TITLE VII. PRIVATE LIMITED COMPANIES
Chapter 1. Formation
and General Provisions
Art. 510. – Definitions. Nature.
1. A private limited company is a company whose members are liable only to the extent of their contributions.
2. A private limited company shall not have less than two or more than fifty members and is always commercial in form.
3. The company shall not issue transferable securities in any form.
Art. 511. - Reduction of the number of members below the legal minimum.
Where the number of members is reduced below two, or where the organs of the company cease to exist, the court may, on the application of a member or a creditor, order the dissolution of the company and make such provisional orders as are necessary unless the company makes arrangements to comply with the law within a reasonable time.
Art. 512. - Capital.
1. The capital of a private limited liability company shall not be less than 15,000 Ethiopian dollars.
2. The amount of a share shall not be less than 10 Ethiopian dollars.
3. All shares shall be of equal value and a member may hold more than one share.
Art. 513. - Prohibited transactions.
A private limited company shall not undertake banking, insurance or any business of a similar nature.
Art. 514. - Designation.
1. A private limited company may have a firm-name which may indicate the nature of its business.
2. The firm-name shall be followed by the words "Private Limited Company."
Art. 515. - Particulars required on company papers.
The firm-name as defined in Art. 514 (2) and the amount of the capital of the company shall appeal on all company documents, invoices, publications and other papers.
Art. 516. - Formation.
The company is instituted when the deed, in the form of a memorandum of association, setting up the company is signed by all the members or by persons acting on their behalf and is authenticated.
Art. 517. - Terms of the memorandum of association.
The memorandum of association shall show:
a. the names, nationality and addresses of the members;
b. the company name, head office, and branches if any;
c. the business purposes of the company;
d. the amount or the capital;
e. the value of contributions made by each member;
f. the valuation of contributions in kind;
g. a statement that the capital is fully paid;
h. the number of shares held by each member;
i. the procedure for distribution of profits;
j. the number of managers, their powers and the agents, if any;
k. the number of auditors, if any;
l. the period of time for which the company is established.
Art. 518. - Articles of association.
The provisions of Art. 314 shall apply to private limited companies.
Art. 519. - Contributions in kind.
1. Where a member makes a contribution in kind, the memorandum of association shall show the nature and the value of the contribution, the price accepted by the other members and the share in the capital allocated to the member.
2. The method of valuation shall be determined by the members.
3. Members shall be jointly and severally liable to third persons for the valuation fixed.
4. Where it is shown that a contribution has been overvalued, the contributing member shall make good the overvaluation in cash. Members shall be jointly and severally liable for such payment, notwithstanding that they were not aware of the overvaluation.
Art. 520. - Publicity.
1. The company shall be made known to third parties in accordance with the provisions of Art. 219-224 of this Code. The memorandum of association and the articles of association, if any, shall be deposited.
2. The notice to be published and the application for registration in the commercial register shall contain the particulars specified in Art. 517 (a)-(h) and (j) - (1).
3. The provisions of Art. 324 shall apply.
Chapter 2. Shares
Art. 521. - Share register.
1. All shares shall be entered in a register which shall show:
a. the names of the members;
b. the value of all contributions made by the members;
c. all transfers of shares;
d. all amendments to these particulars.
2. At the beginning of each calendar year a list containing the particulars under (a) and (b) of sub-art. (1) shall be signed by the managers and sent to the Ministry of Commerce and Industry, unless the managers declare that there has been no change since the last list was deposited.
3. The managers shall be jointly and severally liable for any loss occasioned by inaccuracy in the keeping of the share register or lists. The lists shall be open for inspection by the public.
Art. 522. - Assignment of shares.
Assignments of shares shall be in writing and shall be of no effect in relation to the company or third parties unless they have been entered in the share register.
Art. 523. - Assignment of shares outside the company.
1. Unless otherwise provided in the articles of association, there shall be no restriction on the transfer of shares between members.
2. A transfer of shares outside the company shall be approved by a majority of the members representing at least three-quarters of the capital, unless a larger majority or unanimity is fixed in the art1des of association.
3. Such approval shall be entered in the commercial register.
4. The provisions of sub-art. (2) shall app1yeven where the company is in liquidation.
5. Where execution is levied on a member's share, the purchaser shall obtain the consent of the other members.
Art. 524. - Devolution of shares by way of succession.
1. Unless otherwise provided in the articles of association, the shares of a deceased member devolve upon his heirs.
2. The articles of association may provide that a member has the right to leave his shares to the heir he wishes.
Chapter 3. Organisation of the Company
Art. 525. - Management.
1. A private limited company shall be managed by one or more managers.
2. Where there are more than twenty members, decisions shall be taken at meetings of the members and auditors shall be appointed.
3. Where there are twenty or less members, the members shall not be bound by the provisions of sub-art. (2).
Art. 526. - Appointment of managers.
Managers, other than members, may be appointed by the members or by the memorandum or articles of association for such period as is considered desirable.
Art. 527. - Dismissal of managers.
1. A manager appointed by the memorandum of association may only be dismissed by the members under a decision taken in accordance with the provisions of Art. 536.
2. A manager appointed by the members may be dismissed in accordance with the provisions of Art. 535.
3. Dismissal shall only be for good cause acceptable to a court. A manager who has been dismissed shall forthwith and for ever cease to function. Where the court is of opinion that a dismissal was without good cause, it may grant damages to the manager who has been dismissed.
