|Commercial Registration and Business Licensing Proclamation No. 980/2016||DOWNLOAD|
|The 1960 Commercial Code of Ethiopia||DOWNLOAD|
|Ethiopian Standard Industrial Classification (ESIC)||DOWNLOAD|
|Ethiopian Standard Industrial Classification (ESIC), Revised, 2019||DOWNLOAD|
By virtue of the Commercial Registration and Business Licensing Proclamation, a person is required to obtain a business license in order to conduct a business in Ethiopia. And to obtain a business license, a person should first register within the central register and trade name register.
The procedures of commercial registration, trade registration and business licensing are discussed below.
(The reader is advised to first read the article Regulations of Commercial Registration and Business Licensing in Ethiopia)
1. Commercial Registration(Article 5-13 of the Proclamation)
A person cannot obtain any kind of business license without being registered in commercial register. A person should be registered in the commercial register at the place where the head office of his business is situated. Note that a person can be registered in the commercial register only once even though he conducts different kinds of business activities in different regions.
Any person who opens branch offices at various places is required to register these branch offices at his original registration before commencing business and immediately notify the registering office situated at the places where the branch offices are to be opened.
Requirements for Commercial Registration(Article 5-6 of the Proclamation)
For Sole proprietors:
- Taxpayer’s Identification Number (see Article 9 of the Proclamation);
- No objection is lodged after publication of the commercial register
- An application for commercial registration must be submitted before the commencement date of commercial activity by filling a prescribed form and attaching documents specified under the regulations and directives issued for the implementation of the Proclamation; and
- Requirements stipulated under article 94-108 of the 1960’s Commercial Code of Ethiopia (herein after the Code)
For Business Organizations:
- Founders or members of a business organization should, before signing the memorandum and article of association, apply to the registering office and get verification that another business person has not occupied the name of the business organization.
- After getting the verification, the founders or members of a business organization must sign their memorandum and articles of association at the Document Authentication and Registration Agency, according to standardized samples of memorandum and articles of association.
- TIN (Tax Identification Number)
- An application for commercial registration is, then, submitted before the commencement date of commercial activity by filling a prescribed form and attaching documents specified under the regulations and directives issued for the implementation of the Proclamation, as well as article 219-226 of the Code.
Acceptance or Rejection of Application(Article 7 of the Proclamation)
Where an application submitted for commercial registration is found acceptable by the registering office, the registering office registers the application, upon payment of service fee, and issue a certificate of registration to the applicant.
If the application for registration is rejected, the registering office should immediately notify the applicant in writing by stating the reason for rejection.
An objection filed in accordance with the commercial law shall bar a sole proprietor or a business organization from registration in the commercial register.
Any commercial registration is valid as of the date of the applicant’s registration in the commercial register in accordance with the provisions of this Proclamation. A business organization attains legal personality upon registration. The registration of the business organization should be publicized on a newspaper having nationwide circulation at the time of their establishment.
Note that the commercial register is open to the public at large; third parties are also entitled to look into the register.
Alterations or Amendments to a Commercial Registration
(Article 10 of the Proclamation)
Alternation or amendment on commercial organization registration is allowed, if it registered with the registering office within 60 days after its authentication by a notary. Where the application for registration of alternation or amendment on commercial registration is accepted, the registering office issues a confirmation of acceptance of the alteration or amendment to the commercial registration and notify the applicant and concerned entities in writing details of the alteration or amendment entered into the commercial register. Until written confirmation is issued, the application submitted for alteration or amendment is not recognized.
The registering office may cancel any alteration or amendment already entered in the commercial register if it believes that it was registered inappropriate and shall notify the applicant in writing the detail grounds of the cancellation.
Note that the above requirements on commercial registration are also applicable to apply for amendments to a commercial registration.
Cancellation of Commercial Registration(Article 11 of the Proclamation)
Without prejudice to the provisions of the Commercial Code, the registering office may cancel a commercial registration, without any precondition, where:
- the business person abandons his business activity for any reason;
- an administrative measure is taken or court decision is passed on the business person not to continue with his business;
- the business person was registered by submitting false information or document;
- the business person is found to have violated this Proclamation or regulations and directives issued for the implementation of this Proclamation;
- the business person fails to obtain a business license within one year after being entered in the commercial register.
Cancellation of registration of business organization comes into force one month after publication of notice of cancellation on a newspaper having wider circulation at the expense of the applicant. In the case of sole proprietor, however, the cancellation becomes effective as of the date of its entry into the register and without the need to publicize.
If a business license of a business person is cancelled, his commercial registration shall also be cancelled, unless other additional business licenses are issued based on the same commercial registration.
