Corporate governance is a set of rules, practices, and processes by which a company is directed and controlled. It helps ensure accountability, fairness, and transparency in a company’s relationship with its shareholders, management, customers, and the broader community.

Corporate governance in Ethiopia is primarily regulated by the Commercial Code of Ethiopia (amended in 2020). The law provides the framework for the incorporation, operation, and management of business organizations.  The role and structure of boards of directors, Shareholders’ rights and obligations and Transparency and accountability requirements are the main rules of corporate governance.

Share companies are required to form a board of directors. The composition of the selected directors is allowed to include independent directors. The board is responsible for the overall management and planned direction of the company. Members of the board are expected to always act with care, diligence and loyalty in the best interest of the company, as they can be personally liable for negligence and breaches of their duties.

Shareholders have the right to participate in general meetings, vote on significant corporate matters, and receive dividends. Transparency and disclosure requirements ensure shareholders have access to information about the company’s financial and operational status.

Minority shareholders’ rights are specifically addressed through rules of the right to sell shares, fair exit price, mandatory tender offer to all shareholders, mechanisms for dispute resolution and inclusion of independent members of the board of directors.

Companies are required to maintain financial records and prepare annual reports. Share companies must disclose material information to their shareholders to enhance transparency and accountability. External audits are also mandatory to ensure compliance and prevent fraud.