Month: December 2022

By DMLF Team

The Ethiopian Media Authority has issued a directive namely Directive for Registration and Permit for Foreign Media Correspondents and Foreigners Wishing to Shoot Films in Ethiopia Directive No 900/2022.

The Directive provides the procedure of application, list of documents needed to be attached to the application, visa requirements and fees paid for registration and permit.

 Without obtaining a permit from the Ethiopian Media Authority, a foreigner cannot engage in news or interviews making in Ethiopia or shoot a feature or documentary film in Ethiopia.

The Ethiopian Media Authority issued the Directive based on Art.6(14) of the Media Proclamation No 1238/2021 and Council of Ministers Regulation on Issuance of Permit to Foreigners for Shooting Films in Ethiopia No 66/2000.

The major purpose of the Directive is to enable transparent, speedy and accountable registration and issuance of permits for foreign media correspondence and foreigners wishing to shoot films in Ethiopia. 

For any inquiries on the subject matter contact us at info@dmethiolawyers.com

By Dagnachew Tesfaye, Partner at DMLF

The Ethiopian Government has come up with a fast and easy formation and exit process to joint ventures in construction works. The joint ventures shall be known for third parties. The formation of such joint ventures is for construction projects. The partnership can be between local constructors and consultants or with foreign contractors and consultants. The details of the formation, registration requirements and dissolution of such construction work joint ventures are specified under the Construction Works Joint Venture Directive No 879/2021. The Directive is issued by the Ministry of Urban and Infrastructure Development. The Directive is effective as of March 30/2022.

Formation of Joint Ventures

The partners to form joint ventures are construction companies at various levels, micro and small enterprises, grade 1 foreign construction companies registered in Ethiopia. When the local and foreign companies create a JV, the local company is the leader and is known as the leading company. However if the JV is made by the local companies, the one who has better capacity is the leader.

The type and amount of contribution for the JV can be local or foreign currency, inputs that can add value such as construction technology inputs. When the partner is a foreign construction company, the type of contribution can be in the form of building materials, local or foreign currency, construction equipment, vehicles, knowledge and experience. The in-kind contributions shall be valued in local or foreign currency and entered in the JV.

The number of members shall not be less than 2.The minimum share of members authorized to form a JV shall not be less than 25%.

When the JV is between local and foreign enterprise, the JV shall be allowed to open a foreign currency bank account in accordance with the relevant banking laws of the country.

The JV needs to organize the following documents: memorandum of understanding, contract agreement to work together in general or for a certain project, a joint venture agreement entered in compliance with domestic law and licenses issued by relevant authorities to engage in construction works.

The JV shall appoint external auditors to audit the JV. Accounting of the JV’s books and records shall be done in accordance with accepted basic accounting principles and practices.

Fields of Participation of Joint Venture

The JV may engage in general construction works and services that enhance transfer of knowhow and technology into the country. Another area of participation is for construction works and services provided in accordance with international bidding laws. In the field of work where local companies can work together to build their capacity and reach the highest level is another area of participation to form a JV. More so construction works and services that can bring capacity building and technology transfer as well as construction input products are encouraged to participate in JV. Counseling, training and teaching activities with the permission of the appropriate institution is also a relevant area of participation that can enhance the construction field in terms of knowledge and experience.

Registration of the JV

For each project, the joint venture must issue a registration certificate stating that they are jointly registered. A registered Joint Venture that meets the requirements shall be issued a certificate of registration upon completion of the payment specified in Article 5 of Regulation No. 478/2013.The certificate may be renewed for an extended period of time, even if the completion period of the project is extended for acceptable reasons.

Bidding and Documentation

The partners of the JV have to first present a commitment letter for competing in the bidding process. If they are successful in the bid, the JV shall submit the following documents: the JV agreement, the name and address of the JV, the business license of each partner of the JV, proof of tax clearance of each partner, for a foreign construction company certificate of competence from the country of origin duly authenticated by the Ethiopian Embassy and the Ministry of Foreign Affairs and certificate of registration of the JV. At least 40% of the participants’ capital contribution has to be paid and bank confirmation should be presented as evidence.

Dissolution of the JV

The JV can be dissolved upon expiration of the duration of its establishment objective. The JV can also be dissolved when there is loss for any reason or when partners fail to meet their obligation under the JV or when the JV faces force majeure issues.

Dispute Resolution

Any dispute that arises as a result of the dissolution of the JV has to first be settled by amicable negotiation between the partners. If the negotiations fail, the dispute shall be resolved in accordance with the relevant laws of the country.

Liability

Failure to complete the project on their due date shall cause joint and several liability for the loss incurred, unless the time extension is accepted by the relevant authority. Non performance by the JV in accordance with the contract entered, the partners shall be liable to the extent of their contribution in the JV. In the event that there is disagreement between the partners of the JV before completion of the project, then the lead contractor shall continue to operate responsibility. The JV shall guarantee and be liable up to 10 years individually and collectively for damages to construction works completed by the JV.

