Felix Ntrakwah, Kwadwo Gyasi Ntrakwah and Joyce Franklyn Thompson of Ntrakwah & Co assess the regulatory landscape for mergers and acquisitions in Ghana
1. REGULATORY FRAMEWORK
1.1 What legislation and regulatory bodies govern M&A activity in Ghana?
Public M&A activity is governed by: the Companies Act 1963 (Act 179); the Securities Industry Act 1993 (PNDCL 333) as amended by the Securities Industry (Amendment) Act 2000 (Act 590); the Securities and Exchange Commission Regulations 2003 (LI 1728); the Takeovers and Mergers Code (Code); and, the Central Securities Depository Act 2007 (Act 733).
There are also regulatory consent requirements in certain industry-specific laws such as the Insurance Act 2006 (Act 724) and the Banking Act 2004 (Act 673) as amended by the Banking Act 2007 (Act 738).
M&A activities of public institutions are governed by the Securities and Exchange Commission (SEC) of Ghana and the Ghana Stock Exchange (GSE).
1.2 How, by whom, and by what measures, are takeover regulations (or equivalent) enforced?
Takeover regulations are enforced by the SEC, which has the power to give instructions on transactions governed by the Code, grant exemptions and withdrawals from the offer, and nullify the purchase of shares through a takeover, merger or consolidation that violates the rules of the Code.
2. STRUCTURAL CONSIDERATIONS
2.1 What are the basic structures for friendly and hostile acquisitions?
Where a person or persons acting in concert: (i) acquires or intends to acquire more than 30% but less than 50% of the voting shares of a public company in any 12-month period; or (ii) acquires or intends to acquire 50% or more of the voting shares of a public company; or (iii) acquires a company that holds effective control in the public company or together with the shares already held, will result in acquiring effective control of the public company, they will be obliged to make a takeover offer of the public company and must comply with the takeover procedures of the Code.
A person intending to acquire effective control of a public company is required to make the same offer to all shareholders of the same class of the public company intended to be acquired.
2.2 What determines the choice of structure, including in the case of a cross-border deal?
The choice of structure is determined by the nature of the acquisition, tax implications, or regulatory requirements.
2.3 How quickly can a bidder complete an acquisition? How long is the deal open to competing bids?
Generally, an acquisition may take between 85 to 120 days for completion.
A competing offeror should be submitted at least 10 days prior to the closure of the original offer period.
2.4 Are there restrictions on the price offered or its form (cash or shares)?
There are no restrictions on the form of consideration to be paid for the shares.
Where a takeover results in the offeror acquiring 90% or more of the offeree's voting shares, the offeror must offer the remaining shareholders a consideration that is equal to the prevailing market price of the voting shares, or the price offered to the other holders, whichever is higher.
The minimum offer should be the highest of the following (if applicable): the highest price paid for shares in the target by the offeror or parties acting in concert with it during the 26 weeks before the offer; the price paid under a preferential allotment by the offeror or parties acting in concert with it at any time during the 12 months before the closing date of the offer; or, the average of the highest weekly price realised by the shares of the target in the six-month period before the date the offer was publicly announced.
2.5 What level of acceptance/ownership and other conditions determine whether the acquisition proceeds and can satisfactorily squeeze out or otherwise eliminate minority shareholders?
The price, regulations of the company and conditions of the offer are the key factors which determine whether the acquisition proceeds or not.
Where a takeover results in the offeror acquiring 90% or more of the offeree's voting shares, the offeror would be required to offer the remaining shareholders a consideration that is equal to the prevailing market price of the voting shares, or the price offered to the other holders, whichever is higher.
2.6 Do minority shareholders enjoy protections against the payment of control premiums, other preferential pricing for selected shareholders, and partial acquisitions, for example by mandatory offer requirements, ownership disclosure obligations and a best price/all holders rule?
Yes, all shareholders of the same class of shares are treated equally under the takeover code.
2.7 To what extent can buyers make conditional offers, for example subject to financing, absence of material adverse changes or truth of representations? Are bank guarantees or certain funding of the purchase price required?
Conditional offers can be made. The offeror must state in the announcement the conditions of the takeover offer, including conditions relating to acceptance, listing and increase of capital. The offer can be made conditional upon acceptance of a minimum percentage of shares being received.
3. TAX CONSIDERATIONS
3.1 What are the basic tax considerations and trade-offs?
Consideration received or receivable by a person from the realisation of a chargeable asset inclusive of shares of a resident company is subject to capital gain tax of 15%.
3.2 Are there special considerations in cross-border deals?
Special considerations may arise. For example, in situations where the home country of the offeror has entered into a double taxation agreement with Ghana.
4. ANTI-TAKEOVER DEFENCES
4.1 What are the most important forms of anti-takeover defences and are there any restrictions on their use?
Prior to an offer, changes to the company's regulations can be made. The board of directors of the target may also frustrate the process by recommending that the shareholders do not accept the offer. Shareholders may institute legal action (obstructive litigation) in a bid to frustrate the process. Significant changes to the target's capital structure and assets can also be made prior to the emergence of an offer.
