghana Statistical Service since the January MPC meeting showed inflation still within the medium- term target band. Inflation decelerated in January to 9.0 percent, from 9.4 percent in December 2018, but inched up to 9.2 percent in February 2019 driven by increases in non-food inflation. Since the last quarter of 2018, inflation has oscillated within a band of 9.0 - 9.5 percent, underpinned by a relatively tight monetary policy stance. Underlying inflationary pressures, as measured by the Bank’s coreinflation have continued to ease and inflation expectations remain well-anchored.
- Ladies and Gentlemen, despite these very strong fundamentals, the cedi came under pressure against the major international currencies in February and March 2019, reflecting episodic depreciation similar to what we experienced in May-June 2018. By March 19, 2019, the cedi’s depreciation had peaked at 8.0 percent, compared to a marginal depreciation of 0.02 percent in the same period of 2018.
- A confluence of factors accounted for the depreciation in the first quarter of 2019. First, seasonal pressures that recur in the first quarter of every year on the back of foreign exchange demand by importers and corporates to pay off their fourth quarter imports, as well as repatriate profits and dividends. This, coupled with sentiments over the economic outlook after the completion of the IMF-supported ECF programme and its implications for the next election cycle, fuelled pressures on the foreign exchange market.
- On the international commodities market, prices of Ghana’s threemain exports — oil, gold and cocoa — turned out mixed. Provisional estimates in the year to March 2019 suggest prices for crude oil edged higher. International benchmark crude oil price rose by about 12.0 percent in Q1 2019 to an average of US$67.43 per barrel. Supply cuts, led by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, coupled with oil sanctions on Venezuela and Iran, contributed to the rally in prices. On average, prices of gold firmed up by 5.5 percent to settle at US$1,320.0 per fine ounce. This was supported by a marginal retreat in the US dollar and affirmation that the Federal Reserve would stick to its dovish stance on monetary policy. Cocoa prices however eased by some 5.1 percent from the average of US$2,199 per tonne traded in January 2019. This was attributed to improving weather outlook in West Africa which has boosted supply expectations of cocoa.
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These price developments, alongside fairly improved production levels, especially in crude oil, translated to a provisional trade surplus of US$899.0 million (1.3% of GDP) for the first quarter of 2019, compared with a surplus of US$724.5 million (1.1% of GDP) in the same period of last year. This trade surplus translated into a current account surplus of US$194.5 million (0.3% of GDP) in the first quarter of 2019. The projected current account surplus for the first quarter of 2019, together with the inflows into the capital and financial account, driven mainly by the March 2019 Eurobond will result in a provisional overall balance of payments surplus of some US$3,135.0 million (4.6% of GDP) for the first quarter of 2019. Excluding the proceeds from the Eurobond, the first quarter overall balance surplus is estimated at US$449.0 million, compared with a deficit of US$614 million (0.9% of GDP) same time in 2018. Gross International Reserves (GIR) of the Bank of Ghana rose significantly from US$7.0 billion (equivalent to 3.6 months of import cover) at the end of December 2018 to US$9.9 billion (equivalent to 5.0 months of import cover) as at end- March 2019, mainly reflecting the Eurobond inflows.
- Ladies and Gentlemen, provisional fiscal data for January 2019 indicated an overall deficit (on cash basis) of 0.8 percent of GDP against the target of 0.7 percent. Total revenue and grants amounted to GH¢3.1 billion compared with the programmed target of GH¢3.8 billion, mainly due to shortfalls in international trade taxes. On year- on-year basis, the revenue outturn was up by 14.8 percent. Total expenditures was GH¢5.9 billion, marginally below the target of GH¢6.1 billion, and signalling a 13.0 percent year-on-year growth. The deficit was financed mainly from domestic sources which constituted about 89.0 percent of total financing, alongside a primary deficit of 0.3 percent of GDP compared to a targeted deficit of 0.1 percent of GDP.
- Data on the implementation of the budget for the first quarter shows an elevated financing of the budget deficit relative to target. This suggests continued challenges with revenue mobilization.
- The stock of public debt was 57.98 percent of GDP (GH¢173.2 billion) at the end of 2018 compared with 55.6 percent of GDP (GH¢142.6 billion) at the end 2017. Of the total debt stock, GH¢9.6 billion (or 3.2% of GDP) represented bonds issued to protect depositors’ funds. The external debt component was GH¢86.2 billion with a share of 49.7 percent in the total debt. Proceeds from the recent Eurobond issuance will add some 3.9 percent of GDP to the debt stock.
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Growth in broad money (M2+) picked up in the first two months of 2019, partly reflecting base drift effects arising from the banking sector clean-up exercise. Annual growth M2+ was therefore reported at 22.4 percent at end-February 2019 compared to 12.2 percent in the same period of 2018. The increased pace of growth in total liquidity mainly reflected expansion in Net Domestic Assets, moderated by sharp contraction in the Net Foreign Assets. Annual growth in Reserve Money however slowed to 9.3 percent in February 2019 compared with 22.7 percent annual growth in the same period of last year.
- Private sector credit growth has gained some momentum stemming from improved liquidity position of the banks on the back of the recapitalization exercise. Annual growth in private sector credit was 21.1 percent in February 2019, compared with 2.4 percent growth in the same period of 2018. In real terms, private sector credit expanded by 10.9 percent.
