Abstract
Privatization of public enterprises or state-owned business entities has been greatly acclaimed as one of free market ideas and a sort of democratic rule on equitable distribution of wealth. However, ill-designed modes of privatization, particularly, Article 5 of the Proclamation No.146/1998 transfers the public enterprises to share companies in Ethiopia, goes out of the purpose and creates legal and practical problems on the operation of share companies. The crux of this paper focuses on the formation and operation of state-owned share companies which are evolved by the process of privatization in Ethiopia. It advocates that the new advent of formation of company is out of the Commercial Code of the State and legal jurisprudence ever experienced. Hence, the status of such companies is carefully discussed from the legal point of view. These companies situate in different place than company law perspective, the purpose of privatization sought in these companies and the economic policy which the country follows. To this effect, the legal doctrines of the area, the practice of privatization from Privatization and Public Enterprises Supervising Agency (PPESA) are explored.
Highlights
Privatization of public enterprises or state-owned business entities has been greatly acclaimed as one of free market ideas and a sort of democratic rule on equitable distribution of wealth
In light of association and partnership agreement, since the share companies under study are totally owned by the state, one man-company, as mentioned earlier, the minimum number of members and the company contract sought by Commercial Code are abrogated by the law of privatization of public enterprises
No.146/1998 concerning the conversion of a public enterprise to a share company, in general and the wording of sub-Article 4 of the same, which tells about the fact that the authorities given to shareholders under the Commercial Code are given to the supervising authority, in particular, are ineffective
Summary
Business in organized form has its beginning in Ethiopia during Emperor Menilik’s reign (Punkhrust, 1961). In 1909, a private share company was established under the name of Agricultural and Commercial Development Company of Ethiopia (W/Meskel, 1942) It was incorporated by proclamation of Emperor Menelik II. The new economic policy provided for major and significant liberalization with respect to private owned commercial companies, both local and foreign investors in Ethiopia while limiting the role of the state in the economy. Consistent with free market economy, as one modus operandi of privatization, the conversion of a “Public Enterprise to Share Company form” has been taken by the FDRE Government, the successor of TGE It is depicted in Ethiopian Privatization Agency News, pursuant to Proclamation No.146/1998, 62 large scale Public Enterprises have been converted to “share companies” totally owned by the State in 1999 (EPA News,1999). The issues to be raised here, in comparison with the age-old company law in general and Commercial Code of Ethiopia in particular, without defecting the cherished objectives and methods of privatization employed by the process of privatization in Ethiopia are: Can share companies be formed by excluding the application of core provisions of the Commercial Code concerning number of founders (Art. 307 and 311), depositing at least one fourth of the par value of the shares (Art. 312 (1) (b)), valuation of contribution in kind (Art. 315) and directors and their duty (Art. 347(1) and 349)? Does the application of other provisions of the same where they are deemed necessary enable to say the companies formed in accordance with the Commercial code of Ethiopia? On the other side, transferring of shares has its own objectives, whether the state-owned share companies meet these objectives, and the impact of them in creating fair economic environment should be evaluated
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