Browsing by Author "Yonas Shemelis"

Now showing 1 - 1 of 1
  • No Thumbnail Available
    Item
    Rights and Protection of Creditors in one Person Private Limited Company Under the new Commercial Code of Ethiopia
    (Addis Ababa University, 2024-05) Yonas Shemelis; Tilahun Teshome(Profassore)
    A single member company is a business entity established by one individual with limited liability. It operates as a separate legal entity with its own rights and liabilities, posing concerns for creditors. With sole management control and relaxed regulations, the risk of business failure and misuse for fraudulent purposes is higher. Ethiopia introduced OPPLCs in 2021 to promote capital accumulation and corporate culture transfer. However, questions arise regarding creditor protection under the New Commercial Code for OPPLCs. While limited liability companies safeguard shareholders, creditors may face unfair treatment. To protect creditors, debtor control rules/statutory mechanisms, creditors' contracts-based rules, and insolvency laws are used globally. In Ethiopia, gaps in disclosure of information, capital maintenance, corporate entity treatment, contractual misuse and insolvency rules in the New Commercial Code for OPPLCs may not adequately protect creditors. Improvements are needed to enhance creditor protection, including enhanced disclosures, stronger capital maintenance, member qualifications, law enforcement against entity misuse, and prevention of opportunistic director behavior during insolvency. Reviewing Ethiopian laws regulating limited liability entities is advised for better creditor protection.