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Unless otherwise provided in this Code, the provisions of the Civil Code shall apply to persons and business organizations carrying on a trade.
The relevant provisions of the Maritime Code shall apply to persons and business organizations carrying on maritime trade.
The provisions of this Code applicable to sole traders, other than those provisions applicable to physical persons only, shall apply to business organizations.
1/ Unless otherwise expressly provided by law, the provisions of this Code shall not apply to administrative organs that are bodies corporate under public law, religious institutions, civil society organizations and cooperative societies even where they carry on activities under Article 5 2/ Where administrative bodies that are bodies corporate under public law, religious institutions, civil society organizations or cooperative societies happen to be shareholders or partners in a business organization established pursuant to this law pertinent provisions of this law that are applicable to shareholders or partners, as the case may be, shall apply to them notwithstanding the provisions of Sub-Article (1) of this Article. 3/ Notwithstanding the provisions of Sub-Article (1) of this Article this law shall apply to public enterprises without prejudice to the applicability of the relevant special laws.
Persons who professionally and for gain carry on any of the following or similar activities shall be deemed to be traders: 1/ Purchase of movables or immovable properties with a view to re-selling them either as they are or after alteration or adaptation in retail or wholesale in a domestic or, as the case may be, foreign market; 2/ Purchase of movables or immovable properties with a view to letting them for hire; 3/ Agricultural and forestry development on land lawfully given to a right holder for commercial purpose; 4/ Animal husbandry and production of animal products beyond small-scale levels excluding persons entitled to use rural land under the law; 5/ Fishing and fish farming beyond small-scale levels; 6/ Warehousing activities in accordance with the Civil Code or other relevant laws; 7/ Minining activities not performed by handicraftsmen, exploration,drilling and production of feul oil or gas and related activities; 8/ Exploitation of quarries not by handicraftsmen for buildings, road or other construction works; 9/ Exploitation of salt pans not by handicraftsmen; 10/ Foodstuff production, production conversion, adaptation and maintenance of corporeal movable chattels, from such things as raw materials or semi- finished products not by handicraftsmen; 11/ Building, maintaining and cleaning of houses, buildings, roads and any other construction works and
1/ Persons who undertake activities under Sub-Articles (4), (5), (31), (32), (33), (35) and (36) of Article 5 of this Code in a small-scale shall not be deemed to be traders. 2/ A person shall be deemed to work at a small-scale level when he works, using his experiences or knowledge acquired through education or both, all alone by himself or with the assistance of not more than three employees or apprentices and he buys only such material as is necessary for carrying out his activities, without setting up stocks. 3/ Special law may be issued for people who work in small scale.
1/ The provisions of this Code relating to traders shall not apply to handicraftsmen. 2/ Handicraftsmen are persons with craftsmanship skills, who live mainly on their manual work, by working all alone or with the assistance of members of their family and not more than three employees or apprentices and who buy only such material as is necessary for carrying out their activities, without setting up stocks. 3/ Handicraftsmen in most cases use their hands and may also use as appropriate, small tools or machines. 4/ Special law applicable to the activities of handicraftsmen may be issued.
1/ Subject to the provisions under Sub-Articles (4) and (5) of Article 5 Persons, who carry on activities relating to agriculture, forestry, plant nursery, cattle breeding or maintaining pasture land, shall not be deemed to be traders where they sell the products of the land they exploit or use, or animals or the products of animals bred mainly from the resources of the land which the said persons exploit or use or crops and processed animal products produced from the same land. 2/ Subject to Sub-Article (1) of this Article persons shall not be deemed to be traders whether the exploitation is individual or collective, such as an agricultural community or cooperatives.
1/ A company that does not itself conducts operations to produce goods or render service by engaging in activities specified under Article (5) of this Code but holds shares in other business organisations that do so shall be deemed to be a trader. 2/ Notwithstanding the provision of Sub-Article (1) of this Article a holding company may directly produce goods or render service.
1/ Persons incapable under the relevant law may not be traders. 2/ Subject to the provisions of Article 12 and 13 of this Code, where incapable persons carry on a trade, they shall not acquire the status of traders and their acts may be invalidated in accordance with law.
1/ Tutors may not carry on a trade in the name and on behalf of a minor. 2/ Where an enterprise forms part of the estate of a minor, whether a tutor should liquidate such enterprise or keep it going shall be determined pursuant to the provisions of the relevant law. 3/ The provisions of Sub-Article (1) and (2) of this Article shall also apply to the tutor of an interdicted person.
Minors emancipated in accordance with the relevant law may carry on a trade.
Notwithstanding any provisions to the contrary, where a minor who carries on a trade has caused himself to be entered in the commercial register as though he were of age, his being a minor shall not affect third parties, subject to the provisions of Article 103 of this Code.
The interdiction of a person shall not affect third parties unless notice of such interdiction has been entered in the commercial register notwithstanding the provisions of Article 103 of this Code.
A trade carried on by a married person shall be regarded as a joint enterprise of the couple unless a spouse objects thereto.
1/ As between spouses an objection under Article 15 of this Code may be notified to the trading spouse in any manner. 2/ Such objection shall not affect third parties, other than those who are aware of its existence, unless notice of such objection has been entered in the commercial register.
1/ Where the trading spouse is of the opinion that the objection affects the interest of the family, he may apply to arbitrators to set aside the objection. 2/ Where the objection is set aside by the arbitrators, the spouse for whom the objection was set aside shall enter a notice to this effect in the commercial register.
Debts contracted by the trading spouse shall be deemed to be debts of the marriage and may be recovered on the personal estate of each spouse and on common property.
Where an objection under Article 15 has been entered in the commercial register or the existence of the objection is known pursuant to Article 16 Sub-Article (2), debts contracted by the trading spouse may be recovered on his personal estate only.
Where spouses carry on a trade in cooperation, the debt incurred by the trader spouse shall be deemed to be a matrimonial debt that is recoverable from the common property of the spouses and the private property of each spouse unless it is shown that one of them is the employee of the other.
Subject to restrictions specified by law or prohibitions regarding unfair competition as may be prescribed, any person has the right to carry on any trade.
1/ Particular persons may be restricted or prevented from acting as traders or from carrying on a particular trade that is incompatible with their work by legal provisions. 2/ Specific requirements as to age, qualifications, nationality or license may be imposed by law in respect of particular trades.
1/ Persons who carry on a trade subject to prohibition or without fulfilling legally prescribed special requirements or conditions shall be liable to the penalties provided by the relevant criminal law. 2/ Persons who carry on a trade subject to prohibition or restriction may not invoke the said prohibition or restriction to free themselves from liabilities incurred in carrying on a trade subject to prohibition or restriction. They may not hold themselves out to be traders to third parties but they shall be liable as though they were traders.
The conditions on which not-for-profit civic organizations or other organizations not established for business purpose may carry on trade and the consequences thereof may be determined by law.
No business organization shall carry on a trade which it is not permitted to carry on or which is subject to specific requirements with which the said business organization has not complied.
under Public Law The cases where a trade may be carried on by administrative or religious institutions or any other public undertaking and the conditions and effect of such trade may be prescribed by law.
1/ Commercial employees are persons who are bound to a trader by a contract of employment and who assist the trader by doing work of a non-manual nature as a salesman, secretary, accountant, inspector, director or any other role. 2/ Commercial employees are not traders.
Without prejudice to the provisions of this Code, pertinent labor laws shall apply to commercial employees.
1/ A commercial employee may not carry on, on his own behalf or on behalf of a third party, a trade similar to the trade carried on by his employer. 2/ Where an employee infringes the prohibition under Sub-Article (1) of this Article, his employer may claim damages and the infringement will be a sufficient cause to cancel or refuse to renew the contract of employment. 3/ A contract of employment may only contain a prohibition from carrying on private trade upon the expiry of the contract of employment on the conditions specified in Article 2589, 2590 and 2592 of the Civil Code and with the trader agreeing to pay adequate compensation to the employee.
1/ Commercial employees may act as agents by express or tacit agreement. 2/ The revocation of the power of agency shall not result in the cancellation of the contract of employment.
1/ The employee in charge of the sales in a store shall be deemed to have a power of agency for the purpose of selling or receiving goods which come within the normal business activities of stores of such nature. 2/ He may demand that goods sold by him be paid to him, unless payment is to be made to a special account. 3/ The employee may not demand payment outside the store unless so expressly authorized or unless he produces a receipt signed by the trader.
1/ A Manager is a person who has been authorized, expressly or tacitly, to carry out acts of management and to sign in the name of the trader. 2/ A Manager is not a trader.
1/ Where a manger has been appointed, the trader shall cause an entry to be made in the commercial register. 2/ The manager shall have power to act by virtue of his appointment, notwithstanding that the provisions of Sub-Article (1) have not been complied with.
1/ In his relations with third parties, the manager shall be deemed to have full powers connected with the exercise of the trade, including the power to sign contracts and negotiable instruments. 2/ Unless expressly authorized to do so, he may not sell, barter or mortgage immovable property, nor may he sell, hire or pledge a business.
1/ The powers of a manager may be limited to the management of a branch. Such a restriction shall not affect third parties in accordance with Article 103 of this Code unless notice of such restriction has been entered in the commercial register. 2/ Restrictions other than those stated under Sub-Article (1) of this Article shall not affect third parties.
1/ A Commercial Traveler is a person, domiciled at the place where the head office of the business is situate and bound to a trader by a contract of employment, who is entrusted by the trader with visiting clients and offering to them goods or services in the name and on behalf of the trader. 2/ Unless otherwise agreed, contracts entered into by a commercial traveler shall be presented to the trader for his confirmation. 3/ Commercial travelers are not traders. 4/ Without prejudice to the provisions of this Code specifics about commercial travelers domiciled in foreign countries shall be determined by relevant law.
1/ A Commercial Representative is a person, not domiciled at the place where the head office of the business is situate and bound to a trader by a contract of employment, who is entrusted by the trader with promoting his goods and services, conducting market survey and carrying out similar tasks that support the expansion of the trader’s business. 2/ Commercial representatives are not traders. 3/ Without prejudice to the provisions of this Code detailed rules applicable to commercial representatives of foreign traders shall be determined by law.
1/ Unless otherwise provided in the contract of employment, commercial travelers and representatives may not carry on similar private business for themselves and on behalf of third parties. Where they carry on private business, they shall lose their right to fees or compensation as provided in Article 40 and 41 of this Code. 2/ The provision of Article 29 Sub-Article (2) of this Code shall apply where commercial travelers and representatives have not been authorized to carry on private business.
1/ Unless otherwise agreed, commercial travelers and representatives may not act on behalf of traders other than the trader to whom they are bound, where they act on behalf of other traders, they shall lose their compensation as provided in Article 40 and 41 of this Code. 2/ In no case may they act on behalf of a trader selling goods or offering services similar to the goods sold or services offered by the trader to whom they are bound.
1/ Commercial travelers and representatives may be paid by salary or on commission or both. 2/ The remuneration shall be fixed by the contract of employment or, where not fixed, by custom.
1/ Where the trader terminates the contract without good cause, commercial travelers and representatives who are bound by a contract entered into for an undefined period of time shall be entitled to compensation fixed in accordance with the relevant law. 2/ Where a contract entered into for an undefined or defined period of time is terminated by the trader for no fault attributable to the commercial traveler or representative, the commercial traveler or representative shall receive fair compensation which shall be fixed having regard to expansion of the trader’s market or the customers introduced by him and the like.
1/ A Commercial Agent is a person or business organization, not bound to a trader by a contract of employment and carrying out independent activities, who is entrusted by a trader with representing him permanently in a specified area or to certain customers of the trader and dealing or making agreement in the name and on behalf of the trader. 2/ Unless otherwise provided in the agency agreement, contracts entered into by a commercial agent shall become effective without confirmation by the trader. 3/ A commercial agent normally acts as an agent and may act as a broker. He is a trader.
Unless otherwise provided in the agency agreement, a commercial agent shall be the exclusive agent of the principal in the area specified in the agreement.
1/ A commercial agent shall safeguard the principal’s interests with the care due by a good trader. 2/ He shall: a) carry out all instructions of the principal; b) inform the principal of all contracts concluded and under negotiation by him; c) send to the principal periodic reports on his activities and all such market information as may be useful to the principal regarding the area where he acts. 3/ Even after the agency agreement has come to an end, a commercial agent may not take advantage of or disclose trade secrets revealed to him by the principal or of which he learned in the course of his duties as an agent.
1/ A commercial agent may carry on any private trade which is not similar to the trade carried on by the principal. The agency agreement may be cancelled and damages may be due where the agent carries on trade similar to the trade carried on by the principal. 2/ Unless otherwise provided in the agency agreement, a commercial agent may act in the area specified in the agreement on behalf of other traders who work in areas not similar to the trade carried on by the principal. 3/ In no case may a commercial agent act, in the area specified in the agency agreement, on behalf of traders who carry on trade similar to the trade carried on by the principal. The agency agreement may be cancelled and damages may be due where the agent disregards this prohibition.
The principal shall, to the best of his ability, enable his agent to carry out successfully his duties under the agency agreement, in particular by making all necessary information and samples available to him.
Unless otherwise agreed, recurrent costs and expenses of the agency shall be borne by the commercial agent and are not subject to repayment by the principal. The agent shall only be entitled to the repayment of expenses occasioned by dealings made on behalf of the principal and of such special expenses as were made by him on the order of the principal.
1/ A commercial agent shall receive remuneration for all dealings negotiated or made by him; unless otherwise provided, he shall receive remuneration for all dealings made, in the area where he acts or the principal’s customers covered by the contract, either by the principal himself or by another agent of the principal. 2/ A commercial agent shall receive remuneration even where dealings made by him are not carried out by the principal; however, the agent shall lose his right to remuneration when dealings were not carried out by the principal because of the agent’s fault. 3/ The remuneration shall be fixed in the agency agreement or, where not fixed, by custom.
A Commercial Agent may not assign the agency agreement and may not substitute a third party for himself, as an agency agreement is made on the basis of the personal qualifications and capability of the agent.
1/ An agency agreement shall terminate: a) where the period of time for which it was entered into expires; b) where the agent dies, becomes incapable or is declared bankrupt; c) where the business organization acting as agent is wound-up; d) In the absence of a contrary agreement, where the principal becomes bankrupt, incapable, dies or is declared absent. 2/ Either party to an agency agreement made for an undefined period of time may terminate it on notice. Notice need not be given where there is good cause for termination. 3/ The period of notice shall be fixed in the agency agreement or, where not so fixed, by custom. It shall not be less than one month during the first year of service and not less than two months after the first year.
Where the principal terminates without good cause an agency agreement entered into for an undefined period of time, the agent shall receive fair compensation which shall be fixed having regard, in particular, to the time for which he acted on behalf of the principal, the customers introduced or goodwill created or extended by him.
1/ Where an agency agreement terminates, the agent or his heirs or the business organization having acted as agent shall receive remuneration for all contracts negotiated or entered into prior to the termination of the agreement. 2/ Upon termination of the agreement, all remunerations and expenses due shall be paid forthwith by the principal.
1/ The agency agreement may provide that, upon termination of the agreement, the commercial agent shall not carry on similar trade as the principal or act as commercial agent or representative for a trader carrying on similar trade as the principal. 2/ Notwithstanding any provision to the contrary, any such prohibition shall not be effective for more than three years and unless it is made in writing, clearly specifies the area, clients of the principal, the goods and services as regards which the prohibition applies and adequate compensation is given to the agent.
1/ A commercial broker is a person or business organization who, independently, professionally and for gain, brings parties together for the purpose of their entering into an agreement such as a contract of sale, lease, insurance or carriage. 2/ A commercial broker is a trader, regardless of the parties he brings together and of the nature and object of the contract for the completion of which he acts as an intermediary. 3/ Unless specifically stated in the contract between the two parties, a commercial broker shall not receive remuneration on behalf of the parties or undertake any activity towards implementation of the contract between the two parties.
1/ Unless customary or otherwise agreed, a commercial broker shall, where the parties have agreed to enter into a contract, inform both parties of the terms of the proposed contract. 2/ Unless customary or otherwise agreed, the proposed contract shall not become effective unless it is confirmed by both parties.
A commercial broker shall be liable for any damage he causes to either party.
1/ A commercial broker shall receive remuneration when the contract for the completion of which he acted as an intermediary is entered into, whether such contract is performed or not. 2/ Unless customary or otherwise agreed, the remuneration shall be paid only by the party having required the services of the broker. 3/ The remuneration shall be fixed in the agreement or, where not so fixed, by custom. The court may reduce the agreed remuneration where it appears excessive and disproportionate to the services rendered by the broker. 4/ A commercial broker shall lose his right to claim remuneration when he works for the benefit of a third contracting party in a manner contrary to his obligation towards his client and in particular in a manner prejudicial to the interests of his client or when he received payments from a third contracting
1/ A Commission Agent is a person or business organization who, independently, professionally and for gain, undertakes to buy or to sell goods, movables or any other thing of a similar nature in his name, but on behalf of the principal, or to enter into a contract of carriage of goods in his name but on behalf of the principal. 2/ A commission agent is a trader, regardless of the parties and of the nature and object of the contract.
The provisions of Article 22342252 of the Civil Code shall apply to contracts of Commission.
1/ Stock brokers are commission agents. 2/ Unless otherwise provided by law, stock brokers shall be subject to the provisions relating to contracts of commission.
Any person or business organization carrying on trade shall keep such books and accounts as are required in accordance with business practice and law, having regard to the nature and importance of the trade carried on.
1/ Petty traders shall be exempted from keeping accounts. 2/ The manner in which petty traders carry on trade and amount of capital needed for such trade shall be prescribed by law.
The books and accounts to be kept by traders and the manner in which they are to be kept shall be prescribed by law.
Nothing in this Title shall affect the special provisions of
1/ Traders may keep their general accounts using modern technologies. 2/ The accounts kept in accordance with Sub-Article (1) of this Article shall follow the formalities applicable to accounts or balance sheets kept manually. 3/ The trader may use accounts kept using modern technology as evidence in a manner similar to accounts kept manually.
All books of Accounts and accounting documents shall be preserved for ten years from the date of the last entry or from the date of preparation of such documents.
Originals of all letters, message or telegrams received and copies of all letters, messages or telegrams sent shall be filed and preserved for ten years.
Where a dispute arises between traders or business organizations as to their commercial activities, the court may, notwithstanding the provisions of Article 2016 of the Civil Code, admit as evidence in favor of a party
1/ Books shall prove against the party producing them. 2/ A party who avails himself of books may not conceal any part of such books that may contradict his claim.
1/ The Ministry of Trade and Industry shall establish and administer Federal Commercial Register having nationwide application. 2/ The Ministry shall undertake registration of traders and business organizations in accordance with this Code. 3/ Notwithstanding the provisions of Sub-Article (2) of this Article the Ministry may partially delegate its responsibilities related to the commercial register to another federal institution.
1/ Regional States, Addis Ababa and Dire Dawa City Administrations may establish their own commercial register and undertake commercial registration. 2/ The administration of the regional commercial registers established pursuant to Sub-Article (1) of this Article, designation of the authority in charge of registration and the duties and responsibilities of such authority shall be determined by laws to be issued by the Regional States. 3/ Notwithstanding the provisions of Sub-Article (2) of this Article, any regional institution in charge of commercial registration shall undertake the registration by strictly following the provisions of
1/ The Ministry of Trade and Industry shall establish and administer a central commercial registration database with national application. 2/ The database shall be organized making use of modern information technology and be open and accessible to the public through the Ministry’s website. 3/ The Ministry of Trade and Industry shall, in addition, perform the following: a) enter or register in the database all documents regarding any person registered in the different registers kept by the regional states; b) register and enter into the database letters, documents and notices in relation to business organizations stated under Book Two of this Code; and c) follow up and ensure proper implementation of laws and regulations on Commercial Registers.
1/ Publicity through the commercial register shall be effected, with regard to a trader, by the entry into the register of declarations made by the trader before the authorities responsible for registration. Entries in the commercial register shall have effect as of the business day following the day when, the entry was made. 2/ The provisions of Book II of this Code shall apply to the registration of declarations made by business organizations.
The office in charge of commercial registration shall be liable for any damage caused by its employees in relation to registration jointly and severally with such employees.
1/ The commercial register shall be open to the public. Any person may, upon payment of the required fee, have a look at the information entered in the register, or demand from the appropriate registering office to issue him a copy of any extract from the register or, where the entry for which he is searching has not been made into the register, a certificate to the effect that no such entry has been made. 2/ The registering office has the obligation to provide the required service.
All registered traders shall specify on all papers used in their business the place where they are registered and their registration number.
Central Data Base Any federal or regional institution that has undertaken commercial registration pursuant to this Code shall immediately transmit the information and documents, regarding each trader or business organization it registered, to the Ministry of Trade and Industry. The Ministry shall forthwith enter the data into the central commercial registration database.
Entries in the commercial register shall consist of all principal, subsidiary or complementary registrations, and of all alterations and deletions.
1/ Entries shall be made upon a written statement made by the person seeking registration. 2/ Registration and written statements may be made online through a website created for the purpose of commercial registration that is administered by the registering office. 3/ Entries may be cancelled on the order of the registering office as provided in Article 96 of this Code.
1/ The official in charge of the register shall verify the accuracy of the statement made by the person applying for registration. Where, a person applies to be registered as a trader, the official shall ascertain whether the applicant fulfills the legal requirements for carrying on the trade in respect of which registration is sought. 2/ The official shall see to it that the statement includes all legally required information, check all documentary evidence supporting the statement and the conformity of the statement to such evidence. 3/ The official may require the applicant to produce such further documents or information as may be necessary.
Any disputes arising between the applicant and the official in charge of the register shall be resolved by the competent court.
1/ Without prejudice to the provisions of other laws requiring the registration of other persons or entities any Ethiopian or foreign person or business organization carrying on commercial activities within the territory of Ethiopia shall be registered. 2/ The provisions of Sub-Article (1) of this Article shall apply, in particular, to any: a) Ethiopian or foreign person who is a trader within the meaning of Article 5 of this Code; b) business organization indicated under Article 9 of this Code; c) foreign business entities carrying out commercial activities and to any commercial representatives or agents of foreign States, public institutions or undertakings. 3/ Special regulations applicable to undertakings under Sub-Article (2) (c) of this Article shall be prescribed.
1/ A person shall not be registered as a trader unless an application to this effect is made by the said person or his agent. 2/ A trader shall make his application and get registered before he begins to carry on trade. 3/ The application may be made through a website administered and controlled by the registering body as provided for under Article 79 Sub -Article (2) of this Code.
1/ Where an existing business is sold or let out for hire, the purchaser or lessee shall not be registered for so long as the registration of the former trader has not been cancelled in the register. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the registration of the trader shall not be cancelled from the register where the trader concerned operates more than one business and he sells or let’s out for hire only some of the businesses; Only entries made into the register regarding the sold or leased business shall be cancelled.
1/ The application for registration shall be made at the registry within whose jurisdiction the trader or business organization seeking registration has its head office; the trader shall have the right to choose the address of the head office for his firm. 2/ Unless otherwise prescribed by law where the head office of a trader’s firm or a business organization is abroad, the registration shall be carried out by the registry within whose jurisdiction the principal branch or agency is situate.
1/ No trader or business organization shall be principally registered in more than one local register even if he carries on different trade in different Regions nor shall he be registered under more than one registration number in one register. 2/ Where a trader carries on a trade or operates a branch or has a representative office in Regions other than the place where he is principally registered, he shall make an application to be summarily registered in those Regions and a reference shall be made to the principal registration.
Where a trader makes an application for principal registration, he shall state: 1/ his full name including that of his grandfather or family name, if any; 2/ his date and place of birth; 3/ his nationality; 4/ his personal address; 5/ where he is a minor, the date on which he was authorized to carry on trade by his tutor; 6/ where he is married, the place and date of the marriage and whether or not a marriage settlement was made and the date and the place where or person with whom such settlement was deposited, if any; 7/ the objects of the trade; 8/ Whether he created the business or bought it or leased it and in case of lease, the name of the lessor and all other information necessary for registration; 9/ the trade name; 10/ the trademark, if any; 11/ the address of the business; 12/ the addresses of other businesses, branches or representative offices, if any, which the trader operates either at the place of registration or in other places; 13/ the names of branch managers, if any, and whether their powers are limited to the management of a branch; 14/ the date on which the license for carrying on the trade was granted, if any.
Where a trader makes an application for summary registration, he shall state: 1/ his full name including that of his grad father or family name, if any; 2/ his nationality; 3/ his personal address; 4/ the trade name of the business, branch or representative office; 5/ the address at which the business, branch or representative office is located; 6/ the object of the trade; 7/ the name of the manager and whether his powers are limited to the management of a branch; 8/ the date on which the license for carrying on the trade was granted, if any; 9/ the place of principal registration and the registration number.
The relevant provision of Book II of this Code shall apply to the registration of business organizations.
1/ Any registered person shall, within sixty consecutive days from the occurrence of a fact making necessary an alteration in the particulars of registration, apply for the entry to be altered. 2/ An application under Sub-Article (1) may be made by any interested person. 3/ In particular, the dismissal of the manager shall be entered.
1/ A trader that happens to be a human person may apply for the following additional entries to be made: a) the marriage of the trader, the place and date of the marriage and whether or not a marriage settlement was made, the date and the place where it was signed, if any, and the place where or the person with whom the settlement is deposited, if any; b) the decision of the court to dissolve the marriage, if any; c) a judgment declaring the trader incapable, if any; d) an objection of the spouse, if any; e) the setting aside of an objection under Article 17 of this Code; f) the appointment of a new manager. 2/ An application under Sub-Article (1) may be made by any person with vested interest.
Organizations The relevant provisions of Book II of this Code shall apply to additional entries in respect of business organizations.
Additional entries shall be made regarding judgments given under the relevant provisions of Book III of this Code as concerns the opening of reorganization, bankruptcy, summary bankruptcy and discharge the trader.
1/ Any trader shall apply for the registration to be cancelled within sixty consecutive days from his ceasing to carry on his trade for whatever reason or where he lets his business out for hire. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the registration of the trader shall not be cancelled from the register where the trader concerned operates more than one business and he quits or let’s out for hire only some of the businesses. Only entries made into the register regarding the business he ceased to operate or leased business shall be cancelled.
1/ The spouse or the heirs of a deceased trader shall apply for the registration to be cancelled within sixty consecutive days from the death except in circumstances beyond their control. 2/ Where the right holders under Sub-Article (1) of this Article wish to carry on the trade under joint ownership, they shall apply for a new registration indicating their preferred form of business organization.
1/ The registering office shall, on its own motion, cancel the entries in the commercial register when it becomes aware that the trader has ceased to carry on his trade or a decision has been made to the effect that the trader lacks the capacity necessary to carry on trade or on other grounds that are deemed to be sufficient for cancellation of registration pursuant to other pertinent laws. 2/ Any law that provides for provisional cancellation of commercial registration as an administrative penalty, in the absence of a decision to dissolve and wind up, shall be of no effect. 3/ The cancellation order issued pursuant to Sub-Article (1) shall be notified to the trader concerned and other relevant bodies.
Whosoever fails to register or to cause an entry to be made in the register in accordance with the provisions of this Code shall be guilty of an offence and shall on conviction be liable to the penalties provided in the pertinent penal law.
Whosoever intentionally makes inaccurate statements in relation to registration shall be guilty of an offence and shall on conviction be liable to the penalties provided in the pertinent penal law.
1/ All registered persons or business organization shall be deemed to be traders, unless the contrary is proved. 2/ Registered persons or business organizations shall not be permitted to prove they are not traders and shall incur all liabilities which the status of trader entails.
1/ Any person who fails to register in accordance with the provisions of this Code may not hold himself out to be a trader to third parties, but he shall be liable as though he were a trader. 2/ The relevant provisions of Book II of this Code shall apply to business organizations.
Any registered trader who assigns his business or lets it out for hire shall, until his registration is cancelled, be jointly and severally liable for all debts incurred by the assignee or lessee.
1/ Any person who caused an entry to be made in the register shall not be permitted to show that such entry is inaccurate as a defense against third parties that relied on such entry. 2/ Third parties shall not be permitted to prove that they did not know of a fact entered in the commercial register.
affect Rights of Third Parties. The following facts relating to persons who are traders shall not affect the rights of third parties in good faith where they have not been entered in the commercial register: 1/ the minority of the trader; 2/ the marriage of the trader; 3/ the marriage settlement of the trader; 4/ the dissolution of the marriage of the trader; 5/ the judgment declaring the trader incapable; 6/ an objection under Article 15 of this Code; 7/ the limitation of the powers of a manager to the management of a branch or representative office; 8/ the removal or dismissal of a manager.
Affect Rights of Third Parties. Facts relating to business organizations which do not affect the rights of third parties where they have not been entered in the commercial register are prescribed by Book II of this Code.
Without prejudice to the provisions of Article 71 (2) of this Code the Council of Ministers may issue a regulation for the implementation of the provisions of this title.
A business is an incorporeal movable consisting of all movable property brought together and organized for the purpose of carrying out any of the commercial activities in Article 5 of this Code.
1/ Every trader operates a business. 2/ A trader may operate several businesses for the purpose of carrying out various commercial activities. 3/ A trader may operate a business in the capacity of owner, usufructuary or lessee; only the person who operates the business shall be deemed to be a trader and the owner or lessor of the business shall not be regarded as a trader.
1/ A business may consist of one principal business or of a principal business with branches or representative offices which shall be deemed to be part of the business. 2/ Where a branch or representative office is sold or let out for hire without the principal being sold or let out for hire, such sale or lease shall be deemed to be a sale or lease of a business.
1/ A business consists mainly of goodwill. 2/ A business may consist of other incorporeal elements such as: a) the trade name; b) trademark and any other designation under which the trade is carried on; c) the right to lease the premises in which the trade is carried on; d) intellectual property rights; e) Such special rights as attach to the business itself and not to the trader.
A business may consist of corporeal elements such as equipment or goods.
1/ A business shall normally not include the assets and debts of the trader, with the exception of the right to the lease of the premises. 2/ Nothing in this Article shall affect the special rules provided in relevant law regarding the rights of a transferee of a property with insurance cover and the rights of employees regarding the continuation of employment contracts when the business organization is transferred.
The goodwill results from the creation and operation of a business and is of a value which arises from relations between a trader and third parties who may require from him goods or services.
A trader may preserve his goodwill by instituting proceedings for unfair competition or by setting up the legal or contractual prohibitions provided in Article 29,39,53,118,130,131,166, and 167 of this Code.
1/ A trader may claim damages under Article 2057 of the Civil Code from any person who commits an act of competition which amounts to a fault. 2/ Without prejudice to the provisions of Sub-Article (1) of this Article, details on unfair commercial competition and its effects shall be prescribed by law.
Rights The relevant provisions of the Civil Code and special laws shall apply to the administration of a trader’s trade name, trademarks and intellectual property rights.
Without prejudice to the provisions of this section, the provisions of the Civil Code shall apply to the right to the lease of the premises in which the trade is carried on.
Where the contract of lease specifies the nature of the trade to be carried on by the lessee, the contract may be cancelled where the lessee carries on a different trade.
1/ After the contract of lease has been entered into, the lessor may not carry on in the same building a trade similar to the trade carried on by the lessee. 2/ Where the lessor disregards the prohibition provided in Sub-Article (1) he shall be liable for damages and his business shall be closed.
1/ Notwithstanding the provisions of Article 2959 of the Civil Code, any provision in the contract of lease which prevents the lessee from assigning the contract of lease or from sub-letting the premises to the person who buys his business, or which make such assignment or sub-letting lease dependent on the lessor’s consent, shall be of no effect. 2/ Any provision which prevents or restricts a person in charge of reorganization or trustee in bankruptcy from exercising the powers provided under the proceedings in Book Three of this Code shall be of no effect.
1/ Where a business is mortgaged, the lessor shall inform the creditors when he terminates the lease or he intends amicably to terminate the lease or to enforce a provision for termination made in the contract. The lease shall terminate not earlier than thirty consecutive days following such notice to the creditors. 2/ Where notice is not given under Sub-Article (1) of this Article, the termination of the contract of lease shall not affect creditors having secured rights on the business.
1/ Any clause in the contract of lease providing that the contract shall terminate as of right where the lessee is subject to the proceedings provided in Book Three of this Code shall be of no effect. 2/ Where the lessee is subject to the proceedings under
Without prejudice to the provisions of this chapter, the provisions of Article 22662367 of the Civil Code shall apply to the sale of a business.
1/ The provisions of this chapter regarding the sale of a business shall apply: a) to any sale or assignment, even under a disguised form; b) to any sale by auction at the request of joint owners; c) to any distribution accompanied by compensation, where such sale, assignment or distribution relates to a business or its goodwill or to a branch or representative office assigned without the principal business being assigned or the goodwill of such branch or representative office. 2/ The provisions of this chapter shall not apply to the sale of individual parts of a business other than the goodwill, unless such sale entails or conceals the sale of the business or of the goodwill of a business.
The sale of a business shall be null and void unless evidenced in writing.
The contract of sale shall specify: 1/ The turnover and profits made during the last three financial years or since the business was created or acquired by the seller, where such creation or acquisition took place less than three years before the sale; 2/ Where the business is carried on in premises let out for hire, the date on which the contract of lease was made and is to expire and the name and address of the lessor; 3/ The mortgage on the business, if any.
1/ The court may cancel the contract of sale on the application of the buyer where it is of the opinion that the buyer was injured by the failure to comply with any of the requirements provided in Article 125 2/ The court may cancel the contract of sale or reduce the price of the sale on the application of the buyer where it is of opinion that the buyer was injured by any inaccurate statement made under Article 125 3/ Proceedings under Sub-Article (1) and (2) of this Article shall be instituted within a year starting from the date on which the contract was made.
1/ The seller shall hand over the business to the buyer. 2/ Unless otherwise agreed, the sale of a business implies the sale of all the constituent parts of such business. 3/ The seller shall enable the buyer to take over the goodwill by handing to him all necessary documents and information. 4/ The relevant provisions of the Civil Code and of special laws shall apply to the assignment of intellectual property rights.
1/ On the day of the sale, the seller and the buyer shall check all accounts and prepare an inventory of all accounting documents and books. 2/ The seller shall retain his books and accounting documents and the correspondence sent or received by him, but he shall, notwithstanding any provision to the contrary, keep them available for inspection by the buyer for a period of two years.
The seller shall hand to the buyer all correspondence relating to the business which he may receive after the sale of the business.
1/ During five years from the sale, the seller shall refrain from doing any act of competition likely to injure the buyer. In particular, he may not carry on, in the vicinity of the business he sold, a trade similar to the trade carried on by the buyer. 2/ The contract of sale may specify the area and type of trade covered by such prohibition which shall in no case exceed five years.
A prohibition under Article 130 of this Code shall be deemed to be an element of the business and may be enforced by the buyer and his heirs and by any subsequent buyer.
The buyer shall pay the price in the manner provided in the contract or, where no special provision is made, in cash. Notwithstanding any agreement to the contrary, the provisions of Article 134 of this Code shall apply.
The buyer shall ensure that notice of sale is published in accordance with the provisions of Article 136142 of this Code.
1/ After the sale, the price of the sale shall not be paid to the seller until the period of time for making applications to set aside expires or, where any such application has been made, until the rights of the creditors have been settled by agreement or by the court and such creditors have been paid. 2/ Unless what has been prescribed under Sub-Article (1) of this Article is complied with, no payment or assignment of the claim shall affect the rights of the seller’s creditors. 3/ The contract of sale may provide that the buyer shall deposit the price of the sale with a third party. Any such deposit shall discharge the buyer from his liabilities to the seller but the buyer shall remain liable to the seller’s creditors.
Until he is fully paid, the seller shall be secured by a legal mortgage and shall have the right to cancel the contract as provided in Article 145 to147 of this Code.
1/ Where a business is sold, the buyer shall ensure that a notice to this effect is published in a newspaper with wide circulation in the place where the head office of the business is situate. 2/ Where the business sold comprises branches or representative offices situate in different places, the notice under Sub-Article (1) of this Article shall be published in a newspaper with wide circulation in the places where each branch or agency is situate.
The notice under Article 136 shall show: 1/ the names and addresses of the seller and buyer; 2/ the type and address of the business; 3/ the type and address of any branch or representative office which may have been sold with the business; 4/ the date and nature of the contract of sale; 5/ the price of the sale; 6/ the address chosen for service of court summon at the place where the head office of the business is situated.
1/ Notices under Article 136 shall be published within thirty consecutive days from the date on which the sale took place. 2/ Late notice shall be valid, but the buyer may be liable for any damage caused to the seller or to the seller’s creditors by reason of the delay.
1/ Within thirty consecutive days from the publication of the last notice, any creditor of the seller may, even where his claim is not due, move the court to set aside the proceeds of the sale and shall notify the buyer at his address for service. 2/ The application shall show the name and address of the creditor and the amount money he claims and basis of the claim. 3/ Where notice under Article 136 has not been published or did not contain all the particulars required under Article 137, an application to set aside may be made at any time. 4/ Until the application is decided on, the buyer or third
The seller may move the court to reject an application which is incomplete, or which is late or made without good cause.
1/ The proceeds of the sale shall be distributed by agreement or by order of the court between the creditors having a claim secured by the business and the creditors having made an application to set aside. 2/ The surplus, if any, shall be handed to the seller.
1/ Where the price is insufficient to meet the claims of creditors having a claim secured by the business and creditors having made an application under Sub- Article (1) of Article 141 the creditors may move the court to order that the business be sold by auction. 2/ The court shall order the sale by auction and the price of the sale shall be higher by one tenth than the price specified in the contract of sale. 3/ Where no third party presents himself at the sale, the business shall be sold to the creditor making the highest bid.
1/ A business may be mortgaged. 2/ Mortgage of a business flows from the law or a contract. 3/ Any mortgage, whether legal or contractual, may not be invoked against third parties unless it is registered pursuant to the relevant law. 4/ The provisions of this law shall apply to mortgage established on business without prejudice to special rules embodied in relevant laws concerning the establishment of security rights over movable property.
1/ The following persons shall have their claims secured by a legal mortgage on the business: a) The seller of a business, for so long as the price of the sale has not been fully paid to him; b) The creditors of a bankrupt trader. 2/ The relevant provisions of Book Three of this Code shall apply to a mortgage under Sub-Article (1) (b) of this Article
1/ Where a person sells a business and the price of the sale is not fully paid to him, the payment of the price or such part thereof as is still due shall be secured by a legal mortgage on the business sold. 2/ The legal mortgage provided under Sub-Article (1) of this Article shall not apply unless the sale was made in writing and the mortgage has been registered in the manner provided by the relevant law. 3/ Particulars of the registration of legal mortgage shall be prescribed by special law.
The seller who is not fully paid has the right to cancel the contract of sale. The cancellation of the contract shall not affect third parties unless the mortgage has been registered as provided by the relevant law and the possibility of bringing an action for cancellation has been entered in the register in which the mortgage was registered.
1/ The seller who cancels the contract on the ground that he has not been fully paid pursuant to Article 146 of this law shall, whatever the part of the price still due, take back the whole business in its condition on the day of cancellation, but not including new parts acquired after the contract of sale was made. 2/ The increase or reduction in the value of the price of the parts sold shall be taken into account in settling the rights of the seller and buyer.
1/ Any person who owns a business may mortgage such business notwithstanding that he does not operate it himself. 2/ The mortgage shall not be binding as between the parties unless it is made in writing nor can it be invoked against third parties unless registered in accordance with the relevant law. 3/ Particulars of the registration of contractual mortgage shall be prescribed by special law.
1/ Notwithstanding any provision to the contrary, the debtor may sell or otherwise assign his business or let it out for hire. 2/ It may be provided in the contract that the debtor shall pay forthwith the debt secured by the business in the event of the business being sold or otherwise assigned or let out for hire. Such contractual provision shall be of no effect unless it is entered in the register at the time of the registration of the contract.
Where the debtor reduces or is likely to reduce the value of the business in particular by changing the site of the business, by failing to pay the rent of the premises in which the trade is carried on or by reducing the stocks, any secured creditor may demand that new sureties be produced and, where not produced, may move the court to order that his claim be paid forthwith.
1/ A debtor who wishes to relocate his business shall inform the creditors secured by the business. The debt shall become due immediately where such notice is not given or relocation is effected earlier than one month from the relocation date indicated in such notice. 2/ Creditors may exercise their rights under Article 150 of this law where they are of opinion that the relocation would reduce the value of the business. 3/ Where creditors agree to the relocation and the business relocated remains within the same regional state, the creditors shall apply for the entry in the register to be varied accordingly. Where the business is relocated to another regional state, the creditors shall ensure that a new entry is made in the register kept in the Region in whose jurisdiction the new head office is situate. 4/ Where an entry is varied or new entry is made under Sub-Article (3) of this Article such varied or new entry shall have effect as from the day of the original entry.
1/ A secured creditor may claim the business from a third party, as the mortgage follows the business into whatever hands it may fall. 2/ The third party to whom the business is transferred may avoid attachment of the business by paying fully all secured creditors.
1/ The mortgage charges the business in its condition at the time of attachment, whatever the importance or value of its parts at that time. 2/ The mortgage shall apply to such parts only of the business as are expressly specified in the entry made in the register.
1/ Secured creditors shall have a preferred right on the proceeds of the sale of a business. 2/ As between secured creditors, rights shall rank in accordance with the date on which such rights have been registered. Mortgage registered on the same day shall rank concurrently. 3/ The legal mortgage of the seller shall rank before contractual mortgages.
Proceedings under Book Three The relevant provision of Book Three of this Code shall apply where registered mortgages concern the business of a person subject to the proceedings in the Book Three.
