Feature Article of Sunday, 6 August 2006
Columnist: Debrah, Joe Aboagye
Registration of Business Names and Ghana's Corporate Laws - An Insight
I will attempt in this article to tackle the issue of Ghanaian corporate law regarding the registration of business names and the use thereof in Ghana with particular emphasis on Guinness Ghana Breweries Group (GGBG) and the other corporate names it has sought to operate under since the takeover of Ghana Breweries Limited (GBL). This issue which has been raised before is highlighted by an article that appeared in the business columns of the authoritative Daily Graphic newspaper of Ghana on July 6, 2006 captioned “ GGBL unveils new outlook for Star Beer”. It is particularly interesting when the article gets mixed up in the distinctions between the named corporate entities in the same article, Guinness Ghana Breweries Group (GGBG) and Guinness Ghana Breweries Limited (GGBL). The opening paragraph reads “Guinness Ghana Breweries Group (GGBL), the nations leading brewer, has unveiled a new advertising campaign and outlook for its leading lager brand, Star Beer”. So what is in a name? GGBG? GGBL? GGL? GBL? GGB? Are they the same? Does GGBG exist at all or is it a very convenient creature in an environment of lax laws and regulation? I would attempt to look at the position of Ghanaian law on business names and related matters. I would also review some corporate actions of the entities involved viewed against the position of the law on the matter. Particular consideration would also be given to corporate actions undertaken in the past and present. Finally, it is hoped that a better understanding of the state of Ghana’s business laws vis-à-vis the issues would be reached ultimately.
The entities that would be focused on are the following:
a. Guinness Ghana Breweries Group (GGBG)
b. Guinness Ghana Breweries Limited (GGBL)
c. Guinness Ghana Limited (GGL)
d. Ghana Breweries Limited (GBL) and
e. Guinness Ghana Breweries (GGB)
The rather vexed issues of what entity actually represents the Guinness empire in Ghana after the controversial takeover in 2004 of Ghana Breweries Limited by the then Guinness Ghana Limited (GGL) refuses to go away. Major issues of corporate law and securities regulation have been raised in respect of actions that were undertaken then by major actors in the securities regulatory framework of Ghana. Presently, Ghanaian lawyers and other securities law practitioners around the globe are eagerly anticipating the ruling of the Ghanaian courts in respect of an application for mandamus, filed by ThinkGhana, a not-for-profit organisation engaged in corporate governance and securities regulatory and related human rights issues in Ghana. The determination of the issues raised in the application by ThinkGhana to compel the Securities and Exchange Commission (SEC) of Ghana to act as any other securities regulator would do in any other jurisdiction should be a defining moment in securities regulation in Ghana. Ghanaian courts have never been confronted with the issues that have been raised in the application but which in many other jurisdictions have become the subject matter of cases pending before law courts. The Economist magazine recently carried an interesting article on the conclusion of the Mittal Steel takeover of Arcelor in Europe. It has been a process that I have keenly followed. Ultimately, shareholders’ interests have prevailed and the Arcelor Board has recognised that in a deal such as was offered by Mittal Steel, the Board of a company can only do as much as they did but can never thwart the legitimate interests of shareholders. But a caveat! That can only happen in an environment where the shareholders are discerning enough and are prepared to stand up for their interests. In Ghana, where the majority of our shareholders seem to have no clue as to what pertains in the company let alone appreciate a sophisticated process such as a takeover, and the few discerning shareholders refuse to act, it is expected that the securities regulator will act to protect shareholder interests. It is anticipated therefore that a definitive ruling by the High Court of Ghana will finally bring Ghana into the comity of nations where securities regulation is upheld and corporate governance is central to the economies of those nations concerned. We will keep the world posted on developments.
