ThinkGhana

LETTER TO GHANA REGULATORS ON SPPC

2008-10-24T01:59:00.000-07:00

ThinkGhana

#28/1 Castle Rd., Adabraka Tel/Fax: 00-233-21-271086
P. O. Box AD233 Mob: 00-233-24-4293270
Adabraka, Accra E-mail: thinkghana@yahoo.com

October 22, 2008

The Director-General
Securities & Exchange Commission
1st Floor, SEC Bldg.
PMB, Ministries Post Office
Accra.

Dear Sir,

RE: NOTICE OF EXTRAORDINARY GENERAL MEETING OF SUPER PAPER PRODUCTS COMPANY LTD. –REQUEST FOR INTERVENTION OF SECURITIES REGULATORS TO ASSURE ADEQUATE DISCLOSURE TO SHAREHOLDERS

We wish to bring to your attention for immediate redress, certain matters concerning an Extraordinary General Meeting of Super Paper Products Company Limited (SPPC), a company listed on the Ghana Stock Exchange, scheduled for Wednesday, November 5, 2008 at the TDC Club House, Tema. We do believe that if immediate steps are not taken by both the GSE and the SEC on the matters raised herein, serious damage will be done to the regulatory integrity of the Ghanaian securities market which may affect the nation adversely. We have addressed this communication to you in your capacity as the apex regulator but will serve a copy on the GSE, which has as much responsibility in this particular matter.

ThinkGhana is a not-for-profit organization based in Accra, established inter alia, to promote good corporate governance and securities regulatory practices in Ghana and also work in related human rights activities. SPPC is a company listed on the Ghana Stock Exchange.

You will recall earlier in this year, SPPC scheduled its Annual General Meeting for July 11, 2008 and circulated an Annual Report which specified in the Notice therein, the following as part of the agenda for the said AGM:

“Special Business
To consider and if thought fit, pass the following as Special Resolutions:

6. THAT the name of the company is hereby changed to African Champion Industries Limited.
7. THAT by the nature of business which the company is authorized to carry on is hereby amended by the addition of the following objects:
(f) To purchase or otherwise acquire any mines, mining rights and take concessions in Ghana or elsewhere and to explore, prospect, work and develop those businesses; {emphasis ours}

(g) To purchase, partake in or otherwise invest in stocks, shares, bonds and securities of corporate entities and on the capital markets {emphasis ours}
8. THAT the authorized number of shares of the company is increased to 5,000,000,000 ordinary shares of no par value.

9. THAT Regulation 82 of the company’s Regulations is hereby amended by the substitution of the following new section:
“ Any document may be served by the Company on any member, debentureholder or director of the company in any of the following manners:

a. in the manner provided by section 262 of the Code; or
b. by electronic mail, where the member, debentureholder or director has notified the company of his or her electronic mail address; or
c. by making the document available for accessing and/or downloading on the company’s website and notifying members, debentureholders or directors of such document through publication of notice in widely circulated national newspapers or news media”.

10. THAT subject to Special Resolution 8 passed, the Directors be and are hereby authorized to make a series of private placements in the aggregate of 100, 000,000 shares at a minimum price of 20 pesewas per share by the end of 2010 as an ordinary resolution. {emphasis ours}.

11. THAT subject to Special Resolution 8 passed, the Directors be and are hereby authorized to make a series of secondary issues in the aggregate of 500,000,000 shares at a minimum price of 20 pesewas per share by the end of 2012 as an ordinary resolution.” {emphasis ours}.

It is instructive to note that in the Annual Report, the Chairman’s Statement did not make any reference whatsoever to the rationale behind the fundamental changes being proposed to the company structure and regulations. In fact, the only disclosure on the proposed amendments were found on page 26 of the Annual Report where as additional notes to the said Report, single sentences had respectively been proffered as rationale for the amendments. These were the only information available to shareholders of SPPC in order to make fundamental decisions on the company’s future.

Though at the time, ThinkGhana raised questions for the investing public to ponder about potential breaches of securities rules, we did not deem it necessary to formally draw the attention of the securities regulatory authorities to the matter. However, we feel compelled to draw your attention following the publication of the Notice for the EGM in the Daily Graphic newspaper this week. The notice suggested that our earlier caution to all shareholders to demand further and better particulars from the SPPC directors before voting on such critical matters had been heeded. ThinkGhana has taken the exceptional step of formally communicating to both the GSE and the SEC following perusal of the Notice of the SPPC EGM, a copy of which we have taken the liberty of attaching for your perusal.

We wish to place on record our concern for the integrity of the securities market if the said Notice is allowed to pass and the proposed EGM is sanctioned to take place based on what has been circulated as the official Notice of the said Meeting to all shareholders. For the records, the said Notice seeks to incorporate a circular to shareholders purporting to make disclosures on the rationale for the proposed resolutions. We wish to submit that it fails totally in that regard.

As you are doubtless aware, the proposed resolutions seek to take away the pre-emptive rights of SPPC shareholders in respect of new and additional shares to be issued by the company. Pre-emption rights are protected under section 202(1) of the Companies Code, 1963 (Act 179) and the GSE’s Listing Rules. Recently, the issue of non-disclosure of a consequnetila loss of pre-emptive rights for shareholders of CAL Bank engaged the entire securities market. It will also be noticed that by the SPPC Notice, the new and additional shares are to be offered through private placements at a fixed price. ThinkGhana is alarmed that single sentences have been offered in the said notice as the rationale for the proposals. In our humble opinion, we find this as WHOLLY INADEQUATE for purposes of disclosure. We are also concerned about its precedent effect in a market as unsophisticated as Ghana’s. We wish to submit that the said SPPC Notice offends against all known disclosure rules and principles of the Ghanaian securities market. It also offends against all known international norms of securities regulation particularly with reference to adequacy of disclosures by companies to shareholders. We also find wholly objectionable that in pursuance of fundamental corporate actions to be undertaken at an EGM in respect of a listed company, both the SEC and the GSE will allow a listed company to circulate such wholly inadequate documentation to their shareholders to solicit approvals of such fundamental right-altering resolutions without making adequate disclosure to shareholders.

Having due reference to section 202 (1) of Act 179, rules 26(3), 45(1), 54(4)(d) and the GSE’s Disclosure Policy under Part VII of the Listing Rules and the SEC’s functions under section 9 of the Securities Industry Law, 1993 (PNDCL 333), particularly subsections (b), (f), and (i), we wish to call on the SEC to direct a postponement of the proposed EGM and request adequate disclosures to be made so that all shareholders of SPPC will be in a position to make an informed decision at the EGM.

We further call on the SEC and the GSE to as a matter of policy reject half-page Notices/Circulars submitted by listed companies in future in support of such proposed resolutions.

We further wish to submit that in view of the contents of the original SPPC Annual Report 2007 especially with reference to the Notice of AGM therein and the additional notes on page 26 thereof, the SEC should direct the GSE to institute an investigation into possible insider dealing in the securities of SPPC in order to assure the integrity of the market.

Finally, ThinkGhana strongly recommends to both the SEC and GSE that it must adopt a proactive regulatory posture especially in view of the lack of sophistication on the part of majority of investors in listed securities in Ghana. We take the opportunity to encourage the SEC and the GSE to demand adequate and timely disclosure from all listed companies so that shareholders will be in a better position to make informed decisions on their investments.

In the light of the following, we wish to make the following recommendations to the securities regulators:

a. That the SEC directs that the EGM of SPPC scheduled for November 5, 2008 be postponed on grounds of inadequate disclosure to shareholders.

b. That the SEC declares as wholly inadequate for disclosure purposes, a half-page Notice/ Circular submitted to shareholders in support of proposed resolutions.

c. That the SEC directs that Notices to shareholders in respect of resolutions that effectively take away the pre-emptive rights of shareholders should make adequate and express disclosure of the fact that approving the resolution will essentially mean a waiver of the pre-emptive rights of shareholders.

d. That an investigation should be conducted to determine whether the processes were not willful with intent to prevent full disclosure to SPPC shareholders.

e. That the SEC should investigate whether any insider dealing has taken place in the shares of SPPC especially between March 2008 and October 2008.
f. That the SEC should direct the GSE to strengthen the enforcement of its rules on disclosure in dealings by directors of listed companies, directors of dealing member and all associated persons.

g. That the GSE should approve all circulars from listed companies prior to distribution to shareholders in order to settle the adequate disclosure question before such documents reach the public.

h. That appropriate sanctions be meted out to any corporate entity or other responsible official found to have breached any securities regulations or rules as a result of the distribution of the SPPC documents.

