Good commercial legal work is mostly preventive. The agreements you sign when a venture is going well determine what happens when it is not. We help businesses in Addis Ababa get the structure and the documents right at the outset, and we act for them when a commercial relationship breaks down.
A substantially new commercial law
Ethiopian business law changed materially with the Commercial Code, Proclamation No. 1243/2021, which replaced the Commercial Code of 1960 after six decades. It revised the rules on business organisations, corporate governance, directors' duties and insolvency, and it introduced business forms that did not previously exist. Advice or documents prepared under the old Code should not be assumed to remain correct.
The principal forms of business organisation now include:
- One Person Private Limited Company — a limited liability company with a single member, introduced by the 2021 Code. For sole proprietors who previously had to trade personally or find a nominal second shareholder, this is a significant improvement.
- Private Limited Company (PLC) — the workhorse form for small and medium businesses.
- Share Company — used for larger ventures and those raising capital from a wider group of investors.
- Partnerships — general, limited and joint venture forms.
- Branch or representative office of a foreign company.
Choosing between them is not a formality. The form determines the extent of personal liability, the tax treatment, the governance obligations and how easily ownership can be transferred later.
Formation and licensing
Establishing a business in Ethiopia involves several distinct steps that are easy to conflate: reserving and registering the trade name, preparing and authenticating the memorandum and articles of association, obtaining commercial registration, obtaining the business licence appropriate to the specific activity, registering for tax and obtaining a TIN, and — where employees are engaged — meeting pension and payroll registration obligations. Sector-specific licensing applies in regulated fields such as finance, health, education, transport, construction and import–export.
Foreign investors face an additional layer. The Investment Proclamation No. 1180/2020 and the regulations under it govern which sectors are open to foreign investment, which are reserved for domestic investors, and which are open on a joint-venture basis, along with minimum capital requirements and the process for obtaining an investment permit. We advise on eligibility before a client commits money to a structure that may not be permitted.
Contracts and ongoing advice
Most of what we do for business clients is documentary:
- Shareholder and partnership agreements — decision-making, deadlock, transfer restrictions, and what happens when a founder leaves.
- Commercial contracts — supply, distribution, agency, services, construction and lease agreements, drafted or reviewed.
- Employment documentation — contracts, policies and terminations compliant with the Labour Proclamation No. 1156/2019.
- Corporate governance — board and shareholder resolutions, capital increases, share transfers, amendments to constitutive documents.
- Due diligence — on a target business, a joint venture partner or a property, before the transaction closes.
The most common avoidable problem we see: two or three people start a business together on the strength of a friendship, register a PLC with a standard-form memorandum, and never agree in writing how profits are shared, how decisions are made, or what happens if one of them wants out. A short shareholders' agreement at the beginning prevents a long dispute later.
Commercial disputes
When a commercial relationship fails, we act in negotiation, in arbitration under the Arbitration and Conciliation Working Procedure Proclamation No. 1237/2021, and in the courts. We take a commercial view of these matters: the objective is normally to recover value or exit cleanly, not to win an argument. Where litigation is the right answer we pursue it properly, and where it is not we say so.