1/ A business may be let out for hire. 2/ Without prejudice to Article 157167 of this Code, the provisions of Article 28962974 of the Civil Code shall apply where a business is let out for hire.
1/ A contract of lease shall not affect the rights of third parties unless it is in writing and it is published, on the application of either party, in a newspaper having wide circulation at the place where the head office of the business is situate. 2/ Notices published under Sub-Article (1) of this Article shall show:5 a) The names and addresses of the lessor and lessee; b) The date and nature of the contract; c) The objects and address of the business; and d) The period of time for which the contract is entered into.
1/ The owner of the business let out for hire shall cause his name to be struck off the commercial register. His name shall not be so struck off the register if he happens to have other businesses not covered by the lease. In such a case, appropriate changes shall be made to the entry in the register as concerns the business that has been let out for hire. 2/ The lessee shall cause his name to be entered in the commercial register in accordance with the provisions of Title Four of this Book.
Until the provisions of Article 157 and 158 of this law have been complied with, the owner of the business shall be jointly and severally liable with the lessee for any debt incurred by the lessee in operating the business.
The contract of lease may be cancelled where the lessee fails to add the word “lessee” on all his business papers.
The contract of lease may be cancelled where the lessee fails to pay the agreed rent or does not operate the business with the care due from a good trader taking into account the objects of such business.
1/ In addition to the rent, the contract of lease may provide that the lessee shall produce sureties to guarantee the fulfillment of his obligations towards the lessor or third parties. 2/ Notwithstanding any agreement to the contrary, the sureties shall be fully returned to the lessee where the lessee has fulfilled his obligation to the lessor and no application is made by the creditors within the period of time specified in Article 164 Sub-Article (3) of this Code.
The lessee may not assign the contract of lease without the written consent of the lessor, as a contract of lease is made on the basis of the personal qualification of the lessee.
1/ Where the contract of lease terminates, notices to this effect shall be published as provided in Article 157 Sub-Article (1) of this Code. 2/ Notices published under Sub-Article (1) shall show: a) The names and addresses of the lessor and lessee; b) The type and address of the business; c) The date of termination of the contract of lease; d) The amount of the guarantee deposited under
Any claim which a creditor may have against the lessee shall become due on the termination of the contract of lease.
1/ During the currency of the contract of lease, the owner of the business may not compete with the lessee by creating, buying or otherwise acquiring a business having similar objects. 2/ Where the owner disregards the prohibition provided in Sub-Article (1) of this Article, he shall be liable for damages and his business may be closed.
1/ The parties may agree that, upon the termination of the contract of lease, the lessee shall not compete with the owner of the business by carrying on a trade similar to the trade carried on by the owner. 2/ Any such prohibition shall not be effective for more than five years.
Where a business is contributed to a business organization being formed, notices to this effect shall be published as provided in Article 151 Sub-Article (1) of this Code.
Notices published under Article 168 shall show: 1/ The names and addresses of the contributor; 2/ The objects and address of the business contributed; 3/ The firm-name, nature and head office of the business organization to which the contribution is made; 4/ The date of the memorandum of association of the business organization.
1/ During thirty consecutive days from the last publication made under Article 168 any creditor of the contributor may, even where his claim is not due, send a notice to the head office of the business organization to which the contribution was made to the effect that he objects to the contribution. 2/ Where no publication was made or the publication is invalid, a creditor may make his objection at any time.
1/ Within one month from an application under Article 170 being made any partner may move the court to dissolve the business organization under formation or to cancel the contribution made to the business organization in operation. 2/ Where an application under Sub-Article (1) is not made and the contribution is not cancelled, the business organization shall be jointly and severally liable with the contributor.
1/ A business organization is an association established through a memorandum of association by persons who bring together contributions for the purpose of undertaking an economic activity in cooperation and of participating in the profit made. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, a joint venture is formed by an agreement concluded among members that is not disclosed to third parties. 3/ Notwithstanding Sub-Article (1) of this Article, for the purpose of this Code, one person private limited company is a business organization.
1/ A memorandum of association is an instrument drawn up to establish a business organization. 2/ The Ministry of Trade and Industry or another government agency vested with power by law may prepare a model memorandum of association. 3/ Freedom of contract of the parties shall be respected notwithstanding the provision under Sub-Article (2) of this Article In particular, any law or practice that requires parties to limit themselves to the terms of the model issued by a government agency shall be of no effect.
The following are types of business organizations: 1/ General partnership; 2/ Limited partnership; 3/ Limited liability partnership; 4/ Joint venture; 5/ Share company; 6/ Private limited company; 7/ One person private limited company.
All business organizations other than joint venture shall acquire legal personality upon registration in the commercial register.
A business organization shall have a name. Such name may neither be contrary to the interests of another trader or business organization nor contravene the law and public morality.
The formation of a business organization, except joint venture, shall be of no effect unless established through a memorandum of association.
Any provision giving all the profits to only one or some of the members of a business organization shall be of no effect.
[ 1/ Any business organization, except a joint venture, shall acquire rights and incur liabilities by its agents in accordance with the provisions relating to agency. 2/ A business organization shall act in legal proceedings by its agents. 3/ Any summons to be served on a business organization shall be served at the head-office or the pertinent branch.
With the exception of a share company, a business organization may not issue transferable securities.
A business organization shall be dissolved where: 1/ the purpose for which the business organization was formed has been achieved or cannot be achieved; 2/ the term for which the business organization was formed expires, unless the members agree to continue the business organization; 3/ members agree to dissolve the business organization; 4/ notwithstanding a contrary agreement between members of the business organization, a court decides to dissolve the business organization for good cause on the request of a member; 5/ a court declares the business organization bankrupt; 6/ There shall be good cause for the purpose of Sub- Article (4) of this Article, in particular, if there is a serious disagreement between members and the disagreement obstructs the attainment of the purpose of the organisation; 7/ Notwithstanding the provisions of Sub-Article (6) of this Article, disagreement between members shall not constitute a good enough cause to dissolve a business organisation where the organisation can attain its business purpose if some members are expelled by paying them their share.
1/ Where a business organization is dissolved and wound-up, the liquidators shall apply for the cancellation of the business organizations from the commercial register. The business organization shall cease to have legal personality starting from the day following the date of the cancellation. 2/ The cancellation of business organization from commercial register shall be published in a newspaper having wider circulation in the area where the business organization had its head office.
A general partnership is a business organization consisting of partners who are each jointly and severally liable with the partnership itself for the obligations of the partnership. Any agreement to the contrary may not be invoked against third parties.
1/ The name of the partnership shall consist of the names of all or at least two of the partners. The names of the partners shall be followed by the words “General partnership”. The name of the partnership may not contain names of persons who are not partners. 2/ Where a partner whose name is mentioned in the name of the partnership ceases to be a partner, the name of the partnership shall be changed accordingly. 3/ Where a person who is not a partner knowingly fails to object when his name is used in the partnership name, he shall be liable for the obligations of the partnership as a full partner.
The memorandum of association of the partnership shall contain the following: 1/ the firm-name; 2/ the head office and branches, if any; 3/ the name, address and nationality of each partner; 4/ the business purpose of the firm; 5/ the amount of cash contribution of each partner, in the case of in-kind contributions, their value and method of valuation; 6/ where there is a partner contributing skill, the services required from him; 7/ the share of each partner in the profits and losses, and mode of allocation of profits; 8/ the manager and agent, if any, of the partnership, and powers and duties of the manager; 9/ the period of time for which the partnership has been established; other particulars determined by the law or agreement of the partners.
1/ Each partner shall make a contribution in the form of money, movable or immovable property, skill, trademark, goodwill, patent, copyright, lease right, usufruct or other contributions. 2/ Ownership of property or the use of property may form a contribution. 3/ Unless otherwise agreed, contributions shall be equal and of the nature and extent required for carrying out the business purpose of the partnership. 4/ Valuation of contribution in kind shall be as agreed by the partners. 5/ Where it is shown that a contribution in kind has been overvalued, the contributing member shall pay in cash the difference between the overvaluation and the actual value of the contribution. Where such partner is unable to pay the difference in cash, the value of his share in the partnership shall be adjusted to reflect its actual value.
1/ A partner who has made contributions in kind, excluding skill, shall carry out the duties of a seller under the sale provisions of the Civil Code. 2/ A partner who has contributed only the use of property shall carry out the obligations of a lessor under the provisions of the Civil Code dealing with the contract of lease. 3/ A partner who has contributed a debt shall have the same obligation as a debtor under the contract of loan provisions of the Civil Code.
1/ Where the ownership of property is contributed, the risks shall pass to the partnership in accordance with the provisions of the Civil Code relating to sale. 2/ Where only the use of property is contributed, the risks shall remain with the contributing partner unless the risk is caused by the fault of the partnership.
Time A partner who fails to make a contribution in due time shall be liable to pay interest or penalty to the partnership from the date he should have made the contribution.
Each partner shall have the right to: 1/ participate and vote in meetings of the partnership; 2/ share the profits of the partnership; 3/ inquire about the state of the partnership`s business, consult the books and papers of the partnership, and take notes therefrom; 4/ require a report on the management to be prepared at the end of each year where the partnership continues for more than one year; 5/ share the assets of the partnership when the firm is dissolved; and 6/ enjoy others rights and benefits which emanate from firm membership or the memorandum of association of the partnership.
1/ Each partner shall: a) pay his contribution to the partnership in due time; b) work diligently and with due care to achieve the purpose of the partnership; c) refrain from handling, either for his own benefit or for a third person, any business which would be prejudicial to the partnership; d) be jointly and severally liable for the debts of the partnership; and e) discharge other obligations arising out of the memorandum of association and membership. 2/ Creditors of the partnership may not take an action against individual partners for debts due by the partnership until after the partnership has been served a default notice. However, an action for the repayment of fictitious dividends may be brought at any time directly against individual partners.
1/ Unless otherwise agreed, every partner shall have an equal share in the profits and losses, irrespective of the nature and amount of contribution he made to the partnership. 2/ If the agreement specifies only either the share in the profits or losses, such agreement shall apply equally to the share of profits and losses.
In the absence of a contrary provision in the memorandum of association, unanimous consent of the partners is required to admit an outsider into the partnership.
Unless there is a contrary provision in the memorandum of association of the partnership, a partner is entitled to transfer his share to another partner.
1/ Where a partner leaves a partnership without transferring his share to another partner or a third
A partner who has withdrawn from the partnership shall be liable jointly and severally with the partnership for the debts and liabilities incurred by the partnership before his departure. The liability may be transferred to his substitute if the creditors of the partnership consent to that.
1/ A partner may transfer beneficial interests and rights in his share to a third party without the consent of the other partners. 2/ The transfer of beneficial interests and rights to a third
1/ The partnership shall be managed by one or more managers who may or may not be partners. 2/ Where the number of managers is more than one, their respective duties shall be specified in writing.
1/ The manager shall have the power to carry out, in the name of the partnership, all lawful acts in order to achieve the business purpose of the firm. 2/ Any agreements restricting the powers of the manager may be invoked against third parties where such agreements have been entered in the commercial register or it is shown that the third parties knew the scope of the powers of the manager. 3/ Where the partnership continues for more than one year, the manager shall submit a report on the management of the partnership to the partners at the end of each year.
1/ Where a manager acts in the name of the partnership for his own benefit, the partnership shall be liable to third parties who dealt with him in good faith. Where it is shown that the third parties were aware of the improper use of the partnership name by the manager, the manager alone shall be liable. 2/ Where a manager deals with a third party without using the partnership’s name, he shall be deemed to have acted on his own behalf. The partnership shall be liable where it is shown that the manager was transacting on behalf of the partnership. 3/ A manager who acts outside the scope of his powers shall alone be liable.
Except with the unanimous consent of all the partners, a manager may not have dealings with the partnership on his own behalf or for the benefit of third parties.
No manager may engage in transactions that are similar to those carried out by the partnership, on behalf of a third party or his own interest, without the consent of the other partners, nor may he be a partner with joint and several liabilities in another firm that engages in a similar business.
1/ A partner appointed as a manager in the memorandum of association or in an amendment thereto may be dismissed by the partners in accordance with the rules that apply to the approval or amendment of the memorandum. 2/ A manager who is not a partner or a partner appointed as a manager not in the memorandum or an amendment thereto per Sub-Article (1) of this Article may be dismissed by a majority vote of the partners. 3/ A manager may be dismissed by the court for good cause at the request of a partner.
1/ The consent of all the partners shall be required to vary the memorandum of association, appoint an attorney or carry out any act which goes beyond normal partnership practice. 2/ Without prejudice to the provisions of Sub-Article (1) of this Article, partners may agree to take decisions by a majority vote of all the partners. In the absence of such agreement, decisions shall be taken by a unanimous vote of the partners. 3/ In the absence of a contrary agreement, each partner shall have equal vote.
1/ Without prejudice to the general provisions of this Book, a partnership may be dissolved on one of the following grounds: a) where a partnership is established for an undefined period or for the life of one of the partners, or the right to dissolve on notice is provided in the memorandum of association, every partner may bring about its dissolution by giving in good faith six months advance notice; b) A partner is incapable of carrying out his duties in the partnership due to infirmity or illness or any other reason; c) a disagreement occurs among the partners precluding them from acting together; d) A partner dies or is declared bankrupt by the court or loses legal capacity to be a partner; e) where the personal creditors of a partner cause his entire share to be disposed of or the remaining partners do not agree to his continuation as a partner with the reminder of his share. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the partnership may continue to exist where: a) a partner gives notice to dissolve and the remaining partners pay out his share to such partner and agree to continue the partnership as between them; or b) the remaining partners agree to continue the partnership by paying out the share of the deceased partner to his heirs or tutor of the incapable partner or trustee of the bankrupt partner.
1/ The managers shall retain their powers until the appointment of a liquidator to dissolve the partnership. They may not commence new business after a decision to dissolve the partnership has been made. 2/ The managers shall hand over to the liquidators the property of and all necessary documents relating to the partnership and render an account of their management up to the date of handing over. 3/ Notwithstanding the provisions of Sub-Article 1 of this Article, the managers may, after the start of winding-up process upon the request of the liquidator, exercise acts of management as are necessary to only complete the liquidation.
1/ The winding-up of the partnership shall be carried out by one or more liquidators appointed in the memorandum of association or by the unanimous agreement of the partners. 2/ Failing the agreement of the partners, the court shall appoint one or more liquidators.
1/ The liquidators shall take all steps necessary to complete the winding-up of the partnership. Their powers and duties shall include: a) completion of business already started; b) drawing up an inventory of the assets and liabilities of the partnership; c) collection of the assets of the partnership, selling its property, paying the creditors of the partnership from the assets of the partnership or, where necessary, calling upon the partners for contributions; d) representing the partnership in judicial, administrative, or arbitral proceedings; e) distribution of the assets of the partnership to the partners; f) carrying out other acts necessary for the winding up of the partnership. 2/ The provisions of this Code relating to the liability of managers shall apply to liquidators.
The appointment of liquidators may be revoked by the agreement of all the partners, or by the court at the request of one partner.
1/ After settlement of the debts and liabilities of the partnership, each partner is entitled to the restitution of the contribution he made to the partnership. 2/ A partner who contributed only the use of property is entitled to take it back upon dissolution. 3/ A partner who contributed the ownership of property may not claim it back upon dissolution. Such partner is entitled to receive the monetary value of the property as at the time the contribution. 4/ A partner who contributed skill shall receive the monetary value of the skill on the basis of the estimated value of the skill at the time the contribution was made.
1/ Where there is a surplus after all claims have been settled and contributions returned, the surplus shall be distributed among the partners. 2/ Where the assets are insufficient to repay contributions after payment of debts, expenses and advances, the loss shall be distributed among the partners. 3/ The distribution of profits and losses is to be made among the partners in equal shares, where no other proportion has been specified in the memorandum of association.
A limited partnership comprises partners with different types of liability፡ general partners who are in full liable jointly and severally with the partnership itself for the obligations of the partnership and limited partners who are liable for the obligations of the partnership only to the extent of their pledged contributions.
1/ A limited partnership shall have a firm-name. 2/ The name of the partnership shall consist of the names of at least two general partners followed by the words “Limited Partnership”. 3/ Where a limited partner allows his name to be included in the firm-name, he shall be liable jointly and severally with the partnership itself for obligations emanating from the undertakings of the partnership with third parties in good faith as though he were a general partner.
The memorandum of association of the partnership shall contain the particulars required under Article 185 of this Code, and in addition specify who are general partners and limited partners.
1/ The provisions of Article 186 of this Code shall apply as regard contributions. 2/ Notwithstanding Sub-Article (1) of this Article, limited partners may not make contribution in the form of skill.
1/ The provisions of this Code regarding the rights and obligations of partners in general partnership shall apply to general partners. 2/ Unless a non-member has been appointed as a manager in the memorandum of association or by a decision of the partners only general partners may be appointed as managers.
Unless approved by the other partners, no general partner may carry out transactions, on behalf of a third party or on his own behalf, which are related to business carried on by his firm, nor may he be a partner with joint and several liability in another firm carrying on similar business.
1/ Action may be taken by creditors of a limited partnership to compel limited partners to pay their unpaid contributions. 2/ Limited partners may not be required to repay dividends received by them in good faith after approval of the partnership’s balance sheet. 3/ Limited partners may not act as managers even under a power of attorney. A limited partner who contravenes this prohibition shall be jointly and severally liable with general partners for any obligations arising out of his activities. Where deemed appropriate, taking into account the frequency and gravity of violations of the prohibition, he may be declared jointly and severally liable in respect of some or all the firm`s undertakings. 4/ A limited partner may not be deemed to act as manager when he: a) takes part in consultations in the firm; b) deals with the firm; c) investigates managerial acts; d) gives advice and counsel to the firm; e) gives permission to do acts outside the manager`s powers. 5/ Limited partners may be employed by the firm in non- managerial positions. 6/ Notwithstanding any provision to the contrary, limited partners may inquire regarding the affairs of the firm, inspect the books and accounts of the firm and take notes. 7/ unless otherwise agreed, death, bankruptcy, incapacity and similar things affecting the limited partner shall not constitute grounds for the dissolution of the partnership.
[ 1/ Shares may not be transferred to third parties except with the consent of all general partners and majority of the limited partners. 2/ Notwithstanding the provision of Sub-Article (1) of this Article, the partners may agree to a different consent threshold in the memorandum of association. 3/ A general partner shall remain liable for obligations incurred by the partnership prior to the transfer of his shares unless creditors of the firm agree to the assignment of his obligations.
Subject to the foregoing provisions, the provisions of Article 187211 of this Code shall apply to a limited partnership as appropriate
1/ A limited liability partnership is a business organization formed by two or more persons to render professional service and services complementary thereto in which the liability of partners is limited to the amount of their contributions. 2/ “Professional service” shall, in the context of this partnership, mean a service provided based on a professional license granted by an appropriate organ; 3/ “Complementary service” shall mean a related service that falls under one or more professions and is necessary to provide the professional service.
1/ The partnership has legal personality distinct from that of the partners. 2/ The death, bankruptcy, departure from the partnership or any other fact affecting the partners shall have no impact on the existence, rights or obligations of the partnership. [
The name of a limited liability partnership shall be as agreed by the partners and indicate the purpose of the partnership. It may not adversely affect the interest of other traders, organizations or the rights of third parties. The name of the partnership shall be followed by the words “Limited partnership”.
1/ Only professionals licensed by an appropriate organ to provide professional service or limited liability partnerships which render a service that is similar or related to the one rendered by the partnership may become partners. 2/ The general manager of the partnership shall be a natural person licensed to practice the profession in which the partnership engages to provide service.
The memorandum of association of the partnership shall contain, in addition to the particulars provided under Article 185 of this Code, each partner’s license number and the type of his profession.
The provisions of Article 186 of this Code relating to contributions shall apply mutatis mutandis to a limited liability partnership.
[[[ Without prejudice to relevant laws regarding professions, a partner may, on his own behalf or on behalf of a third
1/ Where a partner or an employee of the partnership intentionally, fraudulently or negligently commits fault or causes damage, in the course of carrying out the activities of the partnership, the partnership shall be jointly and severally, and without limit, liable with such partner or employee for the fault or damage. 2/ The partnership shall be relieved from liability where the injured party knew of the fact that the partner or employee who caused damage was not authorized to carry out the undertaking. 3/ The partnership alone shall be liable for any obligation except the ones indicated in Sub-Article (1) and (2) of this Article whether arising out of contract or other grounds. 4/ The partnership shall have insurance coverage to make good damage caused by professional fault committed by the partners or employees. The extent of the insurance coverage shall be determined by an appropriate organ.
1/ A partner shall leave the partnership on the following grounds: a) Unless otherwise provided in the memorandum of association, where the partner of his own will gives in writing to the partnership a three months advance notice indicating his intention to withdraw from the partnership; b) the partner dies, or is dissolved in the case of a legal person; c) the entire share of the partner is taken or is disposed of by his personal creditors, or he is declared bankrupt; d) the partner`s professional license is revoked, or unless otherwise agreed the professional license is suspended for a long period of time; e) the partner becomes permanently incapable of carrying out his duties as a partner due to illness, infirmity or for any other reason; f) a court rules to expel the partner for good cause. 2/ Where a partner leaves the partnership without giving the notice provided under Sub-Article (1) (a) of this Article, he shall be liable to the partnership for the damage caused by his failure. 3/ A partner shall not be relieved from debts and liabilities to third parties in so far as they are incurred prior to his leaving. 4/ The partnership shall cause the departure of a partner to be indicated in the commercial register it was registered in.
1/ Where a partner dies or leaves the partnership due to illness or bankruptcy or any other reason without transferring his share to another partner or a third
1/ Unless provided otherwise in the memorandum of association of the partnership, an amendment to the memorandum of association shall pass if approved by a two-thirds majority vote of the partners. Any other decision may be made by a majority vote of the partners. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, a decision regarding change in the nationality of the partnership or the business purpose of the partnership shall pass if three-quarters (3/4) of the partners approve that.
1/ Subject to the general provisions of Article 181 of this Code dealing with dissolution of business organizations, a limited partnership shall be dissolved and wound-up where the number of its partners is reduced to one and a partner has not been introduced to bring the membership to the required level within six months. 2/ Notwithstanding the provision of Sub-Article (1) of this Article, the organ in charge of registration of business organizations may extend the six-month period by three months, upon the application of the remaining partner submitted before the expiry of the said period, where it finds the request justified. 3/ Unless an extension has been granted under Sub- Article (2) of this Article, a partner who continues the operations of the partnership for more than six months despite being aware of the fact that the membership of the partnership has been lowered to below two shall be jointly and severally with the partnership itself for the debts and obligations of the partnership.
Without prejudice to the provisions above, the provisions of Articles 187-211 of this Code shall apply mutatis mutandis to a limited liability partnership. [[
A joint venture is a business organization established by an agreement among two or more persons. It has no legal personality and its existence is unknown to third parties. Registration formalities required of other business organizations do not apply to a joint venture.
Where a joint venture is made known to third parties, it shall, as of such date, be regarded, insofar as such parties are concerned, as a general partnership.
1/ The provisions of Article 186 of this Code concerning contributions shall apply to a joint venture. 2/ Unless otherwise agreed, every partner owns his contribution.
Unless otherwise agreed, share in a joint venture may be transferred only with the agreement of all the partners.
1/ A joint venture shall be managed by one or more managers who need not be partners. 2/ Where no manager is appointed, all the partners shall have the powers of managers.
1/ The powers and duties of the manager of a joint venture shall be specified in the agreement among the partners. The agreement may not be invoked against third parties. 2/ A manager shall account to the partners. Any agreement relieving him from this duty shall be of no effect. 3/ The partners may supervise the work of the manager.
The appointment of a manager who is a partner may be revoked for good cause.
1/ Only the manager of a joint venture is known to third parties. He shall alone be liable for the debts and liabilities of the joint venture. 2/ A partner who is not a manager of a joint venture shall meet liabilities towards the manager of such joint venture only to the extent fixed in the agreement between the partners. 3/ Where a partner who is not a manager takes part in the management of a joint venture, he shall be jointly and severally liable with the manager to third parties. 4/ Every partner of a joint venture shall deal with third parties in his own name only.
1/ Without prejudice to the general provisions concerning the grounds for dissolution of business organizations, a joint venture shall be dissolved on the following grounds: a) by unanimous decision of the partners for dissolution; b) a request for dissolution by one partner, where no fixed term has been specified; c) the acquisition by one partner of all the shares; d) death, bankruptcy or incapacity of a partner, in the absence of an agreement to continue the partnership; e) a decision of the manager, if such power is conferred upon him in the agreement between the partners. 2/ The provision of Sub-Article (1) of this Article shall apply notwithstanding any provision to the contrary in the memorandum of association.
1/ Where dissolution is requested owing to fault attributable to one partner, the court may, on the application of the other partners, order the expulsion of the partner at fault in lieu of dissolution. 2/ The agreement among partners may specify the grounds for the expulsion of a partner. 3/ A partner who is expelled is entitled to demand that a share due to him on the day of expulsion be paid to him.
Without prejudice to the preceding provisions of this Title, the provisions relating to general partnership shall apply as appropriate to a joint venture.
1/ A share company is a company whose capital is fixed in advance and divided into shares and whose liabilities are met only by the assets of the company. 2/ The obligation of the shareholders shall be limited to making the contribution they pledged to make to the company.
A share company shall have a name. The company name shall be as agreed by members but shall neither adversely affect the rights of other traders or business organizations nor the rights of other third parties. The company name shall be followed by the words ‘‘Share company’’.
1/ Without prejudice to a contrary stipulation by any other law, the capital of the company may not be less than 50,000 (Fifty Thousand) Ethiopian Birr. 2/ The amount of the par value of each share may not be less than 100 (hundred) Ethiopian Birr.
1/ A promoter shall mean a person who initiates the formation of a company by public subscription, invites persons to join the company by preparing a prospectus or generally acts with the view to realizing the formation of the company and is liable for damage sustained in connection with failure to establish the company, if the company is not formed. An expert who based on a contract concluded with a promoter, for consideration, conducts a study necessary for the formation of the company, renders professional support or similar service is not a promoter. 2/ The promoters of a share company may be one or more natural or artificial persons. A promoter need not be a shareholder in the company. 3/ The number of shareholders of a share company may not be less than five.
A person that had been convicted of breach of trust, theft, robbery or any other similar criminal offense, in connection with his function as a promoter, director, manager, inspector, auditor or any other managerial positions in a business organization or in any other circumstance shall not act as a promoter of a share company formed by public subscription.
1/ Promoters shall be jointly and severally liable to persons with whom they contracted, shareholders, and third parties with respect to the following matters: a) commitments entered into for the formation of the company; b) full subscription of the capital of the company and deposit of the paid-up capital in the name and to the account of the company; c) valuation of contributions made in kind to the company in accordance with the provisions of Article 257 of this Code; d) accuracy of statements made to the public in respect of the formation of the company; e) legality of the process followed in the formation of the company; f) verification by an Auditor of the formation procedure of the company; g) where the company is not formed, refund of paid- up contributions with interest to subscribers who demand that in accordance with this Code; and h) all other matters connected with the formation process. 2/ Claims for damages against promoters under Sub- Article (1) of this Article shall be barred after five years from the date when the aggrieved party knew of the damage and of the person liable. There shall be absolute limitation after ten years from the date when the act complained of took place.
1/ The company shall take over from the promoters commitments entered into by such promoters during the formation of the company and expenses made by them in so far as such commitments and expenses were necessary for the formation of the company or if approved by the general meeting of the subscribers. 2/ Where the company is not established for whatever reason, the subscribers shall not be liable for the commitments and expenses made by the promoters.
1/ Individuals may, without offering shares for public subscription, establish a share company as between themselves, by fulfilling the requirements of this Code for the formation of a share company. 2/ Subject to any other law requiring a different number, the founders of a share company shall be at least five. 3/ The obligations of promoters specified under Article 250(1)(a),(b),(c),(e),(f) and (h) shall apply to founders as appropriate.
1/ The promoters may, for a period not exceeding three years, receive a share in the profits, beginning from the date on which the company starts making profits, which may not exceed twenty percent of the net profits in the balance sheet. Specifics regarding the amount of the share in profits, the manner in which the years payment is to be effected are chosen and the like shall be provided for in the Memorandum of Association. 2/ The promoters may not receive, from the company, any other special benefit except that which is provided for under Sub-Article (1) of this Article 3 Nothing in the provisions of Sub-Article (1) and (2) of this Article shall affect the benefits that may be due to promoters in their capacity as shareholders. [ 4/ The benefit to be provided under Sub-Article (1) of this Article shall be paid in cash. The special benefit due to the promoters may not be paid by issuing shares.
1/ Without prejudice to other provisions of this Code, a share company may not be formed until: a) the capital has been fully subscribed; and b) at least one quarter of the par value of shares sold in cash has been paid up and deposited in a blocked bank account opened in the name of the company under formation. 2/ Sums deposited pursuant to Sub-Article (1) (b) of this Article may not be withdrawn from the bank account until the company is registered in the commercial register. 3/ Where the company has not been registered within the time limit set in the prospectus prepared pursuant to Article 259 of this Code, from the date of deposit in a bank of the paid-up sums, subscribers who do not wish to continue as members of the company may request the refund with bank interest of the paid-up sums. The promoters shall, within thirty days from the date of request, notify the organ in charge of registration of business organizations to effect refund of the contributed sum. The organ mandated to register business organizations shall inform the concerned bank to refund the subscriber. The formation of the company may continue amongst the remaining subscribers. 4/ Where the promoters have failed to notify in due time the organ entrusted with the registration of business organizations pursuant to Sub-Article (3) of this Article to refund the subscriber, they shall be jointly and severally liable to pay the difference between bank interest and legal interest commencing from the date on which they should have made the notification.
The formation of a share company shall be by a memorandum of association. The memorandum of association shall contain the following particulars: 1/ the name of the company; 2/ the head office, and the branches, if any; 3/ the names, nationality, and address of the shareholders, the number of shares they subscribed and the paid-up sums; 4/ the business purpose and sector in which the company is to engage; 5/ the subscribed capital and the amount paid-up; 6/ the number, par value, form and classes of shares; 7/ the name of shareholder who made contributions in kind, the price at which they are accepted ,the method of valuation, their use, and the number of shares allocated in consideration of the contribution; 8/ the manner of distributing profits; 9/ the amount of special benefit allocated to the promoters and the manner in which that is to be effected; 10/ the number of directors and managers of the company and their powers; 11/ the number of members of the supervising board, if the company has any, and their powers; 12/ the Auditor of the company; 13/ the period of time for which the company is to be established; 14/ the time and manner in which the company will publish its performance report; 15/ the management of the company; matters concerning the relations between the company and its shareholders, and amongst the shareholders; and 16/ Other matters required to be included by the law or the agreement of shareholders.
With the exception of skill, cash and other contributions in kind provided for under Article 186 of this Code shall apply mutatis mutandis to a share company.
1/ A subscriber who makes a contribution in kind shall submit an expert valuation report. 2/ The report shall contain a detailed description of the property contributed, the value given to each item, and the method of valuation. The report shall be annexed to the memorandum of association. 3/ The valuation of contribution in kind shall be verified by the promoters and formation auditor before the meeting of subscribers takes place. 4/ Where the company under formation is not formed by public subscription, the contribution in kind shall be verified by the founders of the company. 5/ Notwithstanding the approval of the valuation pursuant to Sub-Article (3) and (4) of this Article, the board of directors and Auditors shall verify the valuation of the contributions in kind within six months from the date of registration of the company. They shall also ensure that the property contributed is, as appropriate, registered in the name of the company and the necessary title deed is issued in the name of the company. 6/ The contributor shall make good the difference, where inspection and verification carried out pursuant to Sub-Article (5) of this Article shows that the value of the contribution is lower than the valuation accepted by one tenth or more. Where the shareholder concerned fails to pay the difference, his share and the capital of the company shall be reduced accordingly.
[ The provisions of Article 259264 of this Code shall apply to the formation of a company by public subscription.
1/ An offer to subscribers shall be made by a prospectus signed by all the promoters. The prospectus shall include the following: a) the draft memorandum of association; b) a summary of the expert valuation report, if there are contributions in kind; c) the date until when the subscribers are required to discharge their obligations to pay; d) the price at which shares are to be issued; e) the amount to be paid up on the shares until the general meeting of the subscribers; f) the place where and the time when applications to subscribe shares shall be made; and the necessary details of the bank account opened in the name of the company under formation in which payments are required to be deposited; and g) the anticipated time within which the formation of the company is to be completed and the company obtain legal personality; the time set for the completion of the formation of the company shall not exceed five years under any circumstances. 2/ Copies of the prospectus and of the expert valuation report of contributions in kind, if any, shall be made available to all persons who may wish to subscribe.
1/ Applications for shares shall be submitted by filling out a form prepared for this purpose. 2/ The applicant for shares shall declare that he has read the prospectus, the draft memorandum of association and the expert valuation report, if any; he shall indicate in the form his name and address, the number of shares he seeks to purchase and the date of application.
1/ The promoters shall have the formation of the company verified by external Auditors once the requirements relating to the formation of the company have been completed. 2/ The Audit shall cover the following: a) the promoters meet the requirements set by law regarding promoters; b) full subscription of the capital of the company; c) the contributions in kind have been effected to the company, valuated by experts and that the expert valuation is correct; d) deposit of cash collected from subscribers in a bank account opened in the name of the company; e) the fulfillment of other requirements set by the law and memorandum of association for the formation of the company. 3/ The Audit report shall be submitted by the Auditor to the meeting of subscribers and approved by the meeting. 4/ The company shall not be registered unless the Audit report confirms the requirements listed under Sub- Article (2) of this Article have been complied with. 5/ Where the contribution in kind is an immovable property or a similar property with respect to which the law requires transfer of title and issuance of document to title, it is sufficient if such property is put in the possession of the promoters or, as appropriate, the founders. [
1/ Upon completion of the Audit of company formation, the promoters shall forthwith call a meeting of subscribers. 2/ Without prejudice to the provisions of Article 264 of this Code, the provisions relating to the calling and decisions of an extra-ordinary general meeting shall apply to the meeting of subscribers.
[[[ The meeting shall have the following powers and duties: 1/ verify that the requirements relating to the formation of the company have been complied with; 2/ deliberate on and approve the final text of the memorandum of association of the company; 3/ approve the report of the promoters and formation Auditors; 4/ approve the valuation of contributions in kind, if any, 5/ determine the share in profits allocated to the promoters; 6/ make appointments to organs of management of the company to be made by the meeting of subscribers under the law and the memorandum of association.
1/ Resolutions of subscribers` meetings shall be drawn up and signed by all the promoters or founders and the members of the board of directors that were elected at the meeting that happened to be present at the meeting. All documents submitted to the meeting shall be annexed to the resolutions. 2/ Any subscriber may take part in the discussions at the meeting and vote. 3/ Persons who contributed in kind may not vote with regard to a resolution approving the valuation of their contributions and the same shall apply to promoters as regards the special allocation of profits to them. 4/ Amendments of substance to the draft memorandum of association may not be made without the unanimous approval of subscribers. Nevertheless, approval by a majority vote shall be sufficient where the amendments relate to valuation of contributions in kind or allocation of special share in the profits to the promoters.
1/ A share company shall be registered in the commercial register regardless of the manner in which it was formed. A company shall obtain legal personality upon registration. 2/ Notwithstanding any provision to the contrary in any other law, the registration of the company shall be effected by the promoters or, as appropriate, the founders or any other person having a power of attorney from the promoters or founders. 3/ Notwithstanding any provision to the contrary in any law, the application for registration shall be accompanied by an authenticated memorandum of association, a prospectus where the company is formed by public subscription, audit reports regarding valuation of contributions in kind and company formation and the minutes of the meeting of subscribers.
1/ Where a company has been entered in the commercial register, it shall have legal personality notwithstanding that all the legal requirements relating to the formation of a company have not been complied with. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, where the interests of creditors or shareholders are endangered by the non-compliance, the court, may, on the application of one of the creditors or shareholders, order the dissolution of the company or corrective measures be taken swiftly. An application pursuant to this Sub-Article may be brought only within one year from the date of entry of the company in the commercial register.
1/ A Share shall be registered in the name of the shareholder. 2/ Notwithstanding any contrary agreement, a person who happens to have been issued bearer shares before the coming into effect of this law shall apply to the company having issued bearer shares to convert them for him into registered shares within three years from the publication of this law in the Negarit Gazzette. 3/ Expenses necessary for the conversion of shares under Sub-Article (2) of this Article shall be borne by the shareholder who has made the request. 4/ Bearer shares shall not confer any membership rights after the expiry of the three-year transition period indicated under Sub-Article (2) of this Article 150 of 611 --
1/ The company may not issues shares at a price lower than their par value. 2/ Shares may be issued at a price greater than their par value where such issue is provided by the memorandum or decided by an extra-ordinary general meeting of the shareholders. The difference between the par value and the price at which shares are issued shall be known as a premium.
Company in the Commercial Register A share certificate issued before the registration of the company in the commercial register shall be null and void. However, duties and liabilities arising thereunder shall not be affected.
1/ Shares are indivisible. 2/ Where several persons own shares jointly, they shall appoint a representative to exercise the shareholder`s rights. 3/ Failing such appointment, notices and declarations made by the company to one joint owner shall be effective against all joint owners. 4/ Joint owners of a share shall be jointly and severally liable in respect of any liabilities as shareholder.
1/ Where a share is pledged or given in usufruct, the right to vote at meetings shall, unless otherwise agreed, be exercised by the pledgee or usufructuary. 2/ Where there is a preferential right of subscription, such right shall be retained by the shareholder. 3/ The shareholder shall be liable for calls on shares which have been pledged. If the calls are not met, the company may sell the share under Article 289 of this Code. 4/ A usufructuary shall be liable for calls on shares. He may claim for repayment when the usufruct expires. 5/ Persons who hold shares with voting rights in pledge or usufruct shall be registered with the company. Upon registration, the company shall provide them with a certificate of registration.
1/ Shares may be issued in paper or incorporeal form. The manner of issuance of shares shall be determined in the memorandum of association or amendments thereto. 2/ An incorporeal share is a share created electronically by an institution authorized by law to issue such shares and retained by such institution in an electronic share account. 3/ A company established before the introduction of electronic share accounts by institutions authorized by law pursuant to Sub-Article (1) of this Article may decide to replace shares issued in paper form by incorporeal shares by the decision of an extra- ordinary general meeting. Such decision shall be valid only where pledgees of shares of the company confirm their acceptance of the decision in writing.
Every share issued in the form of a paper certificate shall contain the following: 1/ the signature of a member of the board of directors of the company; 2/ the name, head office and period for which the company is established; 3/ the amount of the capital of the company and the par value of the share; 4/ the date of signature of the memorandum of association and the date and place of registration of the company in the commercial register; 5/ the serial number of the share, its class, whether it is ordinary or preferential and the kind of preference it accords; 6/ where the share is not fully paid for the amount paid on shares, or a statement that the share is fully paid up; 7/ a statement indicating whether the share may be transferred to a foreigner.
1/ Every share company shall keep a register of shareholders at its head office. The register shall be kept in paper format or by electronic means that can be retained for a long duration. 2/ The register shall contain the names and addresses of shareholders, the number and numeration of the shares, the amount paid up and the date of entry of the shareholder in the register. 3/ Shareholders and concerned government authorities may inspect the register without charge. Persons other than shareholders may also inspect the register upon payment of the fee prescribed by the company. 4/ Any person may obtain a copy of or an extract from the register upon payment of the prescribed fee. The company shall give the copy or extract to the person requesting within fifteen days from the date of such request. 5/ Where an error has occurred in the register, the concerned government authority may order the rectification of the register on the request of any interested party or a shareholder. 6/ The members of the board of directors of the company shall be jointly and severally liable for any damage caused by the inaccuracy in the register.
1/ A company may acquire its own shares from shareholders where: a) the acquisition has been authorized by a meeting of the shareholders; b) the purchase price is made from the net profits of the company; c) the shares are fully paid to the company. 2/ The directors may not dispose of shares thus purchased from shareholders. The voting rights on such shares shall be suspended. 3/ The provisions of Sub-Article (1) of this Article shall not apply where the purchase has been decided by an extraordinary general meeting to reduce the capital of the company. 4/ The provisions of Sub-Article (1) (a) and (c) of this Article shall apply where a company receives its own shares in pledge from its shareholders.
1/ Provisions may be made in the memorandum of association or by resolution of an extraordinary general meeting restricting the free transfer of shares. 2/ Provisions may be made in the memorandum of association or resolution of extraordinary general meeting requiring the consent of the board of directors before the assignment of shares. Such provisions shall be of no effect unless: a) a right of pre-emption is reserved to the company or the shareholders; and b) the conditions relating to the exercise of the right of pre-emption are specified and the price of the pre-emption is fixed in advance. 3/ The restrictions under Sub-Articles (1) and (2) of this Article may neither result in preventing assignment of shares nor in causing serious damage to a shareholder who may wish to assign his share. 4/ where the right of pre-emption is reserved to the company, the price shall be paid from reserve funds or net profits.
Loans on its Shares A company shall not grant its shares before payment determined by the law and the memorandum of association are affected; it may not make loans to enable third parties to acquire its shares.
1/ Without prejudice to any restrictions stipulated by other laws, the memorandum of association or an amendment thereto may provide for the setting-up of classes of shares with different rights. 2/ All shares of the same class shall have the same par value and confer the same rights on shareholders. 3/ A change in the rights conferred to a class of shares may be made only with the approval of a special meeting of the class of shareholders held under the same conditions as the extraordinary general meeting having recommended the change.
