14. one man PLC.ppt 1242 Ethiopian Commercial Code

Ethiopian one man plc

1. One man PLC

2. Nature One Person Company  is a private company incorporated by one person in contrast to the standard practice of having at least two members, five for Sh. Co. But, a member of a company is recognized as the company's shareholders. A new form of BO introduced in the Amended Com. Code thereby by enabling entrepreneurs carrying on business in the form sole proprietorship to enter the corporate world. Relaxed requirements compared to other forms of BOs, specially Sh. Co. Recognized in India, USA, China, Singapore, UK and Australia

3. Nature Only one shareholder Nominee for shareholder, nominee shall agree. The shareholder shall nominate a person who shall replace him in case of absence, death or incapacity. In some jurisdiction, only a natural person may become a nominee [ I ndia] This is a feature distinguishes it from all other types of companies. Manager Can be contrasted more with private companies.

4. Advantage A separate legal entity Easy funding , financial institutions more willing to lend to companies; limited liability: lacking in partnerships and sole proprietorships. More opportunities, : limited liability allows a member to take risks and look for opportunities; Minimum compliance ; Waives a number of compliance requirements. Quick decision making Enjoy increased trust and prestige , it is a company To promote business enterprises that are owned and managed by a single Entrepreneur

5. Formation: Requirements Capital: not less than 15,000 [Art. 535] unilateral declaration incorporating a one member private limited company [536.1] Nominee’s declaration of his acceptance of the nomination before an authority vested with power to authenticate documents . [536.2 (d), 537.1] Article 536. Content and Form of Unilateral Declaration

6. Formation A person can also form one man PLC through conversion of his enterprise from a sole proprietorship into a one member private limited company . [Art. 538] In such case, the trader shall remain jointly and severally liable with the company for all debts incurred prior to the conversion.

7. Other rules A member may not become a nominee for more than a single one person company at a time. [Art. 537.2] Does that mean a person cannot establish more than a single one man PLC? This raises another question that, is unilateral declaration to establish one man PLC to be made only by a person who ‘owns’ the company? The reading of Art. 536 [though does not clearly state by who should the declaration be made] assumes declaration by the member himself. Cum reading of Art. 536 1 and 2 (c). Which reads: the unilateral declaration shall indicate name of the nominee of the company who will act on behalf of the member or his heirs in the event of death or absence or judicial interdiction of the member. Nominee is referred as ዕጩ ንብረት ጠባቂ , not a member someone who would act on behalf of a member in his absence. It seems safe to conclude that the declaration to establish one man PLC shall be made by a member himself. Also read art. 534 [ አንድ ሰው በግሉ በሚሰጠው መግለጫ መሠረት የተቋቋመ የንግድ ማኅበር ነው ]

8. There is discrepancy between the Amharic and English version of Art. 537.2. Whereas the English version reads: 2/ A member may not become a nominee for more than a single one person company at a time. The Amharic version states: (2) አንድ ሰው በአንድ ጊዜ ለተለያዩ ባለ አንድ አባል ኃላፊነታቸው የተወሰነ የግል ማኅበራት የንብረት ጠባቂ ሆኖ መመረጥ አይችልም፡፡ It can be said that the provision prevents a person to serve as a nominee for more than a single one man.

9. In addition, there is no justification to prevent a person from establishing more than one one man PLC. The company’s capital is fully paid 534.3, 536. 2 (9) Member’s liability is limited 534.3 The Company has its own legal personality separate and distinct from that of the member 534.2 The approach is different. [in India a person neither serve as a nominee in nor incorporate more than a single one man company]

10. Other rules a one member private limited company may not establish another one person PLC. [Art. 539] Thus, BOs other than one man PLC can establish a one man PLC.

11. General Manager Though one man PLC is not required to have other governance organs, appointing a manager is mandatory requirement, [541, 536.2 (i)] A manager may be the member of the company himself or another person. Managers of 1-man PLC have the powers and duties of the manager of a private limited company .

12. Meeting of the Company Does one man PLC has a meeting? A single member meeting! Rather, the powers of the general meeting of shareholders of a PLC are exercised by a single member. [542.1] Decisions taken by the member in such capacity shall be reduced into minutes within three weeks from the meeting and kept as part of the records of the company. If the decision introduces changes into matters included in the unilateral declaration incorporating the company, they shall be entered into the commercial register no later than one month

13. Liability of the Member In principle, the member shall not be personally liable for debts due by the company in so far as he has fully made his contribution. However, art. 543 holds the member of a one person private limited company or any other person who has control over the company directly or indirectly hall be jointly and severally liable with the company where he: intentionally commits an unlawful act that jeopardizes the interests of the company or creditors; intermingles the assets of the company with his property; fails to keep separate his own personality and that of the company; deliberately releases misleading information regarding the financial status of the company; make use of the assets of the company for himself or to benefit third parties; receives dividend in excess of the maximum that can be paid under the law or commits other similar acts [specially the last sub article make the provision very broad]

14. Liability of the Member Though the grounds to hold the individuals are somehow valid, including ‘any other person who has control over the company directly or indirectly ‘ in the list of persons who would be jointly and severally liable with the company may complicate the implementation of the provision.

15. Dissolution without Liquidation If all its debts and obligations are settled, dissolution shall result in the universal assignment of all the assets of the company to the member without liquidation of assets taking place [ Article 544] The member shall be personally liable for all the debts and obligations of the company if creditors appear after the dissolution has taken effect. Period of limitation for claims after dissolution. [Art. 544, five years, ten years] However, the member may choose to follow the normal route of liquidation upon the dissolution of the company. [Art. 544.4]

16. Applicability of Other Rules Without prejudice to the special rules of this Code on one person private limited company the rules governing private limited company shall apply as appropriate to this type of company.