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PLC Exclusion From Crowdfunding Draft Sparks Startup Concerns

The Reporter · 5 hours ago · Read the Full Story on The Reporter
PLC Exclusion From Crowdfunding Draft Sparks Startup Concerns
AI SUMMARY

Proposed Ethiopian crowdfunding regulations restricting fundraisers strictly to share companies have sparked concern among experts over the exclusion of private limited companies and MSMEs.

  • Ethiopia’s proposed crowdfunding regulatory framework restricts eligible fundraisers strictly to share companies incorporated under the Commercial Code.
  • The Ethiopian Capital Market Authority held a public consultation on the draft directive at Skylight Hotel in Addis Ababa.
  • Industry experts warn that limiting eligibility to share companies marginalizes private limited companies, which are the predominant structure for small businesses and tech startups.
  • ECMA senior legal adviser Solomon Bekele explained that legal bottlenecks, such as a 50-shareholder limit for PLCs and the absence of mandatory boards of directors, prevent PLCs from engaging in equity crowdfunding.
  • Solomon suggested that PLCs wanting to tap into digital financing should convert into share companies.
  • The draft directive establishes annual fundraising ceilings across three tiers: ETB10 million for Category One, ETB25 million for Category Two, and ETB50 million for Category Three.
  • Individual retail investments are capped at five percent of an investor’s annual net income per offering, and 10 percent cumulatively per annum.
  • Businesses raising debt financing must provide three consecutive years of audited financial statements, prove ongoing profitability and positive cash flows, and submit cash-flow forecasts.
  • ECMA acknowledged the current absence of active credit rating agencies in Ethiopia but anticipates market entry from international agencies following ongoing discussions.
Read the Full Story on The Reporter
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