Monday, March 27, 2006

ThinkGhana and The Guinness "Merger" - The Rejoinder


We wish to invoke our constitutionally guaranteed right to a rejoinder in respect of an article captioned “ThinkGhana and the Guinness Merger”, which appeared in the business column of your highly esteemed newspaper on Monday, February 13, 2006. We do on the presumption that we are not responding to an article from a ghost.

We are deeply distressed by the continuing assault on the collective intelligence of all Ghanaians by the consistent false information that is being peddled by the same public institutions and individuals who have a duty to prevent such occurrences. In normal times, this rejoinder should have been forwarded by the Securities and Exchange Commission (SEC) or the Ghana Stock Exchange (GSE). It has however become increasingly clear that neither the SEC nor the GSE would act to correct the infringement of our securities laws by Guinness Ghana Breweries Ltd. (GGBL). It is in this light that we are compelled to once again attempt to clarify the issues so that the continuing assault on the Ghana’s credibility as an investment destination would be corrected, if at all.

We wish to state categorically that there has been no merger between the then Guinness Ghana Ltd. and GBL to form GGBL. GBL still exists! The writer of that article, Mr. Edward Quartey, conveniently refers to the transaction as a merger. We encourage all journalists to contact the SEC or the GSE and ask this simple question: “Has there been a merger between GBL and GGBL to form GGBL?” Depending on the position and the knowledge wielded by the officer responding, there will be applicable sanctions under Ghanaian law for the answer given. The rather bizarre situation is that a corporate entity that frankly ought to know better and does indeed know better, is consistently evidencing scant regard for our laws, institutions and people and is acting on the presumption that all Ghanaians are unaware of the breaches that have occurred. ThinkGhana is in receipt of a fax from the same entity, on the letterhead of an entity called Guinness Ghana Breweries Group (GGBG). By definition, ‘Group’ denotes more than one company. A merger should by definition necessarily mean only one entity existing after the process. At the bottom of the same letterhead is a statement that “Ghana Breweries Ltd. and Guinness Ghana Breweries Limited are members of the Guinness Ghana Breweries Group of Companies”. Your columnist states inter alia, that he is surprised at the litany of complaints so long after the merger has been completed and the resultant entity had begun operating under its new name and corporate branding. We expect GGBL to publish a rejoinder to that as they should take strong objection to the false information put out by the Graphic columnist. In the Annual Report of GGBG 2004, the Chairman of GGBG states as follows on page 8: “Following completion of the transaction, Guinness Ghana Limited changed its name to Guinness Ghana Breweries Limited”. He states further that “since then, both companies have been working hard to merge the operating businesses of former Guinness Ghana Ltd. and Ghana Breweries Ltd”. According to the said statement, “the businesses have been operating under the name of Guinness Ghana Breweries Group to help the sense of unity that is being built between the two companies. However, I would like to ensure that you are all clear that: Both Guinness Ghana Breweries Limited and Ghana Breweries Ltd. continue to exist as stand alone entities”, end of quote! So one would expect that after such a publication in the Annual Report for an AGM that was held only last December 2005, GGBL would be the entity that should be writing a rejoinder to correct the entirely false impression created by the Graphic columnist. The MD of GBL is also the MD of GGBL. If there has been a merger, would he hold both positions? GGBL is just the old entity, GGL, which changed its name into that of the intended merged entity, GGBL and has consistently worked to promote the wrong impression in the minds of all Ghanaians that GGBL is the merged entity. We therefore reiterate that in normal times, if I were the MD of GGBL and I found my picture in a newspaper article strongly advocating that there has been a merger when I am fully aware that there has not, I will be instructing a rejoinder to correct that misinformation. Indeed, under Ghanaian law, the SEC, GSE and GGBL have a legal duty to as a mater of urgency, immediately correct the false information which evinces a brazen lack of respect for our laws and to halt the impunity with which our securities laws are being breached.

These facts are germane to the matter:
a. In June 2003, GBL completed a capital restructuring programme.
b. In December 2003, Heineken and Diageo, the parents of the Ghanaian entities, announced a deal to acquire Heineken’s stake in GBL triggering a takeover under the GSE Rules.
c. Guinness was obliged to file its first quarter results 2003 by October 2004. It was never filed. Till date, it has not been filed. This is a clear breach of LI 1728. The penalty is two million cedis for each day the default remains. Nothing has been done by the regulators till date.
d. Guinness half-year results for the period were finally released later but it was also an ingenious breach of the rules. Guinness used the old format instead of the stipulated format under LI 1728. That implied that a condensed financial statement was produced instead of a separate balance sheet, profit and loss account and cash flow statement as required by law. Again, the regulators allowed it to pass! Was it an attempt to prevent disclosure of the true financial state of Guinness in the lead up to the takeover? This would only be known if the SEC suddenly wakes up to its responsibilities under law and decides to investigate the acquisition.
e. No valuation report was submitted to the GSE or SEC. The GSE has no discretion in this matter. The GSE’s own Listing Regulations require it to demand a copy of the valuation report. Again, it was never demanded by the regulators and never submitted.
f. Between January 1, 2004 and March 31, 2004, GGBL share prices increased by approximately 65% (that is within three months of the announcement of its merger with GBL) whilst GBL increased within the same period by approximately 19%. GBL’s share price on the date of the announcement of the deal (December 17, 2003) was ¢1425 and rose to ¢1700 by March 31, 2004. GGBL was trading at ¢5400 on the date of the announcement. By March 31, 2004, it was priced at ¢9360. On any other market, the regulator would investigate to assure itself that all was well. Is Ghana any different? We think not.
g. False reports have been made to the GSE and the SEC in clear breach of the law. Guinness sent a press release to the GSE in 2005 stating that the merger was achieved in December 2004. This is false and a breach of the Securities Industry Law, 1993. Nothing has been done till date. Regrettably, the SEC itself has repeated these false and untrue statements in official communication to ThinkGhana. The Daily Graphic itself carried a report of the launch of a corporate entity and logo of GGBG on October 13, 2005. It was all part of the grand deception. GGBG does not exist in law. It has not even been registered with the Registrar-General’s Dept. in contravention of the Registration of Business Names Act, 1962 (Act 151).

So ThinkGhana will ask: Has Ghana’s parliament granted Guinness immunity from Ghanaian law? The deal created a virtual monopoly in the breweries industry in Ghana. Have we created a behemoth that frightens off everyone? We are still investigating the reasons behind what has petrified almost all our institutions into inaction in respect of this matter.

Sour grapes?

We have set this segment out for special reasons. In this dear nation of ours, anytime an issue is raised and people cannot answer on the facts or the law, the easiest option is to attack the integrity of individuals. We take the opportunity to inform Mr. Edward Quartey that on January 24, 2006, we forwarded an 8-page detailed response annexing a 15-page appendix to the SEC. It is instructive on the matters raised. We are ever ready to forward a copy of that communication to you. We believe that you will become an advocate of ThinkGhana after perusing that communication. We think that Guinness itself and its patrons would marvel at the extent to which we would go to defend the indefensible for their sakes when in their own countries, they were duly penalized when these same activities were carried out.

