Introducing Single Member Companies in Ethiopia. Major Theoretical and Legal Considerations

Book excerpt: In an increasingly universalizing world, operating business in the form of companies is apparently becoming an indispensable aspect of modern commercial life. The major reason that led to the corporate form as the principal method of organization of commercial activity, among other things, is its advantage of limited liability. Limited liability, in its classical sense, implies the insulation of individual shareholders composing the company from the liability of company debts. Yet, the traditional corporate legal theory has confined the advantage of limited liability within the purview of multimember corporations, making it inaccessible to solo investors. However, quite recently, the historical relic of corporate theory that views corporations as a legally personified body of numerous subscribes of shares has undergone a sharp evolution, as have many other business practices and their legal bases. The purpose of this thesis is to look into notable literature on major corporate theories and analyze whether it would be applicable to single member companies (SMC). It also seeks to compare major legal frameworks governing SMC’s in comparative jurisdictions to show the legal and theoretical implications of introducing SMC’s into the Ethiopian corporate legal system.