AN OVERVIEW OF A CHANGE IN GOVERNMENT IN GHANA FROM A LAWYER’S LENS: EXPLORING THE IMPORTANCE OF CORPORATE GOVERNANCE IN THE PUBLIC SECTOR
Ghana is six months into the term of a new President elected by the Ghanaian people, and the country continues to navigate its governance landscape. We are also in the season of Board appointments for State-Owned Entities, and there is a need for a reminder of good corporate governance guidelines in the public sector. This article discusses the transfer of power from a previous President to a newly elected President and its impact on the appointment of Board members for State-Owned Entities, and the role and importance of Corporate Governance in the public sector for the sustainability of government-owned entities.
We rely on the following laws and real-life experiences from the practice of law in Ghana to discuss this very crucial topic:
1. The 1992 Constitution of Ghana;
2. Companies Act, 2019 (Act 992);
3. Presidential (Transition) Act, 2012 (Act 845);
4. National Corporate Governance Code, 2022; and
5. Theophilus Donkor v. The Attorney General [Unreported, Suit No. J1/08/2017, 12/06/19].
What happens when a new President is elected in Ghana?
The Presidential (Transition) Act, 2012 (the “Transitions Act”) provides the guidelines for the transfer of power when a new President is elected in Ghana. It governs the formation of a transition team within 24 hours of the declaration of the presidential election results to ensure a smooth change of government.
The transition team is made up of: the Chief of Staff at the Office of the President, the Attorney General and Minister for Justice, the Minister for Presidential Affairs, the Minister for Finance, the Minister for the Interior, the Minister for Defence, the Minister for Foreign Affairs, the Minister for Local Government and the Minister for National Security.
The incumbent President and the President-elect co-chair the team. However, both can delegate their responsibilities to members of their respective teams if necessary. The transition team’s primary responsibilities include: ensuring the transfer of political power
following a Presidential and general election, providing daily national security briefings to the President-elect before the assumption of office, ensuring timely payment of salaries, allowances, and benefits due to Article 71 office holders as determined by the President and Parliament, and performing any additional tasks necessary to fulfill the mandate of the transition team.
The transition team’s term of office is 8 weeks after the Presidential elections, which was held on 7th December 2024. Within this time, the Office of the President prepared detailed handing-over notes summarizing the President’s term under Article 58 of the Constitution. Subsequently, the new President was sworn into office on 7th January 2025, following the elections.
What are State-Owned Entities, and what is the Impact of the Transitions Act on them?
A State-Owned Entity (“SOE”) is an enterprise created by the government, usually to participate in specific commercial activities. SOEs may be fully government-owned or partially government-owned with private sector participation.
In Ghana, SOEs manage major sectors within the country, such as utilities, transportation, natural resources, and finance. The following are some examples of SOEs: the Ghana Ports and Harbors Authority (“GPHA”) which manages and operates all ports in the country, Ghana National Petroleum Corporation (“GNPC”) which is the national oil sector aggregator, Volta River Authority (“VRA”) which generates and distributes electricity in Ghana, and Ghana Revenue Authority (“GRA’) which assesses, collects and accounts for all tax revenue in the country.
Each SOE has a governing Board, whose members are appointed by the President, in consultation with or upon the advice of the Council of State. The main role of an appointed Board is to oversee the SOE’s operations and ensure that its objectives are being met for the good of the Ghanaian people. The appointed Board of a SOE has operational independence; however, the government, as the appointing authority, maintains influence over appointments and removal of directors, which highlights the power each government holds over the Boards of SOEs.
In Ghana, SOEs that are fully government-owned are established by specific legislation. This legislation outlines the SOE’s objectives, functions, management, and other relevant details.
