Understanding Official Liquidation in Ghana: Five Ways to Initiate the Process

Liquidation marks a critical juncture in a company’s lifecycle, involving the systematic winding up of operations and dissolution of its legal existence. In Ghana, official liquidation is governed by the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), which provides a structured framework for companies unable to meet their financial obligations.

While there are two types of liquidation—private and official—this article focuses on the latter, detailing the five modes by which official liquidation can be initiated in Ghana.

What is Official Liquidation?

Official liquidation is the compulsory liquidation process governed by the Corporate Insolvency and Restructuring Act, 2020 (Act 1015). In this process, the Registrar of Companies acts as the official liquidator, managing the winding-up of the company according to the Act.

Typically, official liquidation applies to insolvent companies—those unable to meet their debt obligations. However, solvent companies may also opt for official liquidation if they choose. Creditors can appoint a liquidator as long as the individual qualifies as an insolvency practitioner and provides prior consent. The duties and powers of the official liquidator are defined in Act 1015.

Five Modes of Commencing Official Liquidation

According to Act 1015, there are five ways to commence official liquidation:

1. By a Special Resolution of the Company
When a company decides to end operations, its members can opt for official liquidation through a special resolution. This is often the case when the company is insolvent or when members cannot obtain an Affidavit of Solvency from the directors.

A copy of the special resolution and a notice of the meeting must be submitted to the Registrar, who can attend the meeting. Once the resolution is passed, it is sent to the Registrar for publication in the Companies Bulletin. The liquidation process begins on the date the resolution is passed, and the official liquidator takes control of the company’s assets.

2.  By a Petition to the Registrar

Any member, creditor, or contributory (a person responsible for contributing to the company’s assets during winding up) may present a petition to the Registrar for official liquidation. For shareholders, they must have held their shares for at least six months prior to presenting the petition.

Creditors must provide security for costs and establish a prima facie case for liquidation. If the Registrar is satisfied that the company cannot pay its debts, the petition will be granted. The petitioner must serve the company with a copy of the petition before it is presented.

3. Petition to the Court

The Registrar, a creditor, a member of the company, a contributory or the Attorney General can petition the Court for the official liquidation of the company. The court will order for the official winding up of the company if any of the following grounds is established;

1. Where the company does not within a year from the date of incorporation commence business, 
2.  where the company suspends its business for a year.
3. Where the company does not have members
4. Where the business being carried out by the company is unlawful.
5. Where the company is operating for an illegal purpose
6. Where the business being carried out by the company is unauthorised by the constitution of the company
7. Where the company is unable to pay its debts.
8. Where the court is  of the opinion that it is just and equitable to wind up the company.

The court has discretion in granting the petition, and such actions are considered a last resort.

4. Conversion from Private Liquidation

If a company has started private liquidation but the liquidator finds that it may not be able to pay its debts in full as stated in its Affidavit of Solvency, the liquidator can notify the Registrar and submit a statement of the company’s assets and liabilities. The Registrar will then publish this information in the Companies Bulletin and may order the conversion of private liquidation to official liquidation.

5. Conversion from Administration to Official Winding Up

A company in administration may transition to official liquidation. Administration refers to a process where an administrator manages an insolvent company to restructure it for financial recovery. This conversion can occur if creditors pass a resolution at a watershed meeting, terminate the restructuring agreement and appoint a liquidator, or if the court orders the conversion.

Understanding the modes of commencing official liquidation is essential for companies facing financial distress. These pathways offer structured options for initiating the liquidation process, ensuring that the rights of all parties involved are considered.

Whether through a special resolution, petitioning the Registrar or the court, or converting from other liquidation processes, these mechanisms provide clarity and direction for companies in challenging situations. By being informed about these options, stakeholders can navigate the complexities of liquidation more effectively, safeguarding their interests during a critical time.

David Amaara Adaawin on behalf of OSD & Partners