Rethink compulsory stated capital for foreign liaison offices - GIPC told

The Ghana Investment Promotion Centre (GIPC) has been asked to take a second look at how it deals with liaison offices of external companies seeking to do business in the country.

At a breakfast meeting organised by Firstcode Management Services involving business leaders, lawyers and tax experts, the panellists expressed concerns about the practice of GIPC requiring external companies’ liaison offices to comply with stated capital requirements as though they are wholly foreign-owned limited liability companies.

“Because they are not seen as a limited liability company and are operating on their mother company’s name, they don’t also expect to do business; so, why does GIPC ask them to declare US$500,000? As for foreign companies incorporated in Ghana, they have to show evidence of the US$500,000 minimum foreign equity either in cash or machinery,” the panellists said.

This action against external companies by the GIPC, the discussants at the meeting said, will scare away many external companies who are here to invest and create employment. An act that they said does not come under the law, but has the potential to drive away investors.

“The implications are that when GIPC asks external companies to pay the US$500,000 they also have pay a stamp tax duty of 0.5 percent of the minimum capital requirement (US$500,000), which becomes an additional cost to them – and this will frustrate them to leave because the law does not permit them to do business here in Ghana,” they said.

Per section 329 (2) of the new Company Act 2019 (Act 992), an external company is a body corporate formed outside the republic that has an established place of business in the country.

So, laws of the country in which they were originally incorporated regulate external companies.

The reasons for establishing such liaison and representative offices or external companies can range from proximity to customers to providing customer support, market research, feasibility studies, and assessing investment opportunities for investment decisions.

But according to the Ghana Investment Promotion Centre, all external companies, liaison and representative offices are to invest a minimum capital requirement of US$500,000.