A non-profit in Ghana (LBG) operates under the Companies Act 2019, cannot issue shares or profit members, has liability limits, and requires annual meetings
A non-profit organization, also known as a Company Limited by Guarantee (LBG), and indicated by the suffix ‘LBG’ at the end of the organization’s specific name, operates under specific legal guidelines that ensure its primary focus is on advancing its mission rather than generating profits for its members.
The legal requirements for these organizations are primarily contained in the Companies Act, 2019 (Act 992), which is the main legislation governing companies established and registered in Ghana. To carry out your non-profit work, here are key legal requirements to consider.
1. Object of Carrying Business
A non-profit organization must not be formed with the aim of conducting business for profit unless the profit is used to advance its purpose or mission.
2. Prohibition of the Creation of Shares
A non-profit organization is prohibited from creating or issuing shares to raise capital. Therefore, members of the organization are not entitled to receive profits or dividends.
3. Liability of Members
Upon the closure of the organization, members are liable to contribute to its assets only up to the amount they undertook to pay. The amount each member guarantees to contribute in the event of winding up must therefore be stated in the Register of members.
4. No Remuneration for Members
A member of the organization is not entitled to any salary or benefit, except for repayment of out-of-pocket expenses or reasonable and proper rent for premises leased to the organization.
5. Issue of Debentures
A non-profit organization may raise capital by borrowing money from any lender, acknowledged in a written form and to be repaid at an agreed time.
6. Minimum number of Members and Directors
A non-profit organization can be formed by one or more persons who are at least eighteen years of age, with a minimum of one member and two directors required.
7. Incorporation Requirement
Before commencing business, the promoters of the non-profit organization must submit an application to the Registrar of Companies for incorporation. The application must include details such as the proposed name of the organization, the nature of its intended activities, the address of the proposed registered office and principal place of business, and information about each member and proposed director.
The Registrar may refuse registration if the organization’s name is misleading, or the objects adopted unlawful.
8. Acquisition of Membership
Anyone who signs the incorporation documents of the organization automatically becomes a member. Additionally, a person can become a member through an agreement with the organization. On the recommendation of the directors, members may determine annual subscriptions which would be due and payable on admission to membership.
9. Resignation or Exclusion of Members.
By written notice to the directors, any organization member may resign membership. The directors may also remove any member of the organization by the passage of a resolution.
10. Holding of General Meetings
A non-profit organization must hold an annual general meeting each year in addition to any other meeting that it may hold. The meeting is not to be necessarily held in the same month in successive years, but the period between the previous annual general meeting and the next must not exceed 15 calendar months; the notice calling for the annual general meeting must be sent to the members at least 21 days before the actual meeting is held.
