Petroleum Commission, Ghana -FRONTING
The Petroleum (Local Content and local Participation) Regulations, 2013(L.I 2204) came into force on February 18, 2014. The purpose of the regulation is to, among other things:
- Promote the maximization of value –addition and job creation through the use of local expertise , goods and services, business and financing in the petroleum industry value chain and their retention in the country;
- Develop local capacities in the petroleum industry value chain through education, skills transfer and expertise development, transfer of the technology and know-how, and active research and development programmes.
L.I. 2004 confers a number of benefits on indigenous Ghanaian companies in the upstream petroleum industry in Ghana. One of the distinctive features of L.I. 2204 is the mandatory in corporation of a joint venture company by a non-indigenous Ghanaian company with an indigenous Ghanaian company. Specifically, Regulation 4(6) of L.I. 2204 provides that:
“A non-indigenous Ghanaian company which intends to provide goods or services to a contractor, subcontractor, the Corporation or other allied entity within the country shall incorporate joint venture Company with an indigenous Ghanaian company an equity participation of at least ten percent.”
An Indigenous Ghanaian Company is defined in Regulation 49 of L.I.2204 as:
“A company incorporated under the Companies Act, 1963(Act 179)
a) That has at least fifty-one(51)percent of its equity owned by a citizen of Ghana; and
b) That has Ghanaian citizen holding at least eighty(80)percent of executive and senior management positions and one hundred(100)percent of non-managerial and other positions.”
The commission has observed an increasing and unfortunate development which in addition to being worrisome, threatens to undermine the objectives of L.I. 2204.
This development appears to be in the form of “fronting”, a process where non-indigenous Ghanaian companies connive to make false representations to the Commission.
The Public is hereby reminded that such actions constitute Offences under L.I.2204 and the Laws of the Republic of Ghana.
Specifically, per Regulation 46(2) and (3) of L.I. 2204, a person (Ghanaian or foreigner) who acts as a front of connives to deceive the Commission as representing an indigenous Ghanaian company to achieve the local content requirement commits an offence and is:
Liable on summary conviction to a fine and term of imprisonment on summary conviction to a fine of not less than one hundred thousand penalty units and not more than two hundred and fifty thousand penalty units (GHC 1.2 million to GHC 3.0 million) or to term of imprisonment of not less than one year and not more than two years or to both.
“Front’’ is defined in Regulation 49 of L.I. 2204 as:
“to deceive or behave in a particular manner to conceal the fact that a company is not an indigenous Ghanaian company”.
Directors and authorized representatives of companies who contravene the above Regulations will be subject to the penalties/sanctions spelt out in the Regulations and other applicable laws of the Republic of Ghana and will be strictly dealt with accordingly.
THEOPHILUS N. AHWIRENG
AG. CHIEF EXECUTIVE OFFICER