We hope that the SEC and the GSE will act on our recommendations to assure the integrity of the market, particularly in the wake of the recent CAL Bank matter.

Ghana Deserves Better!!!

Yours in the Service of Ghana,
For ThinkGhana

Cc: The Managing Director
Ghana Stock Exchange
5th Floor, Cedi House
Liberia Road
Accra.

CANCELLATION OF TRADE IN SHARES OF CAL BANK LTD. - MATTERS ARISING

2006-12-08T07:20:00.000-08:00

PRESS STATEMENT:

CANCELLATION OF TRADE IN SHARES OF CAL BANK LIMITED –
MATTERS ARISING

ThinkGhana wishes to express its concern about media reports that the Bank of Ghana (BoG) has ordered the cancellation of a trade in the shares of CAL Bank Ltd., a listed company on the Ghana Stock Exchange. The trade involved the sale of approximately 10.73% of the shareholding of Kingdom R5 and approximately 16.45% of IFC’s stake in CAL Bank to First City Monument Bank of Nigeria. This deal follows in the wake of the sale of 8.16% of the Bank’s shares by Actis plc, formerly CDC Capital Partners (a founding shareholder of CAL Bank) on Wednesday, November 29, 2006.

We wish to point out that in the development of Ghana’s capital markets, all regulators need to exercise caution in the application of perceived powers under law. ThinkGhana wishes to stress that it is the Securities and Exchange Commission (SEC) which has regulatory powers under the Securities Industry Law, 1993 (PNDCL 333) as amended, to regulate the securities industry in Ghana. Having due regard to the powers of the Bank of Ghana under relevant banking laws to regulate the banking industry, it is our sincere opinion that the Bank of Ghana should have acted through the SEC where it had legitimate concerns about the legality of the said trades on the floor of the Ghana Stock Exchange. ThinkGhana is concerned about the potential negative implications for foreign investors on the Ghana Stock Exchange where it is perceived that the powers of the SEC can be usurped by the Bank of Ghana unilaterally. We therefore wish to call on both the SEC and the Bank of Ghana to clarify the situation to assure investors about compliance with due process.

ThinkGhana also wishes to call on the SEC as a matter of urgency to intervene in the CAL Bank affair to ensure compliance with all relevant securities laws and regulations. It is clear from the actions on the Ghana Stock Exchange over the past week that a takeover attempt is underway. ThinkGhana is of the considered opinion that the brokers involved in the share transactions should be compelled to abide by the rules of the market or the appropriate sanctions should be applied. ThinkGhana is concerned that no press releases have been forthcoming from either the Ghana Stock Exchange or the acquirers or their brokers. This is a breach of the GSE’s own Takeovers and Mergers Rules and the GSE must make bold to enforce its rules to assure compliance and transparency on the market. ThinkGhana is particularly concerned that so far, it is only CAL Bank itself that has sought to abide by the rules of the market by issuing a press release after the initial acquisition by the First City Monument Bank of Nigeria.

ThinkGhana therefore takes the opportunity to call on the SEC as the apex regulator to ensure compliance with the rules and to prevent any other institution from invading its legal authority to regulate the industry. ThinkGhana calls on all regulators in the financial sector to work in harmony to allow for the efficient regulation of the capital market.

Finally, ThinkGhana wishes to implore all the regulators to be mindful of the fact that listing on a stock market implies that shares and stocks of the listed entity are freely transferable. We therefore call on the SEC to take another look at the restrictions on foreign investment on the market as being outmoded, and impracticable in the context of the government’s own declared free market policies and trade liberalization.

ThinkGhana is hopeful that the securities rules will be applied fairly and equitably to all players in the market such that the rights of investors will be protected at all times.

Thank you.

Yours in the service of Ghana,

THINKGHANA
Accra, Ghana.

COURT SETS DATE FOR RULING ON THINKGHANA-VRS.-SEC

2006-11-07T06:10:00.000-08:00

We are pleased to announce that the High Court, Fast Track Division, will finally have an opportunity on Thursday, December 7, 2006 to adjudicate in respect of the application for an order of mandamus brought against the Securities and Exchange Commission (SEC) for refusing to apply Ghana’s securities laws to alleged breaches by Guinness Ghana Breweries Limited (GGBL) before, during and after the acquisition of Ghana Breweries Limited (GBL) through the Ghana Stock Exchange (GSE) in December 2004.

Final submissions were made by the lawyers for both ThinkGhana (Kwaku Osafo-Buabeng Esq.) and the SEC (Abena Bonsu Esq.) at the High Court today. ThinkGhana was represented at the hearing by Messrs. Joe Aboagye Debrah, Vincent Aikins and Kojo Larbi, who are all directors.

ThinkGhana’s court action has been necessitated by the continuing disregard for Ghana’s securities laws by the regulators and the impunity with which breaches of Ghana’s securities laws have been condoned by the authorities till date. Fortunately, Ghana’s Constitution and the securities laws give us an opportunity to seek the intervention of the law in a matter that is sure to set a precedent in issues relating to mergers and acquisitions activities in Ghana. The process also gives an opportunity to further clarify the issues regarding the demand for an investigation into the acquisition of GBL by Guinness Ghana and to make a case for good corporate governance in Ghana, which we believe, is equally as critical to Ghana’s socio-economic development as the present-day clarion call for good governance in our body-politic.

The application was therefore filed in view of our absolute belief in the rule of law in Ghana. Our dear nation Ghana can only be better if all Ghanaians nurture a desire to make our laws work, irrespective of personalities.

Ghana Deserves Better!

P/S: The processes filed on behalf of ThinkGhana in relation to the matter can be found on this web-blog.

RE: SAM WOODE LTD. - BREACH OF S.E.C. REGULATIONS

2006-09-06T10:30:00.000-07:00

ThinkGhana
C/o #28/1 Castle Rd., Adabraka Tel/Fax: 00-233-21-271086
P. O. Box AD233 Mob: 00-233-20-8157566
Adabraka, Accra E-mail: thinkghana@yahoo.com

June 20, 2006
The Director-General
Securities & Exchange Commission
1st Floor, SEC Bldg.
PMB, Ministries Post Office
Accra.

Attn: Dr. Nii Kwaku Sowa

Dear Sir,

RE: SAM WOODE LTD – BREACH OF S.E.C. REGULATIONS

We will be grateful to receive information on steps taken by the S.E.C. further to our complaint dated May 26, 2006 in respect of a breach of relevant securities regulations by Sam Woode Ltd., a listed company.

Kindly treat as urgent.

Ghana Deserves Better!

Thank you.

Yours faithfully,

Cc: The Managing Director
Ghana Stock Exchange
Accra

Breach of Disclosure Regulations by Sam Woode Ltd. - Letter to S.E.C.

2006-05-26T07:19:00.000-07:00

ThinkGhana

C/o #28/1 Castle Rd., Adabraka Tel/Fax: 00-233-21-271086

P. O. Box AD233 Mob: 00-233-20-8157566

Adabraka, Accra E-mail: thinkghana@yahoo.com

May 26, 2006

The Director-General

Securities & Exchange Commission

1^st Floor, SEC Bldg.

PMB, Ministries Post Office

Accra.

Attn: Dr. Nii Kwaku Sowa

Dear Sir,

RE: SAM WOODE LTD – BREACH OF S.E.C. REGULATIONS

CALL FOR REDRESS

We wish to bring to your attention for immediate redress, a breach of SEC Regulations, 2003 (L.I. 1728) by Sam Woode Ltd., one of the listed companies in respect of their reporting obligations under law.

