MODEL ARTICLES OF ASSOCIATION OF A SHARE COMPANY

Transcription

1 MODEL ARTICLES OF ASSOCIATION OF A SHARE COMPANY This Articles of Association, which form part of the Memorandum of Association, shall govern the operations of the Company. ARTICLE 1 RIGHTS AND OBLIGATIONS OF SHAREHOLDERS Each Shareholder has the right to: a) participate in all meetings of the shareholders and to vote in proportion to the number of shares held by him; b) participate in the annual net profits and to share in net proceeds on a winding-up in proportion to his shares; c) compete to the position of Director in the Company; d) have a copy of the decisions of Shareholders Meetings; e) have priority right in case there is an increase of capital or when there is transfer of shares; f) inspect and to copy the inventory, the balance sheet and the auditors' report; g) enjoy all other rights granted by the appropriate law, the Memorandum of Association and this Articles of Association. ARTICLE 2 TRANSFER OF SHARES 1. A transfer of share outside the company shall be approved by a vote of the shareholders. 2. The Company or the remaining shareholders shall have right of preemption to buy the share of the member who is selling his share in the Company. EIA 1

2 ARTICLE 3 JOINT OWNERSHIP OF SHARES AND PLEDGE 1. Where several persons hold shares jointly, they shall appoint a representative to exercise the Shareholder s rights. They shall register the name and address of the representative in the shares register of the Company. The Company shall send all notices and declarations to this representative. 2. Where a share is pledged or subject to a usufruct, the right to vote at meetings shall, unless otherwise agreed, be exercised by the plegdee or the usufructuary. ARTICLE 4 REGISTER OF SHAREHOLDERS 1. The Company shall keep at its head office a register of Shareholders. The General Manager shall make sure that the register contains the details required by the relevant law, the Memorandum of Association and the Articles of Association. 2. The General Manager shall, within 30 days of finding out that there is an error, make corrections on the information stated in the register. 3. The register may be inspected by any shareholder without charge; it may also be inspected by any other person upon payment of the prescribed fee. The Board of Directors shall decide the fee to be paid for inspection and/or taking a copy of documents. ARTICLE 5 SHAREHOLDERS WITH UNPAID CAPITAL 1. Shareholders who have not paid on time the subscribed capital of the Company shall pay 9% interest on the unpaid amount. 2. The Company shall notify in writing a shareholder who has not paid the subscribed capital of his share on time. If the shareholder does not make all the payments due on him within days from the receipt of the notification, the Company may sell the share of that shareholder with an auction. ARTICLE 6 MEETINGS EIA 2

3 1. Unless the Board of Directors decides otherwise, the General Meeting of Shareholders shall be held once in a year at the Head office of the Company in the first month of the financial year. But extraordinary meetings may be called at any time. 2. Notice calling the Ordinary or Extraordinary Meeting of a first meeting shall be 15 days (fifteen days) and for a second and subsequent meeting called for lack of quorum at the first meeting shall be 8 days (eight days), irrespective of the mode of calling. 3. Notices of meetings shall contain the Company s name, the nature, capital and head office of the Company and the place where and the time within which bearer shares (if any) are to be deposited. ARTICLE 7 CALLING MEETINGS 1. General Meetings are called by the Directors, the auditors, the liquidator or where appropriate by an officer of the court. 2. Notices calling meetings shall be published in a newspaper authorized to publish legal notices and circulating in the area where the head office is situated or, where all the Shareholders are registered; they shall be notified by registered letter sent to the address of each Shareholder. ARTICLE 8 SECRETARY The Board of Directors shall appoint a secretary who is going to prepare and distribute attendance list, and write the minutes of the meetings. ARTICLE 9 ATTENDANCE ON MEETINGS AND MINUTES 1. The Secretary shall keep an attendance sheet for each meeting containing the names of Shareholders present or represented by proxy and the number of shares and votes held by each Shareholder and Shareholders not present as per Article 403 of the Commercial Code. EIA 3

