7. SHARE COMPANIES IN ETHIOPIA
7.1 Formation of share companies in ethiopia
7.2 Classes of shares(Ethiopia vs USA)
7.3 Issuing shares(Ethiopia vs. USA)
7.4 Types of shareholders meeting
7.5 Treasury share transactions(Ethiopia vs. USA)
7.6 Accounting for dividends (Ethiopia vs. USA)
7.7 Reserve requirements
7.8 Earning per ordinary share (IAS 33)
7.9 Reporting shareholders equity on the statement of financial position (Ethiopia vs. USA)
7.1 Formation of share companies in Ethiopia:
In Ethiopia, share companies are formed under the Ethiopian Commercial Code. The formation process includes drafting the company's memorandum and articles of association, fulfilling the minimum capital requirement, obtaining relevant licenses and registrations, and filing the necessary documents with the Ethiopian Investment Commission.
7.2 Classes of shares (Ethiopia vs. USA):
In Ethiopia, share companies can issue ordinary shares as well as preference shares. Ordinary shares confer voting rights to the shareholders and provide a share in the profits of the company. Preference shares, on the other hand, do not confer voting rights but provide preferential rights to dividends or liquidation proceeds.
In the US, common shares are the most commonly issued shares, which grant shareholders voting rights and the ability to receive dividends. There are also preferred shares that provide preferential treatment in terms of dividends or liquidation proceeds, but do not generally confer voting rights.
7.3 Issuing shares (Ethiopia vs. USA):
In Ethiopia, share companies can issue shares through an initial public offering (IPO), private placement, or bonus issue. The process involves obtaining approval from the relevant authorities, such as the Ethiopian Securities and Exchange Commission, and filing the necessary documents with the respective government agencies.
In the US, shares can be issued through an IPO, private placement, or secondary offering. The process involves compliance with the Securities and Exchange Commission (SEC) regulations, including filing a registration statement, prospectus, and other necessary documents.
7.4 Types of shareholders meeting:
In Ethiopia, share companies are required to hold annual general meetings (AGMs) to discuss matters such as the approval of financial statements, appointment, and removal of directors, dividend distribution, and other matters of importance. Extraordinary general meetings (EGMs) can also be held to address specific issues outside the scope of AGMs.
In the US, similar to Ethiopia, companies hold annual general meetings (AGMs) and special general meetings to discuss matters such as the election of directors, approval of financial statements, and other important company matters.
7.5 Treasury share transactions (Ethiopia vs. USA):
In Ethiopia, share companies are permitted to repurchase and hold their own shares as treasury shares. These treasury shares can be held indefinitely or reissued at a later date. The repurchase and disposal of treasury shares must comply with legal requirements and regulations.
In the US, treasury share transactions are also allowed, and the repurchase and reissuing of treasury shares must comply with applicable laws and regulations, including the rules set by the SEC.
7.6 Accounting for dividends (Ethiopia vs. USA):
In Ethiopia, companies are required to account for dividends in accordance with the Ethiopian Accounting Standards. Dividends are recognized as a liability in the financial statements when they are declared.
In the US, companies also account for dividends in accordance with Generally Accepted Accounting Principles (GAAP). Dividends are recognized as a liability when they are declared, and the payment is recorded when made.
7.7 Reserve requirements:
In Ethiopia, share companies are required to allocate a certain percentage of their profits to reserves, such as the legal reserve, dividend equalization reserve, and general reserve. These reserves are created to ensure the financial stability and sustainability of the company.
In the US, there are no specific reserve requirements for share companies. However, companies may voluntarily allocate a portion of their profits to reserves to strengthen their financial position or fulfill specific legal or regulatory requirements.
7.8 Earning per ordinary share (IAS 33):
In Ethiopia, companies calculate earnings per ordinary share in accordance with International Accounting Standard (IAS) 33, which provides guidance on the calculation and presentation of this financial metric.
In the US, companies also calculate earnings per share (EPS) in accordance with the Financial Accounting Standards Board (FASB) guidelines, which are similar to IAS 33.
7.9 Reporting shareholders equity on the statement of financial position (Ethiopia vs. USA):
In Ethiopia, share companies report shareholders' equity on the statement of financial position, which includes share capital, reserves, retained earnings, and other components of equity.
In the US, companies also report shareholders' equity on the statement of financial position, including common stock, additional paid-in capital, retained earnings, and other components of equity. The specific components may vary depending on the company's capital structure and applicable regulations.