When the NPP government came into power in January 2000, one of the objectives it set itself to achieve was to create the necessary enabling environment that would make the private sector, the “engine of economic growth” in the country. I remember Dr Ndoum of the CPP, before the general elections of December 2008, adding that the “engine” alone will not make a vehicle move. He rightly argued that a vehicle needs good wheels underneath its body and a good driver to make it move. I fully agree with him that until the enabling conditions are created in Ghana for real industrial growth to take-off through private sector investment, our current slogans and efforts will be mere dreams.

And let’s admit, some of the wheels of our vehicle are so worn out that they can hardly take us any farther than a kilometer.

One of our “worn out wheels” inhibiting our economic growth is our Companies Act of 1963. This law was passed when majority of the people living in Ghana now were either children or were not born. Forty-six years have passed and that piece of legislation still remains in our statute books unchanged. It is just as the author (Professor Gower?) left it. I stand to be corrected, but there hasn’t even been an amendment to the Act or, if there has been, the amendments may be too cosmetic to bring it in line with the best in the world. It is strange that all the past governments, since the overthrow of Nkrumah, did not find it necessary to revise our company laws to keep Ghana abreast with changes in corporate laws and governance.

We must remember that we are living in a global village and therefore harmonization of corporate laws, in both investor and investee countries, is imperative. Shareholders especially in investor countries want assurance that the corporate laws in the countries they have invested their money in are similar to those in their home countries and that the laws are good enough to ensure sound corporate governance and also protect their investment.

If our efforts to industrialize and make the private sector the engine of growth have so far failed, I have no doubt that our outdated Companies Act of 1963 has contributed directly to that. The Act must immediately be overhauled to harmonize them with the best in the industrialized countries.

The story of the collapse in the US giants - Enron and WorldCom – some few years back is still fresh in our minds. As a result of those failures, corporate laws in all the industrialized countries (where we need our investors most) have been reformed to protect shareholders and other stakeholders. For example many reforms such as the role of executive and non-executive directors; ethics and the role of the company secretary; the establishment of audit committees; expanded fiduciary duties of directors; the expanded and re-defined roles of both internal and external auditors etc have been brought into the Companies Acts of many countries we call industrialized, for example, the Sarbanes Oxley Act of 2002 in the US. Many countries with strategic foresight like India, Singapore, Thailand, Malaysia, New Zealand etc have followed suit – they have also amended their corporate laws to incorporate many of the modern corporate governance concepts and principles, especially those in the US Sarbanes Oxley Act.

We do not need to reinvent the wheel in Ghana to get our company laws and regulations reformed and get them on par with the best in the world. Many documents have come out from corporate governance experts which have led to the revision of the company laws in other industrialized countries such as the UK. The Cadbury Code 1992, the Greenbury Report 1995, the Turnbull Report, the Combined Code of 2003 etc have helped shape the current Companies Act in the UK. South Africa’s Companies Act is currently under reform as a result of the King’s Reports (King I, II and now III) on corporate governance.

We need a reformed Companies Act to be able to attract some of the multinational companies which can make all the difference in our economic life as a country. I dare say that our archaic company laws have deterred many prospective investors. Those who have come in lately, like Vodafone and MTN calculated that the returns on their investments will at any time outweigh the risks they will be facing because of the particular industry they are in – telecommunication. But in their boardrooms I bet that they may be feeling uncomfortable because of our outdated Companies Act of 1963, which does not provide the necessary guarantees against the abuse of shareholders’ interests by the companies’ directors.

The number of companies listed on the Accra Stock Exchange is insignificant compared to say the companies on the Johannesburg Stock Exchange in South Africa. There are obviously many factors that account for this but one cannot rule out the fact that investors are nervous about our outdated Companies Act of 1963 and the unwieldy and cumbersome company registration procedures..

It’s worth mentioning that many countries have found out that for the needs of small, medium and micro enterprises - the real engines of economic growth - there must be another type of legal entity other than the “private’ and “public” companies. In Ghana we still know only the two types - private and public companies. But in most countries (such as South Africa and Australia), the “Close Corporation” (CC) as a legal entity has been added – to cater for small businesses.

In Ghana, these innovations in company types that have propelled many countries to economic boom and prosperity are unheard of. We are still stuck with our private and public company legal entities.

To add to the archaic laws, potential investors are also over-burdened (or put off) by the cumbersome procedure of getting companies registered. Whilst it may take less than two weeks for a CC or a private company (proprietary limited company) to be registered in South Africa, it takes more than a month in Ghana to go through the same process. And the last time I visited the Registrar General’s department in 2007, computerization of companies’ information seemed a long way off. Registration documents are piling up and can fill Accra Sports Stadium. I wonder how efficient the Registrar General’s office is.

Again the current practice in many countries is for many private companies (or proprietary limited companies) and CCs to be registered with the Registrar of Companies and then sold as “shelf companies”. A person who thus wants to establish a company just buys a “shelf company” (usually sold by chartered accountants or chartered secretaries firms) and gets the firm to change the shareholder(s) and director(s) details on the shelf company. A “trading as” name is normally registered with the Registrar of Companies. All the paperwork is done on behalf of the prospective businessman/woman by the registering firm. The registered name of the company or close corporation (on the database of the Registrar of Companies) stays the same but the owner may use the “trading as” name to trade. By these “shelf companies” the cumbersome and long registration procedures are completely eliminated.

In conclusion Ghana can learn a lot from other countries that have made giant strides in economic growth – if we reform our company laws and streamline our company registration procedures and processes.

The addition of another legal entity (e.g. the close corporation) to meet the needs of small, medium and micro enterprises with simplified registration process and less onerous responsibilities (such as no need for statutory audit) and the introduction of shelf companies may go a long way to make company formation in Ghana easy. We can also research on how close corporations (as legal entities) have helped the countries that have used them to date and incorporate them into our company laws if they can add additional wheels to our vehicle.

One certainty is that if we do not reform our current company laws, our “engine of economic growth” will get stuck in the mud of perpetual economic stagnation.

(The writer is both a chartered management accountant and a chartered secretary and is a Consultant on Corporate Strategy and Public Finance Management. E-mail address – pkboateng@gmail.com).

P. K. Boateng