Author: technobros_admin
Can a Foreign Investor Allowed to Open a Bank Account in Ethiopia?
By DMLF Team
One of the investment incentives in Ethiopia for foreign investors is the privilege of opening bank accounts and operating the same. The Investment Proclamation No 1180/2020 allows foreign investors to open and operate foreign currency accounts in any private bank in Ethiopia for the purpose of their investments. Foreign Investors are defined as an individual or company who has invested foreign capital in Ethiopia. The manner of operation of foreign currency account is determined by the directives of the National Bank of Ethiopia. The National Bank of Ethiopia has issued a directive that is effective as of November 9,2020 namely “Establishment and Operation of Foreign Currency Saving Account for Residents of Ethiopia, Non-Resident Ethiopian and Non-Resident Ethiopian Origin” Directives No. EX1V 68 /2020″ that allows foreign investors who are residents of Ethiopia to open and operate foreign currency accounts in addition to that of local savings or current accounts of their choice.
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The Procedure of Registration of Transfer of Technology Agreement
By Dagnachew Tesfaye, Partner at DMLF
The Ethiopian Investment Proclamation No 1180/2020 and the Investment Regulation No 474/2020 incorporate technology transfer agreement as part of an investment transaction. Technology transfer has been included in the investment objectives of the country in that the government shall strive to advance the transfer of knowledge, skills and technology required for the development of the country. We shall see what is included in the technology transfer agreement, the procedure involved in registration of such an agreement, the difference between technology transfer agreement and collaboration agreement and a brief summary shall follow.
What is a technology transfer agreement?
The definition of a technology transfer is given in the Investment Proclamation. The Proclamation defines transfer of technology as ‘’the transfer of systematic knowledge for the manufacture of a product, the application or improvement of a process or for rendering service, including management and technical know-how as well as marketing technologies, but may not extend to transactions involving mere sale or lease of goods.’’ Hence technology transfer agreement is a contractual agreement entered between a technology provider and technology recipient in which the technology provider agrees to transfer the technology as defined above.
What is the procedure involved in registering such an agreement?
Any investor concluding a technology transfer agreement in relation to his investment must have the agreement registered with Ethiopian Investment Commission(EIC). The reason is because a technology transfer agreement that is not registered shall have no legal recognition in Ethiopia. In order to register the technology transfer agreement in EIC, the following procedures must be adhered to. The technology provider needs to come up with commercial registration or business license or document ascertaining ownership of technology. If such documents originate outside of Ethiopia, the documents should be authenticated by foreign and domestic authorized bodies to authenticate documents. Then the technology recipient and the technology provider shall enter into an agreement in front of notary public namely the Federal Document Authentication and Registration Agency. The signed technology transfer agreement with the relevant documents and a signed application form shall be presented for registration with EIC. EIC shall render a decision to approve or reject within 30(thirty) working days having conducted the necessary review.
If EIC accepts the technology transfer agreement, then EIC shall register the agreement and issue a certificate of registration for the applicant. EIC will notify the relevant Federal Executive Organs and copy the National Bank of Ethiopia the registration of a technology transfer agreement. Where EIC rejects the application, EIC shall notify the decision in writing to the applicant.
Differences with Collaboration Agreement
Here, unlike Collaboration Agreement, which restricts the parties to the agreement as domestic investor on the one hand and foreign enterprise on the other, Transfer of Technology Agreement can be concluded among ‘any investor’. The requirement of fulfilling minimum investment capital if one of the parties to the Technology Transfer Agreement is a foreign enterprise is passed silently. In the case of Collaboration Agreement, the law clearly provides the existence of no requirement of injecting minimum capital for foreign enterprises when it comes to Collaboration Agreement. However the law is silent on contribution of capital when entering to Technology Transfer Agreement when one of the parties to the agreement is a foreign enterprise.
To sum up, the Investment Proclamation and the Investment Regulation provide the concept of technology transfer and provide in detail the procedures as to how technology transfer agreements are reviewed and registered. However the requirement of capital contribution is left unspecified in the case of foreign enterprise agrees with a domestic or foreign investor for technology transfer.
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Website-Obligation to Construct for Share Companies
By Dagnachew Tesfaye, Partner at DMLF
The Commercial Code of Ethiopia Proclamation No 1243/2021 introduces the mandatory task for share companies to create and maintain a website. Such an obligation was not known in the previous Commercial Code of Ethiopia. Construction of a website is made mandatory for a share company only.
The contents of the website should include all necessary information for shareholders, creditors and stakeholders. The basic contents of the website must include a) the memorandum of association, and amendments thereto, if any; b) notices regarding general meetings and related information; c) approved audit reports; d) report on transactions involving conflict of interest prepared pursuant to Sub-Article (5) of Article 395; e) annual reports and information submitted to the Ministry of Trade and Industry pursuant to this Code or other laws; and f) information that should be publicized according to the memorandum of association.
