Demand Promissory Note (Ghana)

A Demand Promissory Note in Ghana evidences a loan, fixing how and when the borrower must repay the amount advanced.

Under the Bills of Exchange Act 1961 (Act 55), a promissory note payable on demand is treated as overdue after a reasonable time has elapsed since its issue, and the holder may enforce it immediately by presenting it to the maker and demanding payment. A Demand Promissory Note is therefore an extremely powerful debt instrument in Ghana, as it dispenses with the need for an agreed repayment schedule and allows the holder to call for payment at any time. The courts of Ghana — including the High Court (Commercial Division) in Accra and the Fast Track Division — recognise Demand Promissory Notes as enforceable instruments and have consistently held that summary judgment may be entered against the maker on the note under the High Court (Civil Procedure) Rules 2004 (C.I. 47), Order 14, without the need for a full trial.

A Demand Promissory Note differs from a Loan Agreement governed by the Contracts Act 1960 (Act 25) in several important respects. A Loan Agreement sets out detailed terms — repayment schedule, interest rate, events of default, security — in a multi-clause document. A Demand Promissory Note is a single-page instrument that contains only the essential elements required by the Bills of Exchange Act 1961 (Act 55): the unconditional promise to pay, the sum certain in money (GHS), the payee's name, the date of issue, and the maker's signature. The simplicity of the instrument makes it attractive for short-term loans between businesses and individuals in Ghana, particularly where the parties want documentary evidence of the debt without the complexity of a formal Loan Agreement.

The Demand Promissory Note is a negotiable instrument — the payee may transfer (negotiate) the note to a third party by endorsement and delivery, and the third party (the endorsee) becomes the holder in due course entitled to enforce the note against the maker, free from equitable defences that the maker might have raised against the original payee. This negotiability makes Demand Promissory Notes useful in trade finance, factoring, and receivables financing transactions in Ghana. Banks licensed by the Bank of Ghana and non-bank financial institutions regulated by the Bank of Ghana (BoG) frequently take Demand Promissory Notes from borrowers as supplementary security in lending transactions.

The Ghana Revenue Authority (GRA) requires that interest income earned by the payee on a Demand Promissory Note be declared for income tax purposes under the Income Tax Act 2015 (Act 896). Withholding tax on interest payments may also be applicable where the payee is a corporate entity. The Stamp Duty Act 2005 (Act 689) imposes stamp duty on promissory notes at the rate prescribed in the schedule to Act 689, and the note must be stamped before it is negotiated or enforced before the courts of Ghana.

The Demand Promissory Note occupies a central place in the informal credit market in Ghana, particularly among traders, market women, and small business owners in Makola Market in Accra, Kejetia Market in Kumasi, and the Central Market in Takoradi. In these trading environments, short-term credit is frequently extended between traders on the basis of a signed Demand Promissory Note, which serves as both a receipt and an enforceable promise to pay. The simplicity of the instrument — a single page, signed by the maker — makes it accessible to small businesses that cannot afford the legal costs associated with a formal Loan Agreement under the Contracts Act 1960 (Act 25).

In the formal financial sector, Bank of Ghana-licensed banks and non-bank financial institutions regulated by the Bank of Ghana routinely take Demand Promissory Notes from business borrowers as supplementary security alongside debentures, mortgages, and personal guarantees. The note provides the lender with a negotiable instrument that can be quickly enforced by summary judgment under Order 14 of the High Court (Civil Procedure) Rules 2004 (C.I. 47) if the main loan facility defaults, without the need to prove the full facts of the loan transaction. The Ghana Association of Bankers (GAB) standard credit documentation templates include a Demand Promissory Note as a standard component of the security package for SME lending.

