Ethiopia
Corporate Guide
What are the different types of companies that can be incorporated in Ethiopia?
The following are business organisations (or companies) that can be incorporated in Ethiopia as per the Commercial Code of Ethiopia:
General partnership
This type of company typically includes forms of partnership consisting of one or more partners who are each jointly and severally liable between themselves and within the partnership itself for the obligation of the partnership. In other words, liability is not restricted to the business. In a general partnership, partners’ contributions can be in the form of money, movable or immovable assets, skills, etc.
Limited liability partnership
This type of business organisation is formed by two or more partners to render professional services and services complementary thereto. In a limited liability partnership, the partners’ liability is limited to the amount of their contributions. What makes it different from the other types of partnerships is that this partnership has a legal personality distinct from that of the partners. Furthermore, only professionals licensed by an appropriate organ to provide that professional service are permitted to be partners.
Limited partnership
These kinds of business partnerships contain partners with different types of liability. General partners are fully jointly and severally liable to the partnership, and limited partners are liable only to the extent of their pledged contribution. Limited partners are restricted from holding managerial positions and they are not allowed to offer their skills as a contribution.
Joint venture
This is a business organisation established by an agreement between two or more persons and is in principle subjected to the general principles of partnerships. However, it has no legal personality, and its existence is unknown to third parties. Moreover, registration formalities required of other business organisations do not apply to joint ventures.
Share company
These are companies whose capital is fixed in advance and divided into shares and whose liabilities are met only by the assets of the companies. It incorporates the concept of limited liability of shareholders as shareholders are liable only to the extent of their contribution or shareholding. Share companies have professional management, such as a board of directors, general managers, secretaries and auditors. Share companies in Ethiopia can issue negotiable securities, such as equity instruments (shares) or debt instruments (debentures). The minimum number of shareholders required to form a share company is five people and they can have an unlimited number of shareholders. Big firms like banks, insurance companies and others usually opt to be incorporated as share companies.
Private limited company
These are the same as share companies for the most part in terms of liability being restricted to the assets of the company and the company having a distinct legal personality from its members. The difference between a private limited company and a share company is the permitted number of shareholders and its more flexible governance. Private limited companies are legally required to have a minimum of two shareholders and the total number of members cannot exceed 50.
One-member private limited company
These are private limited companies with a single shareholder in the company.
Branches of foreign companies
A branch is a fixed establishment of a foreign sole proprietorship, business organisation or a similar entity that is staffed and set up to pursue economic activity for gain, on behalf of, and for the account of the said party for a definite or indefinite period. The branch does not have an autonomous legal entity distinct from that of the sole proprietorship, business organisation or similar entity that owns it.
Commercial representative office
A commercial representative is a person, not domiciled at the place where the head office of the business is situated and bound to a trader by a contract of employment, who is entrusted by the trader with promoting their goods and services, conducting market surveys and carrying out similar tasks that support the expansion of the trader’s business.
Public enterprise / corporation
These are wholly state-owned public enterprises established by the Public Enterprises Proclamation No 25/92 to carry out business activities. Companies like Ethiopian Airlines Group, Ethio Telecom, Ethiopian Electricity Power and the Commercial Bank of Ethiopia are public enterprises.
The recommended and practical types of business organisations for foreign investments are share companies, private limited companies and one-member private limited companies.