We have pointed out to the SEC and we repeat same here:

“The undersigned’s role
Your reference to the undersigned as having “occupied a key position in one of the companies that was a party to the merger” is also factually inaccurate. We find such statements, from no less an entity than the securities regulator as unfortunate and symptomatic of the obvious lack of effort on the SEC’s part to appreciate the whole process of acquisition that it had approved itself. Once again, we wish to point out that the acquisition process was not a merger but a takeover. All the documentation on the process would obviously be lodged with the SEC by GGBL. The undersigned worked with GBL as its Company Secretary/Legal Adviser during the period. Prior to that, he had been with the GSE for six years, three of which he was the Legal Adviser. With this background in securities law, the undersigned is better placed than most to speak to the self-same issues that the SEC refuses to even acknowledge. GBL was the acquired entity, that is, the Offeree. As the SEC is doubtless aware, the acquisition was triggered by an agreement between Heineken International BV and Diageo Plc for the sale of Heineken’s stake in GBL to Diageo. The SEC is fully aware that at all times, GGBL and Diageo were the main actors in the process with Heineken. The deal was done offshore. GBL’s responsibility as the Offeree was to protect the interests of its shareholders and insulate the Board from potential pitfalls arising from the transaction. The role of the undersigned was to help the Board achieve that objective. The GBL Board as far as the undersigned is concerned, took steps that all other actors in the process should have taken. Did they take all the legal advice that was on offer? When the SEC makes a decision not to investigate such a serious matter, it obviously disables itself from determining what roles individuals played and how decisions were taken from the GBL perspective. Obviously, the undersigned cannot be privy to what was happening on the Offeror’s side, which is the issue that must engage the SEC’s attention.

The opportunity is also taken to stress that the SEC should encourage even people who may have committed infractions of its own rules to come forward with information if it would lead to the advancement and growth of our young securities market”.

If Mr. Quartey would be kind enough to request all the memoranda that the undersigned forwarded both to the former Board of GBL and to the present MD of GBL himself, he will be greatly instructed. ThinkGhana was established precisely to offer sanctuary to people who would want to do right by this great nation of ours but are consistently intimidated into silence and inaction.

In order to highlight the “illegality” of the ‘show-me evidence’ syndrome which has infected the securities regulators, ThinkGhana has requested specified documents from GGBG and GSE. GGBG has indicated that they are seeking their solicitors’ opinion on the matter. We will be surprised if they oblige. The GSE however does not have the same leverage under law. We therefore still await access to public information from them.

We wish to point out that we have applied to the Minister of Finance under s140 of PNDCL 333. We patiently await his communication to inform our next steps.

Finally, we cannot help but admit that we are intrigued by the editor’s note to the article. It was, respectfully, completely unnecessary. What it does is to feed a perception that someone is so desperate to keep this matter out of the public domain. We have therefore disregarded that footnote and forwarded this rejoinder to you in the expectation that this rejoinder will be duly published as warranted by Article 162 (6) of the 1992 Constitution. We dare say that until the day all of us as Ghanaians, stop wearing our ignorance with such pride, foreigners will take us for granted and act with impunity, even when they themselves know they are in breach of the law. After all, the good book says, for lack of knowledge, my people perish!

“You can fool some people some of the time
But you can’t fool all the people all the time”.

Yours in the service of Ghana


P/S: This was forwarded to the Daily Graphic newspaper in reaction to an article published in that newspaper. The rejoinder has subsequently been published by the newspaper as required by law.

Role of the Company Secretary in a Ghanaian Listed Company



According to the late Lord Esher M.R., “a Secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent any thing at all”. In this article, I shall endeavour to look at the role of the Company Secretary in the administration of a public listed company. I shall particularly focus on whether the statement quoted above represents what the modern Company Secretary is or should be. Is the Company Secretary an ‘amanuensis’?

In today’s corporate world, normal business activities of both private and more so public companies are subject to a web of various laws and regulations. This is more so for a publicly listed company whose continued listing on an Exchange is subject to on-going compliance with the listing regulations of the relevant Exchange. Information is required on a continuous basis for compliance purposes. Disclosure requirements for listed companies are therefore greater in many respects than for unlisted or private companies. Where a company has multiple listings, that company would in all respects be reporting to the Registrar of Companies or its equivalent in its country of origin as well as the Stock Exchanges on which its securities have been listed.

In this aspect, the role of the Company Secretary is very important. A Company Secretary is a facilitator and guide as to the best possible means of how to perform a certain act, with minimal complications and with avoidance of not anticipated and costly pitfalls. Section 190 of the Companies Code, 1963, Act 179, provides that every company must have a Secretary. A company under the Code cannot operate for more than 6 months without a Secretary and is duly fined for each other day it continues to operate without a Company Secretary. The Company Secretary is an agent and in most cases in Ghana, an employee of the company. This gives rise to a number of common law, statutory and regulatory obligations. The Company Secretary plays a pivotal role in the smooth administration of the company and in the fulfilment of its responsibilities towards all the afore-mentioned regulatory institutions and to the company’s shareholders and other stakeholders.


It has been mentioned previously that the Company Secretary is an agent and in most cases an employee of the company. The Company Secretary of a public listed company usually undertakes the following duties:

1. Maintaining Statutory Registers:

(a) Register of Members (section 32 of Code):

The provisions of the Code stipulates that every company must keep a register of its members (i.e. shareholders) which must include the underlisted particulars:
i. the name and address of each member of the company
ii. a statement of the shares held by each member with distinguishing numbers, if any
iii. the amount paid on each share
iv. the date of entry on the Register
v. the date of cessation of membership.

Members may inspect the Register free of charge. Non-members may inspect the Register on payment of a small fee. It is instructive to note that any person may require a copy of the Register upon payment of a small fee and the copy must be supplied within ten days.

The Register of Members is important, as it is the public representation of who the members are. A Company has no power to create a right of pledge or lien over the Register, since that would deprive the public of their statutory right of access and inspection.

It must be noted that corporate practice in Ghana is that the Register of Members is invariably kept at the office of the Registrar of the company. Registrar services are usually handed out to an entity which is external to the company offering the specialised service. However, it is prudent for every company secretary to have at least a copy of the most recent Register of Members once very quarter and also request from the Registrars a list of the top twenty shareholders of the company at the end of every month. A company secretary will then be able to alert the Board and Management of a listed company to movements in the shareholding worthy of note.

(b) Register of Directors and Secretary (section 196):

Every company is obliged to keep a register of its directors and its secretary at its registered office. Such a Register must contain the name (and former name where applicable) the usual residential address, business occupation and particulars of any other directorships. The company must notify the Registrar within twenty-eight (28) days of any change in the particulars on the Register. When a person becomes a director, the notification must be accompanied by his signed consent to act as such. Unless expressly exempted by the Registrar, the names of all the directors must be put on the company’s business stationery. This requirement is not adhered to in corporate practice in Ghana by some firms and the SE, GSE and the Registrar of Companies should be mindful of it.

(c) Register of Directors Interests (s215):

Every company must keep a register of directors interests in shares and debentures. The Company Secretary must enter the information within twenty-eight (28) days of such acquisition. When a publicly listed company receives notification from a director, it must before the end of the following day, notify the stock exchange which may publish the information. This Register must be produced at the commencement of any general meeting and remain open and accessible during the continuance of the meeting to any person attending the meeting. At every other period, the Register of Directors Interests is accessible at the company’s office for its members (and even former members) and the company’s auditors without cost.

