Types of Companies in Ghana: Comprehensive Legal Analysis Under the Companies Act 2019

BY SETH DOE ESQ AND PHILIPA HAGAN MENSAH

The corporate landscape of Ghana rests on the statutory architecture of the Companies Act 2019, Act 992, which defines the kinds of companies that may be formed or recognised in Ghana and the legal implications that flow from each category. The Act provides a deliberate and structured system of corporate classification which helps determine the legal personality of an entity, its liability regime, its internal governance, the rights of its members and the company’s relationship with the investing public. Understanding these classifications is essential for promoters, investors, directors, regulators and any person who interacts with companies in Ghana.

This essay provides a comprehensive analysis of the various types of companies recognised under Ghanaian law, illuminating their statutory foundations and explaining the legal consequences of each form of incorporation. It presents the framework in an integrated narrative that blends legal doctrine, practical application and legislative intent.

1. THE STATUTORY CLASSIFICATION OF COMPANIES IN GHANA

The Companies Act adopts four distinct approaches to classifying companies. These approaches give rise to several cross-cutting typologies, which ultimately lead to twelve specific corporate categories.

1.  Unincorporated and Incorporated Companies

The first distinction is between companies that are incorporated under statute and those that are not. An incorporated company possesses separate legal personality and perpetual succession; an unincorporated body, such as a partnership, does not. While the Act does not expressly elaborate on the unincorporated category, it is implied by contrast since only an incorporated body attains full juristic personality.

•  Companies Limited by Shares, Companies Limited by Guarantee and Unlimited Companies

The second major distinction appears in section 7 of Act 992, which identifies the four principal liability regimes that govern incorporated companies. A company may be

a company limited by shares
b. a company limited by guarantee or
c. an unlimited company

d. an external company

Each of these reflects a different allocation of risk and financial exposure for members.

•  Public and Private Companies

The third classification relates to whether the company is public or private. The distinction is rooted mainly in membership thresholds and the manner in which the public may participate in the company. Section 7(4) provides that the three types of companies listed above may exist as either private or public companies. This means that each liability regime can appear in both private and public forms.

•  Ghanaian Incorporated Companies and External Companies

The final distinction is between companies incorporated in Ghana and those incorporated abroad but carrying on business in Ghana. Section 7(1) acknowledges the external company as an incorporated entity recognised under Ghanaian law, even though it is formed outside the jurisdiction.

• THE TWELVE RECOGNISED COMPANY TYPES UNDER ACT 992

From the combined effect of these classifications, twelve distinct categories emerge:

1. Ghanaian private company limited by shares
2. Ghanaian private company limited by guarantee
3. Ghanaian unlimited private company
4. Ghanaian public company limited by shares
5. Ghanaian public company limited by guarantee
6. Ghanaian unlimited public company
7. External private company limited by shares
8. External private company limited by guarantee
9. External unlimited private company
10. External public company limited by shares
11. External public company limited by guarantee
12. External unlimited public company

This statutory mapping ensures that the Act regulates every possible form of corporate presence, whether domestic or foreign.

• COMPANY LIMITED BY SHARES

Members of a company limited by shares have a “share” in the equity, working capital and the fortunes of the company. In that case, companies that are limited by shares have necessarily been set up to make a profit.

A company limited by shares is a company which has the liability of its members limited to the amount unpaid on the shares respectively held by them[1]. The consequence is that members do not risk their personal property for the debts of the company. If a shareholder has fully paid for their shares, their liability is extinguished. If they have paid part only, they may be required to pay the balance, but nothing further.

From the foregoing, if a shareholder has fully paid the company for the shares issued to them, they cannot be called upon to make any further payment in respect of the shares held, but if that shareholder has not paid anything at all for the shares or has only made part payment, they may be called upon to pay the amount remaining as determined at the date of the issuance of the shares to him and nothing more. There will be absolutely no question of interest or penalty or revaluation, or repricing of shares for delayed payment.

