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Abstract
Business people tie themselves under certain form of business organization’s chain and tackle commercial hurdles through collective efforts. In Ethiopia, present day witnessed proliferation of tremendous business organizations in all corners of the country. The structure of business organization chosen may, however, have an impact on how simple it is to obtain finances, how taxes are paid, how accounting records are kept, whether liability of members is limited or unlimited and the ways of. Like other forms of business organizations, Private limited company was introduced in Ethiopia in 1960 when the empire of Ethiopia adopted a comprehensive commercial code for the first time. The 1960 Commercial Code of Ethiopia has recognized six forms of business organization from which private limited company is the most popular and prevalent forms of business organization. Per Article 510/2 of the commercial code of Ethiopia, private limited company is a company whose members are liable only to the extent of their contribution. Yet, commercial code have not sufficiently address the issues of capital maintenance, valuation of in kind contribution, administration of paid up capital, shareholders general meeting, liquidation, founders, and expulsion and/or withdrawal of shareholders. Besides, absence of cross reference to provision of law of Share Company is another worst weakness of law of private limited company. This article has unveiled whether filling the gaps via contract, custom or law is possible. Accordingly, contract can solve the conundrums underlying it by inculcating to articles and memorandum of association, and corporate code of conduct. But, since custom on corporate governance is at an infancy stage, it is tricky to recommend customs as a way out. so the best option is to amend laws on private limited companies in a way that address the existing practical problems associated with such companies so as to make the Ethiopian law compatible with the current global affairs.
Highlights
Business Organization is an important scheme that enables people to do business which would be difficult, if not impossible, for them to do alone
Shareholders can fill the gaps that left by laws on corporate governance of private limited company by incorporating the issues that has not been included under commercial code to article of association
In relation to how those gaps may be compromised, the paper has tried to answer whether those gaps can be solved via contract, custom or law
Summary
Business Organization is an important scheme that enables people to do business which would be difficult, if not impossible, for them to do alone. They are artificial organizations created by the law; are separated from their owners and managers; have their own rights, duties and powers; and have the capacity to exist perpetually [2] They are business entities owned by individuals or juristic bodies and operate with names different from their owners. On the basis of article 555-557 of commercial code [9], there are other businesses organizations incorporated outside Ethiopia in other legal systems and carried out their business, and are regulated with the rules that apply to share company. Like other forms of business organizations, was introduced in Ethiopia in 1960 when the Empire of Ethiopia adopted for first times a comprehensive commercial code. The third section will present the issues of legal regime on corporate organization and major gaps of laws that regulate private limited company. The fifth section finalizes the article by a way of conclusion and recommendation
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