The Curious Case of Construction & Business Bank

Businesses want to become big. They want their presence to be felt in every corner of the world. Investors explore different avenues to do this by injecting capital, selling equities, reinvesting their profits, opening different branch offices, acquiring other firms or merging with other entities. By the same token, corporations may also use these tactics to either dominate the market or protect their infant industry from other big entities.

All of these factors for expansion may also force Ethiopian business people to engage in changing their style of business. Nowadays, the government is trying to attract foreign investors by creating industrial parks, adding incentive packages and simplifying the service provision and bureaucratic aspects of the investment climate.

On the other hand, the government seems to engage in strengthening the capacity of its enterprises too. The focus on these enterprises may seem to either strengthen their capacity and prepare them for future challenges (or threats from other entities), or save the struggling entity through the umbrella of the successful one.

In this regard, the recent news about the amalgamation of Commercial Bank of Ethiopia (CBE) and Construction & Business Bank (CBB) can become a talking point among lawyers and economists. It can also trigger a lot of interesting debates and analyses.

Amalgamation is not a new phenomenon. It happens frequently worldwide. To give a recent example, Du Pont and Dow Chemicals, the largest US chemical companies, merged with capital of 113 billion dollars.

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ባለአንድ አባል ኃላፊነቱ የተወሰነ የግል ማህበር እና ኃላፊነቱ የተወሰነ የሽርክና ማህበር በአዲሱ የንግድ ሕግ አዋጅ ቁጥር 1243/2013


1. አጭር መግቢያ

ባሳለፍነው ዓመት ኢትዮጵያ ላለፉት ስድስት አስር አመታት ስትጠቀምበት የነበረውን የንግድ ሕግ በማሻሻል በአዲሱ የንግድ ሕግ አዋጅ ቁጥር 1243/2013 ተክታለች፡፡ ለቀድሞ ንግድ ህግ መሻሻል የተለያዩ ምክንያቶች ቢጠቀሱም በሌላው ዓለም የተለመዱ እና ለንግዱ ማህበረሰቡ አስፈላጊ የሆኑ አዳዲስ የንግድ ማህበራትን ማካተት አንዱ እና ዋነኛው ነው፡፡ በቀድሞ የንግድ ህግ አንድ ነጋዴ ሊመሠርት የሚችለው የንግድ ማህበር ወይም ድርጅት ስድስት ዓይነት ሲሆን እነዚህም ተራ የሽርክና ማህበር (ordinary partnership)፣ የህብረት ሽርክና ማህበር (general partnership)፣ ሁለት ዓይነት ኃላፊነት ያለበት የሽርክና ማኅበር (limited Partnership)፣ የእሽሙር ሽርክና ማህበር (joint venture) ፣ የአክሲዮን ማህበር (share compary) እና ኃላፊነቱ የተወሰነ የግል (private limited company) ማህበር ናቸው፡፡   

በአዲሱ የንግድ ሕግ ባለ አንድ አባል ኃላፊነቱ የተወሰነ የግል ማህበር (One person private limited Company) እና ኃላፊነቱ የተወሰነ የሽርክና ማህበር (Limited Liability Partnership) አዲስ የተጨመሩ ማህበራት ሲሆኑ ተራ የሽርክና ማህበር ደግሞ ከአማራጭ ማህበርነት ተቀንሷል፡፡ የዚህ አጭር ፅሁፍ ዓላማ አዳዲስ የተጨመሩትን እንግዳ የንግድ ማህበራት በመመርመር ማስተዋወቅ ነው፡፡

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Ethiopian Share Company Law in Light of OECD Principles of Corporate Governance

This article critically analyzes the share company law provisions of the Ethiopian Commercial Code in light of the OECD (Organization for Economic Cooperation and Development) Principles of Corporate Governance. For convenience, it organizes and analyzes the share company law provisions corresponding with the structures of OECD Principles. The article identifies and demonstrates the loopholes and drawbacks of the share company law provisions that should be revisited and updated in light of the relevant OECD Principles of corporate governance.  

