WHEREAS the Transitional Government of Ethiopia has adopted a new economic policy and it has become necessary to take successive measures for the implementation of this policy;
WHEREAS as long a public enterprises have to stay under government control, it is necessary to create an organizational structure whereby they can enjoy management autonomy and thus enable them to be efficient, productive and profitable as well as to strengthen their capability to operate by competing with private enterprises;
WHEREAS there has to be a legal framework under which public enterprises, other than those which have to stay under government control, are operated be it with the participation or under the full ownership of private investors pursuant to the new economic policy;
WHEREAS to achieve these objectives, it is necessary to enact a new Public Enterprises Law;
NOW THEREFORE, in accordance with Article 9 (d) of the Transitional Period Charter of Ethiopia, it is hereby proclaimed as follows:
CHAPTER 1. GENERAL PROVISIONS
1. Short Title.
This Proclamation may be cited as the “Public Enterprises Proclamation No. 25/1992″.
In this Proclamation, unless the context otherwise requires:
1) “Enterprise” means a wholly state owned public enterprise established pursuant to this Proclamation to carry on for gain manufacturing, distribution, service rendering or other economic and related activities;
2) “Supervising authority” means an authority that is designated by the Council of Ministers with a view to protecting the ownership rights of the State;
3) “Total assets” means all immoveable and moveable property, receivables, cash and bank balances of the enterprise including intangible assets, deferred charges and other debit balances;
4) “Net total assets” means total assets less current liabilities long-term debts, deferred income and other liabilities;
5) “Capital” means the original value of the net total assets assigned to the enterprise by the State at the time of its establishment or any time thereafter;
6) “Auditor” means a natural or juridical person who is empowered under Article 32 of this Proclamation to audit the accounts of any enterprise;
7) “Net profits” means any excess of all revenue and other receipts over costs and operating expenses properly attributable to the operations of the financial year including depreciation, interest and taxes;
8) “Government” means the Central Government;
9) “State dividend” means the remaining balance after deduction of the transfers to the legal reserve fund and other reserve fund from the net profits;
10) “Board” means the management board of an enterprise formed in accordance with Article 10(2) and 12 of this Proclamation.
3. Repealed and Inapplicable Laws.
1) The following are hereby repealed:
a) the Public Enterprises Proclamation No. 20/1975;
b) the Supervision and Control of Certain Public Enterprises by Certain Ministries Proclamation No. 131/1978;
c) the Public Enterprises Regulation No. 5/1975;
d) the Agricultural Development Corporations Regulations No. 60/1978.
2) The following shall not apply to enterprises:
a) the Regulation and Coordination of Public Financial Operations Proclamation No. 163/1979;
b) any law, regulations, directives or practices inconsistent with the provisions of this Proclamation.
4. Application of Other Laws.
Unless otherwise provided by the Proclamation the relevant provisions of the Civil Code and the Commercial Code shall apply to enterprises.
CHAPTER 2. ESTABLISHMENT OF ENTERPRISES, LEGAL PERSONALITY AND CAPACITY
5. Requirements to be met before Establishment.
1) Before the establishment of an enterprise the supervising authority shall ascertain that:
a) if there is any payment in kind as part of the capital, the property is correctly valued by experts;
b) any cash paid as part of the capital is deposited in a bank in the name and to the account of the enterprise.
2) Notwithstanding sub-article 1 (a) of this Article, if the payment made in kind has audited accounts, the book value of such payment in kind may be taken into account.
3) The experts appointed under sub-article 1 (a) of this Article shall prepare a report containing a detailed description of the property, the value given to each item and the method of valuation. The supervising authority and the enterprise shall get one copy each of such report.
4) If there are any expenses incurred by the supervising authority for but prior to the establishment of the enterprise, such expenses shall form part of the capital where they are confirmed by auditors.
5) The sums deposited under sub-article 1 (b) of this Article may not be withdrawn from the bank until the establishment regulations are issued and published in the Negarit Gazeta.