(d) Register of Charges (s107):

All public companies are also obligated under the Code to register with the Registrar every charge created by the company within twenty-eight (28) days of its creation. The implications of non-registration of the company charge are severe. Unless registered, the charge is deemed void as a security on the company’s property. This however does not mean that the company goes scot-free and is not liable for the repayment of any money that was to have been secured by the unregistered charge. The Code points out that when a charge becomes void, the money secured thereby immediately becomes payable despite whatever contrary intentions may have been stated in any contract.

These provisions however do not apply to pledges of or possessory lien on goods. They also do not apply to any charge by way of pledge, deposit, letter of hypothecation or trust, receipt of bills of lading, dock warrants or other documents of title to goods or of bills of exchange, promissory notes or other negotiable securities or money.

2. Completion of Statutory Forms:

Ordinarily, companies cannot simply forward a letter to notify the Registrar of Companies that the firm wishes to change the situation of the company’s registered office or that changes have occurred among the directors or secretaries or their particulars. The appropriate forms must be secured from the Registrar of Companies and duly completed for submission within the stipulated time frame. The necessary forms have been set out in the Companies Prescribed Forms Instrument, 1963 (LI 289).

3. Providing Members and Auditors with Notice of Meetings:

The company is expected to give members and auditors, at least twenty-one days written notice of an Annual General Meeting (AGM) and fourteen days written notice of a meeting which is neither an AGM or a meeting to pass special resolution. The company has an obligation to supply a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings at least twenty-one days before the meeting. A company may provide in its Regulations for a period longer but not shorter than the twenty-one days stipulated by law. It is instructive to note that members may call any meeting described as a general meeting if they so decided and it will be a meeting properly so-called despite a shorter notice. Furthermore, members holding 95% of the shares may also call a meeting at shorter notice where the holders of the 95% constitute a majority in number of the shareholders. It is the Company Secretary who would administer adherence to all these provisions of the Code.

4. Copies of Resolutions and Agreements:

Under section 176 of the Code, copies of certain resolutions have to be filed within twenty-eight days of their passage by the company with the Registrar of Companies. All special resolutions are required to be filed. Furthermore, resolutions to which the requisite proportion of a class of shareholders have given their written consent but which would otherwise have required a special resolution of the class must also be filed with the Registrar of Companies. It is unclear as to the degree of compliance by listed companies of this provision.

5. Minutes of Directors’ Meetings and General Meetings:

The Company Secretary is required to be fully conversant with the law and procedure relating to the calling and holding of meetings. The administrative tasks related to such meetings could be categorised as preparation for the meeting, holding the meeting, voting, minutes and procedural irregularities. The Company Secretary must also have a sound knowledge of the procedural requirements of holding a meeting, which would include the rules of debates, motions and amendments, polls, elections and ballots. The skill of secretarial administration is possibly one of the least appreciated but can be of tremendous importance where crucial matters affecting a company are the subject of resolutions in a meetings. The Code and the regulations of the company govern the procedure relating to periods of notice, quorums and majorities needed to pass different types of resolutions.

6. Inspection of Company Records:

The company also has an obligation to ensure that people entitled to do so, can inspect company records. For example, members of the company and members of the public, i.e. non-shareholders, are entitled to a copy of the company’s Register of Members. Members of the company are also entitled to inspect the minutes of its general meetings and to have copies of these minutes for a minimal fee.

7. Custody and Use of the Company Seal:

Though in many jurisdictions, companies no longer need to have a company seal, the Code makes provision for it and the Company Secretary is usually responsible for its custody and use, a function adequately catered for under company regulations in Ghana.

8. Chief Administrative Officer:

The Company Secretary therefore invariably acts as the chief administrative officer of the company. Such a position would require supervision of the administrative functions of the company and implementing board policy in relation to this. In the performance of his functions, the Company Secretary is expected to keep abreast with the provisions of the Code and maintain a watching brief over the company’s regulations and its obligations under the Code and to other regulatory institutions.

As chief administrative officer, the Secretary will often deal with employment of staff, contracts relating to the company’s premises and office equipment, the company’s printing and stationery requirements, the company pension arrangements and employee share option schemes and company cars. It must be pointed out that large firms have specialised departments, which handle these ancillary functions thereby freeing the Company Secretary to concentrate on the core functions. In companies that are not very big however, the Company Secretary may perform all the functions of a chief administrative officer.


The Company Secretary’s position also gives rise to certain common law obligations. The Secretary is expected to act in good faith, by acting in the best interests of the company and not use his or her position to make gains for him or herself. The Secretary must also exercise care, diligence and skill. These cover the proper performance of the duties required to be undertaken by the Secretary. The Secretary will be liable for any losses or damages caused through a lack of care, diligence or skill in performing those duties. The Company Secretary as an employee of the company is bound to follow instructions, whether they are written or verbal. He or she is also not at liberty to make use of the company’s records, such as trade secrets or lists of customers which are classified as confidential, for his or her own purposes.


It must be stressed that the duties already enumerated and the roles played thereunder by a Company Secretary are primarily “traditional”. The fact of listing on an Exchange introduces a whole new plethora of obligations the ‘chief administrative officer’ ought to be conversant with.

1. Continuing Listing Obligations:

Stock Exchanges around the world have a statutory duty to protect investors. To help fulfil this responsibility and maintain the prestige and quality of the market, Exchanges require listed companies to provide timely information so that investors can make well-informed decisions. In order to maintain an orderly market in all listed securities, Exchanges set out in their Listing Rules a number of continuing obligations which a company must fulfil on an on-going basis once it is listed. The main aim of these continuing obligations is to ensure that all potentially price sensitive information is released to the market without delay. Price sensitive information is that which has ability to impact the prices of securities when the information gets into the public domain. Timely disclosure of information is vital if investors are to have confidence in the operation of the stock market. This is also critical if the risk of insider dealing is to be minimised. A listed company is therefore expected to disclose all major new developments that may cause substantial price movements in its listed securities. For example, Part VII of the Listing Regulations of the Ghana Stock Exchange has clearly listed matters which must be the subject of public disclosure within specified deadlines, some to be immediately announced by the listed company and others by a stated deadline.

Under Part VII of the GSE’s Listing Regulations, public announcements are required in these situations:

- major developments in the company’s business activities, such as new products, contracts or customers

- significant acquisitions or disposals

- a change in directors or a change in the functions or executive responsibilities of a director

- decisions to pay dividends

- half-yearly results, preliminary financial statements of annual results, fully audited annual results

- changes in the interests of major shareholders and directors

- further issues of securities and changes in the company’s capital structure.

In respect of companies that have listings on more than one Exchange, special procedures are invariably applied to ensure that announcements are made simultaneously to all the Exchanges on which they are listed. Conventionally, such a company would be required to make the announcement in accordance with the requirements of the primary Exchange, for example the Ghana Stock Exchange and simultaneously deliver a copy of the announcement to the other Exchanges for distribution. For example, in respect of the London market, the information is notified to the Regulatory News Service (RNS) of the London Stock Exchange.

