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Companies Limited By Shares

TITLE VI. COMPANIES LIMITED BY SHARES

Chapter 1. General Provisions

Art. 304. – Definition of share company.
1.    A share company is a company whose capital is fixed in advance and divided into shares and whose liabilities are met only by the assets of the company.
2.      The members shall be liable only to the extent of their share holding.

Art. 305. – Company name.

    The company name shall be as agreed but shall not offend public policy nor the rights of third parties and shall include the words “Share company.”

Art. 306. – Minimum amount of capital and a nominal value of shares.

1.    The capital shall not be less than 50,000 Ethiopian dollars.
2.    The amount of the par value of each share shall not be less than 10 (ten) Ethiopian dollars.

Art. 307. – Founders.

1.    A company may not be established by less than five members.
2.    Persons who sign the memorandum of association and subscribe the whole of the capital shall have the legal status of founders.
3.    Where a company is to be formed by the issue of shares to the public, persons who sign the prospectus, bring in contributions in kind or are to be allocated a special share in the profits, shall have the status of founded.
4.    Any person, even though outside the company, who has initiated plans or facilitated the formation of the company, shall have the status of a founder.

Art. 308. – Commitments entered into by the founders of the company.

1.    The founders shall be fully jointly and severally liable to third parties in respect of commitments entered into for the formation of the company. All persons who have acted in the name of the company before its registration in the commercial register shall be similarly liable.
2.    The company shall takeover these commitments from the founders and refund the founders with all the expense made by them insofar as such commitments and expenses were necessary for the formation of the company or approved by the general meeting of the subscribers.
3.    Where the company is not established for whatever reason, the subscribers shall not be liable for the commitments or expenses made by the founders.

Art. 309. – Liability of the founders.

1.    The founders shall be jointly and severally liable to the company and third parties for any damage in connection with:
a.    the subscription of the capital and the payments  for the formation of the company;
b.    contributions in kind as provided under Art. 315;
c.    the accuracy of statements made to the public in respect of the formation of the company.
2.    Claims for damages under this Article shall be barred after five years from the date when the aggrieved party knew of the damage and of the person liable. There shall be absolute limitation after ten years from the date when the act complained of took place.
3.    Nothing in this Article shall affect cases where the liability of the founder arises from the commission of a criminal offence.

Art. 310. – Limit of profits which may be allocated to the founders.

1.    The founders may, for a period not exceeding three years, reserve personally to themselves in the memorandum of association and in addition to their rights as shareholders, a share which shall not exceed one fifth of the net profits in the balance sheet.
2.    No other advantage to founders may be provided in the memorandum of association.
3.    The benefits provided by this Article are personal to the founders but no founder shares may be issued.

Art. 311. – Members reduced in number below the legal minimum.

1.    No company shall remain in business for more than six months after the number of members is reduced to less than five. Every member aware of such reduction shall be personally liable for the debts contracted thereafter.
2.    Where the members are less than five in number or the company does not possess the prescribed organs, the court may order the winding-up of such company on the application of a member or creditor. The court may adjourn its decision upon such term as it thinks fit to permit of the reorganisation of the company and order such conservatory measures as may be necessary.

Chapter 2. Formation of the company

Art. 312. – General requirements in respect of formation.
1.    A share company shall not be formed until:
a.    the capital has been fully subscribed;
b.    one quarter at least of the par value of the shares has been paid up and deposited in a bank, in the name and to the account of the company.
2.    Sums deposited under sub-art. (1) shall not be paid over to the legal representatives of the company until registration in the commercial register has been effected.
3.    Where registration has not been effected within one year from deposit in a blank, the sums deposited shall be repaid to the subscribers. Such repayment shall be effected by the founders who shall be jointly and severally liable. After one year such sums shall bear interest at the legal rate.

Art. 313. – Memorandum of association.

    The formation of a company shall be by public memorandum which shall  contain:
1.    the names, nationality and address of the members, the number of shares which they have subscribed, provided that a member may not subscribe less than one share;
2.    the name of the company;
3.    the head office, and the branches, if any;
4.    the business purposes of the company;
5.    the amount of capital subscribed and paid up;
6.    the par value, number, form and classes of shares;
7.    the value of contributions in kind, their object, the price at which they are accepted, the designation of the shareholder and the number of shares allocated to him by way of exchange;
8.    the manner of distributing profits;
9.    any share in the profits allocated to the founders and reasons for such share;
10.    the number of directors and their powers and the agents of the company;
11.    the auditors;
12.     the period of time for which the company is to be established;
13.     the manner in which the company will publish its reports.

Art. 314. – Articles of association.

1.    The articles of association which govern the operation of the company shall be drawn up by the founders in accordance with the law.
2.    Articles of association may follow the model supplied by the Ministry of Commerce and Industry with any necessary modifications.
3.    Articles of association shall be deemed to form part of the  memorandum of association and shall be attached thereto.

Art. 315. – Valuation of contributions in kind.

1.    A member who makes a contribution in kind shall file a report made and sworn by experts appointed by the Ministry of Commerce and Industry.
2.    The report shall contain a detailed description of the property contributed, the value given to each item and the method of valuation. It shall be annexed to the memorandum of association.
3.    Within six months from the date of formation of the company the directors and auditors shall verify and, where necessary, review the valuation given in the report. The shares representing contributions in kind shall remain deposited with the company and may not be assigned until the valuation has been verified.
4.    Where verification under sub-art. (3) results in the value of the contribution being lowered by one fifth, the value of the capital shall be reduced accordingly: provided that the contributor may make good the difference or shall withdraw from the company.
5.    The provisions of sub-art. (3) and (4) shall apply notwithstanding approval having been given to the report under sub-art. (1) by a general meeting of the subscribers.

Art. 316. – Formation as between founders.

    Where shares are not offered for public subscription, the founders shall show in the memorandum of association:
1.    that all the shares have been allocated;
2.    that the sums have been deposited in the manner required by Art. 312 (1) (b);
3.    that the provisions of Art. 315 have been applied to contributions in kind;
4.    that they have provided for the administrative organs of the company.

Art. 317. – Formation by public subscription.

    Where a company is formed by public subscription, the provisions of Art. 318-322 shall apply.

Art. 318. – Prospectus.

1.    An offer to subscribers shall be made by a prospectus signed by all the founders and shall contain:
a.    the text of the draft memorandum of association;
b.    a summary of the principal provisions of the articles of  association;
c.    a summary of the expert report under Art. 315, if any;
d.    the date until when the subscribers may be required to discharge their obligations;
e.    the price at which shares are to be issued;
f.    the amount to be paid up on the shares until the general meeting of the subscribers;
g.    the place where applications and payments shall be made.
2.    Copies of the prospectus and of the expert report shall be made available to all persons who may wish to subscribe.

Art. 319. – Application for shares.

1.    Applications for shares shall be made on the form provided and deposited in the place of application.
2.    The applicant for shares shall declare that he has read the prospectus and the expert report, if any. He shall state on the form his name and address, the number of shares applied for and the date of application.

Art. 320. – Meeting of subscribers.

1.    When the time for milking applications has expired, the founders shall call a meeting of the subscribers.
2.    The provisions relating to the calling and decisions of an extraordinary general meeting shall apply to meetings of subscribers, without prejudice to the provisions of Art. 322.

Art. 321. – Purpose of the meeting.

    The purpose of the meeting under Art. 320 shall be:
1.    to verify that the requirements relating to the formation of the company have been complied with;
2.    to draw up the final text of the memorandum and articles of association;
3.    to approve contributions in kind, if any, and the share in the profits allocated to the founders;
4.    to make all appointments required under the memorandum of association.

Art. 322. – Special rules regard resolutions of the meeting.

1.    Resolutions meetings shall be drawn up and signed by the founders and all documents submitted to the meeting shall be annexed thereto.
2.    Any subscriber may take part in the discussions at the meeting and may exercise his voting rights under the article of association.
3.    Founders may not vote in their capacity of shareholders or proxies on ,the resolution approving their special share in the profits. The same shall apply to contributors in kind as regards the resolution approving the valuation of their contributions in kind.
4.    Amendments of substance to the draft memorandum and articles of association require the approval of all subscribers.
Provided that a majority vote shall be sufficient where the     amendments     relate to approval of contributions in kind or approval of     shares allocated to the founders.
5.    The provisions of Art. 315 (4) shall apply where the meeting reduces the number of shares allocated to contributors in kind.

Art. 323. – Deposit of the memorandum of association and registration in the commercial  register.

1.    The provisions of Art. 219-224 of the Code shall apply regardless of the manner in which the company was formed.
2.    The following documents shall be deposited:
a.    the memorandum of association;
b.    the articles of association, if any;
c.    the prospectus; ,
d.    the minutes of the subscribers’ meeting and all complementary documents.
3.    The notice to be published and the application for registration shall contain the particulars specified in An. 313 (1) – (7) and (10) – (12).

Art. 324. – Effect of publicity.

1.    Where publication and registration have been made, the company shall have a legal existence and personality notwithstanding that all the legal requirements relating to the formation of the company have not been complied with.
2.    Where the interests of creditors or shareholders are endangered by the legal or statutory requirements not having been complied with, the court may, on the application of any such creditor or shareholder, order the dissolution of the company and such provisional measures as may be necessary.
3.    An application not made within three months from the date of publication in the Official Commercial Gazette shall not be considered.

Chapter 3. Shares and the rights and duties of shareholders

Art. 825. – Form of shares.
1.    Shares are either registered the name of the shareholder or to bearer, as required by the shareholder.
2.    Shares shall be registered in the name of the shareholder where bearer mares are prohibited by law, the memorandum or articles of association.
3.    Where bearer shares are not prohibited, any shareholder may notwithstanding any provision to the contrary convert his bearer shares into registered shares and vice versa.

Art. 326. – Price at which shares issued.

1.    Shares may not be issued at a price lower than their par value.
2.    Shares may be issued at a price greater than their par value where such issue is provided by the memorandum or articles of association or decided by an extraordinary general meeting. The difference between the par value and the price at which shares are issued shall be known as a premium.

Art. 327. – Shares issued before registration of the company in the commercial register.

