Secured Lending

• The Borrowers and Lenders Act 2020 (Act 1052);
• The Mortgages Act, 1972 (NRCD 96);
• The Home Mortgage Finance Act, 2008 (Act 770);
• The Companies Act, 2019 (Act 992); and
• The Corporate Insolvency and Restructuring Act, 2020 (Act 1015).

Bilateral and/or multilateral treaties or trade agreements must be approved by Parliament before they can become enforceable in Ghana. Once a treaty or trade agreement has been approved by Parliament, any terms that it includes in relation to secured financing will be enforceable.

Currently there are no bilateral and/or multilateral treaties or trade agreements which have particular relevance for secured finance in Ghana.

Section 18 of the Borrowers and Lenders Act, 2020 established the Collateral Registry at the Bank of Ghana.

The functions of the registry are as follows:

• to register security interests;
• to keep and maintain a Register of Security Interests;
• to keep and maintain a platform for the conduct of searches in security interests; and
• to perform any other functions as determined by the Bank of Ghana.

Apart from the above, there are no regulatory or tax bodies that play a particular role in secured finance in Ghana.

There are no governmental guarantee/support schemes available to lenders in Ghana. The government does not play an active role in private commercial lending.

Any finance or lending arrangements are entirely in the hands of the parties.

Businesses, individuals and other finance houses mostly lend through secured finance. Most such transactions are either bilateral or domestic. However, many finance transactions take place locally.

There are no special domestic laws for the international syndicated market for secured financing in Ghana.

No. However, the Bank of Ghana, periodically issues directives to licensed banks and other licensed non-banking finance houses in respect of secured financing and other best practices in lending.

On 22 September 2021, the Ghana Cocoa Board (COCOBOD) signed a $1.5 billion syndicated loan agreement with investors to finance its 2021/2022 cocoa crop season. The combined lenders were four local banks and other international banks.

When disbursed, the finance will be used to finance cocoa purchases and related operational activities in the crop season for a period of eight months. The loan was secured by receivables of COCOBOD for the specified period.

The key providers of secured finance in Ghana are commercial banks. The alternatives to commercial banks are finance houses licensed by the Bank of Ghana. These finance houses are not licensed to receive deposits and can only offer loans to clients.

There are no requirements or restrictions in respect of secured finance in Ghana. The arrangements and the terms are entirely in the hands of the parties.

It is possible to take security over all types of assets of a company. The most common secured finance structures are as follows:

• a fixed charge over assets;
• an assignment of accounts receivable;
• a mortgage or charge over property or shares; and
• a floating charge over company assets.

Fixed charge over assets: This is a charge over specific assets of a company. The assets should be identified and valued to determine whether they are sufficient to satisfy the debt in the event of default.

The disadvantage of this structure is that upon default, it can be challenging to dispose of the assets. The debtor can institute frivolous suits to frustrate any attempts to dispose of the assets.

Assignment of accounts receivable: In this case the company uses its potential income, inflows or claims as collateral. The lender can easily collect the income or inflows to defray the debt.

The disadvantage of this structure is that without the borrower’s cooperation, it may be difficult to recover any potential income or inflows.

Mortgage or charge over property or shares: This involves the creation of a security interest over property or shares of a particular company. Upon default, the property or shares can be disposed of to pay off the debt. As the value of property in a good location and shares in a reputable organisation will continue to appreciate, it is likely that the property or shares will cover a substantial portion of the loan upon default.

However, if the property is not located in a prime location, its disposal upon default can be challenging. Similarly, it is always difficult to dispose of the shares of non-performing businesses. The debtor may also launch frivolous legal actions to delay and frustrate any potential sale.

Floating charge over company assets: This can be created even where the business has no assets. It can provide future security for any loan or facility advanced to the borrower.

However, upon default, there may be no assets of the borrower against which to enforce.

• The credibility of the borrower;
• The nature of the business;
• The length of time for which the business has been in operation;
• The purpose of the loan;
• The borrower’s financial history;
• The nature of the security;
• The facility amount;
• The value of the collateral; and
• The duration of the facility.

