A Critical Analysis Of Shareholders’ And Third Parties’ Personal Claims Against Share Company Directors Under Ethiopian Laws

Abstract

Share companies are connected to the welfare of the economy and soundness of financial sectors of countries. Thus, having a well-functioning board of directors is desired by viable and responsible companies in order to align interests of management with other stakeholders of the company. Ethiopian share company law has specific provisions for shareholders’ and third parties’ personal actions against directors of a share company in case they sustain damages as a result of directors breaching their duties. This thesis; by adopting a doctrinal approach; seeks to critically analyze shareholders’ and third parties’ personal claims against share company directors under Ethiopian laws. Despite random references to other pertinent laws; the major focus of the work is a new Commercial Code. Primary and secondary data sources are extensively used. The findings of the thesis reveal that most aspects of the Old Commercial Code have been preserved by the new Code. Personal actions of creditors against share company directors for strict liability is not well-founded due to its contravention with ‘business judgment rule’_ that directors’ performing their activities diligently and with necessary care, but insufficiency of company’s assets to meet its financial liabilities may arise from market failure and other extraneous factors. Besides, the rules for personal actions of shareholders and third parties need to be detailed under Ethiopian share company law.