Month: March 2023

 By DMLF Team

The Commercial Code of Ethiopia Proclamation No. 1243/2021, the Commercial Registration and Business Licensing Proclamation No. 980/2016 (as amended by Proclamation No. 1150/2019), the Commercial Registration and Business Licensing Council of Ministers Regulation No. 392/2017 (as amended) and most importantly the Commercial Registration, Licensing and Post Licensing Inspection Directive No. 935/2022 govern the commercial and business transactions of Ethiopia. This brief article is about the requirements for transfer of business or business organizations.

What is Business?

The Commercial Code of Ethiopia Proclamation No 1243/2021 defines business in what it contains. A business consists mainly of goodwill. A business may consist of other incorporeal elements such as: a) the trade name; b) trademark and any other designation under which the trade is carried on; c) the right to lease the premises in which the trade is carried on; d) intellectual property rights; e) Such special rights as attach to the business itself and not to the trader. A business may consist of corporeal elements such as equipment or goods. On the other hand, A business may normally not include the assets and debts of the trader, with the exception of the right to the lease of the premises. 

What is a Business Organization?

A business organization is an association established through a memorandum of association by persons who bring together contributions for the purpose of undertaking an economic activity in cooperation and of participating in the profit. Nonetheless, a joint venture is formed by an agreement concluded among members that is not disclosed to third parties.The following are types of business organizations: 1/ General partnership; 2/ Limited partnership; 3/ Limited liability partnership; www.abyssinialaw.com 90 4/ Joint venture; 5/ Share company; 6/ Private limited company; 7/ One person private limited company. 

Transfer of Business or Business Organization

The Commercial Registration, Licensing and Post Licensing Inspection Directive No. 935/2022 provides the required documentation for transfer of business or business organization. In order to transfer a business/ business organization by sale or lease, the following documents are required to be submitted: a) an agreement authenticated by a body authorized by law; b) a tax clearance certificate related to the previous business license; and  c) a license issued in the name of the previous owner shall be returned. 

The trader to which the business/business organization/ is transferred by lease or sale shall obtain a business license in his name by submitting a copy of the newspaper or the link of the  newspaper where it is a digital newspaper, having nationwide circulation as evidence. Provided however, if the trader to which the business/business organization/is transferred is already engaged in the same business, he may cause the business to be registered as a branch. If he is not engaged in the same business, he shall obtain a business license on the basis of the previous commercial registration. 

Where the business to be transferred is a business organization, a minute authenticated by a body authorized by law that shows the unanimous agreement of the members to transfer the same shall be submitted. Moreover  an agreement authenticated by a body authorized by law and a tax clearance certificate related to the previous business license  shall be submitted. Then the license issued in the name of the previous owner shall be returned. 

 Where the business is to be transferred to business organization, the memorandum of association of the organization to which a transfer is to be made and a minute authenticated by a body authorized by law which indicates that the transfer is adopted by members with voting rights representing two third (2/3) of the shares of the organization present at the extraordinary meeting is required. An investment permit shall also be submitted where the person to whom the business/business organization/ is being transferred is 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 as well. 

You may contact us at info@dmethiolawyers.com for your legal assistance.

By Dagnachew Tesfaye, Managing Partner at DMLF

Introduction

This article summarized the cassation decision of the Federal Supreme Court Cassation Division on File No 220042 rendered on 9/12/2022. The case has been between Applicant W/ro Hana Solomon Zenebe and Respondents (1) W/ro Asnakeh Wolde G/mariam and (2) Yeka Sub city Land Development and Management Bureau. The case concentrates on the application of the procedure of the Federal Administrative Proclamation No 1183/2020 on administrative decision making process before any request of cancellation of title deed certificate in courts of law.

Federal First Instance Court

The case was first filed to the Federal First Instance Court. The applicant was the plaintiff and the respondents were the defendants. The applicant in an amended claim presented on 28/4/2021 requested the court for revocation of title deed certificate issued by the 2nd respondent to the first respondent on a property located in Yeka Sub city W.06 House No 1168 plot size 692sq.m. The applicant claimed she acquired the property through donation from her late mother. However, the applicant argued the 2nd respondent gave illegally a title deed certificate to the 1st respondent on the 692sq.m on 3/2/2012 with title deed No. Yeka/172834/04. Thus the applicant requested the court for revocation of the title deed certificate.

