The Role of Courts in Ensuring Good Corporate Governance in Ethiopia: the Law and the Practice
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Date
2017-06
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Addis Ababa University
Abstract
The establishment and incorporation of business organizations in every sector of the
economy have numerous importances for countries’ sustainable social, technological,
financial and economic development and progress.
In many jurisdictions, business organizations are classified as companies (corporations)
and partnerships. In Ethiopia, the 1960 Comm.C recognizes six types of business
organizations. Among which, two are companies, namely Share Companies and Private
Limited Companies and the remaining four namely, Ordinary Partnership, Joint Venture,
General Partnership and Limited Partnership are grouped in the category of partnership
.
In Ethiopia, Private Limited Companies are dramatically increasing in number in all
corners of the country and these companies have considerable role in the country’s
economy. However these companies are surrounded by many legal and practical
problems. The inadequacy and sketchy nature of the provisions in the Comm. C and other
relevant laws have triggered practical problems in the courts and have made the
governance of Ethiopian companies’ especially private limited companies, problematic.
The companies, in order to achieve their business objectives, and render their great
contribution in the country’s financial and economic development, should have good and
effective Corporate Governance. The existence of good Corporate Governance
framework in the country fosters market integrity and improves economic efficiency and
development and also builds investor confidence.
Good Corporate Governance is much more important for Developing and Emerging
Market Economy Countries since these countries do not have a strong and long
established financial institutions, strong, independent and efficient judiciary, and weak
enforcement mechanisms in relation to Corporate Governance issues.
Courts have indispensable roles in ensuring good corporate governance. For courts to
play their crucial roles in ensuring good corporate governance practices in companies,
there is a need to have effective legal and institutional frameworks, and courts should be
independent, efficient and should establish special benches for company related cases. If
courts fail to discharge their duties properly or involve in every activities of companies’
management outside the law, this entails bad corporate governance practices
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Keywords
Ensuring Good Corporate Governance