ETHIOPIA Law and Practice Contributed by: Sisay Habte, Tibebe Zewdu, Michael Mengistu and Helina Bezabih, TBeST Law LLP
5. Shareholders 5.1 Relationship Between Companies and Shareholders The relationship between a company and its shareholders in Ethiopia is primarily defined by the company’s memorandum of association and the Ethiopian Commercial Code. Shareholders are the owners of the company through shares that are to be registered in their names. The obligations of shareholders are limited to mak - ing the contribution they pledged to make to the company. On the other hand, shareholders have certain rights, such as: • voting at shareholders’ meetings; • receiving dividends and proceeds on wind - ing-up; • preferred right for subscription of new shares; and • the right to information about the company’s affairs. The rules and requirements governing this rela - tionship include the Ethiopian Commercial Code, securities regulations, and commercial registra - tion and licensing requirements. Companies are often required to provide regular financial reports to shareholders, hold annual general meetings, and ensure transparency and fairness in their dealings with shareholders. Additionally, there are specific rules regarding the rights of minor - ity shareholders and the responsibilities of com - pany directors and officers such as the general manager and auditors. 5.2 Role of Shareholders in Company Management Shareholders play a crucial role in the manage - ment of a company under the Ethiopian Com - mercial Code, although their involvement is limited to certain key decisions. One important
specified share in the net profit of a financial year which shall in no case exceed 10% of the net profit that may be distributed as dividend for the fiscal year. For companies like banks and insurance com - panies, the National Bank of Ethiopia has strict caps for the disclosure requirement as well as a cap on the amount and type of remunera - tion directors may receive. Currently, the cap on annual compensation to be paid to board directors of banks and insurance companies is ETB150,000, and the maximum monthly allow - ance is ETB10,000, both to be paid upon the decision of the ordinary general meeting of the shareholders. Additionally, any public companies listed on an exchange are required to disclose a list of their directors, remuneration, salaries and incentives as reported to the general meeting of share - holders. Failure to comply with these disclosure requirements for financial institutions and listed companies may lead to a fine being imposed on the company. 4.11 Disclosure of Payments to Directors/Officers Please see 4.10 Approvals and Restrictions Concerning Payments to Directors/Officers . Additionally, every share company is required to keep a register of its directors and officers including details on their address, directorship, and responsibility in any other businesses. This register is open to shareholders and government authorities who are permitted to examine it free of charge. Non-shareholders may also examine this register for a fee.
249 CHAMBERS.COM
Powered by FlippingBook