Although the Listing Rules impose an obligation on the directors to enforce the provisions with regard to their company, it is the Secretary to whom the responsibility is delegated to ensure that the administrative
procedures are in place to comply with the Exchange’s requirement. The issue of compliance therefore is a critical matter for every listed company and more so for a company with listings on different Exchanges.

2. Servicing a Plethora of Specialist Committees:

The tightening up of the regulatory framework of companies by Stock Exchanges around the world has given rise to the creation of various specialist committees at the board level in companies. In the wake of Enron and WorldCom, corporate governance has assumed fundamentally critical roles in all listed entities around the world. Board sub-committees may include audit committees, due diligence committees, continuous disclosure committees, remuneration committees etc. Corporate governance principles enable companies to balance the need for managerial risk taking and entrepreneurial abilities with mechanisms and procedures for monitoring purposes to safeguard shareholder interests and other interests in the wider community. The responsibility for ensuring the efficient implementation of such procedures would fall upon the Company Secretary’s shoulders.


A company secretary should not see himself as merely being responsible for ensuring compliance with the statutory requirement such as keeping proper statutory books and following correct procedures for convening relevant company meetings. Following scenarios such as the Enron and WorldCom failures, a very important and critical role for the company secretary arises. The modern company secretary should be the “ keeper of the company’s conscience”.

In playing this role, there is the need to for the company secretary to have a wider perception of the company’s obligations to all shareholders and be steadfast in proffering advice and guidance to the board of directors. But the performance of this function as the compliance officer of the company comes with risks. In Malaysia, for example, attempts have been made to provide legislative safeguards to the effect that any decision to dismiss the Company Secretary should only be carried out with the sanction of a resolution of the company in general meeting which is approved by not less than three- fourth majority of members present and voting at the meeting or by proxy. Ultimately, a Code of Ethics for Company Secretaries could be adopted to guide actions of company secretaries in the performance of their duties.

It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.
It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.

As has been pointed out, the Company Secretary is the chief administrative officer of the company and on matters of administration, he has ostensible authority to make contracts on behalf of the company. In the English case of PANORAMA DEVELOPMENTS – V – FIDELIS FURNISHING FABRICS (1971), the Secretary of the Defendant Company entered into a number of contracts for the hire of cars. The cars were ostensibly to be used to collect important customers from Heathrow Airport, but in fact, the Secretary used them for his own private purposes. Counsel for the Defendants cited a passage of Lord Esher MR in the 1887 case of BARNETT HOARES –V- SOUTH LONDON TRAMWAYS. The Learned Judge had said that “ a secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent anything at all”. However, on appeal to the Court of Appeal it was held that the Defendant Company was liable. The famous English jurist, Lord Denning, sitting in the Court of Appeal said, “…times have changed. A Company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities…. He is no longer a mere clerk…. He is entitled to sign contracts connected with the administrative side of a company’s affairs, such as employing staff and ordering cars and so forth”.

But Company Secretaries, a note of caution. This does not mean that a Company Secretary can begin acting as a Managing Director. A Secretary may not bind the company on a trading contract, borrow money on behalf of the company, issue a writ or lodge a defence in the company’s name without due authorisation. The Secretary also does not have authority to register a transfer of shares, strike a name off the Register of Members, suo motu or summon a general meeting on his own authority.

A word to the wise…

Partner, 1stLaw

Accra JD210905

1. Abbott, K. R. , Company Law, 5th Edition, DP Publishing (1995)
2. Armour Douglas, Company Secretarial Checklists, ICSA Publishing (1992)
3. The Companies Code, 1963 (ACT 179)
4. The Ghana Stock Exchange Listing Regulations of 1990 (as amended)
5. Geoffrey Morse, Charlesworth’s Company Law, 13th Edition, English Language Book Society/Stevens, 1987
6. The Listing Rules, London Stock Exchange (Yellow Book)

Takeover Offer Circular of Total Outre Mer Mobil Ghana Shareholders - A Commentary


We wish to comment on the Offer Circular, which has been forwarded to shareholders of Mobil Oil Ghana Limited (hereinafter referred to as ‘Mobil’). We do so in our capacity as stakeholders in the development of a sound securities industry in Ghana.

We are hopeful that our comments will help in building a viable securities regulatory regime for the capital market in Ghana and also encourage more discussion and dialogue on the future direction of regulation in the securities industry in Ghana.

Page 2, paragraph 3

We notice that no reference is made in the entire Offer Circular about the role of the Board of Directors of Mobil. We recognize that the Ghana Stock Exchange Takeovers and Mergers Rules (hereinafter referred to as the ‘Takeover Rules’), particularly rule 2, assigns a role to the Board of the Offeree in these processes.

We therefore recommend that in future mergers and acquisitions, the role of the Offeree Board be set out clearly. It may be possible for separate communication to be forwarded from the Mobil Board to their shareholders. In an acquisition such as under review, which is not hostile and which essentially is being carried out by the same corporate entity, it would have been fair to denote what the Offeree’s Board will have to do, especially when the applicable rules indicate some actions that ought to be taken by the Offeree Board. This will also help in strengthening the capacities of such Boards, as they will be compelled to abide by relevant corporate governance principles.

Corporate Information/Total Outré Mer’s Advisers, page 5

The Offer Circular seems to reflect the contact persons for both the Offeror and the Offeree as being the same. Though the disclosure is adequate and commendable, it may raise some doubts in the minds of some investors. If the same individual is representing both the Offeror and the Offeree, it is our respectful submission that the Board of Mobil should have been able to make a determination on the fairness or reasonableness of the price to the shareholders. This could be done in separate and additional communication to the shareholders.

Part 1 – The Offer, page 9

ThinkGhana finds the level of disclosures in the Offer Circular as commendable, particularly compared to the previous major acquisition on the stock market involving Guinness Ghana Limited’s takeover of Ghana Breweries Limited. Disclosure is critical to informed investment decisions. We therefore take the opportunity to commend the regulators in this particular instance and to recommend strongly that all Offer Circulars be made to contain relevant material information to enable shareholders make informed investment decisions. We find the disclosure that the agreement forms part of a transaction involving acquisition of fuels and lubricants businesses in 14 African countries as particularly illuminating.

We however draw attention once again to the acute dearth of information on what corporate actions the Board of Mobil will take. The Takeover Rules place an obligation on the Offeror to place the Offer in the first place with the Board of Mobil. What did they do after receiving it? What are they doing presently and what can they tell their shareholders? It cannot be said that in this particular transaction, the Board of Mobil is not involved in the process, with particular regard to the disclosed antecedents to the deal. We will therefore reiterate that Offeree Boards be encouraged to either communicate to shareholders on such Offers in separate communication where it is not feasible to include such communication in the Offer Circular which technically emanates from the Offeror.

Basis of Pricing the Offer, page 9

ThinkGhana acknowledges that the offer price of ¢54,000 per share more than meets the Ghana Stock Exchange requirements. This is also a major cause for optimism as it contrasts sharply with the situation in the GBL acquisition when the Offer Circular claimed that the original offer price of ¢1425 to shareholders of GBL offered an opportunity to make capital gains as it was higher than the stipulated minimum of the 26 week average. This statement was put in the Circular even though GBL’s prevailing price at the material time the statement was made was higher than the offer price.