6. Establishment Regulations.
Every enterprise shall be established by regulations to be issued pursuant to this Proclamation. The establishment regulations shall contain:
1. the name of the enterprise;
2. a statement that the enterprise shall be governed by this Proclamation;
3. the purposes for which the enterprise is established;
4. the authorized capital;
5. the amount of the initial capital paid up both in cash and in kind;
6. a statement that the enterprise shall not be liable beyond its total assets;
7. the head office of the enterprise;
8. a statement that may authorize the enterprise to open branches;
9. the name of the supervising authority;
10. the duration for which the enterprise is established.
7. Legal Personality and Liability.
1) An enterprise shall have legal personality and as such it shall have rights and duties.
2) An enterprise may not be held liable beyond its total assets.
The address of an enterprise shall be the place where its head office is situated.
1) An enterprise shall have such capacity as is necessary to accomplish its purpose and to perform related activities.
2) Without limiting the generality of sub-article 1 of this Article, an enterprise shall have the capacity to:
a) sue and be sued in its own name;
b) acquire, possess, own, dispose of, pledge and mortgage moveable and immovable property;
c) enter into contracts and borrow money;
d) issue and accept commercial and other instruments;
e) open and operate bank accounts;
f) invest money.
CHAPTER 3. ORGANIZATION AND MANAGEMENT OF AN ENTERPRISE
Each enterprise shall have:
1) a supervising authority;
2) a management board;
3) a general manager, deputy general managers as may be necessary; and
4) the necessary staff.
11. Powers and Duties of the Supervising Authority.
The supervising authority shall:
1) appoint and remove the members of the board subject to Article 12(2) of this Proclamation;
2) appoint the chairman of the board from among the members appointed by it;
3) fix the allowances to be paid to the members of the board;
4) appoint external auditors;
5) cause the allocation of the initial capital of the enterprise;
6) decide the increase or decrease of the capital of the enterprise in accordance with Article 21 or s22. Decrease of Capital. of this Proclamation;
7) cause the establishment of reserve funds or the allocation of funds by the Government so that the authorized capital of the enterprise shall be fully paid up within the period specified under Article 20(2) of this Proclamation;
8) determine, based on the proposals of the Board and following the relevant provisions of this Proclamation, the amount of state dividends to be paid to the Government from the net profits of each financial year;
9) approve financial reports of the enterprise and external audit reports;
10) approve the investment plan of the enterprise submitted to it by the Board;
11) propose, where necessary to the Council of MInisters the dissolution, amalgamation or division of an enterprise under its control, or the transfer of the enterprise or its management in any other manner;
12) approve, in consultation with the Board, the annual and long-term corporate targets of the enterprise; and follow up their fulfillment;
13) Without prejudice to the powers and duties given to the Board, perform other functions necessary for the protection of the ownership rights of the State.
12. Formation of the Board.
1) The number of members of the board shall be at least three but not more than twelve.
2) Not more than one-third of the members of the board shall be elected by the general assembly of the workers. The rest of the members of the board shall be appointed by the supervising authority.
3) The chairman of the board shall be appointed in accordance with Article 11(2) of this Proclamation.
4) The members of the board shall be appointed or elected on the basis of their profession, experience and competence.
5) Any member of a board may also be appointed to act as a board member of any other non-competing enterprise.
6) The term of office of the members of the board shall be at least 3 but not more than 5 years. When necessary, a member of the board may be reappointed or reelected at the expiry of his term of office.
7) In order to maintain the continuity of the activities of the board, the term of office of its members shall not expire at the same time.
8) Where any member resigns from membership, the board shall bring the matter to the attention of the supervising authority so that another person is assigned in the same manner as the member who has left the board was assigned.
9) The supervising authority may, at any time, remove a board member where there are sufficient grounds that make him unfit to be a member. Where this provision is applied to a member elected by workers, the general assembly of the workers shall be notified of the removal and may elect another member in replacement.
13. Procedure of the meeting of the board.
1) The board shall meet at least once a month.
2) The chairman shall call a meeting of the board, at any time, in cases of urgency or where at least two members of the board so request.
3) The agenda of a board meeting shall, in advance, be communicated to the board members.
4) There shall be a quorum where a majority of the members are present.
5) The board shall take decision by majority vote. In case of a tie, the chairman shall have a casting vote.
6) The board shall select and assign a secretary from among the employees of the enterprise.
7) The General Manager of the enterprise may attend meetings of the board without having the right to vote.