In December 2004, an announcement was issued through the Ghana Stock Exchange (GSE) to the effect that Diageo Plc and Heineken International, the parent companies of GGL and GBL respectively were in negotiations with a view to a takeover of GBL by GGL. Diageo and Heineken are major multinational breweries based in London and Amsterdam respectively. The takeover arrangement was to the effect that after completion, GGL will proceed to merge its assets with GBL and then form an entity to be called Guinness Ghana Breweries Limited (GGBL). However, before the process of takeover had been completed, GGL changed its name into that of the intended merged entity, GGBL. Thus ultimately, GGBL acquired 99.7% of GBL and in December 2004, assumed control of the company. A lot of corporate communication then followed, some to the GSE itself and a lot in newspapers which seemed to portray GGBL as the merged entity. No efforts were made to disabuse the minds of investors and Ghanaians that GGBL was just the old GGL which had changed its name and was not the merged entity. Indeed, at all times, GBL still existed but had conveniently been lost in the scheme of things. The corporate law issues became a lot more interesting when GGBL launched a new corporate logo and name of a new entity, GGBG and marketed it again as if it was the merged entity arising out of a merger of GBL and GGBL. The defining moment came when the entity GGBG was used to convene GGBL’s Annual General Meeting scheduled for December 12, 2005 as being in breach of the statutory provisions of the Companies Code, 1963, (Act 179). On the Annual Report issued for the Annual General Meeting of GGBL for year 2005, GGBG described itself as “Ghana’s most celebrated company”. Could this be legitimately done under Ghanaian law? The writer of this article was privileged to have been counsel for a shareholder of GGBL who challenged the actions of the directors and sought to restrain them from proceeding with the AGM from continuing to use the business name Guinness Ghana Breweries Group without registration as being in breach of Act 179 and the Registration of Business Names Act, 1962 (Act 151). The application was dismissed because the High Court was of the opinion that on a balance of convenience, the AGM ought to go ahead. Having carefully reviewed the entire matter, I am of the humble opinion that the Court erred. However, we are disabled from proceeding with an appeal as the client is not interested in pursuing the particular matter especially as the AGM has taken place. This exercise is to put the issues across and to invite opinions on the subject to enable us all help develop Ghana’s jurisprudence a little more.
It was the Applicant’s case that the Annual Report and the subsequent communication received by the shareholders of GGBL did not fulfil the requirements of the Ghanaian Companies Code as it was from an entity unknown to the shareholders of GGBL and was also not known to law in Ghana. It was further contended that the said Annual Report and subsequent communication received as purported notice of the Annual General Meeting of GGBL could not be deemed as proper in law as it emanated from an unregistered entity, GGBG and not GGBL.
A writ was issued against GGBL on October 28, 2005 further to which an application for interim injunction against an Annual General Meeting to be held in Kumasi on November 8, 2005 on the basis that that the notices were in breach of the statutory provisions of the Companies Code, 1963, (Act 179) was also filed. This was because though notices had been placed in the Ghanaian national dailies to the effect that GGBL was to hold its AGM on the declared date, the requisite documents under law were still not forthcoming. When a check at the Registrars of GGBL revealed that the Annual Reports were being packaged at a date much later than stipulated in Act 179, an application was filed to halt the said meeting. The High Court on November 4, 2005 refused the application but awarded costs because GGBL had two days prior to the hearing, placed adverts in the national newspapers postponing the Annual General Meeting. At all material times, the Applicant had still not received his copy of the Annual Report.
Much later, a package postmarked October 28, 2005 containing an Annual Report and an Admission card was received from an entity known as Guinness Ghana Breweries Group, referred to as “Ghana’s most celebrated company”. The reference on the said Annual Report was to “Ghana’s most celebrated company”. Later, another mail was delivered containing a letter purporting to be from GGBG containing an amended notice and admission card. Both documents emanated from a company unknown to the Applicant and all shareholders of GGBL except the majority shareholders and the directors. This new entity was also unknown to the Registrar of Companies in Ghana and virtually non-existent under Ghanaian law. Searches at the Registrar of Companies conducted by this writer revealed that GGBG was an unregistered entity at all material times when these actions complained of were being undertaken.
The caption “Guinness Ghana Breweries Group, Ghana’s most celebrated company” had been used in the media and on all the publications of GGBL nationwide when the directors were fully aware that no such entity existed in law and in fact. Intriguingly, the annual report itself also read the same: “GGBG, Ghana’s most celebrated company”! For this writer, one of the more intriguing features of the particular issue under discussion was when after service of the writ and having belatedly realized their mistake, the Directors of GGBL changed the caption from “Guinness Ghana Breweries Group, Ghana’s most celebrated company” to “Guinness Ghana Breweries Group, Ghana’s most celebrated business”. Is that an admission that no such company called GGBG existed?