The negotiability of Demand Promissory Notes also makes them useful instruments in Ghana's nascent receivables finance and supply chain finance market. A supplier who holds a Demand Promissory Note from a creditworthy buyer can discount the note to a bank licensed by the Bank of Ghana or to an invoice finance company, receiving immediate cash in exchange for the note. The bank then presents the note to the maker for payment on demand. The Bank of Ghana's guidelines on negotiable instruments require banks that accept discounted promissory notes to conduct customer due diligence on both the payee and the maker under the Anti-Money Laundering Act 2020 (Act 1044) and the Financial Intelligence Centre Act 2012 (Act 831).

A Demand Promissory Note in Ghana is needed in the following circumstances.

A Demand Promissory Note is required when a short-term loan is made between individuals or businesses in Ghana and the lender wants a simple, enforceable written instrument evidencing the debt — payable on demand — without the complexity of a full Loan Agreement under the Contracts Act 1960 (Act 25).

A Demand Promissory Note is needed when a bank licensed by the Bank of Ghana or a non-bank financial institution requires supplementary security for a credit facility, and requests the borrower to execute a Demand Promissory Note that can be presented for immediate payment if the borrower defaults under the main Loan Agreement.

A Demand Promissory Note is required when a business in Ghana extends trade credit to a customer and wishes to hold a negotiable instrument as security for the outstanding balance, which can be enforced by summary proceedings in the High Court under the Bills of Exchange Act 1961 (Act 55), section 83, or negotiated to a third-party financier.

A Demand Promissory Note is needed when a company incorporated under the Companies Act 2019 (Act 992) borrows money from a shareholder or director under a Directors Loan or Shareholders Loan arrangement, and both parties want a formal instrument evidencing the obligation rather than relying solely on accounting records.

A Demand Promissory Note is required when a contractor in Ghana receives an advance payment from a client under a construction or services contract and is required by the client to issue a Demand Promissory Note as security for repayment of the advance in the event that the contractor fails to complete the works.

A Demand Promissory Note is needed in factoring and receivables financing transactions in Ghana, where a Ghanaian exporter or supplier wishes to use outstanding receivables as security for financing from a bank or factoring company licensed by the Bank of Ghana.

A Demand Promissory Note is required as part of a debt settlement or debt restructuring arrangement in Ghana, where the debtor issues a Demand Promissory Note for the restructured or settled amount to give the creditor an additional enforcement mechanism alongside the Debt Restructuring Agreement or Debt Settlement Agreement.

Parties in Ghana should execute the Demand Promissory Note on the date the loan or credit facility is advanced, stamp the instrument under the Stamp Duty Act 2005 (Act 689), and the payee should retain the original note in a secure location until the debt is fully repaid.

A Demand Promissory Note is required when a company incorporated under the Companies Act 2019 (Act 992) borrows working capital from a related company or affiliated entity in the same corporate group, and the parties want a simple negotiable instrument evidencing the inter-company debt rather than a multi-clause Intercompany Loan Agreement, particularly where the loan is expected to be repaid within a short period.

A Demand Promissory Note is needed when a Ghanaian importer requires short-term trade finance from a bank licensed by the Bank of Ghana to fund the importation of goods through the Port of Tema, and the bank's credit committee requires the importer to execute a Demand Promissory Note for the face value of the goods as security for the import finance facility, to be stamped under the Stamp Duty Act 2005 (Act 689) and held in the bank's security vault.

A Demand Promissory Note is required when parties to a settlement of a commercial dispute before the Ghana Arbitration Centre (GAC) or the Accra Alternative Dispute Resolution Centre (AADR) agree that the debtor party will issue a Demand Promissory Note for the settlement amount as a condition of the settlement, giving the creditor party an additional enforcement mechanism under the Bills of Exchange Act 1961 (Act 55), section 83, in addition to the settlement agreement itself.

A valid Demand Promissory Note in Ghana under the Bills of Exchange Act 1961 (Act 55) must contain the following essential elements.

Words of Unconditional Promise: The note must contain an unconditional promise in writing by the maker to pay a specified sum — for example, "I promise to pay" — without any condition precedent or subsequent. A conditional promise does not constitute a promissory note under Act 55 and is not a negotiable instrument.