Legal Basis, Regulatory Approvals and Waivers, page 10

ThinkGhana finds the disclosures in this section also commendable and worthy of emulation in subsequent acquisitions. We draw attention particularly to Total Outré Mer’s disclosure that it intends to merge with Mobil in 18 months. This is a fundamentally important disclosure which brings into sharp focus the continuing unfortunate situation on the market in the wake of the Guinness deal where there has been a consistent, deliberate effort to miscommunicate the distinctions between takeovers and mergers. In the Guinness scenario, a merger was promised but has clearly not been delivered yet Guinness has consistently put out communication to the effect that it has merged with GBL. This misinformation, regrettably, has also been adopted and repeated by the SEC itself. ThinkGhana believes that the SEC has the capacity to enforce the securities laws and must therefore be seen to be doing that. Confidence is the glue that holds markets together. To the extent that confidence is gnawed at, markets become unstuck, and this negatively affects all stakeholders.

We also note that no reference is made to any specific section of the Takeover Rules as being applicable. It will be recalled that ThinkGhana has had occasion to caution against acquisitions being done pursuant to rule 1(4) for example, as was the case in the Guinness deal. The legal implications of stating that an acquisition was being done pursuant to rule 1(4) have already been communicated to the SEC. We draw attention particularly to rule 2(4) and to the appendix to the rules, particularly clause 6 on rules 2(8) and (9). The Appendix to the Takeover Rules as it stands, states that if the Offer is approved by the Board of the Offeree (i.e. Mobil), then the Offer is done through the Mobil Board. If not, it is done directly to the shareholders. This seems to suggest that the Mobil Board did not approve the Offer when a close reading of the Circular clearly shows that this is not a hostile takeover. In view of the ‘loud silence’ of the Mobil Board on all these issues, shareholders, as rightly indicated in the Circular, would have to consult their own investment advisers on the way forward without the added benefit of the Board’s opinion.

ThinkGhana wishes to recommend that in future, statements sent to the Board of the Offeree and approved by the Board in accordance with the Takeover Rules should be included in the Circular or the Offeree Board should forward separate and additional communication to its shareholders. We believe that this would enhance corporate governance principles in Ghana, as the Offeree Board would be compelled to undertake its own due diligence.

Part III, Reasons for the Offer

As earlier indicated, we find the disclosures in this section very commendable and a major improvement on disclosure standards regarding such transactions on the market.


ThinkGhana finds the Offer Circular a major improvement on disclosures and compliance with basic securities laws and regulations compared to the previous takeover activity on the stock market. ThinkGhana has had occasion to point out to the SEC that there would be a lot more mergers and acquisitions on the stock market and the regulator needs to improve its internal systems to handle them when they arise. We therefore call on the SEC to expedite the promulgation of the Draft Takeovers and Mergers Regulations to provide clarity on the market concerning acquisitions activity in Ghana. As the SEC is clearly aware, the Takeover Rules of the GSE are clearly deficient and also has no provisions in respect of mergers. By definition, it will only apply to listed companies. The SEC’s Rules will apply industry-wide. All efforts should therefore be made to ensure the passage of clear rules for the entire industry without further delay.

The SEC should also be mindful of the commitments made in the Circular regarding the intended merger with Mobil such that the situation does not degenerate as has been allowed to happen in the case of the Guinness acquisition of Ghana Breweries Limited where there has not been a merger but the entire nation has been made to believe that there has been a merger.

Yours in the service of Ghana

Accra, Ghana

Dead Men Walking

'Again I looked and saw all the
oppression that was taking place
under the sun:
I saw the tears of the oppressed-
And they have no comforter;
Power was on the side of their
And they have no comforter.

And I declared that the dead,
Who had already died,
Are happier than the living,
Who are still alive.

But better than both
Is he who has not yet been,
Who has not seen the evil
That is done under the sun.

Ecclesiastes 4:1-3

Okay, admit it. Your sense of self is under constant siege. You desperately want to be but you are not. In short, you are a dead man walking! You have a deep affinity with your ancestors who endured slavery and had to serve the white man. They were consigned by a quirk of fate and the fact of their circumstances to be what they were. They had to keep their thoughts to themselves. Even when the master insulted them and their elders and their kith and kin, they had to grin and bear it. They could be seen but not heard! But our proud history as a nation teaches us that even then, some of our ancestors were brave enough to speak their thoughts, at their peril of course. But speak they did. Most were silent not by choice but a few refused to be intimidated and spoke.

What about you? You are living in your own country. You have a constitution that guarantees your freedom of speech. You have a constitution that compels governments to ensure and assure these freedoms. You have a vibrant legislature and judiciary who are also enjoined to assure these rights. You have a constitution that allows you even to contest any government that attempts to fritter away these rights. Icing on the cake, you are even blessed to have a government in place that unabashedly encourages freedom of speech. Yet, you are chicken! How come? "You are in a pitiable condition if you have to conceal what you wish to tell." (Publilius Syrus)

I personally believe that most of the wife battering and unnecessary mayhem wreaked in most Ghanaian homes by men may be due to impotence. Upstairs, not downstairs, in the little chamber! It may be due to our collective inability to ventilate. Ghanaians for some inexplicable reason seem to be terrified to speak their mind and express their opinions. So, on the outward, everything seems to be fine for you. You are riding the best car and have a nice job. You go to a management meeting and you have an opportunity to contribute to a discussion on the future direction of your company. You know that the tenor of the discussion may well lead to a decision that may ultimately come back to haunt the business. Your boss looks you in the eye and seeks your candid opinion. With a straight face, you play it safe and Ghanaian by answering that you agree with everything that had been said so far. At the end of the day, you go to the nearest bar to drown your frustration in bottles. You are certified chicken!!!

You are an arbiter. You are fully aware of what the applicable rules or laws say on a matter. However, for reasons yet unknown, you skew matters and hand injustice on a silver platter to someone looking for justice. You know you are wrong but you do it anyway. You are chicken!!!

You hold a very important political position. You may even be a minister. You attend meetings and the President seeks your opinion on a matter that’s of considerable importance to us as a nation. You have an opinion. Don’t delude yourself that the President does not know that you do. Everyone has an opinion. You take a quick mental look at your perks ( cars, high table seats, trips, GTV etc) and carefully weigh the options. With a straight face, “Your Excellency, you are the best thing to happen to Ghana since ebunuebunu”! Dead man walking!

You are very high ranking man in a political party. You attend a lot of meetings where matters are discussed to which you have strong objections. On other occasions, some of your top men go about spewing fire and brimstone on every movable object. You are desperate to let the persons know that the actions are costing the party a lot and may even deny you political power. In your quiet desperation, you lament to friends and journalists about what is going on and your distaste for it. You beg them that it’s a private vituperation. Next morning, you get a call from a precocious media seeking your opinion on statements and actions of the same people and what do you do? You put up a vigorous defence of the same actions that you abhor and have deplored, in private. Dead man walking!!!

You are a journalist. You receive information that is undoubtedly of major public interest. Yet, the news is never broadcast and is shelved. You will rather broadcast matters that will not cause you any headaches and lose you advertising revenue. In essence, you have become an amanuensis. Dead men walking!!!

