DEBENTURES AND BONDS UNDER ETHIOPIAN LAW

Abstract

The need to develop domestic security markets has increasingly attracted the attention of national and international policymakers following the recent international financial crises. The issue of debt management is intrinsically linked to security market development. The Ethiopian law recognizes debentures and bonds as debt instruments. Even though the Commercial Code of Ethiopia provides fairly advanced rules governing debentures, private companies have never issued debentures in Ethiopia. Bank- based financing of investments, which leads to a greater degree of control over the private sector by a relatively small group of agents, is still prevalent. So, there is a need for developing a security market as an alternative. There is no a comprehensive and vibrant law that regulates government bonds other than the proclamations (Government Bonds Proclamation No 172/1961, Negarit Gazeta, Year 20, No. 11 and Government Bonds Proclamation No 262/1969, Negarit Gazeta, Year 28, No. 12,) enacted during the Imperial Government. So far there is no law that repeals the 1969 Government Bonds proclamation. Some of the provisions of the proclamation do not, however, correspond with the present practical reality. As per the guidelines of the Grand Renaissance Dam Bond, the present FDRE government sets no maximum ceiling price for the bonds. This article is, therefore, designed to shed light on the legal aspects of debentures and bonds in the context of stock market development as envisaged under the Ethiopian law. It’s methodology is qualitative and it is conducted through: Analysis and assessment of the existing Ethiopian policies, laws and practices; Review of the studies available in Ethiopia: Literature study and consultation of the laws and regulatory practices of countries and Comparison of the Ethiopian policies, laws and practices with the policies, laws, practices and recommendations in the international experience.