On Thursday, May 18, 2006 and on Wednesday May 24, 2006, the Daily Graphic Newspaper carried on pages 26 and 45 respectively, publication by Sam Woode Ltd. of its preliminary 1^st quarter unaudited results for the financial period ended March 31, 2006. The said publication is a clear breach of the provisions of L.I. 1728 and consequently a breach of the disclosure requirements of that company under applicable securities regulations.

The GSE Listing Regulations bind Sam Woode Ltd. as a listed company. However, as you are doubtless aware, 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. Under L.I. 1728, an annual report was to be published not later than 3 months from the end of the relevant financial year (regulation 54 of L.I. 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.

ThinkGhana particularly wishes to reiterate that in terms of content, disclosure requirements have also been fundamentally altered by L.I. 1728. It is also important to note that where the GSE Listing Regulations conflict with L.I. 1728, L.I. 1728 would prevail. The reporting requirements under L.I. 1728 entail a much more detailed disclosure regime than under the requirements of the GSE Listing Regulations. L.I. 1728 has broadened the depth of information to be provided under the Continuing Obligations of listed companies. Regulation 56 on contents of quarterly financial statements reads:

(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.

You will recall that in an earlier petition to the SEC on the acquisition of Ghana Breweries Limited by Guinness Ghana Breweries Limited, ThinkGhana had cause to point out exactly the same problem of continuing breaches of the securities laws by non-disclosure of information and to draw attention to continuing inaction on the part of the regulators. ThinkGhana is therefore distressed to note that regulators seem to allow some listed companies to flout laid-down regulations in such a blatant manner without taking any steps to either stem such breaches or sanction for such breaches. Shareholders and indeed the entire investing market have a right to information which can only be fulfilled when the rules are applied without fear or favour. As you are fully aware, confidence is the glue that holds stock markets together and confidence is engendered by prompt and adequate disclosure of information. The publications which have been attached to this communication for ease of reference clearly show that Sam Woode Ltd. used the old format under the GSE Listing Regulations in purported compliance with LI 1728. Such condensed reports are no longer allowed on the Ghanaian market. ThinkGhana is therefore very distressed that even in the wake of our petition against Guinness on self-same issues, such publications are being sanctioned in purported compliance with disclosure requirements when in actual fact they are clear breaches of the law. The SEC’s continuing inability to stem such practices on the Ghanaian market may damage investor confidence on the market with dire consequences for all investors and the listed companies. We dare ask whether these actions are calculated to prevent the true state of the financial position of the companies concerned being disclosed to shareholders. Only yesterday, Messrs Kenneth Lay and Jeffrey Skilling were found guilty of major infractions of corporate law in the Enron scandal. We must as developing economies, take stock and learn lessons from such incidents. No jurisdiction allows such continuing breaches to recur on its market. There are a lot of listed companies that are working very hard to meet their disclosure obligations. We therefore call on the SEC to ensure that such breaches cease forthwith and appropriate sanctions applied to defaulters. Indeed, we do hope that the mistakes in the Guinness case have not been repeated by allowing the publication which is in breach of the rules to be issued as a press release through the Ghana Stock Exchange already. Again, it seems both the GSE and the SEC have allowed these breaches of fundamental disclosure obligations to pass. We are hopeful that steps will be taken to withdraw the said publications with apologies to Ghanaian investors and the appropriate sanctions applied. We also call on the SEC to intensify its public education campaign on the rules and regulations applicable to Ghana’s securities markets. ThinkGhana also calls on the SEC to ensure that the Ghana Stock Exchange improves its surveillance and compliance capabilities to prevent such unfortunate situations from recurring on our markets. Finally, we call on the SEC to ensure that the GSE takes steps to remove the offending sections from its Listing Regulations as they have a potential to confuse market operators and the investing public on the true state of the disclosure requirements of listed companies.

We will be grateful for information on the steps taken to resolve the issues that we have brought to your attention for redress, please.

Ghana Deserves Better!

Thank you.

Yours faithfully,

Cc: The Managing Director

Ghana Stock Exchange

Accra

ThinkGhana-Vrs-SEC,Ghana: Supplementary Affidavit3

2006-05-05T06:21:00.000-07:00

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

NOTICE OF SUPPLEMENTARY AFFIDAVIT

Please TAKE NOTICE that at the hearing of the substantive application, Counsel for the Applicant will seek leave of this Honourable Court to rely on the supplementary affidavit attached hereto.

DATED AT 1ST LAW, ACCRA THIS 2nd DAY OF MAY, 2006

SOLICITOR FOR APPLICANT

THE REGISTRAR
FAST TRACK COURT
ACCRA.
AND FOR SERVICE ON THE RESPONDENT

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

SUPPLEMENTARY AFFIDAVIT

I, Joe Aboagye Debrah, of F119B, Palm Avenue, Ashongman Estates, Accra, Chief Executive/Founder of ThinkGhana, do make oath and say as follows:

1. That I am the Deponent herein and have the authority and consent of the Applicant organisation to depose to these facts which are also within my personal knowledge.

1. That the Applicant caused its solicitors to file an application for an order of mandamus to issue against the Respondents on March 16, 2006 and attached an affidavit in support.

2. That my solicitors also filed supplementary affidavits in respect of other matters that needed to be brought to the Honourable Court’s attention for justice to be done.

3. That further to the filing of the said affidavits, there has been a publication in the Daily Graphic newspaper of Tuesday, May 2, 2006 to the effect that the Managing Director of Guinness Ghana Breweries Limited and Ghana Breweries Limited (GBL) had admitted at GBL’s Annual General Meeting that Guinness and GBL are separate entities. A copy of the report is attached hereto as exhibit “TG18”.

4. That exhibit TG18 is further incontrovertible proof that there has been no merger between GGL and GBL to form GGBL as stated by the Respondent in exhibit TG2, which formed part of its reasons for refusing to do its legal duty to investigate the complaint filed by the Applicant.

5. That the fact of GBL’s AGM and the publication of the statements in a national newspaper without any disclaimers from the SEC, the GSE or GGBL that all the named parties are fully aware of the breaches of securities laws and have elected to condone them and not apply the applicable sanctions unless compelled by the Honourable Court so to do.

6. Wherefore I swear to this affidavit in support.

Sworn at Accra this 2nd day of May, 2006

………………………..
DEPONENT

BEFORE ME

COMMISSIONER OF OATHS

AND FOR SERVICE ON THE RESPONDENTS

ThinkGhana-Vrs- SEC,Ghana: Supplementary Affidavit 2

2006-05-05T06:16:00.000-07:00

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

NOTICE OF SUPPLEMENTARY AFFIDAVIT

Please TAKE NOTICE that at the hearing of the substantive application, Counsel for the Applicant will seek leave of this Honourable Court to rely on the supplementary affidavit attached hereto.

DATED AT 1ST LAW, ACCRA THIS 24th DAY OF APRIL, 2006

SOLICITOR FOR APPLICANT

THE REGISTRAR
FAST TRACK COURT
ACCRA.
AND FOR SERVICE ON THE RESPONDENT

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

SUPPLEMENTARY AFFIDAVIT

I, Joe Aboagye Debrah, of F119B, Palm Avenue, Ashongman Estates, Accra, Chief Executive/Founder of ThinkGhana, do make oath and say as follows:

1. That I am the Deponent herein and have the authority and consent of the Applicant organisation to depose to these facts which are also within my personal knowledge.

1. That the Applicant caused its solicitors to file an application for an order of mandamus to issue against the Respondents on March 16, 2006 and attached an affidavit in support.

2. That my solicitors also filed a supplementary affidavit in respect of other matters that needed to be brought to the Honourable Court’s attention for justice to be done.

3. That further to the filing of the said supplementary affidavit, there has been a publication in the Daily Graphic newspaper of Friday, April 21, 2006 of a notice of an annual general meeting by Ghana Breweries Limited, a copy of which is attached hereto as exhibit “TG17”.