The Commercial Code has put the period of time required to maintain certain information on the website. For example notices calling meetings and related information have to remain in the website till the end of the meeting. Moreover, the accounts of the company should remain on the website for five years. Other information of the company has to remain in the website at least six months.
The website has to be accessible to any person. The company must take all necessary measures to protect the security of the website.
The share company has to update and post its contents promptly as well. Moreover to the extent possible the website should accommodate features to conduct electronic meetings and enable voting through electronic means. Such features shall support modernization of the meeting and voting process. For members of the share company, it provides an alternative space to participate in a meeting other than in person or through an agent’s physical presence. The law has given such forms of online meeting and voting legal relevance.
Therefore share companies are obliged to construct and maintain a website that disseminates information about the company’s affairs to its members, stakeholders and to the public. Furthermore the website shall serve as a legal platform that enables participation of its members in meetings and voting.
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Five Investment Options that Minimum Capital Requirement doesn’t Apply for Foreign Investors
By Mahlet Mesganaw, Partner at DMLF
The Investment Proclamation No 1180/2020 has allowed minimum capital requirement NOT to apply for the following investment transactions.
1. Where a foreign investor buys a share of a foreign investor in an existing company in full or in part;
2. Where a foreign investor acquires the entirety of an existing enterprise owned by a foreign investor;
3. Where a foreign investor re-investing his profits or dividends generated from his existing enterprise in any investment area open for foreign investor and
4. Where a foreign investor is elected as member of board of directors following the change of a private limited company to share company.
5. Where a foreign enterprise concludes export oriented non-equity based collaboration agreement with a domestic investor.
Therefore the requirement of minimum capital injection to the above areas of businesses are not required for foreign investors. Those foreign investors and domestic investors operating in Ethiopia can use these options. More so foreign investors who wish to see the opportunities existing on the ground, can use one of the above options to invest in Ethiopia.
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How much is paid for informants of illegal money transfer in cash, foreign currency or gold and for informants of forged cash notes?
The National Bank of Ethiopia has issued a directive namely Directive No 931/2022 effective as of October 6, 2022 that provide reimbursements to informants of crimes, maintaining their confidentiality, involving illegal money transfer in cash, gold and foreign currencies. The informant shall be handsomely be compensated 15% of cut seized cash or gold or foreign currency. When it comes to seized forged cash notes, depending on the amount seized, the compensation to the informant ranges from ETB 20,000 to ETB 200,000.
East African Legal Workshop Forum
DMLF Team has attended the East African Legal Workshop Forum organized by the East African Venture Capital Association (EAVCA) on 5th October, 2022 at the Sankara Hotel Nairobi. It has been a productive session.
How much Birr and foreign currency one can carry traveling in or out of the territory of Ethiopia?
By Dagnachew Tesfaye, Managing Partner at DMLF
The National Bank of Ethiopia has issued a directive namely Limits on Birr and Foreign Currency Holding in the Territory of Ethiopia Directive No 927/2022. The effective date of the Directive is as of September 05,2022. This Directive has repealed and replaced Limits on Birr and Foreign Currency Holding Directives No.65/2020.
ETB 3000 is the maximum amount of Birr a person can hold while entering or exiting Ethiopian territory per travel. However a person traveling to Djibouti may hold up to a maximum of Birr 10,000.
When entering the territory of Ethiopia, a person who resides in Ethiopia has to declare to customs and hold such declaration evidence if the foreign currency amount exceeds USD$4000 or its equivalent in any other convertible foreign currency. Similarly foreign nationals of Ethiopian origin or Ethiopian nationals or foreigners not residing in Ethiopia have to declare to customs and hold such evidence if the foreign currency amount exceeds USD$10,000 or equivalent amount in any other convertible foreign currency. When comparing the current directive with the repealed one the obligation to declare for Ethiopian residents was USD$ 1000 and for the others USD$ 3000.
The time limit to hold a foreign currency of any amount in Ethiopia for a person residing in Ethiopia is 30 days from the date of entry stamped on the passport. He or she has the obligation to convert all foreign currencies at an authorized forex bureau for equivalent sum or deposit to his or her foreign currency saving account. Likewise foreign nationals of Ethiopian origin or Ethiopian nationals not residing in Ethiopia, who intend to stay more than 90 days, should deposit such a foreign currency into his/her NR Foreign currency account or his/her foreign exchange savings account within 90 days from the date of entry stamped on the passport. However a foreigner not residing in Ethiopia can carry foreign currency in his/her possession upto the visa validity period.
