ETHIOPIA Law and Practice Contributed by: Sisay Habte, Tibebe Zewdu, Michael Mengistu and Helina Bezabih, TBeST Law LLP
holders and oversees the company’s operations. It makes decisions on behalf of the company, appoints the general manager (if applicable), and ensures that the company complies with laws and regulations. The board also has the author - ity to establish committees (eg, audit commit - tee) to assist in its governance responsibilities. A private limited company may have a board of directors if provided for in its memorandum of association. The board of directors of a private limited company may consist of between three and seven members, while the board of a share company has between three and 13 members. Ethiopian law permits non-shareholders to be board directors, but the number of non-share - holder directors should not exceed one-third of the number of directors. General Manager Both private limited companies and share com - panies have a general manager appointed by the general meeting or the board of directors, if one exists. The general manager may be a shareholder or an outsider, and shall not be the chairperson of the board. Additionally, the gen - eral manager is an employee of the company and is responsible for the day-to-day manage - ment of the company. The general manager shall be liable to the company, shareholders and third parties for any damage caused by breach of their duties under the law or the memorandum of association of the company. In bankruptcy and where the assets of the company are found to be inadequate, the general manager may be liable to settle the company’s debts or part of them along with the previous managers of the company. Supervisory Board A share company may have a supervisory board where its memorandum of association provides the same. The supervisory board is composed
of three to five members who can only be share - holders of the company. The members of the supervisory board are appointed by and are accountable to the general meeting of share - holders. The general meeting of shareholders shall also determine the remuneration of the members of the supervisory board. Additionally, members of the supervisory board are not per - mitted to be members of the management of the company or members of the board of directors. The meeting time for the supervisory board shall be determined by the memorandum of associa - tion of the company. Secretary A share company shall have a secretary who is appointed by the board of directors upon the recommendation of the general manager. The secretary is accountable to the general manager. External Auditors All share companies are required to have an independent and impartial external auditor and assistant auditors, which are appointed by the general meeting of shareholders. A sharehold - er representing at least 20% may appoint an auditor. The general meeting of the sharehold - ers decides on the remuneration of the auditor. Ethiopian law additionally permits both individu - als and corporate entities to act as auditors of a share company. Auditors are appointed for up to three-year terms. Private limited companies will be required to have an external auditor if they have ten or more members or if the total assets of the company exceed ETB10 million. The auditor in a private limited company will also be appointed by the general meeting of the shareholders.
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