4. That exhibit TG17 is further incontrovertible proof that there has been no merger between GGL and GBL to form GGBL as stated by the Respondent in exhibit TG2, which formed part of its reasons for refusing to do its legal duty to investigate the complaint filed by the Applicant.

5. That both the Respondent and Guinness Ghana Breweries Limited have a legal duty under relevant securities legislation to ensure that full disclosure is made to the Ghanaian public that no merger has taken place and the consequential breaches of the law duly acknowledged and punished as such.

6. That if there had been a merger as alleged by the Respondent in exhibit TG2, GBL will not be in existence and would not be calling a general meeting per exhibit TG17 to be held on April 28, 2006.

7. That by condoning such flagrant breaches of the securities laws and not taking any steps to sanction GGBL for the breaches of law, the Respondent is promoting a culture of impunity unknown to securities regulation which can only be ended by the intervention of this Honourable Court.

8. Wherefore I swear to this affidavit in support.

Sworn at Accra this 24th day of April, 2006

………………………..
DEPONENT

BEFORE ME

COMMISSIONER OF OATHS

AND FOR SERVICE ON THE RESPONDENTS

ThinkGhana-Vrs- SEC, Ghana" Supplementary Affidavit

2006-05-05T06:08:00.000-07:00

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

NOTICE OF SUPPLEMENTARY AFFIDAVIT

Please TAKE NOTICE that at the hearing of the substantive application, Counsel for the Applicant will seek leave of this Honourable Court to rely on the supplementary affidavit attached hereto.

DATED AT 1ST LAW, ACCRA THIS 20th DAY OF MARCH, 2006

SOLICITOR FOR APPLICANT

THE REGISTRAR
FAST TRACK COURT
ACCRA.
AND FOR SERVICE ON THE RESPONDENT

IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION}
C/o SEC Bldg, Ministries } RESPONDENT
Accra }
(Applicant will direct service)

Ex Parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

SUPPLEMENTARY AFFIDAVIT

I, Joe Aboagye Debrah, of F119B, Palm Avenue, Ashongman Estates, Accra, Chief Executive/Founder of ThinkGhana, do make oath and say as follows:

1. That I am the Deponent herein and have the authority and consent of the Applicant organisation to depose to these facts which are also within my personal knowledge.

1. That the Applicant caused its solicitors to file an application for an order of mandamus to issue against the Respondents on March 16, 2006 and attached an affidavit in support.

2. That the solicitors inadvertently omitted to attach a copy of the Ghana Stock Exchange Press Release numbered 021/2004 referred to in paragraphs 20 and 21 of the affidavit in support.

3. That I hereby attach a copy of the said press release as “exhibit TG15”.

4. That I have since received notice of a petition to the General Legal Council filed by Mr. Devlin Hainsworth who styled himself as the Managing Director of Ghana Breweries Limited (GBL).

5. That the said petition was on the corporate letterhead of GBL and duly signed as such and also exhibited the names of the directors of GBL on the said letterhead. The relevant portions of the said corporate communication from GBL are attached hereto as exhibit “TG16”.

6. That exhibit TG16 is incontrovertible proof that there has been no merger between GGL and GBL to form GGBL as stated by the Respondent in exhibit TG2, which formed part of its reasons for refusing to do its legal duty to investigate the complaint filed by the Applicant.

7. That the Respondent has a legal duty under relevant securities legislation to ensure that GGBL makes disclosure to the Ghanaian public that no merger has taken place and yet has in the face of all the evidence that is available to it has refused to implement the relevant law on the matter.

8. That if there had been a merger as alleged by the Respondent in exhibit TG2, GBL will not be in existence and would not be communicating as a corporate entity as recently as February 28, 2006.

9. That there are currently about 1000 shareholders of GBL and more than 500 employees of record of GBL which remains a viable separate legal entity as per the Chairman of GGBL’s statement in exhibit “TG10”.

10. Wherefore I swear to this affidavit in support.

Sworn at Accra this 20th day of March, 2006

………………………..
DEPONENT

BEFORE ME

COMMISSIONER OF OATHS

AND FOR SERVICE ON THE RESPONDENTS

ThinkGhana-Vrs- SEC, Ghana: Statement of Case

2006-05-05T05:48:00.000-07:00

IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT OF JUSTICE
FAST TRACK DIVISION
ACCRA A. D. 2006

SUIT NO. AP22/2006
THE REPUBLIC

VRS

SECURITIES AND EXCHANGE COMMISSION }
C/o SEC Bldg, Ministries, Accra } RESPONDENT
(Applicant will direct service)

Ex parte ThinkGhana }
C/o 28/1 Castle Road, Adabraka, Accra } APPLICANT

STATEMENT OF CASE

The Applicant prays for an order of mandamus to issue against the Respondent, Securities and Exchange Commission pursuant to Order 55 of the High Court (Civil Procedure) Rules, 2004 (C.I. 47) to compel the Respondent to investigate the acquisition by Guinness Ghana Breweries Limited (GGBL) of Ghana Breweries Limited (GBL) to establish whether Ghana’s securities laws have been breached and also for the SEC to be compelled to apply the law and sanction defaulters for the breaches of securities laws and regulations that have been occasioned thereby.

1. The Applicant’s case is as set out herein and in the accompanying Affidavit in Support annexed hereto.

2. The Plaintiff’s cause of action is founded on the following provisions of the law:

a. The Securities Industry Law, 1993 (PNDCL 333)
i. s9 ii. s10 (1) (a, g, h); (2) (a, b); (3-11);
iii. s11-15 iv. s18-20; 22; 27(1); 30(1) (c), (5) (a), (b); v. s123, 124,127(c), 128, 129, 130, 132,134,136

b. The Securities Industry (Amendment) Act, 2000 (Act 590)
Section 9 which incorporates the new Part 1A.

c. Securities and Exchange Commission Regulations, 2003 (L.I. 1728)
i. reg. 50, 51, 54-58, 60, 62

d. Companies Code, 1963 9Act 179)
i. s203; s205; 207(7)
ii. s230(7)

e. GSE Listing Regulations
i. Reg. 52 (1) and (2) ii. Part VIII

3. The Plaintiff’s grounds for an order of mandamus is as deposed to in the affidavit in support of the motion.

4. The facts:

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. GGBL was obliged to file its first quarter results for its financial year 2004 by October 2003. It was never filed. Till date, it has not been filed. This is a clear breach of Regulation 55 of LI 1728. The penalty is two million cedis for each day the default remains. Nothing has been done by the Respondent till date.

d. GGBL’s half-year results for its 2004 financial year were finally released later but it was also an ingenious breach of the rules. Under LI 1728, it was to be filed latest by January 2004, at a time when the takeover announcement had already been made through the GSE. However, GGBL used the old format for reporting 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. Please refer exhibit TG15. Again, the Respondent allowed it to pass! It is as yet unclear whether this was an attempt to prevent disclosure of the true financial state of GGBL in the lead up to the takeover. Respectfully, this can only be known if this Honourable Court will make an order of mandamus to issue against the SEC in order to wake the SEC up to its responsibilities under law.

e. No valuation report was submitted to the GSE or the Respondent. We wish to submit that the GSE has no discretion in this regard. The GSE’s own Listing Regulations require it under regulation 52 to demand a copy of the valuation report. Again, it was never demanded by the regulators and never submitted.

f. Between December 17, 2003 when the deal was announced on the Ghana Stock Exchange and July 20, 2004, when the shareholders of GGBL approved the deal and other resolutions pertaining thereto, GGBL’s share prices increased by approximately 136% (that is within seven months of the announcement of its merger with GBL) whilst GBL increased within the same period by approximately 5%. GBL’s share price on the date of the announcement of the deal (December 17, 2003) was ¢1425 and rose to ¢1500 by July 20, 2004. GGBL was trading at ¢5400 on the date of the announcement. By July 20, 2004, it was priced at ¢12750. On any other market, the regulator would investigate to assure itself that all was well. Is Ghana any different? We think not. This is especially so in view of the fact that Diageo caused to be issued to itself to the exclusion of all other shareholders, shares of GGBL which were priced at the prevailing price on the day of the announcement (i.e. ¢5400/17 December, 2003) at a time when the price had already appreciated hugely, thereby making instant capital gains. It is our humble submission that the regulator must investigate to establish where there was no stock market manipulation or insider dealing over the said period leading to these events on the securities market.

g. False reports have been made to the GSE and the Respondent in clear breach of the law. GGBL sent a press release to the GSE in 2005 stating that the merger was achieved in December 2004. Please refer exhibit TG8. This is false and a breach of the Securities Industry Law, 1993. Nothing has been done till date. Regrettably, the Respondent itself has repeated these false and untrue statements in official communication to the Applicant as reflected in exhibit TG2. As shown in exhibit TG12, the Daily Graphic newspaper 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) as evidenced by our search exhibited as TG11.