Issuance of Substitute Certificate of Commercial Registration(Article 12 of the Proclamation)
Any business person whose certificate of commercial registration is lost or damaged may obtain a substitute certificate of registration pursuant to the criteria set forth in the regulations issued for the implementation of this Proclamation.
Issuance of Copies of Entries
(Article 13 of the Proclamation)
Any person or business person requesting a copy of entry made in commercial register, a copy of an extract of entry, a certificate of no entry or a certificate of cancellation or registration shall submit a written application to the registering office. The registering office should, upon payment of the prescribed service fee, immediately provide the information if it is subject to disclosure.
2. Registration of Trade Name(Article 14, 15, 19 and 17 of the Proclamation)
Trade Name is a name that a given business person/company uses for his business or known by the society as such. According to Article 14 of the Proclamation:
- Trade name of a sole proprietor shall include the individual’s first name, his father’s and grand-father’s names; where the a sole proprietor’s name has already been registered, his great grandfather’s name shall be added; if the great-grand father’s name already registered, the individual’s mother’s name shall be added; if the mother’s name is also found to have been occupied by other sole proprietor, a different identification shall be used.
- Trade name of a general partnership shall be given pursuant to the Commercial Code by specifying the commercial sector of engagement.
- Trade name of a limited partnership shall be given pursuant to the Commercial Code by specifying the commercial sector of engagement.
- Trade name of a share company shall be decided by the shareholders pursuant to the Commercial Code by specifying the commercial sector of engagement.
- The trade name of a private limited company shall be decided by the shareholders pursuant to the Commercial Code by specifying the commercial sector of engagement.
A business person, then, apply for a registration of his/her trade name at the place where the commercial registration was conducted. Further, a business person must register his/her trade name at the place where the business license was obtained. A person should also apply for alterations/changes to a trade name at these places.
Where the business person is a foreigner, he/she is required to submit an application for trade name registration, accompanied with notarized certificates of commercial and trade registrations or other legally acceptable evidence issued from the country where the business organization is registered.
Once a trade name has been registered it is a prima facie evidence to use that trade name. The mere prior registration of name of business organization or a trade name does not prevent the registration of the same trade name for a business with an entirely different nature.
Causes Preventing Registration of Trade Name(Article 16 of the Proclamation)
The registering office may refuse registration of trade name on the following grounds:
- where the trade name requested for registration is identical to a trade name or name of business organization previously registered or has misleading similarity to such name;
- where the trade name requested for registration is identical or misleadingly similar to the name of government institution, religious institution, a political party, a nation, nationality, peoples, tribes and clans, any other business organization or association, organizations of nations or states, charities and societies;
- where the trade name includes the name of a celebrity and no written consent of such celebrity is submitted along;
- where the trade name requested for registration does not include the sector of business;
- where the trade name requested for registration is renowned in Ethiopia or around the world even though it is not registered in Ethiopia and no written permission issued to use the name;
- where the trade name is contrary to commendable conduct or ethical values;
Cancellation of a Trade Name(Article 18 of the Proclamation)
The registering office may cancel a trade name registration on the following grounds:
- where the business person that has caused the registration applies for its cancelation (however such person can reclaim the trade registration, whenever he/she wants) ;
- where it is proven that the trade name was fraudulently or erroneously registered;
- where the commercial registration and business license of the business person is cancelled in accordance this Proclamation;
- where a court of law renders decision by nullifying the registration of a trade name ;
- where alteration or amendment are introduced into the trade name in accordance with the Proclamation.
- where a business organization is dissolved and wound-up.
Note that a business person whose trade registration has been cancelled on the grounds stated in (b) and (c) may apply for trade registration after one year unless re-registration is prohibited through an administration decision or court order.
3. Business Licensing Procedures
As per article 22 of the Proclamation, no person can engage in a business activity without having a valid business license. A business person having a valid business license pursuance to the Proclamation is not required to obtain additional business license for branches he open for the same type of business activity.
A licensed importer is also not required to obtain a separate business license to wholesale products he import at his address of business registered at the time of commercial registration. Differently, no licensed importer shall retail goods he import; provided, however, based on type of business and national significance, types of products in respect of which retail sales is permitted under special condition as determined in a regulations to be issued by the Council of Minister (no regulation has been enacted).
Application for Business License(Article 23 of the Proclamation)
Any person desiring to engage in a commercial activity can submit to the appropriate authority an application for business license by completing application form prepared for this purpose accompanied with important documents prescribed in the regulations issued by the Council of Ministers.