8) The board shall keep minutes for every meeting, which shall be signed by the members present.
9) The board shall draw its own rules of procedure.
14. Powers and Duties of the Board.
The board shall:
1) decide on policy issues other than those to be submitted to the supervising Authority pursuant to Article 11 of this Proclamation;
2) appoint and dismiss the general manager of the enterprise and fix his salary and allowance;
3) approve the employment, assignment and dismissal of those officers of the enterprise accountable to the general manager, including their salaries and allowances;
4) approve the internal regulations of the enterprise as well as its work programme and budget;
5) approve long-term loans and credits of the enterprise;
6) approve the sale of fixed assets that may not affect the existence of the enterprise;
7) ensure that proper books of accounts are kept for the enterprise;
8) submit books of account to the auditors of the enterprise, and periodic reports on the state of activities of the enterprise and financial reports to the supervising authority;
9) propose to the supervising authority the increase or decrease of the capital of the enterprise.
15. Liability of Board Members.
1) The members of the board shall carry out their duties with due care.
2) They shall be jointly and severally liable to the enterprise for damage caused by their failure to properly carry out their duties.
3) Notwithstanding sub-article 2 of this Article, a board member shall not be liable where he has dissented from the decision of the board which caused damage.
16. Powers and Duties of the General Manager.
1. The general manager shall:
a) organize, direct, administer and control the enterprise;
b) represent the enterprise in all dealings with third parties and in legal proceedings brought by or against it;
c) subject to the approval of the board, employ, assign and dismiss the officers of the enterprise accountable to him and define their functions;
d) employ, assign and dismiss other employees of the enterprise in accordance with the internal regulations of the enterprise and the appropriate law, and determine their salaries and allowances;
e) keep proper books of accounts of the enterprise, and open and operate bank accounts to the enterprise;
f) enter into short-term loan contracts for the purpose of providing the working capital of the enterprise, borrow money on a long-term basis with the approval of the board, and for those purposes pledge or mortgage the movable or immovable property of the enterprise;
g) prepare and submit to the board the internal regulations as well as the work programme and budget of the enterprise, and implement same upon approval;
h) sell fixed assets that may not affect the existence of the enterprise with the approval of the board;
i) implement and cause the implementation of the decisions of the board;
j) submit report to the board in such manner as it shall prescribe;
k) delegate his powers to the officers and other employees of the enterprise to the extent deemed necessary by him;
l) establish, and preside over the meetings of, a management committee that shall advise on the operations of the enterprise and that may discuss on the progress, plans and decisions of the enterprise;
m) perform other duties assigned to him by the board.
2. The General Manager shall be accountable to the board.
17. Responsibility and Liability of the General Manager.
The general manager shall be liable in accordance with the law, for damage he causes on the enterprise through negligence or intentionally.
Any enterprise shall carry out its activities, acquire rights and incur liabilities by its general manager and other agents authorized in accordance with this Proclamation.
CHAPTER 4. CAPITAL OF ENTERPRISES
19. Capital needed to Establish an Enterprise.
1) Any enterprise shall have capital.
2) The supervising authority shall cause the initial capital needed to establish an enterprise to be allocated by the Government. The capital may be paid in cash or in kind. Where it is paid in kind the supervising authority shall ensure that the property is correctly valued by experts in accordance with Article 5 of this Proclamation or in conformity with the book value thereof.
20. Paid up and Authorized Capital.
1) The amount of the paid up capital of an enterprise at the time of its establishment shall not be less than 25% of its authorized capital.
2) The authorized capital of an enterprise shall be fully paid up within 5 years from the date of its establishment.
3) Where the authorized capital is not fully paid up as provided under sub-article 2 of this Article, the supervising authority shall, without prejudice to the rights of third parties, adjust the capital to the level of the paid up capital.
21. Increase of Authorized Capital.
The supervising authority may cause the funds needed to increase the capital of an enterprise to be allocated by the Government or to be paid out of the net profits of the enterprise.
22. Decrease of Capital.
The capital of an enterprise may without prejudice to the rights of third parties, be decreased where:
1) the auditors have proposed that the capital should be decreased;
2) it was decided to decrease the capital following a proposal by the board to this effect;
3) the authorized capital of the enterprise has not been fully paid as provided for under sub-article 2 of Article 20.
