Ethiopian Law Regarding Business Organizations: Analysis on Selected Questions
Business Law
By:
Aklilu Gebretsadik
Addis Ababa University School of Commerce Department of Marketing Management Feb. 1, 2013 Addis Ababa
1, Mention in detail, at least ten essential, points which must be included in partnership agreement. Answer
The 1960 Commercial Code of Ethiopia states the following to be included in a partnership agreement (memorandum of association) in Art. 284. The memorandum of association shall contain: (1) the name, address and nationality of each partner; ( 2) the firm-name; (3) the head office and branches, if any; ( 4) the business purposes of the firm; ( 5) the contributions of each partner.. their value and the method of valuation; ( 6) the services required from persons contributing skill; (7) the share of each partner in the profits and in the losses and the agreed procedure for allocation; (8) the managers and agents of the firm; ( 9) the period of time for which the partnership has been established. In addition, the partnership agreement shall contain the following additional points on default. (10) right and duties of partners (11) transfer of share outside the partners (12) power and conduct of general meeting (13) financial year (usually from Hamle 1 to Sene 30) (14) legal reserve of the company (15) applicable law for matters not contained in the partnership agreement (16) process of dispute resolution (17) dissolution and liquidation (18) amendment procedure of the articles of association
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Abstract The aim of this paper is to discuss business structure and organization and how liability differs between each organizational form. Society has set standards that govern our interactions with others. In addition, though not often obvious to the naked eye, most businesses have standards that similar to one another in governing their activities and abilities to function continually. The ...
2, Discuss at least eight points of differences between partnership and company. Answer
Distinction between a Company and a Partnership N o Basis of difference Company Partnership
1
Legal Status
2
Minimum number of members
is a legal person and regarded by law as a single person Pvt. Ltd. Co –minimum -2 Share Company – minimum -5
is a collection of individuals
Minimum – 2
3
Maximum number of members
Pvt. Ltd. Co- maximum -50 Share Company – Maximum no limit Limited Subject to some restrictions
Maximum no limit
4 5
Liability Transferability of interest Length of existence
6
7
Transferability shares
8
Management
can continue despite of death and insolvency(inability to pay debt) of the members of A shareholder can transfer his share without the consent of other shareholders Share company vests in the board of directors and Pvt. Ltd. Co on managers
Unlimited Can not transfer interest without the consent of all other partners the death or retirement of a partner dissolves the partnership a partner cannot transfer his share without the consent of other partners
– Ownership and management in the same hands. All partners being owners are entitled to participate in management -Sometimes managers are distributed in agreed proportion or equally in absence of agreement among the partners – Every partner has an
9
Distribution of Profits
10 Implied agency
can be distributed according to the provision of the articles by the directors/managers No member can act as an implied agent and bind the
company
implied authority to bind the firm by his act.
11 Stability
succession ensures stability and continuity
– Comes to an end with the death, retirement insolvency of partner. Hence unstable it is not compulsory.
12 Audit
is compulsory
3, Discuss in detail the differences in between general partnership and limited partnership. Answer
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General partnerships are businesses where each partner has total liability for the debts and actions of the partnership as a whole. Each partner can take part in the daily management of the partnership and they share equally in the profits of the business. Each partner has unlimited liability for the actions of the partnership, which includes the actions of the other partners. A partnership’s assets as well as the personal assets of the individual partners are subject to liability should legal action be taken against the business. A limited partnership has advantages that do not exist in a general partnership. Each limited partner has liability for the debts of the business limited to the extent of their investment in the company. Should the business become liable for some debt or legal proceeding, the limited partners personal assets are not at risk as are those in a general partnership. Unlike general partnerships, the limited partners have no management authority or input toward the operation of the company; this is usually left to a single partner who is classified as a general partner, and is responsible for the debts and liabilities of the company. The general partner is usually paid a management fee. General partnerships are formed when there are several partners investing personal expertise in the business and each of them will take an active role in the management and operation of the company. Limited partnerships are formed usually to raise capital for business start-ups.
