ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Mehrteab Leul, Michael Sebsibe and Debora Belachew, Mehrteab & Getu Advocates LLP (MLA)
Mehrteab & Getu Advocates LLP (MLA) Suite No 805, 8th Floor - Via Lift 4 Dembel City Center
Africa Avenue Addis Ababa PO Box 33449 Ethiopia
Tel: +251 115 159 798 Fax: + 251 115 547 938 Email: getu@mehrteableul.com Web: www.mehrteableul.com
1. Trends 1.1 M&A Market
Further, the recently approved Banking Business Proclamation has empowered the NBE to establish statutory mergers to rescue problem banks and create more viable and stronger institutions. Given that the NBE deadline for banks to raise the minimum capital (30 June 2026) is approaching, pri - vate banks in Ethiopia that fail to meet this minimum paid-up capital requirement are at risk of forced merg - er. This has led to significant attention on M&A in this sector. 1.3 Key Industries Industries experiencing significant M&A activity in the past 12 months were in the real estate and service sectors. 2. Overview of Regulatory Field 2.1 Acquiring a Company In Ethiopia, the primary techniques/legal means for acquiring a company are: • by directly or indirectly acquiring existing shares of a business organisation; • by subscription for new shares in a business organisation; • by directly or indirectly acquiring assets of a busi - ness organisation; • through a merger by acquisition; and • through the privatisation of public enterprises.
The M&A market in Ethiopia seems promising given recent legal and policy developments. However, in comparison with 12 months ago, the market does not seem to have significantly changed. 1.2 Key Trends In 2021, the National Bank of Ethiopia (NBE) had issued Minimum Capital Requirement for Banks (Amended) Directive No SBB/78/2021 (the “Minimum Capital Directive”). Under the Minimum Capital Direc - tive, the minimum paid-up capital required to obtain a banking business licence is ETB5 billion, which must be fully paid up in cash and deposited in the name and to the account of a bank under formation or an existing bank. The transitory provision of the Minimum Capital Direc - tive states that an existing bank, which is a bank that has been licensed by the NBE before the effective date of the Directive, whose paid-up capital is below ETB5 billion shall raise its paid-up capital to the said amount by 30 June 2026. The Minimum Capital Directive gives a five-year period for banks to comply. If a bank fails to comply then the NBE may put it under receivership and appoint a receiver, require the appointed receiver to dissolve the bank through merger with another bank and/or take any other measures it considers fit.
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