4 2. The Secretary shall reduce the discussion at the meeting to minutes entered in a minute book and shall include the details stated under Article 411 of the Commercial Code. ARTICLE 10 PROXY A shareholder may nominate one proxy only to attend meetings. Where a shareholder has appointed a proxy, he may not vote in person. ARTICLE 11 AGENDA 1. The Agenda shall be sent to shareholders together with the notices calling the meeting. 2. Unless otherwise provided, only items on the agenda may be discussed. However, the meeting may at anytime revoke the appointment of Directors and appointment of new Directors in their place. ARTICLE 12 MAJORITY AND QUORUM IN ORDINARY GENERAL MEETINGS 1. When first called, General Meetings shall be composed of that number of shareholders which represent either in person or by proxy at least one-quarter of the voting shares. 2. When called for a second time, the meeting may be held and discussions made without regard to the number of voting shares represented. 3. Decisions shall be taken by a simple majority, abstentions and blank ballots (if any) being disregarded. ARTICLE 13 APPOINTMENT OF DIRECTORS 1. Without prejudice to the right to be re-elected, Directors shall be appointed for a term of three years. EIA 4

5 2. When, during a financial year, one or more directors have left the Board, the provisions of Article 351 of the Commercial Code shall apply. ARTICLE 14 POWERS AND DUTIES OF BOARD OF DIRECTORS 1. The Board of Directors shall have the powers and duties stated in the Memorandum of Association, Articles of Association and the Commercial Code. 2. The Board of Directors shall have, in particular, the following powers and duties: a) Manage the Affairs of the Company; b) Implement the decisions of the General Meeting of Shareholders; c) Appoint the General Manager of the Company; d) Employ and dismiss workers of the Company, determine their salaries, bonus and other conditions attached to employment and termination; e) Own and dispose of movables and immovable properties of the Company as per the decision of the General Meeting of Shareholders; f) Decide whether to open branches in Ethiopia; g) Prepare amendment to these Memorandum of Association and Articles of Association of the Company and submit the same for the approval of the General Meeting of Shareholders; h) develop other ideas that the Board thinks important to enhance the activities of the Company and propose them to the General Meeting of Shareholders for approval; i) Exercise other powers and duties related to the aforementioned. ARTICLE 15 REGISTER OF DIRECTORS AND SHARES HELD BY DIRECTORS 1. The Company shall keep at its head office a register of its Directors and managers with particulars as to their civil status, profession, and any directorship held in other companies and where the director is a company, the name of the company and the address of the head office. EIA 5

6 2. The Company shall keep at its head office a register showing the number and value of shares held by each director in the Company, in subsidiary companies or in any holding company of which the Company is a subsidiary. ARTICLE 16 MEETINGS OF BOARD OF DIRECTORS Unless otherwise agreed, the meeting of the Board of Directors shall be held within days of every month in the head office of the Company. ARTICLE 17 LIABILITY OF DIRECTORS 1. Directors shall be responsible for exercising the duties imposed on them by law, the memorandum of Association or this Articles of Association and resolution of meetings, with the care due from an agent. 2. Directors shall be jointly and severally liable to the Company for damage caused by failure to carry out their duties. 3. Directors who are jointly and severally liable shall have a general duty to act with due care in relation to the General Management. 4. Directors shall be jointly and severally liable when they fail to take all steps within their power to prevent or to mitigate acts prejudicial to the Company which is with in their knowledge. ARTICLE 18 MANAGEMENT OF THE COMPANY 1. The Board of Directors shall appoint a General Manager. 2. The General manager shall have the following powers and duties to achieve the purpose and goals of the Company: a) implement the decisions of the Board of Directors; b) manage, control and follow up the overall activities of the Company; c) prepare the annual financial reports of the Company and submit the same to the Board as per the Memorandum of Association of the Company; EIA 6