4.2 How do targets use anti-takeover defences?
See 4.1 above.
4.3 Is a target required to provide due diligence information to a potential bidder?
Yes.
4.4 How do bidders overcome anti-takeover defences?
Where the board of directors of the target company attempts to frustrate the process, bidders may threaten existing directors with actions for breach of duties. Attempts to replace incumbent directors can also be made.
4.5 Are there many examples of successful hostile acquisitions?
Hostile takeovers are rare in Ghana.
5. DEAL PROTECTIONS
5.1 What are the main ways for a friendly bidder and target to protect a friendly deal from a hostile interloper?
In practice it is difficult. However, a friendly bidder and target may protect a friendly deal by having a break fee provision.
5.2 To what extent are deal protections prevented, for example by restrictions on impediments to competing bidders, break fees or lock-up agreements?
To a large extent. An offer must be open for 30 days and a competing bid can be made as late as 10 days from the end of the offer period.
6. ANTITRUST/REGULATORY REVIEW
6.1 What are the antitrust notification thresholds in Ghana?
Ghana does not have a comprehensive competition regulation. However, the Protection Against Unfair Competition Act 2000 (Act 589) provides for protection against unfair competition and related matters in the course of industrial and commercial activities.
6.2 When will transactions falling below those thresholds be investigated?
Not applicable.
6.3 Is an antitrust notification filing mandatory or voluntary?
Not applicable.
6.4 What are the deadlines for filing, and what are the penalties for not filing?
Not applicable.
6.5 How long are the antitrust review periods?
Not applicable.
6.6 At what level does your antitrust authority have jurisdiction to review and impose penalties for failure to notify deals that do not have local competition effect?
Not applicable.
6.7 What other regulatory or related obstacles do bidders face, including national security or protected industry review, foreign ownership restrictions, employment regulation and other governmental regulation?
The Ghana Investment Promotion Centre Act 2013, Act 865, reserves certain activities such as the retail of finished pharmaceutical products and the printing of recharge scratch cards for Ghanaians and Ghanaian-owned businesses.
Under Ghana's labour laws, where the offer may result in redundancies, the target company will be required to inform the chief labour officer and trade union concerned and that may prolong the process.
7. ANTI-CORRUPTION REGIMES
7.1 What is the applicable anti-corruption legislation in Ghana?
There are various laws aimed at curbing corruption in Ghana.
The Constitution of Ghana as well as several other legislations such as the Criminal Offences Act 1960 (Act 29), Whistleblower Act 2006 (Act 720) and the Anti-Money Laundering Act 2008 (Act 749) have provisions governing anti-corruption in Ghana.
The Parliament of Ghana ratified the United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption on October 18 2002.
7.2 What are the potential sanctions and how stringently have they been enforced?
Criminal and civil sanctions may be imposed. The Criminal Offences Act 1960 (Act 29) provides for sanctions for corruption in general.
8. OTHER MATTERS
8.1 Are there any other material issues in your jurisdiction that might affect a public M&A transaction?
Bureaucracy in dealing with public agencies is always a challenge in any M&A in Ghana, especially where some regulatory approval is required.
8.2 What are the key recent M&A developments in your jurisdiction?
The acquisition of Provident life and Express Life by Old Mutual and Prudential respectively; and, the acquisition of Fan Milk International by Abraaj.
There have also been issues surrounding the proposed takeover of HFC Bank Ghana by Republic Bank of Trinidad and Tobago.
First published by our sister publication IFLR magazine. Take your free trial today.
Felix Ntrakwah
Ntrakwah & Co
Accra
About the author
Felix Ntrakwah is the founder and senior partner of Ntrakwah & Co, and one of Ghana's leading experts in corporate and commercial law. He has advised local and foreign clients and conducted litigation on various corporate, commercial and intellectual property law issues. He is among the committee of experts in Ghana who drafted the new Companies Bill, yet to be passed by parliament. He is an alternate member of the International Chamber of Commerce Court of International Arbitration in Paris, and he established the Corporate Law Institute in Ghana to promote the development of corporate law practice in the country.
Kwadwo Gyasi Ntrakwah
Ntrakwah & Co
Accra
About the author
Kwadwo Gyasi Ntrakwah is a member of the Honourable Society of the Middle Temple, London, and the Chartered Institute of Arbitrators, and a member of the bars of England, Wales and Ghana. He obtained his LLB (Hons) degree from the University of Reading and his LLM in international business law from the University of Exeter.
Ntrakwah advises clients on a wide range of legal issues including M&A, commercial and contractual disputes, corporate transactions, construction law and international commercial arbitration. He has advised local and foreign companies on M&A in Ghana.
Joyce Franklyn Thompson
Ntrakwah & Co
Accra
About the author
Joyce Franklyn Thompson is a junior associate at Ntrakwah & Co, and is attached to the corporate and commercial department. She assists in advising local and foreign companies on various company law issues, labour law, banking and finance, and M&A. She has a keen interest in company formation and corporate governance, intellectual property and international business law. She also works with Ntrakwah & Co's subsidiaries, Corporate Profile and the Corporate Law Institute.