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How to Register Securities in Ethiopia: Key Steps and Guidelines

The Ethiopian Capital Markets Authority (ECMA) has introduced Directive Number 1030/2024 to regulate public offerings and the trading of securities. Chapter Two, Section One of the directive outlines the General Requirements for Registration of Securities, establishing a robust framework to ensure transparency, protect investors, and build trust in Ethiopia's growing capital market.

Prohibition on Unregistered Securities

The directive emphasizes that no security can be offered, sold, listed, or traded without prior registration with ECMA. This prohibition applies to all securities except those explicitly exempted by the Capital Market Proclamation or the directive itself. Such exemptions include:

  • Securities guaranteed by the Federal Government of Ethiopia.
  • Securities offered through private placements or small offerings.
  • Securities offered to qualified investors.

By requiring registration, ECMA aims to safeguard investors from unregulated and potentially risky securities.

Eligibility Criteria for Issuers

To qualify for public offerings, issuers must meet specific criteria:

  1. Legal Status:
    • The issuer must be a share company, a company under formation, a statutory body, a multilateral agency, or another approved entity.
  2. Corporate Governance:
    • Issuers must comply with governance standards, ensuring accountability and transparency.
  3. Financial Health:
    • Audited financial statements are required, and the company must be solvent.
  4. Transferability of Securities:
    • Securities offered must be freely transferable, promoting market liquidity.

Application Procedures

Issuers seeking to register securities must submit a Registration Statement to ECMA. The application process is designed to ensure clarity and thoroughness:

  1. Language Requirements:
    • Applications must be submitted in Amharic or English. If any supporting documents are in another language, authenticated translations are required.
  2. Document Standards:
    • All submissions must be typewritten, legible, and accompanied by the prescribed fees.
  3. Supporting Documents:
    • Applications must include:
      • A prospectus or offer document.
      • Certificate of commercial registration.
      • Business licenses and, if applicable, investment permits.
      • Audited financial statements covering the last three years.
      • Valuation reports and external legal opinions.

Comprehensive Disclosure Obligations

The directive mandates detailed disclosures to promote transparency and investor confidence. These include:

  • Shareholder resolutions approving the offer.
  • A schedule of pending litigation.
  • Material contracts and agreements.
  • A clear breakdown of estimated expenses and fees.

Additionally, issuers must ensure that all financial and legal documents comply with Ethiopian standards, including obtaining necessary no-objections from relevant regulators when required.

Why These Requirements Matter

The General Requirements for Registration of Securities play a critical role in establishing Ethiopia’s capital market as a credible and reliable investment destination. By enforcing stringent eligibility criteria and comprehensive disclosure standards, ECMA ensures:

  • Investor Protection: Investors receive accurate, complete, and timely information to make informed decisions.
  • Market Integrity: The registration process helps prevent fraudulent activities and promotes fair trading practices.
  • Economic Development: A well-regulated securities market can attract both local and international investments, fueling Ethiopia's economic growth.

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