A private company limited by shares is required under section 21(1) of Act 992 to bear the suffix Limited Company or the abbreviation Ltd. The liability protection offered by this company type makes it the most common form of business structure in Ghana, as it accommodates profit-making objectives while protecting personal assets.

4. COMPANY LIMITED BY GUARANTEE

A company limited by guarantee is one in which members agree to contribute a specified amount to the assets of the company if it is wound up[2]. The members of this company undertake in their company constitution to contribute specific amounts each to the assets of the company in the event of the company being wound up while it is indebted. Unlike companies limited by shares, these companies do not issue shares and do not have shareholders. They have members who give undertakings rather than capital subscriptions.

Thus, in the case of limited liability by guarantee, members pledge funds not necessarily as working capital for the going concern of the company or for the company to trade with and make a profit, but as a contribution to meeting any shortfall in meeting creditors’ requirements should the company have to be wound up. Members of a limited liability company by guarantee, therefore, “Guarantee” a minimum statutorily defined sum of money as their contribution to the company should it have to be wound up. Working capital for companies limited by guarantee may therefore come from dues, donations and the like. Old Boys’ Associations, Church-based organisations, and Professional Bodies register as companies limited by guarantee.

These companies are essentially non-profit entities. Section 8(1) of Act 992 prohibits their incorporation for profit-making except where incidental to their objects. Section 8(3) further requires that the total liability undertaken by members must not fall below the minimum amount specified in the incorporation documents.

In accordance with section 21(1)(c) of Act 992, such companies must bear the suffix Limited by Guarantee or the abbreviation LBG.

Guarantee companies are barred from distributing profits. Section 75(1) of Act 992 forbids any payment of dividends or a return of assets to members. Where this rule is breached, section 72(2) requires the member to refund the money with interest calculated at the ninety-one-day treasury bill rate and imposes administrative penalties on defaulting officers. If the company is wound up, any residual assets must be transferred to a similar organisation or to charitable objects rather than paid to members.

• UNLIMITED COMPANIES

Section 7(2)(c) of Act 992 provides that an unlimited company is one where the members have no limit on their personal liability. Section 7(3) requires that such companies must be registered with shares. The members, therefore, remain personally responsible for all debts, which makes such companies rare in practice.

From the foregoing, a shareholder of an unlimited company is practically in the same position as a sole proprietor, and he does not benefit much from the potential advantages of incorporation. Consequently, although permitted by the Act, in practice and in fact, unlimited liability companies are quite rare.

A private unlimited company must bear the suffix Private Unlimited Company under section 21(1)(d) of Act 992, while a public unlimited company must carry the suffix Public Unlimited Company under section 21(1)(e) of Act 992.

Because members risk personal liability, unlimited companies mimic the legal risk profile of sole proprietorships or general partnerships, except that they still enjoy separate legal personality.

• EXTERNAL COMPANIES

An external company in Ghana is a corporate body formed outside the country but operating through an established place of business in Ghana, such as a branch, management office, factory, mine, or other fixed location. This does not include mere agency arrangements unless the agent habitually concludes contracts or maintains stock on the company’s behalf. Under Section 7(2)(d) and Section 329 of Act 992, an entity qualifies as an external company only if it is foreign and has a fixed business presence in Ghana. By contrast, companies incorporated in Ghana, whether limited by shares, limited by guarantee, or unlimited, may be either private or public, with private companies subject to constitutional restrictions under Section 7(5), and public companies being those without such restrictions.

1.  Registration Requirements under Section 330

Within one month of establishing a place of business, the external company must deliver to the Registrar the following documents:

1. A notarised copy of its certificate of incorporation and constitutional documents
2. A notarised statement of details including: the name of the company, its business objects, particulars and address of local managers, details of share structure, address of its principal office abroad, address of its business in Ghana and the name and address of its process agent
3. Notarised particulars of beneficial owners
4. Particulars of charges or a statement confirming that none exist.

These requirements ensure that foreign companies are subject to transparency and accountability when operating in Ghana.

