Revisiting Company Law with the Advent of Ethiopia Commodity Exchange (ECX): An Overview

Author:Getahun Seifu
Position:LL.B; LL.M; Manager for Compliance Monitoring and Investigation at ECX
Pages:102-141
SUMMARY

The historical development of the law of companies shows that this area of the law is evolving and continually changing based on the level of economic development. The law directly dealing with companies, the 1960 Commercial Code of Ethiopia, seems to limit the scope of the law of companies only to private limited companies and share companies, save the partnerships included in the Code. This is... (see full summary)

 
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REVISITING COMPANY LAW WITH THE ADVENT OF
ETHIOPIA COMMODITY EXCHANGE (ECX):
AN OVERVIEW
Getahun Seifu
Abstract
The historical development of the law of companies shows that this area of the
law is evolving and continually changing based on the level of economic
development. The law directly dealing with companies, the 1960 Commercial
Code of Ethiopia, seems to limit the scope of the law of companies only to
private limited companies and share companies, save the partnerships included
in the Code. This is a very narrow approach as it leaves out public enterprises
simply because they are not recognized under the Code. This article examines
the salient features of company law and argues in favour of a broader
understanding of the concept. As such, the article vets the main features of
private limited companies, share companies, public enterprises and The
Ethiopia Commodity Exchange) ECX and shows how the advent of the ECX
has challenged the frontiers of the existing legal framework of Ethiopian law of
companies. The study argues that ECX is a unique “hybrid-model” which can
neither be categorized as a registered company nor as a public enterprise
(statutory company) thereby enhancing the challenge to the frontiers of
company law as envisaged in the 1960 Commercial Code of Ethiopia.
Key words:
Company law, public enterprise, Ethiopia Commodity Exchange (ECX),
public-private partnership, hybrid-model company.
Abbreviations
ECX Ethiopia Commodity Exchange
PLCs Private Limited Companies
SOEs State owned enterprises
SRO Self-regulatory organizations
LL.B; LL.M; Manager for Compliance Monitoring and Investigation at ECX; and
part-time lecturer in law at St. Mary’s University College Faculty of Law and the
Faculty of Law of Addis Ababa University. The author gratefully acknowledges
constructive comments from colleagues and assessors on earlier drafts of this
research. Any opinion expressed in the research remains the personal opinion of the
author and shall not be attributed to the institutions where he works. For comments,
he can be contacted via e-mail at: getahunseifu@yahoo.com.
4(1) Mizan Law Rev. REVISITING COMPANY LAW WITH THE ADVENT OF ECX 103
Introduction
The formation of companies in their modern legal structure (which enables
engagement in large-scale economic activities with substantial resources) does
not have a long history in Ethiopia. Nearly three decades after the promulgation
of the Bankruptcy Law and Company Law in 1933,1 there was a need for a new
law in response to the economic expansion and development as well as the
increased inflow of foreign investment at the time. This new law, “[t]he
Commercial Code of 1960, created a comprehensive law of business
organisations”2 in the country.
Company law is part of the law of business organisations, and refers to the
law that deals with the bringing together of large resources/capital to do
business for profit in accordance with a certain law(s) of organization or
incorporation. It could be established either by private individuals or private
individuals in association with the state or through state ownership. According
to the Commercial Code (hereafter “the Code”), a business organisation is
defined as “any association arising out of a partnership agreement”.3 The Code
envisages only the types of companies that are conventionally understood to be
encompassed by the law of companies.4 Apart from defining a business
organisation, the Code does not define or describe what is meant by
“company”.5 This article argues against the narrow conception of ‘company
law’ as envisaged under the Commercial Code and would support a broader
reach beyond privately owned companies, as envisaged in the Commercial
Code, and argues that company law ought to include the law of public
enterprises.6 This article makes a modest attempt to inquire into the concept and
scope of company law in Ethiopia contrary to the prevailing view.7
1 See paragraph 3, item number 3 of the preambular recitals of the Commercial Code of
1960, which refers back to this law.
2 Everett F. Goldberg (1972), ‘An Introduction to the Law of Business Organizations’,
Journal of Ethiopian Law, Vol. 8, No.2, at 495.
3 Id.; See also Article 210, Commercial Code.
4 See Article 212 of the Commercial Code as well as the curricula of law schools in
Ethiopia. In our law schools, the law of companies is taught as part of the “Law of
Traders and Business Organizations”, which covers only the relevant provisions of the
Commercial Code and its amendments. The other course that covers State owned
enterprises and/or State and privately owned companies as well as cooperative
societies is taught under the title of “The Law of Public Enterprises and Cooperative
Societies.”
5 For the description of the different understandings of what is meant by the term
“company”, see below.
6 It is worth noting at this juncture that one can argue solely based on the provisions of
the Commercial Code, which provide only a narrow description and conception of
104 MIZAN LAW REVIEW Vol. 4 No.1, March 2010
Moreover, this research argues that the horizon of company law is still
expanding with the advent of “hybrid model” self-regulatory organisations
(SROs) such as the Ethiopia Commodity Exchange (ECX). The advent of such
new forms of institutions strengthens the view that the scope of company law
has to be revisited with a view to enabling it to effectively achieve its purpose.
Accordingly, the first section of this article provides a brief overview of the
concept of company law. The second section discusses the bounds of company
law in Ethiopia with analysis of the concept in light of various forms of
establishment and operation and the broader understanding of companies
alluded to above. It also discusses the fundamental elements of the various
forms of companies with the intention of showing that they do not have
objectives that are really far apart. The third section focuses on the formation,
distinctive features and characteristics of the ECX, as a form of company, and
explains the need for a wider conception of company law in the country. Finally,
the last part of the research contains conclusions and recommendations on the
way forward.
1. Meaning and Brief Overview of Company Law
During earlier times, businesses were owned and run by private individuals and
some forms of partnerships.8 Though the reasons for forming such partnerships
company law. However, as will be elaborated in the subsequent sections, such an
interpretation would not solve issues that emerge based on some new developments
under Ethiopian law.
7 It is the view of this author that the curricula of law schools also look at the concept of
companies very narrowly that would not equip graduates with the concept(s)
adequately. Currently, there is no explicit connection between the courses on “Law of
Traders and Business Organizations” and “The Law of Public Enterprises and
Cooperative Societies”. This leads to the conception that they are (completely)
separate courses. That holds true for other stakeholders such as policymakers and the
business community. And, this is the main reason that motivated this author to
conduct research towards clarifying some of the underlying issues. The author also
hopes that this research would encourage more discussion on the matter and tighten
the gap so that it would be addressed properly.
8 See H. R Hahlo (1969), Company Law through the Cases (Cape Town/ Wynberg/
Johannesburg: Juta & Company Limited), pp. 3-9. It provides an interesting overview
of the historical development of the law of companies from the Roman times to the
1960s. See also, in general, John P. Davis (1961), Corporations (New York:
Capricorn Books), pp. i-xix. Some would argue to trace the idea of partnerships to the
very existence of human kind: “The concept of a corporate body [partnership or
otherwise] being a different entity from the individuals who collectively form the
corporate body is as old as man; it is seen in the family, the tribe and the nation.”, P.A

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