5. Breaches of the Law:

We wish to set out in detail the following breaches of the law that have occurred and which is the subject matter of the Applicant’s complaint but which the Respondent has refused to investigate and/or apply the legally stipulated sanctions:

a. Financial Reports

When the original offer was made to the GBL Board after GSE’s approval, GGBL was in breach of its disclosure requirements on the GSE. Part VII of the GSE’s own Listing Regulations was breached. Available records indicate that when the original Offer was made to the GBL Board, GGBL was in breach of its disclosure requirements on the GSE. The provisions in Part VII of the GSE’s Listing Regulations bind GGBL 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. 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.

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. It should however be noted that in terms of content, it also differs. It is also important to note that where the GSE Listing Regulations conflict with LI 1728, 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. Regulation 52(1) of the GSE’s Listing Regulations enjoins all listed companies to comply with the Rules on Takeovers and Mergers of the GSE.

GGBL’s financial year ends on June 30. Thus ordinarily, its first quarter results during the relevant period 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. However even after the transaction had been announced, GGBL’s first quarter results were never disclosed yet the Respondent and the GSE approved a major transaction involving a corporate entity that was essentially in breach of the disclosure rules on the market. Till date, neither the Respondent nor the GSE has published any information to the effect that GGBL was mulcted with the relevant penalties for the said breaches in its continuing obligations by either the GSE or the Respondent. It was only much later that GGBL published its half-year results which went some way to cure the lacunae in information that the market needed in order for informed investment decisions.

However, a cursory look at the mode of disclosure 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. Regulation 56 of LI 1728 on contents of quarterly financial statements reads 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 as evidenced by exhibit TG15, GGBL used the old format under the GSE Listing Regulations in purported compliance with LI 1728. For a major multinational engaged in a major acquisition of another listed company and having access to seasoned financial and legal expertise, the question that necessarily arises, is whether this done deliberately to prevent the true state of the financial position being disclosed to shareholders? It is difficult for GGBL to argue that it was not aware of the promulgation of LI 1728. Again, it seems both the GSE and the Respondent allowed these breaches of fundamental disclosure obligations to pass. The Respondent despite all its powers under law, and despite its attention being drawn to these clear infractions by the complaint of the Applicant and further communication as expressed in exhibits TG1, TG4 and TG5, has done nothing although it is aware of such blatant disregard for securities laws.

b. Valuation Report

No valuation report was submitted to the GSE and the Respondent and yet both institutions strangely abdicated their legal duty to request for the document and ensure its disclosure to shareholders. This is a clear unambiguous breach of regulation 52 of GSE’s Listing Regulations. Respondent’s statement in exhibit TG2 that the valuation report was submitted by GGBL to the GSE and also to shareholders of GBL is therefore materially false. No valuation report was submitted to the GSE. Although the GSE’s own Listing Regulations obligated it to request a copy of the Valuation Report, for reasons as yet undisclosed due to the Respondent’s refusal to investigate this matter, the GSE broke its own regulations and did not request for the valuation report from GGBL neither was it submitted. Instructively, the Offer Circular, (copies of which are necessarily with the Respondent) did not also disclose that the Respondent or the GSE had granted GGBL an exemption, even though, there would have been no legal basis to exempt such a fundamental document from disclosure. We wish to stress that this information could easily be ascertained from the Offer Circular. We wish to submit that the Valuation Report is not listed among the documents exhibited in the Offer Circular underpinning the takeover. The Applicant shudders to think of the implications if later investigations do indeed show that the GSE was given a copy of the Valuation Report and chose not to make the disclosure. If the regulations require this document to be disclosed, why did the regulators allow non-disclosure and did not state to shareholders it has granted an exemption?

c. False Reports

Takeover?/Merger?
False reports, unfortunately swallowed, hook, line and sinker by the Respondent, have been submitted by GGBL as part of a grand design of deception, to the GSE. This is a clear breach of section 134 of PNDCL 333. By law, any person who with intent to deceive makes or furnishes … any false or misleading statement or report to the SEC, the GSE or officers of the SEC on matters relating to dealings in securities, matters required by the SEC for the proper administration of the law or the enforcement of the rules of the GSE commits and offence. This is punishable by 500 penalty units and/or two years.

GGBL in the notes to its GSE press release no. 077/2005 stated that there had been a merger since December 2004. Please refer exhibit TG8. We are alarmed that the Respondent would commit such a fundamental mistake. The complaint was premised on the fact that there had been a calculated and deliberate campaign of misinformation to the unsuspecting Ghanaian public through the very institutions tasked to prevent and penalize such actions. The deliberate maze created can only be unravelled if a clear distinction is made Guinness Ghana Breweries Group (GGBG), Guinness Ghana Breweries Limited, (GGBL), Guinness Ghana Breweries (GGB), and Ghana Breweries Limited (GBL). We wish to submit that the true state of affairs is that GGBL acquired shares in GBL but has not merged with GBL. This is at variance with corporate communication from GGBL itself, which has oscillated between the fact of non-merger and the basic untruth of merger. This matter could have been ascertained if the Respondent had had due regard to press releases through the GSE and to publications in the media and to the Annual Report submitted to GGBL shareholders for the Annual General Meeting held late last year. All these documents, instructively, are either with the Respondent itself or should be with it by law. We wish to submit that the Respondent has a legal duty under regulation 58(1) of LI 1728 to review such documents to ensure compliance with accounting standards and securities laws. Clearly, this has not been done. The latest is exhibit TG16 which is dated as recently as February 28, 2006.

Again, the Daily Graphic publication of October 13, 2005 (please see exhibit TG12) shows a clear attempt to mislead the public on the true nature of the entity GGBL. When those statements are juxtaposed against the Annual Report of Guinness Ghana Breweries Group (GGBG), a phantom entity established and publicly launched by GGBL officials ostensibly as the holding company of the two companies, the securities regulator should have been concerned. Exhibit TG10 clearly shows that the entity GGBG is being referred to as “Ghana’s most celebrated company”. In actual fact, GGBG does not exist. GGBL has not even bothered to register that entity, a clear breach of the Registration of Business Names Act, 1962 (Act 151). All these matters have been pointed out to the Respondent and yet it refuses to act. We respectfully submit that a securities regulator should necessarily act when such acts are committed on the capital markets in Ghana. It is puzzling to say the least that the Respondent would bend over backwards to protect a corporate entity that is clearly in breach of the law by consistently refusing to act in accordance with its mandate under law. The big question that is to be asked is whether the Respondent is to protect investors or its duty is to protect big business? Is GGBL above the law? The law courts have a unique opportunity to lay down the law pertaining to securities activities in Ghana.

d. GSE Liability

Under section 132 of PNDCL 333, executives of the GSE who fail to take all reasonable steps to ensure compliance with the Law or the accuracy or correctness of any statement submitted by those officials commit an offence and will be liable on conviction to 250 penalty units or to one year imprisonment or both. Applicant has pointed out in its complaint to the Respondent that breaches have occurred. The Respondent has a public duty to act yet it has so far failed to act.

e. Court-approved Price?

