ETHIOPIA Law and Practice Contributed by: Getu Shiferaw, Awoke Mitku, Gutema Kajela Ejeta and Debora Belachew, Mehrteab & Getu Advocates LLP
business combinations. The directors may seek outside advice from a legal counsel, financial advisers and tax advisers. The outside advice may pertain to: • the legality of the business combination; • the legal capacity of the parties to execute documents; • the valid establishment of the target compa - nies; • the assets and liabilities of the target compa - nies; • fulfilment of the documentation requirements; • the tax implications of the business combina - tion transaction; and • other general due diligence reports. 8.5 Conflicts of Interest A director shall be dismissed from his or her position where it is proven that they used their powers in such a way that a conflict of inter - est arose with the company, and they directly or indirectly obtained undue benefit. A director of a company must avoid a situation in which he or she has a direct or indirect interest that conflicts, or may conflict, with the interests of the company. If a director is found to violate these legal requirements, either the board of directors or the general meeting of shareholders may scrutinise the matter and remove him/her/it from the posi - tion. 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, liabilities and matters that directly or indirectly involve conflict between the interests of the company and their own interests. If resolutions are passed contrary to these legal prohibitions, any person (specifically sharehold - ers) whose interest is jeopardised by the reso - lution 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 pend - ing the court’s decision. Where a resolution is set aside, the decision of the court shall bind all shareholders. The same scrutiny also applies to conflicts of interest with the company of manag - ers, advisors and auditors. Merger decisions are made at the extraordinary general meeting of the shareholders of a com - pany under Ethiopian law. Therefore, hostile ten - der offers can be made to the shareholders, who shall decide on the matter in the extraordinary shareholders’ meeting. Unless the merger deci - sion is approved by the extraordinary general meeting of the shareholders, a hostile tender offer made to all or some of the shareholders will not have legal effect. Under existing law, shareholders that are the recipients of a takeover offer must be: • given reasonable time to consider the pro - posal; • provided with adequate information to enable them to assess the merits of the proposal; 9. Defensive Measures 9.1 Hostile Tender Offers
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