Tuesday, 18 December 2018 05:28

Ethiopia’s New Business Registration Law recognizes the Formation of Holding Companies

Holding company is a company that typically confines its activities to owning stock/shares in and supervising management of other companies. In Ethiopia, neither the repealed Commercial Registration and Business Licensing Proclamation No. 686/2010, nor the Commercial Code of 1960 gave recognition to the formation of holding companies. However, practically, there are de facto group of affiliated and holding companies in Ethiopia. For instance, MIDROC Ethiopia Groups, East African Holdings, DH Geda Group of Companies and Kangaroo Business Groups are among the practical examples of holding or group of related/affiliated companies. 

To accommodate the practical situation in this regard, the new Commercial Registration and Business Licensing Proclamation No. 980/2016, which came into force on the 5th of August 2016, recognizes the formation of holding companies. This law provides that two or more private limited companies can establish a holding company. The holder company shall be jointly and severally liable with its member companies to the claim of third parties. 

Additionally, the new law recognizes and regulates franchisee trade agreement, border trade business and opening of branch offices by foreign chamber of commerce in Ethiopia. Furthermore, the new law prohibits operating as a sole importer or distributor. It also relaxed the rules on the requirement of certificate of competence. 

 

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