Privatization of public enterprises or state-owned business entities has been greatly acclaimed as one of free market ideas and a sort of democratic rule on equitable distribution of wealth. However, ill-designed modes of privatization, particularly, Article 5 of the Proclamation No.146/1998 transfers the public enterprises to share companies in Ethiopia, goes out of the purpose and creates legal and practical problems on the operation of share companies. The crux of this paper focuses on the formation and operation of state-owned share companies which are evolved by the process of privatization in Ethiopia. It advocates that the new advent of formation of company is out of the Commercial Code of the State and legal jurisprudence ever experienced. Hence, the status of such companies is carefully discussed from the legal point of view. These companies situate in different place than company law perspective, the purpose of privatization sought in these companies and the economic policy which the country follows. To this effect, the legal doctrines of the area, the practice of privatization from Privatization and Public Enterprises Supervising Agency (PPESA) are explored.
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