- Developments in the money market generally indicated upward trends in interest rates on the Government instruments, reflecting a heavy reliance on domestic sources of financing prior to the issuance of the Eurobond. The 91-day Treasury bill rate moved up to 14.7 percent in February 2019 from 13.3 percent a year ago. Similarly, the 182-day instrument increased to 15.1 percent from 14.9 percent. Rates on the secondary bond market have also increased significantly, with yields on the 7-year, 10-year, and 15-year bonds edging up to 21.0, 21.1 and 21.5 percent in February 2019, from 15.5, 15.5 and 15.9 percent respectively a year ago.
- The weighted average interbank lending rate, that is, the rate at which commercial banks lend to each other, however, declined to 15.6 percent in February 2019 from 18.3 percent same period last year, in line with the monetary policy rate. Similarly, average lending rates of banks also declined to 27.8 percent from 29.3 percent over the same comparative periods.
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An assessment of the banking sector shows that the recently recapitalized banking sector is profitable, liquid and solvent exhibiting strong growth prospects in the outlook. In the first two months of 2019, the banking sector posted a stronger after-tax income. Total assets stood at GH¢108.9 billion, representing an annual growth of 14.5 percent in the year to end-February 2019. The growth in total assets was funded mainly from increased deposits and equity injection from the recapitalization exercise.20. Key financial soundness indicators of the industry have also improved, with the Capital Adequacy Ratio (CAR) at 21.7 percent in February 2019, significantly higher than the prudential requirement of 10.0percent. The improved solvency enhances the banking sector’scapacity to deepen financial intermediation and strengthens banks’resilience to shocks going forward. Also, profitability ratios improved while liquidity measures remain broadly adequate. The Non- Performing Loans (NPL) ratio has declined from 21.6 percent in February 2018 to 18.2 percent in February 2019, signalling somemoderation in the industry’s exposure to credit risk. The on-going write-off policy and strengthening of bank’s risk management practices is expected to further impact positively on the industry’sNPLs going forward.Summary and Outlook
- In sum, the Committee observed that global growth has moderated amid weak growth in the Eurozone, continued trade policy uncertainty,concerns about China’s growth outlook, and lingering Brexitnegotiations. Global inflation appears subdued and interest rates, which were expected to rise faster in earlier projections, are now expected to rise more slowly, accentuated by the US Fed’s forwardguidance to pause its hiking cycle on concerns about global growth prospects. This dovish stance is favourable for global financial conditions with positive implications for emerging market and frontier economies in the near-term as investors look for higher yields. These developments could impact Ghana in many directions. While the slower growth could adversely impact commodity prices with implications on the trade account, the improved financing conditions could support the balance of payments and help build strong buffers in the near-term.
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On the domestic front, the Committee noted that growth remains strong with the current negative output gap closing but at a moderated pace. The medium-term outlook for growth is strong with the preparation of new oil wells including those of AKER ENERGY which has submitted a $4.4 billion plan for developing an offshore field, the re-opening of operations at the Obuasi mine, and the implementation of growth-oriented government initiatives. These are all expected to boost medium-term growth prospects.
- The Committee viewed the external sector position as strong from continued trade surplus outturn in the first quarter of 2019, as the current account deficit continues to narrow. The Gross international reserves position has improved and should provide cushion to the Cedi, which is already making some considerable gains against all themajor currencies, as sentiments wane. The overshooting of the Cedi’sexchange rate to a depreciation of 8.0 percent as of March 19, 2019 has corrected to 5.2 percent at the end of March.
- The Committee was of the view that the pace of disinflation has slowed somewhat. While headline inflation remains within the medium-term target band, the latest forecast shows some upside risks in the outlook but not enough to dislodge inflation expectations. Though the exchange rate pressures have moderated significantly, the full pass through of recent depreciation to inflation remains to be assessed.
- The Committee noted the successful conclusion of Ghana’s ECFprogramme with the IMF, and the need to remain steadfast in implementation of prudent policies to anchor the hard-earned stability in macroeconomic conditions. In this respect, the Committee observed that there were risks to the outlook which would have to be monitored very closely. Overcoming these risks would require vigilance and time consistent policy actions. For example, in the energy sector, large foreign exchange payments for excess capacity associated with the‘Take or Pay’ Power Purchase Agreements which has contributed to higher demand for foreign exchange will have to be managed urgently. Also, the vulnerability associated with high non-resident holdings of domestic debt which poses significant risks to the fiscal consolidation process, debt dynamics, and the Bank of Ghana’sefforts at building reserve buffers, should be addressed.
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The Committee was of the view that the monetary policy stance is relatively tight and real interest rates in Ghana are comparatively high. In the circumstances, the Monetary Policy Committee has decided to keep the policy rate unchanged at 16 percent.27. The Committee will closely monitor developments in the coming months and will not hesitate to take immediate and decisive policy actions including on a tighter monetary policy stance, should these risks materialize and threaten to dislodge the disinflation process.
The Vice President of the Republic, Dr. Mahamudu Bawumia has announced 10 measures introduced by various Ministries, Departments and Agencies over the past nine months in an effort to improve the country’s business environment.
