Chapter One

1. Introduction
Bunna International Bank S.C is among the private banks in Ethiopia which has recently joined
the Banking business of Ethiopia following the ideal monetary improvements seen in the nation.
Established by over 10,000 shareholders 12 years ago, used to be named Bunna which is named
after the top export commodity of Ethiopia – Bunna, meaning ‘coffee’ in Amharic language.

It has joined the banking industry of Ethiopia following the favorable economic developments
witnessed in the country during the last decade and the incessantly growing needs for financial
services. The bank has obtained its license from the National Bank of Ethiopia (NBE) on June
25, 2009 in accordance with licensing and supervision of Banking Business Proclamation No.
592/2008 and the 1960s Commercial Code of Ethiopia. The bank officially commenced its
operation on October 10, 2009 with subscribed & paid up capital of 308 million birr and 156
million birr, respectively. Timely introduction of various products to suit the diverse needs of
customers is a functional necessity to the banks. Technology gives the cutting age to come out
with customer centric products and delivery channels in time. Technology in banking has
evolved substantially from the days of back office automation to today’s online, centralized and
integrated solutions ten years ago; in Ethiopia banking industry most of the advanced banks had
branch automation software with “online” passbook printing facilities. At branch level, banks
were moving away from product-specific countries and trying any-counter service for all
products. Nowadays, most banks use CORE banking applications for the smooth running of their
service. This system allows the entire banks branches to access applications from centralized
data centers.

1.1 Background of Bunna International Bank

The bank officially commenced its operation on October 10, 2009 with subscribed & paid up
capital of birr 308 million and birr 156 million, respectively. However, the paid up capital has
increased to over birr 2.1 billion and the number of shareholders has increased to over 13,024,
which makes it one of the strongest and public based banks in Ethiopia. Bunna Bank currently
has a total of 1.8 million customers, 2,700 employees, and 14,000 shareholders. It is recalled that
last budget year concluded June 30, 2021, Bunna Bank has made 937 million Birr profit before
tax showing a decline of 6 percent from the previous year.

Bunna International Bank Share Company (BIB) runs its operations with modern information
technologies for its value adding customer services. Furthermore, BIB is running different ICT
projects to create more convenience for the customers to reach them anytime, anywhere, any
device. BIB is also working to enhance the infrastructure for organizational, national and
international business connectives.
BIB’s core banking services, customer relationship management and straight-through-processing
capabilities are powered by Infosys finance. BIB has integrated its services with Ethiopian
automated transfer system (EATS), national switch (EthSwitch), Ethiopian commodity exchange
(ECX) and the Ethiopian credit reference bureau (ECRB). It has joined the international business
connectivity using SWIFT, Western Union, MoneyGram, Xpress money, Flocash, Juba,
Dahabshiil, Trans-Fast, Kaah, Exchange4free, Remitix, Al Ansari and other fund transfer
technology networks.

Moreover, BIB continues to use innovative ICT solutions in the industry with fast time-to-market
capabilities that allow extend business services of the customers.

Chapter Two
2. LITERATURE REVIEW

2.1 The basic essence of a corporation (S.C)

A Corporation is a business unit owned by many people, created under the authority of
law, which exists and has powers and liabilities independent of its members.

A corporation by its essences is established to carry out non business or business activities.
Business is the provision of product and/or service to satisfy customer requirements. It is also
a situation where by trader delivers good and service for profit. According to Article 124 of
Ethiopia Commercial Code of 1960, it is an incorporeal movable consisting of all movable
property brought together and organized for the purpose of carrying out any commercial
activities specified in its article 5

Article 245(1) and (2) of the Commercial Code define corporation as a company whose
capital is fixed in advance and divided into shares and whose liabilities are met only by its
assets and members of a Share Company are liable only to the extent of their share holdings.

Article 245. Definition

1/ A share company is a company whose capital is fixed in advance and divided into shares
and whose Liabilities are met only by the assets of the company.

2/ the obligation of the shareholders shall be limited to Making the contribution they
pledged to make to the Company.

