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Conversion And Amalgamation

TITLE VIII. CONVERSION AND AMALGAMATION

Art. 544. – General provisions.
1.    The conversion of one form of business organization into another form does not necessarily cause the creation of a new legal person.
2.    The members may unanimously or by the majority required by law or the articles of association decide on conversion. In no case shall the decision increase the liabilities of a member without his consent.
3.    A member may not be deprived, in whole or in part, of the rights of membership without his consent in cases of conversion.
4.    Such decisions shall be by a duly authenticated deed and shall be published in accordance with the provisions of Art. 224.
5.    The rules relating to the formation of the relevant business organisation shall apply without prejudice to the rights of third parties.

Art. 545. – Conversion of a general partnership, a limited partnership or a share company into a private limited company.

1.    Any general or limited partnership and company limited by share may be converted into private limited companies.
2.    In the case of a company limited by shares, the decision shall be taken by an extraordinary general meeting held under the provisions of Art. 425.
3.    Members who dissent may withdraw as provided in Art. 463.

Art. 546. – Rights of creditors.

1.    The assets of the former firm shall pass automatically to the new business organisation as from the date of registration in the Commercial Register.
2.    On registration, creditors of the former firm shall be required to establish their claims within a reasonable time and shall be informed that, unless they object thereto, they shall be deemed to be creditors of the new firm.
3.    The provisions of Art. 502 shall apply to calls to creditors under sub-art. (2).
4.    Creditors who do not accept the new firm shall be paid off or guaranteed. No payment out of the assets shall be made to shareholders until all creditors have been paid or guaranteed.
5.    Managers shall be jointly and severally responsible for carrying out the provisions of sub-art. (2 )-( 4) inclusive.
6.    Managers shall cause the conversion of the former firm to be published. They shall cause the registration of the former firm to be cancelled where the provisions of sub-art. (4) have been complied with.

Art. 547. – Conversion of a private limited company into a company limited by shares.

1.    Private limited company may be converted into share companies under the provisions of Art. 536.
2.    The names of the members taking the decision shall be written in the minutes and such members shall become founders of the new share company.
3.    Members who dissent and whose dissent is recorded in the minutes may withdraw under the provisions of Art. 463.

Art. 548. – Liability of members.

1.    The conversion of a firm shall not discharge members with unlimited liability of their liability for undertakings made prior to the registration of the decision of conversion in the commercial register, unless such registration indicates that the creditors have approved the conversion.
2.    Approval shall be presumed where creditors have been informed of the decision of conversion by registered letter and have not expressly dissented there from within thirty days from the date of such notification.

Art. 549. – Amalgamation.

1.    Two or more firms may amalgamate, either by taking over or by the formation of a new firm.
2.    The provisions of sub-art. (1) shall apply to firms in liquidation.

Art. 550. – Decision to amalgamate.

    A decision to amalgamate shall be taken by each of the firms concerned. Special meetings of shareholders of different classes or meetings of debenture holders shall approve the taking over or being taken over.

Art. 551. – Deed of amalgamation.

1.    The terms of the amalgamation shall be drawn up by a deed which shall be published in accordance with the provisions of Art. 224.
2.    Notices of the amalgamation shall be published at the head office of the firm taking over or of the new firm resulting from the amalgamation, as well as at the head offices of firms ceasing to exist on amalgamation.
3.    The claims and liabilities of the firm ceasing to exist shall pass to the firm taking over or to the new firm.

Art. 552. – Rights of creditors.

1.    Creditors of the firm or firms taken over or the firms constituting a new firm, whose claims came into being before the publication of the deed of amalgamation in the official commercial gazette may object to the amalgamation within three months from the date of such publication.
2.    The court shall reject such objection where it is satisfied that all the creditors have agreed to amalgamation and that those who dissented have been paid or that sums corresponding to their debts have been paid into a special account in the State Bank of Ethiopia.
3.    The court may reject such objection and order that the deed of amalgamation shall be confirmed and that the firm taking over or the new firm resulting from the amalgamation shall pay the debts or provide adequate guarantees.

Art. 553. – Rights of debenture holders.

1.    Where amalgamation is not approved by a meeting of the debenture holders of the firm being taken over, the debtor firm shall redeem the debentures of holders who so require, not later than three months from the date of publication of the deed of amalgamation in the official commercial gazette.
2.    These provisions shall apply to debenture holders of firms amalgamating on the creation of a new firm.

Art. 554. – Publication of the rights of creditors and debenture holders.

    Entries made in the commercial register shall expressly refer to the rights of creditors w1der Art. 552 and of debenture holders under Art. 553.