Examination of Ethiopian share company laws on related party transaction in light of the oecd principles of corporate governance.

Abstract

The purpose of this paper was to examine the current Ethiopian Share Company Laws on RPT in light of the OECD principles of corporate governance so as to identify legal gaps and its possible consequences. Moreover, the paper also examined how the laws are implemented in practice and the possible gaps in implementing the laws in selected companies. In order to analyze the practice of Companies, the researcher gathered data by conducting semi-structured interview with key informants. Document analysis was also conducted by using Court cases and selected Company documents through purposive sampling. The data was qualitatively analyzed and continuously interpreted throughout the paper. Based on the available data and analysis of the Laws, the researcher found out that RPT is not sufficiently regulated in Ethiopia both in law and in practice. Correspondingly, this ineffective regulation of RPT is seriously affecting corporate economic interests, its Shareholders and its Creditors. Therefore, it is recommended that a new comprehensive Ethiopian share Company Law to be enacted by taking in to consideration the OECD principles of Corporate Governance and other developed nation rules and experiences on RPTs. In addition, it is also recommended that Ministry of Trade and Industry should arrange trainings and conduct sustainable follow up mechanisms of implementing the laws in Companies so as to mitigate practical problems on RPT.