FOUNDATIONS OF ENTREPRENEURSHIP Elikem Nutifafa Kuenyehia CLASS FIVE: LEGAL,REGULATORY AND POLICY CONSIDERATIONS

Agenda for Class Five Recap of Class Four Entrepreneuship Forms of business organisation o Sole Proprietorship o Partnership o Limited liability company o Unlimited liability company o External Company o Co-operative Other legal forms o Joint Ventures o Franchising o Agencies Mergers and acquisitions Other Legal Considerations Guest Speaker: Mr. Kwabena Adu-Kusi, Managing Partner, Law Bureau

Recap of Class Four What did you learn about idea generation? Comments on the idea generation exercise Entrepreneurial Conference –Presentations by different groups

Forms of business organisations Sole Proprietorship Partnership Limited liability company Unlimited liability company External Company Cooperative

Sole Proprietorship Most common form of business organisation in Ghana Business owned (and typically also run) by a single individual The sole proprietor and the business are essentially one –No distinction at law –No distinction between the entrepreneur and the enterprise –No limitation on liability

Sole Proprietorship (cont’d) If carrying out business in his true personal name, surname or initials no formality required But if using name different from true surname, name, initials must register under Registration of Business Names Act Certificate of registration to be renewed annually to be able to use the name

Sole Proprietorship (cont’d) Reg. Of Business Name separate from intellectual property registration which gives intellectual property rights to the name Sole Proprietor has sole responsibility for decisions relating to business No fetters on authority so long as lawful No requirement for board No obligation to disclose information or financials

Sole Proprietorship (cont’d) Not appropriate for certain industries where Sole Proprietorships are prohibited by law –Banking, insurance, communications Not appropriate where you want to seek equity funding from other people Does not lend itself to good corporate governance practice Comes to an end on death of Sole Proprietor

Partnership An association of two or more individuals carrying on business for the purpose of making a profit Must be incorporated under Incorporated Private Partnerships Act 1962 Maximum number of individuals = 50 Partners must be of sound mind & not have been convicted of dishonesty offence in last five years

Partnership (cont’d) Is a legal person separate from its partners –May be sued and sue in its own name, own assets etc Partners share decision making, profits and losses Partners jointly and severally liable with the firm and the other partners for all the debts and obligations of the firm

Partnership (cont’d) Passive/sleeping vs. Active partners –Key decisions involving all partners Individual partners taxed on their share of partnership profits –Each treated as a sole proprietor for tax purposes Required to keep proper accounts Required to produce financial statements –No requirement for audit but highly advisable

Partnership agreement provisions Commencement Name Financial Contribution Profit (or Loss) Share Ownership of partnership assets Drawings and/or salaries Decision making Dissolution Payment in event of death or retirement Restraint of trade following departure Dispute resolution (litigation & arbitration) Governing Law

Companies Regulations – constitution of the company Types: –Limited liability Liability limited to amount paid for the shares Generally, shareholders cannot be held liable for liability of company Assets of Directors not available for company’s creditors –Unlimited liability Not generally used or suitable for entrepreneurial ventures ; though some professional firms use this

Companies Incorporating a company Incorporation documents to the Registrar of Companies o Regulations o Form 3 o Form 4 o Registration and presentation fee o A sum equivalent to 0.5% of the stated o capital for public companies and o GH¢500 for private companies

Types of Companies Limited by shares –Owners given shares for money they contribute –Liability tied to shares purchased –Shareholders paid dividend from profits if and when declared Limited by guarantee –No shares issued –Members liability tied amount members agree to contribute if company winds up –Not for profit purposes – income etc goes towards object of the company

External Companies Company incorporated outside Ghana establishes a ‘branch’ in Ghana No separate legal personality from parent Obtain external company status by filing certain documents and Registrar informing you that registered in register of external companies Must have a Local Manager & a local process agent

Co-operatives Association set up to provide service (s) or benefit(s) for its members Typically made up of members with similar characteristics (same employer, trade, profession) May be incorporated or just be a body of individuals –Where incorporated must have word ‘co- operative’ after its name Not permitted to grant loans to anyone other than their members

Co-operatives (cont’d) Registered under the Cooperative Societies Decree 1968 Must have a minimum of ten members Members of co-operative are liable for debts of the co-operative Separate legal personality – can sue and be sued in its own name

Other forms of business organisations Joint Venture –2 or more businesses pool resources to achieve a common objective –Can be established by agreement or by setting up a JV limited liability company

Other forms of business organisations (cont’d) Franchising –An agreement where an owner of a business format, trademark, trade name or copyright (the franchisor) gives the right to another (the franchisee) to sell products or services under the franchisor’s trade name and/or to use his systems and business formula

Other forms of business organisations (cont’d) Principal/Agency –Agent acts on behalf of principal in relation to 3 rd parties –Ultimate liability for far as 3 rd parties are concerned is the principal’s Mergers & Acquisition –Not a separate business form –Typically involve 2 or more companies coming together to form a single entity

Other Legal Considerations Internal Revenue Act, 2000 (Act 592) National Pensions Act, 2008 (Act 766) Value Added Tax, 1998 (Act 546) Ghana Investment Promotion Centre (‘GIPC’) Act, 1994(Act 478) Immigration Labour Issues Factory, Office and Shop Regulations Free Zone Act,1995 (Act 504) Workmen’s Compensation Regulations

Guest Speaker Mr. Kwabena Adu-Kusi Managing Partner, Law Bureau Former Senior Associate at Ntrakwah & Company Teach Civil Procedure at Ghana School of Law