The Ghana Investment Promotion Centre Act, 2013 (GIPC Act), which was enacted on 26th August 2013, remains a key legislation and regulatory consideration for foreign individuals or entities entering the Ghanaian market. Among others, the GIPC Act establishes the Ghana Investment Promotion Centre to facilitate interactions between companies with foreign shareholding and the relevant Ministries, Departments and Agencies. The Parliament of Ghana is however currently considering significant amendments of the GIPC Act and an overhaul of the regulatory framework affecting companies with foreign shareholding.
Specifically, the Ghana Investment Promotion Centre (Amendment) Bill 2023 (the Bill) contemplates a change in the nomenclature and functions of the GIPC and proposes changes to remove significant disincentives to foreign investment in Ghana. The Bill further aims to synchronize the GIPC Act with legislations such as the Exemptions Act 2022 (Act 1083) and Public Financial Management Act 2016 (Act 921) which were enacted after the GIPC Act. The subsequent paragraphs discuss the key amendments proposed under the Bill in detail.
Proposed Changes Under the GIPC Amendment Bill
Removal of Capital Restrictions for Foreign Investors
The GIPC Act currently prescribes minimum capital requirements for foreign shareholders of Ghanaian companies. Foreign investors are required to invest the following amounts in cash or capital goods and by way of equity investment: (a) US$200,000 for joint ventures (with a Ghanaian holding at least 10% equity participation); (b) US$500,000 for wholly owned foreign companies; and (c) US$1,000,000 for trading enterprises.
The Bill seeks to eliminate the minimum capital requirements imposed on foreign investors under the GIPC Act. However, the minimum capital requirement for trading enterprises will be maintained to protect the local economy. Thus, foreign individuals and companies will mostly be free to determine the extent of their initial investment or entry into the Ghanaian market.
According to the memorandum to the Bill, the proposed amendment aims to put Ghana at par with other countries in the sub-region without such blanket minimum capital requirement as a way of encouraging foreign investment.
Unrestricted Participation In the Ghanaian Economy
The GIPC Act sets out eight (8) business activities that are reserved for Ghanaians and Ghanaian owned enterprises. These reserved activities include the printing of recharge scratch cards for telecommunication users, retail of finished pharmaceutical products, as well as the production, supply and retail of sachet water.
The Bill however intends to remove this restriction and permit foreign entities to freely invest in all sectors of the Ghanaian economy. The memorandum to the Bill highlights the amendment as necessary because the existing reservation conflicts with relevant legislation and the mandate of several sector-specific regulators.
Clarification on Registration Requirements for External Companies
The GIPC Act requires enterprises with foreign participation to register with the GIPC after incorporation and before commencement of business. The definition of an enterprise under the law has however called into question whether external companies should be required to register with the GIPC. The registration requirement for external companies was also unclear because such companies do not have equity or shareholding, and therefore, foreign investors cannot meet the minimum capital requirements by way of equity participation.
The Bill seeks to clarify the existing confusion and amend the definition of an enterprise to include an external company. An enterprise is defined to include all body corporates registered under the Companies Act 2019 (Act 992) for profit making. Therefore, external companies would be expected to register with the Authority after incorporation.
The Bill also replaces the biennial renewal of registration with the GIPC with an annual renewal of registration.
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