    Shares issued before the registration of the company in the commercial register shall be null and void, but liabilities arising thereunder shall not be affected.

Art. 328. — Indivisibility of shares.

1.    Shares are indivisible.
2.    Where several persons hold shares jointly, they shall appoint a representative to exercise the shareholder’s rights.
3.    Failing such appointment, notices and declarations made by the company to one joint owner shall be effective against all joint owners.
4.    Joint owners of a share shall be jointly and severally liable in respect of any liabilities as shareholder.

Art. 329. – Pledge or usufruct.

1.    Where a share is pledged or subject to a usufruct, the right to vote at meetings shall, unless otherwise agreed, he exercised by the pledgee or usufructuary.
2.    Where there is a preferential right subscription, such right shall be retained by the shareholder. If the right is not exercised, it shall be sold on behalf of the shareholder as provided in Art. 342.
3.    The shareholder shall be liable for calls on shares which have been pledged. If the calls are not met, the pledgee may sell the share under Art. 342.
4.    A usufructuary shall he liable for calls on shares but may claim for repayment when the usufruct expires.

Art. 330. – Indications on shares.

    Every share shall he signed by a director and shall show:
a.    the name, head office and period for which the company is established;
b.    the amount of capital and the par value of the share;
c.    the date of the memorandum of association and of registration of  the company in the commercial register, and the place of registration;
d.    the serial number of the share, its series or class, whether it is ordinary or preferential and the kind of preference share;
e.    the amount of part payments on shares not fully paid up, or a statement that the share is fully paid up;
f.    a statement showing whether a share may he transferred to a foreigner.

Art. 331. – Register of Shareholders.

1.    Every share company shall keep at its head office a register of shareholders.
2.    The register shall contain the names and addresses of shareholders, the number and numeration of the shares, the amount paid up and the date of entry of the shareholder in the register
3.    The register may be inspected by any shareholder without charge; it may also be inspected by any other person upon payment of the prescribed fee.
4.    Any person may within one month obtain a copy of or an extract from the register upon payment of the prescribed fee.
5.    The Ministry of Commerce and Industry may, on the request of any interested party or partner or of the company itself, order the rectification of the register, where an error has occurred.

Art.332. – Purchase by the company of its own shares.

1.    A company may acquire its own shares where:
a.    the acquisition has been authorised by a meeting of the share holders; and
b.    the purchase price is made from the net profits of the company; and
c.    the shares are fully paid.
2.    The directors may not dispose of shares thus purchased and the voting rights on such shares shall be suspended.
3.    The provisions of sub-art. (1) shall not apply where purchase has been decided by an extraordinary general meeting to reduce the capital.
4.    The provisions of this Article shall apply where a company receives its own shares in pledge.

Art. 333. – Restriction on free transfer of shares.

1.    Provisions may be made in the articles of association or by resolution of an extraordinary meeting restricting the free transfer of shares.
2.    Provisions may be made for the assignment of shares with the consent of the board of directors. Such provisions shall be of no effect unless:
a.    a right of pre-emption is reserved to the company or the share holders; and
b.    the conditions relating to the exercise of the right of pre-emption are specified and the price of pre-emption is fixed.
3.    These provisions may not result in preventing assignment of shares nor in causing serious damage to a shareholder who may wish to assign his shares.
4.    Where the pre-emptive right is reserved to the company, the price shall be paid from reserve funds.

Art. 334. – Company shall not grant advances nor make loans on its shares.

    A company shall not grant advances on its own shares, nor make loans to enable third parties to acquire shares.

Art. 335. – Classes of shares.

1.    The memorandum of association or an amendment thereto by a general meeting may provide for the setting- up of several classes of shares with different rights.
2.    All shares of the same class shall have the same par value and the same rights.
3.    No change in the rights conferred to a class of share may be made unless a meeting of the class of shareholders has agreed under the same conditions as the general meeting having recommended the change.

Art. 336. – Preference shares.

1.    A share company may create preference shares either in the memorandum of association or by resolution of an extraordinary general meeting. Such shares enjoy a preference over other shares, such as a preferred right of subscription in the event of future issues, or rights of priority over profits, or assets or both.
2.    The issue of shares with a preference as to voting rights is prohibited.
3.    Notwithstanding the provisions of Art. 345 (3), the memorandum of association may provide that shareholders who have been given rights of priority over profits and distribution of capital upon dissolution of the company may vote only on matters which concern extraordinary meetings.
4.    The number of shares having restricted voting right under sub-art. (3) may not exceed half the amount of capital.

Art. 337. – Dividend shores.

1.    A company may repay, from profits or reserve funds, without reducing the capital, to shareholders the par value of their shares.
2.    Shareholders whose shares are thus redeemed shall receive dividend shares (actions de jouissance). These shares do not confer any right to that part of the dividend representing the statutory interest, nor to repayment of contributions upon the dissolution of the company. They retain however a right of vote, unless otherwise provided in the memorandum of association, a right to that part of the dividend exceeding the statutory interest and a right to distribution of a share of the surplus in the winding-up.

Art. 338. – Paying up of cash shares.

1.    Shares subscribed in cash shall be paid up upon subscription as to one fourth of their par value or a greater amount if so provided in the memorandum of association and, where appropriate, as to the whole of the premium. They may only be registered shares until they are fully paid.
2.    Payment of the balance may be spread over a period of five years from the date of registration of the company.
3.    Where shares have been issued by existing companies before the coming into force of this Code, the period of five years shall run from the date of coming into force.

Art. 339. – Paying up of shares by way of contribution.

1.    Shares representing contributions in kind shall normally be fully paid at the time of formation of the company and not later than the day of registration of the company.
2.    They may not be separated from the counterfoil and be negotiated before two years from registration.

Art. 340. – Assignment of shares.

1.    Bearer shares are assigned by delivery, without any other requirement.
2.    Unless the country is proved, such shares shall be deemed to be the property of the holder for the purpose of payment of dividends, redemption and right of participation in general meetings.
3.    The provisions of Art. 731 of this Code shall apply to bearer shares which are lost or stolen.

Art. 341. – Conveyance of registered shares.

1.    Ownership of registered shares shall be established by the relevant entry in the register kept at the head office.
2.    No transfer is complete until recorded in this register.

Art. 342. – Liability to meet calls.

1.    Holders, previous assignees and subscribers shall be jointly and severally liable for calls on shares.
2.    Any subscriber or shareholder who has assigned his share shall cease to be liable for calls after two years from the date of the assignment.
3.    Where a shareholder fails to pay the call at the due date, he shall be liable to pay interest at the legal rate where no rate has been provided in the articles of association.
4.    The company may fifteen days after the receipt by the shareholder of a registered letter demanding payment offer the unpaid shares for sale by auction. These shares shall be cancelled and new shares delivered to the purchaser.
5.    Where the sale of the shares cannot be effected, the directors may order the forfeiture of the shares and retain the amounts paid up, without prejudice to any other claim they may have.
6.    Where unsold shares have not been put in circulation during the trading period in which forfeiture was ordered, they shall be cancelled and the capital reduced accordingly.
7.    A member who fails to make payments on shares when they become due shall lose his voting rights.

Art. 343. – Temporary warrants.

1.    Temporary bearer warrants shall only be issued in respect of bearer shares which are fully paid. Temporary warrants shall be of no effect where they are issued before bearer shares are fully paid.
2.    Where temporary registered warrants are issued in respect of bearer shares, they may only be transferred under the provisions relating to the assignment of debts.
3.    Temporary warrants in respect of registered shares shall be registered. The provisions relating to registered shares shall apply to the transfer of such warrants.

Art. 344. – Joint holdings.

1.    Where ten per cent or more of the capital of one company is held by a second company, the first company may not hold shares in the second company.
2.    Where two companies each have a capital holding in the other company and one of such holdings is ten per cent or more of the capital, the companies shall declare their holdings to the Ministry of Commerce and Industry which shall require the companies by agreement to reduce their holdings so as to conform to the provisions of sub-art (1). If the companies fail to agree, the Ministry of Commerce and Industry shall order the company possessing the smaller holding to dispose of that holding.
3.    Where the respective holdings are equal, and failing one company disposing of its shares in the other, each company shall reduce its holding to less than ten per cent of the capital of the other.
4.    The companies shall furnish to the Ministry of Commerce and Industry a sworn statement that they have complied with either sub-art. (2) or sub-art. (3) of this Article.

Art. 345. – Rights arising out of shares.

1.    Every share shall confer a right to participation in the annual net profits and to a share in the net proceeds on a winding-up.
2.    Unless otherwise provided in the memorandum or articles of association, the share in the profits or in the net proceeds on a winding-up shall be calculated in proportion to the amount of capital held.
3.    Subject to the provisions of Art. 336, every share shall confer voting rights.
4.    Every shareholder has a preferred right, in proportion to his holding, to allotment of cash shares issued on an increase of capital.
5.    The provisions of Art. 470 et seq shall apply to the exercise of this right.
6.    Similar rights may be reserved to holders of preference shares by an express provision in the memorandum or articles of association.

Art. 346. – Liability of founders and directors.

    Subject to the provisions of Art. 309, founders and directors shall be  jointly and severally liable to the company and to third parties for the  observance of the provisions of this Chapter.

Chapter 4. Directors, Auditors and Shareholders’ Meetings

Section 1. Management
Art. 347. – Directors.
1.    Only members of a company may manage the company.
2.    A company shall have not less than three nor more than twelve directors who shall form a board of directors.
3.    Where the memorandum of association does not specify the number of directors but fixes only a maximum and a minimum, the meeting of subscribers shall decide the number of directors to be appointed.
4.    Bodies corporate may be directors, but the chairman of the board of directors shall be a person.

Art. 348. – Chairman. – General Manager. – Secretary.

1.    The board shall elect a chairman from among its members where no chairman has been elected by a meeting of subscribers or shareholders.
2.    The board may revoke the appointments of a chairman elected by the board.
3.    A general manager shall be appointed by the board. The provisions of Art. 34, 35, 109 (1) (f) and 121 (h) of this Code shall apply.
4.    The general manager is an employee of the company and may not be a director.
5.    The board may appoint a secretary.

