On the 5th of August 2016, Ethiopia’s parliament has approved a law that allows the formation and operation of holding companies in Ethiopia, a move that is meant to accommodate the increase interests of holding companies.
Ethiopia date from 1960 became the first African state to pass a law permitting businesses to be formed through six types of business organizations. Originating in the 19th century, the commercial code of Ethiopia served the formation and operation of companies in the country. In addition, the government introduced Proclamation No. 686/2002 to regulate business license and registration of companies. However, the existing legal frameworks were not adequate to regulate the emerging corporate grouping as a result of the country’s economic policy the past nearly two decades has witnessed. There are, however, de facto group of affiliated and holding companies in Ethiopia.
The new Commercial Registration and Licensing law (Proclamation No. 980/2016) under articles 2 (40) and 34 provides that two or more private limited companies can establish a holding company in a manner that it would not disturb competition. The holder company shall be jointly and severally liable with its member companies to the claim of third parties. The requirements of registration for holding companies, however, left for regulations to be issued in accordance with the new law.
In addition the new law,
· Recognizes and regulates franchise trade agreement,
· Allows the opening of branch offices in Ethiopia by foreign chamber of commerce,
· Prohibits operating as a sole importer/distributor, and
· Calms the rules on the requirement of certificate of competence.