1/ Special benefits derived from preferential shares may include preference over other shares such as preferred right of subscription in the event of future issues, or rights of priority over profits, or in the case of liquidation of the assets of the company priority right over repayment of contributions or distribution of a share of the surplus in the winding-up. 2/ The issue of shares with a preference as to voting rights is prohibited. 3/ The memorandum of association may provide that shareholders who have been given rights of priority over profits and distribution of capital upon dissolution of the company may vote only on matters which concern extraordinary meetings. 4/ The number of shares having restricted voting rights under Sub-Article (3) of this Article may not represent half or more of the amount of capital.
1/ A company may repay, from profits or reserve funds, without reducing the capital, to shareholders the par value of their shares. 2/ Shareholders whose shares are thus redeemed shall receive dividend shares. These shares do not confer any right to repayment of contributions upon dissolution of the company. They retain however a right to vote and a right to a share in the net proceeds on a winding-up.
1/ Shares subscribed in cash shall be paid up upon subscription as to one fourth of their par value or where a greater amount is provided in the memorandum of association; the whole of such amount shall be paid. 2/ Unless a shorter period is provided in the memorandum of association, payment of the balance shall be effected within a period of five years from the date of registration of the company.
1/ Where transfer of ownership and obtaining title deed in the name of the company are required with regard to contributions in kind, such formalities shall be completed within six month from the date of registration of the company. 2/ Without prejudice to other rights conferred on shareholders by this law, shares representing contributions in kind may not be issued to the shareholder and assigned to third parties before the expiry of one year from the date of registration of the company.
Without prejudice to a contrary stipulation by other laws, an instrument share is a document incorporating a right of a shareholder in such a manner that it be not possible to enforce or transfer the right separately from the document.
1/ A bearer instrument share issued prior to the passing of this law shall be transferred by mere delivery of the document evidencing such share. No other requirement or formality is required. 2/ Unless the contrary is proven, the holder of the share shall be regarded as an owner of such share for the purposes of payment of dividends, redemption and right to vote in a general meeting or benefiting from other rights arising out of the share.
1/ Without prejudice to a contrary stipulation by other laws, a share issued in a specified name shall belong to the person in whose name the share is registered in the register of shareholders kept at the head office of the company. 2/ Without prejudice to a contrary stipulation by other laws, the transfer of a share issued in a specified name shall be effected by delivery and registration of the share in the name of the transferee in the register of shareholders. The registration shall show the names of the transferor and of the transferee, their addresses, number of shares transferred, date of transfer and the date of entry of the transfer in the company`s register of shareholders.
The company may not set up against a holder of an instrument share defenses based on its personal relations with preceding owners of the share, unless the holder, at the time of transfer of the share, has knowingly and intentionally acted to the detriment of the company.
A share may in no case be claimed from a person who acquired it in good faith in accordance with the provisions of this Code relating to assignment of instrument share.
1/ Transfer of an incorporeal share shall be effected by indicating the name of a transferee and the amount of shares through crediting the account in the share account maintained by an institution authorised by law. 2/ The procedure or formalities to be observed for the transfer of an incorporeal share shall be determined by the institution that has created such share. 3/ The institution shall be answerable where it effects a transfer of an incorporeal share without contractual or legal basis.
1/ Holders, previous transferees, and subscribers shall be jointly and severally liable to the company for calls on shares. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, any subscriber or shareholder who has transferred his share shall cease to be liable for call after two years from the date of the transfer. 3/ Where the persons mentioned under Sub-Article (1) of this Article fail to pay the call at the due date, they shall be liable to pay interest at the legal rate where no other rate has been provided in the memorandum of association. 4/ The Company may fifteen days after the receipt by the shareholder of a rewritten notice demanding payment offer the unpaid shares for sale by auction. The shares so auctioned shall be cancelled and new shares delivered to the purchaser. 5/ Where the sale of the shares cannot be effected, the board of directors may decide to forfeit the shares and retain the amounts paid up, without prejudice to any other claim for damages the company may have. 6/ Where unsold shares have not been put in circulation during the trading period in which forfeiture was ordered, they shall be cancelled and the capital reduced accordingly. 7/ A shareholder who fails to make payments on shares when they become due shall lose his voting rights in shareholder meetings.
1/ Where bearer shares have been issued prior to the coming into force of this law, temporary bearer warrants shall only be issued in respect of bearer shares which are fully paid; Temporary warrants shall be of no effect where they are issued before bearer shares are fully paid. 2/ Where temporary registered warrants are issued in respect of bearer shares issued before the coming into force of this law, they may only be transferred under provisions relating to the assignment of debts. 3/ Temporary warrants in respect of registered shares shall be registered. The provisions relating to registered shares apply to the transfer of such warrants.
1/ Every share shall confer a right to participate in the annual net profits and to a share in the net proceeds on a winding-up. 2/ Unless otherwise provided in the memorandum of association, the share in the profits and in the proceeds on a winding-up due to a shareholder shall be calculated in proportion to his holding in the paid up capital of the company. 3/ Every share shall confer voting rights. The voting rights attached to a shareholder shall be in proportion to the amount of capital represented by his shares. 4/ Every shareholder has a preferred right, in proportion to his holding, to purchase of cash shares issued on an increase of capital. 5/ The provisions of Article 448457 of this Code shall apply to the exercise of the right indicated in Sub- Article (4) of this Article 166 of 611 --
1/ Where a shareholder holds shares representing ninety percent or more of the capital in a company, each minority shareholder of the company may demand redemption by that shareholder. 2/ The terms of redemption and particularly the basis used for determining the redemption price must be set out in the request for redemption. 3/ An expert appointed by the court with jurisdiction over the place where the company is registered will determine the price in the event the redeeming shareholder does not agree to the proposal under Sub-Article (2) of this Article 4 The costs pertaining to the price determination are payable by the shareholder seeking to sell his shares. 5/ Notwithstanding Sub-Article (4) of this Article, where the expert determines a redemption price that is higher than that offered by the redeeming shareholder, the court that appointed the expert may order the redeeming shareholder to pay the costs in whole or in particle.
A person who intends to buy shares representing 50% (fifty per cent) and more of the capital of a company shall make a tender offer to all shareholders of the company.
1/ Any shareholder holding shares representing ninety percent or more of the capital of a company may demand that minority shareholders have their shares redeemed by that shareholder. 2/ The demand by the shareholder shall be made to the pertinent shareholders under the rules governing notice for general meetings and require them to transfer their shares to the shareholder within five weeks. 3/ The terms of redemption and the basis used for determining the redemption price must be set out by the shareholder in the request for redemption. 4/ An expert appointed by the court with jurisdiction over the place where the company is registered will determine the price in the event the minority shareholder does not agree to the proposal under Sub-Article (2) of this Article 5 The costs pertaining to the price determination under Sub-Article (4) shall be defrayed by the shareholder who requested such determination. 6/ Notwithstanding Sub-Article (5) of this Article, where the expert determines a redemption price that is higher than that offered by the redeeming shareholder, the court that appointed the expert may order the redeeming shareholder to cover the costs in whole or in particle. 7/ Where the number of shareholders of a company is reduced below five due to the exercise of the right of redemption by a shareholder under this Article, the shareholder who has exercised such right shall see to it that the number of shareholders of the company is increased or the form of the business organization is changed within not more than three months.
Notwithstanding the provisions of Article 245 of this Code, any shareholder with a decisive vote shall be jointly and severally liable with the company where he is found to have committed one of the following: 1/ intentionally commits an unlawful act that jeopardizes the interests of the company, shareholders or creditors of the company; 2/ intermingles the property of the company with that of the shareholder; 3/ blurs the distinction between the identity of the company and that of the shareholder or uses the company as a façade to pursue his own interests and goals or those of third parties 4/ deliberately releases, regarding the financial status of the company, information that can mislead the creditors of the company; 5/ makes use of the assets of the company for himself or the benefit of a third party without making an arm’s length payment or without the knowledge or decision of an appropriate management body and 6/ causes the payment of dividends in excess of that permitted under the law.
1/ A company shall have not less than three or more than thirteen directors who shall be elected by the shareholders. Two-thirds of members of the board of directors may not play a role in the day-to-day management of the affairs of the company. 2/ Persons who are not shareholders may be elected as members of the board of directors. However, the number of non-shareholder directors may not exceed one-thirds of the total membership of the board of directors. 3/ Where the memorandum of association does not clearly specify the number of directors, the meeting of subscribers shall decide the number of directors to be appointed. 4/ An organization or institution vested with legal personality by law may be appointed a director; Upon its appointment, it shall appoint, for the duration of its term, a permanent representative; The legal entity shall appoint a replacement at the earliest practicable time where the permanent representative resigns or cannot discharge his obligations for whatever reason. 5/ Although a permanent representative is not personally a director of the company, he is subject to the same obligations including civil and criminal liability as if he were a director in his own name, without prejudice to the joint liability of the legal entity that he represents.
1/ To qualify for board membership a person shall meet the following requirements: a) minimum age specified by a memorandum of association or law, if any; b) be of good moral character; c) no record of conviction of breach of trust, theft, robbery or other similar criminal offenses while serving as a promoter, director, manager, member of supervisory board or auditor or holding any other managerial position or under any other circumstance; d) compliance with other requirements set by the memorandum of association or another law, if any. 2/ A director shall be dismissed from his position where it is proven that he used his powers in a way that causes conflict of interest with that of the company and directly or indirectly obtained undue benefit. 3/ Without prejudice to the provisions of Sub-Article (1) (c) of this Article, a director who has committed the fault under Sub-Article (2) of this Article shall be barred from serving as a director of any business organization for two years commencing from the date of the establishment of the fault.
1/ The first directors may be appointed under the memorandum of association. The appointment shall be submitted to a meeting of subscribers for approval. Where such approval is not given, the meeting shall appoint other directors. 2/ Subsequent directors shall be appointed by a general meeting. 3/ Directors shall be appointed for a term of three years. Unless otherwise provided a contrary stipulation in the memorandum of association, directors are eligible for re-election. 4/ Where more than one director is to be elected, votes shall be cast for each director separately.
Legal Status Where a company has issued different classes of shares, each class of shares shall appoint at least one representative as a member of the board of directors.
1/ Only a director who is a shareholder may become the chairperson of the board of directors. A director who takes part in the day-to-day management of the affairs of the company may not become the chairperson of the board of directors. 2/ The chairperson of the board of directors, and where appropriate a deputy chairperson, may be elected by a meeting of subscribers or shareholders. The board shall elect a chairperson or deputy chairperson from among its members where no chairperson or deputy chairperson has been elected by the meeting. 3/ The board may revoke at any time the appointment of a chairperson or deputy chairperson elected by the board.
1/ The board of directors may give to one or more of its members a special mandate as regards one or more specific matters including to represent the company in a specific transaction. 2/ The board of directors may decide to create committees consisting of directors to review matters as and when it deems that appropriate and recommend a course of action, if need be; It shall determine the composition and powers of the committees that it establishes without exceeding powers vested in the board itself. 3/ The board shall establish an audit committee consisting of members of the board alone; a director who takes part in the day-to-day management of the affairs of the company may not become a member of the audit committee. 4/ Subject to a contrary stipulation by the board a committee established under Sub-Articles (2) and (3) of this Article may seek the opinion of experts who are not directors.
1/ The memorandum of association may provide that directors furnish security to guarantee proper discharge of their duties. Where the memorandum so requires, it shall also prescribe the necessary details regarding the type and amount of security to be furnished and how the security is to be held. 2/ The security shall be released where the director has ceased to be a director and it has been ascertained that he no longer owes obligations to the company.
1/ Where during a financial year, one or more board seats become vacant, the remaining directors shall choose replacements; The replacements shall complete the period for which the directors who vacated the seat were appointed. 2/ The appointment of replacements shall be submitted to the next general meeting for confirmation; The general meeting may confirm their appointments or appoint other directors in their place; The acts performed by persons appointed under Sub-Article (1) of this Article, while their appointment lasted, shall be valid even where their appointment is not confirmed by the general meeting. 3/ Where the number of the surviving directors is less than half of the board of directors, they shall convene a general meeting to appoint other directors within thirty days as of the time of the shortfall in the number of board members; The surviving directors shall conduct the affairs of the company until the appointment of replacement directors. 4/ Where there are no surviving directors, the supervisory board, and in its absence the Auditors shall convene within thirty days a general meeting to appoint replacement directors. 5/ Until the appointment of replacement of directors in accordance with Sub-Article (4) of this Article, the supervisory board, if any, its absence the auditors, shall manage the company; The management of the company carried out by the Auditors under this circumstance shall be verified by alternative Auditors or another licensed audit professional.
1/ Directors shall receive an annual remuneration the amount of which shall be fixed by a general meeting and charged against general expenses. 2/ An ordinary general meeting of the company may also decide to give to the directors a specified share in the net profits of a financial year. 3/ The amount of the share in the net profits that the directors may receive pursuant to Sub-Article (2) of this Article may not exceed ten percent of the amount that may be distributed as dividend in that fiscal year. 4/ The director`s share in the net profits under Sub- Article (2) of this Article may be paid only where dividend has been distributed to the shareholders in that year. 5/ Remuneration fixed for the directors shall be made in a lump sum; The board shall distribute the sum to the directors as it deems it fit. 6/ The Ministry of Commerce and Industry may, having regard to the financial position of the company, the salaries and benefits of the latter’s employees, and taking into account the need to create a healthy business environment, on the request of shareholders representing at least ten percent of the capital, order the reduction of the remuneration of the directors given under Sub-Article (2) of this Article where it considers it excessive.
1/ Directors may be removed at any time by a general meeting, notwithstanding any provision to the contrary in the memorandum of association. 2/ A director who was removed without good cause is not entitled to be reinstated; He may only claim damages for the wrongful dismissal.
1/ Subject to the provisions of Article 394 Sub-Article (4) and 395 requiring prior approval by shareholders of transactions involving 10% (ten per cent) or more of the assets of the company, dealings made between a company and persons or organizations affiliated with the company shall be approved in advance by the board of directors; Directors having conflict of interest shall not vote regarding the approval of the transaction; Dealings made without an advance approval of the board of directors shall be void; Notice of dealings made with a prior approval of the board of directors shall be given immediately to the Auditors. 2/ The Auditors shall submit a special report to the general meeting as regards dealings approved by the board of directors in accordance with Sub-Article (1) of this Article The Auditors` report shall show: the nature of the dealings, the type and extent of payment effected and adequate information about the circumstance surrounding the affiliation that is the cause of conflict of interest; The general meeting may render a decision that it deems appropriate on the basis of the report. 3/ Dealings approved by the general meeting may be opposed by shareholders only on the ground of serious damage to the company or fraud. 4/ Dealings shall remain in force unless the general meeting has rejected the same on account of serious damage to the company or fraud; The party who has committed the fraud and members of the board of directors who knew or should have known the commission of the fraud or the fact that the dealings would cause serious damage to the company shall be jointly and severally liable for damages incurred by the company as a result of the dealings. 5/ The provisions under Sub-Articles (1) to (4) of this Article shall not apply to routine dealings between a company and persons affiliated with such company, conducted in the same manner as normal dealings between the company and its clients. 6/ Persons affiliated with the company shall, for the purpose of this Article, include the following: a) members of the board of directors, manager, Auditor, members of the supervisory board and secretaries of the company; b) persons related by affinity or by consanguinity with those persons listed under Sub-Article (6) (a) of this Article pursuant to the Revised Federal Family Code; c) a business organization or concern in which persons listed under (a) and (b) of Sub Article (6) of this Article are shareholders or beneficiaries or play managerial role; d) a company that is holding or subsidiary to the company; e) unless a lesser amount of shareholding is provided by the memorandum of association or law, persons who have purchased at least ten percent of the shares of the company or companies in which the company is a shareholder or companies which have reciprocally purchased each other`s shares; f) other persons indicated in the memorandum of association or by another law as having affiliation with the company.
1/ A company may not make a loan to a director of the company or of its holding company, or give a guarantee or provide security in connection with a loan made by any person to such a director, unless the transaction has been approved in advance by a resolution of a general meeting of the company. 2/ Where the borrower is a director of the company’s holding company, the transaction must also be approved by a resolution of a meeting of shareholders of the holding company. 3/ A resolution of the general meeting of shareholders approving a transaction pursuant to Sub-Articles (1) and (2) of this Article must not be passed unless a written report is submitted to it by an independent, impartial external Auditor of the company indicating the nature of the transaction, the amount of the loan, the purpose for which it is required, and the extent of the company’s liability under any transaction connected with the loan.
1/ No decision may be taken by the board of directors unless a majority of directors is present; unless a greater vote is required by the memorandum of association of the company, decisions shall be taken by the majority vote of directors who are present personally, by proxy and by electronic means as provided under Article 309 of this Code; Absent a provision to the contrary in the memorandum of association, the chairperson of the board of directors shall have casting vote in case of a tie. 2/ Decisions of the board shall be drawn up as minutes and shall be signed by directors who were present physically or through a proxy and the secretary of the company; The minutes shall be kept in a minute book. 3/ Copies of decisions shall be signed by the chairperson of the board and the secretary of the company.
1/ Directors may participate in a board meeting by video conference or other means of telecommunications unless the memorandum of association prohibits that; The technology shall enable establishing the identity of the participants and ensure their effective participation; The means of communication shall meet technical requirements allowing continuous and simultaneous transmissions of the proceedings. 2/ Directors who participate by electronic means under Sub-Article (1) of this Article may vote orally. 3/ Subject to a contrary provision in the memorandum of association, the board may not pass a valid decision at a meeting held pursuant to Sub-Article (1) of this Article unless at least one third of its entire membership is physically present at the meeting. 4/ The memorandum of association may restrict the nature of decisions that may be taken at a meeting held under conditions stipulated in Sub-Article (1) of this Article
1/ Unless otherwise provided by the memorandum of association, a director may be represented at a board meeting by another director; the proxy may be given by a letter, fax or electronic mail. 2/ Each director may have, during the same meeting, only one proxy. 3/ The provisions of this Article shall apply to permanent representatives of legal entities.
1/ Every share company shall keep at its head office a register of its directors, managers, members of supervisory board, Auditors, company secretaries and person indicated under Article 306 (6) (b), (c) and (f) of this Code with particulars as to their civil status, profession, interests in other companies or concerns, occupation, and directorship or other responsibility, if any, assumed in other companies or concerns, and any other necessary particulars; Where the director is a business organization, its name and the address of its headquarters shall be indicated. 2/ Where there are changes in the particulars entered in the register, the concerned director, member of supervisory board, Auditor and secretary of the company shall notify to the head office of the company within fifteen days from the date he knew of such changes. 3/ Shareholders and representatives of government authorities may consult the register free of charge; Persons who are not shareholders have the right to consult the register upon payment of a prescribed fee.
A company whose shares are open to the public (Article 258 to 260) shall disclose all individuals or entities who individually or jointly with other persons having shared interest (members of the same family, or affiliated companies) who hold shares representing five per cent (5%) or more of the capital of the company; The company shall report to the Ministry of Trade and Industry or another appropriate office the names of such shareholders and the amount of their shareholding.
1/ Every company shall keep at its head office a register showing the number and value of shares and debentures held by each director in: a) the company; b) its subsidiary company; c) in any holding company of which the company is a subsidiary. 2/ The register and any other documents to be submitted to the general meeting shall be open for inspection by any shareholder or debenture holder before the annual general meeting. 3/ The register shall be available at the annual general meeting for inspection by any member attending the meeting. 4/ An appropriate government authority may at any time inspect the register, take extracts or a copy of the register.
1/ Statement submitted to an annual general meeting shall indicate total remuneration paid to each director and general manager, the amount of remuneration paid from time to time and other in kind benefits given to them. 2/ The statement submitted to the annual general meeting shall clearly show if there is any loan or security extended to the directors or the general manager.
Directors shall be responsible for exercising duties imposed on them by law, memorandum of association, and resolutions of general meetings of shareholders; without prejudice to the generality of the foregoing, the board of directors shall: 1/ Manage the company’s finances with a view to ensuring that the company has adequate capital and liquidity to meet its liabilities in a timely manner; 2/ Ensure that the company´s governance arrangements are such as to ensure the proper monitoring of the company’s financial statements and positions; 3/ Make certain that sufficient procedures for risk management and internal control are established; 4/ Provide to the supervisory board, if any, all information needed for the performance of the duties of the supervisory board in a timely manner; 5/ prevent damage to the company; or where prevention is not possible, mitigate adverse impact of acts which are prejudicial to the company; 6/ Without prejudice to the provisions under Sub- Article 5 (1) to (5) of this Article directors shall be responsible for: a) keeping regular records of the meetings of the board of directors and shareholders, accounts and
1/ Directors shall act in the way they consider, in good faith, would be most likely to promote the success of the company; they shall act for the benefit of shareholders of the company as a whole. 2/ In the discharge of the duty under Sub-Article (1) of this Article, a director shall have regard to the long- term interests of the company, the interests of the company’s employees, the interest of company’s creditors and the impact of the company’s operations on the community and the environment.
1/ A director of a company must exercise independent judgment in the exercise of his responsibilities. 2/ This duty is not infringed by his acting: a) in accordance with an agreement duly entered into by the company that restricts the future exercise of discretion by its directors; or b) in a way authorized by the company’s memorandum or in accordance with the resolution of the general meeting of shareholders.
1/ A director of a company shall discharge his responsibility with care, skill and diligence; The director shall be liable for damages caused to the company and shareholders due to lack of care or diligence on his particle 2 In this regard, the responsibility of the director shall be measured in terms of care and skill that a director of a company must exercise as well as diligence that may reasonably be expected of a person carrying out the functions of a director of the company.
Unless authorized by a general meeting, directors may not be partners in rival business entities nor compete against the company either on their own behalf or on behalf of third parties.
1/ A director of a company shall avoid a situation in which he has a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. 2/ The prohibition under Sub-Article (1) of this Article shall apply in particular to the exploitation of any property, information or business opportunity regardless of whether the company could take advantage of the property, information or opportunity. 3/ A person who ceases to be a director continues to be subject to the duty to avoid the exploitation of any information or business opportunity of which he became aware because of his position either for his own benefit or for the benefit of third parties. 4/ The prohibition under this Article does not apply to conflict of interest arising out of employment contract with the company. 5/ A director may be exonerated from the prohibition under this Article where the matter has been authorized by the board of directors or the general meeting of shareholders pursuant to the relevant provisions of this Code.
1/ Each director shall inform the board of directors of any situation that may involve a conflict of interest between his own and the company’s interest. 2/ Where a director of a company is in any way, directly or indirectly, interested in a proposed transaction, contract entered into or any other relationship with the company, he shall declare the nature and extent of that interest to the other directors. 3/ Any declaration required by Sub-Articles (1) and (2) of this Article shall be made as soon as the existence of a situation that could give rise to a conflict of interest is known.
[ 1/ A director of a company may not without consent of the non-beneficiary directors or the shareholders accept a gift or another type of benefit from a third
[ 1/ A director shall be disqualified from voting at a board meeting on any matter regarding which approval of the board is required to prevent conflict of interest such as regarding a proposed agreement between the director and the company and benefits from third parties. 2/ A director shall likewise be disqualified from voting on a matter pertaining to a contract between the company and a third party indicated under Article 311 of this Code or any other person if the director is to derive an essential benefit from the matter.
1/ The board shall have such powers as are given to it by law, the memorandum of association and resolutions passed at general meetings of shareholders. [ 2/ The memorandum of association shall specify whether the directors are jointly responsible as managers and agents of the company or whether one only of the directors is responsible for this purpose. 3/ Directors authorized to act as agents for the company may exercise in its name their powers as agents. Any restriction on their powers shall not affect third parties acting in good faith.
1/ Directors shall be jointly and severally liable to the company for damages caused by failure to carry out their duties. 2/ Directors shall bear the burden of proof for showing that they have exercised due care and diligence.
1/ Any agreement or provision that purports to exempt a director of a company, to any extent, from any liability that would otherwise attach to him in connection with any negligence, breach of duty or breach of trust in relation to the company shall be of no effect. 2/ Any agreement by which a company directly or indirectly undertakes to pay or provide an indemnity, to any extent, for a director of the company against any liability attaching to him in connection with any negligence, breach of duty or breach of trust in relation to the company of which he is a director shall be of no effect. 3/ The provisions of Sub-Article (1) and (2) of this Article shall apply to any provision, whether contained in a company’s memorandum of association or in any contract with the company or other persons. 4/ Nothing in Sub-Articles (1) and (2) of this Article prevent a company from maintaining indemnity insurance for board members from liability. 5/ A company may provide funds for the legal defense of board members in an action against them by government administrative bodies, creditors or shareholders subject to refund in case they lose the case.
1/ A member of board of director who made a business judgment in good faith shall not be liable for damages to the company where:- a) the subject of the business judgment did not involve conflict of interest with that of the director; b) he was informed with respect to the subject of the business judgment to the extent that the director reasonably believed to be appropriate under the circumstances; and c) he reasonably believed that the decision was in the best interests of the company. 2/ A director may not be liable where he has dissented from the action which is taken by the board and has notified the external Auditor of the decision as soon as possible. 3/ A director may not be liable for damages to the company where the decision was taken on the basis of a resolution of the general meeting of shareholders, provisions of the memorandum of association or the law.
1/ A company may not institute proceedings against its directors in connection with their responsibility without a resolution of a general meeting of shareholders to this effect; Such a resolution may be moved and adopted by the general meeting although not on the agenda. 2/ Where a resolution under Sub-Article (1) of this Article 15 adopted but the company fails to institute proceedings within 3 (three) months, shareholders representing at least ten percent of the capital may jointly institute proceedings in the name of the company. 3/ Notwithstanding the provisions of Sub-Article (1) and (2) of this Article, where a company has made an agreement, whether directly or indirectly, with a director, a member of supervisory board or general manager of the company or persons affiliated with the company listed under Article 306 Sub-Article (6) of this Code, which violates the provisions of this Code and has caused damage to the company, shareholders representing not less than ten percent of the capital of the company may directly institute proceedings against the directors who have failed to discharge responsibility imposed on them under this Code. 4/ The company shall show documents, provide copies and evidence necessary to institute the proceedings to shareholders who seek to institute proceedings pursuant to Sub-Article (2) and (3) of this Article In particular, the shareholders are entitled to inspect agreements that they assume to have involved conflict of interest and supporting documents. 5/ The company shall refund to the shareholders the costs of the proceedings instituted under Sub-Article (2) or (3) of this Article regardless of the outcome of such proceedings as long as the suit was instituted in good faith. 6/ The company may decide to discontinue the proceedings against the directors or to compromise; however, a resolution to discontinue proceedings or to compromise may not be adopted where a general meeting of shareholders representing ten percent of the capital of the company votes against the resolution.
1/ Directors shall be liable for damage caused to creditors where the company continues its business after the time when the directors knew or ought to have concluded that there was no reasonable prospect of the company being able to pay its creditors. 2/ Directors who fail to preserve intact the company's assets shall be liable to the company's creditors to the extent of the reduction in the company’s assets they caused where the company’s assets are not sufficient to pay creditors. 3/ The company`s decision not to institute proceedings against the directors shall not affect the creditor`s rights to sue such directors.
Parties Nothing in this section shall affect the rights of shareholders or third parties to bring legal action for damages where they have been personally injured directly owing to the fault or fraud of the directors.
1/ A company may have a supervisory board where the memorandum of association provides for that. [ 2/ The supervisory board shall have not less than three or more than five members appointed by a general meeting of shareholders. 3/ The general meeting may revoke the appointment of members of the supervisory board at any time. A member of the supervisory board is not entitled to be reinstated into his position even where the dismissal is without good cause. 4/ Only shareholders may be elected as members of a supervisory board. 5/ The supervisory board shall be accountable to the general meeting of shareholders. 6/ Members of the supervisory board may neither be members of the board of directors nor take part in the management of the company. 7/ The supervisory board shall elect a chairperson from among its members; In his absence, the chairperson shall delegate another member of the supervisory board to act temporarily on his behalf; Where the chairperson is unable to appoint a temporary delegate, members of the board shall elect a temporary chairperson from amongst themselves; The supervisory board may dismiss the chairperson at any time. 8/ Meeting time for the supervisory board shall be as determined in the memorandum of association. 9/ The supervisory board shall keep record of its own minutes and other necessary documents. 10/ The amount of remuneration and benefits to be paid to members of the supervisory board shall be determined by the general meeting of shareholders.
The supervisory board shall have the following powers and duties: 1/ causing the submission of documents and information necessary to discharge its responsibility, and examine the same; 2/ calling and leading a general meeting of shareholders, where the board of directors is unable or unwilling to convene such a meeting. 3/ taking part and giving opinion in the meeting of the board of directors without voting. 4/ where it comes to know or has reason to suspect that an act that causes damage to the company has been committed, investigate the matter or cause it to be investigated or, take the necessary measures with the view to instituting legal action, if need be. 5/ undertake supervision to ensure that directors and other members of the management are discharging their responsibilities properly; where it has been ascertained that they have committed an act that jeopardizes the interests of the company, demand that corrective measures be taken; recommend the removal of those who have failed to discharge their responsibilities properly, as appropriate, to the board of directors or general meeting of shareholders. 6/ supervise as well as cause the Auditing of the financial affairs of the company. 7/ submit report to the general meeting. 8/ carry out other functions as may be assigned to it by the memorandum of association or resolution of the general meeting of shareholders.
1/ Where, during a financial year, seats on the supervisory board are vacant, the surviving members shall continue to carry out their functions until a general meeting appoints replacement. 2/ The replacements shall complete the period for which the members of the supervisory board who vacated the seat were appointed. 3/ Where there are no surviving members of the supervisory board, the Auditors shall discharge the responsibilities of the supervisory board until the general meeting appoints replacements to the supervisory board.
Notwithstanding a contrary provision, members of the supervisory board shall be liable jointly and severally for damages that may be caused to the company, shareholders or third parties as a result of failure to discharge their responsibility under the law, the memorandum of association or resolution of general meeting.
1/ Claims for damages by the company, shareholders or creditors against directors and members of the supervisory board, if any, under the provisions of this Code shall be barred after two years from the date when the aggrieved party knew of the damage and the culprit; There shall be an absolute limitation after ten years from the date when the act complained of took place. 2/ The provisions under Sub-Article (1) of this Article shall not apply to the institution of criminal proceedings against the members of board of directors or the supervisory board.
The provisions of Article 297, 298 and 306 of this Code shall also apply as appropriate to members of the supervisory board.
1/ A company shall have a general manager appointed by the board of directors; The general manager shall be accountable to the board of directors. 2/ The board may revoke the appointment of the general manager; The general manager shall have no right to be reinstated as a general manager even where he has been dismissed without good cause; however, the board may reappoint him. 3/ The general manager is an employee of the company; he may be a member of the board of directors; He may not be the chairperson of the board.
1/ The general manager is responsible for the general day-to-day management of the company, In the absence of a provision to the contrary in the memorandum of association, he represents it in its dealings with third parties. 2/ Without prejudice to the generality of Sub-Article (1) of this Article he shall have the duties that follow: a) sign and transfer negotiable instruments especially commercial instruments, transferable securities and documents of title to goods; b) discharge responsibilities entrusted to him by the memorandum of association; c) discharge responsibilities entrusted to him by the board of directors and implement its decisions; d) preparation of annual work plan and budget of the company and implementing the same upon approval by the board of directors; and e) hiring, managing and firing the employees of the company, as necessary.
1/ The decisions of the board of directors or other agreements restricting the powers of the general manager not entered in the commercial register shall have effect only as between the company and the general manager. 2/ The company shall be bound by the actions of the general manager based on Sub-Article (1) of this Article only for the benefit of third parties in good faith.
1/ A company shall have a secretary; The hiring and firing of the secretary shall be approved by the board of directors upon the recommendation of the general manager. 2/ The secretary shall be accountable to the general manager.
A company`s secretary shall have the following powers and duties: 1/ organize and keep information and records of the company; 2/ provide reports and other necessary information promptly to concerned body; 3/ provide information to shareholders and third parties; 4/ organize meetings of shareholders and members of the board of directors; 5/ prepare, organize and keep minutes; and 6/ carry out other tasks assigned to him by the general manager and memorandum of association.
Notwithstanding an agreement to the contrary, the secretary shall be liable to the company, shareholders or third parties for any breaches of his duties under this Code or the memorandum of association.
1/ Every share company shall have one or more independent and impartial external Auditors and assistant Auditors; The Auditors and assistant Auditors shall be elected by the general meeting of the shareholders. 2/ A shareholder or shareholders representing not less than 20% of the capital of the company may appoint an Auditor selected by them. 3/ A body corporate may act as Auditor. 4/ Auditors shall be elected by the meeting of subscribers and thereafter by the general meeting.
Auditors shall hold office: 1/ until the first annual general meeting where elected by the meeting of subscribers; 2/ till the closing of three financial years where elected at an annual general meeting.
1/ To be eligible for the position of an auditor of a share company a person shall fulfill the following: a) issued with a professional license from a relevant authority; b) be of a good moral character; c) not be a shareholder or an employee of the company; d) is not a person affiliated with the company as defined under Article 306 Sub-Article (6) of this Code; e) fulfill other requirements set by the law or the memorandum of association. 2/ Reports submitted by an Auditor and adopted by the general meeting shall not, save in the case of fraud, be invalid merely by reason of the fact that the provisions of this Article have not been observed.
A general meeting may at any time revoke the appointment of an auditor. An Auditor may claim damages if his dismissal is without good cause.
The remuneration of Auditors shall be determined by the general meeting of shareholders.
Subject to the other provisions of this Code and other relevant laws, the Auditors shall: 1/ discharge their duties following generally accepted accounting principles; 2/ provide accurate information; 3/ treat shareholders equally; 4/ keep professional secrets; 5/ annually verify the correctness and accuracy of the inventories, balance sheets, and profit and loss accounts, books and other financial documents; 6/ certify that the report submitted by the board of directors to the general meeting of shareholders reflects the correct state of the company; 7/ carry out such other duties as may be assigned to them in the memorandum of association or by general meeting of shareholders.
1/ The Auditors shall submit to the general meeting their written comments on the report of the board of directors submitted to the meeting; Such report by the Auditors shall also show the manner in which they have carried out their duties. 2/ The Auditors shall recommend to the general meeting either to approve or reject the accounts submitted by the directors. 3/ The auditors shall comment on the proposal for distribution of profits submitted by the directors. 4/ The general meeting shall not consider the balance sheet in the absence of a report under Sub-Article 1 of this Article.
1/ Where the Auditors find irregularities or breaches of legal requirements or memorandum of association, they shall forthwith inform the supervisory board, if any, or the directors and, where grave irregularities or breaches have occurred, the general meeting of shareholders. 2/ The Auditors shall inform the concerned government authority of any matters which would appear to disclose the commission of a criminal offence.
1/ The Auditors shall call a general meeting where the directors or supervisory board fails to call a meetings required by the law or memorandum of association. 2/ They shall call a general meeting where shareholders representing at least ten percent of the capital so request. 3/ Where there are several Auditors, they may jointly call a general meeting in accordance with the memorandum of association; they may, where they think fit, fix for the meeting a place other than the company`s head office or place laid down in the memorandum of association. 4/ Where the Auditors call a general meeting in accordance with this Article, they shall prepare the agenda and a report to be read at the meeting giving the reasons for calling the meeting; one of the Auditors shall preside over the meeting. 5/ Where the Auditors disagree on the need for calling a meeting, one of them may apply to the court having jurisdiction in the area in which the head office is situate to exercise the powers under Sub-Articles (3) and (4) of this Article 6 Necessary expenses incurred under this Article shall be borne by the company.
1/ The Auditors may at any time make on the spot such audits or checks as they think necessary and may call for any information, agreements, books, accounts, minute books or such documents as may be required for the proper execution of their duties; Any person who is required to supply information shall comply. 2/ Auditors shall be present at annual general meetings and any other meetings of shareholders.
Where, in the course of auditing the accounts of a holding company, a consolidated balance sheet of its subsidiary is also required to be audited by this Code or any other law, the Auditors shall audit the accounts of the subsidiary company.
1/ Auditors shall be civilly liable to the company, shareholders and third parties for any fault in the exercise of their duties which occasioned damage. 2/ An Auditor who intentionally gives or confirms an untrue report concerning the position of a company or fails to inform the relevant authority of a criminal offence which he knows to have been committed or divulges professional secret shall be punishable in accordance with the relevant criminal law. 3/ An Auditor shall be liable for damage caused to the company, shareholders and third parties owing to cessation of his duties in breach of conditions provided under the law or agreement.
1/ The Ministry of Trade and Industry or any other relevant government authority shall, upon the request of shareholders representing at least ten percent of the capital of the company, appoint one or more inspectors to conduct an investigation and report on whether the management of the company has been conducted in a manner that jeopardizes the interest of minority shareholders or that of the company. 2/ The applicants shall share with the relevant government authority documents and information which they deem necessary. 3/ The applicants shall bear expenses incurred in connection with the investigation; However, where the investigation has revealed that the allegation is true, the company shall refund the expenses to the applicants.
A general meeting of a company or the court may request the Ministry of Trade and Industry or any other government authority authorized by law for an investigation to be undertaken on the company; the relevant government authority so requested shall appoint one or more inspectors to undertake the investigation.
Government Authority The Ministry of Trade and Industry or any other government authority authorized by law may, on its own motion, appoint inspectors to conduct an investigation where it has good reason to believe that the operations of the company are such as may reveal: 1/ fraud committed or likely to be committed on creditors of the company; 2/ acts prejudicial to the rights of certain shareholders; 3/ illegal or fraudulent activities; or 4/ acts which constitute criminal offence.
Companies Where inspectors have been appointed under Article 355, 356 or 357 of this Code to investigate into the affairs of a company and they are of the opinion that a full investigation into the affairs of such company cannot properly be carried out without an investigation into the affairs of the holding or subsidiary company of such company, they shall report their opinions to the relevant government authority which may order the investigation be extended to the affairs of the holding or subsidiary company.
1/ The directors, supervisory board, if any, managers, secretary or other officers and authorized agents of any company under investigation shall, upon receipt of an investigation order, produce to the inspectors all required books and documents and furnish all information necessary for the investigation. 2/ Where the officers of the company mentioned under Sub-Article (1) of this Article obstruct the conduct of the` investigation, the inspectors shall report to the relevant government authority who appointed them; the relevant government authority that has received the report shall inform an appropriate body to institute criminal proceedings. 3/ Subject to the provisions under Sub-Article (2) of this Article, the relevant authority that received the report may take administrative measures prescribed in special law without prejudice to its power to continue with the conduct of the inspection.
1/ On receipt of the inspectors` report, the relevant authority that has ordered the investigation shall send a copy thereof to the: a) company whose affairs have been investigated; b) shareholders who petitioned for investigation; or c) court which ordered the investigation, if that is the case. 2/ The Authority that has ordered the investigation shall take corrective measures, if the report presented as per Sub-Article (1) of this Article is found to be inappropriate.
1/ Where the Ministry of Trade and Industry or a relevant government authority has good reason to believe that registered shareholders are only nominees of other persons who exercise effective control of a company and derive benefits from that, the authority may appoint inspectors to ascertain the real owners of the shares. 2/ The Ministry of Trade and Industry or relevant government authority may order an investigation under Sub-Article (1) of this Article at the request of shareholders representing ten percent of the capital.
1/ A general meeting of shareholders is the highest decision making organ in a company in which all shareholders take particle. 2/ Shareholders may take part in an annual general meeting in person or by electronic means or where all shareholders agree a decision may be taken by asking the shareholders to state their position on a text of resolutions in writing or through electronic means without calling a meeting.
1/ Notwithstanding the provisions of Sub-Article (1) of Article 391 of this Code, no shareholder may be deprived without his consent of the rights inherent in membership. 2/ Rights inherent in membership are rights that, under the law or the memorandum of association, do not depend upon decisions of the general meeting or board of directors or which are connected with the right to take part in meetings, such as the right to be a member, to vote, to challenge a decision of the company or to receive dividends and a share in a winding-up.
Without prejudice to the rules that provide for the creation of preferred classes of shares, a general meeting may not pass a resolution which may have a clear effect of giving undue benefit to some shareholders.
1/ Shareholders` meetings may be general or special. 2/ General meetings are ordinary or extraordinary and comprise shareholders of all classes. 3/ Special meetings comprise only shareholders of a special class.
1/ General meetings are called by the directors, supervisory board, if any, the Auditors, the liquidators or, where appropriate, by the court. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the Ministry of Trade and Industry or any other relevant government authority may, on its own motion or upon request by any interested person, call a general meeting where there is a compelling reason and the meeting under Sub-Article (1) of this Article could not be called or calling that would take long time. 3/ Upon a request of shareholders representing five percent of the share capital, the court of the place where the head-office is situate may, where it is of the opinion that the request is appropriate, appoint a representative to call a meeting and to draw up the agenda for consideration.
1/ The company may prescribe in its memorandum of association a reliable and effective method for the calling of shareholder meetings. In the absence of such rules notices calling meetings shall be published in a newspaper having nation-wide circulation. 2/ Where all shareholders are registered in the register of shareholders, the meeting may, instead of notices indicated in Sub-Article (1) of this Article, be called at the company`s expense through a registered letter or an e-mail address given by the shareholder for this purpose, or any other reliable electronic message sent to each shareholder. 3/ Even where a company has bearer shares, where a shareholder with a registered share requests the company in writing that notices be issued to him through a registered letter or an e-mail address or any other reliable electronic method, he shall be notified of meetings through the mode he has chosen at his own expense.
Quorum Where an ordinary general meeting has been unable to function for lack of quorum, a second meeting shall be called in the same manner and within the same period of time as the first meeting.
by Reason of Lack of Quorum Where an extraordinary or special meeting has been unable to function for lack of quorum, a second and a third meeting, if necessary, shall be called at one week`s interval in accordance with Article 366 and 367 of this Code.