• PRIVATE COMPANIES

Section 7(5) of Act 992 defines a private company other than a company limited by guarantee as one whose constitution must do the following:

a. Restrict transferability of shares. This often appears in two forms. There may be a right of first refusal or preemption in favour of existing shareholders, or the directors may be given discretion to approve or reject proposed transferees.

b. Limit its total number of members and debenture holders to fifty, subject to the statutory exceptions for employees and former employees who became members during employment.

c. Prohibit invitations to the public to acquire shares or debentures.

d. Prohibit invitations to the public to deposit money with the company for fixed periods, whether interest-bearing or not.

Private companies enjoy simplified governance. Section 300 of Act 992 provides that, unless otherwise provided, a director of a private company holds office for life until resignation or removal. At the same time, private companies impose lower regulatory burdens on members.

A private company may not legally have more than fifty members or debenture holders except for the statutory exclusions. A public company may, however, have fewer than fifty members without losing its public status.

In a private company, the right to transfer shares is restricted, not prohibited, to preserve its private character. Directors may, at their discretion and without giving reasons, refuse to register a share transfer. Two main restrictions apply: first, existing shareholders have a pre-emption right, meaning shares must be offered to them before being transferred outside the company; and second, the company’s constitution typically gives directors the power to approve or reject proposed transferees.

• PUBLIC COMPANIES

Under section 7(7) of Act 992, any incorporated company that is not private is a public company, except that a company limited by guarantee with five or fewer members is not classified as public. Public companies have no upper limit on membership, and they may invite the public to acquire shares or debentures. They must comply with enhanced governance rules, including rotational retirement of directors.

Section 325 of Act 992  requires that at the first general meeting, all directors retire and are eligible for reappointment. At each subsequent annual general meeting, one third of the directors retire in accordance with the principle of first in, first out.

Public companies provide the structural framework for large-scale investments, including listings on securities exchanges.

• CONVERSION OF A COMPANY LIMITED BY SHARES INTO A COMPANY LIMITED BY GUARANTEE

Section 9 of Act 992 provides a procedure for transforming a company limited by shares into one limited by guarantee. Several conditions must be met.

a. No shares must remain unpaid.
b. All members must consent in writing to surrender their shares for cancellation.
c. The constitution must be altered or revoked in accordance with section 30 of Act 992 so that a new guarantee-compliant constitution is adopted.
d. All members must agree to undertake a minimum guarantee contribution in the event of winding up.
e. The word Limited must be omitted from the name.
f. The company must be duly registered.
g. Directors and the company secretary must swear a statutory declaration that all legal requirements have been satisfied.

Once the Registrar is satisfied, a new certificate of incorporation is issued, converting the company into a guarantee company. The conversion does not affect existing rights or obligations, nor does it prejudice legal proceedings involving the company.

1. CONVERSION OF A PRIVATE COMPANY INTO A PUBLIC COMPANY

Section 302 of Act 992 outlines the process for conversion. A private company becomes public when it alters its capacity to operate as a private company and amends its constitution to reflect public company requirements.

A copy of the special resolution must be delivered to the Registrar within twenty-eight days under section 165 of Act 992. The Registrar will publish notice of the conversion in the Companies Bulletin. Failure to comply attracts an administrative penalty of five hundred penalty units.

CONCLUSION

The Companies Act 2019 Act 992 provides an intricate, comprehensive and modern classification system that reflects Ghana’s commitment to robust corporate governance. From the structure of companies limited by shares to the unique non-profit architecture of companies limited by guarantee and the risk-laden existence of unlimited companies, the Act offers promoters and investors a wide range of options. The distinction between public and private companies ensures that corporate participation is carefully regulated, while the recognition of external companies ensures that Ghana remains open for global commerce with accountability safeguards. Understanding these classifications empowers businesses to choose the most suitable structure for their operations and to comply fully with the legal regime that governs companies in Ghana.

[1] Companies Act,2019 (Act 992) s. 7(2)(a)

[2] Ibid, s. 7(2)(b)