A person residing in Ethiopia who purchases foreign currency from a bank may carry such foreign currency up to 30 days from the date a bank advice is stamped. He/she has to convert the foreign currency at authorized forex bureau for equivalent sum in Birr not to exceed the 30 days time limit.
When traveling out of Ethiopia, a person residing in Ethiopia or non-resident foreign national of Ethiopian origin and Ethiopian national not residing in Ethiopia are allowed to carry a foreign currency of any amount as long as he/she presents a bank advice issued for the purchase of the foreign currency within a period of 30 days from the date of the bank advice. For non-resident foriegn nationals of Ethiopian origin and Ethiopian nationals not residing in Ethiopia, they can carry the foreign currency they have brought to the country. They have to travel back within 90 days and have a customs declaration for an amount exceeding USD$10.000 at the time of entry. Embassy Employee, Temporary Worker of different foreign institution or workshop participant or trainer who entered into the country can carry foreign currency exceeding USD 10,000 (USD Ten Thousand) or the equivalent in other convertible foreign currencies only when he/she can produce a bank advice or employer’s letter or a supporting letter from workshop coordinator which justifies the acquisition of the foreign currency is from a legal source.
The current Directive is silent on the amount of foreign currency a non-resident foreigner can hold while exiting Ethiopia. The previous Directive No 65/2020 for example states that any person not residing in Ethiopia who is traveling abroad can carry with him foreign currency exceeding USD 3000 or the equivalent in other convertible foreign currency is required to produce a bank advice or a foreign currency customs declaration declared at the entry point.
For land transport, a person entering into the territory of Ethiopia from a neighboring country carrying foreign currency having value more than or equivalent of USD 500 (USD Five Hundred) in conversion shall declare at the border Customs’ branches or stations and may travel abroad by carrying such declared amount by presenting customs declaration.
Finally the Directive states that any person who acquired foreign currency by donation or gift before the coming into force of this directive shall convert all foreign currencies in his/her possession through an authorized forex bureau against the payment to him/her of the equivalent sum in Birr within 30 days from the effective date of this directive.
In conclusion, unless otherwise provided by this Directive or pertinent laws or without authorization of the National Bank, a person may not transfer or pay foreign currency in cash to a third party either as donation or gift or to discharge any obligation.
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FEW POINTS ON SEXUAL HARRASMENT AND SEXUAL VIOLENCE AT WORKPLACE
By DMLF Team
The Ethiopian Labour Proclmation No 1156/2019 incorporates sexual harrasment and sexual violence as conditions to terminate employment contracts without notice for both the employer and the worker. This is a new addition to the Ethiopian labour law. We shall briefly look into what sexual harrasment and sexual violence are and the consequesnces in terms of termination of employment contract, serverance pay and compensation.
Sexual harassment has been defined in the Proclamation as ‘pursuing or convincing another through utterances, signs or any other manner, to submit for sexual favor without his/her consent’’. On the other hand, sexual harassment accompanied by force or an attempt thereof is defined as sexual violence.(Art.2(11)&(12)).
Commiting sexual harrasment or sexual assualt at workplace is termed a prohibited act for employer and managerial employee.(Art.14(1)(h)). Similarly commiting sexual harrasment or sexual assult at work plae is a prhobited act for the worker.( Art.14(2)(h)).
Sexual harrasment or sexual violence at workplace is therefore a sufficent ground for termination of employment without prior notice by the employer. (Art.27(1)(i)). The right of the employer to terminate the contract of employment shall lapse after thirty working days from the date the employer knew the existence of a ground for termination.(Art.27(3)).
Where a worker has been a victim of sexual harassment or sexual violence by the employer or managerial employee, the worker can terminate his contract of employment without notice.(Art.32(1)(b)). In this regard, the worker has to inform the employer in writing the reasons for termination. An action should be taken within 15 working days from the date at which the act occurred or ceased to exist. Otherwise it will be barred by period of limitation.( Art.32(2)&(33)).
Severance pay is available for a worker who resigned due to sexual harrasment or sexual violence by the employer or managerial employee. Where such an act is committed by a colleague and the incident was reported to the employer but the latter failed to take appropriate action in due time, the worker is entitled to severance pay. (Art.39(1)(d)).
The amount of severance pay shall be thirty times the average daily wage of the last week of service for the first year of service. Where the service of the worker is less than one year, the severance pay shall be calculated in proportion to the period of service.(Art.40(2)). Where a worker who has served for more than one year, severance pay shall be increased by one-third of the monthly wage(i.e thirty times the average daily wage of the last week of service) for every additional year of service. Nevertheless, the total amount shall not exceed twelve months’ wage of the worker.(Art.40(3)).
Where the termination of employment is made by a worker due to sexual harrasment or sexual violence, the worker is entitled to compensation of his daily wage multiplied by 90. This is in addition to the severance pay.(Art.41(2)).