Notices for first general or special meeting shall be given twenty four days before the date of such a meeting.
1/ Notices of meetings shall indicate the company`s name, the nature, capital, registration number, place where head office of the company is located, the place where and time within which bearer shares, if any, are to be deposited, place and time of meeting as well as the agenda of the meeting. 2/ Notices of subsequent meetings made necessary by lack of quorum shall, in addition to items indicated under Sub-Article (1) of this Article, give the dates of the abortive meeting.
1/ Without prejudice to the provisions of Sub-Article (1) and (2) of Article 366 of this Code regarding calling of meetings by the court or relevant government authority, the agenda shall be prepared by the person calling the meeting. 2/ Notwithstanding Sub-Article (1) of this Article, shareholders representing five percent of the capital of the company are entitled to put additional items on agenda for consideration at the meeting; They shall submit their request in writing for additional agenda items as much as practicable before notices of the meeting are issued or within three days from the date of issuance of the notice pursuant to Article 370 of this Code to the body that called the meeting. 3/ Unless otherwise provided by this Code or the memorandum of association, only items on the agenda may be discussed; however, the meeting may at any time revoke the appointment of directors and appoint new directors. 4/ Subsequent meetings made necessary by lack of quorum and called in accordance with Articles 368 and 369 of this Code may only discuss items on the agenda of the first meeting.
1/ A shareholder who is unable to be present at a meeting may take part in and vote through a proxy; Where a shareholder has appointed a proxy, he may neither participate nor vote by himself. 2/ The provisions of Article 270 and 271 of this Code shall apply to joint holders of a share or shares, usufructuary and pledgees.
1/ A meeting may pass a decision where the necessary quorum is met and the majority of those present at the meeting support the motion. 2/ The quorum in relation to the capital is as laid down for each class of meeting under this Code; For all meetings, the quorum shall be calculated on all the shares making up the capital, less these shares which carry no voting rights under the law, taking into account the amount of capital the remaining shares represent. 3/ The memorandum of association may not vary the provisions of this Code relating to majority and quorum.
Rights A company may not vote with shares which it has redeemed under Article 275 of this Code.
The memorandum of association may determine the period of time within which the holders of registered shares shall be entered in the company`s register and bearer shares issued before the coming into force of this Code are deposited with the company to enable their holders participate in a meeting of shareholders.
1/ The content of proxy form, the place where and the time within which the proxy form is to be deposited shall be determined by the board of directors; Such period of time may not expire more than three days before the commencement of the meeting. 2/ The proxy given for purposes of participation in a meeting of shareholders need not be authenticated before documents authentication and registration agency or any other relevant institution.
1/ An attendance sheet shall be kept for each meeting; It shall show the names and address of shareholders present or represented by proxy and the number of shares and votes held by each shareholder. 2/ The attendance sheet shall, before the meeting begins, be initialed by the shareholders or their proxies physically present at the meeting, and shall be certified as correct by the company`s secretary.
1/ The chairperson of the board of directors shall preside at all meetings; In his absence, the deputy chairperson or, in the absence the deputy chairperson, the senior director or, in the absence of the senior director, he who is elected by the general meeting shall preside. 2/ Where the meeting has been called by the supervisory board, the Auditors or an officer of the court or another government authority mandated by law or a liquidator, the person calling the meeting shall preside.
1/ Members of the meeting who are chosen by agreement between those who hold or represent the greater number of shares shall be appointed tellers, where they are willing to accept such appointment. 2/ Where shareholders who may be able to serve as tellers under Sub-Article (1) of this Article are not willing to serve in that capacity or the shareholders present at the meeting seek to elect another person, the meeting shall elect the necessary tellers at the beginning of such meeting. 3/ Notwithstanding the provisions of Sub-Articles (1) and (2) of this Article, a reliable technology may be used for purposes of counting votes cast at a meeting conducted by electronic means.
1/ Every shareholder may at all times inspect and take copies of the following documents kept at the head office: a) balance sheet, profit and loss accounts and inventories; b) reports submitted by the directors and by the Auditors to the general meetings relating to the three preceding financial years; c) minutes and attendance sheets of these meetings; d) a resolution to be submitted to the meeting; e) a register of persons affiliated with the company indicated under Article 311 of this Code; f) the name of the highest paid employee of the company and the total amount of payment effected to such a person in the financial year; g) a register of shareholders of the company. 2/ A shareholder is entitled to inspect or take copies of such documents by applying to the Ministry of Trade and Industry or any other concerned government authority where a company refuses to comply with the provisions of Sub-Article (1) of this Article. 3/ The rights to inspect and take copies of documents under this Article are enjoyed by joint holders of shares, usufructuaries and pledgees.
1/ Where a shareholder requests, in addition to documents specified under Article 381 and other provisions of this Code, access to additional information which is necessary to take a position on the agenda submitted for a general meeting, the board shall give the meeting access to the same; however, the board may refuse to provide such information where disclosure of the information is prohibited by law or doing so would in its opinion cause significant damage to the company. 2/ Where the board fails to give information under Sub- Article (1) of this Article, the shareholder who has made the request may institute court proceedings; The court shall order the board to give the information requested unless the company shows that it has good cause for not disclosing the information. 3/ Where a company is a member of a group of affiliated companies, its obligation to provide information shall also extend to the other members of the affiliated companies; Where the company is a holding company or has direct or indirect effective control over other companies, the obligation to give information shall include the accounts of members of the related group as well as information to be given by their subsidiaries under Sub-Article (1) of this Article
1/ The weight accorded to the vote of a shareholder with ordinary or dividend shares shall be in proportion to the amount of capital represented. 2/ Unless there are legal conditions depriving voting right, every share carries at least one vote.
The memorandum of association may limit the highest number of votes which shareholders may exercise at meetings; However, such limitation shall be equal for all shares without distinction of class.
1/ Where the interests of a shareholder, acting on his own behalf or on behalf of a third party, conflict with the interest of the company on a matter, such shareholder may not exercise his right to vote with regard to such matter. 2/ In particular, directors even if shareholders, may not vote on resolutions relating to their duties, liabilities and matters that directly or indirectly involve conflict between the interest of the company and their won interest. 3/ Shares which are deprived of voting rights under Sub- Article (1) and (2) of this Article shall be taken into account in calculating the quorum. 4/ Where failure to comply with the provisions of Sub- Article (1) and (2) of this Article results in the adoption of a resolution that is prejudicial to the company, such resolution may be set aside in accordance with the provisions of Article 391 of this Code.
Rights Invalid Any agreement restricting or having the effect of restricting the free exercise of voting rights in shareholders` meetings shall be of no effect.
1/ Discussions at meetings shall be reduced to minutes; The minutes shall be signed by members of the board of directors that were present at the meeting and the company`s secretary and entered in a minute book; Such entry shall be certified as correct by the chairperson of the board of directors of the company or by two other directors. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, three shareholders among shareholders present at the meeting may be elected prior to commencement of conduct of the business of the meeting to sign and certify, in place of the directors and the company`s secretary, the entry of the discussions and resolutions passed in the minutes as correct; Such type of election may be made notwithstanding that the matter was not an item on the agenda of the meeting. 3/ Minutes of the meeting shall in particular include: a) the manner in which the meeting was called; b) the place and date of the meeting; c) the agenda; d) members of the board of directors present at the meeting; e) the number of shares represented and the quorum; f) the documents laid before the meeting; g) a summary of the discussions; h) the results of votes taken; i) the texts of resolutions adopted. 4/ Where a meeting lacks a quorum, the chairperson shall cause this fact to be reduced to minutes.
Copies or extracts of the minutes shall be valid where such copies or extracts are certified as correct by the chairperson of the board of directors or by two other directors present at the meeting.
1/ Where shareholders representing at least one third of the capital represented at a meeting consider that they have insufficient information upon the matters to be discussed, they may require the meeting to be adjourned for a period not exceeding three days. 2/ The right under Sub-Article (1) of this Article may be exercised once in respect of a matter on the agenda.
1/ Shareholders or proxies representing all the shares may by agreement hold a meeting without observing formality for mode of calling of shareholders’ meeting. [ 2/ Where shareholders or proxies representing all the shares are present, the meeting may take any decision and adopt any resolution on any matter that falls within the scope of powers of a general meeting under this Code.
1/ Resolutions adopted by a meeting in accordance with the law or the memorandum of association shall bind all shareholders, including those who were not present or abstained or dissented or incapable or whose right to vote is deprived. 2/ Any person whose interest is jeopardized by a resolution adopted in violation the law and the memorandum of association may apply to a court to set aside such resolution within ninety consecutive days from the date he knew of the adoption of the resolution. However, where the resolution is entered in a commercial register, he may, regardless of his knowledge of the adoption of such a resolution, lodge the application to set aside the resolution in the court only within sixty consecutive days from the date of entry of the resolution in the commercial register. 3/ Application to set aside resolutions shall be made to the court within whose area of jurisdiction the head office is situate. 4/ On the request of the claimant and after hearing the general manager or another person representing the company in the proceedings, the court may, where it believes that the execution of the resolution would cause irreparable damage to the company or to the claimant, suspend the execution of the resolution challenged pending the court`s decision. 5/ Where the court believes that the company may suffer unjustifiable damage as a result of the order under Sub-Article (4) of this Article, it may require the claimant to furnish security or deposit money which is proportionate to the damage. 6/ Where a resolution is set aside, the decision of the court shall bind all shareholders. 7/ Nothing in this Article shall affect rights of third parties acquired in good faith while the resolution was effective.
Without prejudice to the provisions of Article 381 of this Code, any shareholder may, during the fifteen consecutive days which precede an ordinary general meeting, inspect or take copies of, or request to send him at his own expense the balance sheet, the profit and loss account and the directors` and auditors` reports as well as proposed resolutions to be submitted at the general meeting from the head office.
1/ An ordinary general meeting shall be held annually within four months from the end of each financial year. 2/ The four months period specified under Sub-Article (1) of this Article, may be extended to six months by the memorandum of association. 3/ Where necessary, additional ordinary general meetings may be held.
Without prejudice to other provisions of this Code, the ordinary general meeting shall have the following powers and duties: 1/ amend or approve or reject, after discussion, the balance sheet, the profit and loss account as well as reports of the board of directors, reports of the Auditors and supervisory board, if any, and where necessary, pass resolutions relating to the allocation of and distribution of profits and on all questions arising out of the accounts for the past financial year; 2/ appoint or remove directors, members of the supervisory board or Auditors as appropriate and decide the amount of their remuneration; 3/ approve the issue of debentures as well as the guarantees attached thereto; 4/ approve transfer of fifty one percent or more of the assets of the company at once or within one year from the date of the first sale at different intervals; and 5/ decide all matters on which a general meeting passes decisions other than those specifically reserved to an extraordinary general meeting under this Code.
1/ Notwithstanding the provisions of Article 306 of this Code, dealings which involve conflict of interest covering ten or more percent of the assets of the company shall be approved by a general meeting before the making of such deals. 2/ Any director, manager or shareholder with a potential conflict of interest with the company shall give to the independent and impartial external Auditor of the company complete and accurate information about the cause of conflict of interest situations, in particular, the type and extent of conflict, and like matters. 3/ The external Auditor of the company shall compile complete information regarding whether there exists conflict of interest, where conflict of interest exists, its cause, type, extent and the identity of the director, shareholder or any other person having affiliation with the company, and any other similar matters; the Auditor shall submit the information he gathered together with his own recommendation to the general meeting before the making of the agreement. 4/ A director or any other person, who stands to benefit from an agreement involving a conflict of interest with the company, may not vote at the general meeting considering the approval of such agreement, even if he happens to be a shareholder. 5/ The directors of the company shall compile a report containing detailed information regarding the related-
1/ A shareholder or shareholders may propose to an ordinary general meeting the appointment of a special investigator who shall submit a report which evaluates the effect on the company and shareholder of specified activities of the company as well as the appropriateness of such activities in light of good business practice and the law; This proposal shall at least indicate: a) reason for the appointment of the special investigator; and b) scope of the investigation. 2/ A company or a person who renders services to the company or is a member of a group to which the company belongs may not be appointed as a special investigator where due to such relation conflict of interest is likely to arise. 3/ Where the ordinary general meeting has rejected the proposal, shareholders representing one tenth of the capital of the company may apply to the court; The court shall order the ordinary general meeting of the company to appoint a special investigator; Where the company shows that the scope of the investigation as requested would seriously jeopardize the interest of the company or third parties, the court may amend the scope of the investigation to avert such damage. 4/ The special investigator shall submit a written report on the results of his investigation; The results of the investigation shall be submitted to the ordinary general meeting; Shareholders may take copies of the report. 5/ The shareholders who have requested the investigation shall cover the remuneration to be paid to the special investigator; the company shall, however, refund the shareholders who requested investigation where the investigation reveals violation of law, memorandum of association or administrative rules of the company. 6/ A proposal for an appointment of a special investigator shall be submitted to the board of directors of the company thirty days before the convening of an ordinary general meeting.
1/ Notwithstanding any provision to the contrary, any shareholder has the right to take part in ordinary meetings without regard to the number of shares held. 2/ Unless otherwise provided in the memorandum of association, any shareholder may be represented by another person, whether a shareholder or not.
1/ Where first called, ordinary general meetings shall be composed of that number of shareholders which represents either in person or by proxy voting shares representing at least one-quarter of the capital of the company. 2/ Quorum shall be calculated based on the amount of capital represented, and not by the number of shareholders; where the meeting is called in accordance with the law and the required amount of capital is represented, it may pass a resolution. 3/ When called for a second time, the meeting may be held and decisions made without regard to the number of voting shares represented. 4/ Decisions are taken by a simple majority of the capital represented at the meeting by shares carrying voting right; in the determination of majority vote, abstentions and blank ballots shall be disregarded.
The provisions of Article 381 of this Code pertaining to the right of shareholders to inspect and take copies of a company`s documents before an ordinary general meeting shall also apply, mutatis mutandis, to extraordinary general meetings.
An extraordinary general meeting shall have the following powers and duties: 1/ amend the memorandum of association of the company; 2/ increase or reduce the capital of the company; 3/ change the nationality of the company; 4/ decide on dissolution, conversion, division or merger of the company; 5/ decide on all other matters specifically assigned to this meeting by the law or memorandum of association 6/ Notwithstanding the provisions of Sub-Article (1) of this Article changes in the identity (names) of shareholders, their address, nationality, number of shares held or amount paid shall not be regarded as amendments to the memorandum of association.
Notwithstanding any agreement to the contrary, any shareholder has the right to take part in extraordinary general meetings without regard to the number of shares held.
1/ Not less than a two-thirds majority of capital represented by voting shares represented at the meeting is required for a resolution to be adopted in an extraordinary general meeting; Abstentions and blank ballots shall be disregarded in reckoning the majority vote. 2/ Resolution of an extraordinary meeting to change the nationality of the company shall only be adopted by the unanimous vote of the holders of all shares carrying voting rights. 3/ An extraordinary general meeting may not pass a resolution compelling a shareholder to increase his investment in the company. Hence, except in the case of increase of the capital from reserve funds or profits which may be distributed, the consent of all shareholders shall be required to increase the capital of the company by increasing the par value of the existing shares. 4/ Without prejudice to the provisions under Sub-Article (2) and (3) of this Article the quorum of the meeting is met: a) at first meeting, where shares carrying voting right representing not less than one third of the capital of the company are present or represented; b) at a second meeting, where shares carrying voting rights representing not less than one fourth of the capital are present or represented and c) at a third meeting, without regard to the amount of capital represented by shares carrying voting rights in so far as shareholders or their proxies are present.
1/ Shareholders dissenting from resolutions relating to change of business purposes or conversion of the company may leave the company. 2/ Where shareholders decide to leave the company pursuant to Sub-Article (1) of this Article, they shall notify the general manager of the company of such decision through a letter or other appropriate electronic means: a) within three days from the end of the meeting, in case of shareholders who were present at the meeting which adopted the resolution; b) within fifteen days from the date of the publication of the resolution in a newspaper having nation- wide circulation and on the website of the company, in case of shareholders who were not present at the meeting that passed the resolution. 3/ Shareholders who have decided to leave the company shall have their shares redeemed at the average price of their shares on the stock exchange over the last six months preceding the meeting where the price of the shares is quoted on the market; if the price is not quoted on the stock exchange, their shares shall be redeemed at a price proportionate to what they represent in the assets of the company in the company`s balance sheet for the last financial year. 4/ Any agreement or resolution which extinguishes or deprives or obstructs the exercise of the right to leave a company under this Article shall be of no effect.
1/ A resolution of a general meeting to modify the rights of a class of shareholders becomes effective only when approved by a special meeting of the shareholders in the class concerned by a quorum and majority required under Article 406 of this Code. 2/ Where a general meeting decides to modify the rights of a class of shareholders, a special meeting shall be convened within sixty consecutive days from such decision and pass its own decision on the matter.
The provisions of Article 381 of this Code shall also apply to a special meeting.
1/ The quorum of the meeting for a special meeting shall be of shares carrying voting rights: a) at a first meeting, not less than one half of the capital of the company represented by the class concerned; b) at a second meeting, not less than one third of the capital of the company represented by the class concerned; c) at a third meeting, not less than one quarter of the capital of the company represented by the class concerned; Shareholders may be represented by proxies. 2/ The provisions of Sub-Article (1) of Article 402 of this Code dealing with majority as regards extraordinary meeting shall apply to special meetings. [[[[
1/ A debenture is a negotiable debt instrument whereby the issuing company undertakes to pay the debenture holder a fixed interest for a specified period of time and to repay him the principal loan upon the maturity date. 2/ Debentures of the same issue with equal par value shall confer equal rights on the debenture holders.
A share company may borrow money through the issuance of debentures where: 1/ its capital is fully paid-up; and 2/ it has been in business for at least one year and has a balance sheet approved by its general meeting.
1/ Debentures issued by a company may not exceed the amount of paid up capital shown in the last adopted balance sheet. 2/ Notwithstanding the provision of Sub-Article (1) of this Article, a company may issue debentures that exceed the amount of paid up capital shown in the last adopted balance sheet where: a) the company`s immovable property is mortgaged and the debentures issued do not exceed two thirds of the value of the mortgage; or b) the excess over the paid-up capital is guaranteed by registered securities or securities issued or guaranteed by the State and the date of redemption is not earlier than that of the debentures; or by government or public authorities annuities. 3/ The securities given pursuant to Sub-Article (2)(b) of this Article shall be deposited in a bank until full repayment of the value of the debentures; Such part of the annuities shall be blocked in a bank unto the time of repayment as is necessary to meet payments of interest and amortization. 4/ The limits imposed by the provisions of Sub-Article (1) of this Article shall not apply to real estate loan or agricultural mortgage companies.
[ 1/ Debentures redeemed by the issuing company shall be canceled; they may not be resold. [ 2/ A company which has issued debentures may reduce its capital only in proportion to debentures cancelled upon payment of the principal and interest thereon.
Company Notwithstanding the provisions of Article 410 Sub- Article (2) of this Code, where a reduction of capital is necessary owing to losses, the amount of the legal reserve shall continue to be calculated on the basis of the capital existing at the time of issue for so long as the capital and the legal reserve are less than the value of the unredeemed debentures.
1/ Debentures may be issued at a price greater than their par value. 2/ Debentures may not be issued at a price lower than their par value except in accordance with special laws.
A debenture certificate shall contain the following particulars: 1/ the company`s name, its objects, the head office of the company and place where the company was registered in a commercial register; 2/ when the company was formed and for how long; 3/ the paid-up capital on the date of issue of debenture; 4/ the date of resolution of the general meeting to issue debentures and its entry in the commercial register; 5/ the serial number and nominal value of the certificate, the rate and date of interest payments and the terms of redemption; 6/ the amount of issue and the special guarantees attaching to the debentures and the date of the deed setting up such guarantees; 7/ the amount of debentures or loan stock issued previously and not amortized, indicating the guarantees attaching thereto; 8/ where appropriate, the period or periods of time within which debenture holders may convert their debentures into shares, and the provisions for such conversion.
[ The provisions of this Code concerning indivisibility, form of issue, transfer and defenses relating to shares shall apply to debentures as appropriate.
1/ Holders of debentures of a given issue may combine as a legal personality to protect their common interest as provided hereinafter. 2/ Notwithstanding any agreement to the contrary, debenture holders who have combined under Sub- Article (1) of this Article may at any time meet in general meeting.
1/ A meeting of debentures holders may be called by the company or by the representative of the debenture holders, if any, or debenture holders representing twenty percent of the issued and unredeemed debentures. 2/ The provisions of this Code relating to the calling and holding of shareholders` general meetings shall also apply mutatis mutandis to the calling and holding of debenture holders` meetings. 3/ Directors, members of the supervisory board or auditors or employees of the company having issued debentures or of companies having guaranteed such issue may not represent debenture holders in general meetings. 4/ Holders of debentures which have been redeemed by the company may not take part in meetings. 5/ The company which has redeemed debentures may not take part in the debenture holders` meetings. This prohibition shall likewise apply to a company which holds more than thirty percent of the capital of the company which has issued the debentures. 6/ The calling and holding of general meetings of debenture holders shall be at the expense of the debtor company.
1/ Meetings may adopt resolutions to protect the interests of debenture holders, to enforce the loan agreement and to provide for all necessary expenses in connection therewith. 2/ Resolutions adopted by debenture holders` meetings bind all debenture holders, whether absent or dissenting.
1/ Without prejudice to the generality of the provisions of Sub-Article (1) of Article 417 of this Code, the general meeting may also consider proposals of the debtor company relating to: a) conversion of the company or its business purpose; b) merger with another company or its division into two or more companies; c) issue of debentures having priority over existing debentures. 2/ The company may enforce proposals under Sub- Article (1) of this Article notwithstanding that the debenture holders` meeting does not approve such proposals: Provided that the company shall in such a case redeem within three months from such proposals having become effective the debentures of such debenture holders as may so request. 3/ The meeting may also consider proposals relating to variations in the terms of the loan. 4/ The meeting may not increase the liability of the debenture holders, it may not, in particular impose duty to extend additional loan or agree to conversion of debentures into shares, except by unanimous vote, nor provide for differential treatment amongst the debenture holders.
1/ A meeting may take decisions where its members representing not less than one-thirds of the debentures with voting rights are present or represented through proxies or take part through electronic means. 2/ For matters to be decided under Article 418 of this Code, three-quarters of the debenture holders shall be present or represented through proxies or take part through electronic means. [[[ 3/ Where the quorum under Sub-Article (1) and (2) of this Article is not attained at the first meeting, a second meeting shall be called in the same manner and within the same period of time. The notice calling shall contain the same agenda, showing the date and outcome of the abortive meeting. The second meeting may make decisions regardless of the number of debentures present. 4/ Notwithstanding the provisions of Sub-Article (3) of this Article, for matters to be decided under Article 418 of this Code, where quorum of one-half (fifty percent) is not attained at the second meeting, a further meeting shall be called in the same manner and within the same period of time. Such meeting may make decisions where one-quarter of the debentures are present or represented.
1/ Resolutions may be adopted by simple majority of debenture holders present at the meeting. [[[ 2/ Except conversion of debentures into shares or differential treatment among debenture holders within the same class, resolutions concerning matters indicated under Article 418 of this Code shall be adopted by a two-thirds majority of debenture holders present. 3/ The voting rights of debentures shall be in proportion to the share of the loan which they represent respectively, each debenture giving the right to not less than one vote.
1/ A resolution adopted under Article 418 of this Code shall be submitted to the court for confirmation within fifteen days from the meeting by the company, the representative of the debenture holders or by a debenture holder; the resolution shall be of no effect unless confirmed by court. 2/ Debenture holders who dissented or were absent may oppose the confirmation of the resolution.
1/ Debenture holders may be represented by one or more agents who shall be appointed by a general meeting of debenture holders having the quorum specified in Sub-Article (1) and (3) of Article 419 and a majority as specified in Sub-Article (1) of Article 420 of this Code; The meeting may at any time remove the agents. 2/ The quorum and majority indicated under Sub-Article (1) of this Article shall be required for a decision on the remuneration and powers of the agents; remuneration shall be borne by the debtor company. 3/ The agents of the debenture holders may, in case of urgency, be appointed or replaced by the court on the application of the debtor company in the absence of appointments made by a properly constituted general meeting, or on the application of one or more debenture holders holding not less than five percent of the total debentures issued. 4/ The provisions of Sub-Article (3) of Article 416 of this Code shall apply to the appointment of an agent of the debenture holders.
Unless otherwise provided by the general meeting of debenture holders, agents of the debenture holders have the power to carry out the following in the common interest and name of the debenture holders: 1/ do all things necessary in particular accept and preserve securities guaranteeing the loan; 2/ represent the group of debenture holders in all legal proceedings; 3/ take part in shareholders` general meetings; 4/ be present at the drawing of debentures for redemption.
1/ Where the debtor company’s ability to pay its debt diminishes or the company suspends payment, the agent of the debenture holders, if any, shall prove for all debenture holders in the preventive restructuring, reorganization or bankruptcy proceedings; he shall receive on their behalf all notices of meetings. 2/ The agent of the debenture holders may, if so authorized by the general meeting of the debenture holders, vote at creditors` meetings held in accordance with rules of bankruptcy on behalf of the debenture holders; in calculating quorum and majority at meetings of the creditors of the company, all debentures issued on the same date shall be deemed to constitute one debt.
1/ Subject to the provisions of other special laws, the provisions of this chapter shall apply to a share company. 2/ Unless otherwise specifically provided by law, the provisions of book I of this Code relating to commercial books and book-keeping shall apply to the accounts of a share company.
1/ At the end of each financial year, the directors shall prepare a detailed inventory of the properties of the company and a balance sheet. 2/ The directors shall draw up a balance sheet and a profit and loss account and prepare a report on the state of the company`s activities and affairs during the last financial year. 3/ The report under Sub-Article (2) of this Article shall give detailed information on the profit and loss account, an exact statement of the total amount of remuneration of the directors, members of the supervisory board, if any, and auditors, and proposals for the distribution of dividends, if any.
The inventory, balance sheet, profit and loss account and the directors` report shall be submitted to the auditors, the Ministry of Trade and Industry or any other relevant government authority, if any, not less than forty days before the notices calling the annual general meeting are dispatched.
1/ The balance sheet, and profit and loss account shall be prepared each year in the same form as in preceding years and the methods of valuation shall remain the same, unless the general meeting adopts variations in the mode of presentation of the accounts or methods of valuation on the reasoned advice of the Auditors. 2/ The profit and loss account shall show under separate heads losses or profits arising out of the company`s various activities.
A return of liabilities which do not appear in the balance sheet, such as guarantees, shall be annexed to the balance sheet.
1/ Provisions for amortization shall be made each year so that the item to be amortized be written off at the end of its period of use; where, during the period of amortization, the rate proves insufficient, such rate shall be increased so that the amortization corresponds to the depreciation. 2/ Provisions shall be made for amortization and allowances for depreciation of assets at the end of each financial year, even where there are no profits. 3/ The costs of capital issue and increases shall be amortized not later than on the expiry of the fifth financial year following that during which such issue or increase was made.
1/ Where a company is a holding company, the accounts of its subsidiaries shall be submitted to the annual general meeting at the same time and in the same manner as its own accounts. 2/ A consolidated balance sheet and profit and loss account shall be prepared in respect of the holding company and its subsidiaries. 3/ The provisions of Sub-Article (1) of this Article may not apply where the board of directors is of opinion that the drawing up of such document: a) would be impractical or too onerous or too costly, or of little concern to the shareholders on account of the small financial interest involved; b) could prejudice the company or its subsidiaries, or that the company and its subsidiaries carry out business of such a differing nature that they may not reasonably be deemed to form a single enterprise and such opinion is approved by the Ministry of Trade and Industry or any other relevant government authority.
1/ The net profits of a company comprise the net receipts for the financial year after deduction of general costs and other charges, and of amortization and allowances. 2/ The profit for distribution is the profit for the financial year less previous losses and plus additional revenue and any distribution from the reserve funds specially approved by the general meeting. 3/ The general meeting shall specify the reserve funds from which profit for distribution may be taken.
1/ Transfers to reserve funds shall be made from the net profits shown in the profit and loss account. 2/ Reserve funds shall include the following: a) the legal reserve required by the law; b) the supplementary reserve created by an ordinary general meeting in accordance with the memorandum of association; c) optional reserve created by an ordinary general meeting in accordance with the memorandum of association; d) free reserve created by an ordinary general meeting there being no special provision in the law or memorandum of association.
1/ Unless provided otherwise by another law, five percent of the net profits of the company shall be transferred each year to its legal reserve fund; however, the obligation to transfer ceases where the amount of net profits transferred to the legal reserve fund amounts to five percent of the company`s capital. 2/ Transfers shall be made to the legal reserve where it has fallen for whatever reason below the amount fixed in Sub-Article (1) of this Article so that such fund once again reaches five percent of the capital.
1/ Where an extraordinary general meeting approving an increase in capital decides sale of shares at a price greater than their par value, such meeting may decide the difference between the actual value of the shares and their par value to constitute a reserve fund. 2/ Only persons who had been shareholders prior to the sale of the new shares may share in the distribution of such reserve.
1/ Subject to the provisions of special law, distribution of profits shall be effected in accordance with the provisions of the memorandum of association after transfer is made to the legal reserve provided under Article 434 of this Code. 2/ Payments to directors shall be made in accordance with the provisions of Article 304 of this Code.
1/ The memorandum of association may provide that a fixed or interim interest shall be paid to shareholders even where there are no profits. 2/ The interest under Sub-Article (1) of this Article may only be paid to the extent of interest secured from the capital of the company deposited in a bank during the period of preparatory works and construction of the enterprise; the interest being paid by the company to its shareholders shall cease to be payable as soon as normal business begins. 3/ A company may not pay interest to its shareholders in accordance with Sub-Article (1) of this Article unless this has been expressly provided for in the memorandum of association.
1/ Dividends may only be paid to shareholders from net profits shown in the approved balance sheet. 2/ Dividends distributed contrary to the provisions of Sub-Article (1) of this Article shall be treated as fictitious dividends; the persons making the distribution shall be criminally and civilly liable. 3/ The general meeting shall, when it decides on distribution of profits, determine the method of payment of dividend and fix the date on which the shareholders are to receive the dividend; the date of payment of dividends may under no circumstances exceed four months from the date on which the resolution to distribute profit was passed. 4/ The general meeting may for a good reason vary or cancel the decision of a preceding general meeting concerning the distribution of dividends or reserves before the expiry of the period fixed under Sub- Article (3) of this Article 5 A shareholder shall become a creditor of the company for the amount of the dividend due to him from the date fixed for payment.
Dividends distributed contrary to the provisions of Article 438 of this Code may not be claimed back from the shareholders, except in the case of family companies or where distribution was made in the absence of a balance sheet or not in accordance with the approved balance sheet.
The approval of the balance sheet by the meeting shall not affect the liability of directors, members of supervisory board, if any, Auditors, Managers, Secretary and other officers of the company in respect of their management.
Within thirty days of the approval of the balance sheet, a copy thereof together with the relevant part of the minute of approval by the meeting shall be sent by the directors to the Ministry of Trade and Industry or relevant government authority as well as posted on the company`s website.
1/ The capital may not be increased without the approval of an extraordinary general meeting. 2/ The capital may be increased by the issue of new shares or by an increase in the par value of existing shares; where an extraordinary general meeting decides to increase capital, it shall at the same time determine the method of increase. 3/ new shares issued may either be paid up: a) in cash or in kind; b) by paying off current debts with shares; c) by capitalization of reserves or other funds at the disposal of the company; or d) by conversion of debentures into shares. 4/ An increase of capital by increasing the par value of existing shares may only be effected under Sub- Article (3) of Article 402 of this Code unless such increase is paid up by capitalization of reserve or profits which may be distributed to shareholders.
1/ Without prejudice to the provisions of Sub-Article (1) and (2) of Article 442 of this Code, an extraordinary general meeting may by resolution delegate to the directors all powers necessary to effect the increase or reduction of capital approved by the meeting. 2/ Any provision in the memorandum of association delegating in advance to the directors power to increase or decrease capital shall be of no effect.
A resolution or an approval by an extraordinary general meeting to increase the capital shall be of no effect if not carried out within five years from the day the resolution was passed unless the increase is by conversion of debentures.
Where a company whose capital is not fully paid increases its capital by a new issue of shares to be paid up in cash or convertible debentures, such issue shall be null and void.
In the absence of a provision to the contrary, a company shall issue new shares in accordance with the provisions relating to the formation of share companies.
Where new shares are offered for public subscription, the offer to the subscribers shall be by a prospectus signed by the chairperson of the board of directors of the company and such prospectus shall contain the following information: 1/ the company`s name and head office; 2/ the date of registration of the company in the commercial register; 3/ the amount of capital of the company, forms of shares, their par value and classes of shares, if any; 4/ the directors, members of the supervisory board, if any, managers and Auditors; 5/ the last profit and loss account, balance sheet and auditors’ report; 6/ dividends paid during the last five years or since formation where the company existed for less than five years; 7/ debentures issued; 8/ the decision of the general meeting regarding the new shares, showing in particular the total price, their number, par value, class and issue price; 9/ contributions in kind and special benefits allocated; 10/ the period from which the new shares will give the rights to a dividend and any restrictions regarding such right, as well as any preference accorded; 11/ the date up to which the subscriber is bound.
1/ Shareholders shall have a preferred right of subscription of new shares, in proportion to the number of shares held. 2/ The right indicated under Sub-Article (1) of this Article may be disposed or assigned under the same conditions as the share itself, during the period of subscription. 3/ The preferred right of subscription may not be exercised in the event of conversion of debentures into shares; The decision of the general meeting relating to issue of debentures convertible into shares at the will of the holders shall indicate renunciation by shareholders of their preferred right of subscription at the time of the issue.
Subject to the provisions of Sub-Article (2) of Article 448 of this Code, where a shareholder has not subscribed shares in respect of which he had a preferred right, the shares shall be allocated to those shareholders having applied for a greater number of shares than they would have been entitled to under their preferred right, such allocation being proportional to their shares in the capital and within the limits of their applications.
Where shares offered for subscription under Article 448 and 449 of this Code have not been taken up fully, the balance may be disposed to non-shareholders in accordance with the decision of the extraordinary general meeting.
1/ The extraordinary general meeting which resolves an increase of capital may also resolve that the provisions of Article 448, 449 and 450 shall not apply, in whole or in part, but after considering: a) a directors` report giving reasons for the increase of capital and the setting aside of the preferred right of subscription, the allotters of the new shares, the number of shares allocated to each, the issue price and the basis for determining such price; and b) an auditors` report certifying the correctness of the directors` report. 2/ Allotters of new shares shall not vote at a meeting which sets aside in their favor the application of the provisions of Article 448 to 450 of this Code. 3/ The quorum and majority required for the decision under Sub-Article (1) and (2) of this Article shall be calculated on the whole of the shares making up the share capital but to the exclusion of the shares held or represented by such allotters.
1/ The issue of convertible debentures is subject to the prior approval of an extraordinary general meeting. 2/ The approval under Sub-Article (1) of this Article shall indicate express renunciation by the shareholders of the preferred right of subscription of the shares to be issued under such conversion, for the benefit of the holders of the convertible debentures. 3/ The directors` report required under Sub-Article (1) (a) of Article 451 of this Code shall indicate the period of time within which the option may be exercised by the debenture holders and the manner of conversion of the debentures into shares. 4/ The Auditors shall prepare a special report on the proposals submitted to the extraordinary general meeting as regards the manner of conversion.
Prohibited The issuance of documents conferring a preferred right of subscription to buy shares issued to increase capital shall not be valid.
Subscription The period of time within which existing shareholders may exercise their right of subscription may not be less than thirty days from the opening of the subscription.
1/ The date of opening of a subscription shall be notified to shareholders by a notice published in a newspaper having nation-wide circulation and through an appropriate electronic means, ten days before the subscription list opens; Such notice shall indicate to shareholders their preferred right, the dates of opening and closing of the subscription list and the issue price of the shares and the amount required to be paid-up immediately. 2/ Where all the shares are registered shares, the company may send the notice to the shareholders by registered letter ten days before the subscription list opens.
1/ An application to subscribe is not effective unless accompanied by the amount to be paid on subscription. 2/ The provisions of Article 260 and 268 of this Code shall apply mutatis mutandis to increase the capital of a company effected by the issue of cash shares.
The board of directors shall certify as correct and keep a record of the following: 1/ the new shares have been fully subscribed; 2/ the amounts to be paid up have been paid; 3/ the authorized increase of capital has taken place; and 4/ the memorandum of association is amended to show the increase in capital.
The provisions of Article 260, 261 and 263 of this Code shall apply mutatis mutandis to increases of capital effected by contributions in kind or which carry special benefits.
1/ New cash shares issued to increase the capital of a company may be used to pay off the current liquid debts of the company at the date the subscription list opens. 2/ An account showing the shares have been paid for by settlement of the debt shall be drawn up by the directors and certified as correct by the Auditors; The Auditors shall prepare a report showing the value of the debt so settled.
Subject to the provisions of Sub-Article (2) of Article 434 of this Code, an extraordinary general meeting may decide to increase the capital by transferring thereto the whole or part of the reserves: Provided that, where the legal reserve is so transferred, no distribution to shareholders may be made until the legal reserve is restored.
1/ Only the memorandum of association or a resolution of an extraordinary general meeting may authorize the gradual refund of contributions of shareholders or par value of their shares to shareholders. 2/ Only profits which may be distributed or reserves other than those indicated in Sub-Article (1) of Article 434 of this Code may be used for such amortization. 3/ The amortization under Sub-Article (1) of this Article may be effected by the redemption of shares within the same class; Shares to be redeemed may be selected by drawings; Reduction of capital may not result from amortization.
Proposals for a reduction of capital shall be sent by the board of directors to the Auditors not less than fifteen days before calling the extraordinary general meeting to approve such reduction; the Auditors shall report to the same meeting their opinion and the reasons therefor on the proposals.
Where a reduction of capital has been effected, an entry shall be made in the commercial register and published in newspaper with wide circulation and posted on the company`s website.
The provisions of Article 465468 of this Code shall apply when losses are the reason for a reduction of capital.
1/ A reduction of capital shall be effected: a) by reducing the part value of shares; or b) by exchanging old shares for a lesser number of shares. 2/ Where a general meeting resolves that a reduction of capital shall be effected as provided in Sub-Article (1) (b) of this Article, the shareholders holding an insufficient number of shares to be exchanged shall within the period fixed by the meeting make up the number of shares to a number which can be exchanged or dispose of their shares to another shareholder.
An extraordinary general meeting may in a resolution authorizing a reduction provide that the shareholders shall be paid as a compensation for the reduction of the number of their shares or of the par value thereof an amount corresponding to the reduction, before any distribution of profits is made.
Where the claim of a creditor holding rights prior to the adoption of a resolution by an extraordinary general meeting to reduce capital is not paid or such creditor is not given adequate guarantees for the payment of his claim, he may oppose the adoption of a resolution in Article 466 of this Code or any distribution of profits until the capital is restored to the amount existing at the time when the claim originated.
1/ Where, by reason of losses, the capital is reduced below the minimum permitted in Sub-Article (1) of Article 247 of this Code, the capital shall be increased to the minimum required by this law within a period of one year from the date of publication of the reduction in the commercial register in accordance with the provisions of Article 463 2/ Nothing in this Article shall affect the rights of creditors under Article 467 of this Code. 3/ Where the increase of capital required by Sub-Article (1) of this Article is not effected or the company is not converted into another type of business organization, the dissolution of the company may be ordered by the court upon the application of any interested person.
The provisions of Article 470472 of this Code shall apply where losses are not the reason for a reduction of capital.
The equality of shareholders may not be affected by a reduction of capital.
1/ Any creditor holding rights against the company prior to the publication of the resolution in a newspaper having a nation-wide circulation in accordance with Article 463 of this Code may, where the reduction of capital is in an amount exceeding ten percent, object to the reduction within three months from such publication. 2/ The court may reject such objection or order the company to pay the claimant or to provide adequate guarantees for payment. 3/ No reduction of capital may be effected until the period specified in Sub-Article (1) of this Article has expired.
1/ A decision relating to a reduction of capital shall be entered in the company`s minute book within one month from the date of such decision. 2/ The minute prepared pursuant to Sub-Article (1) of this Article shall be posted on the company`s website.
1/ Subject to the general provisions under Article 181 of this Code, a share company may be dissolved for one of the following reasons: a) where the number of shareholders falls below the legally required minimum and the organ which registers business organizations decides to dissolve the company on the application of any interested party due to failure to make up for the reduction in number of members within six months; b) decision of the organ in charge of registration of business organization upon application by any interested party where the company does not have the required administrative organs; c) loss of three-quarters of the capital. 2/ Notwithstanding the provisions of Sub-Article 1 (a) and (b) of this Article, the organ in charge of registration of business organizations may, where it thinks necessary, extend the time limit or permit continued existence of the company by reestablishing the prescribed organs. 3/ The board of directors shall call an extraordinary general meeting to consider voluntary dissolution or continuation of the company where three-quarters of the capital has been lost as provided in Sub-Article (1) (c) of this Article. 4/ Where the directors, supervisory board, if any, or Auditors fail to call a general meeting the court may, on the application of any interested party, order dissolution. 5/ Where shareholders knowingly continue the operations of the company without the approval of the organ in charge of registration of business organization per Sub-Article (2) of this Article, such shareholders shall be jointly and severally liable for any debts assumed thereafter by the company.
