The Chief Executive Officer of CDH Financial Holding, Emmanuel Adu-Sarkodee says many of the provisions in Ghana’s Companies Code, Act 179, 1963 are old and have lost their relevance o there is need for major reforms.
Speaking in an exclusive interview with Adom Business, he noted that the law, for instance, does not protect companies in distress and that is not good for a developing economy, which wants to see local businesses grow in spite of their challenges.
He explained that under the law, when a company is in distress it would either be put under private or official liquation, but never given the chance to bounce back.
“A private liquidation means the company is able to pay off its debts within six months of being put in liquidation, and official liquidation means the company cannot pay its debts. No room for protection from its creditors to allow the company to come out distress,” he lamented.
Adu-Sarkodie noted that in other jurisdictions, companies in distress are put under what he called “Chapter 11” (bankruptcy), and are protected from creditors until they are back on their feet.
Adu-Sarkodee is credited with championing the turnaround of a number of companies from distress to profitable entities. These include CDH, Phoenix Insurance, Ivory Finance, Homeland Insurance in Liberia, and Benefits Insurance, which has now become two separate profit making companies.
But he noted that because of the unfriendly provisions of the Companies Code, he suffered in his bid to turnaround those companies because creditors were on his back.
“When I bought Benefits Insurance and it was in debt, one day the IRS (now Ghana Revenue Authority) put padlocks on the company’s doors and was ready to sell it until I borrowed money and paid off the debts,” he said.
The young award-winning entrepreneur also noted that the Companies Code provides that when a company is liquidated, government takes its share of the money in the form of taxes first, before anybody else could get their money.
He said that is a bad law because, in some cases where companies have advanced huge loans to state-owned organizations, when those state organizations are liquidated, the creditors rather suffer and government walks away with its taxes.
“For instance in the case of Ghana Airways, CDH had given them US$17 million loan but when it was liquidated government took away its taxes first and CDH and other creditors were left with nothing,” he said.
The CDH Boss also noted that according to the Companies Code, when a company wants to change its External Auditor, it has to wait for the next Annual General Meeting (AGM) before it can effect that change.
“That is very unfriendly because if that Auditor has lost credibility with shareholders there is no need to wait until the Auditor has caused more damage before putting them out,” he said.
Adu-Sarkodee said there are many more outmoded and outdated provisions in the Companies Code, which calls for major amendments and reforms so the code can address modern day business needs.
He however admitted that portions of the Code are still good and relevant and those ones need to be encouraged.