Issuance of Business license(Article 24 of the Proclamation)
A person/business organization is required to fulfill the following conditions to obtain a business license;
- Commercial registration and Trade registration;
- The business activity shouldn’t be prohibited by any law;
- Submit an application to the relevant authority in accordance to the law applicable;.
- Payment of appropriate service fee; and
- Other requirements provided by the applicable law.
If the above requirements are fulfilled and the relevant authority ascertains thereof, then the relevant authority will issue a business license. Where the relevant authority ascertains that the application for business license is not submitted by fulfilling the requirements provided in the law, it will reject the application and notify the applicant in writing the reasons for rejecting the application.
Renewal of Business License(Article 27 of the Proclamation)
A business license is renewed in six months period within the fiscal year between from Hamle 01 until Tahsas 30 or in his registered budget year. A business person desirous to renew his business license should fill the form prepared for the same purpose and submit documents, as required.
The holder of a business license who has failed to have it renewed within the time specified above shall have it renewed within the time from Tir 01 to Sene 30 by paying, in addition to renewal fee, Birr 2,500 (two thousand five hundred) for the month of Tir and Birr 1,500 (one thousand five hundred) for each subsequent month of delay. A business license not renewed within the period of renewal with penalty entails cancellation of the license unless the business person was prevented by forcemajure. Yet, the business person may obtain the same business license without penalty one year after cancellation of the business license.
Period of Validity of a Business License(Article 28 of the Proclamation)
A business license remains valid provided that it is renewed and is not cancelled pursuant to the provisions of the Proclamation. The business license becomes be invalid, if not renewed within six months after the expiry of the budget year in which it has been issued or renewed upon payment of the appropriate fee,.
Suspension of Business License(Article 29 of the Proclamation)
A relevant authority may suspend business license on the following grounds:
- Where the business person fails to meet occupational, health and sanitation, environmental protection, accident prevention standards and qualities of goods and services;
- Where the business person fails to discharge obligations of a business person clearly specified in this proclamation;
- Where the business person fails to provide information accurately and timely upon the request of the relevant authority;
- Where it is verified that the license was issued or renewed based on falsified document;
- Where the license is used by the holder for an unauthorized purpose;
- Where the business person is unavailable at the registered address; and
- Where the business person is found to have violated the Commercial Code, the Proclamation, the regulations and directives, as well as other laws.
In the case of suspension of business license on the grounds of violation of the provisions of the Proclamation, regulations or directives; or when a relevant sector office verifies violation of provisions of the Commercial Code or a court of law passes an order of suspension, the business facility is immediately sealed. Further, the relevant authority must notify the holder of the business license in writing the cause of the suspension and measures that need to take within reasonable period of time to rectify the shortcomings that led to the suspension.
Where the defects that caused the suspension of the business license are rectified within the prescribed time, the suspension will be lifted and the business license becomes valid.
The suspension of certificates of competence by relevant competence assuring institutions also entails suspension of the corresponding business license without any precondition.
Cancellation of Business License(Article 30 of the Proclamation)
A relevant authority may cancel business license on the following grounds:
- Where the business person terminates his business activity by his own choice;
- Where it is verified that the business license was issued or renewed based on falsified document;
- Where the business person has utilized the business license for an unauthorized purpose;
- Where the business person fails to rectify defects that resulted in the suspension of his business license within the time given;
- Where the business person is declared bankrupt;
- Where the business person fails to have his license renewed under the provisions of this Proclamation;
- Where the commercial registration of the business person is cancelled under the Proclamation.
Obtainment of a Substitute Business License(Article 31 of the Proclamation)
A business person who has his business license lost or damaged may obtain a substitute business license when he meets with the requirements provided by the Ministry. A business person whose license is damaged must return such damaged when he applies for a substitute.
The relevant authority to which the application is made shall require presentation of evidence from appropriate body or police and upon payment of appropriate fee issue the substitute business license.
Issuance of Business License Upon Transfer of a Business(Article 32 of the Proclamation)
A business may be transferred to another person through sale, donation, and inheritance or in a similar manner. There are some requirements that must be fulfilled for the issuance of business license upon transfer of a business;
- The transfer of business must be published on a newspaper having nationwide circulation and no objection is lodged against after one month of publication.
- The business shouldn’t be subjected to any suspension order.
- Tax clearance evidence from the tax collecting authority for the period the license had been in use is presented before the transfer of a business.
- The former business license should be returned.
- The relevant authority verifies that the above requirements are fulfilled.
The relevant authority, upon the satisfaction of the above conditions, will issue a business license to the business person to whom the business is transferred. Where the relevant authority rejects the application, it must notify the applicant in writing and the reasons thereof.