The new Commercial Code (Proclamation No. 1243/2020) provides detailed requirements that govern Mergers and Acquisitions (M&A). It includes detailed procedures, rules, and protections for both local and foreign businesses involved in corporate restructuring.

The law explicitly defines both mergers and acquisitions and differentiates between different types of M&As which are Mergers by Absorption, Mergers by Formation of a New Entity and Acquisitions of Shares or Assets.  

The board of directors of the acquirer and target or all the companies involved must approve the M&A to be in alignment with a proper corporate governance standard. A general meeting of shareholders must also pass a specific resolution to approve the change in structure and ownership. The companies are required by law to disclose essential information like financial statements and impacts on the shareholders to their shareholders.

The main governing authorities of M&A procedures are the Ministry of Trade, Regional Integration and the Trade Competition and Consumer Protection Authority and Ethiopian Revenues Ministry. The Ministry of Trade must be notified of the proposed merger or acquisition and the competition authority needs to approve it. The competition authority has the right to stop M&A if there is a risk of harm in the fair market competition. And the tax collector will do an extensive audit of the involved local companies before issuing a tax clearance that sets the way forward with the process. 

Employees of the companies are also not overlooked as the Labor Proclamation (No. 1156/2019) ensures that workers’ rights in mergers or acquisitions, are protected. It is clearly provided that amalgamation, division or transfer of ownership, a company shall not have the effect of modifying a contract of employment.