The Law, (As I see It):
Is GGBG a company in the eyes of the law? Could it legitimately be called the parent company of GGBL? Is it a holding company? Is GGBL a subsidiary of GGBG? Can the Directors of GGBL summon a shareholders meeting of GGBL on the letterheads of GGBG with a different logo and named directors, events which are completely unknown and unapproved, by shareholders? What is the position of the law in Ghana on these matters?
It is instructive to determine the structure of the entities in play. As alluded to earlier, in December 2003, the parent companies of Ghana Breweries Limited (GBL) and Guinness Ghana Limited (GGL), Heineken International of Holland and Diageo Plc of Great Britain respectively, announced through the Ghana Stock Exchange (GSE) that they were in talks to merge the two businesses with the approval of both parents. The very next day, another announcement was made through the GSE to the effect that the talks had been successful and that an offer would be made by GGL to acquire GBL. The objective was to form a new merged entity to be called Guinness Ghana Breweries Limited. However, before the merger could be consummated, Guinness Ghana Limited changed its name into the intended merged entity and became GGBL. Instead of the directors communicating that GGBL was in fact the old GGL without more, for reasons best known to the directors, it has consistently put out in the media, information to the effect that there had been a merger and that GGBL represented the new merged entity.
It is my humble submission that the original holders of GBL shares, who accepted GGBL shares as part of the takeover deal, exchanged their shares for GGBL shares based on commitments in the circulars underpinning the acquisition that the objective was to merge the two entities. The press releases issued through the GSE and sanctioned by the SEC were all to the effect that the objective was to merge the two entities. Those shareholders to all intents and purposes, therefore invested in the entity called GGBL, which has a defined mark, the harp, with a defined board of directors.
It is my contention that due to difficulties being encountered by GGBL in turning GBL into a 100% owned subsidiary, it has adopted a business approach that flies in the face of law and its commitments to securities regulators concerning the proposed merger of GBL and GGL to form GGBL. The parent company of GBL is therefore GGBL. GGBL, by owning 99.7% of GBL is its holding company. It is further submitted that the entity, GGBG, which the directors have promoted as if it was the holding company of both GGBL and GBL is a non-existent creature of the Board and cannot be allowed by law to be used to perpetuate an illegality on shareholders of GGBL. The continued use of the entity GGBG, is to signal the perpetuation of a situation where there has been a merger in fact but not in law, seemingly endorsed by the securities regulator and the GSE, which situation avoids all the undertakings in the communication to the investing public in the lead up to the takeover and may also have major tax implications for the Republic of Ghana.
Section 1 of the Registration of Business Names Act, 1962 (Act 151) reads in part as follows:
(1) Subject to the provisions of subsection (2) of this section, there shall be registered in accordance with the provisions of this Act the following persons, that is to say
(b) every company carrying on business in Ghana under a business name which does not consist of its corporate name without any addition.
(2) Registration shall not be necessary
(a) where the addition referred to in subsection (1) of this section merely indicates that the business is carried on in succession to a former owner of the business;
(b) where the business is carried on by a receiver or manager appointed by a court of competent jurisdiction.
Act 151 defines “business name” as “the name or style under which any business is carried on whether in partnership or otherwise”.
GGBL has always contended that GGBG is a business name but it is only generic. The fundamental question therefore is whether GGBG is just a phantom creation or it is a company? Can there be a concept of generic name under Ghana’s business laws?
It is respectfully submitted that Ghana’s Companies Code of 1963, (Act 179) would have to be complied with in order for a company to be incorporated. According to section 8 of Act 179, “any one or more persons may form an incorporated company by complying with the provisions of in respect of registration”. The manner of formation is provided in section 14 where proposed regulations satisfactory to the Registrar of Companies must be provided and approved. The Registrar then certifies under his seal that the company is registered. Instructively, section 14 (c) provides that “from the date of registration mentioned in the certificate of incorporation, the company shall be a body corporate by the name contained in the Regulations” and subject to receipt of the certificate to commence business, “be capable forthwith of exercising all the functions of an incorporated company”.
