More than 100,000 companies at risk of ceasing to exist

The structure of Ghana’s formal private sector is about to undergo a major shake-up as the Register General’s Department, RGD begins the delisting of dormant companies from the Companies Register.

The delisting process has commenced with 3,100 companies about to be taken off the Companies Register within the next month under the first phase of a process that will ultimately see over 100,000 companies no longer registered to operate.

The Register General’s Department has issued a statement warning that the over 3,000 enterprises being struck of its list would just be the first batch of companies to be delisted this month.

Over 100,000 new companies have been registered since 2011 when the business registration process was changed but many of them have failed to abide by the terms for their continued existence. A lot more older companies have also failed to keep to the stipulations for continued registration, particularly annual renewal of registration and annual returns based on its financial performance. While some of these are simply the result of their owners reluctance to pay annual renewal fees – and even more importantly their tax obligations – others have since gone under or have been voluntarily discontinued within a business terrain where the business mortality rate is very high for numerous reasons, ranging from insufficient working capital financing, through lack of succession planning, to outright bankruptcy.

The RGD asserts that the delisting exercise has become necessary after the end of the three months validation process conducted by the Department from July to September this year to review the sampled group of companies not in good standing with the Department.

In actual fact though public policy commentators and analysts suspect that the biggest driving force behind the exercise is to get an effective register of businesses who are tax liable. This is part of a wider effort by government to significantly increase public revenues by catching up with profit making businesses that evade taxes by avoiding leaving records from which an audit trail can be derived.

The RGD asserts that over 257,241 companies existing in the database had not filed their Returns or Amendments with the Department since 2011 had not carried out the update of their data dubbed “Re-registration” as at March 2020. The statement further noted that 670,282 companies in the old database had not carried out the update of their data dubbed “Re-registration” as at March 2020

The RGD has therefore spent much of last week urging defaulting companies – whether still currently active or not – to take measures to regularize their business and update their records with the Department to avoid being delisted. However business owners who have no intention of using the registered business name to continue their business activities or who willingly want to wind up or dissolve their company are required to formally inform the RGD in writing about such a decision so the Department can strike the business of the register and free the use of the business name for other business owners

The new Companies Act 2018 (Act 992) tightens the regulations with regards to business regulation just as it does with regards to corporate governance, with the latter having taken most of the attention of the entrepreneurial and direct investment communities in Ghana. Indeed a provision under section 289 of the Act states that a company can be stricken off the register due to the failure of the company to file its annual returns on time or due to a change in the Company’s Registered Office and Principal Place of Business without notifying the Registrar of Companies.

The Act mandates the Registrar of Companies to wind up companies whose office is known not to be in operation after notices have been given to such companies to file their annual returns and a subsequent moratorium has expired without the company duly complying.

A company’s status after the strike off at this period would be classified as being inactive and would not be allowed to engage in any business transaction for the next 12 years, unless given special dispensation by an order from a court of competent jurisdiction, to the RGD to restore it to a status of good standing in the Companies Register.

The RGD notes that: “Two notifications were earlier issued on 12th May and 1st December 2020 with the final notice published on 19th March 2021,”

The list of the first batch companies now facing delisting has been put on the RGD’s website: www,rgd.gov.gh. Their identities are also to be published in some national newspapers soon as well to enlighten the business community in particular and the general public as a whole as to who not to do business with.

However these companies are being given one last chance to avert delisting; the companies due to be delisted van still file their Annual Returns with the RGD and thus have their names taken out if the black list before the end of October.

This though is just the first phase of a delisting process that will run through to the end of this year, with up to 100,000 companies facing the prospect of losing their status as entities licensed to carry out business activities in Ghana.

The next batch of enterprises to be served notice of imminent delisting will comprise limited liability companies, partnerships and business names (effectively sole proprietorships) put in the old register between 1963 – when the original Companies Act first introduced a Register of Businesses) – and 2011 and who have  failed to update their records under the Free-registration exercise.

Ultimately the RGD expects to have a clean and credible register of all compliant companies by the start of 2022, devoid of dormant enterprises and businesses that have simply refused to update their records and meet their fiduciary obligations to the State.

Source: Goldstreetbusiness