We wish to submit that no court of law determined the offer price under the takeover deal. We therefore find it rather unsettling that the Respondent would liberally make in exhibit TG2, factually inaccurate statements to the effect that the High Court determined the offer price. These matters could be cleared if any investigations as prescribed by law had been done to ascertain whether a court of law ever made that determination. The Respondent’s continued assertion of an inaccuracy is a sad testament to its unwillingness to fulfil its legal duty unless ordered so to do by this Honourable Court. The Applicant submits that the Respondent made a rather grave error in stating that “the issue of a fair value does not arise since it was determined by High Court and there was no subsequent appeal”. We respectfully submit that when an apex regulator of the securities industry, with a legal duty, liberally documents untrue statements, which would be an offence under PNDCL 333, as amended, if it were committed by a market operator, the law courts and indeed all investors must be very concerned. The Applicant therefore states categorically that the offer price pursuant to the takeover was not determined by the High Court. The offer price was determined by the offeror, GGBL. The matter brought before the Court by a shareholder of GBL was whether the valuation report had to be disclosed in order to determine the fairness or otherwise of the offer price. As soon as the High Court made a ruling that the valuation report should be submitted, not to the public, but to the Court in order for it to make a determination as to whether it should be disclosed or not, the matter was settled out of court. The substantive issues were therefore never resolved. The Respondent was a party to that suit and is fully aware of all the facts. It is only an investigation that can help determine why the regulator itself will make public statements of an untrue nature.

We wish to submit that Diageo, the parent company of GGBL could only lawfully pay for its new shares after the completion of the EGM of GGBL in July 2004 yet the price it paid for the shares was the prevailing price as at December 17, 2003, when the deal was announced, i.e. ¢5400. This was at a time when the prevailing share price of GGBL was ¢12,270. The Respondent is always invited to the general meetings of listed companies and must have been a witness to this event. Respectfully, no securities regulator in any jurisdiction, perhaps except Ghana, would even wait to receive a formal complaint when it notices a rapid rise in the share price of Guinness between December 17, 2003 and the closure of the deal. Whilst we have consistently stated that we have no evidence of wrongdoing, the facts necessarily warrant an investigation to determine whether any stock market manipulation and/or insider dealing transpired during the period.

Section 123(1) of PNDCL 333 defines stock market manipulation as follows: ‘A person who effects, takes part in, is concerned in or carries out, either directly or indirectly, two or more transactions in securities of a body corporate which are transactions in securities of a body corporate which are transactions that have or are likely to have, the effect of raising, lowering, maintaining or stabilising the price of securities of the body corporate on a stock exchange in Ghana with intent to induce other persons to sell, purchase or subscribe for securities of the body corporate or of a related body corporate commits an offence”.

Section 128 prohibits dealings in securities by insiders. It provides as follows:
(1) A person who is, or has at any time in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in securities of that body corporate if by reason of his association he is in possession of information that is not generally available, but if it were, might materially affect the price of those securities.

(2) A person who is or has at anytime in the 6 months immediately prior to a dealing in the securities of a body corporate been connected with that body corporate shall not deal in any securities of any other body corporate if by reason of his being, or having been connected with the first mentioned body corporate he is in possession of information that

(a) is not generally available but, if it were, would be likely to affect materially the price of those securities; and
(b) relates to any transaction (actual or expected) involving both those bodies corporate or involving one of them and the securities of the other.

We wish to submit that a case of stock market manipulation or insider dealing can never be established by the regulator requesting for evidence from a complainant. This is because some trades on the market would necessarily have to be unravelled to establish who was buying or selling the shares leading to the unusual rise or fall in the shares. No individual has legal authority to demand contract notes and transfer receipts and other records of securities dealers. It is only the Respondent who has been clothed with legal authority under section 10 of PNDCL 333 to legally request the relevant documents in its quest to investigate such matters. Indeed, an attempt by the Respondent to fully establish the futility of the “show-me-evidence” posture of the Respondent was proved by the response of the solicitors for GGBL as evidenced by exhibit TG7. The Applicants were duly rebuffed.

We therefore submit that where share prices have risen by 136% within a period of seven months after an announcement of a takeover and the majority shareholder of the acquiring company, engineers a sale to itself, alone, by getting all other shareholders to waive their right to equivalent shares as priced, of shares not at the prevailing price but at 136% discount, the Respondent ought to investigate to establish whether the shares were not manipulated and also whether no one connected with the acquiring company as defined by law, benefited by trading in shares during the said period. These are basic fundamental securities law principles that must be upheld by law in the event that the regulator fails to do its legal duty as in this instance. Further, Applicant draws the attention of this Honourable Court that Guinness Plc, which is a United Kingdom based company with links to GGBL, has been held to have engaged in stock market manipulation and breaches of securities laws in the past. This has already been pointed out in communication to the Respondent. In the late 1980s, the Department of Trade and Industry (DTI) in the United Kingdom also had an opportunity to request “documentary evidence” in the late eighties when reports of possible wrongdoing in the takeover of Distillers Plc by Guinness Plc initially surfaced. After investigations were made, the then Chairman of Guinness Plc, Ernest Saunders, was tried, convicted and jailed with three other directors of the company. We respectfully submit that if the DTI had responded in a like manner of the Respondent, the facts would never have seen the light of day. We therefore respectfully submit that it is absolutely essential that an order of mandamus issues to compel the Respondent to do its legal duty by saving the dignity of the nation and do its duty under law to investigate such clear infractions of the law and to impose the stipulated sanctions for the breaches that have occurred so far.

Further, we draw attention to events on the Tokyo Stock Exchange in the past few months. Livedoor, an internet brokerage firm, is being investigated based on allegations of fraud. The firm has been placed on the Stockwatch List, a step prior to delisting. The directors of the company have been arrested and are being tried for breaches of securities laws. The Respondent is a member of the International Organisation of Securities Commissioners (IOSCO) to which the Japanese regulator also belongs. All members subscribe to the principles of securities regulation as laid down in the IOSCO Principles.

The Respondent has breached and/or condoned the breach of the following securities regulations and laws including but not limited to the following:

i. s9 of Act 590 particularly s8c (3) of the new Part 1A by refusing to investigate the complaint and summarily dismissing it.

ii. Failing to sanction GGBL for non-compliance with regulation 55 and 56 of LI 1728.

iii. Failing to sanction the GSE and GGBL for non-compliance with regulation 52 of GSE’s Listing Regulations.

iv. Failing to investigate complaint of possible stock manipulation and insider dealing.

v. Failing to investigate and sanction GGBL for false reports submitted to the GSE and also disseminated to the general public through the media pursuant to sections 124 and 134 of PNDCL 333.

6. The Law:

a. SEC’s Legal Duty:

The functions of the Respondent have been set out in section 9 of the Securities Industry Law, 1993 (PNDCL 333), among which are the following:

Section 9:
(b): to maintain surveillance over activities in securities to ensure orderly, fair and equitable dealings in securities;

(c): to register license, authorise or regulate, in accordance with this Law or any regulations made under it, stock exchanges, investment advisers, unit trust schemes, mutual funds, securities dealers and their agents and to control and supervise their activities with a view to maintaining proper standards of conduct and acceptable practices in the securities business;

(d): to formulate principles for the guidance of the industry

(f): to protect the integrity of the securities market against any abuses arising from the practice of insider trading;

(h): to review, approve and regulate takeovers, mergers, acquisitions and all forms of business combinations in accordance with any law or code of practice requiring it to do so;

(i): to create the necessary atmosphere for the orderly growth and development of the capital market;

(k): to undertake such other activities as are necessary or expedient for giving full effect to the provisions of this Law; and

(l): to perform other functions specified under this Law.

Section 9 of the Securities Industry (Amendment) Act, 2000 (Act 590) is instructive on what the Respondent ought to do when a complaint has been filed with it. Section 8c of the new Part 1A governs the submission of complaints and the examination of issues. Section 8c states in part as follows:

(1) A complaint, dispute or any violation arising under this Law shall, before any redress is sought in the courts, be submitted to the Commission for hearing and determination in accordance with this Part.