However, it is submitted that GGBG clearly does not exist!
The First Schedule to Act 179 defines “subsidiary” and holding company” as follows:
“A body corporate shall be the subsidiary of another and that other shall be its holding company if,
(a) that other body corporate by the exercise of some power directly or indirectly vested in it, whether by virtue of the beneficial ownership of shares or otherwise, can appoint or remove or procure the appointment or removal of all or not less than half of its directors for the time being or can prevent the appointment or removal of all or not less than half of its directors: Provided that,
(i) a power exercisable in a fiduciary capacity for another person shall be treated as exercisable by that other and not by the fiduciary;
(ii) a power exercisable by virtue of shares held by way of security only for the purpose of a transaction entered into in the ordinary course of business of that other body corporate shall be disregarded;
(iii) a body corporate shall be deemed to have power to appoint a director or another body corporate if any person’s appointment as director of that other body corporate necessarily follows from his appointment as director or other officer of that first named body corporate; or
(b) it is a subsidiary of any body corporate which is that other’s subsidiary”.
Under Ghanaian law therefore, GGBL is the holding company of GBL, and not GGBG.
The Group Enterprise
It is respectfully submitted, that the relevant section for a determination as to whether directors of a company can unilaterally use another name and another mark and create a mirror image of a holding company and hold itself out as such for the purposes of marketing itself, to the extent of calling AGMs in the name of the new entity can be determined under section 127 of Act 179. Group Accounts!
I wish to set out the relevant provisions in extenso:
Section 127 (1) of the Ghana’s Companies Code states that “the provisions of this section shall apply where at the end of the company’s financial year, a company has subsidiaries.
(2)Accounts and statements dealing, as hereinafter mentioned, with the profit or loss and the state of affairs of the company and the subsidiaries, in this Code called group accounts, shall … be sent to the members and debenture holders of the company with the company’s own profit and loss account and balance sheet pursuant to section 124 of this Code”.
(4) Subject to subsection 5 of this section, the group accounts shall be consolidated accounts comprising
(a) a consolidated profit and loss account dealing with the profit or loss of the company and all subsidiaries to be dealt with in the group accounts;
(b) a consolidated balance sheet dealing with the state of the affairs of the company and those subsidiaries
(5) If the company’s directors are of the opinion that it is better for the purposes of presenting the same or equivalent information in a form which may be more readily appreciated by the members and debenture holders, the group accounts may be prepared in a form other than that required by subsection (4) of this section and in particular, may consist of more than one set of consolidated accounts dealing respectively with the company and various groups of subsidiaries or of separate accounts, dealing with each of the subsidiaries, attached to the company’s accounts of statements expanding the information about the subsidiaries in the company’s own accounts or any combination of those forms.
(6) The group profit and loss account may be wholly or partly incorporated in the company’s own profit and loss account and a consolidated profit and loss account dealing with the company and all or any of its subsidiaries shall be deemed to be a profit and loss account of the company… so long as it complies with the requirements of this section and shows how much of the consolidated profit or loss for the financial year is dealt with in the accounts of the company.
(7) The group accounts shall give a true and fair view of the profit or loss and of the state of affairs of the company and the subsidiaries dealt with thereby as a whole, so far as concerns the interests of the company.”
It is obvious from section 127 of Act 179 that the provision is strictly an accounting-purpose only provision. It is important to note that the obligations under section 127 financial reporting regimes are placed firmly on the holding company itself. In this case, GGBL. Nowhere in the legislation does it state nor imply that a commensurate right arises to use a new name and a new logo to take care of the business of the entity as if a holding company has been established for the purpose.
Indeed, Prof. Gower, in the “Final Report of the Commission of Enquiry Into The Working And Administration of the Present Company Law of Ghana” (popularly called the Gower Report), states that the relationship between a holding company (GGBL) and subsidiary (GBL) is defined in the First Schedule to the Code. According to Prof. Gower, “it is universally recognized that, where this relationship is established, the accounts of the holding company alone may give a misleading impression if those of the subsidiaries are ignored. The best way of avoiding this possibility is to provide for group accounts, normally in consolidated form…” (Emphasis mine). It is therefore obvious that it is the entity GGBL, which further to the acquisition of GBL, in presenting its financial statements, ought to provide a consolidated account to reflect the group earnings. The law does not give the holding company any inherent right to establish a new entity with a defined corporate logo and to the effect that it is the holding company of the holding company, without complying with Act 151!
