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The House of Peoples Representatives of the Federal Democratic Republic of Ethiopia (FDRE) has approved the revision of the 61-years-old Commercial Code of Ethiopia (hereinafter referred to as the Revised Commercial Code) as per the power vested unto it by Article 55(4) of the Constitution of FDRE. The Revised Commercial Code is expected to be soon published on the Negarit Gezeta, the official Law Gazette on which the Ethiopian Federal laws are published. In these successive legal updates what we should expect from the Revised Commercial Code will be highlighted.
This first part will deal with the major changes introduced by Book I of the Revised Commercial Code under its provisions from Articles 1-171.
1. The Revised Commercial Code repeals and replaces Books I (Traders and Businesses /Articles 1 -209/), II (Business Organizations /Articles 210-560/), and V (Bankruptcy and Scheme of Arrangement/Articles 968- 1182/ of the Commercial Code of 1960. Thus, Books III (Carriage and Insurance /Articles 561-714/) and IV (Negotiable Instruments and Banking Transactions /Articles 715-967/ of the Commercial Code of 1960, will remain in force until the Financial Services Code is issued.
2. As compared to its other Books, the changes introduced by Book I of the Revised Commercial Code are very few. In addition to reducing the number of provisions from 209 to 171, Book I of the Revised Commercial Code under its Article 5 has used an indicative listing method instead of an exhaustive listing method to identify persons who are to be regarded as traders and has extended the listings of activities from 21 to 37. However, as the listing is illustrative, as it uses the words “among others”, a person can be considered as a trader even where it/he/she engages in trading activities that are not included within these listings.
3. Articles 6 to 8 of the Revised Commercial Code have also clarified who will not be considered a trader. Accordingly, those persons who engage in small-scale works (as defined under Article 6 [2]), handicraftsmen, and agriculture or forestry undertakings will not be treated as traders, unless they are conducted for commercial purposes and at a commercial scale. The possibility of civil associations or associations (organizations) with legal personality under public law might carry out trading activities is also envisaged under Articles 24 and 26 of the Revised Commercial Code as long as it is prescribed by special law to be enacted for this purpose.
4. The provisions of Articles 61 to 69 of Book I of the Revised Commercial Code have by far reduced the provisions dealing with Accounts and they have maintained the fact that it is compulsory for traders, excluding petty traders to be defined by special law based on their capital, to keep books and accounts. Traders are also required to keep books and accounts, as per the stipulations of special laws applicable to these matters. Books, accounting documents, outcoming and incoming correspondences are required to be preserved for ten years.
5. The provisions of Articles 70 to 105 of Book I of the Revised Commercial Code deals with the Commercial Register. These provisions make registration mandatory for all traders who wish to undertake commercial activities within Ethiopia. The basic provisions of the Commercial Registration and Licensing Proclamation No. 980/2016 (as amended by Proclamation No. 1150/2019) which deals with trade registration of traders, and alterations, as well as the cancellation of entries, are included in the provisions of Articles 70 to 105. The possibility of online registration is also envisaged by these provisions, and the federal and regional government registering organs are required to undertake the establishment of an effective registry system.
6. The provisions of Articles 106 to 171 of Book I of the Revised Commercial Code deals with Businesses. These provisions deal with the definition, elements, sale, lease, mortgage, and contribution of a business. These provisions have not introduced major changes except trying to take into account the provisions included in special laws like the Commercial Registration and Licensing Proclamation No. 980/2016 (as amended by Proclamation No. 1150/2019) and the Movable Property Security Rights Proclamation No.1147/2019.
Please note that the enclosed Revised Commercial Code is a draft that is an unofficial version and not yet promulgated into law.
Makeda Leikun has contributed to this legal update.
Posted on May 13, 2021.
| File | Description | File size |
|---|---|---|
 Commercial law _ Complete Draft _ English.pdf | 1162 kB |