GHANA Law and Practice Contributed by: Adelaide Benneh Prempeh, Michelle Nana Yaa Essuman, David William Akuoko-Nyantakyi and Audrey Nana Oye Addy, B&P Associates
6.4 Construction of Bankruptcy-Remote Transactions Beyond the construction of true sale transac - tions to isolate the originator’s insolvency risks from the SPE, the SEC remains optimistic that additional strategies for creating bankruptcy- remote transactions will be explored as securiti - sation establishes a foothold in Ghana. This may include the use of derivatives to hedge against associated with the originator’s financial stability, providing investors with an extra layer of protec - tion. Due to the emerging nature of securitisation in Ghana, insolvency opinions on bankruptcy- remote transactions are not commonly sought, though obtaining such opinions would be desir - able to ensure compliance in structuring these transactions. 6.5 Bankruptcy-Remote SPE SEC allows flexibility in the form and structure of securitisation documents, provided they align with existing laws and best practices. To protect the SPE from bankruptcy, securitisation docu - ments must be structured to ensure that the SPE operates independently of the originator, preventing it from being included in the origina - tor’s estate if the originator goes bankrupt. Accordingly, the steps that can be taken to achieve bankruptcy remoteness may include: • ensuring the SPE is operated on a solvent basis; • ensuring the SPE is operated separately from the originator; • appointing one or more directors (independ - ent of the originator) whose vote(s) is/are required to pass a board resolution to place the SPE into insolvency proceedings;
The records of the collateral registry must also be updated, where applicable, to reflect the change in ownership of the asset. Some options available to effect the transfer include: • novation – the transferee assumes the rights and obligations of the transferor regarding the financial asset; • legal assignment – the transferor assigns its rights to the transferee; and • declaration of trust – the transferor acts as a settlor and establishes the trust with the transferee as the beneficiary. In Ghana, novation and legal assignment appear to be the most commonly utilised methods for transferring rights in securitisation transactions. Where the property sold is overvalued and the company becomes insolvent within the next 12 months, the liquidator would have the power to reverse the transaction (CIRA, Section 124). The transferor must deal with the transferee at arm’s length, charging market price (Income Tax Act, 2016 (Act 896), Section 31). It must be noted that the transaction documents would have to be duly stamped, or they may be inadmissible as evidence in court or for any pur - pose except in criminal proceedings (see Stamp Duty Act 2005 (Act 689), Section 32(6)). Ultimately, the agreement and the terms stipu - lated may be used to determine whether a true sale is being effected. Where this is not the case, the SEC is unlikely to grant approvals to proceed with the securitisation in the interest of investors.
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