The following types of security interests are available in Ghana:

• pledge;
• contractual lien;
• mortgage; and
• equitable charge.

The type of security to be used will depend on factors such as:

• the parties;
• the nature of the transaction;
• the duration; and
• the amount involved.

In most cases, the lenders seek to use a combination of these different types of security interests to achieve their intended purpose.

For a security interest to be valid and enforceable, it must be executed in writing, which is usually called a ‘credit agreement’.

The credit agreement should clearly identify:

• the lender;
• the borrower;
• the collateral; and
• the secured obligation.

The credit agreement must be registered with the Collateral Registry in Ghana within 21 days of execution. It will thus have binding effect on the debtor and all third parties.

Further, irrespective of the time of registration, the security interest will have priority over any other security interest which has not been registered with the Collateral Registry. An unregistered credit agreement is binding only on the parties to the transaction.

• Property: The lender must ensure that the borrower or its guarantor possesses the requisite legal and beneficial interest in the collateral property. The property must be of a type which can be easily disposed of upon default.
• Cash or investments: The cash or investment must be deposited or invested with a reputable bank or non-banking financial institution.
• Plant and equipment: Plant and equipment should be of a type that is in demand on the local market.
• Unpaid invoices: Invoices of a solvent and/or a reputable organisations or persons.
• Blanket lien.

Yes. A credit agreement must be executed over the property, plant or equipment that is used as the security. Upon execution of the agreement, it must be registered with the Collateral Registry of Ghana.

Yes. A credit agreement must be executed over the cash and/or receivables. Upon execution of the agreement, it must be registered with the Collateral Registry of Ghana.

Yes. A credit agreement must be executed over the shares identifying them as the security for the transaction. Upon execution of the agreement, it must be registered with the Collateral Registry of Ghana.

Alternatively, upon execution of the credit agreement, the shares can be transferred to the lender to hold them in trust for the borrower. The lender may then transfer the shares back to the borrower upon payment of the debt.

Yes. A credit agreement must be executed over the inventory/movables identifying them as the security for the transaction. Upon execution of the agreement, it must be registered with the Collateral Registry of Ghana.

The following charges may arise from the perfection of a security interest:

• payment of stamp duty; and
• administration charges for registration of the security interest at the Collateral Registry.

The amount paid will depend on the asset used as the collateral.

There is no statutory obligation on the parties in respect of credit agreements. The parties’ respective obligations and liabilities must be set out in the security or credit agreement.

• The necessary consent required by law over the security must have been obtained.
• The security interest must be free from any encumbrances.
• The borrower or the guarantor must be the legal and beneficial owner of the asset or property.
• The security interested must be executed in writing.
• The credit agreement must identify:
• • the lender;
  • the borrower;
  • the collateral; and
  • the secured obligation.

The following guarantees are commonly used in Ghana:

• personal guarantees;
• bank guarantees; and
• financial guarantees.

All of the above are recommended. However, the lender is obliged to ascertain that the guarantee presented is credible and adequate for the facility.

• The guarantee must be executed in writing and signed by all relevant parties; and
• The collateral or credit agreement must be registered at the Collateral Registry.

• Payment of stamp duty; and
• Administration charges for registration of the guarantee at the Collateral Registry.

The parties have no statutory legal obligations and liabilities under a guarantee agreement. The usual commercial and company law principles apply to the guarantee. The guarantee agreement must provide for the relevant obligations and liabilities of the parties.

• The credibility of the guarantor;
• The credibility of the bank, in the case of a bank guarantee;
• The assets of the guarantor, in the case of a personal guarantee;
• Confirmation from the guarantee bank or other relevant bodies;
• The capacity of the guarantor;
• The duration of the guarantee; and
• Whether the necessary approval or consent has been sought

There are no requirements and/or restrictions on the provision of financial assistance to a person. However, if a party intends to operate a money lending business in Ghana, it is mandatory for that body to acquire a non-banking financial services licence from the Bank of Ghana.