For your JV legal issues and support, you may contact us at info@dmethiolawyers.com

By  DMLF Team

The principle in which Merger and Acquisition takes place has been provided in the Commercial Code of Ethiopia Proclamation No 1243/2021. Merger of business organizations is defined in the Commercial Code as ‘an operation whereby two or more organizations merge into one either by one of them acquiring the rest or two or more organizations forming a new organization and merging into the new one’. On the other hand a merger by acquisition is also defined as ‘the operation whereby one or more business organizations are wound up without liquidation by transferring all their assets and liabilities to a preexisting organization’. The shareholders or partners of the business organization that is wound up are issued in exchange shares in the acquiring organization. They may also be given, as the case may be, additional payment in cash.  Merger may take place between any forms of business organizations. Under the Commercial Code a directive can be issued to implement the Commercial Code. As a result a Directive to Provide for Commercial Registration and Licencing and Post-Licensing Inspection No 935/2022 has been issued. The contents of this Directive in terms of merger and acquisition requirements shall be the focus of this article. 

Acquisition of a Business through Sale or Lease

A business or business organization can be transferred through sale or lease as the case may be. In order to transfer a business/ business organization by sale or lease, the following documents need to be organized: there should be  an agreement authenticated by  Document Authentication and Registration Agency(DARA),  a tax clearance certificate related to the previous business license, a minute authenticated by DARA that shows the unanimous agreement of the members to transfer same of the transferor, and a minute authenticated by DARA which indicates that the transfer is adopted by members of the transferee with voting rights representing two third (2/3) of the shares of the organization present at the extraordinary meeting. An investment permit shall also be submitted where the person to whom the business/business organization is being transferred to a foreigner or a business organization in which a foreigner is a member. A verification shall also be made whether the area of investment is open for foreign investors. You may click the link to see which areas of investment are open.

Investment Areas Open for Foreign Investors to Engage with Full Ownership in Ethiopia

The trader to which the business/business organization/ is transferred by lease or sale shall obtain a business license in his name. The license issued in the name of the previous owner shall be returned.  For the transferee to acquire the new business license, it has to provide  a copy of the newspaper or the link, if it is a digital newspaper, having nationwide circulation as an evidence. If the trader to which the business/business organization/is transferred is already engaged in the same business, it may cause the business to be registered as a branch. If it is not engaged in the same business, it shall obtain a business license on the basis of the previous commercial registration.  

A Foreigner or Foreign Business Organization Joining An Existing Business Organization 

Whenever the interested party to join an existing enterprise is a foreigner or foreign organization, the first checkpoint is to ascertain the area of investment is open for foreign investors.  Subject to the openness of the investment area for foreigners, the following documents shall be submitted: a) a permission granted by Ministry of Trade Competition and Consumer Protection (MoTCCP) Merger and Acquisitions Department (b) unauthenticated minute of the existing business organization which indicates that it has given its consent to allow the foreigner or the foreign business organization to join the business organization; c) a proof showing that the minimum capital required of a foreign investor provided for in the laws regulating investment has been transferred to local bank save some exceptions, you may read the exceptions using this link:

https://dmethiolawyers.com/four-investment-options-that-minimum-capital-requirement-doesnt-apply-for-foreign-investors/  d) a proof showing the consent of the foreign business organization who is to acquire shares from existing business organization; e) valid business license of the existing business organization. The registering body shall write a letter of support to a body authorized by law to authenticate documents for authentication of the minute by ensuring that the requirements have been met. The minute that has been authenticated shall be submitted to the registering body. 

Merger of Business Organizations 

Where the merger of business organizations is under consideration, the request to the Merger and Acquisition Department of the MoTCCP shall be submitted following the link here in attached. 

https://chilot.me/2021/07/04/procedure-of-application-for-merger-notification/ Thus an authorization for merger from such body and a minute authenticated by Federal Document Authentication and Registration Agency which indicates that the merger is adopted by members with voting rights representing two third (2/3) of the shares of each business organization present at the extraordinary meeting shall be provided.  Where the merger of business organizations is not under consideration by MoTCCP, a minute authenticated by a body authorized by law, which indicates that the merger is adopted by unanimous vote of all members of the business organizations to be merged shall be submitted.  

Merging business organizations shall each submit a separate closure tax clearance certificate. Provided however, if the merging companies agree to consolidate their debts/liabilities, the agreement authenticated by a body authorized by law shall be submitted. A copy of the newspaper or the link, if it is a digital newspaper, having nationwide circulation in which the merger plan is notified to the public once in month shall be submitted as evidence within two months from the date the plan is adopted by the general meeting. The business organizations to be merged shall submit the business name and trade name of the business organization to be merged.  Where the business organization to be merged uses a new business name and trade name other than the one used by one of the merging business organizations, the previous trade name and business name shall be canceled. The new name shall be amended by recording in a minute which shall be authenticated by a body authorized by law.  Where the business organization to be merged uses the trade and business names of one of the merging business organizations, the other name or names shall be canceled.