CHAPTER 5. NAME OF AN ENTERPRISE AND TRADEMARK
23. Name of an Enterprise.
1) The name of an enterprise is the name under which the enterprise carries on its activities and it shall clearly designate such activities.
2) The name of an enterprise shall not offend public policy and morals and it shall not prejudice the rights of third parties.
3) An enterprise shall display its name outside its premises.
24. Restrictions in the use of Names.
1) The supervising authority shall ensure that the selection of the name of an enterprise is in accordance with the provisions of Article 23(2) of this Proclamation.
2) The court may order an enterprise to pay damages resulting from its act of violation of the provisions of Article 23(2) of this Proclamation and/or prohibit such enterprise from using the name giving rise to the dispute.
A trademark is the name, designation, emblem or any other distinctive sign used by an enterprise to distinguish its goods or services.
26. Restrictions in the Use of Trademarks.
1) An enterprise may choose any trademark.
2) No trademark may offend public policy and morals and it shall not prejudice the rights of third parties.
3) Before a trademark is used, it shall be registered by the appropriate government office and published in a newspaper of general circulation.
4) The court may order an enterprise to pay damages resulting from its act of violation of the provisions of sub-article 2 of this Article and/or prohibit such enterprise from using the trademark giving rise to the dispute.
CHAPTER 6. ACCOUNTS AND AUDITING OF ACCOUNTS OF ENTERPRISES
Section 1. Accounts
27. Accounting Principles.
Each enterprise shall keep books of accounts following generally accepted accounting principles. The supervising authority may issue directives to this effect.
28. Financial Year, Closing of Accounts and Annual Reports.
1) The financial year of an enterprise shall be determined by the supervising authority.
2) Any enterprise shall close its accounts at least once a year. The annual closing of accounts shall be completed within three months following the end of the financial year.
3) The enterprise shall prepare a report on the state of its activities and affairs during the last financial year, including a statement of achievements and major plans and programmes to be implemented in the near future.
4) Failure to close, in due time, the accounts of an enterprise in accordance with sub-article 2 of this Article may entail liability.
29. Reserve Funds and their Utilization.
1) Any enterprise shall establish and maintain a legal reserve fund.
2) Without prejudice to the provisions of other laws providing otherwise, any enterprise shall annually transfer 5% of its net profits to the legal reserve fund until such reserve fund equals 20% of the capital of the enterprise.
3) The legal reserve fund may be utilized for covering:
a) losses; and
b) unforeseeable expenses and liabilities.
4) The board of any enterprise may, with the approval of the supervising authority, cause other reserve funds to be established and determine their utilization.
30. Payment of Taxes and Duties.
1) The relevant laws concerning taxes and duties shall be applicable to enterprises.
2) Nothing in this Proclamation shall affect the right of an enterprise to be exempt from taxes and duties and any other right under any other law.
31. Payment of State Dividend.
Subject to Article 11(8) of this Proclamation, any enterprise shall pay to the Government state dividend within seven months following the end of the financial year.
Section 2. Auditing of Accounts
32. Appointment of Auditors.
1) Without prejudice to the powers and duties of the Auditor General under other laws, the accounts of each enterprise shall be audited by external auditors appointed by the supervising authority.
2) The supervising authority shall ascertain that external auditors appointed by it satisfy the criteria set by the Auditor General and that they are free from being under any form of influence.
3) The supervising authority shall determine the term of the external auditors.
33. Obligation to Cooperate.
Any person who has received, paid or expended, or is in charge of the accounts of, the money or property of the enterprise being audited shall, when requested, have the obligation to produce to the auditors the accounts to be audited and to furnish the necessary information.
34. Powers, Duties and Liability of Auditors.
Articles 373, 374, 375, 376, 378 and 380 of the Commercial Code shall apply mutatis mutandis with respect to the powers, duties and liability of auditors.
CHAPTER 7. AMALGAMATION AND DIVISION
1) Two or more enterprises may be amalgamated by the decision of the Council of MInisters, either by the taking over of one enterprise by the other or by the formation of a new enterprise.
2) An enterprise may be divided by the decision of the Council of Ministers, to form two or more new enterprises.