The 1st respondents gave a statement of defense arguing that the respondent acquired the property through inheritance of her late father and brother. Thus the claim of the applicant is not supported by evidence and the request for revocation of the title deed should be dismissed.

The 2nd respondent has also given a statement of defense. The second respondent argued that it gave the title deed certificate based on Directive 17/2006 and following the right steps including posting a request for any opposition to come forward. There was nobody that came opposing the issuance of the title deed certificate. It further argued that it issued the title deed certificate having seen the necessary documents of the 1st respondent. On the other hand, the 2nd respondent said to the court that the applicant doesn’t have vested interest on the property under question.

The Federal First Instance Court has heard witnesses and seen the file from the land administration office. The court reached the conclusion that the title deed certificate granted to the 1st respondent should not be revoked and made a judgment in favor of the 1st respondent.

Federal High Court

The applicant has appealed to the Federal High Court. However, the appellate court did not accept the appeal.

Federal Supreme Court Cassation Division Three Judges

The Applicant presented an application to the Federal Supreme Court Cassation division stating the lower courts committed fundamental error of law in their ruling of her case. As a result the applicant requested the dismissal of the lower court’s decisions due to the reason that the lower courts did not investigate the necessary files concerning the property and corresponding evidence to the property properly.

The three judges of the Cassation Division after examining the applicant’s application, found merit in the fact that proportionality and measurement of the land holding, evidence presented from AA City Land Administration and Development Buauea on the matter were disregarded by lower courts. Thus the applicant’s case has merit for further examination and the application is seen by five judges of the Cassation Division.

Federal Supreme Court Cassation Division of Five Judges

Consequently, the respondents were invited to present their responses on the application of the applicant and on the accepted merit of the applicant’s case as reiterated by the cassation division three judges. The 1st respondent presented her written response. The 1st respondent argued that the AA City Land Development and Management opposes the way the applicant acquired her title deed certificate and not the one in question. Therefore the lower court decision has no basic error of law and should confirm the lower court’s decision.

The 2nd respondent on his part argued that the title deed certificate issued for the 1st respondent and for that matter for the applicant were as per the AA Land Development and Management Bureau. The Applicant’s claim is not about inheritance but cancellation of title deed certificate, and such a request cannot be entertained by this court. Hence the 2nd respondent requested for the lower court’s decision to be confirmed.

The Applicant also gave a counter-response. The applicant contends by strengthening her application.

The Cassation Division rendered its judgment based on the Federal Administrative Procedure Proclamation No 1183/2020. The court stated that the applicant’s application was presented to the lower court at the time when the Administrative Procedure Proclamation was effective. The Proclamation provides the procedure for how administrative decisions are requested and how dissatisfied persons on an administrative decision can take the matter to court.

In the case at hand, the applicant requested for revocation of the title deed certificate. The power to give or cancel title deed certificates rests upon the land administration office. Cancellation of  title deed certificate is an administrative decision. For such matters, administrative decisions have to be sought first. If there is a complaint on the administrative decision, Article 43 and 44 of the Administrative Procedure Proclamation provide for complaint procedure. If still there is dissatisfaction , then an appeal to the Federal High Court can be adhered to. However, the applicant has come to court without exhausting available remedies as indicated in the Proclamation. Previously, the Cassation Division had rendered on File No 220582 on 5/7/2022 a similar decision. Therefore, the Federal First Instance Court should have first evaluated the case as to whether it has jurisdiction to see revocation of title deed certificate in light of the Proclamation and dismiss the case for lack of jurisdiction. The appellate court should have also said the lower court doesn’t have jurisdiction to entertain a case of revocation of title deed certificate and corrected the error. Thus, the Cassation Division dismissed the Federal First Instance Court and appellate courts’ decisions. The Cassation Division reserved the right for the applicant to follow up her case based on the procedure of the Proclamation.

Conclusion

The request of revocation of title deed certificate is a matter of administrative decision. As an administrative decision, the procedure of how administrative decisions are requested, complained and appealed are stated in the Federal Administrative Procedure Proclamation No 1183/2020. One cannot present such a matter directly to court without exhausting the necessary remedies and a lower court should reject such a claim for matters of jurisdiction.

