Ethiopia is drafting a new bill that will allow Share Companies to issue bonds to the public for financing projects. The issue of bonds will depend on the company receiving security guarantees from the National Bank.
The new bill informally known as the ‘Pro-shareholders Bill’ will change the current system whereby only the National Bank of Ethiopia, the Development Bank of Ethiopia and municipality administrations where the only entities issuing bonds.
The new draft bill will also aim to regulate the function and accountability structure of Share companies.According to the bill share companies can issue bonds when their subscribed capital is fully paid up and have financial statements approved by external auditors for two years in a row. Companies that fail to meet either qualification will not be able to issue bonds.
Share companies will be allowed to issue bonds of equal value as their paid up capitals, while companies with immovable assets serving as collateral against loans will not be able to issue bonds more than two-thirds of the value of the immovable assets put up as collateral.
Share companies will be required to acquire government guarantees to issue bonds beyond the value of their paid up capital, with the security documents put in banks alongside the yearly payment of the bonds to be put in blocked accounts according to the draft bill.
Bonds cannot be used as security instruments to secure loans and companies cannot re-issue bonds to the public establishes the bill.
The bill will require share companies to have a minimum 50,000 birr establishment capital and a minimum of shareholders able to pay 10 birr par value of a share. The bill also institutes various fines and deterrents for misleading promotion and criminal liability.
Source: Addis Fortune