The 1960’s Commercial Code vis-a-vis the Draft Commercial Code

By Hami Bogale

This article will focus on the planned change to the 1960 Commercial Code of Ethiopia. In the new draft Commercial Code, although commerce has existed since the ancient times, there has been more advancement with new technologies. This draft Code would set a groundwork for the enlargement of the economic sector of the country and would made new advancements and for the country to get closer to the fastest innovations and advancements of the world.
The Commercial Code should be amended because of the following reasons
• For the establishment of new companies
• For formation of new jobs
• To be competitive in the arena of the global world
• To make vague provision clear and understandable
• To constitute or establish virtual companies, digital banking system etc..
The Commercial Code of Ethiopia was first introduced in the early of 1960’s. The Commercial Code constitutes articles that are related with commerce and business. But Ethiopia needs up-to-date and developed rule of law to progress with the rest of the world. The recent regime after implementing the constitution; there were encounters to review certain laws of the land. The Commercial Code was one of the laws that were appointed by law scholars to be revised. There were strong recommendations and suggestions from different legal advocates and also from different sector of companies that are established in the country, which the Commercial Code seems to be backward for the modern time. The draft code will have significant modifications and also introduces new technological advancements in the country.
Under the new draft Commercial Code there are numerous changes suggested with regards to the Ethiopian economic development. The new draft has innovative commercial structures that were not included in the previous Commercial Code. The 1960’s Commercial Code miss out some important issues which were seen in the
– Life insurance; the description of insurance and insurance strategy against unforeseen accidents is not efficiently stipulated under the Commercial Code. There should have been a clear explanation about unexpected accidents. Elements of accidents should have been cleared.
– Bankruptcy
– Company law; private limited companies (PLC) has been intensely aggregating in our country but there seems to be some difficulties with the articles of the Commercial Code that govern this specific companies. Specifically the articles that are related with mandatory legal requirement, capital, limited liability of members and etc….
The new draft code seems to touch up on the significant problems were stipulated in the 1960’s Commercial Code. The new draft has come up with the following resolutions and new introductions.
• Individual PLC; this new type of organization permits that one person can establish a company. The previous code only permits minimum of two person to establish a private limited company
• Introduction of board of directors even if the board of directors is not shareholders. The new draft states that board of directors may be or not be shareholders.
• Business owners can use their business as collateral. Business owners can use their business as a collateral to ask for loan from banks
• Companies are obliged to keep records and organization of the company.
• Foreign companies are permitted to function in Ethiopia
• In the previous Commercial Code articles of association was a mandatory requirement for establishment of a share company. Under the draft code, articles of association are no longer a mandatory task to fulfill establishment of shareholding companies.

The 1960’s Commercial Code of Ethiopia has governed the commerce sector of the country for over 50 years. The 1960’s Code was first introduced in the reign of the emperor. This generates an obvious difficulty to the modern day commerce and business. As companies generally are increasing with number and recent technologies, they need an up to date law that governs them which goes in parallel with the modern introduced innovations. As a result there were several demands on the side of the law scholars and also startup companies that the 1960’s Commercial Code is regressive for the current time.
After several attempts, the new draft Code was presented. This new code consists of many changes in the previous code and also introduced new features to the procedure of the commerce in the country. This starts new advancements in the sector of commerce and it would be a great advantage for new companies to emerge in the country since the law has introduced different kinds of policies.

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