Art. 349. – Qualification shares.

1.    The directors shall deposit as security with the company such number of their registered shares in the company as is fixed in the memorandum of association.
2.    These shares shall not be handed back until the owners have ceased to be directors and have fully discharged their liabilities, if any to the company.

Art. 350. – Appointment of directors.

1.    The first directors may be appointed under the memorandum or articles of association. This appointment shall be submitted to a meeting of subscribers for confirmation. If such confirmation is not given, the meeting shall appoint other directors.
2.     Subsequent directors shall be appointed by a general meeting.
3.    Directors may not be appointed for more than three years.
4.    Unless otherwise provided in the memorandum or article of association, directors are eligible for re-election.
5.    Where more than, two directors are to be elected, such elections may not take place simultaneously.

Art. 351. – Replacement of directors.

1.    Where, during a financial year, one or more of the directors have left the board, the surviving directors may appoint other; persons to complete the period for which the directors who have left the board were appointed.
2.    Their appointments shall be submitted to the next general meeting for -confirmation and the general meeting may confirm their appointments or appoint other directors in their place. The acts done by persons appointed under sub-art. (1) shall be valid notwithstanding that the appointment of such persons is not confirmed by the general meeting.
3.    Where the surviving directors are less than half of the board of directors, they may not appoint directors under sub-art. (1) but shall convene a general meeting to appoint other directors.
4.    Where there are no surviving directors, the auditors sha1l convene a general meeting without delay for directors to be elected.
5.    During the period prior to the calling of the general meeting under sub-art. (4), the auditors may carry on the management of the company.

Art. 352. – Rights of a minority.

    Where there are several groups of shareholders with a different legal status, the articles of association shall provide for each group to elect at    least one representative on the board of directors.

Art. 353. – Remuneration.

1.    Directors may receive a fixed annual remuneration, the amount of which shall be determined by a general meeting and charged against general expenses.
2.    The articles of association may provide that the directors may receive a specified share in the net profits of a financial year.
3.    The fixed remuneration and share in the profits to be allocated to the board of directors shall be allocated in one sum. The board shall arrange the distribution among its members in such proportion as it deems fit.
4.    The amount of the share in the net profits may not exceed 10%. This share is calculated after deduction of:
a.    amounts allocated to reserve funds provided by law or the articles of association;
b.    the statutory dividend, where provided in the articles of association or where not provided, a sum representing 5% of the paid up value of shares which have not been redeemed;
c.    amounts allocated to reserve funds established by resolution of a general meeting;
d.    amounts carried forward.
5.    In fixing the share under sub-art. (4) regard may be had to amounts distributed or capitalised and charged in a previous balance sheet, with the exception of those arising in a 1iuancial year closed before the coming into force of this Code.
6.    The director’s share in the net profits shall not be paid where no dividend has been distributed to the shareholders.
7.    The Ministry of Commerce and Industry, taking into account the special benefits which have been provided to directors having the status of founders and having regard to the position of the company and to the salaries and benefits of its employees, may, on the position of share holders representing not less than 10% of the capital, order the reduction of the remuneration of the directors where it considers it excessive.

Art. 354. – Removal.

    Notwithstanding any provision to the contrary, directors may be removed  at any time by a general meeting: provided that a director who was removed without good cause may claim compensation.

Art. 355. – Restrictions on private trade.

    Unless authorised by a general meeting, directors may not be partners with joint and several liability in rival companies nor compete against the company either on their own behalf or on behalf of third parties.

Art. 356. – Dealings between a company and its directors.

1.    Any dealings made directly or indirectly between a company and a director shall receive the prior approval of the board of directors and notice shall be given to the auditors.
2.    Approval and notice under sub-art. (l) shall be required in respect of any dealings made between a company and another concern where one of the directors of the company is owner, partner, agent, director or manager of such concern.
3.    The auditors shall submit a special report to the general meeting relating to dealings approved by the board of directors. The meeting may take any action it thinks fit.
4.    Dealings approved by the meeting may only be set aside on the ground of fraud.
5.    Dealings not approved shall remain in force but the director concerned shall be liable for damages arising from fraud and if he fails to meet his liability the board of directors shall be liable.
6.    The provisions of this Article shall not apply to normal agreements between the company and its clients.

Art. 357. – Directors may not contract loons with the company.

1.    Directors of a company other than bodies corporate may not borrow money from the company, obtain an overdraft in current account or have any obligation guaranteed in respect of business transacted with third parties.
2.    The provisions of sub-art. (1) shall not apply in respect of day to day business of a company which carries on banking business.

Art. 358. – Decisions Of the board of directors.

1.    No decision may be taken by the board of directors unless a majority of directors is present. Decisions shall be taken by an absolute majority. Voting may be by proxy.
2.    An absent director may be represented at a board meeting only by another director who acts as proxy for the absent director only.
3.    Decisions of the board shall be drawn up as minutes and shall be signed by the chairman and a secretary. The minutes shall be kept in minute book.
4.    Copies of decisions shall be signed by the chairman and a secretary.

Art. 359.- Register of directors.

1.    Every company shall keep at its head office a register of its directors and managers with, particulars as to their civil status, profession, and any directorship held in other companies and, where the director is a company, the name of the company and the address of its head office.
2.    All particulars entered in the register and any amendments thereto sha1l be sent to the Ministry of Commerce and Industry within fifteen days from the making of the entry or amendment.
3.    The register shall be open to inspection in accord1lnce with Art. 331 (3).

Art. 360. – Register of shares and debentures held by the directors.

1.    Every company shall keep at its head office a register showing the number and value of shares or  debentures held by each director:
a.    in the company
b.    in subsidiary companies;
c.    in any holding company of which the company is a subsidiary.
2.    The register and any documents to be submitted at the general meeting shall be open to inspection by any share or debenture holder before the annual general meeting.
3.    The register shall be open to inspection by a representative of the Ministry of Commerce and Industry at any time and. extracts or a copy of the register may be taken.
4.    The register of directors shall  be available at the annual general meeting for inspection by any member attending the meeting.

Art. 361. – Statements to be provided concerning remuneration of directors.
1.    The balance sheet submitted to the annual general meeting shall show the total amount of remuneration, allowances, annuities, retirement benefits and benefits in kind given to the directors.
2.    Loans or guarantees to directors shall also be shown.

Art. 362. – Duties of directors.

    In addition to their duties under Art. 364, directors shall be responsible  for:
a.    keeping regular records of the management and of meetings;
b.    keeping accounts and books;
c.    submitting the accounts to the auditors and an annual report of the company’s operations including a financial statement to the meetings;
d.    convening meetings as provided in the articles of association;
e.    convening a general meeting without delay where three quarters of the capital are lost;
f.    setting up the reserve funds required by law or the articles of association;
g.    applying to the court where the company stops payments with a view either to a composition with creditors or the winding-up of the company.

Art. 363. – Powers of directors.

1.    The directors shall have such powers as are given to them by law, the memorandum or articles of association and resolutions passed at meetings of shareholders.
2.    The articles of association shall specify whether the directors are jointly responsible as managers or agents of the company or whether one only of the directors is responsible.
3.     Persons authorised to act as agents for the company may exercise in its name their powers as agents. Any restriction on their powers shall not affect third parties acting in good faith.

Art. 364. – Liability of directors to the company.

1.    Directors shall be responsible for exercising the duties imposed on them by law, the memorandum or articles of association and resolutions of meetings, with the care due from an agent.
2.    Directors shall be jointly and severally liable to the company for damage caused by failure to carry out their duties.
3.    Directors who are jointly and severally liable shall have a general duty to act with due care in relation to the general management.
4.     Directors shall be jointly and severally liable when they fail to take all steps within their power to prevent or to mitigate acts prejudicial to the company which are within their knowledge.
5.    Directors shall be responsible for showing that they have exercised due care and diligence.
6.    A director shall not be liable where he is not at fau1t and has caused a minute dissenting from the action which has been taken by the board to be entered forthwith in the directors’ minute book and sent to the auditors.

Art. 365. – Proceedings to enforce directors liability,

1.    No proceedings shall be instituted against the directors without a resolution of a general meeting to this effect. Such a resolution may be moved and adopted although not on the agenda.
2.    Where a resolution to institute proceedings or to compromise the claim is adopted by a vote of shareholders representing at least one fifth of the capital, the director concerned shall be removed. The same meeting shall appoint a director to replace the director who has been removed.
3.    A resolution not to institute proceedings and to compromise shall not be adopted where shareholders representing one fifth of the capital vote against the resolution.
4.    Where a resolution under sub-art. (2) is adopted but the company fails to institute proceedings within three months, the shareholders who voted for the resolution may jointly institute proceedings.

Art. 366. – Liability to creditors.

1.    Directors shall be liable to the company’s creditors where they fail to preserve intact the company’s assets.
2.    Proceedings may be instituted by the creditors against the directors where the company’s assets are insufficient to meet its liabilities.
3.    A resolution of the general meeting not to institute proceedings against the directors shall not affect the creditor’s rights.
4.    Creditors may not apply to set aside a resolution to compromise except on the grounds available to them under civil law.

Art. 367. – Proceedings instituted by shareholders and third parties.

    Nothing in this Section shall affect the rights of shareholders or third parties who have been injured by the fault or fraud of the directors.

Section 2. Auditors

Art. 368. – Appointment of auditors.
1.    The general meeting of every company limited by shares shall elect one or more auditors and one or more assistant auditors.
2.    Shareholders representing not less than 20% of the capital may appoint an auditor selected by them.
3.    Where there is more than one auditor, they may exercise their duties jointly or separately.
4.    A body corporate may act as auditor.

Art. 369. – Nomination and term of appointment.

1.    Auditors shall be elected by the meeting of subscribers and thereafter by the annual general meeting.
2.    Auditors elected by the meeting of subscribers shall hold office until the first annual general meeting. Auditors elected at an annual general meeting may hold office for three years.
3.    When signing as auditor, an auditor shall add the name of the company whose accounts he is auditing.

Art. 370. – Persons not competent.

