Justices at the appellate court of the highest instance have dismissed an appeal by Zemen Bank to overrule a Supreme Court award of over 10 million Br to Ermias Amelga and Tekle Almeneh, founding shareholders of the Bank.
The Cassation’s ruling concludes the judicial litigation once and for all which was taken to the Federal High Court on December 20, 2012. The case was started on February 07, 2012, when the two founders demanded the Bank to give them its 10pc of profit from the previous two years, along with a nine percent interest rate.
When the Bank rejected their claim, the two filed a civil suit and proved to the High Court that their name was on the prospectus with their designation being ‘founders’. Therefore, the memorandum of association entitles them to a 10pc share from three years of profits that the Bank makes, they argued before the Justices through their lawyer.
However, Zemen defended that the presence of their names on the prospectus alone cannot guarantee them the share from profits. Rather, shareholders have to decide during a general assembly meeting whether the two can share profits or not, according to the Bank.
They also argued that Ermias has received payments and commissions for his founding role through Access Capital Services S.C., a company which they claim is owned by him. In addition, Ermias has served as founder, board chairman, and consultant of Zemen Bank in a distinct contract. If he shares profits, that lets him both pay and receive, making the process inappropriate, the Bank reasoned. Therefore, the Bank rested its case claiming that only the subscribers’ meeting was the valid entity to particularly decide on the issue.
For Tekle, Zemen claimed that he was paid a 10,000 Br monthly salary for his contribution during Zemen Bank’s formation, therefore he does not deserve any share from profit, according to the Bank.
The lawsuit finally, after over four years of litigation, ruled in favour of Zemen at the High Court, denying Ermias and Tekle’s claim, reasoning that they have no valid reasons to share in any profit. Even if Access Capital has its own personality, the Justices reasoned that Ermias was the signee of the contract on behalf of Access. And thus, he was paid for his service as a founder. Tekle also founded the Bank as a paid employee, according to the High Court’s ruling.
The High Court also compared the experience of Awash, Nib, Lion and United Banks, which shared their profits with their founders after subscribers meetings decided in a separate decision to share with them the profit.
Accordingly, on July 7, 2016, presided by Judge Negash Kidane, the High Court concluded the litigation in favour of Zemen, which aggrieved the losers to lodge an appeal to the Supreme Court beseeching a complete reversal.
Chaired by Justices Berhanu Amenew, Gebeyehu Feleke, and Teshome Shiferaw, the Supreme Court upturned the judgment of the lower court on March 27, 2017. They reasoned that for sharing profits, a separate decision of a subscribers meeting is not a mandatory rule of the commercial law.
The judgment underscored that founders who contributed money and knowledge to the formation of share companies deserve to reap what they sow. And as long as the memorandum of association entitles them the share from profit and the General Meeting of the share company has approved this, a distinct decision by the meeting of the subscribers is not a mandatory legal requirement, according to the appellate judgment.
The experience of other banks also proves that there is no clear and consistent status on banks with regard to founders and their privileges, reads the judgment.
In its turn, dismayed, Zemen Bank filed its appeal to the Court of Cassation which unfortunately is not a regular appellate judicial body. Rather, it entertains cases only when they have a fundamental error of law.
Preceded by Justices Asegid Gashaw, Abdurahim Ahmed, and Kedir Ally, the highest instance, on May 10, 2017, determined that the Bench could not find a fundamental error of law element in the Supreme Court’s ruling. Hence, the appeal is rejected without trial.
The judgment credited 10.3 million Br to Ermias and Tekle and confirmed Zemen Bank’s judgment debt to reimburse the winners with some of the litigation costs they have covered.
In the previous fiscal year, Zemen’s profit overshot by 32pc to 203 million Br and it also increased its paid up capital by 30pc to 650 million Br. Currently, the Bank is erecting its headquarters in the heart of Ethiopia’s financial district, along Ras Abebe Aregay Street, at a cost of 1.23 billion Br.
About two weeks ago, Access Capital Services S.C. decided that Ermias would continue to serve in his position as chairman. Also, about 18 months ago, the Board of Directors of Access Real Estate removed him from the same position.
Ermias, the business mogul connected with Access Real Estate, Access Capital, Edget Edible Oil Factory, Apex Bottling, and Zemen Bank, has been frequently involved in many civil and criminal cases ever since his return from the United States in the mid-1990s. He has also been in exile to the United Arab Emirates after charges related to his businesses.
Tekle, on the other hand, was once head of the Bank. He has also founded Access Real Estate and other businesses with Ermias.
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