BUSINESS RESCUE PROCEEDING AND ETHIOPIAN BANKRUPTCY LAWUPON BUSINESS DISTRESS

Abstract

financial distress by analyzing the practical and legal aspects of business environment. To achieve the objective of this study the researcher used data from both primary and secondary sources. Data from primary sources were collected using interviews with individuals within the Development Bank of Ethiopia (DBE) and the Federal First Instance Court. Data from secondary sources gathered from published and unpublished books, scholarly journals, DBE Rehabilitation data and articles. The data collected from DBE’s rehabilitation department is categorized in table and analyzed using simple descriptive line graphs. DBE’s data about the procedures they are implementing on Non-Performing Loans (NPL) and the two practical cases that are discussed would try to show the practical aspects rehabilitating or rescuing businesses that are under distress. DBE implements eight procedural steps that are necessary for the successful rehabilitation of business that are in NPL. These procedural steps help businesses that are under distress from moving towards foreclosure and give them different forms of help.Interview with Federal First Instance Court judge tried to show the practice of the Commercial Bench at the court and the attention given to the survival of a business is reflected. It is observed that most of our legal practitioners do not utilize or do not have the knowledge of the legal remedy put in place by the Ethiopian Commercial Law.The 1960 Commercial Code of Ethiopia’s Book V regarding scheme of arrangement was also comparatively analyzed with the Republic of South African Company Act business rescue proceeding. Number of articles from the Commercial Code was discussed and recommendations were given for future amendment on the law. Four problems were identified in the Commercial Code that needs major changes: who to initiate business rescue, when to initiate business rescue, how long should the rescue take, and administration of the business. These problems were tackled from the experience of the Republic of South African Company Law. It is recommended any interested stakeholders should be able to initiate scheme of arrangement under the Ethiopian Law. The scheme of arrangement should be initiated at least six months prior to the business defaults on any payments. Businesses should not wait until the last possible moment to rescue the business. The rescue should be completed in the shortest possible time possibly not more than six months to protect the interest of creditors. The administration of the business should be given to business rescue practitioner not the trader to get the business out of financial distress. The business environment in Ethiopia as well as the legal practice needs to give due attention as businesses are one of the important pillars of the society and their existence benefits different stakeholders in the Country. Key Words: Bankruptcy, Business Rescue Proceeding, Development Bank of Ethiopia,