(2) A matter to which sub-section (1) applies shall be submitted in writing to the Director-General of the Commission and where it is not in writing, the Director-General shall cause the matter to be reduced into writing.

(3) The Director-General shall cause the matter to be investigated and shall unless he

(a) considers the matter to be frivolous or vexatious;
(b) can settle the disputed matter or complaint to the satisfaction of parties concerned,
refer the matter together with the findings of the investigations to the Hearings Committee within thirty days from the date of receipt of the written complaint, dispute or violation and shall at the same time inform the complainant or persons concerned of the submission to the Hearings Committee.

Further, subsection (5) of section 8E of the new Part 1A of Act 590 gives the Hearings Committee a period of thirty days from receipt of the complaint it to examine and determine the complaint or matter unless there is a delay occasioned by the complainant, his representative or witness.

We wish to submit that the Director-General of the SEC has a legal duty under section 9 of Act 590, to investigate the complaint in order to make a determination that it is unmeritorious. It is obvious from the statements made by the Respondent in exhibit TG2 that no such investigation was conducted leading to the repetition of the same false information and untrue statements being published through the regulatory institutions, a situation that necessitated the complaint. If an investigation was conducted as warranted by law, the Respondent would have been in a position to know that there had been no merger between GBL and GGL to form GGBL. It would also have established that no valuation report was ever submitted to the GSE or to the Respondent itself. Further, it would have established by its investigations that no court of law in Ghana ever fixed the offer price under the takeover deal that led to the acquisition by GGBL of GBL. By wilfully making these false statements in support of its decision to abdicate its legal responsibilities, it is obvious that no investigation was ever conducted as required by law. The unfortunate false statements made by the Respondent in exhibit TG2 could easily be ascertained as the facts are already in the public domain and relevant documentary proof on the issues are with the Respondent itself.

b. Mandamus
The principle regulating the grant of an order of mandamus is stated in the Annual Practice (1960 ed), Vol 1 at page 1725 and quoted with approval by the High Court in The Republic vrs. The Inspector-General of Police; Ex parte Hansen and Others [1992] 2GLR at page 179: “An order of mandamus is an order requiring an act to be done… and it may be made where an inferior tribunal or body of persons is charged with a public duty to do an act, and has failed upon demand to do it: see R. v. Inland Revenue Commissioners, Re Nathan (1884) 12Q.B.D. 461 C.A. The making of the order is discretionary: see R. v. All Saints, Wigan (Churchwardens) (1876) 1 App. Cas. 611 at p.620, but it is made where there is a legal right to the act and no other specific and equally convenient remedy… but it may be made against officers of the Crown who are obliged by statute to do some ministerial act in favour of the applicant.”

In Republic v Chief Accountant, District Treasury, Kumasi; Ex parte Badu [1971] 2GLR 285 the court held as stated in the head note: “… an order of mandamus lies against public officials in the performance of their public or quasi-public legal duty, to require them to carry out their duty. The order is not meant to review or control what such officials have done or what they do, but to compel them to act…The order will only issue if the duty required to be performed can be legally done. Ex parte Nash 15 Q.B. 92 and R. V. Eastbourne Corporation (1900) 83 LT 338 applied.”

In Halsbury’s Laws of England (3rd ed), Vol 11, pages 106-107, paragraph 199, the law is set out as follows: “A mandamus will not go when it appears that it would be futile in its result. Accordingly, the Court will not, by mandamus, order something which is impossible of performance by reason of the circumstances that the doing of the act would involve a contravention of law …”.

In the Republic v. Chief Lands Officer; Ex parte Allotey and Others [1982-83] GLR 971 an application for an order of mandamus was made by a joint head of family to compel the Chief Lands Officer to register a number of conveyances relating to land belonging to the Onamrokor Adain family, which the Chief Lands Officer had refused or failed to register. The High Court per Cecilia Koranteng-Addow J, had the opportunity to pronounce on the issue of the locus standi of the Applicant. In her Lordship’s view, “so far as applications for granting prerogative writs are concerned, I think it is in the discretion of the court whom it will hear and whether to grant such a remedy or not. The writ of mandamus is a wide remedy and it should avail anyone who shows that he has sufficient interest to be protected and that there is no other remedy”.

The Supreme Court in the Republic v Lands Commission; Ex parte Vanderpuye Orgle Estates, reported in the 1998-99 Supreme Court of Ghana Law Reports, 677, examined the scope of mandamus and considered circumstances where the court would grant mandamus even where alternative remedy of appeal was available to the applicant. The case was an appeal against the unanimous decision of the Court of Appeal affirming the judgment of the High Court, granting an order of mandamus against the Lands Commission.

Bamford-Addo JSC at 691 quoted from page 63, HWR Wade Administrative Law (5th Ed) on the history, use and effect of mandamus: “Lord Mansfield said in sweeping terms in R v Baker (1762) 3 Burr 1265 at 1267…’ it was introduced to prevent disorder from a failure of justice and defect of police. Therefore it ought to be used upon all occasions where the law has established no specific remedy and where injustice and good government there ought to be one … the value of the matter, or the degree of its importance to the public police is not scrupulous weighed. If there be a right and no other specific remedy, this should not be denied.” Her Lordship further quoted Darling J in R V The Revising Barrister for the Borough of Henley [1912] 3 KB 518 that “instead of being astute to discover reasons for not applying this great constitutional remedy for error and misgovernment, we think it is our duty to be vigilant to apply it in every case to which, by any reasonable construction, it can be made applicable.” His Lordship Charles Hayfron-Benjamin JSC further buttressed the importance of mandamus as a tool for ensuring that public officials did their duty. He stated at page 697 that “the respondents were right in approaching the court for a mandamus, for, wherever there is a danger or threat that an interest, whether proprietary or otherwise, will be prejudiced or unlawfully interfered with, mandamus will lie”.

As succinctly stated by Hayfron-Benjamin JSC in the case, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty. It includes the correction of such acts or duty wrongly performed. The order neither grants victory to the person applying nor is it the result of litigation”.

7. Conclusion

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! Please refer exhibit TG10. The MD of GBL is also the MD of GGBL. If there has been a merger, would he hold both positions? Indeed, the fact of non-merger is borne out by the Managing Director of GBL itself in exhibit TG16. We submit that 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. Indeed, under Ghanaian law, the Respondent has a legal duty to as a matter of urgency, immediately correct the false information which evinces a brazen lack of respect for Ghana’s laws and to halt the impunity with which Ghana’s securities laws are being breached, regrettably with the active connivance of the Respondent in total disregard for its duty under law.

When such statements are made in Annual Reports, copies of which are with the Respondent and the Respondent justifies a refusal to investigate a complaint by making statements that are debunked by documents within its own possession, it is imperative that the law courts intervene to ensure that public officials do their duty under law. As stated by Hayfron-Benjamin JSC in the Republic vrs. Lands Commission, ex parte Vanderpuye Orgle Estates, “… an order for mandamus may issue against a public officer, a statutory authority or person who has a public duty to perform under the common law to do any act so warranted but who refuses or neglects to do that act or perform that duty”. The Applicant has shown beyond all reasonable doubt that the Respondent has refused and/or neglected to do its duty.

The relevant law has made a provision of 60 days for resolution of complaints. In securities issues, time is of the essence. The continuing delay in dealing with the matter makes it imperative that an order of mandamus is the only order that would compel the securities regulator to do its duty under law to investigate the matters complained of and also to apply laid down sanctions for the infractions of the securities laws and regulations that have already taken place.

