Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Construction Business
2. Construction Projects
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1. construction Business
Points of Focus
The Constitutional
Framework •Definition of Business Organization
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Construction Business
Constitutional Framework
According to Article 41(1) & (2) of the Constitution :( Economic, Social
& Cultural Right):
Every Ethiopian has the right to engage freely in economic activity and to
pursue a livelihood of his choice anywhere within the national territory.
Every Ethiopian has the right to choose his or her means of livelihood,
occupation and profession.
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Definition of Trader
According to Article 5 of the Commercial Code (Persons to be regarded
as Traders)
Persons who professionally and for gain carry on any of the following
activities shall be deemed to be traders.
It should be for gain(for profit though loss is a risk attached to the business);
The activity should be one which is enumerated or falls under Article 5;
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Exclusions
According to certain provisions of the Commercial Code certain activities
are specifically excluded from being a trading activity & the persons from
being a trader.
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Restrictions
Incapable persons are restricted not to operate a trade activity by Law. Who
are they?
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Restrictions
Judicially interdicted persons; (Article 351 of the Civil Code, these are
insane persons)
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Prohibitions
In operating a business, if a trader or business organization is legally allowed
to do so, has to refrain from certain legal prohibitions.
These prohibitions are provided under Article 133 of the Com. Code and
under Proc. No. 329/2003 of the Trade Practice Proclamation.
According to Article 6 of the said Proc. The following shall deemed to have
been anti-competition;
Agreements of jointly fixing a price;
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Definition of Business Organizations
for the valid Contract. These elements are, (according to Article 1678 of
the Civil Code) will be discussed in construction contacts.
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Classification of Business Organizations
According to the Commercial Code the following business organizations
are recognized.
Ordinary Partnership;
Joint Venture;
General partnership;
Limited Partnership;
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Ordinary Partnership
It is regulated under Article 227-270;
Joint Venture
It is regulated under Article 271-279;
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General Partnership
It is regulated under 280-295;
Limited Partnership
It is governed under Article 296-303;
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Share Company
It is governed under Article 304-509;
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Private Limited Company
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Common & Distinguishing Features
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Common & Distinguishing Features (Cont’d)
A business organization, especially that of Share Company, may have
Nationality (foreign or Ethiopian); it has its own legal consequences.
In Cash;
In Kind;
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Exclusions
The following are excluded from being a business organization.
Associations; ( Please, see the definition of Association above)
Cooperative; a Society established by individuals on voluntary basis to
collectively solve their economic and social problems and to
democratically manage same.”
The following are illustrative of Cooperative Societies:
Housing Cooperative Society;
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Definition & Elements of Business
Definition of Business
According to Article 124 of the Commercial Code: A business is an
incorporeal movable consisting of all movable property brought together
and organized for the purpose of carrying out any of the commercial
activities specified in Article 5 of the Commercial Code.
Elements of Business
Elements of business divided in to two major categories:-
Corporeal elements; and
Incorporeal elements
Corporeal Elements
Equipment;
Goods;
The said Equipment and Goods should be used to operate the activity
of trade or the business. Immovable properties are not part of the
business. Like the building in which the business is conducted. 19
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Incorporeal Elements
According to Article 127 of the Commercial Code, the incorporeal elements of
a business are consisted of;
Mainly of a Goodwill; and
The Special designation under which the trade is carried on; the
right to Lease the premises in which the trade is carried on ;
Patents or Copyrights;
Such special right as attached to the business itself and not to the
trader;
Goodwill
According to Article 130 of the Commercial Code;
The goodwill results from the creation and operation of a business and is a
value which may vary according to the probable or possible relations
between a trader and third parties who may require from him goods or
services.
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Formation, Operation & Dissolution of a
Construction Business
At the Federal level the Ministry of Trade and Industry, as per Article
15(5) of Proc. No. 471/2005 and Proc. No. 67/1997, Regulations No.
13/1997 including the amendments thereof, is empowered to undertake
a commercial registration and to issue a business license.
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Institutions for construction works
The Federal Investment Agency;
(To secure investments permit, to be entitled any incentives )
The Ministry of Transport & Communication;
(To secure registration & plate number for heavy trucks)
Ministry of Works & Urban Development;
(To secure professional competence certificate,…. )
Federal Revenues & Customs Authority;
(To be registered as tax payer)
(To secure investment incentives, if any)
Public Procurement Agency;
(To get registered in the supplier’s list)
Ministry of Water Resources
(To secure professional competence certificate in case of water works)
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Registration of Business
No person shall engage in any commercial activity unless registered in a
commercial register (According to Article 5(1) of Proc. No. 67/1997)
There are two types of registration: Principal & Summary Registration.
Principal Registration
The following two provisions (Article 5(2) & (3)) of Proc. No. 67/1997,
respectively, may give a fair understanding about Principal Registration.
Any person other than those principally registered by the Ministry (of Trade
& Industry), shall principally registered in the place where the head office is
situate.
Any person shall principally register only once even though he carries on
different commercial activities in different Regions.
Summary Registration
Article 5(4) may give us the notion of Summary Registration.
Any person, who establishes branches in several Regions outside the place
where he is principally registered, shall be summarily registered in those
Regions by making a reference to the principal registration.
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Contents & Formalities
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Types of Commercial Registrations
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The effects of the Registration are:
Business License
According to Article 21(1) of Proc. No.67/1997
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There are legally designated public bodies to grant or deny this certificate
for construction works are:
The Ministry of Works and Urban Development( on the basis of
Article 18(1)(d) of Proc. No. 471/2005) with respect to engineers
and architects, for the contractors and consultants to those
operating in more than one Regional State.
The Ministry of Water Resources (on the basis of Article 8(1)(a)
of Proc. No. 197/2000) to those contractors and consultants to
engage in Water Works design and construction.
The business license, if issued, is valid for one year and has to
be renewed within six months of the given fiscal year.
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Suspension
Where the business license holder fails to rectify(put right;
correct) certain shortcomings as prescribed by Law, the
business license shall be suspended.
The following measures shall be taken against the business
during suspension.
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2. Cancellation
The following are grounds for the cancellation of the license.
If the license holder uses the license for the purpose other than for
which it was issued;
If the license holder has failed to renew his license for the reason other
than force majeure;
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Sanctions ( a threatened penalty for disobeying a law or rule
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Other Obligations of Traders or Business Organizations
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