1.    The following persons may not be elected as auditors:
a.    founders, contributors in kind, beneficiaries holding special benefits, directors of the company or of one of its subsidiaries or of its holdings company;
b.    spouses or relatives by consanguinity of affinity to the fourth degree inclusive, of the persons mentioned in sub-art. (1) (a);
c.    persons who receive from the persons mentioned in sub-art. (1) (a) a salary or periodical remuneration in connection with duties other than those of an auditor.
2.    Auditors may not be appointed directors or managers of the company which they audit, nor of one of its subsidiaries or its holding company within three years from the date of the termination of their functions.
3.    Reports submitted by an auditor and adopted by the annual general meeting shall not, save in the case of fraud, be invalid merely by reason of the fact that the provisions of this Article have not been observed.

Art. 371. – Revocation of the appointment of an auditor.

    A general meeting may at any time revoke the appointment of any auditor without prejudice to any claim he may have for wrongful dismissal.

Art. 372.  Remuneration.

1.    The remuneration of auditors shall be fixed by the general meeting on their appointment.
2.    Where the general meeting fails to agree on the remuneration of the auditors, the Ministry of Commerce and Industry may on the application of any interested party fix the remuneration.

Art. 373. – Professional secrecy.

    Auditors shall be liable to the penalties prescribed in Art. 407 of the Penal Code for breaches of professional secrecy.

Art. 374. – Duties of the auditors.

    The auditors shall have the following duties:
a.    to audit the books and securities of the company;
b.    to verify the correctness and accuracy of the inventories, balance sheets and profit and loss accounts;
c.    to certify that the report of the board of directors reflects the correct state of the company’s affairs;
d.    to carry out such special duties as may be assigned to them.

Art. 375. – Report to general meetings.

1.    The auditors shall submit to the annual general meeting a written report on the manner in which they have carried out their duties and their comments on the report of the board of directors.
2.    They shall recommend approval of the accounts and make such comments thereon as they think fit or refuse to recommend approval, giving reasons for referring the matter back to the directors.
3.    They may comment on the proposed distribution of profits.
4.    The general meeting shall not consider the balance sheet in the absence of a report under sub-art. (l).

Art. 376. – Auditors to inform directors of irregularities.

1.    Where the auditors find irregularities or breaches of legal or statutory requirements, they shall inform the directors and, where grave irregularities or breaches have occurred, they shall inform the general meeting.
2.    The auditors shall inform the public prosecutor of any matters which would appear to disclose the commission of an offence.

Art. 377. – Calling of general meetings.

1.    The auditors shall call a general meeting where the directors fail to do so under the law or in accordance with the memorandum or articles of association.
2.    They shall call a general meeting where shareholders representing at least 20% of the capital so request.
3.    Where there are several auditors, they may jointly call a meeting in accordance with the articles of association and may, where they think fit, fix for the meeting a place other than the company’s head-office or other place laid down in the articles of association, but in the same locality.
4.    The auditors shall prepare the agenda and a report to be read at the meeting giving the reasons for calling the meeting. One of the auditors shall preside over the meeting.
5.    Where the auditors disagree, one of them may move the court having jurisdiction in the area in which the head office is situate for an order appointing an officer of the court to exercise the powers under sub-art. (3) and (4).
6.    Expenses incurred under this Article shall be borne by the company.

Art. 378. – Powers.

1.    The auditors may at any time make on the spot such audits and checks as they think necessary and may call for any information, agreements, books, accounts, minute books and such other documents as may be required for the proper execution of their duties.
2.    Auditors shall be present at shareholders’ meetings and at the annual general meeting.

Art. 379. – Audit of the accounts of a holding company.

    Auditors shall exercise their powers under Art. 378 in respect of the accounts of holding companies under Art. 451.

Art. 380. – Liability of auditors.

1.    Auditors shall be civilly liable to the company and third parties for any fault in the exercise of their duties which occasioned loss.
2.    An auditor who knowingly gives or confirms an untrue report concerning the position of a company or fails to inform the public prosecutor of an offence which he knows to have been committed shall be punished under Art. 438 or Art. 664 of the Penal Code, as the case may be.

Art. 381. – Investigation into the position of a company on the request of shareholders.

1.    Shareholders representing at least one tenth of the shares issued may ask the Ministry of Commerce and Industry to appoint one or more qualified inspectors to make an investigation and report on the company’s state of affairs.
2.    The petition shall contain such evidence as the Ministry deems necessary and the petitioners may be required to guarantee up to a maximum of 500 Ethiopian dollars the expenses of the investigation.

Art. 382. – Investigation compulsory.

    The Ministry shall appoint one or more qualified inspectors to act under  Art. 381 where there has been a resolution of a general meeting or an order of the court.

Art. 383. – Investigation ordered by the Ministry of Commerce and Industry.

    The Ministry of Commerce and Industry may appoint inspectors to  conduct an investigation where it has good reason to believe that the operations of the company are such as may reveal:
a.    fraud on creditors; or
b.    acts prejudicial to a class of shareholders; or
c.    illegal or fraudulent activities; or
d.    acts which constitute offences against the law.

Art. 384. – Investigations may be extended to the affairs of holding companies and subsidiaries.

    Where inspectors have been appointed under Art. 381, 382 or 383 to  investigate into the affairs of a company and they are of the opinion that a  full investigation into the affairs of such company cannot properly be carried out without an investigation into the affairs of the holding or subsidiary company of such company, they shall report their opinion to the Ministry of Commerce and Industry which may order that the investigation he extended to the affairs of the holding or subsidiary company.

Art. 385. – Duties of companies under investigation.

1.    The directors and authorised agents of any company under investigation shall produce to the inspectors all hooks and documents required by them and furnish all information necessary for the investigation.
2.     Any director or authorised agent who obstructs the inspectors in the course of the investigation shall be reported to the Ministry of Commerce and Industry which may cause proceedings to be instituted under Art.  433 of the Penal Code.

Art. 386. – Inspectors’ Report.

    On receipt of the inspectors’ report, the Ministry of Commerce and  Industry shall send a copy thereof:
a.    to the companies whose affairs have been investigated;
b.    to the shareholders who petitioned for investigation;
c.    to the court which ordered an investigation.

Art. 387. – Investigation regarding nominees.

1.    Where the Ministry of Commerce and Industry has good reason to believe that registered shareholders are only nominees of the persons who exercise effective control of a company, the Ministry may appoint inspectors to ascertain the real owners of the shares under Art. 383.
2.    The Ministry may order an investigation under sub-art. (1) at the request of shareholders representing not less than one tenth of the shares issued.

Section 3. Shareholders’ Meetings

Paragraph 1. – General provisions
Art. 388. – General rules.
1.    A general meeting of shareholders properly established and conducting its business in accordance with the law, acts on behalf of all shareholders. Decisions of a general meeting bind all shareholders whether absent, dissenting, incapable or having no right to vote.
2.    The provisions of sub-art. (1) shall apply mutatis mutandis to special meetings.

Art. 389. – Rights proper to shareholders.

1.    Notwithstanding the provisions of Art. 388, no shareholder may be deprived without his consent of the rights inherent in membership.
2.    Rights inherent in membership are rights which, under the law or the memorandum or articles of association, do not depend upon decisions of the general meeting or board of directors or which are connected with the right to take part in meetings, such as the right to be a member, to vote, to challenge a decision of the company or to receive dividends and a share in a winding-up.

Art. 390. – Classes of meetings

1.    Shareholders’ meetings may be general or special.
2.    General meetings are ordinary or extraordinary and comprise shareholders of all classes.
3.    Special meetings comprise only shareholders of a specific class.

Art. 391. – Calling meetings.

1.    General meetings are called by the directors, the auditors, the liquidators or, where appropriate, by an officer of the court.
2.    The court of the place where the head-office is situate may appoint an officer of the court to call a meeting and to draw up the agenda for consideration where shareholders representing one tenth of the share capital show that such an appointment is necessary.

Art. 392. – Mode of calling.

1.    Notices calling meetings shall be issued in accordance with the articles of association and shall be published in the Official Commercial Gazette and in one newspaper authorised to publish legal notices and circulating in the area where the head office is situate.
2.    The provisions of sub-art. (1) shall not apply where all the shareholders are registered and are notified of meetings by registered letter at the company’s expense.
3.    Any registered shareholder may, by registered letter, require the company to notify him of meetings by registered letter at his own expense.
4.    The calling of meetings made necessary in the absence of a quorum is prescribed in the provisions relating to each class of meeting.

Art. 393. – Ordinary meetings called by reason of lack of quorum.

    Where an ordinary general meeting has been unable to function for lack of  the quorum provided in Art. 421, a second meeting shall be called in the same manner and within the same period of time as the first meeting.

Art. 394. – Extraordinary or special meetings called by reason of lack of quorum.

    Where for lack of the quorum provided in Articles 425 and 428 an  extraordinary or special meeting has been unable to function, a second  and a third meeting, if necessary, shall be called by two notices published     at one weeks interval in the Official Commercial Gazette and in a  newspaper authorised to publish legal notices, or under the provisions     of Art. 392 (2), where appropriate.

Art. 395. – Time of notice of meetings.

    Notice to be given for a first meeting shall be fifteen full days and for a second or subsequent meeting called for lack of a quorum at the first meeting, eight full days, irrespective of the mode of calling.

Art. 396. – Contents of notices of meetings.

1.    Notices of meetings shall give the company’s name, the nature, capital and head office of the company and the place where and time, within which hearer shares (if any) are to be deposited.
2.    Notices of subsequent meetings made necessary by lack of quorum shall give the dates of the abortive meetings.

Art. 397. – Agenda.
1.    Save as is provided in Art. 391 (2), the agenda shall be prepared by the person calling the meeting.
2.    Unless otherwise provided, only items on the agenda may be discussed. However, the meeting may at any time revoke the appointment of directors and appoint new directors in their place.
3.    Only items on the agenda of the first meeting may be discussed at subsequent meetings made necessary by lack of quorum (Art. 393 and 394).

Art. 398. – Proxies.

1.    A shareholder may nominate one proxy only. Where a shareholder has appointed a proxy, he may not vote in person.
2.    The representation of joint holders of shares, of reversioners and of pledgees is provided for in Art. 328 and 329.

