1. Introduction
The draft CSO proclamation introduces major changes affecting the governance, operations, and funding of NGOs in Ethiopia. While some reforms support financial sustainability and local collaboration, others expand state control and reduce legal protections for CSOs. The changes carry both opportunities and serious compliance risks if not carefully monitored. This legal update summarizes key features, legal implication, benefit, and risks
2. Salient Features of the Draft Amendment
2.1 Composition of the Board of Directors of the Agency
As provided under Article 8 of the draft amendment, the Board of Directors of the Agency is reduced from eleven members and now limited to seven members, all of whom are designated by the government (by Ministry of Justice). Notably, four of the seven members are representatives from direct government institutions, with the remaining drawn from other sectors at the discretion of the appointing authority.
2.2 On Representatives of the Board
In the existing Proclamation No. 1113/2019, the Board of the Agency, among other members, is composed of three representatives from the Council of CSOs, which provides a conducive arrangement for fair representation of civil society organizations. However, the draft amendment completely overturns this arrangement by reducing the number of Council of CSO representatives to one, while increasing government representatives to four. This gives the government a dominant majority and decision-making power on the Board. Such a structure is unfairly unbalanced and, if approved in its current form, would pose a serious threat to the independence and effective participation of CSOs in Ethiopia.
3. Regulatory Power and Reporting
Under the provision of the existing Proclamation No. 1113/2019, if an organization transfers its properties, it was required to notify the agency within 15 days. However, in the draft amendment to the Proclamation, such transfers are instead to be included in the organization’s annual report. The draft also states that the Agency will issue a directive specifying the types of property transfers that must be reported in this way. The draft amendment to the Proclamation further provides for the issuance of a directive that will regulates how Civil Society Organizations (CSOs) may obtain loans by using property collected from the public as collateral for the purpose of carrying out their objectives.
4. Additional Responsibilities for Foreign and Local Civil Society Organizations
According to the draft amendment to Proclamation No. 1113/2019, foreign CSOs must work with local organizations, community-based groups, and government entities when implementing projects. They are also required to support local capacity building and align their activities with localization principles. Additionally, both foreign and local CSOs must sign a project agreement with the relevant government body before starting any project.
- Foreign CSOs can still receive funds from lawful sources, but the draft amendment adds a requirement: they must include detailed information in their annual report when receiving foreign funds—whether from abroad or foreign entities in the country. This includes the date, source, amount, purpose, and supporting documents.
- The draft amendment requires local CSOs involved in voter education, election observation, or other election-related activities to obtain a support letter from the Agency before starting such activities.
5. Reporting Obligation on the Right to Solicitation, Receiving and Utilization of Funds
The provision of Article 63 (1) (c) Proclamation No. 1113/2019 which provides “Any organization shall have the right to solicit, receive and utilize funds from any legal source to attain its objective is repealed and replaced as follows: “any organization shall have the right to solicit, receive and utilize funds from any legal source to attain its objective. However, in the case where the source of fund is either foreign or local source, it shall present a separate report along with its annual report on the time, the source of the fund, the amount, and its purpose and along with supporting evidence”.
6. Failure to Report its Existence
Under the draft amendment, if an organization fails to submit its report within three months of the deadline and does not respond within 30 days after a public notice (as per Article 70(1) of Proclamation No. 1113/2019), its legal representative must appear before the Authority to explain the delay. If they fail to appear or provide a valid reason, the Authority can decide to dissolve the organization.
This marks a major change from the previous provision, where only the Board—based on the Director General’s recommendation—could decide on dissolution.
7. Renewal of license
The draft amendment to the Proclamation includes detailed provisions under Article 70(3) to (7) on license renewal procedures. Organizations must renew their registration every four months, and renewal must occur within a one-month window starting one month before the four-year expiry date. For organizations registered before the amendment takes effect, the renewal period is calculated from their original registration date. Failure to comply with renewal requirements may result in dissolution after a notification period. The amendment also allows organizations to appeal the Authority’s decision to its Board within 30 days.
8. Exemption on Annual Activity Report
Every organization is required to prepare a statement of accounts annually. Under Proclamation No. 1113/2019, organizations managing funds not exceeding Birr 200,000 (two hundred thousand) were exempted from preparing a full statement of accounts and were only required to submit a simplified financial statement showing income and their expenditure.
