Corporate leadershipi Board structure and practices
Ghanaian boards do not have a two-tier structure. The normal practice is for a single-tier board, made up of executive and non-executive directors, to collectively manage the business of the company.
The company's regulations may prescribe a minimum or maximum number of directors, subject to the requirement under the Companies Act for every company to have at least two directors and for at least one director to be present in Ghana at all times. Public companies, whose regulations authorise cumulative voting in the appointment of directors, are required to have a minimum of three directors on their board. In addition to any other disqualifications specified under the regulations of a company, infants, body corporates, persons of unsound mind, fraudulent persons and undischarged bankrupts are disqualified from being appointed to the board. Non-executive directors must make up at least 50 per cent of the board of a listed company; in addition, there shall be at least two independent directors, or independent directors shall constitute approximately 25 per cent of the board. Sector-specific legislation and regulations may also specify additional requirements relating to the competencies and qualifications of members of the board, as well as representation of non-executive or independent directors on the board. The Corporate Governance Code recommends a board of between eight to 16 members that has a balanced representation of executive and non-executive directors, and that at least one-third be independent. The BoG Directive requires that the board of regulated financial institutions have a minimum of five and a maximum of 13 members, with the majority being non-executive directors who are ordinarily resident in Ghana. In addition, regulated financial institutions boards must be composed of 30 per cent Ghanaian nationals who are ordinarily resident in Ghana, and independent directors must also make up at least 30 per cent of these boards.
An act of the board of directors or the managing director of the company while carrying on the usual business of the company is regarded as an act of the company itself, and the company shall bear civil and criminal liability for that act unless it can be shown that the person with whom the board or managing director was dealing with had actual or constructive knowledge at the time of the transaction that the managing director or the board did not have the power to act in the transaction. A single director, other than the managing director, can only represent the company with the board's express or implicit approval.
The board is responsible for directing and administering the business of the company. In managing the business of the company, the board may not exceed the powers granted to it under the Companies Act or the company's regulations, or exercise those powers for a purpose different from that for which they were granted, whether or not it may be in the best interests of the company to do so. The board has a legal duty to not act on the directions or instructions of any other person, and to ensure that the affairs of the company are being managed in accordance with law and the company's regulations. In filling a casual vacancy on the board, the directors have a duty to satisfy themselves that any person they intend appointing to the vacant office is suitable and has the requisite integrity to be a director of the company.
Unless otherwise specified by the company's regulations, the board may elect one of their number to act as chair at their meetings for a specified period. The BoG Directive, however, makes specific requirements for the board chair: that is, the position must be occupied by an independent director who is also ordinarily resident in Ghana, and the term of office is restricted to three years renewable for only one additional term. Subject to a contrary provision in the regulations of the company, the chair has a casting vote in the event of an equality of votes during the decision-making process of the board, and also presides at meetings of shareholders. The chair is required to sign minutes of board and shareholders' meetings at the end of the meeting or on the next adjourned date, and if duly signed, such minutes are prima facie deemed to be a true record of the proceedings at the meeting. Audited accounts and balance sheets of companies may be signed by any two directors with the approval of the board. Regulatory filings may also be signed by the company secretary and any director of the company.
The board of directors may delegate any of their powers to a committee consisting of one or more of their number. The board may also appoint one or more directors to the office of managing director and entrust any of the powers exercisable by the board to the managing director or managing directors, subject to any restrictions or conditions that they deem fit. The delegation of its responsibilities to a committee or managing director does not absolve the remaining directors of any liability that may arise in the performance of the delegated duties by the committee or managing director. Directors must, therefore, ensure that they have proper oversight over their delegated responsibilities.
The Companies Act provides for the executive office of managing director of the company. The managing director is appointed from among the board, and may exercise all or any of the powers of the board that the board may confer. There is no requirement under the Companies Act that the role of board chair and managing director be separately performed by two different directors. However, the Corporate Governance Code recommends a separation of the two roles, and it is standard practice for the two positions to be occupied by different people. For regulated financial institutions, and per the BoG Directive, the separation of these roles is a requirement and not a recommendation. Further, the position of managing director can only be held for a maximum of 12 years, split into three terms with each term not exceeding four years. The chair's traditional role is to act as leader of the board and to chair board and shareholder meetings. Outside general meetings of the company, direct communications by directors (the chair included) with shareholders are not common, although not prohibited under the Companies Act.