Agency and trustee relationships are well established in Ghana.

Generally, there are no requirements or restrictions in respect of syndicated lending in Ghana.

• The value of the security or guarantee;
• The purpose of the loan;
• The duration of the loan;
• The payment plan;
• The collateral or security;
• The credibility of the borrower;
• The source of payment; and
• The default clause.

The potential charges or taxes to be incurred are as follows:

• stamp duty; and
• filing fees.

The charges do not vary. The same charges apply to all entities, whether domestic or foreign.

Currently, there are no exemptions or incentives available to lenders in Ghana.

There are none.

There are none.

In the event of default, the lender may avail of one of the following options:

• Sue the borrower on the basis of any covenant to perform under the credit agreement;
• If the credit agreement has been registered with the Collateral Registry, realise the security interest without initiating court proceedings; or
• Appoint a receiver or manager.

Sue the borrower: In the event of default of the payment terms or any terms of the finance agreement, the borrower can institute a legal action in the courts of Ghana for the recovery of the outstanding amount and/or enforcement of the security interest or guarantee.

Upon securing a judgment, the judgment creditor can explore all execution options available to the court in order to recover the outstanding debt and/or realise the security interest in the collateral.

Realise the security interest without initiating court proceedings: Under the relevant laws, upon default of a credit agreement, the borrower can realise or dispose of the security interest without any court order. This right is available to a borrower that has registered its security interest with the Collateral Registry of Ghana.

In the event of default, the lender must issue written notice to the borrower notifying it of the default. The borrower will be given a period of 30 days from the date of the notice in which to remedy the default.

After the notice period has expired, the lender must notify the Collateral Registry of its intention to realise the security interest without a court order.

The registrar will issue a certificate known as a memorandum of no objection to the lender. The lender can then take possession of the collateral asset and dispose of it without a court order.

If the lender is unable to enforce its rights peaceably, it may apply for the court to issue a warrant for police protection.

Appoint a receiver or manager: A lender in whose favour a security interest has been created may, upon the default of the borrower, appoint a receiver or manager in accordance with the provisions of the credit agreement. Alternatively, if there are no such provisions, the borrow can apply to court for the appointment of a receiver or manager to take possession or collect rent and profits derived from the property, or to realise the security interest on behalf of the lender.

The duration of the enforcement process will depend on the steps that the lender undertakes to enforce the security interest.

It normally takes between three and 12 months for the lender to enforce a security interest without a court order as indicated in question 10.1

Where the lender is enforcing the security interest through court proceedings, this will normally take between 18 and 36 months.

The nature of the entity does not affect the duration of the enforcement process.

• Whether the security interest was executed in writing;
• Whether the security interest was registered;
• The default clause;
• The nature of the security interest or guarantee;
• The amount involved; and
• Whether the default notice has been served on the borrower.

Yes.

All security interests and guarantees must be registered with the Collateral Registry of Ghana. However, if the security or guarantee relates to immovable property, in addition to registration with the Collateral Registry of Ghana, it must also be registered with the Lands Commission of Ghana.

Bankruptcy and insolvency proceedings are available only for incorporated companies. The relevant applicable law is the Corporate Insolvency and Restructuring Act, 2020 (Act 1015).

During insolvency proceedings, a secured creditor cannot enforce its security, except with leave the court. The secured creditor must apply for grant of leave within the decision period, which:

• begins to run when notice of the appointment of an administrator is given to the charge holder or otherwise on the day on which the administration begins; and
• ends at the close of the fourteenth day thereafter.

The secured creditor requires the permission or leave of the court before the security interest of the borrower can be enforced.

Antecedent transactions are specific types of transactions that were made prior to or during a company’s insolvency. They may be reversed by a liquidator or administrator if the company was insolvent at the time the transactions were made or caused the company to become insolvent at a later date.