Sum Certain in Ghana Cedis: The principal amount payable must be stated as a fixed, certain sum in Ghana Cedis (GHS) — for example, "GHS 50,000 (Fifty Thousand Ghana Cedis)". A note that specifies the amount only by reference to a formula or variable is not a promissory note under the Bills of Exchange Act 1961 (Act 55).

Payable on Demand: The note must state that the sum is payable on demand — for example, "payable on demand" or "on demand, I promise to pay." A note payable at a fixed future date is a time note, not a demand note, and carries different rights of enforcement under Act 55.

Payee Identification: The full legal name of the payee — the person to whom payment is to be made — or the words "to bearer" if the note is to be payable to the bearer. A note payable to a named payee is an order instrument; a note payable to bearer is transferable by delivery alone.

Maker's Signature: The full name and handwritten signature of the maker (the person promising to pay), together with the date and place of execution of the note. Where the maker is a company incorporated under the Companies Act 2019 (Act 992), the note must be signed by authorised signatories in accordance with the company's authority matrix and the Companies Act 2019 (Act 992).

Date and Place of Issue: The date of issue of the Demand Promissory Note in DD/MM/YYYY format and the place of issue (city and country). The date is relevant to determining when the note becomes overdue for the purposes of the Bills of Exchange Act 1961 (Act 55) and when the limitation period begins to run under the Limitation Act 1972 (NRCD 54).

Interest Rate (optional): Where interest is to accrue on the principal from the date of issue until payment, the interest rate should be stated as an annual percentage rate (APR) in compliance with the Borrowers and Lenders Act 2020 (Act 1052) where the maker or payee is a regulated lender. The interest accrual provision does not destroy the negotiability of the note under the Bills of Exchange Act 1961 (Act 55) provided the rate is certain.

Stamp Duty: An acknowledgment that the Demand Promissory Note is subject to stamp duty under the Stamp Duty Act 2005 (Act 689) at the rate prescribed in the schedule to that Act, and that the payee will arrange stamping of the note with the Ghana Revenue Authority (GRA) Stamp Duty Unit before enforcing or negotiating the instrument.

Governing Law: The laws of the Republic of Ghana, with disputes referred to the High Court of Justice, Ghana (Commercial Division) under the High Court (Civil Procedure) Rules 2004 (C.I. 47), Order 14 (summary proceedings on negotiable instruments).

Forms-legal.com provides this Demand Promissory Note template as a starting point for Ghana-compliant negotiable instrument documentation. Parties should confirm stamp duty requirements and seek advice from a legal practitioner enrolled with the Ghana Bar Association before issuing or enforcing the note.

Notarisation or Commissioner for Oaths: While a Demand Promissory Note does not require notarisation to be valid under the Bills of Exchange Act 1961 (Act 55), notarisation by a Notary Public or attestation before a Commissioner for Oaths in Ghana adds evidentiary weight to the instrument and makes it easier to enforce in foreign jurisdictions where the note is to be collected or discounted. Where the maker is a foreign company, notarisation is particularly advisable to confirm that the note is recognised under the laws of the maker's home jurisdiction.

Cross-Default Provision: Where the Demand Promissory Note is issued as supplementary security for a main Loan Agreement or facility letter, the note should include a cross-default clause providing that the note becomes immediately due and payable on demand upon the occurrence of any event of default under the main Loan Agreement, without the need for a separate demand under the note. This gives the payee a swift enforcement route through the courts of Ghana under C.I. 47, Order 14, in parallel with enforcement under the main Loan Agreement.

Forms-legal.com provides this Demand Promissory Note template as a starting point for Ghana-compliant negotiable instrument documentation. The maker and payee should confirm stamp duty requirements with the Ghana Revenue Authority (GRA) Stamp Duty Unit and should seek advice from a legal practitioner enrolled with the Ghana Bar Association before issuing or discounting the note.