3) The decision to amalgamate or divide shall be effected in accordance with regulations issued under this Proclamation by the Council of Ministers.
36. Common Provisions.
1) The consent of the creditor and the guarantor shall be sought before the amalgamation or division of an enterprise which has an outstanding debt.
2) In the event that an enterprise which is being considered for amalgamation or division has obligations towards creditors, no decision shall be taken to amalgamate or divide if the enterprise(s) resulting from the amalgamation or division is unable to meet the obligations towards the creditors.
3) The accounts of an enterprise to be amalgamated or divided shall be closed and audited from the beginning of the last financial year up to the date of the amalgamation or division.
37. Transfer of Rights and Obligations.
1) The rights and obligations of an enterprise that ceases to exist as a result of amalgamation shall be transferred to the enterprise taking over or to the new enterprise resulting from the amalgamation.
2) The rights and obligations of an enterprise being divided shall be transferred to the new enterprises resulting from the division on the basis of the distribution of rights and obligations under Article 38 of this Proclamation.
38. Distribution of Rights and Obligations of an Enterprise Being Divided.
1. a) The distribution of the rights and obligations of an enterprise being divided to the enterprises resulting from the division shall be determined by the supervising authority.
b) The supervising authority shall prepare a complete report containing the decision to divide and a statement as to the distribution of rights and obligations to the enterprises resulting from the division.
c) A copy of the report shall be submitted to the Council of Ministers at the time of establishment of each enterprise resulting from the division and each such enterprise shall get a copy of the report.
d) The supervising authority shall cause a notice containing the major points of the report to be published in newspapers of general circulation.
e) For the purpose of matters relating to the division of an enterprise established under another law, “supervising authority” means the supervising authority designated under such other law.
2. Notwithstanding the provisions of sub-articles 1-4 of this Article, the enterprises resulting from division shall be jointly and severally liable towards the creditors of the enterprise divided.
CHAPTER 8. DISSOLUTION AND WINDING-UP
39. Grounds for Dissolution.
An enterprise may be dissolved for any one of the following reasons:
1) The expiry of the life of the enterprise as fixed in its establishment regulations;
2) Completion of the venture for which the enterprise was established;
3) Failure of the purpose or impossibility of performance;
4) Loss of 75% of the paid up capital of the enterprise;
5) A decision of the Council of Ministers affecting the existence of the enterprises;
6) Decision of the court declaring the enterprise bankrupt.
40. Bankruptcy and Winding-up.
1) The provisions of Book V of the Commercial Code shall apply mutatis mutandis to the winding-up of an enterprise declared bankrupt.
2) Notwithstanding the provisions of Article 1166 (1) and (2) of the Commercial Code, the court may decide that bankruptcy proceedings of an enterprise be conducted by way of summary procedure.
41. Appointment, Duties and Powers of Liquidators.
1) In cases referred to under Article 39 (1-5) of this Proclamation, the supervising authority, shall appoint one or more liquidators that could satisfy the criteria set by the Auditor General and who are not employees of the enterprise. The supervising authority may dismiss the liquidators and replace them with other liquidators for good cause.
2) The liquidators shall take possession of the books and accounts of the enterprise under liquidation.
3) Unless the supervising authority decides otherwise, the liquidators shall take possession of the property of the enterprise and shall assume the powers and duties of the board and the general manager under this Proclamation; provided, however, that the liquidators may not undertake new business unless required for the execution of contracts still running or where the interests of the winding-up so require.
4) The board shall prepare a report for the liquidators on the affairs of the enterprise covering the period from the end of the last financial year to the date of the opening of the winding-up.
5) The liquidators and the board shall jointly prepare and sign a statement of affairs summarizing the rights and obligations of the enterprise.
6) Unless the supervising authority decides otherwise, the board and the general manager shall assist the liquidators in carrying out their duties.
42. Calling on Creditors.
1) The liquidators shall inform creditors of the proposed dissolution of the enterprise and require them to file their claims with supporting documents.
2) Creditors appearing in the books of the enterprise or who are otherwise known shall be notified by registered letter. Other creditors shall be notified by notice published in three successive weekly issues of a newspaper of general circulation. Creditors shall be required to submit their claims within 90 days from the date of receipt of the letter or from the date of the last issue of the notice in the newspaper, as the case may be.
