ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Mehrteab Leul, Michael Sebsibe and Debora Belachew, Mehrteab & Getu Advocates LLP (MLA)
4.2 Material Shareholding Disclosure Threshold
Therefore, acquirers should consider the existing agreements and determine how to proceed with the existing employees and contracts of employment through discussions with the employees. 2.6 National Security Review There is no publicly available information on national security review of acquisitions in Ethiopia. 3. Recent Legal Developments 3.1 Significant Court Decisions or Legal Developments A significant legal development in Ethiopia related to M&A in the past three years is the introduction of a new banking business law, Banking Business Procla - mation No 1360/2024, which establishes a compre - hensive framework for M&A and ownership transfers in the banking sector. This law mandates that banks have to obtain prior written approval from the NBE before entering into a voluntary merger or acquisition. Additionally, it grants the NBE mandate to facilitate statutory mergers for struggling banks and approve acquisitions by foreign banks under exceptional cir - cumstances to ensure financial stability. The law also sets clear restrictions to prevent M&A that may harm financial system stability, consumer rights or market competition. Furthermore, it intro - duces strict oversight on significant ownership trans - fers and asset disposals, enabling the NBE to nullify unapproved transactions and ensure compliance with banking regulations. 3.2 Significant Changes to Takeover Law No significant changes to takeover law have been made in the past 12 months. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies In Ethiopia, it is not customary to build a stake in the target as a strategy to increase influence before a for - mal takeover.
The Ethiopian Commercial Code provides a material shareholding disclosure, and the disclosure obliga - tion is imposed on a company rather than the share - holders. In the event that a certain company’s shares are open to the public, the company must disclose shareholders having a shareholding of 5% or more to MoTRI or any other relevant authority, as the case may be. In the report, the company shall include both the names of the shareholders and the number of shares they hold. According to the Banking Business Proclamation, any share transfer or purchase that causes signifi - cant ownership in a bank shall be approved by the NBE prior to being recorded in the share register. Sig - nificant ownership is defined as the direct or indirect shareholding of 2% or more of the total subscribed capital of a bank by a person. Similarly, capital markets law obliges interested per - sons and share companies that are listed publicly to disclose the names of interested persons to the ECMA. An “interested person” is a person having a shareholding of 5% or more. When there is a change in the shareholding of persons having a share of more than 5%, such change must be disclosed. 4.3 Hurdles to Stakebuilding Under Ethiopian law, a company’s by-laws may intro - duce a lower threshold for shareholding disclosure than the one required by law – ie, it may stipulate that if a shareholder has a 3% stake, it must be disclosed to the relevant authorities. However, a company’s by- laws may not introduce a higher reporting threshold – ie, they may not stipulate that a shareholder must have a minimum shareholding of 6% for disclosure to the relevant authorities. This is because the reporting threshold set under the Commercial Code is a mini - mum standard of compliance below which derogation is not allowed, where the aim is to provide transpar - ency for the public and ensure the protection of the investor’s interest. 4.4 Dealings in Derivatives The recent Ethiopian Capital Market Proclamation considers derivatives as a form of security. Under the
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