Fees and other remuneration payable to directors in their capacity as directors may only be determined by the ordinary resolution of members. The remuneration of executive directors in respect of the executive positions that they hold at the company may be fixed by the board as part of the board's terms of employment; however, these terms must be approved by ordinary resolution of the members of the company prior to any payments being made. Unless the company's regulations provide otherwise, the board has the power to determine the remuneration of senior management. Directors' remuneration may not be paid free of income tax; nor can it be calculated by reference to or varying with the amount of income tax payable by directors.
The board may exercise any of its powers through committees consisting of one or more of its number. The Corporate Governance Code recommends the constitution of at least an audit committee and a remuneration committee composed of a majority of non-executive directors. It also advocates the inclusion of executives who are not directors of the company on whatever committees that the board considers appropriate to effectively discharge their functions so long as the responsibility for decision making remains with the directors on the committees. The BoG Directive on the other hand makes it a requirement for regulated financial institutions to have at least two board committees, an audit committee and a risk committee, which must be chaired by independent directors.
Directors of a listed company are guided by the tenets of the SEC's Takeover Code. The board of a target company is required to make a recommendation to shareholders on the acceptance or rejection of any takeover offers made by third parties. The board must appoint an independent adviser upon receipt of a takeover offer, who shall advise the board and the company on all relevant issues and information relating to the takeover for the purpose of enabling shareholders to make an informed assessment of the takeover offer.ii Directors
Under the Companies Act, no distinction is made between executive or non-executive directors of the company with respect to their duties and liabilities. Directors' duties and liabilities are the same irrespective of whether they are non-executive directors or otherwise. In addition, directors may exercise any power that has not been reserved for the members under the Companies Act or the company's regulations. Further, to the extent that a person is described as a director, with or without a qualifying title, that person is deemed to be a director, whose role and involvement is expected to be the same as all other directors of the company.
Companies are required to circulate information to all directors, including non-executive directors, at the same time. Non-executive directors are not prohibited from conducting on-site visits of subsidiaries of the company. They are also at liberty to freely interact with lower management. In practice, it is usual, especially at the board committee level, for directors to work directly with the relevant management team to achieve their mandate. For example, directors on a risk subcommittee of the board may freely interact with the head of finance or another relevant department of the company, and may make enquiries with respect to reports or other information submitted to the board or board committee.
The generally applicable legal duties and best practice for directors in Ghana are summed up in Sections 203 to 208 of the Companies Act. Essentially, a director of a company is deemed to stand in a fiduciary relationship towards the company, and must at all times observe the utmost good faith towards the company whether in a transaction on behalf of the company or with it. Further, the actions of a director must at all times be what he or she believes is in the best interests of the company in order to preserve its assets and further its business, and the purpose for which it was formed. Directors must act in the faithful, diligent and careful manner in which an ordinarily skilful director would be expected to act. They may not place themselves in any position in which their duty to the company conflicts with their personal interests.
A director is liable to compensate the company for any loss that it suffers as a result of a breach of the director's duties to the company. Directors must also account to the company for any profits they make from transactions involving a breach of their duties to the company. Contracts entered into between the company and a director who acts in breach of his or her duty to the company are subject to rescission.
Directors are appointed by ordinary resolution of members. The regulations of a company may validly provide for the appointment of one or more directors by a class of shareholders, debenture holders, creditors, employees or any other person. The board may also appoint a director to fill a casual vacancy on the board. A director of a private company shall continue in office until he or she vacates the office or is removed in accordance with the law and the company's regulations. Directors of public companies, except the managing director, are subject to retirement by rotation – usually one-third of the board must retire every year. There are formal processes and default rules regulating the appointment and removal of directors of both private and public companies. With respect to public companies limited by shares, a resolution for the appointment of two or more directors shall not be moved as a single resolution except with unanimous approval of the shareholders. Nonetheless, the company's regulations may authorise cumulative voting for appointing directors.
Directors are prohibited from putting themselves in situations where a conflict arises between their duty to the company and their own personal interests or the interests of other persons. In very limited circumstances, the company may consent to a conflict situation following full disclosure of all relevant information to the board or members in general meeting. These include instances where a director is directly or indirectly personally interested in a transaction entered into by the company or in a competing business with that of the company, or intends to use for personal advantage money or property belonging to the company or confidential information obtained in his or her capacity as a director of the company. Sector-specific laws may also require directors to disclose conflict situations to the company. For instance, directors of banks, specialised deposit-taking institutions or financial holding companies must declare on an annual basis any personal interests and business or investment interests that they may have in the company, and notify their board in the event of any changes to that declaration.
There are no provisions regulating the manner of interaction between executive and non-executive directors. In practice, directors cooperate fully with each other for the purpose of ensuring the effective management of the company.