Though the final conclusion of the Cassation Division is correct, there is a discrepancy between what the cassation division three judges frame as an issue and the conclusion reached by the five judges of the Cassation Division. Article 28(3) of the Federal Court  Proclamation No 1234/2021 provide as follows ‘’ When the Cassation Division to which the application is referred concludes upon examination of the application that the case has a merit, it shall frame issue and send the same with the Cassation application and summon to the respondent to reply in writing.’’ This shows the fact that the 5 judges of the Cassation Division will not be limited and deterred by the framed issue of the 3 judges of the Cassation Division. For the disputant parties, the fact that the 5 judges of the Cassation Division may go beyond the framed issue, will leave these parties not know where the case will be headed. As a result the disputing parties shall be pushed to write and argue their response and counter response beyond the ‘framed issue or issues’.  Indirectly, ‘framing an issue’ will become unnecessary. This will contradict the law.

For any inquires on Ethiopian law, you may contact us at info@dmethiolawyers.com

By Mahlet Mesganaw, Partner at DMLF

Introduction

The Ethiopian Civil Aviation Authority (ECAA) is the authority that regulates and licenses operators of aerodromes. Civil Aviation Proclamation No 616/2008 and its amendment Proclamation No 1179/2020 mandate ECAA with the power among others to review and issue license, certificate or other legal documents to the applicant where it finds satisfactorily that the applicant is ready to operate an aerodrome. To implement the mandate, in September 2022, ECAA has come up with Procedure for the Application and Issuance of Airstrip/Heliport Permit, Approval and Business Licence( the ‘Procedure’ hereafter). In this article a look on the objective of the Procedure, who are eligible to invest and the procedures and requirements needed shall be discussed briefly and a conclusion shall follow.

Aim of the Procedure

The aim of the Procedure is to promote the development of Airstrips and Heliports by private investors. The Procedure intends to establish an efficient and transparent process for application and issuance of airstrip/heliport investment permit, construction & operation approval.The number of standard airports has to increase. Thus private sector  involvement for expansion of small airports as an investment is believed to expedite the overall growth of the country.

Who Could Invest in Airstrip/Heliport?

Any Ethiopian national above the age of 18 and/or domestic investor as defined by Investment Proclamation No.1180/2020 are eligible for investment permit application for airstip/heliport construction and operation. Any domestic investors interested in engaging on Airstrip/Heliport operation for commercial purposes are eligible to apply. Domestic investor as defined by the Investment Proclamation No 1180/2020 Article 2(5) include  ‘’a) An Ethiopian National; b) An Enterprise incorporated in Ethiopia and wholly owned by Ethiopian National; c) The Government; d) a Public Enterprise  e) a cooperative society established as per the relevant law; f) A Foreign National or Foreign Enterprise treated as domestic investor as per the relevant law or international treaty ratified by Ethiopia; g) An Enterprise incorporated in Ethiopia jointly between any of the investors specified … paragraphs (a) to (f) of this Article; h) A Foreign National or Foreign Enterprise accorded a domestic investor investment permit as per laws….i) Descendant of a foreign national specified under Sub-article (5) paragraph (h) of this Article, provided that this applies only in respect of investments specified in the same Sub-article.’’ According to this Procedure, Foreign investors either alone or in collaboration with domestic investors are excluded from the construction and operation of airstrip and heliport. 

Application Procedure

Airstrip/Heliport investment process commences by applying simultaneously to ECAA and to the Ethiopian Investment Commission (EIC). The interested party will submit the following documents: a) Completed application form of EIC; b) Completed application form of ECAA and other documentation as detailed in the Application Form. The Application Form indicate details such as rights held in relation to the site, written evidence to show permission has been obtained for the site to be used by the applicant as an airstrip or heliport and Environmental Impact Assessment for the development of Airstrip/Heliport approved by the appropriate authority; c) Certificate of Principal Registration; d) Original and necessary copies of valid identity card or passport of the applicant; e) Two passport size photographs taken within six months, which shows the clear identity of the applicant; and f)Where the application is submitted by an attorney; original and copy of power of attorney given by all of the founders, copies of valid identity card or passport of the attorney and the manager. 