So I ask, when was the last time you heard anyone resign his position on a matter of principle? As a young professional sitting in corporate boardrooms and having a unique opportunity to be up close and personal with some of the cream of corporate Ghana, there had been many occasions when I had been chicken. Two major events in my life changed my outlook forever. Thank Chineke God for the power in the resurrection. I am resurrected. “ Me nwu biom!”. I had also been running away from issues until those events made me decide that it was always better to stand and speak my mind. That comes with pain, of course, which naturally has scared most of us to continue playing dead. One of the things I am struggling to come to terms with is why we live in our own country, free citizens with inalienable rights guaranteed under law and yet are so afraid to speak our minds, even to people who need the Immigration Service to be on our land. Its mind boggling! Ghana is our country. This is our land. Yen ara asaase ni. A grown man afraid to speak his mind is worse that a slave in his own land. And we are not slaves! We are a proud people, a proud nation. Stop playing dead because you are hurting the motherland. Wake up and live! Isn’t it interesting that most young people born and bred in ‘aburokyire’, regardless of the home they grew up in, tell it as it is? Before you raise the hackles, let me hasten to assert that they are no different in the beginning from our own kids here. Every kid made in Ghana also has the same traits. Until they begin to get the knocks and the lashes for, … “telling it as it is”. Our kids go through their own crisis too. “Why is dad bashing me when all I did was to speak the truth”? Over time, the kid grows up knowing that in these hereabouts, playing dumb pays. Otherwise, at a very early age, you get the title “too known”. Every young person growing up in Ghana goes through their own growing up pains. At a point in your professional career, you will be compelled to make a choice between standing up for your beliefs and for principle and ‘living unhappily ever after’ or blending in and becoming chicken, so you can have a chance to feed at the table. Invariably, for bread and butter reasons, most of our young have a crisis of conscience but are compelled to forget values, principles, and thinking Ghana. In their frustration, they head for the exit doors! "We have always known that heedless self-interest was bad morals; we now know that it is bad economics." (Franklin
D. Roosevelt).

There are too many dead men walking the streets of Ghana. When no one is hounding you, but on your own psychological evaluation of self-preservation, you have elected to clam up, I humbly recommend that you remain in your grave because you are a dead man. You have no business walking around. You are doing a great disservice to our dear nation’s drive for true independence. What is a dead man doing walking the surface of the earth anyway? How can you live in your own land and quake before foreigners when you have committed no offence?

But thankfully, it is not all gloom and doom. There is hope. Just like I am resurrected to stand up for principle and for truth, so can everyone else. In this enterprise, it’s never too late. Collectively, all of us as a people have to work to make principle and truth fashionable again. Why should we as a nation reward people who do wrong and rather hound those who stand up for truth and principle? One of the many baffling things for me as a young professional is how whenever you raise an issue of principle, suddenly, everyone calls to advise that you have to be careful. As a nation, we must make the wrongdoers quake, not the ones who have elected to speak the truth. We must all rise together as a nation to help protect people who think Ghana. That’s when our nation would be worth dying for!

Are you a dead man walking? In the name of Chineke God, wake up and live so Ghana can grow!!!

"Stand upright, speak thy thoughts, declare
The truth thou hast, that all may share;
Be bold, proclaim it everywhere:
They only live who dare." (Lewis Morris)

Joe Aboagye Debrah Esq.
Legal Practitioner
Accra 200106

Mergers and Acquisitions on the Ghana Stock Exchange - A Legal Analysis

Mergers and Acquisitions On The Ghana Stock Exchange (GSE) and Rule 1(4) of the GSE Takeovers and Mergers Rules– A Case Study of the Legal Basis of the Offer for the Shares of Ghana Breweries Ltd by Guinness Ghana Breweries Limited

Mergers and acquisitions on the Ghana Stock Exchange (GSE) are
essentially guided by the GSE’s own Rules on Takeovers and Mergers. The
said Rules apply only to listed companies or companies who have
notified the GSE of intended acquisitions activity involving themselves and
a listed entity such that the Rules would become applicable. However,
the apex regulator, the Securities and Exchange Commission (SEC) is also
working on Draft Regulations on Mergers and Takeovers which would be
applicable to all public companies in Ghana engaged in mergers and
acquisitions, pursuant to the Securities Industry Law, 1993 (PNDCL 333), as
amended. The promulgation of the SEC’s Regulations on Takeovers and
Mergers will automatically be the demise of the GSE Rules on Takeovers
and Mergers.

The acquisition of Ghana Breweries Limited (GBL) by Guinness Ghana
Limited (GGL) in 2004 (which changed its name to Guinness Ghana
Breweries Limited, GGBL) has thrown up very interesting legal questions
that necessarily must be answered to guide the entire market in future M
& As. In this article, I would attempt an assessment of the legal basis for
the acquisition as expressed in the Offer Circular and postulate an opinion
on the legalities underpinning the particular transaction. Ghana’s stock
market is a fast-growing emerging market and there are strong indications
that major M & As will happen on the market in the near future. Currently, Total Outré Mer S.A. of France is in the process of a takeover offer to shareholders of Mobil Oil Ghana Limited. It is noteworthy that the Total acquisition is by way of a tender offer, having expressly disclosed in the circular that it will only acquire shares up to a defined percentage. The tender offer technique is a means of buying a substantial portion of the outstanding shares or stocks of a company by making an offer to purchase all shares, up to a specified number, tendered by shareholders within a specified period at a fixed price, usually at a premium above the market price. A tender offer is often the first step in acquiring a company, since the company making the tender offer may follow the tender offer with a merger proposal. The Total Offer is a good example. It is therefore important the ground rules are made clear to avoid the controversy that has accompanied the acquisition of GBL by GGBL.

Takeovers Vrs. Mergers
Takeovers and mergers have been used interchangeably and especially
regarding the acquisition by GGBL of GBL, the general population may still
be unclear as to what has actually taken place and whether the
transaction was a merger or a takeover. In June 2004, GGL launched its
Offer Circular in which it detailed the terms of an offer to the ordinary
shareholders of GBL to purchase all the outstanding ordinary shares of
GBL. This followed Heineken’s Irrevocable Undertaking to offload its shares in GBL to Diageo Plc, the parent company of GGBL. Irrevocable Undertakings are essentially binding promises on the part of the holders of the relevant shares to offer them to the offeror provided certain agreed conditions are satisfied. Ultimately GGBL was able to acquire 99.7% of GBL’s outstanding shares. Currently, there are about 1000 shareholders of GBL, which pursuant to undertakings in the Offer Circular has been delisted from the GSE. It must be pointed out that delisting does not mean liquidation. GBL has not been liquidated and still exists. It is however unclear whether the workers of GBL are aware of the legal implications of their present conditions of service where they do not know whether they still work for the entity that employed them or have metamorphosed into workers of GGBL by virtue of the acquisition. In all the scenarios, major legal implications exist for both employer and employee.

According to the Concise Oxford Dictionary (9th Edition), a merger is “the
combining of two commercial companies etc into one.” A takeover is
defined as the “assumption of control (especially of a business); the
buying out of one company by another.

It will be necessary to set out in full, rule 1 of the GSE Rules on Takeovers
and Mergers as a guide.