However, under the draft amendment to the Proclamation, this threshold has been raised. Now, organizations handling funds not exceeding one million Birr 1,000,000 (one million) in a budget year are allowed to submit only a simplified financial statement that includes income, expenditure, assets, and liabilities.
9. Stricter Regulation on Opening Bank Accounts
As per the draft amendment to the Proclamation, every organization that intends to open a bank account needs to get it approved by the organ of the organization that is empowered to decide on such matter. All organizations are also required to undertake its financial activities using only bank accounts that are opened as per the permission of the Authority.
10. Inspection
The draft amendment to the Proclamation grants the Authority broader powers than the current law. While the existing Proclamation allows suspension only after confirming a serious violation, the amendment permits suspension based on suspicion if there’s a risk of irreversible harm.
It also extends the suspension period: under the current law, suspension lasts up to three months, ending if the investigation isn’t complete. The amendment allows the Board to extend it for another three months. Additionally, the Authority is given the power to partially or fully freeze an organization’s bank accounts during investigations—an authority not granted under Proclamation No. 1113/2019.
Finally, the right to appeal is limited. Under the amendment, appeals can be made to the Board, but its decision is final, effectively removing the option for judicial review through the High Court.
11. Administrative Measures
As outlined in Article 78(2) of the applicable law, CSOs or their administrators who violate rules set by the Council of Ministers or directives from the Authority—such as those on information management, reporting, bank account permits, or asset transfers—will first receive a written warning. If the violation is repeated or not corrected, a stricter warning follows. Continued non-compliance can lead to suspension by the Authority.
The draft amendment introduces a more structured enforcement process. If violations are not addressed, the Director General may suspend the organization for three months. If non-compliance continues, the Board may dissolve the organization. Notably, the amendment allows the manager, founder, or members of the organization to appeal the dissolution decision to the High Court.
12. Elaborate Penalties Provisions
The draft amendment introduces several penalties and dissolution grounds not included in Proclamation No. 1113/2019:
- Failure to Renew: Non-renewal within 4 years leads to revocation.
- Unlicensed Activities: Operating beyond licensed scope results in revocation.
- Financial Violations: Poor recordkeeping or failing to retain documents (5 years) results in a fine of ETB 50,000–500,000.
- Financial Reporting Failure: Not submitting required reports or maintaining records attracts fines of ETB 100,000–200,000.00.
- 80/20 Rule Violation: Breaching program/admin expense ratio incurs fines of ETB 200,000–500,000.
- Misconduct by Officials: Violations under Article 78(2) result in fines of ETB 100,000–400,000 and possible imprisonment.
- Unlawful Property Disposal: Leads to confiscation, up to 5 years imprisonment, and fines of ETB 500,000–1,000,000.
- Unlawful License Transfer: Transferring fundraising licenses results in up to 2 years imprisonment and ETB 100,000–500,000 fines.
- Obstructing Oversight: Hindering regulatory actions results in up to 1 year imprisonment and fines of ETB 100,000–300,000.
- Legal Entity Violations: Entities violating Article 78 face fines of ETB 400,000–600,000.
- Repeated Offense: Leads to fines plus mandatory closure or dissolution.
13. On Source of Income of Civil Societies Fund
The draft amendment to the Proclamation introduces an additional source of income for the Council of Civil Societies Fund, allowing it to receive support from donor organizations as well as contributions made voluntarily or through self-initiated support by other organizations. This is a positive development that could enhance the financial sustainability and independence of the Civil Societies Fund.
14. Conclusion
The draft amendment introduces stricter regulatory frameworks and severe administrative measures, along with additional burdensome obligations on foreign CSOs operating in Ethiopia. While opposition has been raised against its enactment, if it ultimately comes into force, Ethiopia NGO will need to closely monitor developments and ensure full compliance with the new requirements.
Compiled by Melkamu Destaw (Junior Associate at MAP Legal Services LLP),
Disclaimer: This legal update is provided for informational purposes only and should not be considered an official translation of the law. Million Alemu and Partners Legal Services LLP does not accept any responsibility for the accuracy or completeness of the information herein. If you require legal advice related to the NGO legal framework, operations, or related matters, please contact us directly. https://millionlegalservices.com