A corporation is a legal entity that is separate and distinct from its owners. Under the law,
corporations possess many of the same rights and responsibilities as individuals. A share
company is a legal entity that often has similar rights in law to those of natural person .They
 can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets,
and pay taxes. Some refer to a corporation as a "legal person."

Artificial or Legal persons or persons refer to entities or organizations, which are given
rights and duties by the operation of the law. These entities include associations, share
companies, private limited companies, etc. these Legal persons are also referred to as
artificial, juristic, fictitious, juristic and moral persons.

Naming of corporation

Naming of a corporation is an important part of forming a corporation as it reflects the core

values and visions of the intended company. Its advised that the following steps are helpful
to choose a proper name for a corporation.

6 Tips for Choosing a Business Name

1. Follow Your State's Naming Guidelines

2. Don't Pick a Name That's Too Similar to a Competitor's Name
3. Choose a Name That People Can Spell and Pronounce
4. Make the Name Web-Friendly
5. Be Memorable But Not Too Unique
6. Pick a Name that's Consistent With the Brand

Article 246. Company Name

A share company shall have a name. The company name shall be as agreed by members
but shall neither adversely affect the rights of other traders or business organizations nor the
rights of other third parties. The company name shall be followed by the words ‘‘Share
company’’

Promoters of a corporation

Stock promoters are individuals or institutions that help companies to raise capital.

Responsible for demonstrating the features of a product or service to an audience or client.
They raise funds for companies by capturing the attention of potential investors.

Article 248. Promoters and Members of a Company Formed by Public Subscription

1/ A promoter shall mean a person who initiates the formation of a company by public
subscription, invites persons to join the company by preparing a prospectus or generally acts
with the view to realizing the formation of the company and is liable for damage sustained in
connection with failure to establish the company, if the company is not formed. An expert
who based on a contract concluded with a promoter, for consideration, conducts a study
necessary for the formation of the company, renders professional support or similar service is
not a promoter.

2/ The promoters of a share company may be one or more natural or artificial persons. A
promoter need not be a shareholder in the company.

3/ The number of shareholders of a share company may not be less than five.

Article 249. Persons not Competent to be Promoters

A person that had been convicted of breach of trust, theft, robbery or any other similar
criminal offense, in connection with his function as a promoter, director, manager, inspector,
auditor or any other managerial positions in a business organization or in any other
circumstance shall not act as a promoter of a share company formed by public subscription.

KEY POINTS

 A corporation is legally a separate and distinct entity from its owners. Corporations
possess many of the same legal rights and responsibilities as individuals.

 An important element of a corporation is limited liability, which means that its

shareholders are not personally responsible for the company's debts.

 A corporation may be created by an individual or a group of people with a shared

goal. That does not always involve making a profit.

The precise legal definition of a corporation differs from jurisdiction to jurisdiction, but
the corporation's most important characteristic is always limited liability. This means that
shareholders may take part in the profits through dividends and stock appreciation but are
not personally liable for the company's debts.

1.2.2 Characteristics of a Corporation:

The corporation form of business organization has several characteristics, among

them are;
1) Separate Legal Entity: A Corporation is a separate legal entity that has most of
the rights of a person except those of voting and marrying. As such, it can buy,
sell or own property, sue and sued; enter into contracts; hire and fire employees,
and be taxed.
2) Limited Liability: Because a corporation is a separate legal entity, it is
responsible for its own actions and liabilities. Since the owners of a corporation
are not responsible for the corporation's debts, their liability is limited to their
shares in the corporation.
A corporation grants the owners limited liability against debts and lawsuits filed
against the company. This means that any loans, credit cards, mortgages or
revolving credit with vendors, are the sole responsibility of the company. The
same is true for any lawsuits or insurance claims against the company.

This is best illustrated when a company goes into financial hardship and files for
bankruptcy; payroll, taxes and debts are all paid before any shareholder gets paid
from the remaining assets, but the shareholders are not liable to pay for any of these if
the assets are not enough to pay everything off.

