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The dismissal of PLC's manager by its board under the revised Ethiopian commercial code, and the steps to follow

Ethiopia's Revised Commercial Code (Proclamation No. 1243/2021) makes governance of a private limited company by a board of directors optional. It means it is up to the PLC to have such a type of corporate governance. See Article 513 of the revised commercial code.

If the private limited company is to be governed by a board of directors, the detailed provisions governing the Board of Directors of Share Companies (Articles 296, 297, 298, 300-312, and 314-330) apply to the PLC's board.

Election and dismissal of the manager of the PLC (Articles 514-517)

The manager of the PLC is considered an employee of the PLC.

Where the PLC has a board, it is the board itself that has the power to elect and dismiss the manager. The manager of the company can also be dismissed by the court if there is a good cause such as breach of duty. This legal action has to be initiated by shareholder of the PLC.

Steps of dismissal

1. Ordinary meeting of the board

Manager of PLC may be dismissed by an ordinary general meeting irrespective of whether he is appointed in the memorandum of association or by an ordinary general meeting. Shareholders vote is not a requirement here to initiate the process of the dismissal. Board of directors do it on their behalf.

2. Valid ground of dismissal

There should be a proven reason to dismiss the manager of the company. Breach of duty, lack of competency, and conflict of interest are some examples of good cause to remove the manager.

3. Compliance with the procedures of dismissal

The decision to be undertaken should be compliant with the right to be heard of the manager, employment contract, documentation with the commercial registry, etc.

Under the Ethiopian Commercial Code, a private company’s top executive (manager/CEO) can only be dismissed by the organ that appointed them or as provided in the company’s own articles of association. Article 527 of the Commercial Code states that:

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  A manager appointed by the memorandum of association may be dismissed only by the members (shareholders) in a decision taken according to the company’s rules.

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  A manager appointed by the members similarly may be dismissed by them.

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  The memorandum of association can also allow removal “at the pleasure of the members.”

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What This Means in Practice

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  If your articles give the board explicit authority to appoint and remove the CEO/manager, then the board can remove them without a shareholder meeting.

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  If the articles do not grant this power to the board, then removal must be done by the shareholders at a properly convened meeting or via written shareholder resolutions.

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Always follow notice, quorum, voting, and minute‑taking procedures to avoid invalid decisions or future legal challenges.

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Nevertheless, under Article 527 of the Ethiopian Commercial Code, the CEO/manager must be removed by the members (shareholders) unless the company’s MOA explicitly give the board authority to do so. If the articles are silent or reserve removal for members, a proper shareholder meeting or written resolution is required.

If the company is a Share Company, then it can't be done; however, if it is not- meaning it is a PLC- then it can be done.