For your merger and acquisition needs, you may contact us at info@dmethiolawyers.com

By DMLF Team

Introduction

This is a summary of a managerial employee case. The case is between Applicant Ato Daniel Suse and Respondent Aspire Elicom PLC. The case has been decided by the Federal Supreme Court Cassation Division on Seber File No 214112 on 6/5/2022. The case is about which division i.e. labour division or civil matter division has jurisdiction to see a managerial employee’s case where the employee and employer agreed in their employment contract the application of the labour proclamation.

Federal First Instance Court Labour Division

The case has started in the Federal First Instance Court Labour Division. The Applicant filed a case stating he has been hired as a contract administrator section head. The Applicant’s employment agreement mentions that his leaves, benefits and notice of termination of employment follow that of the Labour Proclamation No 377/2003. However, the deputy manager of the Respondent informed the Applicant the termination of his employment with only 1 month salary. The Applicant however demanded a three month salary. Due to the refusal of the Respondent to give a three month salary, the Applicant filed for unlawful termination of employment and consequential payments to the labour division of the Federal First Instance Court. 

The Respondent gave a statement of defense stating first a preliminary objection. The  labour division does not have the jurisdiction to see the case as the Applicant is a managerial employee. For the defense, the Respondent argued that the Applicant’s employment is terminated due to the fact that the Applicant is absent from work regularly, the Applicant does not execute his task on time and fails to report as expected on his tasks and similar other reasons and argued the termination is lawful.

The Federal First Instance Court ruled on the case first by refusing to accept the preliminary objection of the Respondent. The court then ruled in favor of the Applicant. The absence of agreement to terminate the employment contract between the employer and employee makes the termination unlawful. As a result, the Respondent has to pay severance, notice period and compensation to the Applicant.

Federal High Court

The Respondent appealed the case to the Federal High Court. The court accepted the appeal and heard the parties. The court framed the issue of whether or not the Applicant is a managerial employee or not. The court then confirmed that the Applicant is a managerial employee. The fact that certain provisions of the labour law are mentioned to apply in the employment agreement doesn’t make the case a labou division case, the court said. The appellate court continued, since the Applicant is a managerial employee, the labour division’s ruling is dismissed due to the fact that the labour division does not have the mandate in the first place to entertain the case.

Federal Supreme Court Cassation Division

Dissatisfied with the Federal High Court decision, the Applicant filed an application to the Federal Supreme Court Cassation Division. The Applicant stated that the employment agreement mentions the application of the labour law. Disregarding our agreement  by the Federal High Court is a basic error of law, argued the Applicant.

The Cassation Division to which the application is referred to concludes that the case has a merit and framed an issue. The fact that the case cannot be presented to labour division even where the employment agreement mentions the application of Proclamation  no 377/2003 for employment issues is subject to be investigated by the Cassation Division.

The Respondent is given a chance to reply. The Respondent argued that the Applicant fulfills the definition of a managerial employee. The Applicant signed by mistake an employment contract of an ordinary employee. This doesn’t make him non-managerial employee. Hence the Federal High Court decision is correct and should be upheld. Similarly the Applicant gave a counter-reply. In the Applicant’s counter reply, the Applicant argued supporting his application.

The Federal Supreme Court Cassation Division investigated the case. The Cassation Division commenced its reasoning from the fact that the  Applicant is a managerial employee. The Federal High Court has confirmed this fact. The Cassation Division said the argument of the Applicant is not whether the Applicant is or is not a managerial employee. The Applicant’s argument is that since the employment agreement mentions the application of the labour law provisions, the labour division does have jurisdiction to see the Applicant’s case. Then the issue is: does the labour division have a mandate to entertain a managerial employee’s labour claim by the mere fact that there is a mention of labour law provisions in the agreement of the employer and employee? 

The Labour Proclamation No 1156/2019 Art.3(2)(c) provides that the labour proclamation does not apply to managerial employees. Art. 138(1) of the same proclamation states that the labour division sees cases falling under the labour proclamation. Therefore since managerial employees are outside the scope of the labour proclamation, their case cannot be referred to labour benches. The fact that the employer and managerial employee mention in their agreement the application of labour law provisions, doesn’t render a mandate to the labour division to see the case. Parties to a case do not have the power to choose which court or which division accepts and sees their case. Rather the power to determine which court sees which case rests and is assigned by the law or the court administration. For the case at hand, the civil matter divisions have jurisdiction to see managerial employee labour matters and not labour divisions. The civil matter bench shall determine the application of labour law provisions as appropriate. The Cassation Division concluded, the fact that the Applicant is a managerial employee makes the labour division not to accept and see the case even where there is reference in the employment agreement the application of labour law provisions. Therefore the Federal High Court decision is upheld.

Conclusion

Managerial employees labour matters are seen not by labour divisions but by civil matter divisions. The content of the employment agreement mentioning the application of labour law provisions doesn’t guarantee the fact that the case can be seen by labour divisions. Where the employee is a managerial employee, even if there is an employment agreement that the labour law provisions are cited to apply, the case is presented to civil benches and not labour divisions.

For any labour matters, contact us at info@dmethiolawyers.com