Approval to Build, Operate and Registration

When the Applicant has met the necessary aerodrome and flight operation standards of the site, then ECAA shall give a green light to build. ECAA shall inspect the completion of the construction for compliance and upon satisfaction issue Compliance Certificate. Then when the requirements of safe air navigation are met, ECAA shall issue an approval to operate. Consequently, the airstrip or heliport which successfully obtained approval to operate shall be registered.

Business License Issuance and Renewal

The Commercial Registration and Licencing Proclamation No 980/2016 on Article 21(4) (d) provides air transport services and other aviation service business licenses to be issued by relevant government organs. ECAA is  the authority duly mandated to issue business licenses for aviation related services. Thus the Procedure authorizes ECAA for issuance of business license for airstrip or heliport and the renewal of the same by ECAA.

Conclusion

The participation of the domestic private sector including regional governments or city administrations in the construction and operation of airstrips and heliports will give multiple benefits not only to the investors but also to the economy. The ECAA Procedure, though not a Directive, has put transparent procedure as to the regulatory, administrative and technical activities needed to build, operate and register airstrip and heliport.

For your investment inquires on airstip/heliport, you may contact us at info@dmethiolawyers.com

By DMLF Team

One of the issues in the promulgation of the Administrative Procedure Proclamation was the fact that Directives were not accessible to end users. Moreover, directives were not issued in a timely manner and due such fact administrative tasks were kept on hold. The Federal Administrative Procedure Proclamation No 1183/2020 (the Proclamation) is issued to address these and other issues. The Proclamation defines Directives on Article 2(2) as ‘’a legislative document that is issued by an administrative agency based on delegation of Power bestowed upon it by the Legislator which affects people’s Rights and Interests’’. Thus Directives are laws. In the  hierarchy of laws Directives can be put as the lowest form of legislation after Proclamation and Regulation. Directives are issued by administrative agencies and the Proclamation defines Administrative Agencies as ‘Executive Organ of the Federal Democratic Republic of Ethiopia duly established by law and includes the Executive Organs of City Administrations accountable to the Federal Government.(Article 2(1)).

When should a Directive be Issued?

If the Directive is mandatory, the administrative agency has to adopt a directive indicated in the  mother law  within 90 days. The aim is to prevent procrastination by administrative agencies in coming up with a working Directive. If the Directive is not mandatory, the administrative authority should ratify within a reasonable period of time. In any case, an administrative authority cannot deny service or shy away from giving an administrative decision for failure on the part of an administrative agency to issue Directives legally empowered to adopt. 

Filing of Old Directive 

All administrative agencies, within three months after the coming into force of this Proclamation, are obliged to file Directives they have adopted previously. The agencies should send copies to the Federal Attorney General(now the Ministry of Justice). The Proclamation came into force around April 2020. Thus all administrative agencies by now are assumed to have duly filed their existing directives with  the Ministry of Justice. Otherwise a directive that has not been filed this way may not be enforced. For newly adopted directives as per the Proclamation,  the administrative organ should send the copies of the Directive and accompanying explanatory statement to the Ministry of Justice. The Ministry will give a serial identification number and record the Directives.  Then the Ministry will  immediately inform the administrative agency about the status of registration.  

Accessibility of Directives

Customers or interested parties have access to the Directives online or can acquire them in hard copy. The Ministry of Justice and the administrative organ shall post directives on their own website. In addition to this, the administrative organ should print and disseminate the registered Directive to Governmental and other Stakeholders.  Any person who is interested can request to have a look and observe the Directive in the office of the administrative organ or may get a copy of the directive subject to payment of expenses. Otherwise a directive that has not been posted on the website of the administrative agency  may not be enforced. 

To sum up, administrative agencies are obliged to timely enact directives, follow the legislative procedure indicated in the Proclamation, file old and new  Directives to the Ministry of Justice and upon registration, post them on their websites. Failure to file to the Ministry or failure to post the Directives on their websites shall render the Directive or directives unenforceable. Impliedly Administrative agencies including the Ministry of Justices are required to have working websites and Directives and other relevant laws governing their administrative tasks should be posted on those websites. Administrative agencies leaders should make their agencies abide by the Administrative Procedure Proclamation and guarantee transparency and accountability.

For your legal inquiries you may contact us at info@dmethiolawyers.com