Art. 399. – Requirements in respect of conduct of business.

1.    A meeting is not legally constituted for taking decisions where there is not a quorum and a majority.
2.    The quorum in relation to the capital is as laid down for each class of meeting. For all meetings the quorum shall be calculated on all the shares making up the capital, less these shares which carry no voting rights under the law or the articles of association.
3.    The memorandum and the articles of association may not vary the provisions of this Code relating to majority and quorum.

Art. 400. – Shares redeemed by the company carry no voting rights.

A company may not vote with shares which it has redeemed under Art.  332.

Art. 401. – Period of time for registration of shares.
The articles of association shall determine the period of time within which the holders of registered shares shall be entered in the company’s register and bearer shares deposited. This period of time shall not expire more than five full days before the date of the meeting. This period may be shortened in the articles of association.

Art. 402.- Proxy.

    The form of proxy, the place where and the time within which they shall be deposited shall be determined by the directors: Provided that such period of time may not expire more than three full days before the meeting.

Art. 403. – Attendance sheet.

1.    An attendance sheet shall be kept for each meeting. It shall show the names and address of shareholders present or represented by proxy and the number of shares and votes held by each shareholder.
2.    The attendance sheet shall be initialled by the shareholders or their proxies, and shall be certified as correct by the bureau of the meeting.

Art. 404. – Chairman.
1.    The chairman of the board of directors or, in his absence, the senior director shall preside at all meetings. In the absence of both such persons, the person named in the articles of association or appointed by the meeting shall preside.
2.    Where the meeting has been called by the auditors, an officer of the court or a liquidator, the person calling the meeting shall preside.

Art. 405. – Tellers and secretary.

1.    The two members of the meeting who hold or represent the greater number of shares shall be appointed tellers, where they are willing to accept such appointment.
2.    The bureau shall appoint a secretary who, unless otherwise provided, need not be a shareholder.

Art. 406. – Right to inspect documents.

1.    Every shareholder may at all times, lilt the head office, inspect and take copies of:
a.    balance sheets and profit and loss accounts;
b.    reports submitted by the directors and by the auditors to general meetings relating to the three preceding financial years;
c.    minutes and attendance sheets of these meetings.
2.    Where a company refuses to give a shareholder access to any of the documents specified in sub-art. (1), the Ministry of Commerce and Industry shall be informed.
3.    The rights under this Article are enjoyed by joint holders of shares, reversioners and usufructuaries, and pledgees.

Art. 407. – Voting rights attached to shares.

1.    The voting rights attached to ordinary or dividend shares shall be in proportion to the amount of capital represented.
2.    Every share carries at least one vote.

Art. 408. – Limitation of votes.

    The memorandum or articles of association may limit the number of votes which shareholders may exercise at meetings so long as such limitation is  equal for all shares without distinction of class.

Art. 409. – Conflicts of interest.

1.    Where the interests of a member, acting on his own beha1f or on behalf of a third party, conflict with the interests of the company, such member may not exercise his right to vote.
2.    Where failure to comply with the provisions of sub-art. (1) results in a resolution being adopted’ prejudicial to the company, such resolution may be set aside in accordance with the provisions of Art. 406.
3.    Directors may not vote on resolutions relating to their duties and liabilities.
4.    Shares which are deprived of voting rights under this Article shall he taken into account in calculating the quorum.

Art. 410. – Provisions restricting the free exercise of voting rights invalid.

    Any provision restricting the free exercise of voting rights in shareholders’  meetings shall be of no effect.

Art. 411. – Minutes.

1.    Discussions at meetings shall be reduced to minutes entered in a minute book and signed by a majority of the members of the bureau. Such entry shall be certified as correct by the chairman of the board of directors of the company or by two directors.
2.    The minutes of a meeting shall include:
a.      the manner in which the meeting was called; and
b.    the place and date of the meeting; and
c.    the agenda; and
d.    the members of the bureau; and
e.    the number of shares represented and the quorum; and
f.    the documents laid before the meeting; and
g.    a summary of the discussions; and
h.    the results of votes taken; and
i.    the texts of resolutions adopted.

Art. 412. – Minute where there is no quorum.

    Where a meeting lacks a quorum, the chairman shall record this fact in the minute book.

Art. 413. – Copies or extracts of the minutes.
Copies or extracts of the minutes shall be certified by the chairman of the board of directors or by two directors.

Art. 414. – Adjournment of meetings.

1.    Where shareholders representing one third of the capital represented at a meeting consider that they have insufficient information upon the matters to be discussed, they may require the meeting to be adjourned for a period not exceeding three days.
2.    This right may be exercised once in respect of one matter.

Art. 415. – Informal meeting of all shareholders.

1.    Shareholders or proxies representing all the shares may by agreement hold a general meeting without further formality.
2.    Where shareholders or proxies representing all the shares are present, the meeting may take any decision and adopt any resolution as in a general meeting.

Art. 416. – Effect of resolutions.

1.    Resolutions adopted by a meeting in accordance with the law, the memorandum or articles of association shall bind all members, including those who were not present or dissented.
2.    Resolutions adopted contrary to the law, the memorandum or articles of association may be challenged within three months from the resolution but in no case after three months from the entry of the resolution in the commercial register.
3.    Applications to set aside resolutions shall be made to the court within whose area of jurisdiction the head office is situate. The court may require the claimant to provide security for costs.
4.    On the request of the claimant and after hearing the directors and auditors, the court may, where good reasons are disclosed, suspend the execution of the resolution challenged pending the court’s decision.
5.    Where a resolution is set aside, the decision of the court shall bind all members and the directors shall be responsible for taking all measures necessary to implement such decision.
6.    Nothing in this Article shall affect rights of third parties acquired in good faith while the resolution was effective.

PARAGRAPH 2. – ORDINARY MEETINGS

Art. 417. – Right to inspect documents.
In addition to his rights under Art. 406, any shareholder may, during the  fifteen days which precede an annual ordinary general meeting, inspect  and take copies at the head office of the balance sheet, the profit and loss account and the directors’ and auditors’ reports to be submitted at the annual general meeting.

Art. 418. – Meetings.

1.    Within four months from the end of each financial year, an ordinary annual general meeting shall be called by the directors.
2.    This period of time may be extended to six months by the articles of association.
3.    Where necessary, other ordinary general meetings may be held.

Art. 419. – Business conducted at the meeting.

1.    The balance sheet, the profit and loss account and the directors’ and auditors’ reports shall be read out at the ordinary general meeting. After discussion it shall approve or reject the accounts for the past financial year. It shall decide, where necessary, on the allocation and distribution of profits and on all questions arising out of the accounts for the past financial year.
2.    The meeting may appoint or remove directors and auditors, decide the amount of their remuneration, amend where necessary the accounts after considering the report required under Art. 375, approve the issue of debentures as well as the guarantees attached thereto and decide all matters other than those reserved, to extraordinary general meetings.

Art. 420. – Taking part in meetings.

1.    Notwithstanding any provision to the contrary, any shareholder has the right to take part in ordinary meetings without regard to the number of shares held.
2.    Unless otherwise provided in the articles of association, any person may be represented by a third party, whether a shareholder or not.

Art.421. – Majority and quorum in ordinary general meetings.

1.    When first called, general meetings shall be composed of that number of shareholders which represents either in person or by proxy at least one-quarter of the voting shares.
2.    When called for a second time, the meeting may be held and discussions made without regard to the number of voting shares represented.
3.    Decisions are taken by a simple majority, abstentions and blank ballots (if any) being disregarded.

PARAGRAPH 3. – EXTRAORDINARY MEETINGS

Art. 422. – Right to inspect documents.
1.    Any shareholder may, during the fifteen days which precede an extraordinary meeting, inspect and take copies at the head office of the text of resolutions to be proposed or of the auditors’ report to be submitted.
2.    A shareholder may require the company in writing to send him copies at his own expense.

Art. 423. – Business.

    Unless otherwise provided by law, only extraordinary meetings may amend the memorandum or articles of association.

Art. 424. – Admission.

    Any shareholder, including preference shareholders, may take part in an extraordinary meeting without regard to the number of shares held.

Art. 425. – Majority and quorum in extraordinary meetings.

1.    Not less than a two-thirds majority is required for a resolution to be adopted in an extraordinary meeting, abstentions and blank ballots being disregarded.
2.    Resolutions to:
a.    change the nationality of the company; or  require
b.    require shareholders to increase their investments in the company, shall only he adopted where the holders of all shares having voting rights are present or represented and the vote is unanimous.
3.    Resolutions other than resolutions under sub-art. (2) may only be adopted:
a.    at a first meeting, where not less than one half of the holders of all shares having voting rights are present or represented;
b.    at a second meeting, where not less than one third of the holders of all shares having voting rights are present or represented;
c.    at a third mooting, where not less than one tenth of the holders of all shares having voting rights are present or represented.
4.    Nothing in this Article shall affect the provisions of Art. 463.

PARAGRAPH 4. – SPECIAL MEETINGS

Art. 426. – Cases where special meetings are to be called.

    A resolution of a general meeting to modify the rights of a class of shareholders becomes effective only when confirmed by a special meeting of the shareholders in the class concerned.

Art. 427. – Right to inspect documents.

    The provisions of Art. 422 shall apply mutatis mutandis to special meetings.

Art. 428. – Quorum and majority in special meetings.

1.    Special meetings shall he composed:
a.    at a first meeting, of shareholders holding not less than one half of all voting shares;
b.    at a second meeting, of shareholders holding not less than one third of all voting shares;
c.    at a third meeting, of shareholders holding not less than one quarter of all voting shares. Shareholders may be represented by proxies.
2.    The majority in special meetings shall he as provided in Art. 425 (1).

Chapter 5. Debentures

Art. 429. – Cases where issue is prohibited.
No negotiable debentures shall he issued by:
1.    individuals;
2.    companies whose capital is not fully paid;
3.    companies which have not issued a balance sheet in respect of their first financial year.

Art. 430. – Maximum amount of the issue.