Rule 1: Substantial Acquisition of Shares:
1. (1) Where any person acquires or agrees to acquire any
shares and the number of shares so acquired or agreed
to be acquired, together with the total number of
shares already held by such a person, exceeds or shall
exceed in the aggregate 15% of the voting
capital of the company, the company and the acquirer shall notify the Exchange within 2 days of such acquisition or such agreement for acquisition.

(2) Where any person holds shares which in the aggregate carry less than 25% of the voting rights in the Company, he shall not acquire any shares which, when aggregated with the shares already held by him, shall carry 25% or more of the voting rights unless he notifies the Exchange and fulfills the conditions specified in rule 2.

Provided that nothing in this sub-rule shall apply to a person who on an
application to the Council is specifically granted exemption.

(3) A listed company which has any information on the transactions mentioned above which has or is likely to have any effect on:

a. the company's assets and liabilities;

b. its financial position; or

c. the general course of its business

leading to substantial movements in the price of its
shares shall make this information known to the
Exchange within 7 days.

(4) The above requirements shall not be applicable to an acquisition by a person who has announced his firm intention to make an offer to a listed company and has also notified the Exchange.

Legal Basis/Conditions of the Offer
The Offer Document submitted by Guinness stated that the Offers were being made under Rule 1(4) of the GSE Takeovers Rules because GGL is not a registered shareholder of GBL at the time of the Offers. This was also sanctioned by both the GSE and the SEC. At the time the announcement of the transaction was made through the GSE, a firm intention to make the offer had been made by GGBL and the GSE notified. Could those three characteristics, namely:
a. status as non-shareholder of GBL
b. announcement of firm intention to make an offer to GBL, and
c. GSE notification
imply that the Rules were not applicable? What rules guide an acquisition in that regard? The Offer Circular stated clearly that “As Guinness Ghana is not currently the registered holder of any Ghana Breweries shares, the Offer is being made pursuant to regulation 1(4) of the Ghana Stock Exchange Rules on Takeovers and Mergers. In addition, the Transaction does not constitute an arrangement or amalgamation for the purposes of Part S of the Companies Code.”

Part S of the Companies Code concerns arrangements and amalgamations. Section 229 of the Code defines what the terms mean. Under s229(a), “the expression ‘arrangement’ means any change in the rights or liabilities of members, debenture holders or creditors of a company or any class thereof or in the Regulations of a company, other than a change effected under any of the foregoing sections of this Code or by the unanimous agreement of all the parties affected thereby. S229(b) defines “amalgamation” as “any merger of the undertakings or any part of the undertakings of two or more companies or of the undertakings or part of the undertakings of one or more companies and one or more bodies corporate”. Prof. Gower, the brain behind Ghana’s Companies Code of 1963, admitted in the Final Report of the Commission of Enquiry Into The Working and Administration of Present Company Law of Ghana (usually referred to as “Gower’s Report”) that an arrangement could include a compromise with creditors or members which is to bind all concerned in the corporate entity even though all may not have agreed. An amalgamation would necessarily involve the merger of undertakings.

The relevant rules for the purpose of this discussion are sub-rules (1) and (2) of rule 1 of the GSE Takeovers and Mergers Rules. Sub-rule 2 states that where any person holds shares which in the aggregate carry less than 25%, such a person cannot acquire more such that will hold 25% or more unless the GSE is notified and also fulfils conditions under rule 2 which is the core conditions underpinning takeovers on the GSE. The caveat applies to persons who already hold shares. I therefore submit that the exemption under sub-rule 2 would apply to such persons.

Rule 1(4) states that the requirements in rules 1(1),(2), are not applicable to acquisitions by persons who have announced a firm intention to make an offer to a listed company and have also notified the GSE. It is instructive that rule 1(1) states “acquires or agrees to acquire” an aggregate of 15% of voting capital. This implies that under that sub-rule, a notification that a person intended to acquire up to 15% or more should suffice. I wish to submit that a close reading shows that an agreement to acquire 15% could trigger rule 1(1). Thus the first threshold for communicating to the GSE in respect of acquisitions is 15%. However, unless there is an agreement to acquire more shares such that the person’s aggregate holdings would exceed 25%, the “real’ takeover rules are not triggered. Thus one can acquire shares below 25% and not trigger the takeover rules of the GSE but would necessarily have to send a notice to the Exchange at the 15% threshold. Acquisitions can continue so far as they remain less than 25%.

Rule 1(2) does not present such ambiguities. It states that where any person holds shares less than 25%, he cannot acquire more such that the person holds 25% or more unless the GSE is notified and the person fulfils the conditions in Rule 2 (emphasis mine).

The essential characteristic under rule 1(2) to my mind is that one must already hold shares of the entity. “A person” in the exemption refers to persons clothed with a certain characteristic: “…holds shares which in the aggregate carry less than 25% of the voting rights….”

The interpretation of the position that the transaction was done pursuant to rule 1(4) would seem to necessarily imply that exemptions had to be granted by the GSE in respect of:
● precondition of being a shareholder in the first instance before rule 1 (2) is invoked and
● requirement of notification to GSE (admittedly a moot point in this case) and
● fulfilling conditions in rule 2.

The position on this matter is informed by the fact that in the GBL Acquisition, GGBL had secured irrevocable undertakings in respect of the Heineken holdings in GBL. Heineken could therefore not be able to resile from the undertaking to transfer its stake in GBL to GGL. From these irrevocable undertakings therefore, GGL had “agreed to acquire” approximately 76% of GBL. In the circumstances, all things being equal, I wish to submit therefore that the applicable rule to the transaction would be rule 2, unless the GSE had expressly granted an exemption from the said rule. However, a close study of the Offer Circular does not make any specific reference to any such exemption.

It is therefore my considered submission therefore that it is only in respect of acquisitions between 15% and 24.99% which would not trigger rule 2. In the event that exemptions become necessary, it is important in the circumstances for such exemptions, if any, to be clearly stated in the Offer Document (emphasis mine). If the GSE and/or the SEC had granted an exemption, it should have been expressed and the reasons therefore clearly given in the Offer Document.

I respectfully wish to submit that rule 2 is invoked by virtue of the provisions of rule 2(1)(b) of the Takeover Rules. Rule 2(1)(b) states that where “any person secures the control or management of a company by acquiring or agreeing to acquire, irrespective of the voting capital, the securities of directors or other members who by virtue of their holdings of securities together with the holdings of their relatives or nominees control or manage the company”, the applicable rules under rule 2 are invoked. It seems to me that this particular provision best describes the antecedents to the transaction and therefore looks to be the most applicable trigger for the invocation of rule 2 of the GSE Takeovers Rules.

Rule 1(4) states that certain requirements shall not be applicable in case of a person who has announced a firm intention to make an offer to a listed company. The major question is which requirements are the exemptions applicable? Respectfully, rule 1(1) is not in contention as it is obviously not applicable. The relevant clause for interpretation is rule 1(2). Is it the requirement not to make the acquisition without prior notification to the GSE? A close reading of rule 1(2) and (3) seems to suggest that notification is not waived. Therefore is it in respect of fulfilling the conditions specified in rule 2? It may be necessary for these knotty legal issues to be clarified.

