Can Ermias resume his job as chairman of Board of Directors of Access Real Estate?


Though I would be happy to see Ethiopian diasporas to return to Ethiopia and undertake business which they think profitable I could not understand the purpose of some media that do repeatedly tell us that Ermias would soon return to Ethiopia to resume his role at Access Real Estate Company and pull the company out of problems it is presently facing.
It is absolutely clear that it is Access Real Estate that has entered into an agreement with house buyers. The Company has its own legal personality different from its share holders, the Board of Directors and the management team or any other employees. The Company has not so far delivered a single room to house buyers, although it agreed to hand over the houses in 10 months time. This means the Company has failed to meet its contractual obligations. This in turn means the Company’s shareholders general meeting, board of directors and the management team have failed too.
How, therefore, can Ermias resume his role as chairman of the Board of Directors of access Real Estate after he has vacated his post for a long time for the reason only he knows? Can the shareholders elect him again or can he simply go to his office and resume his job?
I am of the opinion that this would not happen. The shareholders cannot elect or re-elect a person who vacated his post on his own will; a person who did not enable the Company accomplish its objective where the Company had all those resources (assets) at its disposal, i.e., the capital the shareholders raised, the money the house buyers paid to the Company and where the money relatively had a better purchasing power and where the input to construct real estate was relatively cheaper than it is today, and where the Company, the Board and Ermias more or less enjoyed the trust of creditors, suppliers, the government, etc.
I do not also think that any government organ can appoint Ermias as chairman of Access Real Estate or permit him resume his chairmanship once again. I do firmly believe that the government knows its mandate and role in this regard.
In connection with this I have read about the committee formed by the prime minister and composed of various government ministries and Addis Ababa City Administration in order the said committee resolve the problem the company is facing.  This is good. I do also have a profound respect to the prime minister for his determination to support the Company to come out of its problems and to redress house buyers.
On the other hand I do question whether the Committee has such a mandate in the Ethiopian legal system.  The Constitution and the proclamation that spell out the duties and responsibilities of each and every ministry and Addis Ababa City Administration maynot permit some of the functions the Committee is desirous to undertake. There is no doubt that the Company has failed to meet its obligation. There fore the affairs of the company should be left to the competent court of law. And also individual law suits should not be filed in such circumstances. The legal action against such trader who has suspended payment to several creditors should rather be bankruptcy proceeding that serves all creditors fairly.
The Company did not so far start to deliver houses to the buyers even after 5 years. This means the Company has suspended payment to its creditor as stated in article 971 of the Commercial Code. The Company itself ought to have filed a notice of suspension of payment with a view to the institution of bankruptcy proceedings or the approval of scheme of arrangement in line with Article 971 of our Commercial Code.
Some may argue that since the value of the land the Company has bought from individuals and the unfinished houses it has started constructing have increased dramatically and can cover the claim of the house buyers and shareholders. Thus the assets of the Company are still intact and therefore there is no loss that leads to bankruptcy.
In a country where the Constitution has made land inalienable such argument will not be sound. It should also be noted that had the house buyers taken delivery of the houses in due time, the said houses would have been rented out for an amount of money much greater than the increased value of the land. On top of this what one has to see now is where the suspension of payment of the company leads to. Valuing the asset of the company can be undertaken at the time of the Company’s proceeding of bankruptcy.
If the court having jurisdiction in bankruptcy proceeding pronounces bankruptcy of the company Compulsory winding up or composition may follow for settlement of the bankruptcy. Though the company has suspended payment, it can apply for scheme of arrangement if it is not declared bankrupt, to continue its business under new leadership, strategy and reviewed objective. 
I have learnt that this Company and other companies under the chairmanship of Ermias had some problems of meeting legal requirements at the foundation, subscription, constitution, registration and operation phases. Some of the mistakes of the Company’s founders, board of directors, managers and auditors have been shared by the licensing authorities including Ministry of Trade. The National Bank of Ethiopia, though, had demonstrated proper leadership in many instances; it has also overlooked some problems relating to formation and operation of some banking companies.
The Board of Access Real Estate S.C did not undertake its functions properly. The Board members are not fully doing what they are legally, morally and ethically supposed to do. It is true that members of boards of some companies in this country are untrained and cannot instruct or control management properly.
Though possessed of ultimate organizational power, the general assembly of shareholders of the Company is also too weak. Where the opportunity for leadership is greatest job design for leadership is poorest.
Thus the Government has to properly implement the Commercial Code and review of the said Code will be needed in order to address new issues brought into being after its issuance. The proper implementation of the Code requires legal professionals versed in business laws in general and corporate law in particular specifically in the judiciary, the Ministry of Trade, National Bank of Ethiopia, etc.
Is the effort the Government is currently making a rescue of Access Real Estate S.C?
I do not think so. Access Real Estate is not either government or private enterprise whose business objective has no substitute. Hence rescuing efforts are not necessary since its dissolution and liquidation cannot as such harm the public and the country.
Rescuing enterprises like in the USA and UK or other countries may be important where the dissolution of the enterprise to be rescued adversely affects the general public and the country. Access Real Estate is a fresh company that has not even delivered a single room to house buyers owing to expensive mistake its board of directors, shareholders and management team have committed. I do not  believed that the company deserve rescuing. The house buyers themselves also should shoulder some responsibilities for the mistakes they have committed when they concluded an agreement with Access Real Estate without making adequate enquiry about the company.
We also should not forget what the founders told the public where they offered shares to the public. They said they will make the Competitions of Competitors irrelevant by creating value innovation strategy. The Company, however, failed even to battle for market share and fight over price in existing market space, let alone to create a leap in value for house buyers and for itself leaving the competition behind. I have learnt that the founders also have said to the public the company will not be a contractor but an investor in the real estate sector.
I kindly request the public, the government, house buyers and the share holders themselves to notice the fact that in Ethiopian Context Access Real Estate is not a Real Estate Developer in its strict sense of the term. It is rather an intermediary between house buyers and the company that undertook the construction of the unfinished houses. Thus, Access Real Estate has reduced itself to a broker level and attempted to play simply the role of a broker. House buyers would not have benefited form such brokerage even where Access Real Estate had discharged its functions properly. It is because brokerage is an additional cost to house buyers and the leadership of the broker has no expertise and experience relevant to the construction industry.
So, the effort of the government does not seem rescuing but seems an effort to seek solutions that redress house buyers. I do not think that the government will allocate revenue collected in the form of tax from the public to rescue the company. The government can of course help house buyers to solve some of their problems through its courts of law and scheme of arrangement as per the Commercial Code. If scheme of arrangement will not be possible, dissolution of the company due to bankruptcy is unavoidable. If dissolution is inevitable to finalize the construction of the houses the government can facilitate to the contractor which has started the construction of the houses on the land the company has bought or the government can itself construct the houses to house buyers with new arrangement.
If however the government tries to rescue this company similar claims from other failed companies will continue to arise.
On the other hand since we all have to be responsible citizens and shoulder risks and responsibilities that occurred due to our own choices and decisions, the problems around Access Real Estate Share Company have to be resolved in accordance with the rules contained in the Commercial Code of Ethiopia.
Finally I encourage the Federal Ministry of Trade to organize a platform where public dialogue can take place on the problems surrounding the formation and governance of business organizations in general and share companies in particular.

The writer is a Consular and Attorney at law specializing in Business Law and can be reached at