ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Mehrteab Leul, Michael Sebsibe and Debora Belachew, Mehrteab & Getu Advocates LLP (MLA)
Proclamation, derivatives are financial instruments that derive their value from relevant assets or rates, such as shares, bonds, commodities and curren - cies. The Proclamation allows trading in derivatives through a securities exchange, derivative exchange or over-the-counter exchange. Derivatives exchanges are securities exchanges that are specifically licensed to list exchange-traded derivatives. Directive No 1009/2024 on Licensing, Operation, and Supervision of Securities Exchanges, Derivatives Exchanges, and the Over-The-Counter Market governs the manner in which derivatives may be traded. It lists relevant requirements for the licensing of derivate exchanges, securities exchanges and over-the-counter markets. However, even though dealings in derivatives are legally allowed, such dealings do not take place in practice in Ethiopia. 4.5 Filing/Reporting Obligations Under Ethiopian law, there is no specific requirement for filing or reporting derivatives, but the general requirements for securities apply. Accordingly, when a security is issued, the issuer must provide certain information about the underlying security. The information required includes the financial posi - tion, members of the board of directors and managers of the company. Such information must be announced in a register designated for the purpose of disclosure. Licensing law also imposes listing requirements on an exchange, allowing for fair trading of securities, and its listing requirements must be met by the exchange. As a strategy to prevent distorted trading, a licensed exchange must formulate policies to meet reporting and transparency obligations. 4.6 Transparency In merger procedures companies are required to pre - pare a legal document (ie, a merger plan and report) that discloses or indicates the rationale behind and the economic goal of the merger.
by MoTRI in a newspaper of wide circulation prior to the issuance of merger approval. When the deal is completed, the details and name of the acquiring company must be registered in the commercial regis - try, which is publicly available. In contrast, the recently enacted Capital Markets Law provides that listed companies must disclose all mate - rial changes that may occur. Further, listed compa - nies and the acquirer company shall notify the ECMA, security exchanges and the issuer of the securities – within five days from acquiring the interest – of any person who acquires 5% or more of the capital of a company (indirectly, directly or in alliance with others). In addition, an interested person and a share com - pany listed on an exchange shall report to the ECMA, and to the securities exchange on which securities are traded, changes in interest exceeding 0.5% of the issuer’s capital within a period of ten days from the date of the change. Further, the Banking Business Proclamation requires the disclosure of any share transfer or purchase that causes significant ownership in a bank to the NBE before being recorded in the share register. 5.2 Market Practice on Timing All M&A in Ethiopia are private and are undertaken confidentially without being announced to the public. Disclosure is made by MoTRI in a newspaper of wide circulation prior to the issuance of merger approval. There is no common market practice regarding the timing of disclosure of M&A transactions by the par - ties. The parties may agree to disclose at any time during the transaction process. There is no market practice regarding the disclosure of public M&A since such business combinations have not yet been undertaken in Ethiopia. 5.3 Scope of Due Diligence Most business combinations undertake commercial and financial due diligence, which is conducted by audit firms, as well as compliance and legal due dili - gence, which is conducted by law firms. Legal due diligence covers general corporate; financial arrange - ments and borrowings; real property; health, safety
5. Negotiation Phase 5.1 Requirement to Disclose a Deal
In Ethiopia, private M&A do not have public disclosure obligations. However, transactions must be disclosed
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