What is the main source of law authorising this entity form?

Law No 159 of 1981 on joint stock and limited liability companies and law No 95 of 1992 on capital markets.

Executive Regulation of Joint Stock and Limited Liability Companies No.96 of 1982

Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The JSC has a separate legal personality

(Maximum) period of existence

Twenty-five years, renewable.

Governing document(s)

Articles of incorporation and by-laws both issued by virtue of a ministerial decree.

Liability of incorporators / shareholders

Founding shareholders are jointly liable for any undertaking they make on behalf of the company prior to the incorporation and are furthermore personally liable for any unpaid portion of the issued capital. Otherwise, the liability of shareholders is limited.

(Governing) bodies

General Authority for Investment and Free Zones (GAFI) and Financial Supervisory Authority (EFSA).

Other particularities

The name of the joint stock company should indicate the activity or objectives of the company. Joint stock companies’ shares may only be transferred through the stock exchange (even if they are not listed) and founder shares cannot be transferred for two fiscal years.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Yes.

Can this type of entity be publicly listed or held?

Yes.

Can this type of entity be used for a non-profit or charitable organization?

No.

Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

The main documents are:

The key document is a power of attorney from each founder either notarised in Egypt or legalised by an Egyptian consulate. If the power of attorney is issued in a language other than Arabic, it has to be translated by a government department. The translation process takes about 10 business days.

Involvement of notary, company register, governmental authorities

A bank account is opened after receipt of an Arabic language power of attorney and the founders are required to transfer the initial capital. The timing starts from the date on which the bank issues a certificate evidencing said deposit. The bank account is opened by the attorney on behalf of the founders.

Timing (estimate)

From the date on which the bank certificate is issued, the process takes a maximum of three (3) business days.

Main costs, including registration and similar fees (excluding legal fees)

Foreign shareholders must submit their passport copies, residential addresses and particulars of any shares or bank accounts they hold in Egypt for the purposes of security clearance.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The government fees are highly variable and have changed more than three (3) times in less than one (1) year. Fees vary depending on the company’s issued capital, object and geographical operation area.

The company’s object (business purpose) has to be indicated in the incorporation process.

Minimum number of incorporators / shareholders and residency requirements

A minimum of three (3) shareholders is required at all times and there are no residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

The company is managed by a board of at least three (3) directors with no residency requirements.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The minimum issued capital is EGP 250,000, and the minimum paid up capital is 25% of the issued capital to be deposited with the bank (note: previously the minimum paid up capital was 10% but the authorities now require 25%). The paid-up capital is deposited with the bank prior to incorporation.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No, all procedures are carried out by virtue of a power of attorney.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A tax number is issued to the company when it is incorporated as part of the incorporation process.

What is the title of the applicable company registry?

All businesses in Egypt are registered with the Commercial Register.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles , Ownership identification (direct and/or indirect ownership, 'beneficial owners') , Group structure , Share capital , Directors , Accounts , Insolvency, good-standing, liquidation , Liens and encumbrances on the shares , Liens and encumbrances on assets of the entity , Other (e.g. litigation, tax matters)

All the information described above must be filed at the company register and updated whenever modifications occur, however, the only public data available is the data mentioned in the commercial register. The commercial register is a publicly accessible document that shows, inter alia, the names of the board members and managers, and the company’s capital, duration, object, registration number and headquarters.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The executive body is the Board of Directors composed of at least three members. The board is charged with the general management of the company.

How are the members of the executive body appointed, dismissed and replaced?

The first board is named in the Articles of Association and then the board is elected by the general assembly. In certain cases, the Articles may contain a provision for an appointing authority that appoints and replaces a certain number of directors.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes an entity may be a director.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Non-executive directors are only required in the case of listed companies where they sit on the Board of Directors. Other companies may appoint non-executive members and may create a multiple tier board or other committees.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

General assembly, in which there are two types:

• Ordinary General Assembly which has the authority to –
• Elect and remove directors.
• Monitor the work of the Board of Directors and consider its discharge if applicable.
• Approve the financial statements.
• Approve the report of the Board of Directors on the company's activities.
• Approve the budget.
• Approve dividends.
• Appoint, remove, and decide on the remuneration of the auditor.
• Extraordinary General Assembly which has the authority to amend the company’s by-laws and cause its winding up or reorganisation. More specifically, it has the authority to –
• Increase or decrease the issued and authorised capital.
• Extend or reduce the term of the company or cause its dissolution.
• Change the number of directors.
• Change the company’s name, object or fiscal year.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

For the ordinary general assembly, the minimum quorum to convene is 25% of the issued shares, which may be increased in the by-laws to a maximum of 50%. In all cases the general assembly can duly convene with any number of shares in the event that it fails to convene due to the lack of a quorum on the first date set for it to convene. The vote required to pass a resolution or other action is a majority of the shares present or represented.

For the extraordinary general assembly, the minimum quorum to convene is 50% of the issued shares which may be increased in the by-laws for the first date set for it to convene, and 25% of the issued shares which may be increased in the by-laws in case the quorum is not achieved on the first date set for it to convene. The vote required to pass a resolution or action is two-thirds of the votes present except that resolutions on mergers, change of objects, dissolution, capital increases/decreases require 75%. The issuance of new preferred shares requires a majority vote of 75% of all issued shares (not just the shares present)

In all events, a general assembly is only valid if attended by the Board of Directors properly convened and the company’s auditor.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Listing rules are decided and amended from time to time by the Stock Exchange (EGX) and EFSA.

There are special requirements with respect to the offering circular, subscription rules, governance, disclosures, and audit. Furthermore, the current listing rules require the company to be profitable for at least two (2) consecutive years in order to be listed.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Companies are required to submit their audited balance sheets to GAFI annually.