For example, the Ghana Ports and Harbours Authority (GPHA) was established by the Ghana Ports and Harbours Authority Act 1986 (P.N.D.C.L. 160). The Ghana National Petroleum Corporation (GNPC) was created under the Ghana National Petroleum Corporation Law 1983 (P.N.D.C.L. 64). The Volta River Authority (VRA) was established by the Volta River Development Act 1961 (Act 46), and the Ghana Revenue Authority (GRA) was created by the Ghana Revenue Authority Act 2009 (Act 791).
SOEs that are partially government-owned with private sector participation are usually registered under the Companies Act 2019 (“Act 992”) as private limited liability companies or public limited liability companies. For corporate governance purposes, the legal foundation of an SOE matters. If the SOE is registered under the Companies Act, 2019, that Company must be governed and operate in accordance with the Companies Act. However, if the SOE was created through specific legislation, then the rules in that law (its own statute) will govern its operations.
Section 14 of the Transitions Act provides a legal basis for the change in Board members when a new administration comes into effect. It provides that upon the assumption of a new President, previous appointees or Ministers who served on statutory Boards and Corporations cease to hold that office, and must be paid the relevant retirement benefits as provided by law.
This means that on 7th January 2025, when His Excellency President John Dramani Mahama was sworn into office, all persons serving as Board members of SOEs (established by specific legislation) ceased to hold office.
In the landmark case of Theophilus Donkor v. The Attorney General, the Supreme Court clarified the scope and effect of section 14 of the Transitions Act. For clarity of the court’s decision, here are the relevant facts of the case: The plaintiff, Theophilus Donkor, challenged the constitutionality of section 14 of the Transitions Act regarding the cessation of office of Board members and Chief Executive Officers (“CEOs”) of statutory bodies appointed by a previous President upon the assumption of office by a new President in accordance with the 1992 Constitution of Ghana (the “Constitution”).
Below are the effects of this case, which strongly impact Corporate Governance in the Public Sector:
In relation to governing boards of Statutory Boards and Corporations, the Supreme Court held that such boards cease to hold office upon the assumption of office by a new President, irrespective of the tenure provided in their various statutes. Therefore, section 14 applies to Board members of Statutory Boards and Corporations. The Court explained that these persons are appointed under Article 70(1)(d)(iii) of the Constitution and are not members of the Public Services of Ghana. This decision brought clarity to the tenure of Board members of statutory Boards and Corporations to the extent that their term of office does not automatically end after the results of a presidential election are declared, but rather when the new President officially assumes office (January 7th).
Additionally, regarding CEOs of Statutory Boards and Corporations, the Supreme Court ruled that CEOs and Director-General positions are considered public offices appointed under Article 195(1) of the Constitution. This means they are appointed by the President based on the advice of the governing Board and in consultation with the Public Services Commission. Their tenure and the terms for their removal are outlined in their letters of appointment. Therefore, they do not vacate their positions automatically when a new President is elected. As a result, section 14 of the Transitions Act does not apply to them, as it contradicts Articles 190 and 191 of the Constitution.
This allows for a level of governance to remain in the operations of those SOEs for stability and continuity of business operations until the President appoints new Board members, which in our experience usually takes at least 6 months after the President is sworn into office. This means that the appointment of a new President does not automatically terminate their positions, allowing them to continue serving unless their contracts are otherwise terminated or renegotiated.
The Transitions Act aims to ensure continuity in SOEs during the transition period from one administration to the other. However, in practice, the business continuity of these SOEs is often disrupted until new Board members are appointed. This is because the CEOs, who were appointed by the previous President, vetted by the Public Service Commission, and given a contract of employment, are also removed from office along with the Board members whose term of office ended.
What is the role of the Transitions Act on SOE subsidiary companies?
It is important to note that the Supreme Court decision in Theophilus Donkor v. The Attorney General and the Transitions Act does not apply to companies fully or partially owned by SOEs (such as those registered as companies with government ownership). Therefore, the Boards of such companies are not dissolved by the appointment of the new President. Instead, the continuity of the Board is required for good governance,
and until such a time that its shareholders wish to reconstitute the board in accordance with the Companies Act.