To sum up, the introduction of sexual harrasment or sexual violence as a serious ground for termination of employment without notice shows the level of importance such an act is given by the legislator. The employer is required by law to take action when such a sexual harrasment or sexual violence in a work place is reported. A victim of sexual harrasment or sexual violence is therefore entitled to severance pay and compensation.
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Investment Areas Open for Foreign Investors to Engage with Full Ownership in Ethiopia
By Mahlet Mesganaw, Partner at DMLF
Introduction
Questions are asked as to which business areas are open for foreign investors in Ethiopia. To answer the question it is important to state what business areas are reserved for domestic investors and the government. 32 business areas are exclusively reserved for domestic investors, 7 business areas are reserved for joint investment by foreign investors and domestic investors and 5 business areas are assigned for joint investment between the government and any investors. Aside from the business areas reserved above, the remaining business areas are open for foreign investors to engage. Lets see now in detail those reserved business areas for domestic investors and the government.
32 Business Areas Exclusively Reserved for Domestic Investors
Business areas reserved exclusively for domestic investors are as follows: 1/ Subject to applicable law, banking(policy change is occurring here), insurance and microfinance businesses, excluding capital goods finance business; 2/ Transmission and distribution of electrical energy through integrated national grid system 3/ Primary and middle level health services; 4/ Wholesale trade, petroleum products, wholesale of own products produced in Ethiopia; excluding wholesale of electronic commerce; 5/ Retail trade excluding retail of electronic commerce as provided under appropriate law, of own products produced in Ethiopia; 6/ Import trade, excluding liquefied petroleum gas and bitumen;7/ Export trade of raw coffee, khat, oil seeds, pulses, minerals, hides and skins, products of natural forest, chicken, and livestock including pack animals bought on the market; 8/ Construction and drilling services below Grade I; 9/ Hotel, lodge, resort, motel, guesthouse, and pension services, excluding those that are star-designated; 10/ Restaurant, tearoom, coffee shops, bars, nightclubs, and catering services, excluding star-designated national cuisine restaurant service;11/ Travel agency, travel ticket sales and trade auxiliary services 12/ Tour operation; 13/ Operating lease of equipment, machineries and vehicles, excluding industry-specific heavy equipment, machineries and specialized vehicles;14/ Transport services, excluding the following areas: a) Railway transport; b) Cable-car transport; c) Cold-chain transport; d) Freight transport having a capacity of more than 25 tones; and e) Transport services reserved for joint investment with the Government or domestic investors; 15/ Making indigenous traditional medicines; 16/ Producing bakery products and pastries for domestic market; 17/ Grinding mills; 18/ Barbershop and beauty salon services, smithery, and tailoring except by garment factories; 19/ Maintenance and repair services, including aircraft maintenance repair and overhaul (MRO), but excluding repair and maintenance of heavy industry machineries and medical equipment; 20/ Aircraft ground handling and other related services21/ Saw milling, timber manufacturing, and assembling of semi-finished wood products; 22/ Media services; 23/Customs clearance service; 24/ Brick and block manufacturing;25/ Quarrying; 26/ Lottery and sports betting; 27/ Laundry services, excluding those provided on industrial scale;28/ Translation and secretarial services;29/ Security services; 30/ Brokerage services; 31/ Attorney and legal consultancy services; and32/ Private employment agency services, excluding such services for the employment of seafarers and other similar professionals that require high expertise and international experience and network.
7 Business Areas Reserved for Joint Investment by Foreign Investors and Domestic Investors
The following business areas are reserved for joint investment by foreign investors and domestic investors. However the foreign investor jointly investing with a domestic investor in these investment areas cannot hold more than 49% of the share capital of the enterprise. The joint investment businesses are: 1) Freight forwarding and shipping agency services; 2) Domestic air transport service; 3) Cross-country public transport service using buses with a seating capacity of more than 45 passengers; 4) Urban mass transport service with large carrying capacity; 5) Advertisement and promotion services; 6) Audiovisual services; motion picture and video recording, production and distribution; and 7) Accounting and Auditing services.
5 Business Areas are Assigned for Joint Investment Between the Government and any Investor
Any investor together with the government can invest in the following areas. These are: 1/ Manufacturing of weapons, ammunition and explosives used as weapons or to make weapons; 2/ Import and export of electrical energy; 3/ International air transport services; 4/ Bus rapid transit; and 5/ Postal services excluding courier services.
Conclusion
We have seen in detail the list of businesses reserved exclusively for domestic investors. We have also seen those business areas that are jointly developed with a domestic investor and the government. Therefore all the rest of the business areas are open for foreign investors to invest with 100% ownership of the enterprise.
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