Ethiopian Economy

Currently Ethiopian economy is showing a remarkable growth. According to the Ministry of Finance and Economic Development, Ethiopia has showed 10% percent economic growth over the last two years. On February 2013, the Ministry of Finance and Economic Development announced that Ethiopia has registered an average of 10% economic growth during the past two years of the five-year Growth and Transformation Plan (GTP).

According to this report Ethiopia’s economy showed 8.5% growth during the fiscal year of 2011-2012, with 4.9 % growth in the agriculture sector, 13.6 % in industry and 11.1 % in the service sector. Investment is also up by 6.7% from 27.9% to 34.6%. During the year, the country registered a national savings rate of 16%. The State Minister underscored that the nation will continue to register an average double-digit growth in the remaining three-year period of the GTP. He further said that Ethiopia’s average 11% economic growth rate recorded during the past nine years is far better than the Sub-Saharan average of 5% to 6%. According to the report, Ethiopian gross domestic product (GDP) has hit $40.5 billion and the per capita income grew from $387 in 2011 to $513 in 2012.

The issue of which Law Governs “bond” in Ethiopia is not an easy one as it seems. There are different views about it. Some say “bond” is governed by the Insurance Provisions of the Commercial Code of Ethiopia while others say Guarantee articles of the Civil Procedure Code of Ethiopia are the ones that should govern this issue.

Regarding this issue the cassation bench of the Ethiopian Supreme court has rendered a decision on May 11, 2004 E.C. The applicants in their claim stated that the Federal Supreme Court gave undefined explanation of laws and dismissed the decisions of the arbitration board knowing the fact that the contractor concluded a contract of a third person guarantee and the main aim of the performance bond is to make sure that the premium is paid.

In its defense the respondent stated that the construction company by their construction contract concluded a performance bond of 1,101,890.00 Ethiopian Birr for any failure of performance on the road construction with the applicant on October 10, 1989 E.C. Because of the failure of the contractor to perform the duty as precluded in the contract, the Federal Supreme Court Appellate division revoked the decision of the arbitration board and decides that their contract on the performance bond should be governed by guarantee contract provisions as mentioned in the Ethiopian Civil Code.

Even though a company is setup to run a business, at some point in time the business may need to stop for one or another reason. The dissolution of a company is one aspect of a company’s life. The Ethiopian legal system addresses the issue of dissolution as one important aspect of a company’s phase of life. Dissolution of companies may result from non compliance with the requirements of the law, from provisions of the bylaws of the company, from the common agreement of members to dissolve or from a judicial decision dissolving the companies for just cause.

Non Compliance with the Requirements of the Law

One of the grounds for dissolution as per Ethiopian law is noncompliance with the requirements of the law. This type of dissolution occurs when companies don’t comply with the rules set out in the Commercial Code of Ethiopia. For instance in the case of Private Limited Company (PLC) if one or more share holders leave the company for any reason and the number of shareholders becomes less than two the company shall dissolve for noncompliance with the requirements of the law. The Commercial Code of Ethiopia of Ethiopia requires PLC to be formed and run at least by two persons. Failing to do that the company shall dissolve.

In such cases, the dissolution shall be ordered by the court. But it’s important to note that the court may make some provisional arrangements, in which if the companies comply with such arrangement, they may survive from dissolution.

In principle during succession the rights and obligation of the deceased will be transferred to the heirs. The same applies for Ethiopian legal system. According to article 826(2) of the Ethiopian Civil Code, the rights and duties of the deceased, unless they are closed by the death of the deceased will be passed to the heirs.

However the tricky question is what will happen when the deceased’s obligations are much more than the rights to be inherited. The contradicting matter in here is that if the deceased’s debt is much more than the net inheritance of the heirs, by approving their inheritance, will they be liable for the debt of the deceased? If so, should the heirs pay the debt of the deceased from his personal property?

The above question was entertained first by the High Court of Semen Shewa Zone and also seen by the Oromiya Cassation Bench. Then the matter then reached the Federal Supreme Court on February 24, 2001 in file number 38691, applicant Ato Legesse Biratu and the respondent Ato Dereje Jimma.

The cassation bench by using article 826(2) of the Ethiopian Civil Code decided that the heirs are only responsible for the debt of the deceased on the amount they inherited. So the creditors of the deceased cannot claim the debts of the deceased from the personal property of the heirs.