1/ Where a decision to dissolve a company has been taken pursuant to this Code such decision shall be published in a newspaper having wide circulation and posted on the company`s website within twenty one days from the date of the decision to dissolve; The notice, to which the words “in liquidation” shall be added, shall include the name of the company, amount of the capital, ground for dissolution, name, address, and the scope of power of the liquidator. 2/ Documents which indicate the decision to dissolve the company and appointment of a liquidator following such decision shall be kept at the head office of the company and be entered in a commercial register.
1/ Where liquidators have not been appointed in the memorandum of association, they shall be appointed by the extraordinary general meeting which resolved dissolution. 2/ Where liquidators are not appointed under Sub-Article (1) of this Article, they may be appointed by the court on the application of the board of directors, supervisory board, Auditors, shareholders or creditors. 3/ The appointment of liquidators pursuant to Sub- Article (1) of this Article may be revoked by the extraordinary general meeting; the liquidators may, regardless of the manner of their appointment, be removed by the court for good cause on the application of persons indicated under Sub-Article (2) of this Article. 4/ The body that removed liquidators in accordance with Sub-Article (3) of this Article shall appoint new liquidators.
1/ Liquidators may resign by giving three months advance written notice to the body that appointed them; they shall submit the resignation to the board of directors of the company where they were appointed by the general meeting or in the memorandum of association. 2/ Where the liquidators resign without giving prior notice under Sub-Article (1) of this Article, they shall be jointly and severally liable for damage caused to the company, the creditors or shareholders due to their failure.
A person may qualify as a liquidator upon the fulfillment of the following requirements: 1/ be of a good character; 2/ have the necessary expertise to undertake liquidation; 3/ No record of conviction of breach of trust, theft, robbery or other similar criminal offenses while serving as a promoter, director, manager, member of supervisory board. Auditor or holding any other managerial position or under any other circumstance.
1/ Liquidators shall be remunerated for the service they render. 2/ The remuneration shall be determined by the body that has appointed them in accordance with Article 475 of this Code.
1/ Until winding-up is completed, the company shall retain its legal personality and name, to which the words “in liquidation” shall be added. 2/ During winding-up, the management organs of the company shall restrict their activities only to acts necessary to facilitate the winding-up which do not fall within the scope of powers of the liquidators.
1/ Where a company is declared bankrupt by a court, the winding-up shall proceed in accordance with the provisions of this Code pertaining to bankruptcy. 2/ Subject to the provisions of this Code on bankruptcy, the directors` powers to represent the company shall be restricted to cases where that is necessary for the work.
1/ Unless otherwise provided by law or memorandum of association, the liquidators shall have the same duties and liabilities as directors. 2/ The liquidators shall take possession of the property and books of the company; the directors shall prepare a report for the liquidators on the management of the company from the end of the last financial year to the commencement of the winding-up. 3/ The liquidators and directors shall jointly prepare and sign an inventory of assets and liabilities. 4/ Where the assets appear to be insufficient to cover the debts of the company, the liquidators shall call upon the shareholders to make contribution that may be still due on their shares, if any.
1/ Subject to any limitations imposed by the memorandum of association or by the meeting that appointed them, liquidators shall have full powers to carry out the winding up process; they may, in particular, sell all the assets of the company, represent the company in judicial proceedings, compromise and arbitrate, collects sums due to the company and pay its debts. 2/ The liquidators may not undertake new business, unless required for the execution of contracts still running or where the interests of the winding-up so require. 3/ The liquidators shall be jointly and severally liable to the company or third parties in respect of any business undertaken outside the scope of powers conferred upon them by law, memorandum of association or shareholders` general meeting. 4/ liquidators have a responsibility to complete the liquidation with in a reasonable time.
Payment of Debts Until the creditors of the company have been paid in full or provision for payment deposited in the court, the liquidators may not distribute any part of the assets among the shareholders.
1/ Creditors whose names appear in the company`s
1/ Where known creditors have failed to file their claims, the amounts owing to them shall be paid into court. 2/ Adequate sums shall be set aside in a court to meet claims in respect of undertakings of the company which are not completed or disputed claims where the creditors have not been guaranteed or distribution of assets has not been postponed until such undertakings are completed.
1/ After paying the company`s liabilities, the liquidators shall prepare a final balance sheet, showing what percentage of the surplus asset is available for distribution on each share. 2/ Unless there is a provision to the contrary in the memorandum of association, the liquidators shall calculate the distribution under Sub-Article (1) of this Article having regard to whether shares have been fully paid up and preferential rights attaching to shares. 3/ The balance sheet signed by the liquidators and the Auditors` report shall be deposited in the Ministry of Trade and Industry or any other relevant government authority. 4/ Any shareholder may, within three months from the deposit of the balance sheet under Sub-Article (3) of this Article, apply to the court to set aside the final balance sheet; such application shall be heard after the period of three months has expired and, where there are several applications, they shall be heard together; the court`s decision shall bind other shareholders of the company. 5/ Where no application has been made within the period indicated in Sub-Article (4) of this Article, the final balance sheet shall be deemed to be approved.
The surplus assets may not be distributed to the shareholders until one year from the third publication specified in Sub-Article (1) of Article 484 of this Code: Provided that the court may order the distribution of the surplus assets before the expiry of this period where it is satisfied that the creditors will not suffer.
Where a shareholder has not collected the percentage of the surplus assets due to him within three months from the deposit of the balance sheet and auditor’s report mentioned in Sub-Article (3) of Article 486 of this Code with the appropriate government authority, the liquidators shall deposit such sum in a special account in a bank indicating the name of the shareholder or the serial numbers of the shares, if they are to bearer.
1/ When the final balance sheet has been approved, the liquidators shall cause the registration of the company to be cancelled from the commercial register. 2/ The liquidators shall be jointly and severally liable for any damage caused to shareholders or third parties due to failure to cancel the registration of the company from the commercial register.
1/ Creditors who show up after the cancellation of the registration of the company in accordance with Article 489 of this Code, may claim against the shareholders to the extent of the share in the surplus assets received by the shareholders. 2/ Creditors may claim against the liquidators, where they have not been paid owing to the negligence of the liquidators.
1/ The books of a company which has been dissolved shall be deposited with the relevant government authority where they shall be kept for ten years. 2/ They shall be open for inspection by any person.
Every share company shall have a website.
1. The following information shall be promptly posted on the website፡ a) the memorandum of association, and amendments thereto, if any; b) notices regarding general meetings and related information; c) approved audit reports; d) report on transactions involving conflict of interest prepared pursuant to Sub-Article (5) of Article 395; e) annual reports and information submitted to the Ministry of Trade and Industry pursuant to this Code or other laws; f) information that should be publicized according to the memorandum of association; and g) other information necessary for shareholders, creditors and stakeholders which does not jeopardize the interest of the company. 2/ The website shall, to the extent possible, include features to conduct electronic meetings and enable voting through electronic means.
1/ The information shall remain on the website as follows: a) notices calling a meeting and related information until the end of the meeting; b) accounts for five years; c) other information for six months. 2/ The website shall be accessible to any person. 3/ The company shall take all the necessary measures to protect the security of the website.
1/ A private limited company is a business organization whose capital is fully paid in advance, divided into shares and whose members are not liable for the debts of the company provided that they have paid up their contributions. 2/ Shares of the company shall not be open for subscription by the public. 3/ Notwithstanding Sub-Article (1) of this Article, the provisions of Article 295 of this Code shall apply to the liability of a member with a decisive vote. 4/ A private limited company may not have less than two or more than fifty members. 5/ The company may not issue transferable securities.
1/ The capital of a private limited company may not be less than fifteen thousand Ethiopian Birr. 2/ The par value of each share may not be less than one hundred Ethiopian Birr; All shares shall be of equal par value.
A private limited company shall have a firm-name indicating its business purpose; The firm-name shall be followed by the words “Private Limited Company”.
1/ Where the number of members of a private limited company falls below two and a person does not join such company within six months, the company shall be dissolved. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the company may be converted into a one-person private limited company by amending its memorandum of association within six months from the company’s membership falling below two.
1/ A private limited company is instituted when its capital is paid-up fully and the memorandum of association is entered in the commercial register. 2/ The par value of shares sold in cash shall be deposited before the registration of the company in a blocked bank account opened in the name of the company under formation.
The memorandum of association of the company shall show: 1/ the names, nationality and addresses of the members; 2/ the company name, head office, and branches, if any; 3/ the business purposes of the company; 4/ the amount of the capital and a statement that the capital is fully paid; 5/ the sum of money paid-up by each member; 6/ the value of contributions in kind, if any; 7/ the number of shares held by each member; 8/ the procedure for distribution of profits; 9/ if there are directors, their number and powers; 10/ the number of managers and their powers; 11/ the number of Auditors, if any; 12/ the period of time for which the company is established; 13/ the manner in which and the period within which the company will publish its performance report; 14/ relationship among the company’s management, company and its members and amongst the shareholders; and 15/ other particulars that should be included pursuant to the law or agreement of members.
Cash and contributions in kind indicated under Article 186 of this Code shall, with the exception of service, constitute valid contributions for a private limited company.
1/ where a shareholder makes a contribution in kind, the memorandum of association shall show the nature and value of the contribution, price accepted by the other members and the number of shares allocated to the member in return for the contribution. 2/ the method of valuation shall be determined by the shareholders. 3/ Shareholders shall be jointly and severally liable to third parties for the accuracy of the valuation fixed at the time of payment. 4/ where it is shown that a contribution in kind has been overvalued, the contributing member shall pay the difference in cash; Shareholders shall be jointly and severally liable for such payment, notwithstanding that they were not aware of the overvaluation. 5/ the manager and the members of the board of directors, if any, shall ensure, where appropriate, the registration of contributions in kind and issuance of title deed in the name of the company.
The company may issue only shares registered in the name of the members.
1/ A member may inspect and make an inquiry about accounts and documents of the company to evaluate its financial state or any other matter affecting his interest; the member may exercise this right through an agent or in person accompanied by an assistant. 2/ Where disclosure of the information is prohibited by law or it would cause serious damage to the company, the company shall deny access to such information or document.
Where a share is pledged or given in usufruct, the right to vote at meetings shall, unless otherwise agreed, be exercised only by the pledger or the person who gave it in usufruct.
Each share shall contain: 1/ the serial number of the share and sequence; 2/ the signature of the chairperson of the board of directors, or of the manager, if the company has no board; 3/ the name of the company, its head office and period for which it is established; 4/ the amount of the capital of the company and the par value of the share; 5/ the date of signature of the memorandum of association and the date and place of registration of the company in the commercial register; 6/ other necessary information.
1/ The head office of the company shall keep the following particulars in a share register: a) name and address of members; the shares of the members and the serial number of shares; b) particulars about transfers of shares; c) all amendments to these particulars. 2/ Where there are changes in the particulars under (a) and (b) of Sub-Article (1) of this Article, the chairperson of the board of directors, if any, or the manager of the company shall submit at the beginning of each calendar year to the Ministry of Trade and Industry or any other relevant government authority a list showing the changes made.. 3/ Members may consult the share register free of charge or take a copy thereof; the company shall give a copy of the register to the requesting member within one month from the date of such request. 4/ Any third party may upon payment of the prescribed fee consult the share register or request the company to give him a copy thereof. 5/ Upon notification by a member or any other interested person of the existence of inaccuracy in the entries in the register, the Ministry of Trade and Industry or any other relevant government authority may cause the rectification of such inaccuracy; the directors, if any, or the managers of the company, in case the company has no directors shall be jointly and severally liable for any loss occasioned by inaccuracy in the particulars entered in the share register.
1/ Any transfer of shares shall be made in writing; Transfer of shares shall be of no effect in relation to third parties unless it has been entered in the share register. 2/ Unless otherwise provided in the memorandum of association, there shall be no restriction on the transfer of shares among members. 3/ A member shall, prior to disposing of his share to a person outside the company, reveal the price offered to him and give the right of first refusal to the other members to purchase the share at the price offered to him and under the same conditions. 4/ Where any of the shareholders does not accept the offer made by the member within 15 (fifteen) days from receipt of the notice under Sub-Article (3) of this Article by the general manager, the member may accept the offer made to him by the person outside the company
1/ Notwithstanding the provisions of Sub-Article (4) of Article 508 of this Code, a transfer of shares outside the company shall be approved by members representing at least three-quarters of the capital, unless a larger majority or unanimity is fixed in the memorandum of association. 2/ The provisions of Sub-Article (1) of this Article shall apply even where the company is in liquidation.
1/ Where execution is levied on a member`s share in favor of a person who is outside the company, such person shall need the approval of the other members in accordance with Sub-Article (1) of Article 509 of this Code to become a member. 2/ Where members representing three-quarters of the capital do not to agree to admit the person who bought the share against which execution had been levied, such share shall be transferred to any member of the company interested in buying it; Where there is no member interested in purchasing the share, the company shall pay the price of the shares to the judgment creditor. 3/ Where the company purchases shares in accordance with Sub-Article (2) of this Article, the payment shall be effected from reserve funds which may be distributed to shareholders. 4/ Where shares cannot be purchased under Sub-Article (3) of this Article owing to lack of distributable reserve funds, the payment for the purchase shall be effected from the capital which shall be reduced accordingly; The shareholders shall be jointly and severally liable, to the extent of the reduction in capital, to persons who concluded contracts with the company prior to such reduction.
1/ unless otherwise provided in the memorandum of association, the shares of a deceased member shall devolve upon his heirs. 2/ however, where the heirs do not want to be shareholders, they shall be paid from reserve funds the amount that the deceased’s shares represent in the assets of the company in the final balance sheet. 3/ the right under Sub-Article (2) of this Article shall not apply where the company does not have sufficient reserve that is distributable to shareholders.
The provisions of Article 273275 of this Code shall apply to this chapter as appropriate.
1/ the memorandum of association may provide for the management of a private limited company by a board of directors. 2/ the board of directors, if any, shall consist of three to seven members. 3/ The provisions of this Code on the board of directors of a share company concerning appointment, guarantees provided, removal, term of office, decision making, liability, remuneration, powers and duties and other relevant matters under Sub-Article (4) and (5) of Article 296, Article 297, 298, 300-312 and Article 314330 shall apply as appropriate to the board of directors of a private limited company.
1/ a private limited company shall have a general manager appointed by a general meeting; He may be a shareholder or an outsider. 2/ where the memorandum of association provides for a board of directors, the manager shall be appointed by the board; the manager shall not be the chairperson of the board of directors. 3/ the manager is an employee of the company.
1/ where the company is managed by a board of directors, the provisions of Article 337339 of this Code shall apply as appropriate to the powers of the manager. 2/ where the company does not have a board of directors, the manager shall have full powers to act in the name of the company for the realization of the business purposes of such company. 3/ Provisions of the memorandum of association restricting the powers of the manager shall be of no effect except as between the company and members on the one hand and the manager on the other.
1/ Notwithstanding any provision to the contrary, the manager shall be liable to the company, shareholders and third parties for any damage caused by breach of his duties under the law or the memorandum of association. 2/ Where in bankruptcy the assets are shown to be inadequate, the court may, on the application of the trustee in bankruptcy, order that the company`s debts or part of them shall be paid by the manager and the previous managers of the company. 3/ the provisions of sub-Article (2) of this Article shall not apply to managers who have shown that they have acted with due care and diligence.
1/ A manager may be dismissed by the organ appointing him; In particular, in the absence of a provision to the contrary in the memorandum of association, a manager appointed by the board of directors shall be dismissed in the same manner as a manager of a share company. 2/ In the absence of a provision to the contrary in the memorandum of association, a manager may be dismissed by an ordinary general meeting irrespective of whether he is appointed in the memorandum of association or by an ordinary general meeting; A manager is not entitled to be reinstated to his position even where the dismissal is without good cause. 3/ notwithstanding the provisions of Sub-Article (1) and (2) of this Article, a manager may be dismissed, on the request of any shareholder, by the court where it is of the opinion that there is good cause. 4/ where replacing the dismissed manager takes time, the deputy manager or the chairperson of the board of directors shall act, in this particular order, in place of the dismissed manager. 5/ the court shall appoint other provisional manager where the cause for the removal of the manager under this Article is a conflict between the manager and the deputy manager or the chairperson of the board of directors and if replacing the manager by either the deputy manager or chairperson of the board is not in the best interest of the company.
1/ where a private limited company consists of ten and more members or its total assets exceed Ten Million Ethiopian Birr; it shall have an independent and impartial external Auditor. 2/ an Auditor shall be elected by a general meeting. 3/ the provisions of Article 343354 of this Code shall apply as appropriate to an Auditor of a private limited company.
Meetings of the company may be ordinary or extraordinary.
1/ Members may participate in a meeting of the company by electronic or other means of communication unless the memorandum of association prohibits that; the technology shall enable establishing the identity of the participants and ensure their effective participation; The means of communication shall meet technical requirements allowing continuous transmission of the voice of the participants and simultaneous transmission of the proceedings. 2/ Members who participate in a meeting without being physically present pursuant to Sub-Article (1) of this Article may vote orally. 3/ The memorandum of association may not be amended by a meeting conducted through electronic means; the memorandum of association may decide on matters which decisions may not be taken at a meeting held by electronic means.
1/ At least one ordinary general meeting shall be conducted within four months from the end of each financial year. 2/ The four months period indicated under Sub-Article (1) of this Article may be extended up to six months by the memorandum of association or by the decision of a relevant government authority. 3/ The meeting shall be called by the board of directors, by the manager where there is no board or it fails to call the meeting, or in case of failure by the preceding by the auditor, if any, or by members representing more than one-half of the capital of the company. 4/ A body mentioned under Sub-Article (3) of this Article shall call a meeting of shareholders upon the request of members representing at least ten percent of the capital. 5/ Where persons responsible under this Article are unable or have refused to call a meeting or upon the request of any member, the court may for good cause appoint a person to call a meeting and to draw up the agenda for consideration.
1/ Minuets of meetings shall be reduced into writing and signed by members who were physically present at such meetings. 2/ Minutes of meetings shall in particular include the following: a) the manner in which the meeting was called; b) the place and date of the meeting; c) the agenda; d) members of the board of directors, if any, present at the meeting; e) the number of members present at the meeting and the quorum; f) the documents laid before the meeting; g) a summary of the discussions; h) the results of votes taken; and i) the texts of resolutions adopted. 3/ where a meeting lacks a quorum, the chairperson shall cause this fact to be reduced into minutes.
Where the number of members of the company is less than ten, a text of resolutions may, without calling a meeting, be sent to each member for the members` written or electronic vote thereon.
1/ In the absence of a provision to the contrary in the memorandum of association, each member may personally attend or be represented by a proxy at a meeting and vote. 2/ Each member shall be entitled to a number of votes equal to the number of shares held by him.
1/ Members or a member representing more than one-half of the capital of the company shall be present for a decision to be taken at an ordinary meeting. 2/ Quorum shall be reckoned based on the amount of capital represented, and not by the number of shareholders; the meeting may adopt a resolution so long as it is called in compliance with the law and the required amount of capital is represented; In particular, the mere fact that some shareholders are not willing to attend a meeting shall not preclude the general meeting from discharging its responsibility. 3/ Decisions of an ordinary general meeting are taken by a simple majority of shares represented at the meeting. 4/ Where the quorum under Sub-Article (1) of this Article is not obtained in the first meeting, the members shall be called again by registered letters or other suitable electronic means; At a second meeting, decisions shall be taken by a simple majority of shares represented without regard to the amount of capital represented.
1/ Changes in the nationality of the company or increase in the capital of the company by raising the par value of existing shares requires the unanimous decision of members. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, consent indicated under Sub-Article (3) of this Article is sufficient where an increase in the capital of the company is to be effected from profits or reserve funds that may be distributed to members. 3/ An amendment to the memorandum of association requires the consent of members representing three- quarters of the capital, unless a larger quorum and majority is provided for in the memorandum of association. 4/ Amendments to the memorandum of association shall be entered in a commercial register.
Subject to the special provisions of this Chapter, the provisions of this Code: 1/ under Article 392403 concerning general meetings; 2/ under Article 442446, 448-451, 453-461 or 462-470 concerning the increase or reduction of capital shall apply to this Chapter as appropriate.
Not less than five percent of the profits shall be transferred each year to the legal reserve until such fund amounts to ten percent of the capital.
1/ Members may be required to repay dividends which have been paid out of sums which are not actual profits. 2/ Claims for repayment of fictitious dividends shall be barred by a period of limitation after five years from the date the dividends were paid.
Subject to the provisions of this Chapter, Article 425441 of this Code shall apply, as appropriate, to this Chapter.
Subject to the general provisions of Article 181 of this Code, where a private limited company does not have a required management organ, such company shall be dissolved by an appropriate court on the application of a member or a creditor.
1/ where three-quarters of the capital is lost, the board of directors, if any or the manager shall cause the members to decide whether or not to dissolve the company. 2/ Where the members decide not to dissolve the company; they shall make additional contributions to restore the capital. 3/ Where the provisions of Sub-Article (1) and (2) of this Article are not complied with within ninety consecutive days from the date on which the loss of three-quarters of the capital is known, any interested person may apply to the court for dissolution.
Subject to the provisions of this Chapter, Article 473491 of this Code shall apply, as appropriate, to the dissolution and winding-up of a private limited company.
1/ a one member private limited company is a business organization incorporated by the unilateral declaration of a single person. 2/ The Company has its own legal personality separate and distinct from that of the member. 3/ the member shall not be personally liable for debts due by the company in so far as he has fully made his contribution.
The capital of a one member private limited company shall not be less than 15,000 (fifteen thousand) Ethiopian Birr.
1/ the unilateral declaration incorporating a one member private limited company shall be made before an authority entrusted with authentication of documents and entered into the commercial register. 2/ the unilateral declaration shall indicate: a) that the company has only one member; b) the name, nationality and address of the member; c) The name of the nominee of the company who will act on behalf of the member or his heirs in the event of death or absence or judicial interdiction of the member; d) the acceptance by the nominee to shoulder responsibility; e) the company name, head office, and branches, if any; f) the business purpose of the company; g) the amount of the capital of the company and a statement that the capital has been fully paid; h) the valuation of contributions in kind, if any; i) the name and powers of the manager; j) the name of the auditor, if any; k) the period of time for which the company is established; l) the method and time within which performance report of the company is released; m) other particulars required to be included by the law or the member.
1/ A one member private limited company shall not be formed unless the nominee has declared his acceptance of the nomination before an authority vested with power to authenticate documents. 2/ A member may not become a nominee for more than a single one person company at a time.
Croprietorship to a One Member Private Limited Company A trader may convert his enterprise from a sole proprietorship into a one member private limited company. The trader shall, however, remain jointly and severally liable with the company for all debts incurred prior to the formation of the one person private limited company through conversion.
1/ a one member private limited company may not establish another one person private limited company. 2/ any interested party may apply to the court with jurisdiction at the place of incorporation for the dissolution of the company formed in violation of the provision of sub-Article 1 of this Article. 3/ Notwithstanding the provisions of Sub-Article (2) of this Article, the member and the company shall be jointly and severally liable for any damage incurred by third parties owing to the violation of the prohibition under Sub-Article (1) of this Article.
1/ Where the member makes a contribution in kind, the nature and the value of the contribution (or its estimate) shall be indicated expressly in the declaration submitted pursuant to Sub-Article (2)(h) of Article 536 2/ the member shall appoint, where there is contribution in kind, an auditor for the formation proceedings who shall verify the value of the contributions in kind. 3/ The auditor shall determine the method of valuation of contributions in kind and state that in the valuation report. 4/ the valuation by the auditor shall prevail over that of the member where the valuation by the latter is bigger than that of the auditor. 5/ the member and the auditor shall be jointly and severally for damage caused to third parties owing to overvaluation of the contribution in kind. 6/ No action may be brought on grounds of overvaluation under Sub-Article 5 of this Article after five years from the date on which the contribution was duly made to the company.
1/ A one member private limited company shall have a general manager who may be the member of the company himself or another person. 2/ The general manager shall have the powers and duties of the manager of a private limited company under this Code.
1/ the member of the company shall exercise the powers of the general meeting of shareholders of a private limited company under this Code. 2/ Decisions taken by the member in the exercise of the powers of a general meeting shall be reduced into minutes within three weeks from the meeting and kept as part of the records of the company. 3/ A resolution that introduce changes into matters included in the unilateral declaration incorporating the company shall be entered into the commercial register no later than one month from the date on which the decision is passed. 4/ Resolutions of a member shall be valid even where they do not comply with the provisions of this Article but the member of the company shall be jointly and severally liable with the company itself for any damage caused to third parties by the violation of these provisions.
Notwithstanding the provision of Article 534 Sub-Article (3) of this Code pertaining to limited liability of the member, the member of a one person private limited company or any other person who has control over the company directly or indirectly shall be jointly and severally liable with the company where he is found to have committed one of the following: 1/ intentionally commits an unlawful act that jeopardizes the interests of the company or creditors of the company; 2/ intermingles the assets of the company with his property; 3/ fails to keep separate his own personality and that of the company; 4/ deliberately releases regarding the financial status of the company information that can mislead the creditors of the company; 5/ make use of the assets of the company for himself or to benefit third parties without adequate payment being made the company; 6/ receives dividend in excess of the maximum that can be paid under the law or 7/ commits other similar acts.
1/ the dissolution of a one person private limited company that has settled all its debts and obligations shall result in the universal assignment of all the assets of the company to the member without liquidation of assets taking place. 2/ The member shall be personally liable for all the debts and obligations of the company if creditors appear after the dissolution has taken effect. 3/ Claims under Sub-Article (2) of this Article shall be barred after five years from the date on which the aggrieved party knew of the dissolution. No legal action can be lodged after ten years from the date when the transfer of the assets of the company to the member took place. 4/ Notwithstanding the provisions under Sub-Articles (1), (2) and (3) of this Article, the member may choose to follow the normal route of liquidation upon the dissolution of the company.
Without prejudice to the special rules of this Code on one person private limited company the rules governing private limited company shall apply as appropriate to this type of company.
1/ The conversion of a business organization from one type into another does not cause the creation of a new legal person but only amendment of the memorandum of association. 2/ The members may, as the case may be, decide on conversion unanimously, or by the majority required by the memorandum of association or this law. 3/ The decision shall not deprive a member, in whole or in part, of the right of membership or increase his liabilities without his consent. 4/ The conversion decision shall be published in a newspaper having wide circulation and on the website of the business organization, if it has one. 5/ The provisions of this Code governing the formation of the relevant new business organization shall apply without prejudice to the rights of third parties.
Notwithstanding the provisions of Article 546 Sub- Article (3) of this Code members of a share company or a private limited company who dissent, from the decision on conversion, may withdraw by selling their shares to the organization as provided under the provisions of Article 403 of this Code.
1/ The rights and duties of the former organization shall pass automatically to the new business organization as from the date on which the amended memorandum of association of the latter is entered in the commercial register. 2/ On entry into the commercial register of the amended memorandum of the new business organization, creditors of the former firm shall be required to establish their claim forthwith, and shall be informed that, unless they object thereto, they shall be deemed to be creditors of the new business organization. 3/The provisions of Article 484 of this Code shall apply to make calls for creditors. 4/ The organization shall pay creditors who make their objection to conversion pursuant to Sub-Article (2) of this Article or provide adequate guaranty to them, if it cannot pay. No payments of profit out of the assets of the firm shall be made to shareholders until all creditors have been paid. 5/ The general manager, or the secretary of the organization, as the case may be, shall cause the conversion of the firm to be published in a newspaper which has wide circulation. 6/ The general manager and the secretary of the business organization shall be jointly and severally liable for carrying out the provisions of Sub-Article (2) to (5) of this Article.
1/ the conversion of a firm shall not discharge partners with unlimited liability of their liability for undertakings entered into by the firm prior to the registration of the decision of conversion in the commercial register, unless it is proven that the creditors have approved the conversion. 2/ where a share company, private limited company or one person private limited company is converted into a partnership, the partners shall not be personally liable for debts incurred by the organization before the conversion. 3/ Approval of conversion shall be presumed where creditors have been informed of the decision of conversion by registered letter or an electronic means they had chosen, and have not expressly objected to the conversion in writing within thirty days from the date of the dispatch of such notification.
1/ a “group” is a set of companies comprising of the parent company and all its domestic and foreign subsidiaries, unless otherwise provided by law. 2/ a “subsidiary” is a company subjected to the control of another company, the “parent” company, either directly or indirectly through another company. 3/ a “parent” is a company that has subjected another company to control either directly or indirectly through the instrumentality of another company. 4/ the term “control” shall have the meaning provided under Article 552 for the purpose of Sub-Article (2) and (3) of this Article. 5/ for the purpose of this Title “company” shall mean a share company, private limited company, one person private limited company and as appropriate any other business organizations registered abroad that is of similar nature with these.
A “wholly-owned Company” is a company with no other shareholders except its parent company and any other subsidiary of its parent company or persons acting on behalf of its parent or such other subsidiaries.
1/ “Control”, for the purpose of this chapter, is the power to formulate and govern, alone or with other shareholders, the financial and operating policies of a subsidiary. 2/ Without prejudice to Sub-Article (1) of this Article control of a subsidiary exists where a company owns, directly or indirectly, shares with voting rights representing more than half of the capital in that subsidiary. Nevertheless, the legal effects of “control” shall not follow if, under exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. 3/ Where one company holds shares with voting rights representing half or less than half of the capital of another company, control exists over the second if the former has one or more of the following: a) the right to exercise more than half of the voting rights by virtue of an agreement with other shareholders; b) the right to control the financial and operating policies of the company under the memorandum of association or any agreement; c) the right to appoint or remove the majority of the members of the governing body, which has the power to run the business; or d) acquired the right to exercise the majority of votes at general meetings or an equivalent body and thus has actual control of the business. 4/ Control is presumed to exist under Sub-Article 3) (c) and (d) of this Article when a majority of the members of the governing body of a company has been appointed by a company holding half or less than half of the voting rights in the Relevant Company for two successive financial years. The Relevant Company is deemed to have effected such appointments if, during that financial year, it held a fraction of the voting rights greater than 40%, and if no other shareholder directly or indirectly held a fraction greater than its own.
1/ In calculating voting right for the purpose of determining whether there is control, rights to subscription and purchase of shares carrying voting rights that are currently exercisable or convertible are to be included. 2/ Any voting rights attaching to shares owned by the subsidiary itself or by its subsidiaries must be disregarded in the determination of the voting rights in a subsidiary held by the parent company.
1/ The management of the parent company must inform in writing the management of a subsidiary as soon as control has been established or removed. 2/ As soon as it is informed, the subsidiary, unless it is a foreign company and such obligation is not recognized by the law of the country whose rules apply to the subsidiary, must inform without delay the parent company of the number of shares and voting rights held by it in the parent company, and in any other companies.
1/ A subsidiary may not hold any shares directly or indirectly in the parent company. 2/ Where five per cent or more of the capital of one company is held by a second company, the first company may not hold shares in the second company even where there is no parent subsidiary relationship. 3/ Where two companies each have a capital holding in the other company and one of such holdings is five per cent or more of the capital, the companies shall declare their holdings to the Ministry of Trade and Industry or another pertinent authority which shall require the companies by agreement to reduce their holdings so as to conform to the provisions of sub-art (2). If the companies fail to agree, the Ministry of Trade and Industry or another pertinent authority shall order the company possessing the smaller holding to dispose of that holding. 4/ where the respective holdings are equal, and failing one company disposing of its shares in the other, each company shall reduce its holding to less than five per cent of the capital of the other. 5/ the companies shall furnish to the Ministry or another pertinent authority a written statement that they have complied with the foregoing provisions. The right to vote and participate in the distribution of profit conferred by the shares that should, thus, be transferred shall be suspended pending compliance with the provisions of this Sub-Article
1/ a parent company, acting as a shareholder in the general meeting of shareholders or through its board of directors or senior management has the right to give instructions to the organs of management of its subsidiaries. 2/ Subject to the conditions specified under Article 563 and the exception in Sub-Article (3) of this Article, the organs of management of a subsidiary shall comply with the instructions issued by the parent. 3/ Directors and managers who were not appointed by the parent company, but as a result of provisions in the memorandum of association, or a shareholders’ agreement or of any law or regulation are not bound by the instructions of the parent company. 4/ A non-wholly-owned subsidiary shall clearly indicate in the Commercial Register kept by the Ministry of Trade and Industry or another pertinent authority whether or not its management is directed by the parent. 5/ In the absence of a contrary disclosure, a wholly- owned subsidiary is presumed to be subject to instructions of its parent company and does not need to make a disclosure in the Commercial Register, except to disclose that it is wholly-owned.
The board of directors or a management body at equivalent status of the parent company has the right to obtain any information from a subsidiary, unless such communication would violate the law of another country which applies to the subsidiary or the rights of third parties.
1/ A parent company, controlling more than 90% of the capital and voting shares of the subsidiary, has the right to purchase the remaining shares from the other shareholders in the subsidiary. 2/ The provisions under Article 294 sub–Article (2) to (7) shall apply to such purchase.
1/ the relationship between the companies of the group, including companies formerly members of the group, are subject to the right of shareholder to information and the right to request a special investigation. 2/ Shareholders of the parent company shall, in particular, have the rights provided under Article 355, 358 and 381 Sub-Article (1) (a) and (b) with respect to subsidiaries of the company.
1/ A parent company whether registered in Ethiopia or abroad, must not itself or through another subsidiary exploit a corporate opportunity of a subsidiary unless it has received the approval of directors of the subsidiary that have not been appointed by it, and if there are none, of the non-controlling shareholders of the subsidiary. 2/ The prohibition imposed on a parent company under Sub-Article (1) of this Article shall not apply to a wholly owned subsidiary.
Investigation The shareholders of a subsidiary that hold voting shares that represent ten percent of the capital can request the conduct of a special investigation on the parent company in relation to a decision which has affected the interest of the subsidiary, under the same conditions as provided under Article 559
1/ When a parent company owns directly or indirectly more than ninety percent of the shares with voting rights in a subsidiary, the other shareholders may request that their shares be purchased by the parent company. 2/ The shareholders of a subsidiary can request in court that the parent company or another person designated by it purchase their shares. 3/ The provisions of Article 292 Sub-Article (2) to (5) shall apply to the sell-out necessary changes having been made.
1/ the management or director of a subsidiary that acts in a way contrary to the interest of the subsidiary, whether or not as a result of an instruction issued by the parent company, shall not be deemed to have acted in breach of their fiduciary duties only if: a) the decision is in the interests of the group as a whole; b) the management, acting on the basis of the information available to them and that would be available to them if they complied with their fiduciary duties before taking the decision, may reasonably assume that the damage will, within a reasonable period, be balanced by gain, and c) the damage is not such as would place the continued existence of the company in jeopardy. 2/ If the subsidiary is wholly-owned, Sub-Article (1) (b) shall not apply. 3/ The management of the subsidiary may refuse to comply with instructions from the parent company if the conditions set in Sub-Article (1) are not satisfied.
1/ Whenever a subsidiary company, which has been managed according to instructions issued by its parent even in the interest of the group, has no reasonable prospect, by means of its own resources, of avoiding dissolution or winding-up, the parent company shall without delay effect a fundamental restructuring of the subsidiary or initiate its winding-up procedure. 2/ If the parent company acts in contravention of Sub- Article (1) of this Article, it shall be held liable for any unpaid debts of the subsidiary incurred after the said crisis point. 3/ If the parent company has managed the subsidiary to the detriment of the subsidiary and in violation of the interest of the group, it shall be held liable for any unpaid debts of the subsidiary which are the consequences of the harmful instructions. 4/ The right to claim compensation provided for in Sub- Article 5 (2) and (3) of this Article can be invoked only by the liquidator or trustee of the subsidiary. The liquidator or trustee, as the case may be, is obliged to exercise such claim if creditors holding not less than 10 % of the debts of the subsidiary request that.
1/ Merger of business organizations is an operation whereby two or more organizations merge into one either by one of them acquiring the rest or two or more organizations forming a new organization and merging into the new one. 2/ a merger by the formation of a new organization is the operation whereby two or more business organizations are wound up without liquidation by transferring all their assets and liabilities to an organization they themselves form. The shareholders or partners of the business organizations that are wound up are issued in exchange shares in the new organization. They may also be given, as the case may be, additional payment in cash. 3/ a merger by acquisition is the operation whereby one or more business organizations are wound up without liquidation by transferring all their assets and liabilities to a preexisting organization. The shareholders or partners of the business organization that is wound up are issued in exchange shares in the acquiring organization. They may also be given, as the case may be, additional payment in cash. 4/ a business organization under liquidation to dissolve may merge with another organization before distribution of assets takes place. 5/ merger may take place between any forms of business organizations.
1/ Division is the operation whereby a business organization is wound up without liquidation by transferring all its assets and liabilities to more than one preexisting organizations or organizations newly formed by it. The shareholders or partners of the business organization that is divided are issued in exchange shares in the organizations to which the assets are divided. They may also be given, as the case may be, additional payment in cash. 2/ A division by acquisition is the operation whereby a business organization is wound up without liquidation by transferring all its assets and liabilities to more than one other preexisting organizations; the shareholders or partners of the business organization that is divided are issued in exchange shares in the organizations to which the assets are divided; they may also be given, as the case may be, additional payment in cash. 3/ A division by the formation of new organizations is the operation whereby a business organization is wound up without liquidation by transferring all its assets and liabilities to organizations formed by it. The shareholders or partners of the business organization that is divided are issued in exchange shares in the organizations to which the assets are divided. They may also be given, as the case may be, additional payment in cash. 4/ Dividing a certain portion of asset means separating a business unit that can subsist separately or part of assets of an organization and transferring the same to a business organization that is under formation or to an existing organization by way of contribution. 5/ Division may take place into any type of business organization.
1/ Merger or division plan shall be drawn up by each of the business organizations that participate in the merger or division and signed by the chairperson of the board of directors, or where the organization has no board, by the general manager. 2/ The merger or division plan must state the following: a) The type, name and address of the head office of each of the business organizations involved in the merger or division; b) Where the merger or division, as the case may be, results in the creation of a new business organization, the type, name and the address of its head office; c) The economic rationale and condition of the merger or division; d) The approved, annual, consolidated financial report of each of the organizations involved; e) A description of the assets or business unit that can subsist separately and liabilities that are transferred to the acquiring or newly formed business organization, estimate of their value and how the valuation was done; f) The ratio applicable to the exchange of shares to be allotted owing to the merger or division and the determination of the amount of payment in cash, if any; the date from which the holding of such shares entitles the holder to participate in profits and any special conditions affecting that entitlement. g) The amount of money to be paid to members that leave owing to their opposition to the merger or division; h) The date from which the transactions of the business organization being acquired or divided shall be treated as being those of the acquiring or newly formed business organization; i) The names of partners with unlimited liability, if any; j) The rights and benefit to be accorded to preferred shareholders; k) The duties and liabilities that the merger or division causes and its impact on creditors; l) Comprehensive information regarding any payments or benefits paid or given or intended to be paid or given to independent experts or auditors for the evaluation of the merger or division plan and m) A draft memorandum of association and other pertinent information if a new business organization is to be formed as a result of the merger or division.
1/ The board of directors or the general manager, if the business organization does not have a board, of each of the merging or dividing business organization shall draw up a detailed written report explaining the merger or division plan to the general meeting of the shareholders or members of the organization. 2/ The report indicated under Sub-Article (1) of this Article shall include the following: a) Economic goals of the merger or division, and legal grounds if any; b) Merger or division agreement; c) The number of shares to be given to shareholders or partners in exchange, the manner in which the allotment is determined and the amount of payment in cash, if any; d) The payment in cash that is to be made to shareholders or partners that leave the business organization owing to their disapproval of the merger or division; e) Where the merger requires prior approval indication that approval has been secured from the pertinent body; f) The possible impact of the merger or division on the employees of the business organizations that engage in the merger or division and g) Any other relevant information.
1/ The merger or division plan, report and other necessary conditions for the merger or division shall be examined by an independent and impartial expert. 2/ Each of the business organizations involved in the merger or division shall appoint its own independent and impartial expert for the examination. Notwithstanding the foregoing a joint expert may be appointed where all the business organizations involved in the merger or division have agreed to that effect. The independent and impartial expert shall be appointed pursuant to the rules set out in this book for the appointment of the auditor of a share company. 3/ The business organizations involved in the merger or division shall provide to the experts all the documents and other information necessary for the conduct of the examination. 4/ The independent and impartial expert shall submit, in writing, to the shareholders or partners of the business organization that appointed him his own opinion regarding the matters that follow:- a) Whether, in the experts opinion, the number and type of shares to be issued in exchange to the members of the business organizations involved in the merger or division is fair and reasonable; b) The method used to arrive at the share exchange ratio and type of shares proposed, and his opinion as regards whether such method is appropriate in the case in question, and describe any special valuation difficulties which have arisen, if any; c) Whether the payment proposed to be made to shareholders or partners that may leave the business organizations owing to their disapproval of the merger or division is appropriate; d) a declaration as to whether the creditors of each of the business organizations involved in the merger or division, whose claims antedate the publication in a newspaper of the merger or division plan and have not fallen due at the time of such publication, can be considered to be sufficiently protected after the merger or division; e) a statement as to whether the financial situation of the business organizations involved in the merger or division poses a particular risk to the rights of the creditors and proposed safeguards to be implemented. 5/ The body that registers business organizations may exempt business organizations from the duty to conduct evaluation of merger or division, having regard to their annual turnover or balance sheet, where these are below a certain threshold.
1/ the merger or division plan, merger or division report, the report submitted by impartial expert and other relevant information shall be made available at the head office and branches of the business organization one month ahead of the meeting called to approve the merger or division. 2/ The shareholders and creditors of each of the business organizations participating in the merger or division must be able to inspect and take copies of the documents indicated under Sub-Article (1) of this Article
1/ The merger or division must be approved by the general meeting of each of the business organizations participating in the merger or division pursuant to the rules that apply to the amendment of the memorandum of association of the business organization. 2/ The merger or division must also be approved by the special meeting of shareholders having preferred shares where the business organization engaged in merger or division is a share company that happens to have different classes of shares.
