Legal risk refers to unexpected and unforeseen legal and regulatory restrictions and changes to such restrictions which may result in losses or business failure.

Regulatory and compliance restrictions & changes may be in the form of:
▪ Incorporation requirements
▪ Business Ownership (Foreign and Local/Local Content)
▪ Capital requirements (Industry specific)
▪ Labour requirements (Local / Immigrant Quotas)
▪ Permits/Licenses/Consents (Industry specific)
▪ State procedures

▪ By Negotiating Effectively
▪ By Conducting a pre-Contract due diligence & post-Contract due diligence
▪ By Conducting periodic transaction review
▪ By Conducting periodic regulatory regime reviews
▪ By Ensuring Compliance with Agreed Terms
▪ By Complying with all relevant Laws & Policies
▪ Securitization of Credit & Financial Transactions
▪ Perfection of Security Documents

▪ Rigorous Project Assessment
It helps the parties to better understand the whole life cycle cost of investments and enables a more rigorous project assessment.

▪ Risk Sharing
It allows for risk sharing between the parties (between private owners or private and government). One party therefore doesn’t bear all risks associated with its infrastructure & service delivery.

▪ Accelerated Delivery
Prior steps taken to reduce or eliminate all possible risks, helps facilitate accelerated delivery of needed infrastructure and services, on time and within budget.

▪ Legal
Just like any project involving different project owners or partners, there are Legal, Compliance and other implications, including, rights, duties or responsibilities, liabilities, benefits, consequences for breach.

▪ Financial Stability

▪ Operational Stability

This refers to uncertainties and unforeseen events that may result in inadequate profits, losses or project/business failure.

Types of Risks

▪Risks may differ depending on the nature, size or location of the project or business. Eg. A mining project may face different risks from that of manufacturing.

▪Risks may also result from the presence or absence of a particular activity or service or non-occurrence or occurrence of an event, as well as change in policy or regulation. Eg. irregular supply of raw materials, machinery breakdown, labour unrest, market price fluctuations, changing trends and fashions, error in sales forecasting, fire, flood, earthquakes, riots or war, political unrest, changes in regulations and government policies.

Internal Risk

Risks arising from the events taking place within the organization.

▪ Sources of Internal Risks

They arise from factors which can be controlled such as human factors (talent management, strikes), technological factors (emerging technologies), physical factors (failure of machines, fire or theft), operational factors (access to credit, cost cutting, advertisement)

External Risk

Risks arising from events taking place outside the organization.

▪ Sources of External Risks

External risks arise from factors which cannot be controlled, such as economic factors (market risks, pricing pressure), natural factors (floods, earthquakes), political factors (compliance and regulations of government or changes in legal regimes ).

Stakeholders

Every regulated activity or regulatory regime has 3 key stakeholders.
▪ Regulator ▪ Regulated Group ▪ Consumer

All Individuals, Organisations and Government Agencies

Every entity or person is required to comply with all relevant sector specific regulations, anti-bribery, corruption and anti-money laundering laws or regulations applicable to certain transactional activities or projects in Ghana.
Particularly, if it involves the government or a government agency.

“any contract entered into by the Government or any statutory corporation or any
other agency of the Government ….”

Projects & Parliamentary Approval

A Project involving the government of Ghana is required to follow the procedure laid down under Article 181 of the 1992 Constitution of Ghana.

Loans or International Transaction

A Transaction which is by way of a loan or which is considered as an international business or economic transaction will require approval by Parliament in accordance with the provisions of Article 181 of the Constitution.

Facility/Loan Agreement

Guarantees (Shareholders/Directors/Personal/3rd Party/Sovereign Guarantees)

Mortgages

Promissory Notes / Undertaking

Charges / Debenture Secured by a Floating Charge or Fixed Asset

Share Pledge

Assignment

An Agreement for the Appointment of a Receiver Manager in the event of a breach or Non-Payment

❑ The Stamp Duty Act, 2005 (Act 689) (as amended the Stamp Duty Amendment Act, 2008 (Act 764)
▪ Act 689 requires that “an instrument (a) executed in Ghana; or (b) executed outside Ghana but relating to property situate or to any matter or thing done or to be done in Ghana shall except in criminal proceedings, not be given in evidence or be available for any purpose unless it is stamped in accordance with the law in force at the time when it was first executed.

• Therefore to render loans and security agreements valid and enforceable in Ghana, they must be stamped in accordance with applicable rates within two months from the day of execution. Documents not stamped within the stated period may be stamped thereafter upon payment of penalty.

❑ The Borrowers and Lenders Act 2008 (Act 773)

Act 773 regulates ‘arm’s length’ credit transactions between parties where those transactions are subject to the laws of Ghana.

▪ Section 25(1) of Act 773 provides that “A borrower or a person interested in a charge shall register a certified copy of a charge or collateral created by the borrower in favour of a lender with the Collateral Registry within twenty-eight days after the date of the creation of the collateral or charge.”

▪ Act 773 further provides that a charge which is not registered is of no effect as security for a borrower’s obligations for repayment of the money secured and the money secured, shall immediately become payable despite any provision to the contrary in any contract.

▪ In view of the above, all instruments of security which may be enforced in Ghana must be registered and filed at the Collateral Registry.

❑ Companies Act, 1963 (Act 179)

• “Where a charge is created by a company, the requirement to register charges with the Collateral Registry shall be in addition to the requirement under section 107 of the Companies Act, 1963 (Act 179) to register charges with the Registrar of Companies.” Section 25(2) of Act 773

❑ Land Registry Act, 1962 (Act 122)

There are also requirements for registration of charges under the Land Registry Act, 1962 (Act 122) and the Land Title Registration Law, 1986 (PNDCL 152) where the charge is over immovable property in Ghana.