1.    Debentures issued by a company may not exceed the amount of paid up capital shown in the last adopted balance sheet. This amount may be exceeded:
a.    where the company’s debentures issued do immovable property is mortgaged and the not exceed two thirds of the value of the mortgage; or
b.    where the excess over the paid-up capital is guaranteed:
I.    by registered securities or securities issued or guaranteed by the State and the date of redemption is not earlier than that of the debentures; or
II.    by government or public authorities annuities.
2.    Such securities shall he deposited ill a bank and such part of the annuities shall be blocked in a bank upto the time of repayment as is necessary to meet payments of interest and amortisation.
3.    The provisions of sub-art. (I) shall not apply to real estate loan or agricultural mortgage companies.

Art. 431. – Reduction of capital where there are debentures.

    A company which has issued debentures may only reduce its capital in proportion to the debentures redeemed. Where a reduction of capital is  necessary owing to losses, the amount of the legal reserve shall continue  to be calculated on the basis of the capital existing at the time of issue for so long as the capital and the legal reserve are less than the value of the unredeemed debentures.

Art. 432. – Premium bonds and bonds at a discount.

1.    Bonds may be issued at a price greater than their par value.
2.    Bonds may not be issued at a price lower than their par value except in accordance with special laws.

Art. 433. – Contents of debenture certificates.

    Debenture certificates shall be issued from a counterfoil register and shall show:
a.    the company’s name, its objects, the head office of the company, and the place where the company was registered:
b.    when the company was formed and for how long;
c.      the paid-up capital on the date of issue;
d.    the date of resolution of the general meeting and its entry in the register;
e.    the serial number and nominal value of the certificate, the rate and dale of interest payments and the terms for redemption;
f.    the amount of the issue and the special guarantees attaching to the debentures and the date of the deed setting up such guarantees;
g.    the amount of debentures or loan stock issued previously and not amortised, indicating the guarantees attaching thereto;
h.    where appropriate, the period or periods of time within which debenture holders may convert their debentures into shares, and the provisions for such conversion.

Art. 434. – Application of provisions relating to shares.

    The provisions of Art. 318, 319, 325, 328, 329, 340 and 341 of this Code shall apply mutatis mutandis to debentures.

Art. 435. – Debenture holders’ meetings.

1.    Holders of debentures of a given issue may combine as a legal personality to protect their common interests as provided hereinafter.
2.    Notwithstanding any provision to the contrary, debenture holders who have combined under sub-art. (1) may at any time meet in general meeting.

Art. 436. – Calling of debenture holders’ meetings.

1.    A meeting of debenture holders may be called by the company or by the representative of the debenture holders, if any.
2.    A meeting may also be called by debenture holders representing one twentieth of the issued and unredeemed debentures.
3.    The provisions of Art. 388 et seq. relating to the calling and holding of shareholders’ meetings shall apply mutatis mutandis to the calling and holding of debenture holders’ meetings.
4.    Directors, auditors or employees of the company having issued debentures or of companies having guaranteed such issue may not represent debenture holders in general meetings.
5.    Holders of debentures which have been amortised and redeemed may not take part in meetings.
6.    The company which has redeemed debentures may not take part in the debenture holders’ meeting by reason of the debentures it has redeemed. A company which holds more than 30 per cent of the capital of the company which has issued the debentures may not take part in the debenture holders’ meeting.
7.    The calling and holding of general meetings of debenture holders shall be at the expense of the debtor company.

Art. 437. – Business of debentures holders’ meetings.

1.    Resolutions adopted by debenture holders’ meetings bind all debenture holders, whether absent, dissenting or incapable.
2.    Meetings may adopt resolutions to protect the interests of debenture holders, to enforce the loan agreement and to provide for all necessary expenses in connection therewith.

Art. 438. – Decisions on proposals by the company.

1.    The meeting may also consider proposals of the debtor company relating to:
a.    modifications in the structure of the company;
b.    amalgamation with another company;
c.    issue of debentures having priority over existing debenture.
2.    The company may enforce proposals under sub-art. (1) notwithstanding that the debenture holders’ meeting does not approve such proposals: Provided that the company shall in such a case redeem within three months from such proposals having become effective the debentures of such debenture holders as may so request.
3.    The meeting may also consider proposal relating to variations in the terms of the loan.
4.    The meeting may not increase the liability of the debenture holders by imposing additional payments or agree to the conversion of debentures into shares, except by an unanimous vote, nor provide for differential treatment amongst the debenture holders.

Art. 439. – Conditions for the validity of decisions Quorum.

1.    A meeting may take decisions where its members represent not less than one-third of the debentures which may be represented.
2.    For matters to be decided under Art. 438, the quorum shall be three quarters.
3.    Where the quorum under sub-art. (1) and (2) is not attained at the first meeting, a second meeting shall be called in the same manner and within the same period of time. The notice of calling shall contain the same agenda, showing the date of the abortive meeting. The second meeting may make decisions regardless of the quorum present.
4.    For matters to be decided under Art. 438, where a quorum of one shall is not attained at the second meeting, a furhter meeting shall be called in the same manner and within the same period of time. Such meeting may make decisions where one-quarter of the debenture are present or represented.

Art. 440. – Majority.

1.    Resolutions shall be adopted by simple majority.
2.    Resolutions under Art. 438 shall be adopted by a two-thirds majority.
3.    The voting rights of debentures shall be in proportion to the share of the loan which they represent respectively, each debenture giving the right to not less than one vote.

Art. 441. – Confirmation of certain decisions.

1.    A resolution adopted under Art. 438 shall be submitted to the court for confirmation within fifteen days from the meeting by the company, the representative of the debenture holders or by a debenture holder. In default of submission, the resolution shall be of no effect.
2.    Debenture holders who dissented or were absent may oppose the confirmation of the resolution.

Art. 442. – Agent of debenture holders.

1.    Debenture holders may be represented by one or more agents who shall be nominated or removed by a general meeting of debenture holders having the quorum specified in Art. 439 (1) and (3) and a majority as specified in Art. 440 (1).
2.    The same quorum and majority shall be required for a decision on their remuneration and powers. Remuneration shall be borne by the debtor company.
3.    The agents of the debenture holders may, in case of urgency, be appointed or replaced by the court on the application of the debtor company in the absence of appointments made by a properly constituted general meeting, or on the application of one or more debenture holders holding not less than one twentieth of the debentures issued.
4.    The provisions of Art. 436 (4) shall apply to the appointment of an agent of the debenture holders.

Art. 443. – Powers of agents.

1.    Unless otherwise provided by the general meeting of debenture holders, agents of the debenture holders may do all things necessary in the interest of the debenture holders, and in particular accept and preserve securities guaranteeing the loan.
2.    They shall represent the debenture holders in all legal proceedings.
3.    They may take part in shareholders’ general meetings.
4.    They shall be present at the drawing of debentures for redemption.

Art. 444. – Duties in the event of the bankruptcy of the debtor company.

1.    Where the debtor company is adjudged bankrupt or enters into a scheme of arrangement, the agent of the debenture holders, if any, shall prove for all debenture holders thereof. He shall receive on their behalf all notices of meetings.
2.    The agent of the debenture holders may, if so authorised by the general meeting of debenture holders, vote at creditors’ meetings on behalf of all the debenture holders. In calculating the quorum and majority, all debenture” issued on the same date shall be deemed to constitute one debt.

Chapter 6. Accounts of companies

Art. 445. – General provisions.
Unless otherwise expressly provided by law, the provisions of this Code relating to commercial Looks and book-keeping shall apply to be accounts of share companies.

Art. 446. – Account Annual report.

1.    At the end of each financial year, the directors shall prepare a detailed inventory and valuation of assets and liabilities.
2.    They shall draw up a balance sheet and a profit and loss account and prepare a report on the state of the company’s activities and affairs during the last financial year.
3.    The report shall give detailed information on the profit and loss account, an exact statement of the total amount of remuneration of the directors and auditors, and proposals for the distribution of dividends, if any.

Art. 447. – Submission of accounts and report to the auditors.

    The inventory, balance sheet, profit and loss account and the directors’ report shall be submitted to the auditors and the Ministry of Commerce  and Industry not less than forty days before the notices calling the annual general meeting are dispatched.

Art. 448. – Drawing-up of the balance sheet and profit and loss account.

1.    The balance sheet and profit and loss account shall be prepared each year in the same form as in preceding years and the methods of valuation shall remain the same, unless the general meeting adopts variations in the mode of presentation of the accounts or the methods of valuation on the reasoned advice of the auditors.
2.    The profit and loss account shall show under separate heads losses or profits arising out of the company’s various activities.

Art. 449. – Annexures.

    A return of liabilities which do not appear in the balance sheet, such as guarantees, shall be annexed to the balance sheet.

Art. 450. – Amortisation and allowances.

1.    Provisions for amortisation shall be made each year so that the item to be amortised be written off at the end of its period of use. Where, during the period of amortisation, the rate proves insufficient, such rate shall be increased so that the amortisation corresponds to the depreciation.
2.    Provisions shall be made for amortisation and allowances for depreciation of assets at the end of each financial year, even where there are no profits.
3.    The costs of capital issues and increases shall be amortised not later than on the expiry of the fifth financial year following that during which such issue or increase was made.

Art. 451. – Accounts of holding companies.

1.    Where a company is a holding company, the accounts of its subsidiaries shall be submitted to the annual general meeting at the same time and in the same manner as its own accounts.
2.    A consolidated balance sheet and profit and loss account shall be prepared in respect of the holding company and its subsidiaries.
3.    The provisions of sub-art. (2) shall not apply where the directors are of opinion that the drawing up of such balance sheet would be impracticable or too onerous, or of little concern to the shareholders on account of the small financial interests involved.
4.    The provision of sub-art. (2) shall not apply if the Ministry of Commerce and Industry approves, where the directors of the holding company are of opinion that the drawing up of such balance sheet could prejudice the company or its subsidiaries, or that the company and its subsidiaries carry out business of such a differing nature that they may not reasonably be deemed to form a single enterprise.

Art. 452. – Profits.

1.    The net profits comprise the net receipts for the financial year after deduction of general costs and other charges, and of amortisation and allowances.
2.    The profit for distribution is the profit for the financial year less previous losses and plus additional revenue and any distribution from the reserve funds specially approved by the general meeting.
3.    The general meeting shall specify the reserve funds from which profit for distribution may be taken.

