FOUNDATIONS OF
ENTREPRENEURSHIP
CLASS FIVE: LEGAL,REGULATORY AND POLICY CONSIDERATIONS
Elikem Nutifafa Kuenyehia
Agenda for Class Five
• Recap of Class Four
• Entrepreneuship
• Forms of business organisation
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Sole Proprietorship
Partnership
Limited liability company
Unlimited liability company
External Company
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
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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
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Regulations
Form 3
Form 4
Registration and presentation fee
A sum equivalent to 0.5% of the stated
capital for public companies and
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 ‘cooperative’ 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 3rd parties
– Ultimate liability for far as 3rd 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
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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