In conclusion, the points of difference are formation procedure, liability, founders and their role.
4, Discuss in detail at least six differences between PLC and Share Company. Answer
Distinction between Share Company and Private Limited Company N Basis of difference o 1 Minimum no. of members 2 maximum no. of members 3 Business type Share Company five No limit Can undertake any kind of business PLC two fifty
4 Management 5 Transferable securities (like bonds…) 6 Public offering of shares 7 Capital requirement
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Information systems are necessary for supporting the business functions in a company. How well a company chooses the proper information systems can make the difference between a successful business and a failure. This paper will discuss information systems and how they impact organizations. Information Systems Support Business Processes in OrganizationsAny modern business requires information ...
8 Nature
It can’t under take banking and insurance commercial activities Bored of directors General manager It can issue Transferable It can’t issue securities transferable securities Shares can be offered to Shares can’t be offered public to raise capitals to public All capital must be subscribed It is only registered by and 25% of the capital must be fully paid-up capital paid –up before registration It is fully an association of It is fully an association capital of Persons
5, Discuss in detail the meaning of business and business organizations in detail. Answer
According to Article 124 of the Commercial Code, a business is an intangible property consisting of all movable property brought together and organized for the purpose of carrying out any commercial activity. On the other hand, Business Organization is an individual or group of people that collaborate to achieve certain commercial goal. An ordinary meaning of business is a commercial activity that is undertaken by a person called by business men or traders.It is a continious selling or buyingor provision of service.But the legal definition is different from this,under our commercial code,Art 124,it defines as “business is an incoporeal movable consisting of all movable property brought together and organized for the purpose of carrying out any of the commercial activities specified under Arts of this code “As this artice is saying business is composed of or includes both tangiable and intangiable assets, but immovables like building(house) and land are not part of business.The tangiable elements are those corporeal things like table,car,machines and others.The incorporeal(intangiable)elements are good will,trade name,trademark,patent and copy right. Business is an undertaking or entity that is distinct from its constituent elements.It is a person called trader that undertakes business and one can not be a trader without operating a business(Art.125).Trader is someone that undertake economic activities continously(professionaly and for profit)by operating a buisness.For example if Mr X buys a car and resell it continiously(not one time) and for profit,he is a trader and operating a business.Generally in ordinary sense business is an economic activity of a movable that have consitituent elements both corporeal and incorporeal,in which those business it self can be sold or leased. Business organization in lay language it is an entity that undertakes commercial activity,and that is concerned with marketing and recieving payements for the products or service they provided or rendered.In legal term Business organization is an entity that have a name,aquire rights and liabilities.They have more than one member having asset distinct from the asset of its members,they can sue and be sued in their names.Under our commercial code Art.210 is defined as “Business organization is any association arising out of a partnership agreement”.As we see it one of its element is partnership agreement,this is also defined under Art.211 as
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The political environments which include political stability , government support for different types of organisation, fiscal, direct support, providing infrastructure, enhancing skills of the working population, organisations to support businesses and membership of international trading communities. Political factors can affect a business in the following ways: Political stability affects a ...
“Partnership agreement is a contract where by two or more persons ontended to join together and to cooporate undertake to bring together contributions for the purpose of carrying out activities of an activities of an economic nature and of participatin in the profits and losses there of any”.As commulative reading of this two article reveal business organization have elements,those are:-agreement of two or more persons mean one person or sole propritor can not establish business organization.The person can be physical or legal(judicial)person.Those persons have to bring contribution on either in cash or in kind.What they undertake is an economic activities it can not engage in non economic activities.The members drive profits there of and losses incured by the organization.They have their own legal personality. Business organization is different from an association like cooperative societies in that their primacy objective is profit making unlike the latter one.The primacy motive of association is non profit one,they are like charitable organization,religious groups,NGO`s and others.Generally business organizations are established by two or more persons with primacy motive of profit making by bringing contributions to undertake economic or commercial activity.