Again, Farrar’s Company Law, 3rd Edition (published by Butterworths) illustrates the manner in which groups may occur. According to Prof. John Farrar, groups arise in different ways. Firstly, they may be founded as such. A company is incorporated to carry on business as a holding company and then proceeds to incorporate trading subsidiaries. Secondly, a company which is a trading company may grow and convert itself into a holding company, later hiving down its trading activities into subsidiaries. Finally, according to Prof. John Farrar, a group relationship may arise as a result of a takeover. One company takes over another which then becomes its subsidiary when its shares have been acquired by the first company.
It is respectfully submitted that the third model of Prof. John Farrar represents the present case under discussion. GGL took over GBL and renamed itself GGBL. That’s how GBL becomes its subsidiary. Indeed, Prof. Farrar states succinctly that” there are various reasons why the subsidiaries are kept in business. The bidder will wish to preserve the goodwill of the business. There are costs involved in transferring the actual business. The subsidiary may constitute a convenient unit of management or accounting within the group”.
What therefore may motivate a major subsidiary of a multinational, having committed to a merger based on which investments decisions had been made by Ghanaian citizens, to decide to create a mirage for the purposes of keeping a subsidiary in business? Is it the costs of transferring the business?
GGBG, fact or fiction? Is GGBG really a company properly so-called? What is a company supposed to do under Ghanaian law to be properly so-called? I submit that under Ghanaian law, it must have a name. GGBG is a name! It must have a registered address and office. Under law, a company must also have a board of directors. A close check of the latest Annual Report of GGBG and the list of directors displayed therein make interesting reading. Originally also, official communication from GGBG displayed a list of directors at the bottom as warranted of all companies. That is until it was realized that continuing to issue those letterheads will give the story away. A company must also have a management. Official communication seems to imply that GGBG has a management. Finally, a company properly so-called must also have a letterhead with directors displayed which it uses to communicate officially. GGBG has that. Where it so desires, a company must also have a mark to identify itself. It must be noted that GGBL’s corporate logo is the harp, ably defended by Mr. Michael Power, as against two interlocking Gs which is the supposed corporate logo of GGBG.
All communication so far accessed by this writer as emanating from GGBG has clearly stated office address. The only distinction is that whilst at first, no effort was made at distinguishing between the two entities supposedly now under the umbrella of GGBG, the new letterheads of GGBG seem to show that. There is now in circulation in Ghana, letters emanating from GGBG without more. This letterhead shows no directors and gives no fixed address yet corporate actions have been taken based on such communication. Then there is a letterhead boldly showing GGBG but with an address showing that of GGBL. This letterhead shows a list of distinguished personalities as the directors. It is as yet unclear whether they hold themselves out as directors of GGBG or GGBL. The said letterhead with the GGBL sub-address has at the bottom this statement: “Ghana Breweries Limited and Guinness Ghana Breweries Limited are members of the Guinness Ghana Group of Companies”. This writer is yet to see the same type of letterhead by GGBG but this time showing an address of GBL. Perhaps it exists. Perhaps not. If another letterhead exists showing GBL’s address, it may signal an admission that GGBG does not exist. Interestingly, at the same time all these new letterheads had been designed and were being used for corporate actions, GBL was also communicating on its old letterhead with its own logo. The fact of the newly designed letterheads of GGBG with a GGBL address and directors listed and the statement thereon is a reflection of the sensibilities after issues had been raised about the legality or otherwise of those actions. The situation therefore warranted the same efforts that moved GGBG from a celebrated company to a celebrated business.