As established above, some SOEs establish subsidiaries or create companies limited by shares for specific purposes. In such cases, the SOE typically serves as the shareholder of the newly created company. A notable example is the GNPC, which owns some companies such as GNPC Exploration and Production Limited, Mole Motel Limited, and Prestea Sankofa Gold Limited, all registered as companies limited by shares, just to name a few.
The Board of these subsidiaries should remain in office and continue their functions until one of the following occurs:
1. The SOE, acting as the shareholder, reconstitutes the Board in accordance with the Companies Act; or
2. Existing Board members voluntarily resign.
Based on the above, a transition process should follow this narrative: upon assuming office, the President constitutes the Board of the SOE. Once constituted, the new SOE Board determines the future of the Board of its subsidiaries by way of reconstituting the Board. This will ensure a proper handing over of the previous Board’s activities to the new Board for business and operational continuity.
For example, upon the swearing-in of President John Dramani Mahama, the tenure of the GNPC Board (as an SOE) is automatically dissolved under Act 845. However, the Board of GNPC Exploration and Production Limited, Prestea Sankofa Gold Limited, and Mole Motel Limited, which are all companies limited by shares, should remain in office and continue operating.
The newly constituted GNPC Board may choose to:
1. Reconstitute the current Board members of its subsidiaries, compensating them according to the Board charter or established practices; or
2. Retain the existing board members to continue their duties.
This practice will allow for either a proper handing over from an old Board to a new Board, or continue with work as usual. Either practice does not cause a break in the operational activities of the company.
Similarly, the CEO of GNPC Exploration and Production Limited should remain in office unless replaced by the new Board of GNPC. If replaced, the CEO would be entitled to compensation as per their contract of employment.
How is Corporate Governance practiced and sustainability maintained in light of changes in government and the election of new administrations in Ghana?
In practice, the SOE, through its Management and staff, often prevents the Board of the company limited by shares from meeting or conducting business until the new President appoints a new Board for that SOE. This interference undermines good corporate governance and brings the subsidiary’s operations to a standstill. Such a divergence from established legal practices highlights how political influence can disrupt the law, creating a significant gap between legal standards and actual practices.
According to the Corporate Governance Institute, corporate governance is essentially a set of tools that enables Management and the Board to run an organisation more efficiently and effectively. Corporate governance does not exist without Fairness, Accountability, Responsibility, and Transparency. These pillars are what define whether a company, through its Management and Board of Directors, is truly practicing corporate governance.
As established above, the very nature of SOEs are vehicles of government policy. In Ghana, it is common practice that when a new political party is elected, it forms the new government. As a result, the newly elected government proceeds to replace all Board members and CEOs of SOEs to align these institutions with their political party’s policies and campaign promises. However, this is often done to the detriment of the SOE.
The above is the bedrock of the challenges of good corporate governance in the public sector. Some examples of these challenges faced by SOEs are:
● Lack of continuity in ongoing projects because when new Boards are eventually appointed, they align their objectives with the new administration’s policies.
● Lack of clear fiduciary accountability for SOE Boards because they are not clearly bound by the duties and responsibilities of directors in the Companies Act 2019 (“Act 992”) as with companies established under Act 992.
● Continuous delays in financial reporting, such as the delays in publishing their financial statements for fully-owned government entities and delays in filing their audited financial statements at the Office of the Registrar of Companies for partially-owned government entities.
The National Corporate Governance Code, 2022 (the “Code”) is a great resource that addresses the corporate governance needs of all forms of organisations, including the private and public sectors, listed and unlisted corporations, large and small businesses, formal and informal sector businesses, and not-for-profit organisations and serves as a guiding framework for the above-listed companies. Appendix H of the Code, which provides the
Corporate Governance Manual for Governing Boards or Councils of the Ghana Public Services suggests the following:
1. Accountability
Boards of SOEs must be ready to render account of their stewardship to their appointing authority, and they should be held responsible for all acts of omission or commission on their part.