Art. 453. – Reserve funds.

1.    Transfers to reserve funds shall be made from the net profits shown in the profit and loss account.
2.    Reserve funds shall be as follows:
a.    the legal reserve required by law;
b.    the supplementary reserve created by an ordinary general meeting in accordance with the articles of association;
c.    optional reserve created by an ordinary general meeting in accordance with the articles of association;
d.    free reserve created by an ordinary general meeting there being no special provision in the law or articles of association;
3.    Unless otherwise provided in the articles of association reserve funds shall not bear interest.

Art. 454. – Legal reserve fund.

1.    Not less than one twentieth of the net profits shall be transferred each year to the legal reserve fund until it amounts to one-fifth of the capital.
2.    Transfers shall be made to the legal reserve fund where it has fallen below the amount fixed in sub-art. (1).

Art. 455. – Reserve created by issue premiums.

1.    Where an extraordinary general meeting has approved an increase in capital, the issue premiums may be transferred to a reserve fund.
2.     Only former and new shareholders may share in the distribution of such reserve.

Art. 456. – Allocation and distribution of profits.
1.    Distribution of profits shall be effected after transfer to the legal reserve as provided in Art. 454.
2.    Unless otherwise provided by law, the balance shall be distributed in accordance with the articles of association.
3.    Payments to directors shall be made in accordance with the provisions of Art. 353.

Art. 457. – Fixed at interim interests.

1.    The articles of association may provide that a fixed or interim interest shall be paid to shareholders even where there are no profits.
2.    Such interest, in a fixed amount, shall be carried to the debit of the installation account. It may only be provided for during the period of preparatory works and construction of the enterprise and shall cease to be payable as soon as normal business begins. The articles of association shall, within these limits, specify the date when such interest shall cease to be paid.
3.    Where the articles of association provide for a fixed or interim interest as defined in sub-art. (1) and (2), such interest shall not be paid unless the articles of association have been published.

Art. 458. – Payment of dividends. Rights of shareholders.

1.    Dividends may only be paid to shareholders from net profit shown in the approved balance sheet.
2.    Dividends distributed contrary to the provisions of & sub-art. (1) shall be treated as fictitious dividends and the persons making the distribution shall be criminally and civilly liable.
3.    The date and methods of paymel1lt of dividends shall be decided by the general meeting.
4.    Up to the date fixed for payment, the general meeting may for good reason vary or cancel decisions of a preceding general meeting concerning the distribution of dividends or reserves.
5.    A shareholder shall become a creditor of the company for the amount of the dividend from the date fixed for payment.

Art. 459. – Claiming back of dividends.

    Dividends distributed contrary to the provisions of Art. 458 may not be  claimed back from the shareholders, except in the case of family companies or where distribution was made in the absence of a balance sheet or not in accordance with the approved balance sheet.

Art. 460. – Effect of approval of the balance sheet.

    The approval of the balance sheet by the meeting shall not affect the liability of directors, auditors or general managers in respect of their management.

Art. 461. – Publication of the balance sheet.

    Within thirty days of the approval of the balance sheet, a copy thereof  together with the relevant minute of approval by the meeting shall be sent     by the directors to the Ministry of Commerce and Industry for publication  in the Official Commercial Gazette.

Chapter 7 Amendments to the memorandum or articles of association

Art. 462. – Application of general rules
1.    Extraordinary meetings called to vote on amendments to the memorandum or articles of association shall conduct their business in accordance with the provision of Art. 388-416 and 422-425.
2.    Resolutions shall be published in accordance with the provisions of Art. 224.

Art. 463. – Right of withdrawal from the company.

1.    Shareholders who dissent from resolutions concerning any change in the objects or nature of the company or the transfer of the head office abroad may withdraw from the company and have their shares redeemed, at the average price on the stock exchange over the last six months. Where the shares are not quoted on the stock exchange, they shall be redeemed at a price proportionate to the company’s assets as shown in the balance sheet for the last financial year.
2.    Where shareholders wish to withdraw under sub-art. (1), they shall notify the company by registered letter:
a.    within three days from the meeting, where they have taken part in such meeting; or
b.    where they were not present at the meeting, within fifteen days from the publication of the resolution in the Official Commercial Gazette.
3.    The provisions of this Article shall apply notwithstanding any provision to the contrary in the articles of association.

Art. 464. – Increse of capital Procedure.

1.    The capital may be increased by the issue of new shares or by an increase in the par value of existing shares.
2.    New shares issued may either be paid up:
a.    in cash;
b.    by paying off current debts with shares; or
c.    by capitalisation of reserves or other funds at the disposal of the company; or
d.    by conversion of debentures into shares.
3.    An increase of capital by increasing the par value of shares may only be effected under Art. 425 (2) where such increase is not paid up by capitalisation of reserves or other funds.

Art. 465. – Delegation of powers to directors.

1.    An extraordinary general meeting may by resolution delegate to the directors all powers to effect the increase of capital approved by the meeting.
2.    Any provision in the memorandum or articles of association delegating such powers in advance to the directors shall be of no effect.

Art. 466. – Period for effecting an increase of capital.

    A resolution of a general meeting to increase the capital under Art. 465 shall become of no effect if not carried out within five years unless the increase is by conversion of debentures.

Art. 467. – Capital to be fully paid before a new issue.

    Where a company whose capital is not fully paid increases its capital by a new issue of shares to be paid up in cash or of convertible debentures, such issue shall he null and void.

Art. 468. – Conditions for the issue of new shares.

    Unless otherwise provided by law, a company may only issue new shares  in accordance with the provisions relating to the formation of share companies.

Art. 469. – Subscription with offer to the public.

    Where new shares are offered for public subscription, the offer to the subscribers shall be by prospectus signed by a representative of the company.
The prospectus shall show:
1.    the date of registration of the company in the commercial register;
2.    the company’s name and head office;
3.    the existing amount and composition of the capital, showing the various kinds and classes of shares, their par value and preferences attaching thereto;
4.    the managers and auditors;
5.    the last profit and loss account, balance sheet and auditors’ report;
6.    dividends paid during the last five years or since formation;
7.    debenture loans issued;
8.    the decision of the general meeting regarding the new shares, showing in particular the total amount, their number, par value, nature and issue price;
9.    contributions in kind and special benefits allocated;
10.    the period from which the new shares will give the right to a dividend and any restrictions regarding such right, as well as any preference accorded;
11.    the date up to which the subscriber is bound.

Art. 470. – Preferred right of subscription.

1.    Shareholders shall have a preferred right of subscription of new cash shares, in proportion to the number of shares held.
2.    This right may be transferred or assigned under the same conditions as the share itself, during the period of subscription.
3.    This right may not be exercised in the event of conversion of debentures into shares. Shareholders shall renounce such right under the provisions of Art. 474, at the time of issue of debentures convertible into shares at the will of the holders.

Art. 471. – Rights of reduced subscription.

    Where any shareholder have not subscribed shares in respect of which they had a preferred right, the shares shall be allocated to those shareholders having applied for a greater number of shares than they would have been entitled to under their preferred right, such allocation being proportional to their share in the capital and within the limits of     their applications.

Art. 472. – Allocation of the remainder.
Where preferred allocations and the reduced allocations provided in Art. 471 have not taken up the whole of the increase of capital, the balance shall he allocated in accordance with the decisions of the general meeting.

Art. 473. – Exceptions to the preferred right.

1.    The general meeting which resolves an increase of capital may also resolve that the provisions of Art. 470, 471 and 472 shall not apply,  in whole or in part, but after considering:
a.    a directors’ report giving reasons for the increase of capital and the setting aside of the preferred right of subscription, the allottees of the new shares, the number of shares allocated to each, the issue price and the basis for determining such price; and
b.    an auditors’ report certifying the correctness of the directors’ report.
2.    Any allottees of new shares may not vote in person or by proxy at a meeting which sets aside in their favour the application of the provisions of Art. 470, 471 and 472.
3.    The quorum and majority required for such decision shall be calculated on the whole of the shares making up the share capital but to the exclusion of the shares held or represented by such allottees.

Art. 474. – Issue of convertible debentures.

1.    The issue of convertible debentures is subject in the prior approval of ‘an extraordinary general meeting.
2.    Such approval requires express renunciation by the shareholders of the preferred right of subscription of the shares to be issued under such conversion, for the benefit of the holders of the convertible debentures.
3.    The directors’ report required under Art. 437 (1) (a) shall give reasons for the issue and the period of time within which the option granted to the debenture holders shall be exercised, and the manner of conversion.
4.    The auditors shall prepare a special report on the propoaa1s submitted to the meeting as regards, the manner of conversion.

Art. 475. – Documents conferring special preferred rights prohibited.

    No documents conferring a preferred right of subscription may be issued.

Art. 476. – Periods of time for the exercise of the right of subscription.

    The period of time within which shareholders may exercise their right of subscription may not be less than thirty days from the opening of the subscription.

Art. 477. – Publication of notices of subscription.

1.    The date of opening of a subscription shall be notified to shareholders by a notice published in the Official Commercial Gazette and in a newspaper empowered to publish legal notices circulating at the place where the head office is situate, ten days before the subscription list opens. Such notice shall indicate to shareholders their preferred right, the dates of opening and closing of the subscription list and the issue price of the shares and the amount to be paid-up.
2.    Where all the shares are registered shares, the shareholders may be notified by registered letter ten days before the subscription list opens.

Art. 478. – Subscription of new shares.

1.    An application to subscribe is not effective unless accompanied by the amount to be paid on subscription.
2.    Where increases of capital are effected by the issue of cash shares, the provisions of Art. 312 (3) and 319-324 shall apply.

Art. 479. – Declaration of subscription.

    The directors shall keep a record showing that:
a.    the new shares have been fully subscribed;
b.    the amounts to be paid up have been paid;
c.    the authorised increase of capital has taken place; and
d.    the necessary amendment to the articles of association have been effected.

Art. 480. – Increase of capital by contribution in kind.

