ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Mehrteab Leul, Michael Sebsibe and Debora Belachew, Mehrteab & Getu Advocates LLP (MLA)
meeting of shareholders may scrutinise the matter and remove him/her/it from the position. The company or the shareholders may also lodge a complaint before the court to remove the director from their position and/or request compensation for damage. Where the interests of a shareholder, acting on his or her own behalf or on behalf of a third party, conflict with the interests of the company on a matter, such shareholder may not exercise his or her right to vote on such matter. Directors, even if shareholders, may not vote on resolutions relating to their duties, liabili - ties and matters that directly or indirectly involve con - flict between the interests of the company and their own interests. If resolutions are passed contrary to these legal prohi - bitions, any person (specifically shareholders) whose interest is jeopardised by the resolution may apply to a court to set aside such resolution. The court may, where it believes that the execution of the resolution would cause irreparable damage to the company, suspend the execution of the resolution challenged pending the court’s decision. Where a resolution is set aside, the decision of the court shall bind all share - holders. The same scrutiny also applies to conflicts of interest with the company of managers, advisors and auditors. Recently, a private bank in Ethiopia initiated legal action against 30 former board members, senior exec - utives and audit officials. The lawsuit alleges that their misconduct and mismanagement resulted in financial losses totalling approximately ETB507 million. Apart from a press release providing an overview of the mat - ter, the detail of the case is not publicly available.
hostile tender offer made to all or some of the share - holders will not have legal effect. Under existing law, shareholders that are the recipi - ents of a takeover offer must be: • given reasonable time to consider the proposal; • provided with adequate information to enable them to assess the merits of the proposal; • given reasonable and equitable opportunities to participate in any benefits accruing to shareholders under the proposal; and • accorded fair and equitable treatment in relation to the proposal. However, in practice, hostile tender offers for public mergers have not been seen, since Ethiopian capital market practice is yet to be developed. 9.2 Directors’ Use of Defensive Measures Since the power to decide on a merger lies with the shareholders through their extraordinary general meeting, defensive measures by directors do not As long as a merger is approved by the shareholders of a company, there are no common defensive meas - ures for directors under Ethiopian law. 9.4 Directors’ Duties The power of merger approval is given to the share - holders’ general meeting, and there are no common defensive measures under Ethiopian law; therefore, there are no directors’ duties in relation to enacting defensive measures. 9.5 Directors’ Ability to “Just Say No” As long as the shareholders decide in favour of a merger/business combination, the directors cannot “just say no” and take action that prevents the com - bination. apply in principle under Ethiopian law. 9.3 Common Defensive Measures
9. Defensive Measures 9.1 Hostile Tender Offers
Merger decisions are made at the extraordinary gen - eral meeting of the shareholders of a company under Ethiopian law. Therefore, hostile tender offers can be made to the shareholders, who shall decide on the matter in the extraordinary shareholders’ meet - ing. Unless the merger decision is approved by the extraordinary general meeting of the shareholders, a
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