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 1.   Introduction

In a Private Limited Company ("PLC" or "the Company"), shareholders play a vital role in the governance and decision-making processes. As stakeholders, they have certain rights and privileges that enable them to engage actively in the affairs of the Company. One essential right is the ability to access and inspect documents and information pertaining to their Company's operations, financial status, and decision-making processes. This right to information is crucial for shareholders to make informed decisions, assess the Company's performance, and protect their interests. In Ethiopia, the Commercial Code (Proclamation No. 1243/2021) ("Commercial Code") outlines the specific documents and information that shareholders have the right to access and inspect. Understanding these rights empowers shareholders to participate effectively in the governance of their Company and hold the management accountable. In this brief article, we will explore the documents and information that shareholders of a PLC in Ethiopia are entitled to access and inspect, as well as the exceptions and remedies available in case of non-compliance.

 2.   General Remarks on Shareholder Transparency

As per the Commercial Code, shareholders of a PLC have the right to access and inspect certain documents and information to evaluate the financial state of the Company and protect their interests. According to Professor Fekadu Petros[i], the level of transparency required varies depending on the size and nature of the Company. Larger companies are mandated to disclose more information while smaller, minority-owned companies have limited disclosure requirements.  The distinction aims to prevent unfair competition and maintain business privacy.

3.  Documents and Information Accessible to Shareholders

According to Article 504 of the Commercial Code as we read it in conjunction with Article 181, shareholders have the right to access and inspect specific documents such as balance sheets, profit and loss accounts, financial reports, inventories, directors’ reports, auditor reports, meeting minutes, and shareholder registers. These documents enable shareholders to assess the Company's financial performance, governance, and share values. Shareholders are entitled to this information to make informed decisions regarding the Company's affairs, specifically concerning its governance.

Generally, we can classify the manners and instances of the rights of shareholders to access information and documents of the Company into four as follows:

 3.1.   List of Documents and Information a Shareholder of PLC Can Ask at Anytime  

In this regard Article 381 of the Commercial Code expressly provides that every shareholder may always inspect and take copies of the following documents kept at the head office of the Company: 

• Balance sheet;

• Profit and loss accounts;

• Financial documents;

• Inventories;

• Reports submitted by the directors and by the Auditors to the general meetings relating to the three preceding financial years;

• Minutes and attendance sheets of these meetings;

• A resolution to be submitted to the meeting;

• A register of persons affiliated with the company indicated under Article 311 of the Commercial Code;

• The name of the highest paid employee of the company and the total amount of payment effected to such a person in the financial year; and

• A register of shareholders of the company.

 Although shareholders of the PLC have the right to inspect and access the aforementioned documents and information at any time, it raises the question of whether there should be limitations on the frequency and reasons for inspection. Without such limitations, it may lead to inconvenience and disruption if shareholders, without valid reasons, continuously request information from the Company. This could potentially cause significant problems in the day-to-day activities of the general manager and other members of the Company's governance.

 3.2.   Upon Request by Shareholder and Additional Information

 According to Article 382, shareholders are entitled to request additional information in addition to the documents mentioned above. This information is necessary for them to form an informed opinion on the agenda items submitted for a general meeting. The board is obligated to provide access to this information during the meeting. However, there are circumstances in which the board may refuse to disclose such information. This includes cases where the law prohibits disclosure or if the board believes that providing the information would result in significant harm to the Company.

 The determination of the specific type of information envisioned by this provision is made on a case-by-case basis. It depends on factors such as the nature of the agenda items, the surrounding circumstances, and the current situation of the Company. The board assesses these factors to determine the relevance and necessity of the additional information requested by the shareholder. This approach ensures that the information provided is tailored to the specific needs and circumstances of each situation, promoting a fair and informed decision-making process.

 3.3.   Documents and Information to be Inspected at Ordinary Meetings

 Article 392 of the Commercial Code stipulates that within the fifteen consecutive days leading up to an ordinary general meeting, shareholders have the right to inspect, make copies of, or request to be sent at their own expense the following documents: 

• The balance sheet;

• The profit and loss account;

• The directors' and auditors' reports; and

• Proposed resolutions to be presented at the general meeting.

 3.4.   At Special Meeting 

 At the time of special meetings, Article 405 of the Commercial Code directly cross refers to Article 381 and hence, all information and documents to be disclosed at all times shall also be available in case of special meeting.

 4.   Exceptions to Shareholders’ Information Access

 While shareholders have broad access rights, there are exceptions where Companies may restrict access to information. Article 504(2) of the Commercial Code stipulates that if disclosing certain information would cause serious harm to the Company or if prohibited by law, the Company can deny access to such documents. This provision safeguards the Company's sensitive and confidential data from potential harm or exploitation.

 5.  Remedies for Non-Compliance

 If the Company refuses to comply with the law and denies shareholders access to documents, shareholders have recourse to the Ministry of Trade and Industry /currently named as the Ministry of Trade and Regional Integration/, other relevant government authorities, or the court according to Article 382(2) of the Commerical Code. These avenues allow shareholders to enforce their right to inspect and obtain copies of essential documents of the Company.

 6.  Conclusion

 In conclusion, shareholders of a PLC in Ethiopia have certain rights to access and inspect documents and information related to the Company. These rights are aimed at promoting transparency, enabling shareholders to evaluate the Company's financial state, and make informed decisions. However, the extent of these rights may vary depending on the size and status of the Company, with larger companies having more extensive disclosure requirements.

 Shareholders have the right to access and inspect documents such as the balance sheet, profit and loss accounts, financial documents, inventories, reports submitted by directors and auditors, minutes of general meetings, resolutions, register of persons affiliated with the Company, and register of shareholders. These documents should be made available at all times at the Company's head office.

 Additionally, shareholders have the right to request additional information necessary to take a position on the agenda of a general meeting. However, the Company may refuse to provide certain information if its disclosure is prohibited by law or would cause significant damage to the Company, such as risks of unfair competition or violation of business privacy.

 If the Company refuses to comply with the law and denies shareholders access to documents, shareholders have remedies available, including applying to the Ministry of Trade and Regional Integration, other government authorities, or seeking legal recourse through the court.

 Disclaimer: The information provided on this website or through any communication with our law office is not intended as legal advice and should not be relied upon as such. Communication with our law office does not establish an attorney-client relationship. We accept no liability for any loss or damage resulting from the use of this information.

 For reliable and top-quality legal services pertaining to Company Law in Ethiopia, we encourage you to reach out to our law firm. Our team provides assured and high-standard legal assistance to clients seeking help with Company Law matters in Ethiopia. Contact us for comprehensive and trustworthy legal support in navigating the intricacies of Company Law in Ethiopia.

 [i] Fikadu Petros, Ethiopian Company Law (3^rd Ed.), Far East Trading PLC, 2014 E.C