4. Notwithstanding the provisions of sub-art. (3), the articles of association may stipulate that managers may be removed at the pleasure of the members, irrespective of the form of appointment.
5. Revocatory proceedings for due cause may be brought by any member individually.
Art. 528. - Powers of managers.
1. Within the limits of the objects of the company, managers shall have full powers.
2. Provisions in the articles of association restricting the powers of the managers shall be binding only as between members and managers. They shall not bind third parties, even if properly published.
Art. 529. - Manager's remuneration.
The manager's remuneration shall be fixed by the members. It may consist either of a fixed salary, or of a share in the profits, or both.
Art. 530. - Liability of managers.
In accordance with civil law, managers shall be liable individually or jointly and severally, as the case may be, to the company and third parties for any breach of their duties under this Code or the articles of association.
Art. 531. - Bankruptcy of the company.
1. Where in a bankruptcy the assets are shown to be inadequate, the court may, on the application of the trustee in bankruptcy, order that the company's debts or part of them shall be paid by the managers or by the members or by both or some of them, with or without joint liability.
2. An order under sub-art. (1) shall not be made in respect of members who have not acted as managers, nor shall it be made where the managers and members show that they have acted with due care and diligence.
Art. 532. - Meetings.
1. A company consisting of more than twenty members shall hold a general meeting each year at the date fixed by the articles of association.
2. Other meetings may be called by the manager or, in his absence, by the auditors, if any, and in their absence by members representing more than one-half of the capital.
Art. 533. - Decision taken without a meeting.
Where the holding of a meeting is not required by the law or by the articles of association, the managers shall send to each member the text of resolutions or decisions to be taken and ask for the members written vote thereon.
Art. 534. - Votes held by members.
1. Notwithstanding any provision to the contrary in the memorandum of association, every member may take part in the meetings.
2. Each member shall be entitled to a number of votes equal to the number of shares held by him.
Art. 535. - Majority and quorum.
1. Decisions under Art. 532 (1) and Art. 533 shall be taken by a majority of members representing more than one half of the capital.
2. Where such majority is not obtained, the members shall be called again by registered letter, and decisions shall be taken by a simple majority without regard to the capital represented.
Art. 536. - Modification of the articles of association.
1. Change in the nationality of the company requires the unanimous decision of the members.
2. All other amendments to the articles of association require a majority vote of the members representing three-quarters of the capital, unless a larger majority is provided in the articles of association. No member may be required to increase his contribution without his consent.
3. Amendments shall be published in accordance with the law.
Art. 537. - Right to inspect documents.
1. Where there are twenty or less members, every member may at any time, in person or through his agent, inspect and take a copy of the inventory, the balance sheet and the auditors' report, if any, at the head office.
2. Where there are more than twenty members, the rights under sub-art (I) may only be exercised during the fifteen days preceding the general meeting.
Art. 538. - Auditors.
1. Where a company consists of more than twenty members, not less than three auditors shall be appointed in the memorandum of association.
2. Auditors may be re-elected at such periods and under such conditions as may be provided in the articles of association.
3. Auditors may be dismissed as provided in the articles of association. Failing such provision, they may be dismissed as provided in Art. 535.
4. The provisions of Art. 374 and 378 shall apply to auditors.
5. Auditors shall be liable, individually or jointly and severally, to the company and third parties for any fault or negligence in the execution of their duties.
6. Auditors shall not be civilly liable managers, unless they were aware of them to the meeting for offences committed by the managers such offences and failed to report them the meeting.
Chapter 4. Accounts
Art. 539. - Legal reserve.
Not less than one-twentieth of the profits shall be transferred each year to the legal reserve fund until such fund amounts to one-tenth of the capital.
Art. 540. - Fictitious dividends.
1. Members may be required to repay dividends which have been paid out of sums which are not actual profits.
2. Claims for repayment shall be barred after five years from the date the dividends were paid.
Art. 541. - Fixed interest.
1. The memorandum of association may provide that a fixed interest shall he paid to members, even where there are no profits, during the period when works are being constructed prior to business operations. Such period shall be fixed in the memorandum of association.
2. Such provision shall be of no effect unless published in the official commercial gazette.
3. Such interest shall be carried to the debit of the installation account and spread over the years where profits are made, in accordance with the articles of association.
Chapter 5. Dissolution
Art. 542. - Grounds of dissolution.
1. A private limited company may be dissolved on the grounds applicable to all business organizations, including dissolution by the court for good cause and dissolution at the request of any member where the term of the company has not been fixed.
2. Provision may be included in the articles of association permitting redemption of the members' shares for a fixed sum.
3. A judicial interdiction, bankruptcy or insolvency of a member shall not cause dissolution of a company, nor shall the death of a member, unless otherwise expressly provided in the articles of association.
4. The articles of association may provide that the heirs of a deceased member may, at their option, join the company or be repaid the decease member's shares at a rate based on the last inventory.
Art. 543. - Loss of three-quarters of the capital.
1. Where three-quarters of the capital are lost, the managers shall consult with the members and decide whether the company should be dissolved.
2. Where the managers fail to consult the members or no valid decision is taken, any interested person may apply to the court for dissolution.