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Monitoring the Nationality of Shareholders of a Bank (Directive No. 195/2021)

National Bank Of Ethiopia195/2021

Summary

This directive establishes mechanisms for banks to monitor and ensure that their shareholders are exclusively Ethiopian nationals or institutions wholly owned by Ethiopian nationals, in accordance with existing banking laws.

Who's affected

Banks operating in Ethiopia and their shareholders.

Action required

Banks must establish and notify the National Bank of a mechanism to ensure all shareholders are Ethiopian nationals or companies fully owned by Ethiopian nationals, and report any non-compliance.

Key points

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  • Banks must ensure all shareholders are Ethiopian nationals or institutions wholly owned by Ethiopian nationals.
  • Mechanisms for monitoring shareholder nationality must be established and reported to the National Bank.
  • Strict verification procedures are required for share transfers and dividend payments.
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    • Non-compliance leads to suspension of dividends/transfers and penalties.
    • Reporting requirements to the National Bank and Police are mandated for non-compliant shareholders.

Requirements

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  • The board of directors of a bank must put in place and notify the National Bank of a mechanism to ensure all shareholders are Ethiopian nationals or companies fully owned by Ethiopian nationals.
  • The board of directors must monitor the implementation of this mechanism.
  • Shareholders transferring or selling shares must present valid documents evidencing Ethiopian nationality.
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    • Agents transferring shares must present copies of valid documents evidencing the principal shareholder's Ethiopian nationality and certify their authenticity.
    • Banks must verify the nationality of new persons before selling or transferring shares.
    • Banks must pay dividends directly to shareholders upon presentation of valid identification documents certifying Ethiopian nationality.
    • Banks must pay dividends to agents upon presentation of copies of valid identification documents certifying the shareholder's Ethiopian nationality and a declaration statement from the agent.
    • Banks must pay dividends to usufructuaries upon presentation of copies of valid identification documents certifying the shareholder's Ethiopian nationality and a declaration statement from the usufructuary.
    • If a shareholder is a juridical person, banks must check if the legal entity is wholly owned by Ethiopian nationals before paying dividends.
    • If a bank identifies a non-Ethiopian national shareholder, it must suspend dividend payment and transfer of shares.
    • Banks must notify the National Bank and the Police in writing within five working days of identifying a non-Ethiopian national shareholder, with supporting evidence.
    • Banks must file a suspended dividend payment and/or share transfer or selling report in the prescribed format to the National Bank at the latest nine months after the end of its financial year.

Rights and permissions

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  • Shareholders have the right to receive dividends and transfer/sell their shares, subject to compliance with this directive.
  • Banks have the authority to verify shareholder nationality and suspend payments/transfers in cases of non-compliance.

Restrictions

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  • Banks shall only be owned by Ethiopian nationals and institutions wholly owned by Ethiopian nationals.
  • Payment of dividends and transfer of shares are suspended if a shareholder is identified as not possessing Ethiopian nationality.

Penalties

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  • A bank that fails to comply with the provisions of this directive shall be penalized in accordance with article 58(7) of Banking Business Proclamation No. 592/2008.

Objectives

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  • To ensure banks are owned by Ethiopian nationals and institutions wholly owned by Ethiopian nationals.
  • To establish a reviewing and monitoring mechanism to track shareholder nationality on an ongoing basis.
  • To provide guidelines for verification during share selling/transfer and dividend payments.

Organizations

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  • National Bank of Ethiopia
  • Police

Legal references

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  • Banking Business Proclamation No. 592/2008, Article 59(2)
  • Banking Business Proclamation No. 592/2008, Article 58(7)
  • Banking Business Proclamation No. 592/2008, sub-article 2(2)
Original sourcehttps://justice.gov.et/en/directives/monitoring-the-nationality-of-shareholders-of-a-bank-directive-no-195-2021/
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