Addis Ababa, Ethiopia (11 February 2023)
The Ministry of Trade and Regional Integration in Ethiopia has issued Directive No. 935/2022, replacing the 2017 Directive, to align commercial registration and business licensing with the recent Commercial Code Proclamation No. 1243/2021, Amendment Proclamation 1150/2019, and Amendment Regulation No. 461/2020.
One of the major changes in the new directive is the inclusion of provisions for the implementation of elements included in the Commercial Code. The new directive includes provisions for implementing elements of the Commercial Code, including recognition of a One-Member Private Limited Company and rules for converting business organizations from one type to another.
Another key modification in the directive is the requirement for an external audit report. The previous directive required companies with 20 or more members to present an external audit report when requesting renewal for their business license. The new directive requires an external audit report for PLCs with 10 or more members or PLCs with total assets of ETB 10,000,000 or more.
The directive gives strong emphasis on digitizing services and creating a favorable ecosystem to do business in Ethiopia by providing cost-effective, efficient, and accessible commercial registration and business licensing services supported by modern technology.
The new directive also addresses the issue of capital reduction, which was lacking in the previous directive. The directive stipulates that PLCs, SCs, or One-Member PLCs can reduce their capital after presenting an authenticated minute endorsing their auditor’s presentation of the reason for and manner of the capital reduction.
In terms of existing rules, the new directive has modified the requirements for renewing business licenses in cases where a company loses three-fourths of its capital. The directive provides that a SC or PLC whose capital is lost or reduced by 3/4th can decide on the dissolution or continuation of the company, which can be done by raising the company’s capital by 1/4th of the registered capital within 90 days. Failure to implement the increase within this period would give third parties the power to cause the cancellation of the company’s registration.
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