Analyzing the Impact of Bankruptcy Provisions in the Ethiopian Commercial Code on Bank Foreclosure Practice
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Date
2025-09-01
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Addis Ababa University
Abstract
The 2021 Ethiopian Commercial Code introduced a modern insolvency regime that reshapes banks’ enforcement rights against defaulting debtors. At their core, insolvency and foreclosure proceedings pursue at opposite goals. Unless a delicate balance is maintained, the credit market will suffer. This research examined the impact of insolvency provisions on bank foreclosure practices and asks How do the new bankruptcy provisions of the Ethiopian Commercial Code affect the rights of secured creditors—particularly banks’ power-of-sale foreclosure—and what legal and practical implications follow from this reform? The research objective is to evaluate the legal and practical impact of the new insolvency framework on secured creditors’ enforcement rights, and to explore ways to reconcile Ethiopia’s nascent debtor-rescue regime with the longstanding creditor-friendly foreclosure system. Using a doctrinal analysis, this thesis closely examines legal texts, judicial decisions, and practical developments before and after the reform. qualitative review of recent cases where debtor companies invoked insolvency proceedings to halt bank-led collateral auctions will be discussed.
Key findings reveal a critical disconnect between the new collective insolvency procedures with pre-existing foreclosure laws, leading to ambiguity and room for strategic behavior by debtors. In practice, some debtors have misused preventive restructuring filings to paralyze foreclosure for years, exploiting procedural loopholes. This has eroded secured creditors’ positions and raised concerns about credit risk and enforcement delays. The thesis argues that, without careful implementation of the laws by the courts, the laudable goal of business rescue could inadvertently undermine creditor confidence and financial stability. The study fills a critical gap in Ethiopian legal scholarship by bridging foreclosure and insolvency domains, providing timely analysis as Ethiopia transitions to a modern insolvency regime. The thesis offers important recommendations – including legislative clarifications, stronger procedural safeguards against abusive filings, and capacity-building for the judiciary – to harmonize the foreclosure and bankruptcy systems
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Keywords
Bankruptcy, Foreclosure, Insolvency, Automatic Stay