A new amendment to Ghana’s Companies Act is coming which will, in fact form part of an impending overhaul of the entire law that provides the framework for how private enterprise are established and run in the country. The amendment sets out to address the issue of beneficiary ownership in Ghana; in plain English this translates to identifying the true owners of business enterprise as different from the people who are officially registered as the owners.
In Ghana, as in most other African countries, those differences can be very wide indeed; fronting by people as shareholders of companies to hide the identities of the real owners is a common place phenomenon. Family members or close friends regularly stand in for others as shareholders and in many cases even as sole proprietors.
There are several primary reasons why this is done and what they have in common is that in every case it is used to hide malfeasance in one sort or the other.
One reason is that public officers in positions of business regulatory authority often take advantage of their office to set up enterprises that effectively they themselves have the mandate to regulate and thus can use their public office to give the enterprise they own some undue advantage. For instance, there are lots of allegations – none of them yet publicly confirmed – that some central bank officials own microfinance institutions through undisclosed beneficiary ownership and thus can enable them to escape prudential regulation and accompanying sanctions.
Related to this, some public servants or private sector corporate executives, use undisclosed beneficiary ownership to establish enterprises that they are authorized to award – or at least influence the award of – contracts to by their own employers, sometimes on financially malfeasant terms, which result in inordinate profits at the expense of those employers.
Another reason is that undisclosed owners of business enterprises use beneficiary ownership to hide the malfeasance used in acquiring their investment capital in the first place. For instance, a public servant who had amassed wealth through corrupt practices including outright embezzlement of public funds, can use undisclosed beneficiary ownership to establish enterprises worth several times the salaries and official benefits accruing to them throughout their working lives, without being questioned as to the source of their investment capital.
The fact that in most cases, beneficiary ownership covers financial malfeasance or outright crime, should be an incentive for government to strive hard to eradicate it, or at least ensure it is disclosed so such enterprise owners can be monitored to ensure they do not take undue advantage of their circumstances.