2. Transparency
There should be no secrecy about transactions handled by a Board member on behalf of the rest, and if a member is interested in a transaction or contract that the SOE is about to enter into, the member should make his intentions known to his colleagues.
3. Conflicts of Interest
The Code reiterates article 284 of the 1992 Constitution of Ghana, which mandates Board members to ensure they don’t put themselves in a position where their personal interest conflicts or is likely to conflict with the performance of their duties.
4. Integrity
Boards of SOEs are mandated to be honest and bold to resist fraudulent practices and not to be complicit in all forms of corrupt practices.
5. Efficiency and Effectiveness
Board members of SOEs are mandated to refrain from misuse of corporate resources and to participate in all Board meetings to make decisions and retain full and effective control over the SOEs.
6. Social Accountability
Board members must not be exclusively interested in financial issues, be accountable to a broader group of stakeholders, and recognize that the success of their entities goes beyond reporting financial success.
7. Code of Conduct
Boards of SOEs must adopt a Code of Conduct that outlines how members should behave, work with management and stakeholders, attend and take part in meetings, keep official information confidential, and follow their oaths of office and secrecy.
8. Independence
Board members must avoid being pressured into questionable transactions that benefit others and are required to seek a second opinion or legal advice if they are unsure about the consequences of any action, especially when the request comes from a third party.
9. Board Evaluation
Boards of SOEs are mandated to annually assess their performance and effectiveness as a team and that of individual members, including the Chief Executive Officer of the SOE.
10. Capacity Building
SOEs are mandated to make provision for the capacity development of Board members of SOEs, irrespective of a Board member’s experience and academic and professional qualifications .
11. Auditing Requirement
Boards of SOEs are also mandated to ensure regular internal or external auditing of the business transactions and financial statements of the SOE, as well as audit recommendations for the SOE are implemented promptly.
It is important to note that Board members of SOEs are liable both as a group and individually whenever a liability arises, and for that reason, the above guidelines must be taken seriously if a board wants to maintain good corporate governance.
What is the Importance of Corporate Governance in SOEs?
The Code serves as a unified standard for all entities, in this case, all SOEs, and ensures their long-term sustainability and growth. The uniqueness of SOEs lies in the fact that they are to be profit-making entities as well as serve in the interest of the public. Therefore, effective
corporate governance is essential to protect the public interest and purse as well as ensure these SOEs serve their intended purpose efficiently and transparently. This is why continuity in governing Boards and proper transition of old to new Boards is necessary.
Adhering to the above corporate governance guidelines in SOEs is critical because:
1. It promotes transparency and accountability with the public to prevent corruption, financial misreporting, and abuse of public resources.
2. It ensures the fiduciary responsibility of directors is adhered to.
3. It builds investor confidence by enhancing the country’s international competitiveness in attracting foreign investment. In an increasingly global economy, transparency and good governance are prerequisites for attracting private capital, international development assistance, and public-private partnerships.
4. It improves operational efficiency and performance of SOEs, which reduces resource wastage and underperformance.
5. It ensures appropriate sanctions for breach of good corporate governance
Conclusion
Corporate Governance is majorly overlooked in the public sector, specifically with State-Owned Entities. The tools and framework needed to ensure good corporate governance already exist, particularly with the launch of the National Corporate Governance Code, 2022. To safeguard public interest and the public purse to advance national development, Ghana must prioritize the full implementation of corporate governance principles, not merely as guidelines, but as legally enforceable standards to ensure that every SOE remains functional, accountable, and responsible through every administration of government. We must all commit, both the government, regulators, and state-owned entities, to ensure good corporate governance, regardless of political affiliations.
Co-Authored by Lady-Ann Essuman (Managing Attorney) and Verissa Odame-Koranteng (Junior Associate).
VINT & Aletheia Attorneys and Consultants.