1/ The merger or division plan shall be publicized via a newspaper having a nationwide circulation once a month for two months starting from the date on which the plan is approved by the general meeting. The notice must, likewise, be posted at the head office of the business organization undergoing merger or division. 2/ The notice indicated under Sub-Article (1) of this Article must also be posted on the website of the business organization undergoing merger or division, in so far as the organization happens to have a website. 3/ The notice publicized pursuant to Sub-Articles (1) and (2) of this Article shall indicate where and how the merger or division plan, he report drawn up by an impartial expert and the report prepared by the board of directors or, as the case may be, by the general manager can be found. It shall also indicate the deadline within which creditors may raise their objections.
Merger or division shall be effective: 1/ Starting on the date of entry into the commercial register of the new business organization created as the result of the merger or the new business organizations created owing to the division. 2/ Itwillbe effective on the date of entry of the amendments to the memorandum of association of the pre-existing business organization into the commercial register, if the merger or division results from a course of action other than those indicated under Sub-Article (1) of this Article.
1/ Merger or division shall have the effects that follow. a) The winding up of the business organization that ceases to exist without the need for liquidation; b) The transfer of all the assets and liabilities of the business organization that ceases to exist owing to the merger or division to the acquiring or newly formed business organization; c) The issuance of shares in exchange to the shareholders or partners of the business organization that is wound up in the acquiring or newly formed business organization, and payment in cash, if need be, on the basis of the conditions set out in the merger or division plan; d) Conferral of shares on members of the business organization that transferred a portion of its assets or a business unit to a business organization under formation or to an existing organization in the transferring organization itself or the newly formed business organization or the organization to which the assets are transferred, depending on the terms of their agreement. 2/ Notwithstanding the provisions under Sub-Article (1) (c) and (d) of this Article, no shares shall be issued in exchange for the shares in the business organization engaged in merger or division under the following circumstances: a) shares held in the business organization undergoing merger or division by the acquiring business organization itself directly or indirectly through a person acting in his own name but on its behalf; b) shares held in the business organization undergoing merger or division by such organization in itself directly or indirectly through a person acting in his own name but on its behalf. 3/ Starting on the effective date, the merger or division may only be annulled by order of the court. 4/ The court may annul a merger or division pursuant to Sub-Article (3) of this Article only if, the requirements of this law for drawing up a merger or division plan or approval of the plan by the general meeting of shareholders or partners, as the case may be, of each of the business organizations that underwent merger or division have not been observed.
1/ The shareholders or partners of the business organization shall be issued, based on the terms of the merger or division plan, shares and rights in exchange, in the acquiring or newly formed business organization, that are equal or equivalent to those they had in the business organization that was wound up or divided. 2/ Where shareholders or partners could not be issued, pursuant to Sub-Article (1) of this Article, shares that are equivalent to those that they had in the business organization that was wound up or divided they shall be paid in cash an amount that does not exceed 10% (ten percent) of the value of the shares issued to them. 3/ shareholders who had held non-voting shares or dividend shares in the business organization that is wound up or divided shall be issued shares that confer similar or equivalent rights in the acquiring or newly formed business organization. 4/ shareholders who held preferred shares in the acquired or divided business organization shall be issued shares that confer equivalent rights.
1/ Creditors whose claims against the business organizations participating in merger or division antedate the publication of the merger or division plan in a newspaper and have not fallen due at the time of such publication may petition the court to grant them adequate securities if one of the following conditions is fulfilled. a) where the assessment conducted by an impartial expert pursuant to Article 569 (4)(d) of this Code concludes that the creditors are not sufficiently protected after the merger or division or b) If the impartial expert concludes the financial standing of the business organizations involved in the merger or division poses a particular risk to the rights of creditors and gives opinion regarding safeguards to be implemented. 2/ The creditors must file their claim for adequate security pursuant to Sub-Article (1)(a) and (b) of this Article within sixty consecutive days from the first publication of the merger or division plan in a newspaper pursuant to Article 572(1). 3/ The court may order each business organization involved in the merger or the business organization to be divided to pay the creditors or provide adequate security for the payment of the debt.
1/ Where the meeting of the debenture holders of the business organizations to merge or the organization to be divided disapproves the merger or division, the debtor organization shall redeem the debentures by paying the par value and interest due on the debentures to the debenture holders who submit their application within sixty consecutive days from the first publication of the merger or division plan in a newspaper. 2/ The provisions under Sub-Article (1) of this Article shall, likewise, apply to debenture holders of business organizations creating a new business organization by merger or division. 3/ Where the business organization announces that it will pay the par value and interest to debenture holders, it shall redeem the debentures from all those who prefer that, without the need for convening the meeting of debenture holders, by making the appropriate payment. 4/ The debenture holder that fails to submit his application within the time prescribed under Sub-Article (1) of this Article shall be a creditor of the acquiring or newly formed business organization, as the case may be.
1/ A branch is a fixed establishment of a foreign sole proprietorship, business organization or a similar entity that is staffed and set up to pursue economic activity for gain on behalf and for the account of the said party for a definite or indefinite period. 2/ The branch does not have an autonomous legal entity distinct from that of the sole proprietorship, business organization or the similar entity that owns it. 3/ The rights and obligations arising from its activity shall be part of the assets of the sole proprietorship, business organization or the similar entity that owns it.
A foreign sole proprietorship, business organization or a similar entity incorporated abroad may operate via a branch in Ethiopia provided it is entered into the Commercial Register kept by the Ministry of Trade and Industry or another pertinent authority.
Without prejudice to the disclosure requirements imposed by other laws, the following information shall be provided at the time of registration of a branch in the commercial register. 1/ the type of business activity in which the branch is to engage; 2/ the law of the foreign state by which the sole proprietorship, business organization or similar entity that owns the branch is governed; 3/ the register in which the sole proprietorship, business organization or similar entity that owns the branch is entered into and the registration number; 4/ the name and legal form of the sole proprietorship, business organization or similar entity that owns the branch; 5/ Preventive restructuring, reorganization, bankruptcy proceedings or any analogous proceedings to which the sole proprietorship, business organization or similar entity that owns the branch is subject; 6/ The accounting documents of the sole proprietorship, business organization or similar entity that owns the branch as drawn up, audited and disclosed pursuant to the foreign law of the State by which it is governed, and 7/ A copy of the certificate of incorporation or establishment of the sole proprietorship, business organization or similar entity, memorandum, Articles of association, or documents that substitute these in the foreign country of the firm’s establishment. These documents must also be translated either into English or Amharic.
1/A branch must have its own manager, who fulfills the eligibility requirements for directors of a share company provided under Article 297 of the law. 2/ A branch manager shall have the power to represent the foreign sole proprietorship, business organization or similar entity to some extent. 3/Subject to the provisions of Sub-Article (2) of this Article, the branch manager shall, at a minimum, have the power to represent the foreign sole proprietorship, business organization or similar entity in legal proceedings.
Without prejudice to duties imposed on him under any other law, a branch manager shall: 1/ Annually file into the Commercial Register maintained by the Ministry of Trade and Industry or any other pertinent authority the accounting documents of the foreign sole proprietorship, business organization or similar entity as drawn up, audited and disclosed pursuant to foreign law of the state by which the foreign sole proprietorship, business organization or similar entity is governed. 2/ Provide an English or Amharic translation of the balance sheet or similar financial statement that can help creditors assess the financial standing of the foreign sole proprietorship, business organization or similar entity and file that along with the documents required to be filed under Sub-Article 1 of this Article 3 Enter into the Commercial Register a statement disclosing the commencement of bankruptcy proceedings, arrangements, compositions, or any analogous proceedings regarding the foreign sole proprietorship, business organization or similar entity owning the branch, as soon as he comes to know that.
A branch shall be removed from the Commercial Register if any of the following occurs. 1/ the foreign sole proprietorship, business organization or similar entity that owns the branch is dissolved; 2/ The branch is closed; 3/ The branch has no manager and this is not remedied within six months from the removal of the previous manager; 4/ The branch manager has failed to file, as soon as reasonably possible, accounting documents and other statements regarding the foreign sole proprietorship, business organization or similar entity as required under Article 582 of this law and 5/ A branch creditor establishes that his claim cannot be satisfied out of the assets that the foreign sole proprietorship, business organizations or similar entity has within Ethiopia.
in Ethiopia Business organizations incorporated abroad or sole proprietorships established outside Ethiopia and whose head office or principal place of business is in Ethiopia shall be subject to the relevant provisions of this Code and other laws of Ethiopia.
Abroad The provisions of this Code shall apply to business organizations or sole proprietorships incorporated or established pursuant to Ethiopian law and operating abroad.
Recognized by this Law Firms incorporated abroad, having a form which differs from those provided for under this law, shall be subject to the provisions of this law concerning share companies, as appropriate, regarding entry into the commercial register of resolutions of general meetings of shareholders and the liability of directors.
Nothing in this law shall affect the application of other Ethiopian laws prohibiting, or subjecting to special conditions, the exercise of certain activities by firms in which foreign interests are represented.
1/ The objective of preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings is to promote economic stability, maximize the value of the estate and ensure legal certainty and transparency through efficient, effective and timely procedures. 2/ The objective of preventive restructuring proceedings is to ensure that, with the unanimous consent of affected creditors, viable debtors in financial difficulties are able to contractually, at early stage, efficiently and effectively restructure their debts and continue operating, or to prepare for the sale of the business as a going-concern. 3/ The objective of reorganization proceedings is, with the consent of a qualified majority of affected creditors, to timely, efficiently and effectively restructure the debts as well as operations of the debtor in a reorganization plan or realize the sale of its business as a going-concern to the benefit of its creditors. 4/ The objective of bankruptcy proceedings is to timely, efficiently and effectively organize the liquidation of the debtor’s business, whether by piecemeal liquidation or by a sale of business as a going-concern, in order to maximize the value of the assets available for recovery by creditors, to ensure for honest debtors a fresh start after a full discharge of their debts and to provide for sanctions against debtors and their management as well as creditors that are responsible for its bankruptcy.
1/ The proceedings referred to in this Book shall apply to traders and business organizations, other than joint ventures having no legal personality, as well as craftsmen and natural persons exercising independent professional activities. 2/ Without prejudice to the special laws regulating preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings of banks and other financial institutions, the proceedings referred to in this Book shall be applicable to banks and other financial institutions. 3/ Without prejudice to the special laws regulating preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings of state- owned enterprises (SOEs), the proceedings referred to in this Book shall apply to SOEs. 4/ Special laws may be issued for preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings of specialized business activities.
1/ Cessation of payments shall occur when the debtor is unable to pay its debts which are due and payable with its liquid assets. 2/ For the purpose of Sub-Article (1), liquid assets shall include credit reserves, overdraft and similar facilities available to the debtor. 3/ Debts which are granted grace periods, moratoria or debts which are the subject of standstill arrangements shall not be considered to be due and payable. 4/ For the purpose of Sub-Article (1) of this Article, debts shall be considered due and payable only after the creditor has given a default notice as required by law.
1/ At the hearing for opening the proceedings, the Court shall verify whether the debtor is in cessation of payments and fix the date of cessation of payments. 2/ The court may, at its discretion, appoint an investigator for the purpose of investigating into the affairs and activities of the debtor; The investigator so appointed may request the assistance of the supervisor in reorganization or the trustee in bankruptcy, where one has already been appointed. 3/ Unless an extension is given by the court, all information collected by the investigator shall be reported to the court within thirty days. 4/ Within one year after the opening of proceedings, the supervisor in reorganization, the trustee in bankruptcy, any controller, the public prosecutor or a creditor may file an application to the court to reassess and redetermine the date of cessation of payments; The court may for this purpose appoint an expert to investigate the affairs and activities of the debtor. 5/ The period from the date of cessation of payments as fixed by the court in accordance with Sub-Article (1) until the date of the opening of proceedings shall be considered as a suspect period; The duration of the suspect period may not exceed a maximum period of eighteen (18) months.
1/ For the purpose of this Book, pre-insolvency claims refer to all the claims that arise prior to the opening of reorganization proceedings, or bankruptcy proceedings, as the case may be, including interests thereon, irrespective of whether these claims are due and payable. 2/ In the case of ongoing contracts, claims arising from the continued performance of the contract after the opening of reorganization proceedings or bankruptcy proceedings, as the case may be are post-insolvency claims. 3/ In the case of the termination of ongoing contracts by the supervisor- in reorganization or the trustee- in bankruptcy, penalties and other forms of indemnities resulting from the termination shall be considered to be pre-insolvency claims.
1/ The opening of preventive restructuring, reorganization and bankruptcy proceedings shall not affect the continuation of ongoing contracts. 2/ Ongoing contracts are contracts, including, but not limited to, essential services contracts and immovable business property leases where the debtor carries on his business, including premises forming part thereof and occupied by himself or his family, between the debtor and one or more creditors under which, at the moment of the opening of proceedings, at least one
1/ Creditors may submit an opposition to the decision to continue or terminate an ongoing contracts; Such opposition shall be filed within seven consecutive days from the date of the decision of the supervisor-in reorganization or trustee- in bankruptcy. 2/ Any opposition shall be decided by the supervisory judge within seven consecutive days of filing. 3/ An appeal may be filed with the court on the decision of the supervisory judge within ten consecutive days of such decision..
1/ Notwithstanding the provisions of Article 593 of this Code where immovable property business leases are continued, any contractual provisions providing for immediate payment of leases before the end of such period shall be ineffective during the first four months of the observation period in reorganization proceedings or during the duration of the continuation period as provided under Article 744 in bankruptcy proceedings. 2/ Where immovable property business leases are continued, and the lessor has received payment of all lease installments at the conclusion of the lease agreement or has received adequate securities for such payment, the lessor may not demand any current and future lease installment arising after the opening of the proceedings. 3/ Notwithstanding any contractual provisions, the trustee- in bankruptcy may assign lease agreements for the remaining period; provided that the purpose for which the business premises are utilized may not be changed; Where appropriate, the supervisory judge may authorize such change.
Notwithstanding the provisions of Article 593 of this Code the following contracts shall be governed by the relevant laws: 1/ Employment contracts; 2/ Banking and insurance contracts; 3/ Administrative contracts; 4/ Contracts concluded within the framework of financial markets, including stock exchange.
1/ The overarching principle of proceedings set out in this Book is to protect the legitimate interests of creditors. 2/ In preventive restructuring proceedings, the restructuration plan shall be approved unanimously by all affected creditors. 3/ In reorganization proceedings, the reorganization plan shall be approved by a predetermined qualified majority of affected creditors and the sale of the business as a going-concern shall be approved by a majority of creditors. 4/ In bankruptcy proceedings, the sale of the business as a going-concern in total, or of substantial portion thereof shall be approved by a majority vote of creditors.
Creditors shall have the right to present their opinions and be heard at court hearings throughout proceedings.
1/ A creditor, a group of creditors, a class of creditors or the general creditors' meeting shall have the right to request all relevant information from expert of the restructuring field, the supervisor- in reorganization and the trustee- in bankruptcy. 2/ Such a request shall be made in writing and the expert in the field of preventive restructuring, the supervisor in reorganization and the trustee in bankruptcy shall provide a response within ten consecutive days from the receipt of such request, and shall satisfy the request as quickly as possible. 3/ Where a request is unjustified or overly burdensome, the expert of the preventive restructuring field, the supervisor in reorganization and the trustee in bankruptcy may decline such request.
1/ The Ethiopian Court having jurisdiction in preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings shall be the Federal High Court of the place where the individual’s principal place or the registered office of the company or the legal person is situated. 2/ The Court having opened preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings shall have jurisdiction for actions which derive directly from these proceedings and are closely linked with them, such as actions regarding: a) the restructuring and reorganization plan; b) the confirmation of the sale of the business as going-concern; c) ongoing contracts; d) liability of the supervisory judges, trustees of the debtors’ estate, controllers and directors ; e) submission, verification and admission of claims; f) rights in rem; g) set-off; h) the sale or transfer of assets; i) ranking of claims; j) distribution of proceeds from sale; k) invalidation of acts; l) validation and enforceability of contracts; m) the discharge of the debtor; n) closure of the proceedings.
1/ Each legal entity of a group of companies and their estates shall remain independent. The Court may not extend the proceedings opened in favor of an entity of the group of companies to another legal entity or physical person. 2/ The Court having first opened proceedings for a legal entity of a group of companies shall have territorial jurisdiction to open proceedings for other group members; The Court may appoint the same supervisor in reorganization or trustee in bankruptcy for all proceedings of the group. 3/ Where two or more legal entities of a group of companies are subject to proceedings which have been opened by one or several Courts in Ethiopia, such Courts, supervisors and the trustees shall cooperate and coordinate, to the extent possible, to establish a reorganization plan or facilitate the sale of the business as going-concern for the various members of the group. 4/ The cooperation and coordination referred to in Sub- Article (3) of this Article, may be implemented by any means that the Court, the supervisor in reorganization and the trustee in bankruptcy consider appropriate, in particular through: a) coordination in the appointment of supervisors in reorganization and trustees in bankruptcy; b) communication of any relevant information; c) coordination of the administration and monitoring of the assets and affairs of the group members; d) coordination of the conduct of hearings; e) coordination in the approval of the global reorganization plan or of the sale of the business as going-concern for various or all entities of the group.
1/ The Ethiopian Courts shall have jurisdiction to open main proceedings if the center of the debtor’s main interest is situated in Ethiopia; The center of main interest shall be the place where the debtor conducts the administration of its interest on a regular basis and which is ascertainable by third parties; In the case of a company or legal person, the place of the registered office shall be presumed to be the center of its main interests in the absence of proof to the contrary; In case of a physical person, the center of its main interests shall be presumed to be the principal place of business in the absence of proof to the contrary. 2/ The judgment rendered for the opening of preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings with respect to a debtor having its center of main interest in Ethiopia shall have universal effect. 3/ Ethiopian Courts shall have jurisdiction to open territorial proceedings in respect of local assets if an establishment of the debtor is situated in Ethiopia; The establishment shall be the place of operations where the debtor carries out a non-transitory economic activity with human means and assets. 4/ The effects of territorial proceedings of the debtor having an establishment in Ethiopia shall be restricted to the assets of the debtor situated in the territory of Ethiopia. 5/ Ethiopian Courts shall have jurisdiction to adjudicate actions which derive directly from such proceedings and are closely linked with them as referred to in Article 600(2) of this Code.
1/ The judgment for opening preventive restructuring, reorganization, bankruptcy proceedings as well as insolvency-related judgments handed down by the jurisdictions of another originating State shall only be recognized by Ethiopia jurisdictions provided that: a) the foreign judgment is not contrary to Ethiopia’s public order, including its fundamental principles of procedural fairness; b) the foreign judgment has not been obtained by fraud; c) the foreign judgment has been handed down by a competent Court in accordance with Ethiopia's conflict of jurisdictions rules; d) the foreign judgment is in line with international treaties or agreements signed by Ethiopia; e) no preventive restructuring proceedings, reorganization proceedings and bankruptcy proceedings have been opened in Ethiopia with respect to the same debtor; f) the foreign judgment is not inconsistent with a judgment issued in Ethiopia in a dispute involving the same parties; g) upon its exequatur, the effects of the foreign judgment rendered for opening insolvency proceedings is limited to the assets of a debtor situated in the territory of Ethiopia; h) the foreign judgment has effect and is enforceable in the originating State; and i) the recognition and enforcement of the foreign judgment would not interfere with the administration of the debtor’s insolvency proceedings or would not conflict with a stay or other order issued in insolvency proceedings relating to the same debtor commenced in Ethiopia. 2/When application is filed for recognition and enforcement of a foreign judgment rendered for opening preventive restructuring, reorganization, bankruptcy and insolvency proceedings as well as an insolvency-related foreign judgment, the following evidence shall be submitted to the Court: a) A certified copy of the insolvency-related foreign judgment; and b) Any documents necessary to establish that such foreign judgment has effect and is enforceable in the originating State; or c) in the absence of evidence referred to in Sub-Article (2) paragraphs (a) and (b) of this Article, any other evidence on those matters acceptable to Ethiopian Courts. 3/ Subject to international agreements or conventions, the supervisor in reorganization proceedings and the trustee in bankruptcy proceedings shall not accept a request for claims of tax or customs duty and fine that are based on decisions of foreign governments.
1/ The Court which has opened reorganization or bankruptcy proceedings shall supervise all proceedings and shall make orders on matters which are outside the powers of the supervisory judge; It shall hear appeals from orders of the supervisory judge. 2/ The Court shall have the power to hear and decide on all cases connected with reorganization and bankruptcy proceedings, including matters referred to in Article 600(2) of this Code.
The Court shall appoint a supervisory judge in the judgment rendered for opening reorganization and bankruptcy proceedings. The supervisory judge shall be selected from among the members of the Court but may not be a member of the Court which opens these proceedings.
The supervisory judge shall have the following powers: 1/ receive pre-insolvency claims against the estate; 2/ take or cause to be taken by the appropriate authorities all steps and measures necessary to preserve the assets; 3/ authorize transactions or agreements which are outside the ordinary course of business; 4/decide on the continuation or termination of ongoing contracts; 5/authorize the payment of pre-insolvency claims; 6/ decide on the disputes arising in connection with the constitution of the classes of creditors.
Orders of the supervisory judge shall be deposited without delay in the Court registry and shall be notified to all interested parties by a registered letter or any other electronic means with a receipt of acknowledgement.
The court may at any time, of its own motion, replace the supervisory judge by other supervisory judge for a justified cause.
All decisions, judgments and orders of the bankruptcy court or of the supervisory judge shall be enforceable immediately.
The supervisor in reorganization and the trustee in bankruptcy shall be chosen from among the members of relevant similar professions.
1/ Experts in the field of restructuring, supervisors in reorganization and trustees in bankruptcy shall be bound by rules of professional conduct and ethical standards appropriate to their respective professions. 2/ Special regulations shall be issued to regulate further persons and bodies to be appointed in the proceedings.
1/ The court shall appoint supervisors in reorganization and trustees in bankruptcy from among qualified members of legal, accounting, auditing, finance, management and similar such professions having relevant experience; In appropriate cases, the court may appoint supervisors in reorganization and trustees in bankruptcy from members of other professions where it deems that a particular person has the requisite qualifications to carry out his duties with competence. 2/ Special regulations shall be issued governing matters such as qualifications, competence, licensing, supervision, liability, outgoing and professional rules of conduct of supervisors in reorganization and trustees in bankruptcy.
Reorganization and Trustees in Bankruptcy Supervisors in reorganization and trustees in bankruptcy shall: 1/ be competent to undertake the work for which they are appointed and to exercise the powers given to them; 2/ act with integrity, impartiality and independence; 3/ be subject to removal by the court for incompetence, negligence, fraud or other wrongful conduct.
1/ Supervisors in reorganization and trustees in bankruptcy shall: a) be deemed to be public officials in the exercise of their functions; b) carry out their duties with all necessary care; c) be liable for gross negligence or willful misconduct, open-mindedly special causes of liabilities set out in this Book or in other regulations. 2/ The supervisor and the trustee who replace the supervisor in reorganization or trustee in bankruptcy, a controller, the public prosecutor and the debtor in possession in reorganization proceedings may bring a liability action against the supervisor in reorganization or the trustee in bankruptcy before the court that shall have exclusive jurisdiction to hear such cases. 3/ Any action under Sub-Article (2) shall be time barred where it is not brought within one year from the closure of the proceedings; Such timeline shall not be subject to any interruption or suspension.
1/ The following persons shall not be appointed as supervisors in reorganization and trustees in bankruptcy: a) any person who has been convicted of any offence involving a breach of trust or fraud, whether in Ethiopia or in other country; b) any person who has been sentenced to deprive his civil rights; c) any shareholder, manager or director of the debtor; d) any person related by consanguinity or affinity inclusive of and up to a fourth degree a shareholder, manager or director of the debtor; e) any creditor of the debtor; f) any person having or likely to have conflict of interests. 2/ The supervisor in reorganization and the trustee in bankruptcy shall not acquire any asset or property of the debtor through purchase or other means; Any acquisition in violation of this provision shall be of no effect; Supervisors in reorganization and trustees in bankruptcy who violate this rule shall be removed.
1/ The supervisor in reorganization and the trustee in bankruptcy shall be entitled to a reasonable remuneration in order to carry out their duties and exercise their powers, taking into consideration, in particular, the complexity of the case. 2/ The court shall fix the reasonable remuneration in the judgment for opening reorganization or bankruptcy proceedings. 3/ The court may, on the application of the supervisor in reorganization, the trustee in bankruptcy, a manager of the debtor or a creditor, review the supervisor or trustee’s remuneration at a level that is reasonable in the circumstances. 4/ The supervisor in reorganization and the trustee in bankruptcy shall not be entitled to receive any other amount except as a reimbursement of their costs and expenses to be paid out of the estate. 5/ The particulars of the remuneration may be determined in special regulations.
1/ Preventive restructuring proceedings shall be available upon the sole application of a debtor, which is not yet in cessation of payments or has been in cessation of payments for less than forty-five days and faces actual or foreseeable economic or financial difficulties. 2/ The debtor shall provide the bankruptcy Court with its latest financial statements, a memorandum outlining the circumstances of its financial difficulties and means to resolve them, as well as cash-flow projections; The Court may order the debtor to provide any further documentation and information it deems necessary and may order third parties such as banks or tax authorities to provide them. 3/ Without prejudice to the mandatory laws of Ethiopia, restructuring may include changing the composition, conditions or structure of a debtor's assets and liabilities or any other part of the debtor's capital structure or sales of assets or parts of the business or the whole business as a going-concern, as well as any necessary operational changes, or a combination of those elements.
1/ The preventive restructuring plan shall be concluded with the affected creditors within four months. 2/ Notwithstanding the provisions of Sub-Article (1) of this Article, the Court may grant an extension provided that the debtor demonstrates that it is likely that the restructuring plan would be accepted unanimously by the affected creditors; The total duration for the plan to be concluded, including extensions and renewals, shall not exceed eight months. 3/ The debtor’s obligation to file for the opening of bankruptcy proceedings shall be suspended for the duration of the preventive restructuring proceedings.
Restructuring The president of the Court shall appoint, upon the suggestion of the debtor, an expert in the field of restructuring for the duration of the proceedings.
1/ At any time during proceedings, a creditor may file an application to the Court for the replacement of the expert in the field of restructuring. 2/ The Court may grant such an application in its own discretion. 3/ Notwithstanding Sub-Article (2), the Court shall grant such an application and appoint the expert in the field of restructuring suggested by the applicant where creditors, representing two-third of the total amount of claims subject to the preventive restructuring proceedings, support such appointment.
1/ Acting independently, the expert in the field of restructuring shall, among others, carry out the following tasks: a) determine the creditors participating in the preventive restructuring proceedings; b) assist the debtor and the creditors in drafting and negotiating a restructuring plan; c) convene and preside over the creditors’ meetings; d) supervise the activities of the debtor during the negotiations on a restructuring plan and report periodically to the Court on the progress of the negotiations; e) present the restructuring plan to the Court for confirmation; and f) prepare the sale of the business as a going-concern, as the case may be. 2/ In discharging his duties, the expert in the field of restructuring may: a) order the debtor or any third party to provide necessary additional financial or accounting information; b) appoint independent experts including to audit the financial situation and business plan of the debtor.
Restructuring The remuneration agreed upon between the debtor and the expert in the field of restructuring shall be subject to approval by the Court at the time of the appointment.
The opening of preventive restructuring proceedings including information exchanged during the proceedings and the restructuring plan shall remain strictly confidential; and the Court proceedings shall be held in camera; any violation of this provision shall result in civil and criminal liabilities in accordance with relevant laws.
During the preventive restructuring proceedings, the debtor shall remain in possession and shall have the power to take all decisions falling within the ordinary course of business; Any decision outside the ordinary course of business, such as the sale of significant portion of assets and the creation of a security interest, shall require the prior approval of the expert in the field of restructuring.
1/ In order to support the negotiations of a restructuring plan, the debtor may apply to the Court for a single stay against a creditor who has requested payment of its claim or has instituted enforcement actions; the Court shall decide hearing the observations of the expert in the field of restructuring. 2/ Single stay of actions means a temporary suspension on the enforcement of a claim by a single creditor against a debtor or a third party security provider; the stay of actions shall cover all types of claims, including secured and preferential claims. 3/ The total duration of the single stay of actions shall not last longer than the duration of the preventive restructuring proceedings.
1/ The debtor shall pay all debts arising in the ordinary course of business, except for the claims already subjected to a single stay as provided for in Article 625 of this Code. 2/ Where the debtor anticipates that he will be unable to pay all debts arising in the ordinary course of business, the debtor shall file for the opening of reorganization proceedings. 3/ In case of cessation of payments, the debtor shall file for bankruptcy proceedings in accordance with sub article 2 of Article 705
1/ The restructuring plan is prepared by the debtor with the assistance of the expert in the field of restructuring; The creditors shall have the right to seek to amend the restructuring plan and make counter-proposals. 2/ The restructuring plan shall be accepted by all affected creditors participating in the preventive restructuring proceedings. 3/ The restructuring plan may provide for: a) the rescheduling of the claims of the affected creditors; b) the waiver of claims of the affected creditors; c) the settlement of claims through the issuing of financial debt instruments subject to laws regulating the issuance of financial debt instruments; d) the conversion of claims of the affected creditors into equity; e) without prejudice to the mandatory provisions of this Code, the reduction or increase of capital of the debtor to be subscribed to by creditors or third party investors; f) the sale of existing or issuance of new shares in favor of creditors or third party investors.
1/ The new financing shall be approved by the Court within the framework of the homologation of the restructuring plan. New financing means any new financing provided by an existing or a new creditor in order to implement a restructuring plan, included in that restructuring plan and subsequently approved by the Court. 2/ The grantors of new financing shall not incur civil, administrative or criminal liability on the ground that such financing is detrimental to the general body of creditors. 3/ New financing shall have priority over unsecured creditors in case of the subsequent opening of bankruptcy proceedings.
1/ The restructuring plan shall be approved by the Court. 2/ The Court in approval of the restructuring plan shall verify that: a) third parties’ interests are adequately protected in particular with respect to the taking of security interests and in the framework of new financing; b) the restructuring plan has a reasonable prospect of preventing the bankruptcy of the debtor and assuring the viability of the business. 3/ In the event that terms of the restructuring plans require the approval of the shareholders, such approval shall be made in accordance with the provisions of the Commercial Code. 4/ In case of new financing, the extract of the judgment indicating the privileged amount of new financing shall be publicly available. 5/ Guarantors may claim their right by invoke the benefit of the terms of the restructuring plan; any dispute arising in relation to this Sub-Article shall be heard by the Court opening preventive restructuring proceedings. 6/ Upon approval by the Court, the restructuring plan shall be deemed to constitute an executor title.
1/ The debtor may appeal against the judgment of the Court rejecting the restructuring plan. 2/ Appeals presented in accordance with Sub -Article (1) of this Article shall be filed within ten consecutive days from the judgment rendered rejecting the restructuring plan.
Third parties may file an opposition against the new financing privilege to the Court. The opposition shall be filed within twenty days from the publication of the judgment.
1/ Where the debtor fails to carry out the terms of the restructuring plan, a creditor may file an application to the Court to set aside the restructuring plan and to open reorganization or bankruptcy proceedings. 2/ The opening of reorganization or bankruptcy proceedings shall result in the automatic setting aside of the restructuring plan. 3/ The setting aside of the restructuring plan shall have no retroactive effect; in particular, creditors shall retain, without any possibility of claw-back, the amounts received under the restructuring plan; Creditors shall retain the benefit of new financing privilege priority obtained under Article 628 of this Code. 4/ Notwithstanding Sub-Article (3) of this Article, the rescheduling of claims and any grace period provided under the restructuring plan shall automatically cease to have effect. Creditors shall recover all claims and security interests that have been waived under the restructuring plan.
1/ Notwithstanding the provision of Article 629 Sub- Article (6) of this Code, the parties may agree to amend the restructuring plan after its approval. 2/ Such an amendment shall be valid and binding between the parties without being subject to any approval by the Court under Article 629 of this Code.
1/ At the request of the debtor, the Court may convert preventive restructuring proceedings to reorganization proceedings or bankruptcy proceedings, where at the end of preventive restructuring proceedings, no restructuring plan has been agreed upon among the parties. 2/ Acting on its own motion, the Court may convert preventive restructuring proceedings to bankruptcy proceedings where: a) the restructuring plan has been rejected by the Court; or b) the restructuring plan has been set aside. 3/ At the request of the debtor, the Court may convert preventive restructuring proceedings to reorganization proceedings where the expert in the field of restructuring has received an offer for the purchase of the business as a going-concern in accordance with Article 689 of this Code.
1/ The Court may open reorganization proceedings: a) at the request of the debtor, where he is not in cessation of payments or has been in cessation of payments for less than forty-five days, provided that he is facing financial difficulties that he is unable to overcome; b) at the request of a creditor or the public prosecutor, where the debtor is in cessation of payments and no preventive restructuring proceedings is pending; c) in case of the application by a creditor or the public prosecutor to open bankruptcy proceedings, at the request of the debtor where he can prove that he has been in state of cessation of payments for less than forty-five days. 2/ At the request of a creditor, the public prosecutor or acting ex officio, the Court shall not open reorganization proceedings for the benefit of dishonest debtors who have, in particular, fraudulently concealed part of their assets, fraudulently omitted certain creditors, increased their liabilities without any cause or committed any other fraudulent acts.
The debtor shall fully cooperate with persons and bodies supervising or responsible for proceedings.
1/ The following documents shall be submitted as annexes to an application by the debtor for the opening of reorganization proceedings: a) the last three balance sheets or financial statements of the business organization; b) a profit and loss account; c) a cash flow statement in order to demonstrate that the debtor is able to finance the observation period. d) a list of commercial credits and debts to be collected, with the names and address of the creditors and debtors. 2/ Where the debtor is not in a position to provide the Court for a complete set of documents, the debtor shall explain the reasons in the petition. 3/ The Court may ask the debtor to submit any further relevant documents and may ask any third party to provide such documents, in particular banks and public administrations. 4/ The petition submitted by creditors shall comprise an affidavit and the following documents: a) evidence that creditors have a due and payable claim that has not been paid; b) evidence showing why the debtor was unable to effect payments; c) evidence showing the reasons why the creditor, using ordinary civil procedures could not or was no longer in a position to enforce his claims against the debtor; d) evidence showing that the debtor is in a situation of cessation of payments.
1/ The judgment rendered for opening reorganization proceedings shall have effect on all parties as of the beginning hour of the day on which the judgment has been handed down by the Court. 2/ The judgment rendered for opening reorganization proceedings shall be enforceable immediately.
1/ The debtor, a creditor or the public prosecutor may appeal against the judgment rejecting the opening of reorganization proceedings within ten days from the date on which such judgment was handed down. 2/ The appeal shall be heard summarily and decided within two months and the judgment shall be enforceable immediately.
1/ The public prosecutor may appeal against or request the court to set aside the judgment opening reorganization proceedings within ten days from the date of the publication of such judgment. 2/ Creditors who did not apply for the opening of reorganization proceedings may ask the court to set aside the judgment opening the reorganization proceedings within ten days from the date of the publication of such judgment. 3/ The appeal shall be heard summarily and decided within two months and the judgment shall be enforceable immediately.
The judgments concerning the appointment or replacement of the supervisory judge, the supervisor in reorganization, or controllers shall not be open to appeal or to set aside.
1/ The court shall appoint a supervisor in reorganization, in accordance with the provisions of Article 610 to Article 616 of this Code, in the judgment rendered for opening reorganization proceedings. In complex cases, the court may appoint two supervisors in reorganization. The court may appoint the person suggested by the debtor. 2/ Where several supervisors are appointed, they shall act jointly except where the court authorizes them to act individually. 3/ Where the expert in the field of restructuring has prepared the sale of the business as a going-concern, the court shall appoint him as a supervisor in reorganization.
1/ At any time during proceedings, the supervisory judge, a creditor, a controller, or a public prosecutor, may file an application to the Court for the replacement of the supervisor in reorganization. 2/ The Court may grant such an application in its own discretion. 3/ Notwithstanding the provision of Sub-Article (2) of this Article, the Court shall grant such an application and appoint the supervisor in reorganization suggested by the applicant where creditors, representing a majority of the total amount of pre-insolvency claims, support such appointment.
Reorganization During reorganization proceedings, the supervisor in reorganization shall have the following powers and responsibilities: 1/ supervise the debtor with respect to the conduct of the ordinary course of business; 2/ receive information enabling him to know the exact position of the debtor’s estate from public authorities, social security institutions, credit institutions and other institutions; 3/ supervise the debtor in the preparation of the inventory of the estate; 4/ assist the debtor in the preparation of the reorganization plan; 5/ constitute classes of creditors, where applicable; 6/ organize the sale of the business as a going-concern; 7/ deposit in a bank account opened in the name of the estate any money received outside of the ordinary course of business of the debtor; 8/ recommend to the supervisory judge the admission or rejection of pre-insolvency claims; 9/ prepare and submit a detailed report on the affairs and conduct of the debtor to be deposited with the Court's registrar at least five days before the classes of creditors’ meeting or the general creditors’ meeting; 10/ prepare and submit a detailed report on the various reorganization plans including guarantees offered to creditors to be deposited with the Court's registrar at least five days before the classes of creditors’ meeting or the general creditors’ meeting; 11/ preside over the classes of creditors’ meetings and the general creditors’ meetings; 12/ request the supervisory judge for the appointment of suitable independent experts, in particular to audit the financial situation and business plan of the debtor and prepare the inventory and valuation of the debtor’s property; 13/ file a report with the court within thirty days of the termination of his services, or, at the latest, within thirty days of the termination of the proceedings.
1/ The supervisory judge shall appoint up to five controllers from among creditors at their request. The supervisory judge shall ensure that a controller is selected from among secured creditors and another one from unsecured creditors. 2/ No relatives by consanguinity or affinity of the debtor or manager of the debtor up to a fourth degree inclusive, or no person owning directly or indirectly equity or interest in the debtor’s estate, may be appointed as a controller. 3/ Controllers shall defend the general interest of all creditors and shall assist the supervisor in reorganization in the preparation of the reorganization plan. 4/ Controllers may not be entitled to receive any remuneration, except the reimbursement of their costs and expenses as approved by the supervisor in reorganization. 5/ Controllers shall not acquire any asset of the debtor’s estate; Any acquisition in violation of this provision shall be of no effect; and the controller who violates this rule shall be removed and replaced with another person.
The court may at any time, of its own motion, or at the request of the supervisory judge or the public prosecutor, replace a controller by another person for a justified cause.
A controller may only be liable for gross negligence or willful misconduct.
1/ The judgments rendered for opening and closing of reorganization proceedings shall be publicized by the registrar of the court by means of notices posted at the entrance of the Court and by an extract publication in a newspaper of wide circulation in Ethiopia. 2/ The court's registrar shall ensure that the judgment rendered for opening reorganization proceedings is entered in the commercial register in accordance with the relevant laws. 3/ The supervisor in reorganization and the court's registrar shall enter and sign a note of the judgment opening reorganization proceedings at the end of the entries in the debtor's books, and the books shall be handed back to the debtor. 4/ Copies of the judgments rendered for opening and closing reorganization proceedings shall be sent to the debtor, the supervisor in reorganization and the petitioning creditor, immediately after the judgment; the copy shall mention the names of the debtor, other parties to the proceedings, the supervisor in reorganization, and the supervisory judge and shall mention the effective date of the judgment. 5/ The court's registrar shall send a copy of the judgment to the public prosecutor. 6/ The court's registrar shall send three official copies of the judgment to the federal or regional officials in charge of the commercial register with a view of making the necessary changes in the registers. 7/ A copy of the judgment shall be posted at the premises of the debtor and any place where the debtor carries out his business.
Within one month after the publication of the judgment on opening of the reorganization proceedings, the supervisor in reorganization shall send to all known creditors of the debtor, by registered letter or any other electronic means with a receipt of acknowledgment, a notice containing: 1/ the date of the judgment opening reorganization proceedings; 2/ the names of the supervisory judge and the supervisor in reorganization; 3/ the conditions for submission of pre-insolvency claims.
Documentary evidences showing that the mandatory publications have been made and that notice has been given to the creditors shall be inserted by the courts' registrar in the file of the reorganization proceedings.
1/ The judgment rendered for opening of reorganization proceedings shall result in the commencement of an observation period, the purpose of which is to enable: a) the debtor to prepare a reorganization plan with the assistance of the supervisor in reorganization; b) the creditors and the supervisor in reorganization to propose amendments to the reorganization plan of the debtor or, where necessary, develop an alternative reorganization plan; c) the supervisor in reorganization to prepare, in addition, a plan for the sale of the business as a going-concern to investors; in preparing for the sale of the business as a going-concern, the supervisor in reorganization may conduct a market study in connection therewith and shall solicit bids by investors. 2/ The initial duration of the observation period shall be limited to a maximum period of four months. 3/ Notwithstanding Sub-Article (2) of this Article, the Court may extend the duration of the observation period or grant a new observation period, upon the request of the debtor, a creditor, the controller or the supervisor in reorganization; the Court may grant an extension only if such an extension is duly justified by the following circumstances: a) relevant progress has been made in the negotiation of the reorganization plan; and b) the continuation of the general stay of individual enforcement actions does not unfairly prejudice the rights or interests of any affected parties. 4/ The total duration of the observation period granted, including extensions and renewals, shall not exceed twelve months.
