How to Form a Company Limited by Guarantee in Ghana: A Comprehensive Guide for Non Profit and NGO Incorporation

BY SETH DOE ESQ AND YAW MENSAH BOSOMPEM, ESQ

INTRODUCTION

A company limited by guarantee is the recognised legal structure in Ghana for establishing non-profit organisations, NGOs, charities, religious bodies, social enterprises, and other entities that exist to pursue public-interest objectives rather than to make profit. It is governed by the Companies Act, 2019 (Act 992) and is the most suitable corporate form for organisations funded by donations, grants, or volunteer support.

This article presents an in depth, fully developed analysis of the formation of a company limited by guarantee in Ghana, the legal framework governing such entities, the contents of the standard constitution, and the practical and regulatory steps required before and after incorporation.

1. Legal Framework Governing Companies Limited by Guarantee

The legal basis for forming this category of company is contained in sections 9, 12 and 36 to 43 of Act 992. These provisions set out the nature of guarantee companies, their structure, the conditions for membership and the legal restrictions imposed upon their operations.

The Registrar of Companies is the statutory authority responsible for the incorporation and regulation of companies limited by guarantee. In addition to registration under Act nine nine two, non profit organisations that operate as non governmental organisations or as charitable institutions are also subject to the regulatory supervision of:

• the Department of Social Welfare for registration and monitoring of NGOs
• the Ghana Revenue Authority for tax exemption applications under the Income Tax Act

These agencies ensure accountability, proper governance and lawful operation.

2. Essential Characteristics of a Company Limited by Guarantee

A company limited by guarantee possesses several legal features that distinguish it from companies limited by shares.

First, absence of share capital

There are no shareholders and no issuance of shares. Ownership is based on membership rather than equity holding.

Second, guarantee of members

Each member undertakes to contribute a specified nominal amount toward the assets of the company in the event of winding up. The standard constitution under Act nine nine two typically sets the guarantee amount between one hundred Ghana cedis and one thousand Ghana cedis, though promoters may select any reasonable sum.

Third, prohibition on distribution of profits

All income and property of the company must be used solely to further its stated objects. No profits may be distributed to members or directors. Section 38 of Act nine nine two requires that the constitution contain an express prohibition against profit distribution.

Fourth, separate legal personality and perpetual succession

Under section 18 of Act 992, the company becomes a body corporate capable of suing, being sued and holding property distinct from its members. The organisation continues regardless of changes in membership.

Fifth, restriction on political activity

A company limited by guarantee may not operate as a political organisation or engage in activities contrary to public policy.

These features align the structure with its intended non profit purpose.

3. Contents of the Standard Constitution for a Company Limited by Guarantee under Act 992

The constitution, which is the governing document of the organisation, is mandatory and must accompany the registration application. The standard form of constitution provided under Act nine nine two includes the following:

A. Name clause

This states the name of the company and must end with the expression Company Limited by Guarantee.

B. Object clause

This is the core of the constitution and must contain clear non profit objects such as promoting education, providing social welfare services, advancing religion, supporting health projects or offering community development services. Act nine nine two prohibits vague or overly broad objects.

C. Guarantee clause

This specifies the amount each member undertakes to contribute in the event of winding up.

D. Contribution of members clause

This reinforces that the liability of each member is limited to the stated guarantee amount.

E. Application of income clause

This expresses that the income and property of the company shall be applied solely toward the promotion of its objects.

F. Prohibition of profit distribution

This clause expressly states that no portion of the income or property shall be paid or transferred directly or indirectly by way of dividend or bonus to members or directors.

G. Dissolution clause

This states that upon dissolution, any remaining property must be transferred to another organisation with similar objects.

H. Governance clauses

These relate to the appointment, removal and powers of directors, meetings of members, quorum requirements and the duties of officers.

I. Secretary and auditor provisions

These provisions reflect the requirements in sections 172 and 211 of Act 992.The constitution must be adopted and signed by all subscribers before filing.

4. Detailed Procedure for Forming a Company Limited by Guarantee

The formation process consists of the following steps.

Step 1: Conduct a name search and reserve the name

The Registrar verifies whether the proposed name is available. Upon approval, the name is reserved for thirty days.

Step 2: Drafting the constitution

The promoters must prepare the constitution using the standard clauses required by Act 992. It must include the name, objects, guarantee clause, governance provisions and the prohibition on profit distribution.

Step 3: Appointment of directors and secretary

A company limited by guarantee must have at least two directors and at least one company secretary. The directors must be over eighteen years old and must not be disqualified under Act nine nine two. The secretary must satisfy the qualification requirements in section 211.Each appointee must provide a consent letter and a statutory declaration that they qualify to act.

Step 4: Declaration of compliance

A statutory declaration must be signed by a director or the secretary before a Commissioner for Oaths confirming that the requirements of the Act have been met.

Step 5: Preparation of the registration documents

The following must be submitted to the Registrar:

• completed Form 3B
• the constitution of the company
• statutory declarations
• copies of the national identification documents of all directors, secretary and members
• beneficial ownership details
• name reservation certificate
• registration fees and stamp duty

Step 6: Issuance of Certificate of Incorporation

Once the Registrar is satisfied that all requirements have been met, a Certificate of Incorporation and a Certified True Copy of the constitution are issued. At this point the company becomes a legal person under section 18 of 992.

5. Additional Post Incorporation Requirements

Organisations formed for non profit purposes must comply with additional regulatory obligations.

A. Registration with the Ghana Revenue Authority

The company must secure a Tax Identification Number and may apply for tax exempt status if its objects qualify.

B. Registration with the Department of Social Welfare

Non governmental organisations and charities must register with the Department of Social Welfare which provides oversight, monitoring and compliance evaluation.

C. Filing of annual returns

Under section 126 of Act 992, the company must file annual returns that include audited financial statements.

D. Financial accountability and governance

Directors owe fiduciary duties of honesty, good faith and proper stewardship. All income must be reinvested into the organisation’s activities. Misuse of funds may result in sanctions including personal liability under section 198.

6. Dissolution of a Company Limited by Guarantee

The organisation may be dissolved:\

• by voluntary winding up through a resolution of members
• by court ordered winding up for illegality, insolvency or abuse of the company formSections 349 to 366 of Act 992 govern the winding up process.

Upon dissolution, any remaining property must be transferred to an organisation with similar objects and may not be distributed to members or directors.

Conclusion

A company limited by guarantee provides the most appropriate legal structure for non profit organisations in Ghana. It offers separate legal personality, perpetual succession, strong governance provisions and statutory protection of assets for charitable and public interest purposes. The process requires careful compliance with the procedural and substantive requirements of Act nine nine two, particularly the mandatory constitutional clauses, director qualifications, registration formalities and post incorporation obligations.

By following the statutory framework, promoters can establish legally compliant, credible and sustainable entities that are capable of delivering social, charitable and developmental impact.