Listed companies must submit their audited balance sheets quarterly to EGX and EFSA in addition to publishing them.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

Yes, it has to retain a chartered accountant as a statutory auditor.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

The company must also retain a legal counsel who is accepted to plead before the Court of Appeals.

What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Preference can be given with respect to liquidation proceeds, dividends and voting rights. Liquidation preference and special voting rights cannot be combined in one class of shares.

What documentation is required for the transfer of ownership interests?

Any transfer of unlisted shares must be effected through the EGX and the transfer of ownership is evidenced by EGX transfer certificates. As for listed shares, account statements are issued by Misr for Central Clearing, Depository and Registry.

Any transfer of shares of a joint stock company must take place through the EGX, whether the shares are listed or not. A licensed broker should be appointed to effect the shares’ transfer in accordance with the transfer procedures set out by the EGX and the FRA.

Any transaction exceeding EGP 20,000,000 must be pre-approved by the EGX Pricing Committee which convenes on a weekly basis to study and resolve on each envisaged transaction. In 2016, the EGX issued a decree regarding transfer of unlisted shares requiring consideration to be deposited with a bank regulated by the Central Bank of Egypt if the value of the transaction exceeds EGP 100,000 or if the transfer involves a foreign party. The competent committee at the EGX may, at its discretion, provide for exceptions in this respect.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Founding shares and shares issued in return for in-kind (i.e. non-cash) contributions may not be transferred (except to other founders) until financial statements covering two (2) full fiscal years are published. The Chairman of GAFI or his/her nominee can waive the stated restrictions in relation to joint stock companies established under Investment Law.

Are there any applicable stamp duties imposed when transferring ownership interests?

Yes.

How are shares issued? (including information on payment obligations, registration requirements)

Shares may be issued by virtue of a Board or General Assembly resolution subject to the approval of EFSA.

Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?

In kind contributions are subject to approval and secondary valuation by GAFI.

Current regulation allows for the issuance or sale of options in capital increases and the shareholders’ current account may be converted into shares. There is no regulation yet to govern convertible notes.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Companies must dispose of any treasury shares within one (1) year from their acquisition whether through capital reduction or disposal.

Share cancellation is allowed by virtue of a resolution from an Extraordinary General Assembly.

Any requirements with respect to distributions to shareholders?

The annual net profit of a joint stock company has to be appropriated and allocated in accordance with the provisions of the Companies Law and the related executive regulations as follows:

• At least 5% of the net profit is set aside as legal reserve; adding to this reserve will cease when its amount reaches 50% of the issued share-capital.
• At least 5% of the paid-up capital is payable to shareholders as a first distribution. Of the remaining profit, a maximum of 10% is deducted as remuneration to the board of directors. The remaining profit may be distributed to the shareholders as a second distribution, carried forward to the next year, or set aside in a special reserve account.
• The employees are entitled to receive, as part of profit-sharing, 10% of the first and second distributions mentioned above, but with a maximum of 100% of their annual salaries. Therefore, the actual dividends to the shareholders would be the total of the first and second distributions excluding the employees' profit sharing. The dividends are payable to the shareholders free of any taxes or duties.
• The dividends of the foreign shareholder can be repatriated abroad through one (1) of the accredited banks in Egypt without any restrictions, and free of any taxes or duties.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Shareholders may adopt a restrictive Shareholders Agreement that does not violate any of the mandatory provisions set by the governing laws.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Essentially equal to the costs of ratifying the Ordinary General Assembly and commercial chamber subscription.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

22.5% of the net profits.

Summary of any specific matters, e.g. recent or prospective major legal developments

A brief on the legislative development in Egypt includes:

• Egypt has recently issued a New Investment Law; and the government introduced some amendments to the Companies law No. 159/1981 (Companies’ Law). On 16 January 2018, the Egyptian President issued Law no. 4/2018 (New Amendments); three (3) weeks later the Ministry of Investment and International Cooperation issued the Executive Regulation (ER) of the New Amendments. The enactment of the New Amendments was to ameliorate Egypt’s ranking in international reports of doing business and to help bring the economy to its full potential.

The New Amendments introduced some new provisions and amended others; these amendments cover subjects ranging from introducing a new type of company, to amending companies’ incorporation provisions, in addition to granting extra powers to the General Authority for Investment (GAFI).

• Egypt has issued on 19 February 2018, a new Bankruptcy Law no. 11/2018 (New Law). The New Law replaces and revokes the bankruptcy rules set out in chapter 5 under the Commercial Code No. 17 of 1999 (Commercial Code). The New Law introduces a new philosophy.

For a long time, Egyptian bankruptcy regulations used an approach that dealt with the bankrupt as a criminal. However, it seems as if the New Law is trying to change this entrenched belief by introducing new mechanisms like reorganisation and by mitigating strictness with the debtor such as by mitigating the imprisonment penalty for non-fraudulent bankruptcy.

• New amendments were issued to the Capital Markets Law (CM Law) on 14 March 2017. The Capital Markets Law’s new amendments (CM Law Amendment) aim to increase competitiveness and create an inclusive economic climate.

The law introduced more protection for minority stakeholders, especially in acquisition cases. It gave the power to the Egyptian Exchange to lower registration fees in case of small businesses to encourage small companies to compete in the market. Moreover, the law introduces Sukuks to the exchange market; which are bonds compliant with Sharia law. The law sets the foundation for establishing a union for securities companies. The said union is composed of all companies operating in an activity pertaining to securities (e.g. securities brokerage, portfolio management, venture capital, holding companies, depositaries etc.). Also, the amendments include a harsher punishment for crimes related to financial malpractice, including any action that compromises trading fairness. On the other hand, it introduces commodities exchange and futures trading to the Egyptian market. The recent amendments also allow for unwinding stock market trades in case of international money laundering suspicions.