Company Registration In Ethiopia | How to register a company in Ethiopia

Company Registration In Ethiopia

Ethiopia, a burgeoning East African economy, presents a favorable environment for investors, driven by Its growing population, abundant resources, and strategic location present significant opportunities. Company Registration is a fundamental step for businesses operating in Ethiopia, ensuring compliance with local laws and regulations.

This guide will provide you with a comprehensive overview of the company registration process in Ethiopia, covering key considerations, requirements, and procedures. By understanding the legal aspects involved, you can ensure a smooth and compliant establishment of your business entity in the country.

Capital Requirements when Registering a Company in Ethiopia

• 1.Minimum Capital Requirements for Foreign Investors -Any foreign investor, to be allowed to invest under this Proclamation, shall be required to allocate a minimum capital of USD 200,000.00 (two hundred thousand)
• 2.The minimum capital required of a foreign investor jointly investing with a domestic investor shall be USD 150,000.00 (one hundred fifty thousand).
• 3) The minimum capital required of a foreign investor investing in architectural or engineering works or related technical consultancy services, technical testing and analysis or in publishing works shall be: a) USD 100,000.00 (one hundred thousand) if the investment is made on his own; b) USD 50,000.00 (fifty thousand) if the investment is made jointly with a domestic investor.

This minimum capital requirement shall not apply to:

1. Foreign investor re-investing his profits or dividends generated from his existing enterprise in any investment area open for foreign investors
2. Persons elected as members of board of directors following the change of a private limited company to share company; and
3. c) A foreign investor buying the entirety of an existing enterprise owned by a foreign investor or the shares therein.

AREAS OF INVESTMENT

Investment Areas Reserved for Joint Investment with the Government

Any investor may invest in the following investment areas only jointly with the government;

1. Manufacturing of weapons, Ammunition and explosives used as weapons or to make weapons.
2. Export and import of electrical energy.
3. International air transport services.
4. Postal services excluding courier services.

Investment Areas Reserved for Domestic Investors

The following areas are exclusively reserved for domestic investors;

• Subject to applicable law, banking, Insurance and Microfinance businesses, excluding capital goods and finance businesses.
• Transmission and distribution of electrical energy through Integrated national grid System.
• Primary and Middle level Health Services.
• Wholesale trade, petroleum, Petroleum products, wholesale of own products produced in Ethiopia, Excluding wholesale of electronic commerce.
• Retail trade, excluding retail of and electronic commerce as provided under appropriate law, of own products produced in Ethiopia.
• Import Trade, Excluding liquidities Petroleum gas and bitumen.
• Export trade of raw coffee, khat, oil seeds, pulses, hides and skin, products of natural forest, chicken and livestock including pack animals bought on the market.
• Construction and drilling Services below Grade 1.
• Hotel, Lodge, resort, motel, guesthouse and Pension Services, excluding star designed national Cuisine Restaurant Service.
• Export trade of raw coffee, khat, oil seeds, pulses, minerals, hides and skins, products of natural forest, chicken, and livestock including pack animals bought on the market.
• Travel agency, travel ticket sales and trade Auxiliary Services.
• Tour Operation
• Operating lease of Equipment’s, Machines and vehicles, Excluding Industry-Specific heavy equipment’s and specialized vehicles.
• Transport services, Excluding the following areas;
  1. Railway Transport
  2. Cable-Car Transport
  3. Cold-Chain Transport
  4. Freight transport having a capacity of more than 25 tones and
  5. Transport services reserved for joint investment with the Government or domestic Investors.
• Making Indigenous traditional medicines
• Producing bakery products and pastries for domestic market
• Grinding mills
• Barbershop and beauty salons services, Smithery, and tailoring except by garment factories.
• Maintenance and repair services, including aircraft maintenance repair and overhaul (MRO), But excluding repair and maintenance of heavy industry machineries and medical equipment.
• Aircraft ground handling and other related services.
• Saw milling, timber manufacturing, and assembling of semi-finished wood products.
• Media Services
• Custom clearance Service
• Brick and Block Manufacturing
• Quarrying
• Lottery and Sports Betting
• Laundry services, excluding those provided on Industrial scale.
• Translations and Secretarial Services
• Security Services
• Brokerage Services
• Attorney and Legal Consultancy Services and
• Private Employment agency services, Excluding such services for employment of seafarers and other similar professionals that require high expertise and International experience and network.