3) Easy to raise capital: it is fairly easy for a corporation to raise capital because
shares of ownership in the business are widely available to potential investors.
4) Easy of transfer of ownership: the ownership of a corporation is represented by
a transferable unit, a share of stock. An owner of shares of stock, or a stockholder,
normally can buy and sell shares of stock without affecting the activities of a
corporation or needing the approval of other owners.
5) ) Lack of Mutual Agency: There is no mutual agency in the corporate form of
business. If a stockholder, acting as an owner, tries to enter into a contract for the
corporation, the corporation is not bound by the contract.
6) Continuous Existence/ Unlimited life: Another feature of a corporation being a
separate legal entity is that an owner's death, incapacity, or withdrawal, does not
affect the life of the corporation.
7) Centralized Authority and Responsibility: the board of directors represents the
stockholders and delegates the responsibility and authority for the day to day
operation of the corporation to single person, usually the president of general
manager. This power is not divided among the many owners of the business.
Large corporations are owned by many people who probably do not have the time
or training to make timely decisions about the business's operations. So in most
cases, management and ownership are separate. This allows the corporation to
hire the best talent available to manage the business. The owners of a corporation
may be able to vote on decisions for the board of directors to make final
 directives on, but the shareholders are not necessarily the managers of the
company. For many small businesses, the majority shareholder is the founder
and main leader of the company. However, it is possible for any corporation to
hire a company leadership, while also reaping the benefits of the profits. The
board of directors votes on major budget items.

8) Government Regulation: Corporation must meet the requirement of the state

laws. This creature of the state is subject to greater control and regulation by the
state than are other forms of business.

9) Taxation: For a smaller corporation, double taxation is a significant

consideration. The corporation is taxed on earning at the business level. When
profits are distributed to shareholders, those are also taxed as dividends.
Depending on the overall revenues and how much is distributed to the
shareholders, this could have a significant financial impact on the owners. Keep in
mind that there are two types of corporate structures, the C Corporation and the S-
corp. smaller businesses may elect the S-corp to pass through revenues directly to
owners to mitigate the double taxation.

1.2.3 Types of corporation

A corporation can be created by a single shareholder or by multiple shareholders who

come together to pursue a common goal. A corporate can be formed as a for-profit or a not-
for-profit entity.

 For-profit entities form the majority of corporations, and they are formed to generate
revenues and provide a return to their shareholders, according to their percentage of
ownership in the corporation.
 Not-for-profit entities operate under the category of charitable organizations, which
are dedicated to a particular social cause such as educational, religious, scientific, or
research purposes. Rather than distribute revenues to shareholders, not-for-profit
organizations use their revenues to further their objectives.

The three main types of business incorporations are:

1. C Corporation
C Corporation is the most common form of incorporation among businesses and contains
almost all of the attributes of a corporation. Owners receive profits and are taxed at the
individual level, while the corporation itself is taxed as a business entity.

2. S Corporation

S Corporation is created in the same way as a C Corporation but is different in owner

limitation and tax purposes. An S Corporation consists of up to 100 shareholders and is not
taxed as separate – instead, the profits/losses are shouldered by the shareholders on their
personal income tax returns.

3. Non-Profit Corporation

Commonly used by charitable, educational, and religious organizations to operate without

generating profits. A non-profit is exempt from taxation. Any contributions, donations, or
revenue received are retained in the entity to spend on operations, expansion, or future plans.

1.2.4 Formation of corporation

A corporation is formed when it is incorporated by a group of shareholders who share

ownership of the corporation, represented by their holding of stock shares, and pursue a
common goal.The vast majority of corporations have a goal of returning a profit for their
shareholders. However, some corporations, such as charities or fraternal organizations, are
nonprofit or not-for-profit.In any case, their shareholders, as owners of the corporation, do
not accept responsibility for it beyond the potential loss of their investment in it.A private or
"closed corporation" may have a single shareholder or several. Publicly-traded corporations
have thousands of shareholders.

Each country has its own laws regarding incorporation. Most countries require the
owners to file articles of incorporation with the state and then issue stock to the company's
shareholders. The shareholders are required to elect the board of directors in an annual
meeting.

As most countries, Ethiopia has her own laws regarding the formation of a corporation
under commercial code of Ethiopia

Article 254. General Requirements in Respect of Formation

1/ Without prejudice to other provisions of this Code, a share company may not be formed
until:
 a) the capital has been fully subscribed; and b) at least one quarter of the par value of shares
sold in cash has been paid up and deposited in a blocked bank account opened in the name
of the company under formation.