GGBG=GGBL? The matrix unravelled Is GGBG therefore just a mere generic name as claimed by GGBL? The Concise Oxford Dictionary, 9th Edition defines generic as follows: “characteristic of or relating to a class; general, not specific or special; (of goods, esp. a drug) having no brand name; not protected by a registered trade mark”. The Annual Report that was allegedly forwarded by GGBL for 2005 has emblazoned on it “Guinness Ghana Breweries Group”. There is also prominently displayed, the new logo of the new company. Such a smokescreen deliberately created by directors cannot be allowed to stand under Ghana law. GGBG has clearly marketed itself as “Ghana’s most celebrated company”. There is a list of members of a board of directors not under GGBL’s logo or name but clearly under that of GGBG! Is that also generic? Certainly not! The belated attempt to re-brand GGBG as “Ghana’s most celebrated business” after attention has been drawn to the breaches of law does not cure the illegality and the willful mis-information being undertaken by the Directors of GGBL.
It is respectfully submitted that under Ghanaian corporate law, business names and names of any corporate entities must be registered, irrespective of whether it is holding company or group name or generic name. The concept of a generic name is alien and unknown to Ghanaian law and has great potential to create chaos on the Ghanaian corporate scene. The only instance where registration does not become an issue is when the holding company itself, in its accounts, shows the group accounts.
The entire “GGBG Project” is a calculated attempt by a very respectable firm to bamboozle its shareholders, GBL shareholders, GBL employees, the securities regulators, the investing public and indeed the entire nation. It is a matter of record that during the acquisition of GBL in December 2004, a shareholder of GBL sued the company for inter alia, the production of a valuation report to determine the fairness or otherwise of the offer price of the deal. As soon as the ruling was made by the High Court for the production of the valuation report, GGBL quickly reached a settlement with the said shareholder and the matter was withdrawn from the Courts. The valuation report underpinning the said acquisition project which led to the present structure where GGBL has become the holding company of GBL was therefore never disclosed, even in the face of securities regulations which warranted such disclosures. The securities regulators despite provisions to the contrary, neither demanded nor were they given a copy of the valuation report underpinning the offer.
In the event that the merger must proceed pursuant to the commitments in the offer circulars, GGBL would have to value the assets of GBL again in order to determine a fair value for the rest of the shareholders. However in the event that the valuation report discloses a far higher value than that given to shareholders of GBL under the acquisition deal, GGBL may have to pay all the rest of GBL shareholders a top-up. In the circumstances, it may be understandable that a an artificial situation has been created to give a semblance of a merger having taken place when in fact nothing of the sort has occurred in order to delay the process for as long as possible. In the intervening period, the majority shareholder alone, GGBL has moved and against all legal norms, physically taken over the assets of GBL and benefits alone from sweating the subsidiary’s assets to the detriment of the remaining shareholders of GBL. With the assets of GBL completely fudged, the possibility of major litigation from GGBL’s actions is very real and high. It also becomes near impossible to make a fair determination of GBL’s assets and that is critical for tax purposes. The present artificial situation also jeopardizes the legal rights of all employees of GBL. Due to the arrangements, GBL employees have been unilaterally transferred to GGBL. Their service contracts have also been altered. Poor Ghanaian workers who would have been entitled to redundancy pay under Ghanaian law if regulators were awake are now losing their jobs, having been fired by an entity that did not employ them in the first place. There are therefore major legal implications of the present artificial maze created for the State, securities regulators, GBL employees, labour regulators and the tax authorities. GGBL must therefore be encouraged to do the right thing in order to protect the investment of all GBL shareholders and the reputation of the company. As so succinctly put by Prof. John Farrar in his book, quoted hereinbefore, “ a holding company, while the owner of whole or part of the share capital of a subsidiary, is not regarded as the owner of the assets of the subsidiary in the absence of an express agency or trust relationship”.
The actions of the directors of GGBL may not be without precedent. In 1987, during the takeover of Distillers Plc, a company in the United Kingdom by Guinness Plc, the Chairman of Guinness, Ernest Saunders and 3 others executives were jailed for various infractions of the law which only came to light only after the acquisition. Diageo Plc, being the parent company of GGBL, is fully aware that in its home country, an investigation would have been launched into the circumstances of the acquisition and the actions of the directors following the acquisition. In the light of the Enron, WorldCom and other recent corporate scandals, and the fact that corporate governance is absolutely critical to assuring value for all shareholders, the directors ought to be made to abide by Ghanaian law to ensure that the interests of the shareholders and indeed all Ghanaians, particularly the poor employees of GBL who keep inundating the writer with their problems but are sadly too petrified in their own homeland to speak for their rights when it is been infringed by an entity that would not be able to do the same things in its home country.