A close reading of rule 1(2) seems to indicate that where the acquisition is more than 25%, the requirements of rule 2 which are the essential disclosure requirements in that regard has to be complied with. Conventionally, regulators would only grant such exemptions where it is in respect of corporate actions such as rights issues where mini-prospectuses may be required because the targeted persons are either already members of the company or are privy to the information. My submission is that in this case where GBL shareholders were being solicited to invest in GGBL, all relevant information necessary for informed decisions as defined under rule 2 are applicable. Any deviation therefrom must be clearly pursuant to exemptions expressly granted by the regulators and the Offer Circular must denote as such. I further submit that in the philosophy of regulation, it should not be possible for any regulator to grant an exemption from disclosure requirements obligated by law which shareholders need in order to make an informed investment decision (emphasis mine). In this particular instance therefore, the regulators seem to be signalling that there were no rules that guided that transaction on the stock exchange. That, respectfully cannot be the position. If a transaction can be done under rule 1(4), which by the definition of the regulators technically ousts the invocation of rule 2 which contains all the necessary requirements on disclosure for the protection of investors and the Offer Document further states that the “Transaction does not constitute an arrangement or amalgamation for the purposes of Part S of the Companies Code”, the billion-cedi question is therefore under what rules or law was the transaction premised?

Legal Effect
The major question that confronts all students of securities law in Ghana should be, what standards of disclosure are guaranteed in this regard. Does the Offeror then have power to cherry-pick what disclosures to make in the Offer Circular? Does the regulator strike a deal with the Offeror to keep material information, necessary and indeed warranted under law, out of the Offer Circular? What does the Securities Industry Law, 1993, as amended and the LI 1728 say on disclosures? When a statute demands disclosure, can the GSE suo motu or even with the fiat of the SEC, sanction an abdication from fulfilling statutory disclosure obligations? (emphasis mine).

The situation becomes even more intriguing when available records on the Transaction indicate that when the original Offer was made by Guinness to the GBL Board, Guinness was in clear breach of its disclosure requirements on the GSE.

The provisions in Part VII of the GSE’s Listing Regulations bind the Offeror as a listed company. However the reporting regimes in the market have been fundamentally altered by the promulgation of the SEC Regulations, 2003 (LI 1728). Regulation 55(1) of LI 1728 is instructive. Under the old GSE reporting regime, listed companies were obliged to disclose half-year results not later than 3 months after the end of the relevant period. Preliminary financial results were to be published not later than 3 months after the end of the relevant financial year. A fully audited annual report was expected to be published not later than 6 months. But the old order hath changeth! Under LI 1728, an annual report was to be published not later than 3 months from the end of the relevant financial year (regulation 54 of LI 1728). However, regulation 55 introduced a new quarterly reporting regime such that quarterly financial statements in defined form were to be filed with the regulators and published not later than one month from the end of the relevant quarter. What this means is that where a firm’s quarter ended in March, if the SEC did not receive the quarterly unaudited results by May 1, defined sanctions must necessarily be applied.

It is significant to note that LI 1728 does not mention half-year results as was the case in the GSE Listing Regulations. This is because the reporting format was such that the second quarter results would automatically reflect the position at half-year. The more important point to note however in respect of the new reporting regimes is in terms of content. It also differs fundamentally from the old regime. It is also important to note that where the GSE Listing Regulations conflict with LI 1728, it is my submission that LI 1728 would prevail. The reporting requirements under LI 1728 entail a much more detailed disclosure regime than under the requirements of the GSE Listing Regulations. Note reg. 52(1) entails all listed companies to comply with the Rules on Takeovers and Mergers of the GSE.

Guinness’ financial year ends on June 30. Thus ordinarily, its first quarter results for financial year 2004 should have been published latest by October 1, 2003. LI 1728 clearly states that after a month’s grace period has expired, a company would be in default and is liable to pay ¢2million for each day the default continues. Till date, the Offeror’s first quarter results have never been disclosed yet the SEC and the GSE approved a major transaction involving a corporate entity that was essentially in breach of the disclosure rules on the market. Ultimately, the Offeror’s half-year results for the period in question were published as GSE Press Release No. 021/2004. This obviously went some way to cure the lacunae in information that the market needed in order for informed investment decisions. But did the half-year results published through the GSE actually set out to provide badly needed information or was a cosmetic attempt at financial disclosure?

A cursory look at the mode of disclosure by Guinness in respect of the half-year results also gives cause for concern. As outlined earlier, LI 1728 has broadened the depth of information to be provided under the Continuing Obligations of listed companies. Reg.56 on contents of quarterly financial statements provides as follows:

(1) “The quarterly financial statements shall comprise either a complete set of financial statements or a set of condensed financial statements but the statements shall include at least
a. A balance sheet
b. An income statement for the period on a year to date basis;
c. A statement where relevant showing either
i. Changes in equity
ii. A statement of recognized gains and losses, changes in equity,
except those arising from capital transactions with owners
and distribution to owners;
iii. selected explanatory notes as specified in this regulation; or
iv. a condensed cash flow statement.”

However it seems that the Offeror used the old format under the GSE Listing Regulations in purported compliance with LI 1728. What this means is that essential details of financial information that would have been captured under the applicable regulation which is the LI 1728, were conveniently missing in the format adopted. Was it deliberate? Was it inadvertent? Were the regulators aware of this? Did the regulators grant an exemption to make disclosure as provided under LI 1728? Again, it seems both the GSE and the SEC have allowed breaches of fundamental disclosure obligations to pass. This however does not absolve SEC and the GSE from potential lawsuits alleging complicity in the breach of the securities laws, which could possibly be interpreted as calculated to deny full disclosure in respect of a major transaction such as under review.

Having evaluated all these situations, I have been concerned about the continued insistence on rule 1(4) as the legal basis for the transaction. In the light of the foregoing, more disclosure, not less, was necessary. The irony in the particular situation was that the Offer Document fundamentally and in a very large measure, attempted to comply with rule 2 of the GSE Rules on Takeovers and Mergers. I therefore do not see any utility in tagging the transaction under rule 1(4) as it served no purpose but to heighten doubts about fundamental disclosures in respect of the deal.

In the light of the foregoing, I am not comforted by the fact that both the Offer letter and the Offer Document indicated that both the GSE and SEC were satisfied with the Transaction and the disclosures made pursuant thereto. I submit that takeovers are legally done under rule 2. The non-applicable requirements should not be interpreted to imply total abdication from the provisions of rule 2. That may give too much room to Offerors to determine what disclosures to make, leading to potential breaches of our securities laws, ironically sanctioned by the very ‘policemen’ who have been tasked with protecting the integrity of the market and investors. After all, the cardinal principle in disclosures is “material information necessary for informed investment decisions”. Thus, if the information is material and is necessary for informed investment decisions, any regulator who grants an exemption from disclosure would either have been acting to guarantee a potentially ‘fat’ listing fee or would have inadvertently sanctioned a clear breach of Ghana’s securities laws, for which all parties involved ought to be held accountable. Does that account for the loud silence of the Total Offer Circular on what particular provisions were applicable to the transaction?

A word to the wise…

Joe Aboagye Debrah Esq.
CEO, ThinkGhana, Accra

Partner, 1stLaw
Former Company Secretary/Legal Adviser, Ghana Breweries Limited
Former Legal Adviser, Ghana Stock Exchange