Notwithstanding the provisions of Article 651 of this code, the Court may terminate the observation period and convert the reorganization proceedings into bankruptcy proceedings, where: 1/ it becomes apparent that the proportion of creditors which could prevent the adoption of the reorganization plan does not warrant the continuation of the negotiations; or 2/ it becomes apparent that the supervisor in reorganization is unable to find any investor for the sale of the business as a going-concern; or 3/ the request is made by the debtor, the supervisor in reorganization or the controller; or 4/ the debtor is not able to meet its payment obligations with respect to claims that arise after the opening of reorganization proceedings.
1/ During the observation period, the debtor shall remain in control of its assets and affairs, subject to Sub- Article (3) of this Article. 2/ The debtor shall have the right to conduct all day-to- day operations of his business without requiring the prior consent of the supervisor in reorganization or the supervisory judge. 3/ After the opening of reorganization proceedings, all agreements or transactions, including, but not limited to, all gratuitous acts and the constitution of guarantees or in rem security interests, which are outside the ordinary course of business of the debtor, shall require the prior authorization of the supervisor in reorganization. 4/ The supervisor in reorganization and the supervisory judge may at any time inspect the books and accounts of the debtor. 5/ The supervisor in reorganization shall report to the appropriate law enforcement and prosecution authorities any violation of Sub-Article (3) of this Article, as well as any fraudulent act, including intentional omission of creditors.
1/ During the observation period, all individual enforcement actions by all creditors, including secured in rem by pledges, mortgages or otherwise, preferred and creditors benefiting from a sale contract with ownership reserved, shall, as a matter of law, be automatically stayed, without any need for the debtor or the supervisor in reorganization to request a stay of individual enforcement actions. 2/ Natural persons as guarantors may invoke the benefit of the stay of individual enforcement actions in reorganization proceedings. 3/ During the observation period, the statutes of limitation and pre-emptions rights are suspended. 4/ Notwithstanding Sub-Article (1) of this Article, payment made to employees of the debtor may not be terminated. 5/ The supervisory judge may exclude other claims from the scope of general stays of individual enforcement actions, where: a) the debtor is not in possession of encumbered assets; or b) individual enforcement actions are less likely to jeopardize the restructuring of the business; or c) one or more creditors would be unfairly prejudiced by a general stay of individual enforcement actions.
Enforcement Actions For the duration of the observation period: 1/ the obligation to file for the opening of bankruptcy proceedings shall be suspended; 2/ the due date of pre-insolvency claims may not be accelerated; 3/ interest accruing on pre-insolvency claims shall continue to accrue at the applicable rate; 4/ creditors may not start any legal proceedings with respect to the payment of pre-insolvency claims; 5/ creditors may not receive any payment of pre- insolvency claims.
1/ For the duration of the observation period, the debtor may not pay pre-insolvency claims, including accrued interest thereon. 2/ Notwithstanding Sub-Article (1) of this Article, the supervisory judge may authorize such payments to enable the debtor to recover possession of encumbered assets, including assets subject to a pledge with dispossession, where such restitution is in the interest of the estate.
1/ For the duration of the observation period, all pending legal proceedings, including arbitration, shall be suspended provided that the pre-insolvency claim has not been submitted. 2/ Upon acceptance of the pre-insolvency claim, such procedure shall continue with the supervisor in reorganization becoming a party to the proceedings, but such proceedings shall be limited to the establishment of the amount of the pre-insolvency claim. 3/ All proceedings not entailing the payment of pre- insolvency claim or the termination of ongoing contract for cause of non-payment, but excluding set off arising from ongoing contracts, shall not be affected by the opening of reorganization proceedings, in particular: a) criminal proceedings against the debtor; b) declaratory actions against the debtor; c) proceedings to enforce governmental regulatory powers; d) tax audits and investigations, except collection of taxes.
1/ The seller shall be entitled to retain goods sold by him where such goods have not been delivered to the debtor or they have not been consigned either to the debtor or to a third person on his behalf. 2/ The supervisor in reorganization may, upon authorization by the supervisory judge, demand delivery of goods retained by paying the agreed price to the seller. 3/ Where the supervisor in reorganization does not demand delivery in accordance with Sub-Article (2), the seller shall repay to the debtor any installments received by him as well as any advances received from the debtor in respect of freight or transport costs, commission, insurance or other expenses and the seller shall have the obligation to pay such amounts himself, provided that the seller may claim damages in respect of such non-performance of the contract.
1/ The debtor, under the supervision of the supervisor in reorganization, shall prepare, within fifteen days from the opening of reorganization proceedings, the inventory of all its assets, in particular include a list of: a) creditors stating the amount of their claims, names and addresses; b) ongoing contracts including sale contracts with ownership reserved; c) personal guarantees and encumbered assets, including assets pledged with dispossession, mortgages on the business and immovables; d) pending legal proceedings to which the debtor is a
The court may appoint an appraiser, an accounting expert, a public notary or any other qualified expert to assist the debtor, or prepare the inventory in lieu of the debtor.
Goods which are subject to recovery under Article 751 and 752 of this Code shall not form part of the estate of the debtor.
1/ Each creditor, himself or through an agent, shall submit its pre-insolvency claims within four (4) months from the date of the judgment rendered for the opening of reorganization proceedings by sending to the supervisor in reorganization a registered letter or any other electronic means with a receipt of acknowledgement; Such period may be extended by the supervisory judge in exceptional cases. 2/ In their submission, creditors shall clearly specify: a) the amount of the pre-insolvency claim, specifying the principal and, where applicable, interest and the date on which it became due or will become due; b) for contingency claims, an estimation of the claim; c) the legal basis for the pre-insolvency claim; d) the name, address and bank details of the creditor; e) any preferential status claimed and the legal basis for such preference; f) any security in rem or sale with ownership reserved claimed in respect of the pre-insolvency claim and assets covered by the in rem security interest being claimed, the date on which the security was granted and, if the security has been registered, the place of registration and registration number; g) any personal guarantee in respect of the pre- insolvency claim, the name and address of the guarantors, the amount of the guarantee, the date it was granted and whether the guarantee is several, joint or joint and several; h) any set-off claimed and, if so, the amounts of the mutual claims existing on the date when reorganization proceedings were opened, the date on which the claims became due and the amount remaining after set-off. 3/ Creditors shall provide documents supporting their claims and shall receive receipts for proofs produced. 4/ The supervisor in reorganization shall return the proofs after the reorganization proceedings are closed and shall cease to be liable for such return after one year. 5/ Creditors, who fail to submit their pre-insolvency claims and security interests within the time limit set out in Sub-Article (1) of this Article may not participate in the distributions and their claims shall not be assumed by the investor in case of the sale of the business as a going-concern.
1/ The following creditors shall be exempted from submitting pre-insolvency claims: a) employees of the debtor who claim unpaid salary or any other payment arising from employment contracts; b) government organs claiming payment of taxes and duties; c) creditors whose total amount of pre-insolvency claims is less than one thousand (1000) Birr. 2/ the supervisor in reorganization shall verify and admit such claims by reviewing the debtor’s financial statements, pay roll and other relevant documents; where the supervisor in reorganization is unable to verify the claims under Sub-Article (1), he may require creditors to submit evidence supporting their claims.
1/ The supervisor in reorganization shall verify the validity, the amount and the timely submission of the pre-insolvency claims and security interests. 2/ The debtor shall provide all necessary information and documents to the supervisor in reorganization for purposes of verification. 3/ Where the claim is queried by the supervisor in reorganization, the supervisor in reorganization shall inform the creditor by a registered letter or any other electronic means with a receipt of acknowledgement; and the creditor shall reply to the queries in writing within eight days from receipt; The supervisor in reorganization may admit claims in whole or in part 4 The supervisor in reorganization may temporarily admit claims of unspecified amount or debts whose performance is conditional. 5/ The final inventory of verified and admitted pre- insolvency claims shall be counter-signed by the supervisor in reorganization. 6/ Any dispute regarding whether pre-insolvency claims and securities have been submitted on time shall be settled by the supervisory judge within ten days from the decision of the supervisor in reorganization. 7/ The court's registrar shall make the final list of all admitted pre-insolvency claims and security interests available to all interested parties.
1/ The supervisory judge shall refer the contested pre- insolvency claims to be decided by the competent court or tribunal after having duly notified the concerned parties five days prior to the hearing, by a registered letter or any other electronic means with a receipt of acknowledgement. 2/ The competent court or tribunal may grant an interlocutory order allowing a creditor whose claim is contested to join in reorganization proceedings in respect of such amount as the court or tribunal may decide. 3/ The competent court or tribunal shall notify the concerned parties, by registered letter or by any other electronic means with a receipt of acknowledgement, of the order, within three days from the date it has been given. 4/ A party dissatisfied by the order may appeal against the order within fifteen days from the date it has been given. 5/ Contested claims shall not result in the suspension of the reorganization proceedings; they shall be referred to the competent court of tribunal for settlement; the provisionally admitted pre-insolvency claims shall be adjusted according to the judgment of the competent court or tribunal.
1/ Where pre-insolvency claims have been verified and admitted, the supervisor in reorganization shall deposit with the court's registrar the inventory of verified and admitted pre-insolvency claims showing the claims admitted and those rejected; he shall also send to the supervisory judge a list of creditors claiming special preferences over assets of the bankrupt debtor. 2/ Where the supervisor in reorganization has rejected a claim partly or fully, he shall state clearly the reasons in the inventory.
1/ The supervisor in reorganization shall forthwith deposit with the court's registrar the inventory of verified and admitted pre-insolvency claims and publish such inventory in a newspaper of wide circulation in Ethiopia. 2/ The supervisor in reorganization shall give notice, forthwith, by a registered letter or any other electronic means with a receipt of acknowledgement, of rejected claims to the creditors concerned. 3/ A creditor may challenge the inventory of verified and admitted pre-insolvency claims, provided that he demonstrates an interest; Such a challenge shall be filed with the supervisory judge within ten days from the date of the receipt of the notice.
1/ Where a creditor holds a security in rem or have preferential right and only the security in rem or the preferential right is contested, such creditor may join in the proceedings as unsecured creditor. 2/ Any contestation of a security in rem or preferential right shall be decided by the court.
1/ Creditors failing to submit their pre-insolvency claim within the specified period of time under Article 662 shall nevertheless participate in reorganization proceedings, subject to making such submission at the latest within one year from the judgment rendering the opening proceedings. 2/ Such one year period may not be subject to any interruption or suspension.
Guaranteed Where the claim of a creditor has been endorsed or guaranteed jointly and severally by several guarantors, each creditor and guarantor may submit a pre-insolvency claim for the full amount without taking into consideration any right of recourse.
At the request of the supervisor in reorganization, the court shall invalidate the following acts performed by the debtor during the suspect period: 1/ assets or rights transferred to other persons through gratuitous assignments, donation, cancellation or waiver of rights; 2/ assets or rights transferred to other persons for a price that is manifestly undervalued; 3/ payments of debts that are not due, whether in cash, by assignment, set-off or otherwise; 4/ payments of debts due otherwise than in cash, or by set-off, or by negotiable instrument or by transfer to a bank; 5/ creation of mortgages, pledges or other in rem security interest, over the assets of the debtor, in respect of debts contracted before the creation of such rights in rem.
1/ At the request of the supervisor in reorganization, the court may invalidate all other acts performed by the debtor during the suspect period provided that: a) the creditor knew or should have known that the debtor was already in a situation of cessation of payments; and b) the act was detrimental to the estate or the payment was made in preference to other creditors. 2/ The supervisor in reorganization shall bear the burden of proof of the knowledge of the creditor referred to in Sub-Article (1) (a), except where the act was concluded with a related party.
1/ The supervisor in reorganization shall institute legal proceedings for invalidation where such proceedings are beneficial to the estate or confer an unjustified preference upon the creditors. 2/ Where the supervisor in reorganization decides not to institute legal proceedings: a) a controller or a creditor, acting ut singuli on behalf of the estate, may institute such proceedings after having summoned the supervisor in reorganization to do so and, where such a summon is duly served, no or a negative response within one month from the receipt; b) where such action is successful, the expenses engaged by the controller or the creditor for purpose of the proceedings shall be borne by the estate.
The following acts and payments made by the debtor during the suspect period may not be subject to invalidation, except in the case of fraud: 1/ new financing, the creation of security interests, the sale of assets, the payment of debts, as well as any other legal acts and payments made by the debtor pursuant to the restructuring plan, which has been confirmed by the Court; 2/ the realization of mortgages, pledges and other in rem security interests; 3/ acquisition of assets necessary for carrying out the ordinary course of business; 4/acquisition of goods by and rendering of services to third parties in good faith provided fair price paid for the goods or services.
Proceedings Rights arising out of securities in rem validly set up may be registered up to the date of the judgment opening the proceedings.
1/ Invalidation proceedings brought under this Section shall be barred after two years from the date of the judgment opening reorganization proceedings. 2/ Where the debtor did not inform the supervisor in reorganization about the acts and transactions subject to invalidation, the period of the statute of limitation mentioned above shall run from the day the supervisor in reorganization knew about the existence of such act.
1/ The decision to invalidate a payment or an act shall have a retroactive effect. 2/ Where restitution in kind is not possible, the market value of the property shall be returned to the benefit of the estate. 3/ Where the property or right subject to invalidation has been transferred to third party, the cash equivalent of such property or right shall be returned to the estate at the prevailing market value at the time of the rendering of the judgment. 4/ The creditors affected by invalidation may submit their pre-insolvency claims arising from the invalidation provided that such submission is still possible in accordance with.
1/ The reorganization plan is prepared by the debtor with the assistance of the supervisor in reorganization. 2/ Creditors shall have the right to seek amendment to the reorganization plan and make counter-proposals. 3/ Subject to mandatory laws, the reorganization plan may provide for: a) the rescheduling of claims of the affected creditors; b) the waiver of claims of the affected creditors; c) the settlement of claims by issuing financial debt instruments, subject to laws regulating the issuance of financial debt instruments; d) the conversion of claims of the affected creditors into equity; e) the reduction and increase of capital of the debtor to be subscribed to by creditors or third-party investors or the sale of equity interest in favor of creditors or third-party investors; f) a sale of assets or business units but excluding the sale of the business as going-concern. 4/ The reorganization plan shall outline the criteria used to constitute classes of creditors. 5/ The reorganization plan shall at all times comply with the “best-interest-of-creditors’ test”, whereby no dissenting creditor would be worse off under the reorganization plan than he would be if the ranking of priorities in bankruptcy proceedings was applied under Article 786 of this Code.
1/ New financing may be granted by existing or new creditors in order to implement a reorganization plan. 2/ New financing included in the reorganization plan and confirmed by the Court shall have priority over unsecured creditors in case of the subsequent opening of bankruptcy proceedings; but shall rank below the new financing granted in the framework of preventive restructuring proceedings; the Court may confirm a security for new financing over unencumbered assets of the debtor in which case the priority of new financiers shall be treated in accordance with the rules of priority of secured creditors.
1/ The supervisor in reorganization shall constitute classes of affected creditors to facilitate the adoption of the reorganization plan. 2/ The classes of creditors shall reflect a sufficient commonality of interest based on objectively verifiable criteria; At the minimum, creditors of secured and unsecured claims shall be treated in separate classes. 3/ Creditors that are secured by in rem security interest over assets of the debtor shall participate in the class of unsecured creditors for the amount of their claim that is not covered by the liquidation value of the asset affected as security. 4/ Creditors that are secured by personal guarantees and insurance mechanisms may constitute a separate class. 5/ Employees of the debtor shall constitute a separate class of their own where the employees' claim are affected by the reorganization plan. 6/ Notwithstanding that shareholders are not creditors, they shall constitute a separate class of their own. 7/ constitution of the classes and the criteria used for their constitution shall be deposited with the Court's registrar. 8/ Notwithstanding the provisions of Sub-Article (1) of this Article, where the debtor is a small or a medium- sized enterprise (SME), at the request of the debtor or the supervisor in reorganization, the supervisory judge may decide not to treat affected creditors and shareholders in separate classes. For the purpose of this provision, a sole proprietor or a business organization shall be considered as a small or medium sized enterprise where: a) it has less than ten employees; or b) its turnover of the last twelve months is less than five million (5,000, 000 Birr (subject to adjustment for inflation); or c) its total amount of assets in the last balance sheet of the last twelve months is less than twenty (20) million Birr. 9/ Any dispute with respect to the formation of the classes of creditors shall be decided by the supervisory judge within ten days from the deposit of the constitution of classes of creditors with the court's registrar, subject to an appeal to be filed within ten days from the date of the judgment handed down by the supervisory judge.
1/ The voting rights of the creditors in the classes of creditors’ and general creditors’ meetings are determined by the supervisor in reorganization and shall correspond to the principal amount of the pre- insolvency claims, excluding interest, resulting from the last certified accounts or financial statement of the debtor. 2/ Such determination shall be made three days before the holding of the creditors' meeting, and shall take into account any assignment and any reimbursement of pre-insolvency claims that occurred after the opening of proceedings; The supervisor in reorganization may be assisted by independent auditors in the determination of the amount of pre- insolvency claims. 3/ Any assignment and transfer of pre-insolvency claims that occurs less than three days before the classes of creditors’ and general creditors’ meetings shall be unenforceable against the proceedings. 4/ Any dispute concerning determination of voting rights shall be decided by the supervisory judge with no appeal possible. 5/ The supervisor in reorganization shall take into consideration provisional admissions under 0 (2), but shall not wait for the final decision of the supervisory judge or the competent court or tribunal with respect to the admission of pre-insolvency claims. 6/ Any decision on the voting rights of creditors in the classes of creditors’ and general creditors’ meetings shall have no effect upon the admission of pre- insolvency claims by the supervisory judge or the competent court or tribunal.
1/ The supervisor in reorganization shall, before the end of the observation period, convene one or several meetings of creditors’ classes. 2/ The supervisor in reorganization shall notify creditors by a registered letter or any other electronic means with a receipt of acknowledgement at least fifteen days before the date of the meeting. 3/ The supervisor in reorganization shall present to the classes of creditors’ meetings the reorganization plan prepared by the debtor, amendments or counter- proposals by the creditors as well as the offers for sale of the business as a going-concern. 4/ The debtor shall attend in person all classes of creditors’ meetings and respond to any queries of the creditors. The debtor may be represented by an attorney. 5/ The discussions, the names of the participants and the results of the votes shall be recorded in the minutes of such meetings and all relevant documents shall be annexed thereto.
1/ The supervisor in reorganization shall organize and submit to the vote of each class of creditors the reorganization plan prepared by the debtor and amended by creditors, and if applicable, any counter-proposal prepared by creditors. 2/ The reorganization plan is accepted provided that one or more creditors, representing at least two-thirds of the claims in each class of creditors have voted in favor of the reorganization plan, including by way of written agreements among the creditors. Creditors who are notified but neither present nor represented shall not be taken into account for the purpose of voting. 3/ Where the two-third majority is not reached in each class of creditors’ meetings, the reorganization plan is accepted provided that the plan has been approved by the debtor and by a majority of classes of affected creditors. 4/ Where the majority of Sub-Article (2) above has not been reached, the plan shall be deemed accepted where at least one of the classes of creditors, other than an equity-holders class or any other class which, upon a valuation of the debtor in a liquidation scenario, would not receive any payment or keep any interest, votes in favor of the plan. 5/ The classes of creditors' meetings may be adjourned to the next working day without further notice to creditors, even though not present at the meeting.
1/ In the absence of constitution of classes of creditors in case of a small or a medium-sized enterprise, the supervisor in reorganization shall convene a general creditors’ meeting to vote on the restructuring plan. The reorganization plan shall be accepted where creditors representing at least two thirds of the claims of the general creditors' meeting have voted in favor of the plan. 2/ The rules applicable to the classes of creditor’s meeting under Article 682 of this Code shall apply, mutatis mutandis.
1/ The supervisor in reorganization shall present to the court the reorganization plan which has been accepted, together with a report containing his comments and recommendations; such report shall be filed with the Court at least three days before the Court hearing and shall be freely accessible to all parties to the proceedings. 2/ At the Court hearing, the supervisor in reorganization, the debtor and creditors shall be heard. 3/ In approving the reorganization plan, the Court shall verify that: a) the reorganization plan has been approved by the required majority of the creditors, and has a reasonable prospect of preventing the bankruptcy of the debtor and assuring the viability of the business; b) the reorganization plan complies with the “best- interest-of-creditors’ test”; c) no shareholder would be worse off under the reorganization plan than such shareholder would be in case of bankruptcy proceedings; d) third parties’ interests are adequately protected in particular with respect to the taking of security interests and in the framework of new financing; e) in case of cross-class cram-down provided for under Article 683(3) of this Code, dissenting voting classes of affected creditors are satisfied in full by the same or equivalent means where a class ranking below is to receive any payment or keep any interest under the plan; f) Classes of creditors with the same rank shall receive the same or equivalent satisfaction of their claims; g) the Court may, on its own motion, depart from principles e) and/or f) above where it is necessary to achieve the aims of the reorganization plan and where the reorganization plan does not unfairly prejudice the rights or interests of any affected parties; h) no class of affected parties may, under the reorganization plan, receive or retain, more than the full amount of its claims. 4/ Natural persons as guarantors may protect their interest by invoking the benefit of the provisions of the reorganization plan. 5/ The judgment confirming or rejecting the reorganization plan shall have an erga omnes binding effect and shall be published in a newspaper of wide circulation in Ethiopia.
1/ After the confirmation of the plan by the Court, the reorganization plan may only be amended with the consent of the debtor and the unanimity of its creditors. 2/ Such an amendment shall be valid and binding between the parties without being subject to any confirmation by the Court.
1/ The debtor shall execute the reorganization plan in accordance with terms set out in the plan; he shall not pay any amount that is not due and payable under the plan. 2/ Creditors may not request nor receive any amount that is not due and payable under the plan. 3/ The supervisor in reorganization shall supervise the execution of the reorganization plan in accordance with the procedure laid down in the judgment. 4/ The supervisor in reorganization shall immediately inform the court of any fact or act likely to be prejudicial to the interests of the creditors. 5/ The court shall determine the amount of costs, fees and expenses incurred by the supervisor in reorganization that shall be reimbursed to him during the term of his office.
Where the debtor fails to carry out the terms of the reorganization plan, the supervisor, a creditor, a controller or the public prosecutor may file an application to the court to terminate the reorganization plan and open bankruptcy proceedings.
1/ The sale of the business as a going-concern may be prepared by the expert in the field of restructuring in the framework of preventive restructuring proceedings or, by the supervisor in reorganization after the opening of reorganization proceedings. 2/ The debtor, its directors and shareholders shall have the right to make a take-over bid for the business as a going-concern; but shall obtain the authorization of the supervisory judge. 3/ The expert in restructuring and supervisor in reorganization shall organize the sale-process as they deem appropriate with the objective of maximizing the value of the business as a going-concern for the benefit of the creditors; they may be assisted by experts, consultants or investment banks. 4/ The supervisor in reorganization may organize a public auction or arrange for a private sale of the business as a going-concern only where it has become apparent that the reorganization plan has been rejected or is likely to be rejected. 5/ In the case of private sale, the offers may be kept confidential in order to increase the value of the business as a going-concern. 6/ Where the sale of the business as a going-concern has been prepared by the supervisor in reorganization, he shall make the selected offer public following the opening of the reorganization proceedings in order to obtain competing bids; after an appropriate period of time to be fixed by the Court, the supervisor in reorganization shall submit the offers to the vote of the general creditors’ meeting.
1/ The supervisor in reorganization in collaboration with the debtor shall organize a data room to which all interested bidders shall have access. 2/ All interested bidders shall be required to sign non- disclosure agreements (NDAs) before gaining access to the data room. 3/ Every interested bidder shall submit a bid with the appropriate supporting documentation containing: a) the financial standing of the bidder; b) the source of financing of the take-over; c) the business plan; d) a list of the proposed assets for purchase; e) the purchase price; f) the categories and number of employees which the bidder will be willing to take over, subject to the mandatory labor laws; and g) the contracts that are necessary for continuation of the business as a going-concern to be assigned to the bidder.
Contractual provisions restraining the assignability of the contracts, including intuitu personae contracts, shall be unenforceable as long as such contracts are necessary for the continuation of the business.
1/ Where encumbered assets are included into the sale of the business as a going-concern, the consent of the concerned mortgagees, pledgees and other beneficiaries of in rem security shall be obtained. 2/ Where the value of the pledged or mortgaged property is higher than the secured claim, the supervisor in reorganization may cause the release of the security interest by paying the claim or exchanging the property with another property of same value. 3/ Where the beneficiary creditor is not willing to release the encumbered asset, the supervisor in reorganization may apply to the court; the court may order the creditor to accept the payment of the secured claim or the exchange of the property with another property of same value. 4/ Where the property offered for exchange is not sufficient to fully cover the claim secured by the previous encumbered asset, the court shall order the supervisor in reorganization to pay the difference in favor of the secured creditor.
1/ Where the reorganization plan is rejected by the creditors' meeting or by the court, the supervisor in reorganization shall submit the bids received to acquire the business as a going-concern for voting by creditors. 2/ The bid is accepted provided that one or more creditors, representing at least two-thirds of the claims of creditors support the bid, including by way of written agreements among the creditors; creditors who are notified but neither present nor represented shall not be taken into account for the purpose of voting.
1/ In case of the sale of the business as a going-concern, the court shall verify that no reorganization plan had been adopted by the required majority of creditors and that the business plan of the winning bidder has a reasonable prospect of assuring the viability of the business. 2/ The Court shall order the transfer of the contracts that are listed in the offer and that are necessary for continuation of the business as a going-concern and shall fix the date of the transfer of the business to the winning bidder to enable the winning bidder to take over management, pending the effective legal transfer of title. 3/ The court may restrict the free transferability of the assets purchased by the winning bidder for a maximum period of two years. 4/ The sale of all transferred assets shall occur free and clear of all liens, encumbrances, charges, and liabilities, whether actual, contingent or otherwise, including, and in particular, environmental charges and liabilities.
1/ Following the confirmation by the court, the supervisor in reorganization shall facilitate entry into all necessary contracts, including contracts for the transfer of ownership, and fulfill all necessary formalities to implement the effective legal transfer of the business as a going-concern. 2/ Assets which are not part of the sale of the business as a going-concern shall be sold and employees who have not been transferred shall be laid-off. The proceeds of the sale shall be distributed among the creditors in accordance with the rules of priority laid down in 0.
Bankruptcy Proceedings After the confirmation of the sale of the business as a going-concern or where the reorganization plan has been rejected, the court shall convert the reorganization proceedings into bankruptcy proceedings.
1/ A dissenting creditor may appeal against the judgment confirming the reorganization plan or the judgment confirming the sale of the business as a going-concern. 2/ The debtor may appeal against the judgment rejecting the reorganization plan or the judgment rejecting the sale of the business as a going-concern. 3/ Contracting parties to transferred contracts may appeal against the judgment confirming the sale of the business as a going-concern but only with respect to the transfer of such contracts. 4/ The debtor, the supervisor in reorganization and all the parties to the proceedings shall be notified of the appeal. 5/ An appeal against a decision confirming the reorganization plan shall not result in the suspension of the execution of that plan. 6/ Where an appeal against the reorganization plan is upheld, the Court may either: a) set aside the restructuring plan in case of manifest violation of the procedure or violation of the “best interest of creditors’ test”, as the case may be; or b) confirm the plan and grant compensation to the
Losing bidders may not file opposition against the judgment confirming the sale of the business as a going- concern.
In the event of likelihood of insolvency, managers and directors shall primarily have the fiduciary duties to: 1/ protect the interests of the creditors; and 2/ take all necessary steps to prevent insolvency.
1/ The court shall open simplified reorganization proceedings, provided that: a) preventive restructuring proceedings are pending; b) the debtor demonstrates that the restructuring plan is supported by a large number of its creditors and is likely to be adopted by the required majority of creditors voting in the classes of creditors’ meetings or the general creditors’ meeting within simplified reorganization proceedings. 2/ In addition to the documents set out in Article 673 of this Code, the debtor shall submit: a) a copy of the judgment opening preventive restructuring proceedings; b) the draft reorganization plan agreed upon by its main creditors; c) all necessary documents showing the viability of the business under the reorganization plan.
The court shall fix the duration of simplified reorganization proceedings in the judgment opening the proceedings.
1/ The court shall appoint the expert in the field of restructuring as supervisor in reorganization. 2/ The supervisor in reorganization shall, diligently, constitute the classes of creditors, if applicable, and submit the reorganization plan to the vote of the classes of creditors’ or the general creditors’ meetings.
Save as otherwise provided in this Chapter, provisions of TITLE , excluding provisions of its CHAPTER (The Estate of the Debtor), shall be applicable to simplified reorganization proceedings.
1/ The court shall terminate simplified reorganization proceedings where the reorganization plan has not been adopted by the required majority of creditors voting in the classes of creditors’ or the general creditors’ meetings. 2/ Upon such decision, simplified reorganization proceedings shall be automatically converted to reorganization proceedings. 3/ Notwithstanding Sub-Article (2), where the sale of the ongoing business is unlikely to occur, the court shall, in its discretion, after having heard the debtor and the supervisor in reorganization, convert simplified reorganization proceedings to bankruptcy proceedings
1/ Bankruptcy proceedings shall be opened upon the application of a debtor who has been in cessation of payments. 2/ Debtor who has been in cessation of payments shall at the latest within forty-five days apply to court for the opening of bankruptcy proceedings unless the debtor has already applied for the opening of reorganization proceedings in accordance with TITLE of this Book. 3/ The obligation of the debtor under Sub-Article (2) of this Article shall apply also to each partner in a general partnership and general partners in a limited partnership. 4/ Bankruptcy proceedings may also be opened upon the application of: a) persons who are jointly and severally liable with the debtor; b) one or more creditors whose claim against the debtor is due and payable; c) a liquidator appointed to liquidate the debtor’s business outside bankruptcy proceedings; d) a public prosecutor where the debtor’s cessation of business is apparent from criminal proceedings involving the debtor. 5/ The court may also initiate bankruptcy proceedings on its own motion where, as a result of proceedings against the debtor, it is apparent that the debtor is in cessation of payments. The court which has ascertained debtor’s cessation of payments shall refer the case to the court which has jurisdiction to order judgment of bankruptcy under this Book. 6/ In addition to his application, debtor shall submit documents listed under Article 637(1) of this Code. 7/ In addition to their application, creditors shall submit documents listed under Article 637 Sub-Article (4) of this Code and may suggest the name of the person to be appointed as trustee in bankruptcy.
1/ At first hearing, or, where appropriate, on receiving the report from the investigator under Article 591 Sub-Article (2) of this Code, the Court shall: a) declare the debtor bankrupt; b) appoint the supervisory judge in accordance with Article 605 of this Code; c) appoint the trustee in bankruptcy for the conduct of the bankruptcy proceedings in accordance with Article 610 to 616 of this Code; and d) fix the date of cessation of payments, where the date has not been fixed in the context of reorganization proceedings, in accordance with Article 591 of this Code. 2/ A judgment of bankruptcy against a business organization comprising joint and several liability partners shall result in the bankruptcy of partners; The assets of the firm and of the partners shall be dealt with separately and the bankruptcy proceedings shall be conducted separately.
1/ Where application for bankruptcy is filed by creditors, partners with joint and several liability or a public prosecutor, the Court shall notify the debtor of the application within seven days from the application. 2/ The debtor shall, within twenty days from the receipt of the application, submit his reply indicating his agreement with or opposition to the application of bankruptcy. The debtor shall submit the documents listed under Article 637 Sub-Article (1) of this code and other supporting documents indicating whether he is in cessation of payments. 3/ Where the debtor admits the cessation of payments, the debtor shall indicate whether his business can still be eligible for reorganization proceedings under Title Three of this Book or should go to bankruptcy proceedings specified under this Title. 4/ Where the Court finds that the debtor is eligible for the opening of reorganization proceedings and where it anticipates that the reorganization plan, when prepared and submitted, will obtain the necessary votes, under TITLE of this Book, it shall order the opening of reorganization proceedings in lieu of bankruptcy proceedings.
1/ A debtor, whose registration has been struck of the commercial register may be declared bankrupt where such trader has been in cessation of payments within one year from the date he was struck off from the register. 2/ Where the trader was not registered in the commercial register, he may be declared bankrupt at any time after the cessation of payments.
1/ Where a trader dies after having been in cessation of payments, he may be declared bankrupt within one year from his death. 2/ Bankruptcy proceedings may be opened against such trader by: a) a creditor; b) the public prosecutor; or c) the Court acting on its own motion. 3/ An heir may apply for bankruptcy in order to prevent the assets of the succession from being mixed with his own property. 4/ Judgment rendered for opening bankruptcy after death shall immediately suspend the effect of the separation of estates obtained by the creditors of the deceased under the provisions of the Civil Code.
1/ Except as provided otherwise in this Article, provisions of Article 648 of this Code shall apply mutatis mutandis to the publication of bankruptcy judgments. 2/ Where the natural person debtor has died, extracts from judgment shall be sent to the debtor’s heir, if any, immediately after the judgment.
1/ The debtor and the public prosecutor may appeal against the judgment opening bankruptcy proceedings within ten days from the date on which such judgment was handed down. 2/ A creditor and the public prosecutor may file an appeal against the judgment rejecting the opening of bankruptcy proceedings. 3/ The appeal shall be heard summarily and decided within two months and the judgment shall be enforceable immediately.
1/ An application to set aside a judgment in bankruptcy shall be made within ten days from the date of such judgment; In respect of judgments subject to posting and to insertion in newspapers empowered to publish legal notices, the period of time shall run only from date of publication. 2/ An application to set aside may not be lodged by the petitioner. 3/ An application of the debtor to set aside judgment may not suspend the execution of the judgment.
1/ The following judgments shall not be opened to applications to set aside or appeal: a) those concerning the appointment or replacement or removal of the supervisory judge or the trustee in bankruptcy; b) those deciding upon requests for discharge and requests for assistance to the debtor and his family; c) those authorizing the sale of property and goods forming part of the estate's assets; d) those deciding upon any application to set aside orders filed by the trustee in bankruptcy within the scope of his powers; e) those authorizing the continuation of the business. 2/ The trustee in bankruptcy may not appear in proceedings under Sub-Article (1) (d).
1/ A Judgment shall be set aside where, between the pronouncement of the judgment and the date of the order given in respect of an application to set aside or an appeal, the bankrupt has restored his affairs by repaying his creditors or the court has opened reorganization in lieu of bankruptcy proceedings. 2/ The effect of acts taken by persons responsible for conducting bankruptcy proceedings shall not be affected.
Article 604 of this Code shall apply to the court opening bankruptcy proceedings under this Title.
The supervisory judge in bankruptcy proceedings shall be appointed in accordance with Article 605 of this Code where one has not been appointed in the context of reorganization proceedings. The supervisory judge shall have the powers set out in Article 606 of this Code.
1/ In addition to the powers specifically provided for in Article 606 of this Code, the supervisory judge shall, in the context of bankruptcy proceedings, have the powers to: a) refer to court any claims which fall within the jurisdiction of the court and the court shall in its decisions mention such reference; b) take or cause to be taken by appropriate authorities all steps and measures necessary to preserve the assets of the estate; c) call the creditors’ committee as required by law or where he considers it to be necessary; d) authorize, where it is in the interests of the estate, the trustee to appoint assistants, unless such appointment is reserved to the trustee by law; e) authorize the trustee in writing to enter appearances in civil proceedings. 2/ The legal orders of the supervisory judge shall be treated as judicial orders.
1/ The court shall appoint a trustee in bankruptcy, in accordance with Article 610 to 616 of this Code, in the judgment opening bankruptcy proceedings. 2/ Where the trustee in bankruptcy has been suggested by an applicant creditor, the court may appoint such person. 3/ Where reorganization proceedings are converted to bankruptcy proceedings, the court shall appoint the supervisor in reorganization as trustee in bankruptcy.
1/ At any time during proceedings, the trustee in bankruptcy, a creditor, the creditors’ committee or a public prosecutor, may file an application to the court for the replacement of the trustee in bankruptcy. 2/ The court may in its own discretion replace the trustee. 3/ The court may, on its own motion, replace the trustee in bankruptcy, in particular where the trustee in bankruptcy fails to deposit or withdraws, without authorization from the supervisory judge, any amount received in a bank account opened in the name of the estate in accordance with Article 720 Sub-Article (1) (e) of this Code. 4/ Notwithstanding the provisions of Sub-Article (2) of this Article, the court shall grant such an application and appoint the trustee in bankruptcy suggested by the applicant where the creditors’ committee or creditors, representing a majority of the total amount of pre-insolvency claims, support such an appointment.
1/ The trustee in bankruptcy shall have the following powers and duties: a) be responsible for the administration of the bankrupt estate under the supervision of the supervisory judge in accordance with the provisions of Articles 742 to 746 of this Code; b) receive information enabling him to know the exact position of the debtor’s estate from public authorities, social security institutions, credit institutions and other institutions; c) prepare, with the assistance of the debtor, the inventory of the estate in accordance with the provisions under Articles 735 to 741 of this Code; d) recommend to the supervisory judge the admission or rejection of pre-insolvency claims; e) deposit, without delay, in a bank account opened in the name of the estate any fund received, less the amounts determined by the supervisory judge in bankruptcy proceedings to meet legal costs and management expenses; f) file a report with the court within thirty days after the termination of his services, or, at the latest, within thirty days after the termination of the proceedings. 2/ The trustee in bankruptcy may not assign his functions but may, with the authorization of the supervisory judge, delegate them to independent experts in respect of isolated transactions.
The bankrupt or any other interested party may file an opposition to any act of the trustee in bankruptcy in respect of the bankrupt estate to the supervisory judge in bankruptcy proceedings; The supervisory judge shall decide on the objection within three days.
1/ The supervisory judge shall constitute a creditors' committee within ten days from the opening of bankruptcy proceedings and appoint five members among creditors with substantial claims as well as the chairman of the creditors’ committee. 2/ The constitution of the creditors’ committee shall be submitted to the court for approval. 3/ A member of the creditors' committee may only be removed from his position upon a decision of the court on the proposal of the supervisory judge. 4/ However, the supervisory judge may substitute a member requesting his own substitution by another creditor. 5/ No relative by consanguinity or affinity of the debtor, up to the fourth degree inclusive, may be appointed as a member of the creditors' committee.
1/ The Court, the supervisory judge and the trustee in bankruptcy may require the creditors' committee to give its advice where appropriate. 2/ Decisions of the creditors' committee shall be made by a majority vote of its members. 3/ The creditors' committee shall be consulted by the trustee in bankruptcy with respect to: a) the verification of the accounts; b) the statement of affairs prepared by the debtor; and c) legal proceedings. 4/ The creditors' committee shall supervise the trustee in bankruptcy. 5/ The creditors' committee may make an application to the court to replace the trustee in bankruptcy. The creditors' committee shall make such an application if the creditors, representing a majority of the total amount of pre-insolvency claims, support the replacement of the trustee in bankruptcy. 6/ The creditors' committee may at any time require information on the state of the bankruptcy proceedings and on the position of receipts and payments. The creditors' committee shall be consulted by the trustee in bankruptcy with regards to all legal proceedings. 7/ A members of the creditors’ committee may only be liable for gross negligence or willful misconduct. 8/ Members of the creditors' committee shall represent the interests of the community of all creditors. 9/ Members of the creditors' committee may not receive any remuneration. However, they shall have the right to request the reimbursement of expenses where such expenses have been approved in writing by the trustee in bankruptcy.
1/ The public prosecutor shall have the power to require the supervisory judge to transmit any deeds, books, documents related to the conduct of bankruptcy proceedings. 2/ The public prosecutor shall have the duty to inform the supervisory judge, upon request or on his own motion, of all information relevant to bankruptcy proceedings, including any information regarding criminal proceedings involving the debtor, notwithstanding the confidentiality of investigations.
conservatory acts and day to day management duties as practiced in its line of business until the trustee in bankruptcy takes over according to Sub-Article (2) of this Article. 2/ Within three days of the opening of bankruptcy proceedings, the debtor shall hand over to the trustee in bankruptcy books and records to be reviewed and closed. Any third party that holds these books on behalf of the debtor shall have the obligation to deliver these books and records upon request by the trustee in bankruptcy; where necessary, the supervisory judge shall give orders in order to enforce the surrender of the books and records. 3/ Without prejudice to the provisions under Article 732 of this Code, the trustee in bankruptcy shall summon the debtor to be present at the writing up and closing of his books and records. 4/ Where the debtor does not appear, he shall be summoned by a registered letter or by any other electronic means with a receipt of acknowledgement to appear within forty-eight hours and to produce his
1/ Notwithstanding the provisions of Sub-Article (1) of
1/ The trustee in bankruptcy, on assuming office, shall take all steps to preserve the rights of the debtor. 2/ The trustee in bankruptcy shall enforce registration of mortgages and other security interests where registration has not been enforced during reorganization or winding up by the debtor after the declaration of bankruptcy; the mortgage shall be registered in the name of the bankrupt estate by the trustee in bankruptcy on proof of his status.
1/ Within one month from assuming office, the trustee in bankruptcy shall send to the supervisory judge a report detailing the affairs of the debtor and the reasons for the opening of bankruptcy proceedings. 2/ The supervisory judge shall send the report to the public prosecutor together with his observations thereon. Where the public prosecutor has not received the report within the prescribed period mentioned in Sub-Article (1) of this Article, he shall inform the public prosecutor, explaining the cause of the delay. [[[[
1/ The bankrupt estate shall include: a) all assets and rights, including usufruct, owned by the debtor; b) civil liability claims against third parties, including against de facto and de jure managers under Article 803 of this Code. 2/ The bankrupt estate may not include all assets and rights subject to recovery pursuant to Articles 751 and 752 of this Code.