Can GGBG therefore do acts in the name of GGBL? It is my contention that an Annual Report for the purposes of an AGM must come directly from the company concerned. The Annual Report and notices for the AGM of GGBL for 2005 ought therefore to have come from GGBL and not GGBG, especially when checks at the Registrar-General’s Dept. showed that GGBG was an unregistered entity. Ghana’s Company Code provisions that allow a company with subsidiaries to provide in its financial reporting, consolidated accounts cannot by any stretch of the imagination be interpreted as tantamount to a fiat to use an unregistered business name and a logo in order to summon a general meeting. GGBL is fully aware of all these actions and yet has taken a very unprincipled stand in achieving its corporate objectives at the risk of endangering the investments of poor Ghanaians in the entity. These concerns are heightened by the manner in which the resolutions to approve the merger were rammed past shareholders in 2004 to benefit the majority shareholder, Diageo Plc, at the expense of ordinary Ghanaian shareholders. Diageo Plc benefited from a placement of shares solely to itself at a whopping 136% discount but managed to get gullible Ghanaian shareholders to waive their rights to same. This was done in order to assure Diageo Plc, a continued majority stake in GGBL. However the “control premium” which it would have paid to the company in any other jurisdiction including its home country was conveniently lost. Meanwhile as disclosed by GGBL itself in the circulars, the acquisition of GBL itself was not done through foreign inflows. GBL was bought by GGBL through loans sourced from local banks. That means that all investors in GGBL would share the burden of that investment but the primary beneficiary at all times may be Diageo Plc, Heineken International B.V. and a few other institutional investors. Whilst dividends are being declared for GGBL, none has so far been declared for GBL. Indeed, GBL had always been conveniently buried until it became increasingly untenable to continue along that line and therefore AGMs for GBL were finally held in the past few months. Interestingly, two AGMs were held at the same time in another flagrant abuse of Ghanaian corporate law. All these actions were taken after articles had appeared in Ghanaian newspapers authored by as yet unidentified people to the effect that GBL and GGL had merged to form GGBL, a basic untruth and falsehood. Interestingly, neither GGBL itself nor the SEC of Ghana nor indeed the GSE have found it necessary to correct that falsehood. Under Ghana’s securities ;laws, an immediate duty arose firstly on the writer, and on GGBL, GSE and the SEC itself to make a statement to the effect that it was incorrect to state that GBL and GGL have merged to form GGBL. It is a very sad testament to the state of Ghana’s securities regulation when the securities regulator itself, also peddles this basic untruth, which is a breach of Ghana’s securities laws, in official communication.
An interesting example of what seems to be a campaign of misinformation is a press release by GGBL through the Ghana Stock Exchange. It is the unaudited results for the nine months ended March 31, 2005. In spite of the oath sworn by the directors of the company, they proceeded to mis-inform the investing public by stating as follows:
The performance of “GGBL Group” includes four months profit of Ghana Breweries Ltd., following the merger between the two companies on December 1, 2004”. (Emphasis mine).
This statement is false in material particular! There has been no merger between the two companies yet! It is also instructive to note that in this reporting to the regulator, it is coming from GGBL and not GGBG. GGBL’s mark is therefore prominently displayed as the HARP. The name of the company is also displayed. The entity in question at all times is GGBL. From whence cometh the GGBG? It is therefore submitted that the said GSE press release, apart from the false information therein displayed, is the more accurate format for GGBL to make its financial report.
