Ethiopia issued a new commercial code (the Commercial Code) aimed at removing obstacles to the ease of doing business. The main changes in the new Commercial Code are as follows:
- introduction of two new forms of doing business i.e. limited liability partnership and a one-person private limited company. This brings the number of vehicles through which a person can do business to seven. The other forms include general partnerships, limited partnerships, joint ventures, share companies, and private limited companies;
- recognition of groups of companies/holding companies: It also recognizes the right of a parent company, acting as a shareholder in the general meeting of shareholders or through its board of directors or senior management, to give instructions to the organs of management of its subsidiaries that the management of the subsidiary should adhere to;
- in relation to corporate governance, the Commercial Code allows companies and their shareholders to assign a board of directors that are not shareholders. Previously, only shareholders could hold seats on a board;
- allowing the establishment of a supervisory board to share companies that will oversee the activities of the board of directors with the view of ensuring transparency. The Commercial Code also imposes detailed obligations on the board of directors in relation to disclosure, transparency, avoidance of conflict of interest and protection of minority shareholders;
- providing detailed protection for minority shareholders; one of these being permitting minority shareholders to assign their representative to the board of directors; and
- in connection with insolvency, the Commercial Code has introduced a broad range of schemes to save financially strained businesses, including preventive restructurings and reorganization of businesses.
The Commercial Code replaces the old Commercial Code that has been in existence for over 6 decades. The Commercial Code will come into force upon publication in the official gazette.