The manner in which the Respondent has abdicated its legal responsibility to regulate the market by refusing to investigate the complaint and ensure that defaulters are appropriately sanctioned leaves much to be desired and is a dangerous precedent that needs to be reversed. The grounds adduced by the Respondent to support its regrettable decision to abdicate its legal responsibility have been shown to be wholly inaccurate. The stated grounds of the Respondent are false in material particular and therefore cannot lawfully found a proper determination not to investigate the complaint. The Respondent is akin to a policeman. Indeed, it is the Police of the securities industry. When a policeman can tell a complainant that he will not investigate a complaint in the face of overwhelming evidence, it is a recipe for chaos. Indeed, the policeman has no such discretion. It has a duty to investigate the matter and cite the complainant for deceit of public officer in the event that it finds that the complaint is wholly unmeritorious. Indeed, that is why mandamus is available “to prevent disorder from a failure of justice and defect of police.”

The applicant has established that the Respondent has a legal duty. It was called upon to perform that duty. It refused. The applicant wrote to the Minister of Finance (please refer Exhibits TG13 and 14). No response has been forthcoming. This is a monumental, indeed, unprecedented breakdown in regulation that may be unique to Ghana. This nation will encounter a lot of mergers and acquisitions in the near future as businesses consolidate on the local market. It is therefore essential to understand the regulatory failures in this particular instance in order to correct any mistakes and better the regulatory framework for such critical economic activities. The matters complained of and warranting the present application can therefore by no stretch of the imagination be termed as frivolous or vexatious. Indeed, after 49 years of independence, the Applicant sincerely believes that it is not only small or medium sized local companies that can fall foul of the law. The law is blind as to personalities. The best signal that the Ghanaian judiciary can send to the investing world is that in Ghana, as in other jurisdictions, the law is applied regardless of the personalities involved. Just as the DTI in the United Kingdom did to Guinness Plc by investigating allegations of impropriety in securities dealings, leading to the trial, indictment and conviction of Mr. Ernest Saunders, then Chairman of Guinness Plc and three other directors for breaches of a similar nature, we wish to humbly submit that in the light of the evidence adduced, “the chips should fall where they may”.

We therefore call on this Honourable Court to order mandamus to issue against the Respondent to compel compliance with its duties under law and to prevent total mayhem on Ghana’s securities markets.

DATED AT ACCRA THIS 23rd DAY OF MARCH, 2006

SOLICITOR FOR APPLICANT
THE REGISTRAR
FAST TRACK HIGH COURT
ACCRA

AND FOR SERVICE ON THE ABOVE-NAMED RESPONDENT

ThinkGhana-Vrs-SEC,Ghana :Affidavit in Support of Mandamus Application

2006-05-05T05:44:00.000-07:00

PRESS STATEMENT ON GHANA INTERNATIONAL AIRLINES AND THE S.E.C.

2006-04-21T11:53:00.000-07:00

April 21, 2006
PRESS STATEMENT

ThinkGhana is compelled by the extraordinary situation unfolding in respect of two matters that have a direct bearing on the level of corporate governance practices in Ghana and its potential to affect investment inflows and the continuing sorry state of Ghana securities regulatory framework to issue this press statement.

Ghana International Airlines

“The proper government of companies will become as crucial to the world economy as proper governing of communities”
(James Wolfensohn, Former President, World Bank)

ThinkGhana wishes to express its concern at the procedure adopted by the government to protect its investment in Ghana International Airlines (G.I.A.). We do believe sincerely that having declared the private sector as the engine of growth, and having shown a desire to engage in public-private sector initiatives such as GIA, for the benefit of all citizens of Ghana, it is imperative that the government utilizes and follows laid down corporate governance principles in such matters. We do sincerely believe that though the government may have genuine concerns about certain developments in GIA, its interests are better protected by its chosen appointees on the Board of Directors. At worst, we believe that the government with 70% stake in the business could also utilize its powers as a majority shareholder, expressed through shareholder meetings to achieve its objectives. We are concerned that in government’s desire to halt a perceived wrongdoing, it apparently did not follow the laid down structures and acted not through the corporate organs at its disposal but rather chose to achieve what may ultimately be a good intention by unfortunately abandoning good corporate governance practices.

ThinkGhana therefore takes the opportunity to encourage the government to act as in its capacity as a shareholder when it enters into private sector ventures. Ghana has all the facilities available for redress in corporate governance matters. We encourage the government to set an example for the rest of the continent by continuing its laudable reliance on the rule of law in corporate matters, in order to further assure all investors, especially private sector partnerships with government, that their interests as expressed in shareholder agreements would be upheld, no matter how politically expedient a ‘governmental act’ may seem in the short term.

The Securities and Exchange Commission and Guinness
“At times to be silent is to lie. You will win because you have enough brute force. But you will not convince. For to convince you need to persuade. And in order to persuade you would need what you lack: Reason and Right”. - Miguel de Unamuno, "in a confrontation with fascist General Milan-Astray", at the University of Salamanca.
As far back as December 18, 2005, ThinkGhana filed a complaint with the SEC on breaches of Ghana’s securities laws by Guinness Ghana Breweries Limited. The SEC, threw out the complaint on the grounds , inter alia, that our allegation that there has been persistent, consistent and willful misinformation to the Ghanaian investing public by Guinness through the mass media and through the Ghana Stock Exchange that Guinness Ghana Limited and Ghana Breweries Limited have merged to form Guinness Ghana Breweries Limited was part of a catalogue of unproven allegations. We have watched in amazement as the SEC, GSE and Guinness itself, took no steps whatsoever, to correct that false impression in the minds of unsuspecting Ghanaians. ThinkGhana had asserted all along that there had been no merger, which will lead to only one company existing but rather a takeover of GBL by GGBL which is now the majority shareholder of GBL. We have been compelled to fall on the last bastion of the defence of Ghanaian rights, the judiciary, in respect of the core issues. We however take the opportunity to draw the attention of all Ghanaians to page 43 of the April 21, 2006 edition of the Daily Graphic and dare ask: IF THERE HAS BEEN A MERGER, HOW COME AN ENTITY KNOWN AS GHANA BREWERIES LIMITED IS NOW PURPORTING TO CALL TWO ANNUAL GENERAL MEETINGS IN ONE DAY IN A NATIONAL NEWSPAPER? HAS THE ADVERT BEEN SEEN BY THE GSE AND THE SEC? IS GUINNESS ABOVE THE LAW?

ThinkGhana will continue to make a case for good corporate governance in Ghana, which we believe is equally as critical to Ghana’s socio-economic development as the present-day clarion call for good governance in our body-politic. We will also continue to fight to ensure that our laws are applied equally, with fairness and justice to all persons in Ghana. We therefore look forward, thankfully, to our day in Court when the Ghanaian judiciary would have an opportunity to rule on the matter. Our dear nation Ghana can only be better if all Ghanaians nurture a desire to make our laws work, irrespective of personalities.

“God bless our homeland, Ghana
and make our nation great and strong.
Bold to defend forever, the cause
of freedom and of right.
Fill our hearts with true humility,
make us cherish fearless honesty,
and help us to resist oppressors rule
with all our will and might forever more!

Ghana Deserves Better!

Thank you.

Yours in the service of Ghana

THINKGHANA
Accra 210406

ThinkGhana and The Guinness "Merger" - The Rejoinder

2006-03-27T11:02:00.000-08:00

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.

Conclusion:
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

ThinkGhana

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

2006-03-27T09:26:00.000-08:00

“THE ROLE OF A COMPANY SECRETARY
IN A PUBLIC LISTED GHANAIAN COMPANY”

INTRODUCTION:

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.

DUTIES:

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.

COMMON LAW DUTIES:

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.

OTHER DUTIES:

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.

CONCLUSION:

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…

JOE ABOAGYE DEBRAH Esq.
Partner, 1stLaw

Accra JD210905

Reference:
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 S.A.to Mobil Ghana Shareholders - A Commentary

2006-03-27T04:02:00.000-08:00

RE: TAKEOVER OF MOBIL OIL GHANA LTD. BY TOTAL OUTRE MER S.A. –
COMMENTARY ON OFFER CIRCULAR

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.

Conclusion

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

ThinkGhana
Accra, Ghana

Dead Men Walking

2006-03-27T03:59:00.000-08:00

'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
Oppressors-
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

2006-03-27T03:54:00.000-08:00

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

Introduction:
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.

Conclusion
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

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