1.1  Enhancing the Legal and Regulatory Framework

The OECD Principles urge government policy makers should craft their legal, regulatory and institutional bases that ensure the effective and efficient corporate governance framework. It should foster market integrity and create incentives to different market players. The principles suggested three prerequisites for effective corporate governance framework. First, it should integrate effective corporate laws, regulations and voluntary codes and standards. Second, it should avoid overregulation and regulatory vacuum, as well as be to cost effective, equitably enforceable to all market players. Third, it should be supplemented by clearly allocated regulatory and supervisory powers with robust implementing institutions.

Nonetheless, as noted, the legal frameworks of some share company law provisions apparently failed to create incentives to market players and also failed to encourage transparent and efficient markets. To demonstrate these, the provisions requiring minimum capitals and memberships for the formation of share companies are inappropriate and unnecessary. These requirements not only discourage new pools of resources and investments but also contravene international best practices. Currently, several countries have abolished minimum capital requirement for two reasons. First, it is blurred and confusing because capital requirements are prone to accounting manipulation. Second, such provision neither protects shareholders nor creditors in the first place. Similarly, minimum shareholding requirement has two shortcomings. On one hand, it creates obstacles to form new share companies by less than the legal limits. On the other hand, it compels incorporated companies to winding up by the fact that company’s shareholder memberships are less than the legal limits. However, in practice companies may have less than the legal limit shareholders but may have several wholly owned subsidiary companies. Therefore, compelling to wind up such companies by mere reason of the reduction of membership to the legal limits is clearly unfeasible to the modern realities of corporate structures.

Second, the share company provisions have loopholes in the requirements of initial offering of shares to the public. The requirements of the initial offering of shares to the public provided from articles 317-323 of the Commercial Code are defective and inadequate. First, the contents of the prospectus under article 318 do not require an audit opinions of the financial information incorporated in the prospectus. Second, there are no requirements for approval and registration of the draft prospectus by regulatory authority before issued and offered to the public. In addition, the offering of additional new shares in article 469(5) or debt securities provided in articles 429-433 of the commercial failed to require financial reports to be prepared based on established accounting and auditing standards and audited by independent auditor. It also neglected to clearly articulate the liabilities of founders/issuers where the offered prospectus to the public contained untrue or misleading statements or omitted the relevant information for investors’ investment decisions. All these legal and regulatory loopholes of the share company law provisions will have potential impacts on investors’ investment decisions. This in turn not only creates loss of investors’ confidence in the Ethiopian capital markets but also results in market inefficiency, raises the cost of capitals and inefficient use of scarce resources in the country.

Third, the share company law provisions are not supplemented by other legislation. Including security laws, regulations, and voluntary codes and listing standards. Only two sets of laws regulating banking and insurance companies exist. For this reason, there are no stock exchanges or alternative trading systems for trading of shares in the capital markets. Hence, in Ethiopia company shares can be only traded by direct dealings between the shareholders and investors or informal contacts between the company and investors. Therefore, the legal and regulatory frameworks should allow the establishments of organized stock exchanges and alternative trading systems by considering the country’s business culture. The establishment of stock markets will have crucial roles for the existence of strong capital markets in Ethiopia. They will serve as markets organizer (companies share liquidity), information distributors (between investors and issuers), standard setters (setting the listing standards for companies), regulators (regulating their members based on sated standards) and as business compotators.

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የአክሲዮን መያዣ አመሠራረትና የመያዣ ተቀባዩ መብቶች



