ETHIOPIA Law and Practice Contributed by: Sisay Habte, Tibebe Zewdu, Michael Mengistu and Helina Bezabih, TBeST Law LLP
aspect is that only a shareholder director can become the chairperson of the board of direc - tors. Additionally, the number of non-shareholder directors is restricted not to exceed one-third of the total membership of the board of directors. Furthermore, shareholders representing at least 20% of the capital of the company can appoint an auditor selected by them. This gives them a significant say in the financial oversight of the company. A general meeting of shareholders can also resolve to institute proceedings against its directors, even if it is not on the agenda. If the company fails to institute proceedings within three months, shareholders representing at least 10% of the capital have the right to institute pro - ceedings in the name of the company. This dem - onstrates their ability to hold the management accountable for their actions. In terms of decision-making, general meetings of shareholders have the authority to amend, approve, or reject the balance sheet, the profit and loss account, reports of the board of direc - tors, reports of the auditors and supervisory board, if any. They can also pass resolutions relating to the allocation and distribution of prof - its and make decisions on various matters such as appointing or removing directors, members of the supervisory board or auditors, and deciding the amount of their remuneration. Moreover, it is shareholders that have the power to amend the memorandum of association of the company, increase or reduce the capital, change the nationality of the company, and decide on dissolution, conversion, division, or merger of the company. 5.3 Shareholder Meetings The Ethiopian Commercial Code mandato - rily requires the holding of an ordinary general
meeting of shareholders within four months from the end of each financial year with a possibility of extension to six months under the by-laws of a company. The Commercial Code outlines specific rules and requirements for ordinary gen - eral meetings (OGM) and extraordinary general meetings (EGM) to govern the conduct of such meetings. EGMs can be convened whenever necessary. Mode and Time of Calling Meetings In terms of convening shareholder meetings, the responsibility falls on various entities, including the directors, supervisory board, auditors, liqui - dators, or even the court in exceptional cases. Additionally, the Ministry of Trade and Regional Integration or a similar entity may also call for meetings under specific circumstances. Share - holders are notified of these meetings through registered letters, emails, or other reliable elec - tronic methods, with the company bearing the expenses associated with the notification pro - cess. The timing of the notice is critical, with a mini - mum of 24 days required for the first OGM or EGM. In cases where a quorum is not met, sub - sequent meetings can be called. For an OGM, the same 24 days is given for a second meeting while there is no specific date for subsequent meetings called for lack of quorum. For an EGM, second and third meetings can be called at one- week intervals. The content of the notice is man - dated to include essential details such as the company’s name, capital, head office, meeting specifics, and the agenda to be discussed dur - ing the meeting. Quorum Quorum requirements vary for OGMs and EGMs. For OGMs, at least 1/4th of voting shares is required for the first meeting, while the second
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