7 d) open, manage and control branch offices of the Company; e) employ, promote, and manage employees of the Company, decide on their salary and conditions of work, and recommend nominees for the position of Assistant General Managers for appointment by the Board; f) take disciplinary measures on employees as per this Articles of Association and the relevant labour laws of the country; g) approve expenditures of the Company based on the decisions of the Board of Directors; h) take other necessary actions related to the powers and duties given above. ARTICLE 19 AUDITORS 1. The General meeting of the Company shall elect one or more auditors and one or more assistant auditors. 2. Shareholders representing not less than 20% of the capital may appoint an auditor selected by them. 3. Where there are more than one auditors, they may exercise their duties jointly or separately. 4. Without prejudice to the Provisions of Article 374 of the Commercial Code, the Auditor/Auditors shall have the following powers and duties: a) Inspect the documents of the Company; b) Check the report of the Board of Directors; c) Participate in the General Meeting of Shareholders and other meetings; d) Inspect documents and minutes that he thinks necessary for the performance of its actions e) Perform other duties; ARTICLE 20 LEGAL RESERVE OF THE COMPANY Five percent (5%) of the net profit shall be transferred to the reserve fund every year until it amounts 20% of the capital as laid down in the Commercial Code of Ethiopia. EIA 7

8 ARTICLE 21 ACCOUNT OF THE COMPANY 1. At the end of each financial year, the directors shall prepare a detailed inventory and valuation of assets and liabilities. 2. They shall draw up a balance sheet and a profit and loss account and prepare report on the state of the Company s activities and affairs during the last financial year. ARTICLE 22 FINANCIAL YEAR 3. The financial year of the Company starts at July 7(Hamle 1 E.C) and ends at July 7 (Sene 30 E.C). ARTICLE 23 DISTRIBUTION OF PROFIT AND LOSS 1. Distribution of profit shall be effected after transfer to the legal reserve. 2. Unless the Shareholders agree otherwise, the annual profit of the Company shall be distributed among the shareholders proportional to the number of their shares. Accordingly, if there is a loss, it shall be distributed among themselves. In any case the shareholders shall not be made liable beyond the value of their shares in the Company. ARTICLE 24 Dispute Resolution 1. Any dispute which may arise between partners/share holders shall, if possible, be settled amicably. 2. If any such dispute cannot be settled amicably within two months following the date on which the dispute has been raised by the partner through written notification to the other partner, it shall at the request of either parties, be submitted to an arbitration tribunal for resolution, without prejudice to the parties right to submit a dispute to a competent federal court of Ethiopia, to one of the following fora: EIA 8

9 a. A competent arbitration institute registered in Ethiopia (like the Addis Ababa Chamber of Commerce and Sectoral Associations Arbitration Institute, Ethiopian Conciliation and Arbitration Center); and b. An ad-hoc tribunal of arbitration to be set up by the consent of the disputing parties. 3. Any arbitral award rendered pursuant to this Article shall be binding on the parties to the dispute. 4. If the parties to the dispute choose to submit their case to an ad-hoc tribunal as provided for in sub-article (2)(b) of this Article, the tribunal shall be set up as follows: a. The arbitration tribunal shall be set up from case to case, each party appointing one member. These two members shall then agree upon a neutral member as their chairperson, to be appointed by the parties to the dispute. The members shall be appointed within one month, and the chairperson within two months, from the date either party to the dispute, has advised the other party of its wish to submit the dispute to an arbitration tribunal. b. If within the periods specified in sub-article (4) (a) of this Article the necessary appointments have not been made, either party may, in the absence of any other agreement, involve the head of one of the arbitration institute registered in Ethiopia (like the Director of the Addis Ababa Chamber of Commerce and Sectoral Associations Arbitration Institute, Ethiopian Conciliation and Arbitration Center) to make the necessary appointments. c. Unless the parties to the dispute decide otherwise, the Arbitral Tribunal shall lay down its own procedure. EIA 9

10 d. The arbitration tribunal shall reach its decision by a majority of votes, the decision being binding on the parties. Each party shall bear the cost of the member appointed by the party as well as the costs for its representation in the arbitration proceedings; the cost of the chairperson as well as any other costs shall be born (in equal parts by the two parties) or(by the party in whose disfavor the award is made). e. The arbitration shall be based on the provisions of the Memorandum and Articles of Associations of the company in which the parties are member and the relevant laws of Ethiopia. ARTICLE 25 DISSOLUTION OF THE COMPANY The Company may be dissolved on reasonable grounds stated under Article 217,218 and 495 of the Commercial Code. ARTICLE 26 APPLICABLE LAW For matters not covered in this Articles of Association, the relevant provisions of the Commercial Code shall apply. Shareholder s Name Signature Date EIA 10