The methods of disclosure prescribed in article 392 are inadequate and in terms of cost effectiveness they are burdensome for the company. [xli] However, in both cases their statutes failed to clearly articulate stakeholders substantive and procedural enforceable rights in the corporate governance of the company. Both internal and external governance framework intends to ensure the effective functioning of companies in the creations of wealth by minimizing costs. Shareholders have right to subscribe additional new shares. They assist minority shareholders to strengthen their voice within the company by electing their representatives in board members and auditor proportion to their shareholdings. As a result, the financial disclosure provided in the share company law should include companies’ cash flows and income statements, and statements of any equity changes and recognized gains or losses. Independent and objective judgements in corporate affairs are essential elements for boards’ stewardship towards shareholders and the company. It was a government owned integrated mill manufacturing 100 % woven cotton … The factory has become a reliable producer of drugs that meet the needs of the people in all regions of Ethiopia. Regarding companies disclosure and transparency, poor disclosure regime deters effective functioning of capital markets, raises costs of capital and result in poor allocations of resources. Second, provisions can be made that impose a fiduciary duty on controlling shareholders. Berle, one of the leading proponents of the first approach dictated that boards and companies managers should direct the company for the sole interests of maximizing shareholders profit by disregarding the interests of stakeholders. More severely, there is no channel of disseminating even these limited companies’ information to the public. In one hand, impose fiduciary duties on controlling shareholders. disbursed, the share of the private bank is at par with the public commercial banks. For convenience, it organizes and analyzes the share company law provisions corresponding with the structures of OECD Principles. With regard to boards, the contradicted provisions of articles 348(3&4) and 362(2) of the commercial code that prescribe the compositions of boards should be harmonized. After evaluated the two different criteria developed by those authors one by one corresponding with the relevant share company law provisions, he concluded that the level of minority shareholder protections under the Ethiopian share company law only comply with two of both the five and six criteria.[xxxvi]. Third, this may lead to evasion of government taxes and abuse of company’s assets by mangers. It also missed to cover the director’s transactions with the company on behalf of third parties and their families. The OECD Principles urge government policy makers should craft their legal, regulatory and institutional bases that ensure the effective and efficient corporate governance framework. Second, there are no requirements for approval and registration of the draft prospectus by regulatory authority before issued and offered to the public. In addition, the offering of additional new shares in article 469(5) or debt securities provided in articles 429-433 of the commercial failed to require financial reports to be prepared based on established accounting and auditing standards and audited by independent auditor. It also neglected to clearly articulate the liabilities of founders/issuers where the offered prospectus to the public contained untrue or misleading statements or omitted the relevant information for investors’ investment decisions. Secondly, it leads to tax evasion and misuse of the company’s assets by corporate insiders to the detriment of minority shareholders and the company. Second, they hamper their incentives to pare take in the meetings of shareholders. It failed to adequately protect minority shareholders from corporate insiders and abusive self-dealings by or in the interests of majority shareholders directly or indirectly. The establishment of stock markets will have crucial roles for the existence of strong capital markets in Ethiopia. This in turn will have two drawbacks. Faffa is one of the top suppliers … Here, one may argues that as long as directors are accountable to the company and the law, the interests of stakeholders are recognized under the share company law impliedly. The existence of good corporate governance framework within the country will not only foster market integrity, improves economic efficiency and development but also builds investor confidence. Shareholders rights to withdraw or exit is provided under article 463 of the commercial code in cases where any changes are made in the nature or objects of the company or the company’s head office are transferred in abroad. 214 0 obj <> endobj The requirements of the initial offering of shares to the public provided from articles 317-323 of the Commercial Code are defective and inadequate. Third, it serves as main tools for regulators to supervise and control corporate malpractices for the protection of investors and avoiding market inefficiencies. So there is a complete information asymmetry between investors and companies in the current corporate governance framework of Ethiopia. Here, one may argues that as long as directors are accountable to the company and the law, the interests of stakeholders are recognized under the share company law impliedly. Since the decisions of the board may affect different classes of shareholders, they should make objective and independent judgments which align the interests of all shareholders with the stakeholders (OECD Principles VI, (B&C)). We give a brief account of what one needs to do to start a PLC in Addis Ababa. Finally, Fekadu Petros also clearly demonstrated the inadequacies of minority shareholder protections under the share company law. It should also prescribe the minimum qualification to be eligible an auditor or holding a practicing license issued according to the regulations of country’s accountancy professions. Head quarters: Addis Ababa, Ethiopia. These are: - right to ownership registrations, right to information, right to pare take and vote in the meetings of shareholders, right to transfer or sale shares and participate in the profits or proceeds of the company.  These ownership rights of shareholders are similar to the OECD Principles. Accountability of boards is among the four pillars of corporate governance and hence they are required to effectively overseeing managements and accountable to shareholders and the company. This article critically analyzes the share company law provisions of the Ethiopian Commercial Code in light of the OECD (Organization for Economic Cooperation and Development) Principles of Corporate Governance. Contrarily, article 365(3) of the commercial code blocked minority shareholders right to institute proceedings against the liable directors where one fifth of share capitals of shareholders vote against the resolution. However, as illustrated in the above paragraph, there is the possibility that all board members are executive directors as per article 363(2) of the commercial code. 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