State to Impound Dividend of Ethiopian Origins

Foreign nationals of Ethiopian origin who are shareholders in Ethiopian banks and insurance have been given 60 days to relinquish their shares and return their share certificates.

Upon returning their share certificates, the banks are expected to pay outstanding dividends of two years, 2014/15 to 2015/16.

At the end of fiscal year 2015/16, banks were ordered to identify their respective shareholders of Ethiopian origin and pass the list to law enforcement bodies. Payment of the annual dividend been delayed because of this issue.

Last week’s guidelines clarified a pending issues – waiver of any possible criminal liability for overlooking the legal prohibition from engagement in financial sector, and the release of the suspended two years dividend.

What is left of their investment  four months after the end of the last fiscal year, June 2016, will be transferred to the Central Treasury or Ministry of Finance &  Economic Cooperation accounts.

Last week the National Bank of Ethiopia issued a new guideline which put an end to the involvement of foreign nationals of Ethiopian origin in the banking and insurance industries as shareholders.

The guideline, entitled The Manner of Relinquishing Share holding of Foreign Nationals of Ethiopian Origin in a Bank or Insurance Company was distributed to all banks and insurance companies a week ago, with specific details of the manners of surrendering the shares.

Banks and insurance companies are expected to publicly issue a notice to their shareholders informing them of the guideline on a weekly basis for 30 calendar days, requesting that any shareholders with foreign nationality give up their shares and collect their investments.

Last week, a handful of banks and insurance companies including Zemen Bank S.C, Oromia International Bank S.C and United Insurance Company S.C had notified last week shareholders with foreign citizenship to return their share certificates to the companies within 60 days. All shares in this category will be paid for in cash.

It might be a little bit difficult for smaller banks to get the returned shares sold, said a CEO of a private bank. However the bigger once will have no problem.

“I don’t understand the motive of the Central Bank to exclude the existing shareholders of Ethiopian origin from the banking business,” commented a director at a private bank. So far I dont see any negative impact of these shareholders on the overall banking business.

If shareholders fail to come forward as per the call or for shares whose value was paid for without receiving share certificates, their shares will be deemed surrendered to the respective bank or insurance company. Cancelled shares have to be notified to the public within 15 days of the cancellation.

Institutions are allowed to sell shares to the public via an open public auction. The guideline forbids negotiations. In this regard, prices where the shares are being sold should not be less than their par value.

Banks and insurance companies are supposed to report to NBE and the Ministry when dividends are paid, shares cancelled or sale process is completed.

The guidelines were effective October 28, 2016.







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