2/ Sums deposited pursuant to Sub-Article (1) (b) of this Article may not be withdrawn
from the bank account until the company is registered in the commercial register.

3/ Where the company has not been registered within the time limit set in the prospectus
prepared pursuant to Article 259 of this Code, from the date of deposit in a bank of the paid-
up sums, subscribers who do not wish to continue as members of the company may

request the refund with bank interest of the paid-up sums. The promoters shall, within thirty
days from the date of request, notify the organ in charge of registration of business
organizations to effect refund of the contributed sum. The organ mandated to register
business organizations shall inform the concerned bank to refund the subscriber. The
formation of the company may continue amongst the remaining subscribers.

4/ Where the promoters have failed to notify in due time the organ entrusted with the
registration of business organizations pursuant to Sub-Article (3) of this Article to refund
the subscriber, they shall be jointly and severally liable to pay the difference between bank
interest and legal interest commencing from the date on which they should have made the
notification

1.2.4.1 Memorandum of association

A Memorandum of Association (MOA) is a legal document prepared in the formation and

registration process of a limited liability company to define its relationship with
shareholders. The MOA is accessible to the public and describes the company’s name,
physical address of registered office, names of shareholders and the distribution of shares.
The MOA and the Articles of Association serve as the constitution of the company.

Legal Name of the Company

The name clause requires you to state the legal and recognized name of the company. You
are allowed to register a company name only if it does not bear any similarities with the
name of an existing company.

Physical Address of the Registered Office

The registered office clause requires you to show the physical location of the registered
office of the company. You are required to keep all the company registers in this office in
addition to using the office in handling all the outgoing and incoming communication
correspondence.

Objectives of the Company

The objective clause requires you to summarize the main objectives for establishing the
company with reference to the requirements for shareholding and use of financial resources.
You also need to state ancillary objectives; that is, those objectives that are required to
facilitate the achievement of the main objectives. The objectives should be free of any
provisions or declarations that contravene laws or public good.

Liability of Shareholders

The liability clause requires you to state the extent to which shareholders of the company
are liable to the debt obligations of the company in the event of the company dissolving.
You should show that shareholders are liable only their shareholding and/or to their
commitment to contribute to the dissolution costs upon liquidation of a company limited by
guarantee.

Authorized Share Capital

The capital clause requires you to state the company’s authorized share capital, the different
categories of shares and the nominal value (the minimum value per share) of the shares.
You are also required to list the company’s assets under this clause.

Association and Formation of a Company

The association clause confirms that shareholders bound by the MOA are willingly
associating and forming a company. You require seven members to sign an MOA for a
public company and not less than two people for a MOA of a private company. You must
conduct the signing in the presence of witness who must also append his signature.

The Ethiopian commercial code article 225 has stipulated what a memorandum of
association entails and the components that must be present in preparation of one.

Article 255. Contents of Memorandum of Association

 The formation of a share company shall be by a memorandum of association. The
memorandum of association shall contain the following particulars:

1/ the name of the company;

2/ the head office, and the branches, if any;

3/ the names, nationality, and address of the shareholders, the number of shares they
subscribed and the paid-up sums;

4/ the business purpose and sector in which the company is to engage;

5/ the subscribed capital and the amount paid-up;

6/ the number, par value, form and classes of shares;

7/ the name of shareholder who made contributions in kind, the price at which they are
accepted ,the method of valuation, their use, and the number of shares allocated in
consideration of the contribution;

8/ the manner of distributing profits; 9/the amount of special benefit allocated to the
promoters and the manner in which that is to be effected;

10/ the number of directors and managers of the company and their powers;

11/ the number of members of the supervising board, if the company has any, and their
powers;

12/ the Auditor of the company;

13/ the period of time for which the company is to be established;

14/ the time and manner in which the company will publish its performance report;

15/ the management of the company; matters concerning the relations between the company
and its shareholders, and amongst the shareholders; and

16/ Other matters required to be included by the law or the agreement of shareholders.