Payment by preferred creditors: The liquidator can recover a payment, transfer of property or surrender of rights which was transferred to a creditor with the intent that one creditor should benefit at the expense of others. The liquidator will issue a notice to the creditor to repay the benefit within the period indicated in the notice.

Similarly, any payment or transfer of property made during the winding-up period can be reversed upon notice given by the liquidator.

The Corporate Insolvency and Restructuring Act does not apply to companies that carry on the business of banking, insurance or any other business which is subject to special legislation, except where the special legislation does not include rescue provisions.

Banks and specialised deposit-taking institutions: The Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) deals with insolvency proceedings involving banks and special deposit-taking institutions. If the Bank of Ghana determines that the bank or specialised deposit-taking institution is insolvent or is likely to become insolvent within the next 60 days, it will revoke the licence of the relevant institution.

Insurance companies: Under the relevant laws, the official winding up or liquidation of an insurance company requires the consent of the Insurance Commission of Ghana. As a result, private liquidation and the other methods mentioned do not apply to the liquidation of insurance companies.

• The Common Law;
• The 1992 Constitution of Ghana; and
• Other relevant statutes and regulations.

Where the choice of law and jurisdiction is indicated in an agreement, it will be valid and enforceable in Ghana. If the local court assumes jurisdiction of a dispute and the agreement has provided for a choice of foreign law, the local court will apply the substantive law indicated in the agreement to resolve the dispute. However, in adjudicating the dispute between the parties, the local law will apply the procedural laws applicable in Ghana.

The general rule is that the court will enforce the jurisdiction provisions in any agreement that has been validly executed. However, in some cases the court may depart from it.

Where the agreement between the parties was executed and performed in Ghana, in the event of any breach, the court may assume jurisdiction over the dispute notwithstanding the jurisdiction provision in the agreement – most importantly, where the provision favours one party over the other.

Yes.

Foreign judgments: Judgments of the superior courts of countries which have reciprocal agreements with Ghana can be enforced in the High Court of Ghana. The foreign judgment must be final and conclusive between the parties.

The judgment creditor under the foreign judgment must apply to the High Court of Ghana for registration of the foreign judgment. The application must be brought within six years of the date of the foreign judgment.

Once the foreign judgment has been registered, it can be enforced as if it were a judgment of the High Court of Ghana.

Foreign awards: The High Court of Ghana will enforce a foreign arbitral award if it is satisfied that:

• the award was made by a competent authority under the laws of the country in which the award was made;
• a reciprocal arrangement exists between Ghana and the country in which the award was made; or
• the award was made under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 or under any other international convention on arbitration ratified by the Ghanaian Parliament; and
• no appeal against the award is in any court under the law applicable to the arbitration.

The party seeking to enforce the award must produce:

• the original award or a copy of the award authenticated in the manner prescribed by the law of the country in which it was made; and
• the agreement pursuant to which the award was made or a copy thereof, duly authenticated in the manner prescribed by the law of the country in which it was made or in any other manner as may be sufficient according to Ghanaian law.

The court will not enforce a foreign award if:

• the award has been annulled in the country in which it was made;
• the party against which the award is invoked was not given sufficient notice to enable it to present its case;
• a party that lacked legal capacity was not properly represented;
• the award does not deal with the issues submitted to arbitration; or
• the award contains a decision that is beyond the scope of the matters submitted for arbitration.

The institutions that provide the credit histories of potential borrowers in Ghana are not very sophisticated and cannot provide adequate data about the creditworthiness of potential borrowers.

As a result, almost all credit transactions that are executed in Ghana are backed by a security or guarantee.

We do not anticipate any new developments or changes in any laws with regard to secured financing.

Lenders should consider the following tips when lending in Ghana:

• The transaction should be executed in writing.
• Any charge created should be registered with the Collateral Registry of Ghana.
• The value of the security used must be sufficient for the loan facility.
• The relevant consent, if any, must be sought over the secured property.
• The collateral must be sufficiently described.
• Proper due diligence must be conducted on the collateral to ascertain that the property is free from all encumbrances.