INTRODUCTION
Private companies are the creation of laws – permitting their legal status, existence, nature of operation and management. In the process, regulatory compliance demands are imposed on companies to facilitate their continuous legal approval and operations.
Generally, all private companies are required to perform some regulatory obligations only varying in extent due to the nature and size of their operations. Additionally, based on the object of the company, other specialized regulatory obligations may be imposed requiring the registration with specialized statutory bodies and compliance with operational demands pursuant to issued permits and licenses.
Compliance with the general and specific regulatory compliance obligations is a pre-condition for the legal recognition and approvals granted to companies by law. Nonetheless, some private companies fail to comply with these demands but continue to operate at full capacity.
The purpose of this article is to highlight some of these regulatory demands and regulatory responses to non-compliance and discuss some options for the promotion of compliance culture for private companies in Ghana.
COMPLIANCE OBLIGATIONS AND REGULATORY RESPONSES TO NON-COMPLIANCE
In the year 2020, the Registrar of Companies warned of the deletion of companies and businesses for the failure to comply with the regulatory demands of re-registration and/or filing of annual returns. Out of a database of some 1,264,634 registered companies and businesses, the Registrar reported that about 74% were non-compliant with the re-registration and/or filing of annual returns demands. And the opportunity was given the affected companies and businesses to take steps to regularize their legal status within specified time.
Following the said warning, the Registrar of Companies has as of January 2022 deleted or struck out some 2,788 companies from the Register of Companies and set to delete 2,584 more for the same non-compliance by the end of this year.
By this deletion, the affected companies will be deemed dissolved, and their separate legal personality terminated. This premature and unexpected termination will affect the legal capacity and status of the affected companies in respect of their contractual obligations and put the enforcement of rights either by or against such companies into dispute. In effect, the accrued rights of creditors, employees and other stakeholders will be put at risk of enforcement by judicial means.
Further, in the process, the perpetual existence feature which permits continuous legal existence and operation of the affected companies will also be lost. While these companies will no longer be legally recognized, some may in fact continue operations at full capacity without knowing that their legal recognition has been lost due to regulatory non-compliance – and that they are no more recognized as companies, legally.
Apart from compliance demands of this nature, other regulatory demands – general and/ or specific are required of private companies to facilitate their operations. In Ghana, before the commencement of business, private companies are required to generally register with and while in operation comply with regulatory obligations as mandated by the Ghana Revenue Authority (GRA), the Social Security and National Insurance Trust (SSNIT), the Data Protection Commission and the Metropolitan, Municipal and District Assemblies (MMDAs).
Further, depending on the object of a private company, it may also be required to obtain permits or licenses from specialized regulatory bodies such as the Food and Drugs Authority (FDA), the Bank of Ghana (BOG), the Securities and Exchange Commission (SEC), the Insurance Commission, the Ghana Standard Authority (GSA), the Environmental Protection Agency (EPA) and the Ghana Fire Service among others before the commencement of operation. The issuance of permits or licenses imposes regulatory duties whose performances are mandatory to ensure their validity and continuous legal approvals for a company’s specialized services.
However, many private companies are in default of these general and specific regulatory compliance demands. For instance, GRA has in recent times closed down companies for not registering and honoring their tax obligations. Relatedly, SSNIT has also prosecuted directors of defaulting companies while some MMDAs are threatening closures of companies for non-compliance with the business operating permit regime. Also, the Bank of Ghana and SEC have in recent times issued warning about the activities of unlicensed financial service providers and revoked the licenses of others for non-compliance.
SOME STRATEGIES TO ENSURE COMPLIANCE
The current alarming trend of regulatory non-compliance by private companies poses a risk to their ability to remain in operation, improve their competitiveness and attract funding and investments. Therefore, there is an urgent need to reverse this trend and support compliance initiatives that facilitate the existence, operations, and sustainability of private companies in Ghana.
To achieve this, firstly, private companies must recognize regulatory demands as key business risks and prioritize compliance with a strong board of directors’ oversight. Efforts must be made to assign the responsibility for the overall regulatory compliance demands to a senior management staff or a dedicated staff who must be supported to build a competitive compliance culture. The development of regulatory dashboards or checklists should be the starting point for understanding the scope of the demands, timelines, and compliance requirements.
Additionally, companies must engage 3rd party services that build their compliance capacities and ensure strict compliance – service providers such as lawyers, accountants, tax and human resource experts, etc must be considered.
Also, the regulatory agencies must explore new amnesty programs that give opportunities to defaulting companies to engage and put in measures to ensure compliance. An amnesty program must always be pursued before the ultimate imposition of sanctions. This will result in the voluntary participation of private companies in regulatory compliance initiatives and help build collaborations for continuous compliance.
To sustain the gains, the Companies Act, 2019 (Act 992) must be amended to provide for the appointment of a Regulatory Compliance Officer. This officer recognized in parity with Directors should have the sole responsibility for compliance with all regulatory demands on a company. To be effective, the proposed amendment must mandate qualification requirements based on some prior regulatory understanding and experience as a leverage for ensuring the capable personnel are appointed.
CONCLUSION
In conclusion, compliance with regulatory demands on private companies is imperative for their existence and continuous operations. Thus, initiatives that promote regulatory compliance must be aggressively pursued by private companies taking into account some of the strategies discussed here. Conceivably, these may help reverse the growing trend of non-compliance with general and specific regulatory demands.
ABOUT THE AUTHOR
RICHARD NUNEKPEKU is the Managing Partner of SUSTINERI ATTORNEYS PRUC (www.sustineriattorneys.com) a client-centric law firm specializing in Transactions, Corporate Legal Services, Dispute Resolutions, and Tax. He also heads the firm’s Start-ups, Fintech, and Innovations Practice division. He welcomes views on the issues discussed in this article via richard@sustineriattorneys.com or 0500000767.