1/ The court may when declaring the debtor bankrupt order that seals be affixed, in particular on stores, pay counters, tills, books, documents, papers and as may be appropriate on furniture and chattels belonging to the debtor. 2/ Where the debtor has absconded or hides his property or has inappropriately used the assets, the appropriate public authorities, of their own motion or on an application made by a creditor, may, before adjudication, affix seals to the property specified in Sub-Article (1) of this Article
1/ The court may, on the application of the trustee in bankruptcy, dispense him with affixing, or authorize him to remove seals on the property specified hereinafter: a) in case of the bankruptcy of a sole proprietor, such basic personal movable property and chattels needed by the debtor and his family as have been set out in a list; b) property necessary for the continued operation of the business or undertaking, where such continuation of operations has been authorized. 2/ All property specified in Sub-Article (1) of this Article shall be listed and valued by the trustee in bankruptcy, in the presence of the appropriate authorities who shall sign the list.
1/ Where books and accounting documents have been sealed under Article 730(1) of this Code, the supervisory judge, together with the competent authorities shall hand over the property to the trustee in bankruptcy after having removed the seals and closed the books and documents and report their status. 2/ The competent authorities shall remove from under seal short term bills or bills to be presented for acceptance or in respect of which conservatory steps are required, list them and hand them to the trustee in bankruptcy for purposes of collection or otherwise. The trustee in bankruptcy shall prepare a report and submit them to the court.
1/ The supervisory judge may order that correspondence addressed to the debtor be routed to trustee in bankruptcy after the opening of bankruptcy proceedings. The debtor shall assist the trustee in bankruptcy in the routing of mail; The debtor shall have the right to be present when correspondence addressed to him is opened by the trustee in bankruptcy. 2/ All personal correspondence shall be returned to the debtor after verification by the trustee in bankruptcy. 3/ The trustee in bankruptcy shall be permitted to access debtor’s non-personal email account. The court may, for reasons of professional secrecy, restrict the trustee’s access to debtor’s non-personal email account.
Within five days from the affixing of seals, the trustee in bankruptcy shall ask for the removal of the seals in order to prepare an inventory of the debtor’s property.
Article 659 of this Code shall apply to bankruptcy proceedings subject to the provisions of this section.
Where a balance sheet has not been prepared and deposited by the debtor, the trustee in bankruptcy shall without delay prepare and deposit with the court's registrar a balance sheet based on the books, documents, papers and other available information.
1/ The trustee in bankruptcy shall prepare, with the assistance of the debtor, an inventory of the debtor’s property after having summoned the debtor by a registered letter or any other electronic means with a receipt of acknowledgment. 2/ During inventory, the debtor shall deliver to the trustee the list of creditors stating the amount of their claims, names and addresses, and the list of ongoing contracts as well as pending legal proceedings to which the debtor is a party. 3/ All property of the debtor that is sealed under Sub- Article (1) of Article 730 or whose seal is removed under Article 734 of this Code shall also be verified. 4/ Goods placed under customs and warehouses shall receive special reference in the inventory. 5/ The trustee in bankruptcy shall retain an original of the list of the inventory. 6/ The trustee in bankruptcy may appoint an appraiser, an accounting expert, a public notary or any other qualified expert in order to prepare the inventory. 7/ The absence of an inventory may not preclude the exercise of actions of claims or refunds.
1/ Debtor shall state his tax and duty obligations to the trustee during the taking of inventory. 2/ Trustee shall submit the statements of the debtor to the tax and social security authorities. 3/ Where the debtor refuses to cooperate within twenty days of the request of the trustee, the trustee shall notify the refusal to the supervisory judge and to the tax and social security authorities.
Where the estate is declared bankrupt after the death of the debtor and no inventory has been prepared, or where the debtor has died before the inventory has been completed, the inventory shall be prepared and completed in the presence of the heirs or executors or in their absence after having been duly summoned through a registered letter or any other electronic means with a receipt of acknowledgment.
1/ The public prosecutor has the right to be present at the preparation of the inventory. 2/ The public prosecutor has the right to inspect at any time any document, book or paper in bankruptcy proceedings. 3/ The trustee in bankruptcy shall inform the public prosecutor to enable him to be present at the preparation of the inventory.
On completion of the inventory, all property listed in the inventory and related documents and records shall be handed over to the trustee and a note of such handing over shall be made at the foot of the inventory.
1/ The trustee in bankruptcy shall, with the permission of the supervisory judge, sell all depreciable or perishable goods or property the preservation of which is costly; the supervisory judge shall fix the conditions and procedures for such sale. 2/ The trustee in bankruptcy shall collect receivables and deposit forthwith the proceeds in the bank account of the estate after deduction of costs and expenses authorized by the supervisory judge. 3/ The trustee in bankruptcy shall inform the supervisory judge of the progress of the proceedings at least every three months.
1/ The trustee in bankruptcy shall have the power to make calls on shares and order shareholders and partners to pay their subscriptions regardless of the fact that these subscriptions may not be due on the day of the judgment of bankruptcy. 2/ Where shareholders and partners fail to meet their subscription within ten days from the notification of the trustee in bankruptcy, the trustee in bankruptcy shall take legal action to recover the subscription amounts on behalf of the estate.
1/ Subject to Sub-Article (2) of this Article, the judgment opening bankruptcy proceedings shall put an end to the business activity of the debtor. 2/ The trustee in bankruptcy may continue operating the business where authorized by the court after a report from the supervisory judge and a recommendation of the creditors' committee; such an authorization shall only be given where it is in the creditors' or public interest to maximize the value of the estate, in particular in order to prepare for the sale of the business as a going concern pursuant to Articles 747 to 750 of this Code; the court may order continuation of business for a maximum period of sixty days, which may be renewed only once for the same duration. 3/ Instead of operating the business himself, the trustee in bankruptcy may be authorized by the supervisory judge to: a) appoint a receiver to carry on the business. The receiver shall have the necessary powers to carry on the business; or b) be assisted in the recovery by some employees of the debtor. 4/ Where the business continues to operate, post- insolvency creditors are entitled to be paid in accordance with contractual provisions; Where any such post-insolvency claims have not been paid, they shall have priority over unsecured creditors but shall rank below new financing granted in the framework of reorganization or preventive restructuring proceedings in accordance with Article 786 of this Code.
1/ In exceptional cases, upon approval of the creditors’ committee, new financing may be authorized to finance the continuation of the debtor’s business. 2/ Such new financing shall have priority over unsecured creditors but shall rank below new financing granted in the framework of reorganization or preventive restructuring proceedings in accordance with Article 786 of this Code. The court may confirm the granting of security for new financing over unencumbered assets of the estate in which case the priority of new financiers shall be treated in accordance with the rules of priority of secured creditors.
1/ The supervisory judge may, in consultation with the creditors’ committee and, after having heard the bankrupt debtor or in his absence after having been summoned by a registered letter or any other electronic means with a receipt of acknowledgment, authorize the trustee in bankruptcy to compromise or settle in respect of any claim concerning the bankrupt estate. 2/ Any compromise or settlement exceeding one hundred thousand birr shall be ratified by the court after having heard the debtor’s observations.
Where the court has authorized the continuation of the debtor’s business following the recommendation of the creditors’ committee in accordance with Article 744 of this Code, the trustee in bankruptcy shall prepare and implement the sale of the business as going-concern in accordance with Articles 689 to 692 of this Code which shall apply mutatis mutandis.
1/ The trustee in bankruptcy shall submit the bids received to acquire the business as a going-concern to the vote of the creditors’ committee. 2/ One or more dissenting creditors, representing at least twenty-five percent of the aggregate amount of pre- insolvency claims, may request the trustee in bankruptcy to convene a general creditors’ meeting to vote on the bids. 3/ The bid is accepted provided that one or more creditors, representing at least half of the claims of creditors support the bid, including by way of written agreements among the creditors. Creditors who are notified but neither present nor represented shall not be taken into account for the purpose of voting.
1/ The court shall verify that the business plan of the winning bidder has a reasonable prospect of assuring the viability of the business. 2/ Article 694(2) to (4) of this Code shall apply to the sale of the business as going-concern in bankruptcy proceedings.
Where the business as a going-concern has been sold, the trustee in bankruptcy shall sell the remaining assets of the debtor in accordance with Articles 775 to 779 of this Code.
1/ The owner of tangible and intangible movable rights, goods, and assets, the possession in kind of which is with the debtor at the date of the opening of bankruptcy proceedings, shall have the right to recovery from the estate, to be exercised in accordance with this
1/ The tax authorities shall have the right to collect taxes which the bankrupt debtor holds on behalf of the government. 2/ The amount under Sub-Article (1) of this Article may not include interest and penalties which the bankrupt debtor may have to pay under the relevant tax laws; The interest and penalties shall be considered as pre- insolvency claims and shall be submitted as such in bankruptcy proceedings.
1/ Persons entitled to recovery under this Section shall make an application for recovery to the trustee in bankruptcy within three months from the opening of bankruptcy proceedings, by a registered letter or any other electronic means with a receipt of acknowledgement. 2/ The trustee in bankruptcy may accept or refuse the application, stating the reasons for such decision, by a registered letter or any other electronic means with a receipt of acknowledgement addressed to the applicant, within one month from the receipt of the application. 3/ Where the trustee in bankruptcy does not respond within one month from the receipt of the application, the application shall be deemed to be accepted. 4/ Where the trustee in bankruptcy has refused the application, the applicant owner may file an opposition with the supervisory judge, within one month from the receipt of the decision of refusal from the trustee in bankruptcy. 5/ The supervisory judge shall decide such an application within fourteen days from the receipt of the application. 6/ The applicant and the trustee in bankruptcy shall have the right to appeal the decision of the supervisory judge to the court within ten days from the decision. 7/ Following the admission of the application for recovery, the trustee in bankruptcy shall immediately restitute the right, good or asset, including any payments received from the sub-transferee after the opening of proceedings.
1/ Article 658 of this Code shall be applicable mutatis mutandis to bankruptcy proceedings. 2/ The trustee in bankruptcy shall have the powers of the supervisor in reorganization with respect to rights of retention.
In furtherance with the obligations of the debtor set out in Article 5 636 and 637 of this Code, upon the judgment opening bankruptcy proceedings, the debtor shall deliver to the trustee in bankruptcy a list of customers and clients and other related documents, including a list of names and addresses, rights and obligations of contracting parties not supported by contract documents, with a view to facilitate the decision for the continuation of the business.
The debtor shall not leave the area in which he resides without the permission of the supervisory judge; the relevant provisions of the Criminal Code of Ethiopia shall apply where the debtor breaks any such prohibition. Where there are adequate reasons showing that the debtor may leave the country or change the area where he resides, the supervisory judge may apply to the Court to put restriction on the debtor from leaving his residence or the seat of his principal business.
The debtor may be employed by the trustee in bankruptcy to facilitate bankruptcy proceedings upon authorization by the supervisory judge.
The supervisory judge may, when requested to do so by the trustee in bankruptcy, authorize part of the estate to be applied in supporting the debtor and his family where the debtor is a natural person and he does not have income to support himself and his family other than the estate.
1/ The extent of the personal property of the spouse of the bankrupt debtor shall be determined in accordance with the relevant family laws. 2/ The creditors’ committee may request the supervisory judge that purchases made by the spouse of the bankrupt debtor be added to the estate by providing evidence that property acquired by the spouse was provided by the debtor. 3/ The spouse of the bankrupt debtor who provided some professional, civil, commercial, or handcraft activity shall not exercise any action in relation to the benefits granted by one spouse to the other provided those services are provided within a year from the celebration of their marriage.
Subject to actions authorized under Sub-Article (2) of Article 673 of this Code, after the date of judgment rendered for opening bankruptcy proceedings of the debtor, the capacity to sue or to be sued shall only be vested in the trustee in bankruptcy; The court may authorize the debtor to intervene in any proceedings upon the latter’s request.
1/ Subject to Sub-Articles (2) to (6) of this Article, Article 5 654 to 657 of this Code shall apply mutatis mutandis upon the opening of bankruptcy proceedings. 2/ Guarantors, including natural persons, may not invoke the benefit of a stay of individual enforcement actions in bankruptcy proceedings. 3/ The trustee in bankruptcy shall have the power to sell all assets, including encumbered assets, except where such encumbered asset is in possession of a creditor as a pledgee. 4/ The creditor in possession of an encumbered asset may realize his in rem security interest or, at his discretion, entrust the trustee in bankruptcy with the sale of such an asset; where the encumbered asset is realized by the secured creditor for a sum exceeding the amount of the claim, the excess shall be collected by the trustee in bankruptcy; where the price of sale is less than the amount of the claim, the creditor may submit his claim for the difference, as an unsecured creditor. 5/ Where the trustee in bankruptcy fails to take actions towards the sale of encumbered assets within six months after the judgment opening bankruptcy proceedings, all creditors whose claims are secured by a specified assets of the estate, including creditors benefiting from a sale contract with ownership reserved, may realize their in rem security interest. 6/ Notwithstanding Sub-Article (1) of this Article, creditors entitled to recover goods from the estate under Articles 751 and 752 of this Code may bring their claims of recovery.
Sub-Article (2) of Article 656 of this Code shall be applicable in bankruptcy proceedings. In particular, the trustee in bankruptcy shall have the powers of the supervisor in reorganization.
1/ With the exception of claims secured by mortgage, the interest on claims of creditors in bankruptcy shall cease to run as of the date of the judgment opening bankruptcy proceedings. 2/ Only sums arising from property given as security may be used to pay interest on secured debts.
1/ From the date of the judgment opening bankruptcy proceedings, all pre-insolvency claims shall become immediately due and payable. 2/ Pre-insolvency claims expressed in foreign currencies shall be converted into local currency at the official rate of exchange on the day of the judgment opening bankruptcy proceedings.
1/ Where a lease is terminated under Article 595 of this Code of this law, the lessor shall have a preference in respect of all claims arising out of the performance of the contract of lease and contingent damages for the two years of the lease prior to the judgment opening bankruptcy proceedings and for the current year. 2/ The scope of the lessor’s preference shall comprise all movables furnishing the premises leased, whether these movables belong or not to the lessee.
The trustee in bankruptcy shall take action to invalidate actions performed by the debtor during the suspect period prior to the judgment of bankruptcy in accordance with Article 5 671 to 677 of this Code where these actions were not invalidated by the supervisor in reorganization in the context of reorganization proceedings; for purposes of invalidation, the trustee in bankruptcy shall have the powers of the supervisor in reorganization.
Article 673 of this Code shall apply mutatis mutandis to bankruptcy proceedings. In particular, the trustee in bankruptcy shall have the power of the supervisor in reorganization and the creditors’ committee shall have the powers of the controllers under this Article
The provisions of Articles 649 (Notice to creditors), and Article 5 662 to 670 (Submission and verification of pre- insolvency claims) shall be applicable mutatis mutandis to this chapter, subject to the following provisions. In particular, the trustee in bankruptcy shall have the powers of the supervisor in reorganization.
1/ Where the debtor is an entity with unlimited liability, debts verified and admitted in the firm's bankruptcy by the creditors of the entity shall be deemed to be verified and admitted in each of the partner's bankruptcy, where the partners of the entity are declared jointly with the entity. 2/ The firm's creditors may participate in all distributions until they are fully paid, without prejudice to claims as between the various bankrupt estates regarding over payment of contributions. 3/ Personal creditors of the partners may only claim in the estate of their debtors. 4/ Any creditor may contest preference with other creditors.
The trustee in bankruptcy shall verify pre-insolvency claims in the presence of the creditors' committee or its representative, where such committee has already been formed, and of the debtor, whether he is present of his own motion or in his absence, after being summoned by registered letter or by any other electronic means with a receipt of acknowledgement.
1/ Where an objection contesting a debt is lodged and such objection may cause delay, the court shall decide whether to stay the admission of the pre-insolvency until the objection is decided on by the competent court or tribunal. [ 2/ Where the competent court or tribunal disallowed the objection, it may at the same time make an order enjoining the trustee in bankruptcy to provisionally accept the claim. 3/ Where a debt gives rise to criminal proceedings, the court may order a stay of bankruptcy proceedings. In such a case, where the competent court or tribunal disallows the objection, it may not make an interlocutory order for the acceptance of the pre- insolvency claim and the creditor holding the contested debt may not join in the proceedings until judgment in criminal proceedings has been given.
1/ Creditors failing to submit their pre-insolvency claim within the specified period of time shall not share in any distribution, but they may lodge an objection until final distribution of the residue. [ 2/ Any such objection shall not suspend any distribution authorized by the supervisory judge in bankruptcy proceedings; however, where further distributions are made, such creditors shall share therein to the extent of an amount provisionally fixed by the court and retained in reserve until adjudication upon their objection.
Creditors admitted after distributions ordered by the supervisory judge in reorganization proceedings shall have no claim in such distributions, but they may deduct from undistributed assets the dividends relating to their claims in the first distributions.
1/ Article 670 of this Code shall apply mutatis mutandis in bankruptcy proceedings. 2/ Any payment made by a guarantor in favor of the creditor shall be taken into consideration when calculating the final distribution. 3/ A creditor whose claim has been endorsed or guaranteed jointly and severally by several guarantors subject to insolvency proceedings may submit his pre- insolvency claim in all the proceedings for the nominal value of such pre-insolvency claim and share in the distributions in each proceedings until his claim is fully satisfied. 4/ Where a guarantor has paid a creditor but has not submitted his pre-insolvency claim in accordance with Sub-Article (1) of this Article, he shall not be admitted to distributions, save for the portion of the claim paid for which the creditor had been admitted
Upon the expiry of the continuation period, if any, under Article 744 of this Code, the court shall order the winding-up and payment to the creditors entitled as per the order of priority of payments set down in this Chapter.
1/ Subject to the special provisions of this Chapter, the trustee in bankruptcy shall sell the debtor's movable and immovable property in accordance with the provisions of the Civil Procedure Code; The proceeds of the sale shall be deposited in accordance with Article 720 Sub-Article (1) (e) of this Code. The trustee in bankruptcy shall submit forthwith receipt of deposit to the supervisory judge. 2/ The trustee in bankruptcy may enter into an agreement regarding any rights of the debtor as provided in Article 746 of this Code. 3/ The sale of assets shall occur free and clear of all liens, encumbrances, charges, and liabilities, whether actual, contingent or otherwise, including, and in particular, environmental charges and liabilities.
1/ Where foreclosure proceedings have been stayed due to the judgment opening bankruptcy proceedings, the trustee in bankruptcy shall be subrogated to the foreclosing creditor and shall sell the security in accordance with the provisions of this Chapter. The process of sale of the immovable assets shall start within eight days of the order of the supervisory judge in bankruptcy. 2/ The supervisory judge may authorize the private sale of immovable assets by the trustee in bankruptcy where such procedure is likely to increase the price by comparison with a public auction sale. 3/ Where the trustee in bankruptcy fails to start the process of sale within six months of the date of the judgment opening bankruptcy proceedings, the secured creditor shall be reinstated to its power of foreclosure sale unless the court for good cause grants an extension upon the request of the trustee in bankruptcy. The distribution of the proceeds shall be subject to the provisions of this Chapter.
1/ Where the sale of the business as a going-concern has not occurred in reorganization or bankruptcy proceedings, the trustee in bankruptcy may sell together all or part of its tangible and intangible movable assets, if he believes that such a sale is feasible and provided that it maximizes the price by comparison to a piecemeal sale. 2/ The trustee in bankruptcy may decide to sell the business by means of a public auction or private sale, whichever seems the more likely to maximize the price.
The trustee in bankruptcy shall sell all the remaining assets of the debtor by means of public auction or private sale, whichever seems the more likely to maximize the purchase price.
1/ Article 780 to 784 of this Code shall apply where specified encumbered or unencumbered assets are sold and proceeds distributed before the final distribution in accordance with Article 785 to 793 of this Code. 2/ Article 780 to 784 of this Code shall apply to all secured creditors whose right in rem security is related to specified assets of the estate, whether such assets are immovable or movable, tangible or intangible. 3/ For the purpose of this section, preferred creditors on all movable or immovable assets of the debtor may participate in interim distributions but shall be treated as unsecured creditors.
1/ Where the trustee in bankruptcy realizes encumbered immovable or movable, tangible or intangible assets of the estate, and decides to distribute the proceeds, creditors with security over these assets shall be paid in priority over other creditors, after deduction of costs and expenses for the realization of such encumbered assets. 2/ Secured creditors who have been paid out of the proceeds of the assets as laid down in Sub-Article (1) shall be treated as unsecured creditors for the residual amount still remaining due.
Unencumbered Assets Where the trustee in bankruptcy decides to realize and distribute the proceeds of unencumbered assets before the sale of encumbered assets of the estate, secured and preferred creditors with verified and admitted pre- insolvency claims may participate along with unsecured creditors in proportion to the whole of their pre- insolvency claims, subject to the deductions set forth in Article 783 of this code.
1/ After the sale of encumbered assets and final establishment of the order of priority of secured, preferred and unsecured creditors in accordance with Article 786 of this Code secured and preferred creditors entitled to claim priority of payment from the proceeds of encumbered assets shall receive their secured dividends only after the deduction of the amounts collected by them from the proceeds of the sale of unencumbered assets. 2/ Amounts thus deducted shall be added to the estate and form part of the proceeds to be distributed among creditors in accordance with the order of priority set down in Article 786 of this Code.
Where secured creditors have received partial payment from the distribution of the proceeds of the sale of encumbered assets: 1/ The remaining unsecured portion of their pre- insolvency claims shall be finally settled after the sale of the other assets, including unencumbered in the final distributions. 2/ Any residue which they have received over such amount in the prior distribution shall be withheld from the amount of their secured dividend and allocated to the unencumbered assets.
1/ Creditors secured by rights in rem over specified assets, including by pledges and mortgages, shall have an exclusive right on the realization value of the encumbered assets, after deduction of costs and expenses for the realization of such encumbered assets. 2/ The residual portion of pre-insolvency claims not covered by such net realization value shall be treated as unsecured claims.
After the realization of encumbered assets, the remaining proceeds of the realization shall be distributed among preferred and unsecured creditors in accordance of the following ranking priorities: 1/ costs and expenses of the proceedings; 2/ new financing in the context of preventive restructuring; 3/ new financing in the context of reorganization; 4/ new financing authorized in the context of bankruptcy; 5/ post-bankruptcy creditors, including creditors of new and ongoing contracts; 6/ employee claims and claims of social security authorities; 7/ taxes and duties owed to federal, regional and local government authorities, other than those which can be claimed from the debtor holding taxes and duties on behalf of the government (but excluding interest and penalties); 8/ amounts ordered for the maintenance of the bankrupt debtor and his family; 9/ other preferred creditors; [ 10 unsecured creditors; 11/ Penalties and fines imposed upon the debtor.
Contractual subordination clauses, in particular in credit agreements, shall be enforceable in bankruptcy proceedings and shall be taken into consideration in the ranking of Article 786 of this Code.
Costs and expenses of the proceedings shall include pari pasu the costs and expenses incurred in connection with bankruptcy proceedings as well as those incurred in connection with reorganization proceedings which has been converted into bankruptcy proceedings, including: 1/ payments to the supervisor in reorganization, the trustee in bankruptcy and to the employees they recruited; 2/ costs and expenses incurred for the conduct of the reorganization and bankruptcy proceedings and other costs that the court may order; 3/ costs and expenses made by the supervisor in reorganization and trustee in bankruptcy in performance of their duties as authorized by law or court.
1/ Where the total amount to be paid is not sufficient to fully satisfy the claims of creditors belonging to the same class of rank, such creditors shall be paid on a pro rate basis based on the admitted claims. 2/ Where the total amount of money to be distributed is not sufficient to fully satisfy the claims, the creditors at the lower rank shall not be paid before all the creditors at the higher rank are fully paid.
1/ The final distribution shall not be delayed by the outcome of legal proceedings with respect to disputes on the admission of contested claims. 2/ The trustee in bankruptcy shall retain, in a reserve account, a portion of the proceeds corresponding to the amount the creditor of the contested claim would have received if its claim was admitted and shall adjust, where necessary, the final distribution accordingly.
1/ The trustee in bankruptcy shall submit to the creditors’ committee the proposal for distribution of the amount deposited in accordance with Article 786 of this Code. 2/ On the recommendation of the creditors' committee, the trustee in bankruptcy shall make all relevant changes in the proposal and shall submit the amended proposal to the supervisory judge for approval. 3/ The supervisory judge shall approve the amended proposal and order its deposit with the Court’s registrar. 4/ Where the supervisory judge rejects the proposal, he shall communicate his amendments to the trustee in bankruptcy who then shall revise the proposal accordingly and deposit the final proposal with the Court’s registrar. 5/ The trustee in bankruptcy shall inform each creditor of the deposit by a registered letter or any other electronic means with a receipt of acknowledgement. 6/ Within ten days of being informed, creditors may submit an opposition to be decided by the supervisory judge, subject to appeal before the court.
The trustee in bankruptcy shall pay to each creditor whose claim is verified and admitted his entitlement, in accordance with the final proposal of distribution set out in Article 791, from the account opened in the name of the bankrupt estate under the provisions of Article 786 of this Code.
Where there is residual money after all debts and costs owed by the debtor are fully paid in accordance with this law, such money shall be refunded to the debtor or, where the debtor is company, to the shareholders proportionately or in accordance with the bylaws of the company.
Subject to the provisions of Article 796 of this Code, bankruptcy proceedings shall be closed: 1/ by the final distribution of the proceeds of the winding- up; 2/ by reason of insufficiency of assets; or 3/ by reason of absence of any claim against the estate.
1/ Where at any time during the bankruptcy proceedings, it becomes apparent that the proceeds of the sale of the assets, net of any distribution to secured creditors, is insufficient to cover the costs and expenses of the proceedings, at the request of the trustee in bankruptcy, the court may order the closure of bankruptcy proceedings. 2/ Where at any time the bankruptcy proceedings, it becomes apparent that the remaining assets are insufficient to pay unsecured or a category of preferred creditors in accordance with the ranking of Article 786 of this Code, at the request of the trustee in bankruptcy, the court may order a stop to the verification and admission procedure of such pre- insolvency claims which are unlikely to be paid, and order the closure of bankruptcy proceedings. 3/ Where at any time the bankruptcy proceedings, it becomes apparent that the sale of assets is unlikely to produce positive net proceeds, at the request of the trustee in bankruptcy, the court may order the closure of bankruptcy proceedings. 4/ The closure of bankruptcy proceedings shall not affect the rights of creditors to call on personal guarantees of the debtor for the unsatisfied portion of their claim.
1/ The debtor or any other interested party may at any time apply to the court for setting aside the order closing bankruptcy proceedings upon showing that there are sufficient funds to meet the costs of the proceedings, or upon depositing with the trustee in bankruptcy a sufficient amount to meet the costs. 2/ The debtor shall first pay the costs arising from proceedings under Article 795 of this Code.
1/ After the deposit of the inventory of debts, the court may on the application of the debtor order the bankruptcy proceedings to be closed, where the debtor proves that he has paid all claims and all costs including the fees of the trustee in bankruptcy or that he has deposited with the trustee in bankruptcy an amount sufficient to meet all the stated payments. 2/ The court shall make its decision upon a report by the supervisory judge showing that the debtor has satisfied the requirements under Sub-Article (1) of this Article 3 The judgment has the effect of bringing the bankruptcy proceedings to an end and restoring the debtor to his full rights.
The court’s registrar shall ensure that any judgment closing bankruptcy proceedings in accordance with the provisions of this chapter is duly registered in the commercial register and published in accordance with the provisions Article 710 of this Code.
1/ A bankrupt trader who is a natural person shall, notwithstanding there is unpaid debt, be discharged from all his debts after three years from the judgment opening bankruptcy proceedings. 2/ The following traders shall not benefit from the discharge provided under Sub-Article (1): a) a trader who he is guilty of crime related to bankruptcy; b) a trader against whom an evidence is produced for concealing or removing property; c) a trader who fails to cooperate, or to carry out in good faith his obligation in the course of bankruptcy proceedings; or d) a trader who has been declared bankrupt within five consecutive years preceding the judgment opening bankruptcy proceedings. 3/ The following debts shall not be discharged: a) debts related to taxes and duties, subject to the application of other laws allowing waiver of taxes, duties and penalties; b) debts arising from dissolution of marriage, maintenance; and c) criminal penalties.
1/ The bankrupt shall apply to the Court which ordered the judgment opening bankruptcy proceedings and submit with his application all relevant receipts and documents supporting his discharge. 2/ Upon receipt of the application, the Court shall forward the application together with the supporting documents to the public prosecutor in the area where the bankrupt resides. The trustee in bankruptcy shall receive the application and documents. 3/ The Court and the public prosecutor shall collect all relevant information to verify the accuracy of debtor’s application. 4/ The trustee in bankruptcy and the public prosecutor shall submit to the Court their reports on the application within thirty days from the receipt of the application and documents.
1/ The court shall order the notice of the request for discharge to be sent to all creditors admitted or shown on the list of creditors prepared by the trustee in bankruptcy during bankruptcy proceedings of the debtor; The notice shall be sent by registered letter or any other electronic means with a receipt of acknowledgement. 2/ Creditors who have not been fully paid under bankruptcy proceedings may within fifteen days from the notice file an opposition to the discharge of the bankrupt by submitting relevant supporting documents evidencing why the bankrupt should not be discharged. 3/ The court shall send to the public prosecutor the opposition filed by creditors together with the report of the trustee in bankruptcy concerning the discharge of the bankrupt. 4/ The court may, where necessary, summon the bankrupt and opposing parties and hear them behind closed doors. 5/ Applications for discharge shall be exempt from stamp duties, registration as well as any other taxes and charges.
1/ The court shall order discharge where the bankrupt fulfills the conditions for discharge set out under Article 799 of this Code. 2/ Where the court has rejected the application for discharge, the bankrupt may apply for discharge only after the expiry of one year from the date of rejection of his discharge by the court. 3/ Where the court has ordered discharge of the debtor, such order shall be registered in the commercial register. The discharge shall not entail any radiation of the bankrupt from the commercial register. 4/ The debtor shall be allowed to publish his discharge in a newspaper of wide circulation in Ethiopia.
1/ The Court may, in the course of bankruptcy proceedings, order that one or more de facto or de jure managers of an entity bear all or part of the debts of the entity where the manager is at fault and has contributed to the insufficiency of assets of the company, corresponding to the aggregate of the decrease of value of the assets and the increase of value of the liabilities, in particular by: a) gross negligently failing to file for bankruptcy within forty-five days after the cessation of payments; or b) grossly negligently continuing money-losing activities; c) carrying out commercial operations on their own personal behalf and disposing of company assets as though they were their own and concealing their personal affairs under the cover of the company. 2/ Where several managers have committed the management faults contributing to the insufficiency of assets, the court may hold these managers liable jointly and severally. 3/ Sums recovered under an action under Sub-Article (1) of this Article shall be used to pay off creditors of the bankrupt entity in accordance with the order of priorities of Article 786 of this Code.
1/ Creditors who have abusively supported the debtor, by granting credit facility, shall only be liable where creditors: a) have committed fraud; or b) have acted as de facto managers of the debtor; or c) have taken, over the assets of the debtor, rights in rem securities that are disproportionate in comparison with the amount of the credit facility; 2/ In addition to the conditions set out in Sub-Article (1) of this Article, creditors may only be liable where: a) the terms and conditions of the credit facility were ruinous for the debtor; and b) the creditor knew or should have known the debtor was in cessation of payments and impossible to be redressed. 3/ The amount of damages shall correspond to the aggregate of the decrease of value of the assets and the increase of value of the liabilities, since the granting of the credit facility.
Subject to liability incurred as de facto managers under Article 803 of this Code, shareholders of the debtor shall only be liable towards creditors of the debtor where the shareholders: 1/ have committed fraud; or 2/ acting in their own interest, have given instructions to the management, leading to the cessation of payments of the debtor.
1/ The actions referred to in this Chapter may only be brought before the court by the trustee in bankruptcy. 2/ Where the trustee in bankruptcy decides not to institute proceedings, a creditor, acting ut singuli on behalf of the estate, may institute such proceedings after having summoned the trustee in bankruptcy to do so and where such a summon is issued, no or a negative response within one month from the receipt. 3/ Where such action is successful, the expenses engaged by the creditor for purpose of the proceedings shall be borne by the estate. 4/ The claimant shall bear the burden of the proof.
Unless the Criminal Code of Ethiopia provides for more severe punishment, debtors and managers of business organizations that have been declared bankrupt and who: 1/ intentionally enter into contracts giving undue advantage to the other contracting party; 2/ with intent to delay the cessation of payments, make purchases for re-sale at lower prices or with intent to delay, used ruinous means to obtain funds; 3/ without lawful excuse, failed to declare cessation of payments to the court within forty-five days of the cessation of payments in accordance with Article 705 of this Code; 4/ willfully left the financial statements incomplete or kept books and records irregularly or kept financial statements that failed manifestly to comply with accounting reporting standards given the size of the company; shall, upon conviction, be punishable with simple imprisonment not exceeding six months and a fine amounting to ten thousand Ethiopian Birr (10,000 ETB).
Unless the Criminal Code of Ethiopia provides for more severe punishment, a debtor and persons who, directly or indirectly, de jure or de facto, have managed a business organization and persons who have served as lawful representatives of the managers shall, upon conviction, be punishable with simple imprisonment ranging from six months to three years and a fine of five thousand to fifty thousand Ethiopian Birr where they: 1/ embezzled or concealed all or part of the assets of a business organization; 2/ fraudulently declared themselves liable for sums not owed either in his accounting records or by virtue of the law or commitments lawfully entered; 3/ fraudulently increased the bankrupt debtor’s liabilities; 4/ kept fictitious books of accounts or destroyed accounting documents and records belonging to the bankrupt debtor; 5/ kept accounts that are manifestly incomplete or irregular.
1/ Debtors and managers, who are convicted of the offense provided for in Article 808 of this Code (fraudulent bankruptcy), may, in addition to or in lieu of the sentences and fines, incur one or more of the following disqualifications: a) prohibition from any commercial act, including the capacity to manage, administrate or control a sole proprietorship business or any legal entity engaged in any commercial activity; b) prohibition from exercising civic, civil and family rights according to the Secondary Punishments that may be imposed by the Criminal Division Courts under the Criminal Code of Ethiopia; c) prohibition from occupying a public office, from running directly or indirectly professional or corporate entities; d) ineligibility for public procurement contracts; e) prohibition from issuing cheques and other negotiable instruments other than those allowing for the withdrawal of funds by the drawer from the issuing bank or from issuing certified cheques. 2/ The court which pronounces the prohibitions and disqualifications stated under Sub-Article (1) of this Article shall fix the duration of the prohibitions, which may not be less than six months but not exceeding five years, unless other mandatory laws provide for longer period of prohibition and disqualification.
1/ Business organizations may be declared guilty, according to and subject to the conditions provided for in Article 34 of the Criminal Code of Ethiopia for offenses stipulated in Article 808 of this Code. 2/ The penalties to be incurred by business organizations shall be a fine, under the terms and conditions provided for in Article 90 of the Criminal Code of Ethiopia.
1/ A debtor or a de facto or de jure manager of debtor’s business who, during reorganization or bankruptcy proceedings: a) grants a mortgage or a pledge or carries out an act of transfer without the permission provided for in Article 653 Sub-Article (3) of this Code, or who pays, in whole or in part, a debt in breach of the prohibition referred to in Article 656 Sub-Article (1) of this law; b) makes a payment in breach of the terms and conditions for the payment of liabilities provided for the reorganization plan under Article 687 Sub- Article (1) of this Code. 2/ A creditor of the debtor who, during the observation period or while a restructuring plan or reorganization plan is being implemented, while being aware of the debtor’s situation, requests or receives an irregular payment under Article 655 (5) and Sub-Article (2) of 687 this Code; 3/ A winning bidder who violates the obligation of untransferability of assets under Article 694 Sub- Article (3) of this Code; shall, upon conviction, be punishable by simple imprisonment not exceeding one year and a fine of Ten Thousand (10, 000) Ethiopian Birr.
A spouse, relatives by consanguinity or affinity up to a fourth degree inclusive of the debtor who embezzle, conceal or illegally hold assets that should belong to the estate of the bankrupt debtor shall, upon conviction, be punishable with a simple imprisonment not exceeding six months and a fine of Ten Thousand (10, 000) Ethiopian Birr.
Supervisor in Reorganization or Trustee in bankruptcy A supervisory judge, a supervisor in reorganization or a trustee in bankruptcy who: 1/ voluntarily harms the creditors’ or debtor’s interests by either using the payment received under the proceedings of this Book while carrying out his duties for his own profits or causes others to grant him benefits that he is aware that they are not due; or 2/ makes use, in his own interest, of his powers for a purpose he knows to be contrary to the creditors’ or debtor’s interests; shall, upon conviction, be punishable with a simple imprisonment ranging from six months to three years and a fine of Five Thousand to Fifty Thousand Ethiopian Birr.
1/ The public prosecutor or the trustee in bankruptcy shall seize the criminal court on the offenses set down in this Chapter. 2/ The trustee in bankruptcy shall forward to the public prosecutor supporting documents, receipts and other information in his possession for the effective prosecution of the offenses. Supporting documents and receipts shall be kept at the court registry when they are required. 3/ Convictions for negligent or fraudulent bankruptcy and other related offenses may be prosecuted even where the debtor has not been adjudged bankrupt under Title Four.
1/ The Court may, in the course of bankruptcy proceedings, order that one or more de facto or de jure managers of an entity declared bankrupt personally and bear all or part of the debts of the entity, where he has committed the following acts: a) selling property belonging to the entity as his own; b) carrying out the transactions of the entity to further his personal interests by using the entity as a cover; c) using the property or credit of the entity for personal purposes or in favor of another entity in which he has direct or indirect interest; d) engaging in a manifestly unprofitable venture for his personal gain using the entity as a cover; e) embezzling or concealing all or part of the assets of the entity or fraudulently increasing its debts. 2/ Sums recovered under a suit above shall be used to pay off creditors of the bankrupt entity in accordance with the orders priority laid down under Article 786 of this Code.
1/ The simplified bankruptcy proceedings referred to in this Title shall apply to small and medium-sized enterprises that are in cessation of payments and whose value of assets in their balance sheet of the last twelve months is less than Twenty (20) Million Birr, or whose annual turnover of the last twelve months is less than Five (5) Million birr (adjusted for inflation) or whose total number of employees is less than ten (10). 2/ The court shall not open simplified bankruptcy proceedings where the debtor has been dishonest and, in particular, concealed part of its assets, fraudulently omitted certain creditors, exaggerated his liabilities or committed any other fraudulent acts. 3/ Where the court determines that a debtor under simplified bankruptcy proceedings is dishonest according to Sub-Article (2) of this Article, it shall immediately convert simplified bankruptcy proceedings into bankruptcy proceedings.
1/ The debtor shall apply for the opening of simplified bankruptcy proceedings within forty-five days from the date of cessation of payments. 2/ Where the debtor is in cessation of payments, a creditor or the public prosecutor may file an application to the court to open simplified bankruptcy proceedings.
1/ The following documents shall be submitted as annexes to an application by the debtor for the opening of simplified bankruptcy proceedings: a) the last balance sheet, financial statements or accounts of the debtor; b) a list of commercial credits and debts, with the names and address of the creditors and debtors; c) a list of main ongoing contracts, including supply contracts, lease and license agreements. 2/ The court may order the debtor or any third party, including banks and public authorities, to submit any additional relevant documents.
1/ The court shall appoint a trustee in bankruptcy for the duration of simplified bankruptcy proceedings. 2/ Acting independently, the trustee in bankruptcy shall, among others, carry out the following tasks: a) notify the creditors the opening of simplified bankruptcy proceedings; b) verify the completeness and truthfulness of the information submitted to the court by the debtor, and report to the court any dishonest behavior of the debtor; c) selling all the debtor's assets by means of auction or individual sale, whichever is more efficient to maximize the purchase price; d) establish a list of creditors, which claims have been accepted, to be deposited with the court’s registrar; e) distribute the product of the sale among the creditors in accordance with their ranking in accordance with Article 786; f) establish a final report to the court summarizing the list of creditors, the sale of assets and the distribution of the proceeds. 3/ The trustee in bankruptcy shall complete the sale of all assets and the distribution of the proceeds within one year from the opening of proceedings. 4/ In furtherance to liability provisions in Article 614, the trustee in bankruptcy may engage his personal liability where he has not completed the sale of all assets and the distribution of the proceeds within one year from the opening of proceedings.
The duration of simplified bankruptcy proceedings shall not exceed one year.
The court shall, after the expiration of one year, close simplified bankruptcy proceedings.
Upon the closing of simplified bankruptcy proceedings, debtors who are physical persons shall be discharged from all their debts, including contingent unknown debts, provided that: 1/ the debtor has not been dishonest; 2/ the debtor has not filed for opening of bankruptcy or simplified bankruptcy proceedings within the last three years.
Upon the closing of simplified bankruptcy proceedings, debtors as legal persons shall be cancelled from the commercial register.
Where, upon the closing of simplified bankruptcy proceedings, the debtor has any remaining assets, creditors shall have the right, within two years after the closing of proceedings, to request the reopening of simplified bankruptcy proceedings, in order to allow the sale of these assets and distribution of proceeds.
Notwithstanding the closing of simplified bankruptcy proceedings, a creditor shall have the right, within two years after the closing of proceedings, to request the reopening of bankruptcy proceedings where he can prove that the debtor has acted dishonestly.
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