መያዣ ለአንድ ግዴታ አፈፃፀም ማረጋገጫ የሚሰጥ የንብረት ዋስትና ነው፡፡ ዋና ግዴታ በሌለበት መያዣ ስለማይኖር መያዣ በንብረት ላይ የሚፈፀም ደባል ግዴታ (accessory obligation) ነው፡፡ መያዣ በሚንቀሳቀስ ወይም በማይንቀሳቀስ ንብረት ላይ የሚመሠረት ሲሆን በዚህ ጽሑፍ ምልከታ የሚደረግበት የአክሲዮን መያዣ የሚንቀሳቀስ ንብረት መያዣ /pledge/ በመሆኑ ከማይንቀሳቀስ ንብረት መያዣ ጋር በተገናኘ በንጽጽር ካልሆነ በቀር የሚነሱ ነጥቦች አይኖሩም፡፡ የፍትሐብሔር ሕጋችን ፕሌጅ ከውል የሚመሠረት ግዴታ እንደሆነ ይደነግጋል፡፡ የሕጉ አንቀጽ 2825 የመያዣ ውል ማለት አንድ ባለዕዳ በባለገንዘቡ በኩል የገባውን ግዴታ ለመፈፀም መቻሉን በማረጋገጥ መያዣ ተብሎ የሚጠራውን ዕቃ ለመስጠት የሚገደድበት ውል ማለት ነው ሲል ግልጽ ትርጉም ይሰጣዋል፡፡ በመያዣ ሊሰጥ የሚችለውን ነገር በመወሰን ረገድ የፍትሐብሔር ሕጉ የሚታይም ሆነ የማይታይ ተንቀሳቃሽ ንብረትን ሊያካትት እንደሚችል ይደነግጋል፡፡ ሕጉ በቁጥር 2829 በመያዣነት የሚሰጠው አንድ ተንቀሳቃሽ ንብረት (a chattel) ወይም በጠቅላላው ዕቃ ተብለው ከሚጠሩ ተንቀሳቃሽ ንብረቶች አንዱ (a totality of effects) ወይም አንድ የገንዘብ መጠየቂያ መብት ሰነድ (a claim) ወይም በአንድ ተንቀሳቃሽ ንብረት ላይ ያለ የመብት መጠየቂያ ሰነድ ለመሆን እንደሚችል ይደነግጋል፡፡ አክሲዮን የአንድ የንግድ ማኅበር (የአክሲዮን ማኅበር ወይም ኃላፊነቱ የተወሰነ የግል ማኅበር) የአባልነት ማስረጃና በካፒታሉ ውስጥ ያለ ድርሻ (ጥቅም) ማረጋገጫ ነው፡፡ አክሲዮን የገንዘብ መጠየቂያ ሰነዶች (claims) ውስጥ የሚወድቅ ግዙፍነት የሌለው ተንቀሳቃሽ ንብረት (incorporeal Movable) ነው፡፡ የፍትሐብሔር ሕጉን አንቀጽ 1125 ይመለከቷል፡፡ አክሲዮን በመያዣ የሚሰጥበት የሕግ ማዕቀፍ በፍትሐብሔር ሕጉ ቁጥር 2863-2874 እንዲሁም በንግድ ሕጉ ቁጥር 329 ላይ የተካተተ ሲሆን በዚህ ጽሑፍ የአክሲዮን መያዣ የሚቋቋምበትን ሁኔታ እና አክሲዮን በመያዣ የተቀበለ ባለገንዘብ ያሉትን መብቶች የተመለከቱ ነጥቦችን ለማየት ሙከራ ይደረጋል፡፡


የሚንቀሳቀስ ንብረት መያዣ (ፕሌጅ) አመሠራረት

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Letters of Credit in General



Letter of credit transactions have been developed since the middle Ages in connection with the trade of goods at the international level. Individuals and companies have found themselves dealing with partners of whom they know little, who are located in distant countries with often insecure political and economic situations. Furthermore, the dynamism of the actual economy creates a need for financing that requires a guarantee of payment at a time and for an amount that must be certain. Diversity in geographical nature, weather, climate, production system and globalization in culture and fashion has made the countries dependent on each other for the daily necessities. Similarly, one continent is, largely, dependent on the products of other continents. In addition, diversity in human appetite and attitude, unequal development of technology, desire for luxury, and the development of communication system and tale-communication, revolutionarily, increase the necessity of transnational, transcontinental business activities.

As far as the payment issue is concerned, market reality, distance, geographical barriers, uncertainty and lack of confidence among the business actors discourage the global commercial venture. In market reality, the buyer, always, wants to pay the seller only after selling the imported products in the internal market. On the other hand, the seller wants payment as soon as possible ‘if possible, even before shipment’. Moreover, in transnational business transaction, where the goods and the payment are not exchanged simultaneously there is a risk that parties to an exchange may not fulfill their obligations. In such a case the seller may take the payment and not give the good or the buyer take the good and not give the payment. Furthermore, trade transactions between different countries involve different payment systems, conflict of laws, barrier of languages, lack of understanding and reliability among the business partners and other barriers.

Fortunately, letter of credit (LC) or ‘documentary credit’ or ‘banker’s commercial credit’ has Brought a revolutionary solution to all this problems and has ensured sufficient securities and certainty in payment transaction.

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