Affiliate Companies in Ethiopia: Analysis of Organization, Legal Frame Work and the Current Practice
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Date
2010-01
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Addis Ababa University
Abstract
The formation and of operation of affiliate companies have become an enterperunreial
reality in contemporary society. These companies have the freedom to determine the size
and boundary of their organization , and in so doing they limit (and some time evade)
their legal duties since they are characterized by their unity as commercial enterprise
and their legal diversity (multiplicity) and legal segregation and insulation and member
companies .Such a gap between organizational and legal structure in the realm of
affiliate companies have been the subject of many academic discussion and there are also
judicial and legislative development in the area, a tendency for special regulation in the
interest of minority shareholders and creditors of the member company in the group
particularly in the civil Law legal system. The paper endeavors to investigate the
organizational structure of officiate company in Ethiopia and analyzed with the rules on
joint holding, limitation on acquisition of bank shares, rules on liability of directors
officers and managers and consolidation in bankruptcy. Apart from the absence of special
regime and the insufficiency in the existing legal rules; courts, practitioners and
regulators are not familiar with the legal consequences of opera ting affiliate company.
So to curb problems presented to interests allied with affiliate company organizational
structure such as creditors; judicial actions under the existing legal framework and
legislative reform of the subject under consideration is recommended.
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The formation and of operation of affiliate, companies have become an enterperunreial