    The provisions of Art. 315, 321 and 322 of this Code shall apply to     increases of capital effected by contributions in kind or which carry special benefits.

Art. 481. – Payment by set off.

1.    New cash shares which form the whole or part of an increase of capital may he used to pay of the current liquid debts of the company at the date the subscription list opens.
2.    An account showing the settlement of the debt shall be drawn up by the directors and certified as correct by the auditors who shall prepare a report showing the value of the debt so settled.

Art. 482. – Capitalisation of reserves.

    Subject to the provisions of Art. 454 (2), an extraordinary general meeting     may decide to increase the capital by transferring thereto the whole or     part of the reserves and to vary the articles of association accordingly: Provided that, where the legal reserve is so transferred, no distribution to shareholder may be made until the legal reserve is restored.

Art. 483. – Amortisation of capital.

1.    Only the articles of association or a resolution of an extraordinary general meeting may authorise amortisation of capital.
2.     Only profits and reserves other than the legal reserve may be used for such amortisation.
3.    Amortisation is effected by the redemption of shares within the same class. The date on which shares shall be redeemed may be selected by drawings.
4.    Reduction of capital shall not result from amortisation.

Art. 484. – Reduction of capital.

    Proposals for a reduction of capital shall be sent to the auditors not less than fifteen days before calling the meeting to approve such reduction. The auditors shall report to the meeting their opinion and the reasons therefore on the proposals.

Art. 485. – Reduction of capital to be published.

    Where a reduction of capital has been effected, an entry shall be made in the commercial register and published in accordance with the provisions of Art. 224.

Art. 486. – Reduction of capital following losses.
The provisions of Art. 487-490 shall apply when losses are the reason for a reduction of capital.

Art. 487. – Manner of reduction.

1.    A reduction of capital shall be effected;
a.    by reducing the par value of shares; or
b.    by exchanging old shares for a lesser, number of new shares.
2.    Where a general meeting resolves that a reduction of capital shall be effected as provided in (b), the shareholders holding an insufficient number of shares to be exchanged shall within the period fixed by the meeting make up the number of shares to a number which can be exchanged or dispose of their shares to another shareholder.

Art. 488. – Preservation or conferral of rights on shareholders.

    A general meeting may in a resolution authorising a reduction provide that the shareholders shall be paid as a compensation for the reduction of  the number of their shares or of the par value thereof an amount  corresponding to the reduction, before any distribution of profits is made in any financial year.

Art. 489. – Rights of creditors.

    Where the claim of a creditor holding rights prior to the publication of the reduction of capital is not paid or such creditor is not given adequate guarantees for the payment of his claim, he may oppose the adoption of a resolution under Art. 488 or any distribution of profits until the capital is restored to the amount existing at the time when the claim originated.

Art. 490. – Reduction of capital below the minimum required by law.

1.    Where, by reason of losses, the capital is reduced below the minimum permitted in Art. 306 (1), the capital shall be increased to the minimum required in Art. 306 (1) within a period of one year from the date of publication in the official commercial gazette in accordance with the provisions of Art. 485.
2.    Nothing in this Article shall affect the rights of creditors under Art. 489.
3.    Where the increase of capital required by sub-art. (1) is not effected or the company is not reorganised, the dissolution of the company may be ordered by the court upon the application of any interested person.

Art. 491. – Reduction of capital not motivated by losses.

    The provisions of Art. 492-494 shall apply where losses are not the reason for a reduction of capital.

Art. 492. – Equality of shareholders.

    The equality of shareholders shall not be affected by a reduction of capital.

Art. 493. – Rights of creditors.

1.    Any creditor holding rights prior to the publication in the official commercial gazette under Art. 485 may, where the reduction of capital is in an amount exceeding 10%, object to the resolution within three months from such publication.
2.    The court may disallow such objection or order the company to pay the claimant or to provide adequate guarantees for payment.
3.      No reduction of capital may be effected until the period specified in sub-art. (1) has expired.

Art. 494. – Minute recording reduction.

1.    Where a reduction of capital has been effected, a minute shall be prcpared by the directors within one month and not later than one year from the date of publication in the official commercial gazette as provided in Art. 485.
2.    The minute shall be published in the same time and manner as decisions of general meetings amending the articles of association.

Chapter 8. Dissolution and Winding-up

Art. 495. – Grounds for dissolution.
1.    A share company may be dissolved for one of the following reasons:
a.    expiry of the life of the company as fixed in the memorandum of association, unless extended by a decision of an extraordinary general meeting;
b.    completion of the venture for which the company was formed;
c.    failure of the purpose or impossibility of performance;
d.    voluntary dissolution resolved by an extraordinary general meeting;
e.    dissolution by order of the court for good cause on the application of a member;
f.    subject to the provisions of Art. 311, acquisition of all the shares by a member;
g.    institution of bankruptcy proceedings;
h.    loss of three-quarters of the capital.
2.    An extraordinary general meeting shall be called to consider voluntary dissolution or the continuation of the company where three-quarters of the capital have been lost as provided in sub-art. (1) (h).
3.    Where the directors or auditors fail to call a general meeting or a general meeting cannot be regularly held, the court may, on the application of any interested party, order dissolution.

Art. 496. – Appointment and removal of liquidators.

1.    Where the appointment of liquidators is not provided for in the memorandum or articles of association, they shall be appointed by the general meeting which resolved dissolution.
2.    Where liquidators are not appointed under sub-art. (1), they may be appointed by the court on the application of the members, directors or auditors.
3.    The appointment of liquidators may be revoked by the general meeting or by the court for good cause on the application of members or auditors.
4.    Appointment of new liquidators shall be made as provided in sub-art. (1) and (2).

Art. 497. – Survival of the company during winding-up.

1.    Until winding-up is completed, the company shall retain its legal personality and name, to which the words “in liquidation” shall be added.
2.    During winding-up, the organs of the company shall restrict their activities to acts necessary to facilitate the winding-up and which are not acts within the scope of the liquidators.

Art. 498. – Bankruptcy and winding-up.

1.    Where a company is declared bankrupt, the winding-up shall proceed under the provisions of Book V of this Code.
2.    The directors’ powers shall be restricted to representing the company if necessary.

Art. 499. – Duties and liability of liquidators.

1.    Unless otherwise provided by law or the articles of association, the liquidators shall have the same duties and liabilities as directors.
2.    The liquidators shall take possession of the property and books of the company. The directors shall prepare a report for the liquidators on the management of the company from the end of the last financial year to the date of the winding-up.
3.    The liquidators and directors’ shall jointly prepare and sign an inventory of assets and liabilities.
4.    When, the assets appear to be insufficient cover the debts of the company, the liquidators shall call upon the members to pay according to their share holding such instalments as may be due on their shares.

Art. 500. – Powers of liquidators.

1.    Subject to any limitations imposed by the articles of association by the meeting appointing them, liquidators shall have full powers.
Liquidators may sell the property of the company as whole, compromise and arbitrate and s hall represent the company in legal proceedings.
2.    They may not undertake new business, unless required for the execution of contracts still running or where the interests of the winding-up so require. They shall be personally, jointly and severally in respect of any business undertaken outside the limits provided in this Article.

Art. 501. – Prohibition from distributing assets among members before full payment of debts.

    Until the creditors of the company have been paid or provisions for     payment made, the liquidators may not distribute any part of the assets     among the members.

Art. 502. – Calling on creditors.

1.    Creditors shall be paid on the basis of a balance sheet prepared by the liquidators as soon as they are appointed. .
2.    Creditors shall be informed of the dissolution of the company and required to file their claims with supporting vouchers.
3.    Creditors appearing in the company’s books or who are otherwise known shall be notified by registered letter. Notice to other creditors shall be given by notice, published in three successive monthly issues of the official commercial gazette and in the form laid down in the articles of association.

Art. 503. – Protection of creditors.

1.    Where known creditors have failed to file their claims the amounts owing to them shall he paid into court.
2.    Sums shall be set aside to meet claims in respect of undertakings of the company which are not completed or disputed claims where the creditors have not been guaranteed or distribution of assets has not been postponed until such undertakings are completed.

Art. 504. – Final balance sheet.

1.    After paying the company’s liabilities, the liquidators shall prepare a final balance sheet, showing what percentage of the surplus assets is available for distribution on each share.
2.    Subject to the provisions of the articles of association, the liquidators shall calculate the percentage under sub-art. (1) having regard to whether shares have been fully paid up and to preferential rights attaching to shares.
3.    The balance sheet signed by the liquidators and the auditor’s report shall be deposited in the Ministry of Commerce and Industry.
4.    Any shareholder may, within three months from the deposit of the final balance sheet under sub-art. (3), apply to the court to set aside the final balance sheet. Such application shall be heard after the period of three months has expired and, where there are several applications, they shall be heard together. The court’s decision shall be binding on all members and shareholders of the company.
5.    Where no application has been made within three months, the final balance sheet shall be deemed to be approved.

Art. 505.- Suspension of distribution.

    The surplus assets shall not be distributed to the shareholders until one year from the third publication specified in Art. 502 (3) in the official commercial gazette:
Provided that the court may order the distribution of the surplus assets before the expiry of this period when satisfied that the creditors will not suffer.
Art. 506. – Deposit of amounts uncollected.
Where a shareholder has not collected the percentage of the surplus assets due to him within three months from the deposit mentioned in Art. 504 (3), the liquidators shall deposit such sum in a special account in the State Bank of Ethiopia together with the name of the shareholder or the     numbers of the shares, if they are to bearer.

Art. 507. – Striking off the commercial register.

    When the final balance sheet has been approved, the liquidators shall make an application for the registration of the company to be cancelled in accordance with the provisions of Art. 226.

Art. 508. – Rights of creditors.

1.    After action has been taken under Art. 507, creditors who have not been paid may claim against the shareholders in person to the extent of their shares in the surplus assets.
2.    Creditors may claim against the liquidators, where they have not been paid owing to the liquidators’ negligence.

Art. 509. – Preservation of the books.

1.    The books of a company which has been dissolved shall be deposited with the Ministry of Commerce and Industry where they shall be kept for ten years.
2.    They shall be open to inspection after payment of the prescribed fee.