The Role Of Courts In Ensuring Good Corporate Governance In Ethiopia The Law And The Practice

The establishment and incorporation of business organizations in every sector of the economy have numerous importances for countries’ sustainable social, technological, financial and economic development and progress.rnIn many jurisdictions, business organizations are classified as companies (corporations) and partnerships. In Ethiopia, the 1960 Comm.C recognizes six types of business organizations. Among which, two are companies, namely Share Companies and Private Limited Companies and the remaining four namely, Ordinary Partnership, Joint Venture, General Partnership and Limited Partnership are grouped in the category of partnershiprn.rnIn Ethiopia, Private Limited Companies are dramatically increasing in number in all corners of the country and these companies have considerable role in the country’s economy. However these companies are surrounded by many legal and practical problems. The inadequacy and sketchy nature of the provisions in the Comm. C and other relevant laws have triggered practical problems in the courts and have made the governance of Ethiopian companies’ especially private limited companies, problematic.rnThe companies, in order to achieve their business objectives, and render their great contribution in the country’s financial and economic development, should have good and effective Corporate Governance. The existence of good Corporate Governance framework in the country fosters market integrity and improves economic efficiency and development and also builds investor confidence.rnGood Corporate Governance is much more important for Developing and Emerging Market Economy Countries since these countries do not have a strong and long established financial institutions, strong, independent and efficient judiciary, and weak enforcement mechanisms in relation to Corporate Governance issues.rnCourts have indispensable roles in ensuring good corporate governance. For courts to play their crucial roles in ensuring good corporate governance practices in companies, there is a need to have effective legal and institutional frameworks, and courts should be independent, efficient and should establish special benches for company related cases. If courts fail to discharge their duties properly or involve in every activities of companies’ management outside the law, this entails bad corporate governance practices

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