3) The liquidators shall then prepare and submit to the supervising authority a financial statement of the enterprise together with their recommendations and a list of creditors and priorities, if any, according to which such payments are to be made.
4) The supervising authority shall, on the basis of the financial statement prepared by the liquidators and after taking into consideration their recommendations:
a) authorize the payment of creditors who have filed their claims with the necessary proof;
b) where the cash balances of the enterprises are not sufficient to cover the debts due to the creditors, authorize the liquidators to sell assets of the enterprise by using methods approved by him without affecting the rights of third parties.
5) Where the total assets of the enterprise are not sufficient to pay off its debts and the authorized capital is not fully paid up, the liquidators shall ask the supervising authority for the full payment of the capital.
43. Protection of Creditors.
1) Where known creditors have failed to file their claims within the time limit specified in Article 42(2) of this Proclamation, the amounts due to them shall be deposited with a bank in the names of the creditors.
2) Sums shall be set aside to meet claims n respect of undertakings of the enterprise which are not completed or disputed claims where the creditors have not been guaranteed until the dispute is settled.
3) After the enterprise ceased to exist under Article 44(2), creditors not appearing in the books of the enterprises may claim from the surplus assets collected by the Government, provided their failure to claim within the time limit specified in Article 42(2) was due to force majeure. Creditors may claim against the liquidators, where they have not been paid owing to the liquidators’ negligence.
44. Final Balance Sheet and Publication of Notice of Dissolution.
1) After the creditors have been paid or sums have been set aside to meet potential claims pursuant to Article 43(1) and (2), the liquidators shall prepare a final balance sheet showing surplus assets, if any, and submit the same to the supervising authority with a copy to the Ministry of Finance and Auditor General. The Auditor General shall promptly forward his comments, if any, to the Ministry of finance and the supervising authority. The supervising authority shall notify the Council of Ministers of the finalization of the liquidation process as soon as he approves the final balance sheet, and obtains the concurrence of the Ministry of Finance.
2) The Council of Ministers shall then repeal the establishment regulations of the enterprise. The enterprise shall cease to exist as of the date of repeal of its establishment regulations.
3) The books of the dissolved enterprise shall be deposited with the supervising authority where they shall be kept for 10 years. Any interested person may inspect such books after payment of the prescribed fee.
45. Assets Due to the Government.
Any surplus assets of an enterprise dissolved and liquidated shall devolve to the Government.
CHAPTER 9. MISCELLANEOUS PROVISIONS
46. Enterprises Established under Other Laws.
1) Any enterprise established under other laws before the coming into force of this Proclamation may be:
a) pursuant to regulations issued under this Proclamation, re-established, divided to form new enterprises or amalgamated with another enterprise; or
b) deemed established under this Proclamation so that the Council of Ministers shall designate a supervising authority for it and it shall be governed by the provisions of this Proclamation.
2) Where enterprises are established as a result of division or amalgamation under sub-article 1 of this Article, the provision of Articles 36(3), 37. Transfer of Rights and Obligations. and 38. Distribution of Rights and Obligations of an Enterprise Being Divided. shall apply with respect to the closing and auditing of the accounts of the enterprise being divided or the enterprises being amalgamated as well as the transfer of the rights and obligations of such enterprise or enterprises.
47. Powers and Duties of the Council of Ministers.
The Council of Ministers shall have the following powers and duties:
1) pursuant to this Proclamation to:
a) establish an enterprise;
b) allocate capital and designate a supervising authority for an enterprise being established by it;
c) dissolve an enterprise;
d) determine the amalgamation of an enterprise with another or the division thereof;
2) without affecting the rights of third parties, to determine:
a) the establishment of any enterprise as a business organization under the Commercial Code;
b) the sale of any enterprise, or the transfer of the enterprise or its management in any other manner;
3) to decide on the sale of shares held by the Government in business organizations established under sub-article 2(a) of this Article;
4) to issue regulations for the proper implementation of this Proclamation.
48. Effective Date.
This Proclamation shall enter into force on the date of its publication in the Negarit Gazeta. (August 27, 1992)