Bearer Share Under Ethiopian Share Company Laws: Abolishing or the other option?

Abstract

A company can issue shares in the form of registered or bearer. Bearer share is without indicating the identity of the owner and that information is not registered in the registry of a company issuing it. Once it is issued, it is unknown who owns the security. Such shares have benefits and risks. The risks are significantly higher than the benefits that a given economy can get. By using the anonymity created by bearer shares, there are possible illicit activities that may be committed by the owners and by the Companies themselves. The 1960 Ethiopian commercial code recognizes the issuance of bearer shares for share companies. However, it seems it is prohibited by subsequent legislation for financial share companies in the country such as banking, Insurance, and microfinancing under the new commercial code of Ethiopia. This bearer shares may open the door for some unlawful activities such as money laundering and tax evasion and it has some benefits at the same time. This paper dealt with the concept of bearer shares under the share company law of Ethiopia. It specifically focused on justifying why deny or allow the issuance of bearer shares by raising the benefits of having it and the dangers of allowing it and argued for the third option of keeping them with custodians instead of banning it. In doing so, the writer assessed provisions of the 1960s the 2021 Ethiopian Commercial Code, and laws governing Ethiopian financial institutions by employing the doctrinal research approach and qualitative data analysis. The study analyzed the experience of other countries towards bearer shares and their reason for taking it as an experience for Ethiopia.