Investment Areas Reserved for Joint Investment with Domestic and Foreign Investors

Any foreign investor may invest in the following areas only jointly with a domestic investor

1. Freight forwarding and shipping agency services
2. Domestic Air transport Service
3. Cross-Country public transport service using buses with a seating capacity of more than 45 passengers.
4. Urban mass transport service with large carrying capacity.
5. Advertisement and promotion services.
6. Audiovisual services, motion picture and video recording, production and distribution and
7. Accounting and auditing Services.

Investment Areas Open to Foreign Investors;

1. Investment areas not listed above are herein open to foreign investors.

Key Economic Indicators in Ethiopia

• GDP Growth: Ethiopia has consistently maintained a high GDP growth rate, outpacing many of its regional peers. This growth is driven by sectors such as agriculture, manufacturing, and services.
• Population: With a population of over 120 million, Ethiopia is one of the most populous countries in Africa, offering a large domestic market.
• Natural Resources: The country is rich in natural resources, including agricultural products, minerals, and hydropower potential.
• Infrastructure Development: Ethiopia has made significant investments in infrastructure, including roads, railways, and energy projects, to support its economic growth.

Promising Sectors for Investment:

• Agriculture: Agriculture remains a vital sector of the Ethiopian economy, with opportunities in crop production, livestock, and agro-processing.
• Manufacturing: The government has been actively promoting industrialization, offering incentives to investors in sectors such as textiles, pharmaceuticals, and food processing.
• Mining: Ethiopia possesses significant mineral resources, including gold, copper, and gemstones, attracting interest from mining companies.
• Infrastructure: The country’s ongoing infrastructure development projects present opportunities for investment in transportation, energy, and telecommunications.
• Renewable Energy: Ethiopia’s abundant renewable energy resources, such as hydropower and solar power, offer potential for clean energy investments.

Company Registration Requirements in Ethiopia

A Step-by-Step Guide to Company Registration in Ethiopia

1. Choose a Business Structure:

• Limited Liability Company (LLC): The most common choice for foreign investors, offering limited liability and flexibility.
• Branch Office: A representative office of a foreign company, primarily for market research and liaison activities.
• Joint Venture: A partnership with a local Ethiopian company, combining strengths and expertise.

2. Reserve a Business Name:

• Check the availability of your desired business name with the Ethiopian Investment Agency (EIA).
• Submit the necessary documents and fees for name reservation.

3. Company Registration Requirements in Ethiopia

• Three preferred names of the proposed company
• Articles of Association or Memorandum of Association
• Identification documents of shareholders or directors
• Proof of registered office address
• Business plan (may be required)
• All documents should be authenticated by Ethiopian Embassy
• Share Apportionment

4. Submit Application to the EIA:

• Submit the completed application form and required documents to the EIA.

5. Obtain Investment Permit:

• The EIA will review your application and issue an investment permit if approved.

6. Register with Relevant Government Agencies:

• Depending on your business activities, you may need to register with other government agencies, such as the Ministry of Trade and Industry or the Ethiopian Revenue Authority.

7. Obtain Necessary Licenses and Permits:

• Secure any industry-specific licenses or permits required for your business operations.

8. Open a Corporate Bank Account:

• Open a bank account in Ethiopia for your business transactions.

9. Comply with Tax Regulations:

• Register for taxes with the Ethiopian Revenue Authority and file the required tax returns.

10. Hire Local Staff (if applicable):

• If you plan to employ local staff, ensure compliance with Ethiopian labor laws and obtain necessary work permits.

11. Start Operations:

• Once all legal requirements are met, you can commence your business operations in Ethiopia.

CONCLUSION

Remember to consult with a Business professional or the Ethiopian Investment Agency for specific guidance and to ensure compliance with the latest regulations.

Reach out to us today for free consultation.