The Daily Graphic newspaper, respected as it is, may have also been an unwitting purveyor of the GGBG falsehood sometime last year. At the launch of this phantom creation called GGBG, the entire Ghanaian public was hoodwinked into believing that they were seeing the parent company of GBL or at best that of the two entities. In fact, it was categorically stated that the actions in structuring the new company was further to the merger of GBL and GGBL. Juxtaposed against the printed statement of the Chairman of the Board of GGBG to the effect that they are still working on achieving a merger, investors are left wondering what the directors are communicating. Indeed, Mr. Nicholas Bodo Blazquez is described as Chairman of the Board of GGBG in the Annual Report issued for the AGM 2005! How can a generic name have a board? That would seem to suggest that all the persons listed thereunder are also members of the said Board. Unless GGBG is an incorporated entity, it is absolutely unclear what the intention is. The Chairman of GBL is Mr. Devlin Hainsworth. The Chairman of GGBL is Mr. Blasquez. The Chairman of GBL is the Vice- Chairman of GGBL but he is the MD of the two entities. Mr. Devlin Hainsworth was duly appointed at different times by the separate boards of the two entities as provided under law. Has GGBL changed its name into GGBG? Why then has the said change of name not been registered with the Registrar of Companies? Can a harp and a name be automatically exchanged at will by directors for two interlocking Gs and a different name? Is your head swimming? I hope not as we all need to clear our heads in order to appreciate what is happening in today’s Corporate Ghana.
Indeed, to my mind, the situation is very simple. What should happen under Ghanaian corporate law is that when GGBL is to have its AGM, it should forward all legitimate documents to its shareholders. This cannot be legitimately done by GGBG, an unregistered, uncertificated, unlicensed, creation of the directors for an as yet undisclosed purpose. In the event that it is the case, notices must be sent to GGBG shareholders of whom the writer is unaware. In the real world, GGBL has only one subsidiary, GBL. With GGBL’s vast resources and excellent corporate secretarial and legal support services, the rationale for the artificial legal maze being created is to say the least baffling. The fact of GBL as the sole subsidiary is even meant to be transitional. All communication during the acquisition to the investing public and to the securities regulators was to the effect that there will be a merger with GBL. The creation of this white elephant, GGBG, is therefore in my opinion after having carefully considered the law on the subject, illegal and potentially litigious and if the Ghanaian stock market was efficient, could potentially lead to unpleasant situations for all concerned.
Respectfully, if any corporate entity in Ghana, with a single subsidiary, reserved the right to use a “generic name” with a logo in Ghana without registration, and proceed to issue corporate communication using that name and logo, it is an invitation to chaos. The directors of GGBL should be called to order such that general meetings and other corporate events are summoned by GGBL itself, not GGBG, styling themselves under a different name and logo, unknown to law and to shareholders. It is also respectfully submitted that even in the United Kingdom itself where Diageo Plc is based, it will be held to account as the DTI showed in the Distillers Plc Case. The directors of GGBL should refrain from using the business name, GGBG, pending confirmation of fulfillment of the due legal processes by registration. Further, Annual Reports and the notices of GGBL cannot purport to emanate from GGBG and therefore cannot be claimed as satisfying relevant Code provisions on AGMs. Finally, GBL employees are not obliged to accept service contracts offered by GGBL as it is an entirely separate legal entity and effectively truncates the old service contract with GBL. Ghanaian law makes it amply clear that there are costs to acquisition. Where an entity is not ready to pay the costs, our citizens should not lose their benefits through a very clever scheme that seeks to avoid the making of a “redundancy payment” to citizens who have toiled from the days of the late Siaw till date. It is proposed that the present government ought to show a little interest in the rights of our citizens especially in matters such as these. When GBL workers are coerced to make the transition to GGBL, and then they are likely to be terminated with GGBL seeking to rely on notice to avoid its duties under law. For the workers of GBL, if any do exist by now, remember, “vigilantibus non dormientibus servient leges” . This means that laws serve those who are vigilant, not those who sleep!
It is only then that the long-suffering Ghanaian shareholders, employees and other trade partners of GGBL and GBL would be saved from deciphering the legal nexus between Guinness Ghana Breweries Group, (GGBG, Ghana’s most celebrated company) and lately, Ghana’s most celebrated business; Guinness Ghana Breweries Limited, (GGBL), Guinness Ghana Breweries Limited Group (GGBL Group), Guinness Ghana Breweries (GGB) and Ghana Breweries Limited (GBL).
“Quid faciat leges, ubi sola pecunia regnat” - Petronius. “What may laws do where only money reigns”.
God Bless Our Homeland, Ghana!
JOE ABOAGYE DEBRAH Esq.
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