1.2.4.2 Corporate capital 

 Corporate capital is the mix of assets or resources a company can draw on in financing its
business. Corporate capital results from debt and equity financing. Debt financing occurs
when a company raises money by selling debt instruments to investors. equity financing
occurs When companies sell shares to investors to raise capital.

Article 247. Minimum Capital and par value of Shares

1/ Without prejudice to a contrary stipulation by any other law, the capital of the company
may not be less than 50,000 (Fifty Thousand) Ethiopian Birr.

2/ The amount of the par value of each share may not be less than 100 (hundred) Ethiopian
Birr.

1.2.4.3 Organization cost

The costs of forming a corporation are called organization costs. These costs which are
incurred before the corporation begins operation include State incorporation fee ,Attorney's
fees for drawing up the articles of incorporation ,Promotional costs, The cost of printing
stock certificates ,Other expenditure which are incurred for forming the corporation.

The company we choose is a share company formed by public subscription so its best to
cover The provisions of Article 259-264 which stipulates rules regarding A Company
Formed by Public Subscription. The article covers issues like prospectus of the company,
application of shares, auditing formation procedures, meeting of subscribers and powers and
duties of meeting of subscribers

Article 259. Prospectus of the Company

1/ an offer to subscribers shall be made by a prospectus signed by all the promoters. The
prospectus shall include the following:

a) the draft memorandum of association;

b) a summary of the expert valuation report, if there are contributions in kind;

c) the date until when the subscribers are required to discharge their obligations to pay;

d) the price at which shares are to be issued;

e) the amount to be paid up on the shares until the general meeting of the subscribers;

f) the place where and the time when applications to subscribe shares shall be made; and
the necessary details of the bank account opened in the name of the company under
formation in which payments are required to be deposited; and

g) the anticipated time within which the formation of the company is to be completed and
the company obtain legal personality; the time set for the completion of the formation of the
company shall not exceed five years under any circumstances.

2/ Copies of the prospectus and of the expert valuation report of contributions in kind, if
any, shall be made available to all persons who may wish to subscribe.

Article 261. Auditing Formation Procedure of the Company

1/ The promoters shall have the formation of the company verified by external Auditors
once the requirements relating to the formation of the company have been completed.

2/ The Audit shall cover the following:

a) the promoters meet the requirements set by law regarding promoters;

b) full subscription of the capital of the company;

c) the contributions in kind have been effected to the company, valuated by experts and that
the expert valuation is correct;

d) deposit of cash collected from subscribers in a bank account opened in the name of the
company;

e) the fulfillment of other requirements set by the law and memorandum of association for
the formation of the company.

3/ The Audit report shall be submitted by the Auditor to the meeting of subscribers and
approved by the meeting.

4/ The company shall not be registered unless the Audit report confirms the requirements
listed under Sub Article (2) of this Article have been complied with.

5/ Where the contribution in kind is an immovable property or a similar property with

respect to which the law requires transfer of title and issuance of document to title, it is
sufficient if such property is put in the possession of the promoters or, as appropriate, the
founders.

1.2.4.4 Registration of a corporation

The ministry of trade and industry is the legal body authorized for registering businesses in
Ethiopia. It is illegal to engage in any commercial activity unless your business/ entity is
recorded in a commercial register.
To run a business in Ethiopia, you must obtain a business license. This is according to
commercial registration and business licensing proclamation. The ministry of trade and
industry provides its services through an online system known as the Online trade
registration and licensing system to ease the registration process.
Anyone who opens branch offices at various places must register these branch offices at
their original registration before commencing business. After that, they should immediately
notify the registering office situated in the areas where the branch offices are to be opened.
Acquiring a business license requires you to first register within the central commercial
register and trade name register. Registering in the commercial register has to be done at a
place where the head offices of the business are situated. Registration into the commercial
register is done once for each business person irrespective of the number of companies you
run (according to article 5-13 of the proclamation).

Article 265. Registration of the Company in the Commercial Register

1/ A share company shall be registered in the commercial register regardless of the manner
in which it was formed. A company shall obtain legal personality upon registration.

2/ notwithstanding any provision to the contrary in any other law, the registration of the
company shall be effected by the promoters or, as appropriate, the founders or any other
person having a power of attorney from the promoters or founders.

3/ Notwithstanding any provision to the contrary in any law, the application for registration
shall be accompanied by an authenticated memorandum of association, a prospectus where
the company is formed by public subscription, audit reports regarding valuation of
contributions in kind and company formation and the minutes of the meeting of subscribers.

1.2.4.5 MANAGEMENT OF A CORPORATION

The Office of Board of Directors The second organ of management in Share Company
is the office of board of directors. It is the most important and key organ in the management
of Share Company. Board of direction is responsible for decision making in their major
business and overseeing the general affairs of the company. As the Commercial Code of the
Federal Democratic Republic of Ethiopia implies the role of the directors in managing a
Share Company is by far the most significant type of management than any other organs in
Ethiopia.

Boards of directors have their own power and duties they carry out in managing a
Share Company. The power and duties of directors emanates from the law (Commercial
Code), Memorandum of Association, Article of Association and Resolution of shareholders
meeting. Board of directors may use their power and duties for conservative and proper
purpose as well as for improper ends. To tackle this improper use of power, there are civil
and criminal liabilities in the Commercial and Criminal Codes respectively.

Article 296. The Board of Directors

1/ A company shall have not less than three or more than thirteen directors who shall be
elected by the shareholders. Two-thirds of members of the board of directors may not play a
role in the day-to-day management of the affairs of the company.

2/ Persons who are not shareholders may be elected as members of the board of directors.
However, the number of non-shareholder directors may not exceed one-thirds of the total
membership of the board of directors.

3/ Where the memorandum of association does not clearly specify the number of directors,
the meeting of subscribers shall decide the number of directors to be appointed.

4/ An organization or institution vested with legal personality by law may be appointed a

director; Upon its appointment, it shall appoint, for the duration of its term, a permanent
representative; The legal entity shall appoint a replacement at the earliest practicable time
where the permanent representative resigns or cannot discharge his obligations for whatever
reason.

5/ Although a permanent representative is not personally a director of the company, he is

subject to the same obligations including civil and criminal liability as if he were a director
in his own name, without prejudice to the joint liability of the legal entity that he represents.

1.3 DISSOLUTION OF CORPORATION

Dissolution of corporation refers to the closing of a corporate entity which can be a complex
process. Ending a corporation becomes more complex with more owners and more assets.
The most common causes of corporate dissolution include
company bankruptcy, total property loss or destruction, or an internal disagreement on the
direction that the company should take.

The Ethiopian commercial code has put down some grounds of simply reasons for the
dissolution of a share company on article473.

Article 473. Grounds for Dissolution

1/ Subject to the general provisions under Article 181 of this Code, a share company may be
dissolved for one of the following reasons:

a) where the number of shareholders falls below the legally required minimum and the
organ which registers business organizations decides to dissolve the company on the
application of any interested party due to failure to make up for the reduction in number of
members within six months;

b) decision of the organ in charge of registration of business organization upon application

by any interested party where the company does not have the required administrative organs;

c) loss of three-quarters of the capital.

2/ Notwithstanding the provisions of Sub-Article 1 (a) and (b) of this Article, the organ in
charge of registration of business organizations may, where it thinks necessary, extend the
time limit or permit continued existence of the company by reestablishing the prescribed
organs.

3/ The board of directors shall call an extraordinary general meeting to consider voluntary
dissolution or continuation of the company where three-quarters of the capital has been lost
as provided in Sub-Article (1) (c) of this Article.

4/ Where the directors, supervisory board, if any, or Auditors fail to call a general meeting
the court may, on the application of any interested party, order dissolution.

5/ Where shareholders knowingly continue the operations of the company without the
approval of the organ in charge of registration of business organization per Sub-Article (2) of
this Article, such shareholders shall be jointly and severally liable for any debts assumed
thereafter by the company. \
Addressing if the selected share company followed and executed the rules and regulation
According the business law when forming the organization

Name of the company

“Bunna bank share company” it follows article the chosen company name followed by the
words share company