Navigating Egypt’s Corporate Law: A Guide for New Businesses

Introduction

Starting a business in Egypt requires a thorough understanding of the country’s corporate laws and regulations. This comprehensive guide will walk you through the key aspects of Egyptian corporate law that new businesses need to know.

Egypt’s legal system is primarily based on civil law, with influences from Islamic law in personal and family matters. The cornerstone of Egyptian corporate law is:

• The Companies Law No. 159 of 1981
• The Investment Law No. 72 of 2017
• The Capital Markets Law No. 95 of 1992

These laws govern the establishment and operation of businesses in Egypt, providing a framework for corporate structures, governance, and compliance.

Choosing the Right Legal Entity

When starting a business in Egypt, one of the first decisions you’ll need to make is selecting the appropriate legal entity. The most common options include:

1. Joint Stock Company (SAE)
2. Limited Liability Company (LLC)
3. One Person Company (OPC)
4. Branch of a Foreign Company

Each entity type has its own advantages and considerations:

Entity Type	Minimum Capital	Minimum Shareholders/Partners	Liability
SAE	250,000 EGP	3 shareholders	Limited
LLC	No minimum	2 partners	Limited
OPC	1,000 EGP	1 owner	Limited
Branch	N/A	N/A	Unlimited

Key Considerations

When choosing your entity type, consider factors such as:

• Ownership structure
• Liability protection
• Capital requirements
• Legal formalities and reporting obligations
• Tax implications
• Foreign ownership restrictions

Pro Tip: The LLC is often the preferred choice for foreign investors due to its flexibility and relatively simple governance structure.

Incorporation Process and Requirements

Once you’ve selected your entity type, you’ll need to navigate the incorporation process. Here’s a step-by-step guide:

1. Reserve Company Name: Obtain a non-confusion certificate from the Commercial Registry.
2. Prepare Documents: Draft and notarize the company’s Articles of Association.
3. Capital Deposit: For SAEs, deposit the required minimum capital in a bank account.
4. Submit Application: File incorporation documents with the General Authority for Investment and Free Zones (GAFI).
5. Obtain Approvals: Secure necessary licenses and permits from relevant authorities.
6. Register with Commercial Registry: Complete registration within 15 days of incorporation.
7. Tax Registration: Register with the Egyptian Tax Authority.
8. Social Insurance Registration: Register employees with the Social Insurance Authority.

Required Documents

• Non-confusion certificate
• Notarized Articles of Association
• Bank certificate of capital deposit (for SAEs)
• Power of attorney for legal representative
• Copies of shareholders’/partners’ ID documents
• Lease agreement for company premises

Note: The incorporation process typically takes 2-4 weeks, depending on the entity type and sector.

Corporate Governance and Management

Egyptian corporate law sets out specific requirements for company governance and management:

Board of Directors (SAEs)

• Minimum 3 members
• At least one Egyptian national required
• 3-year terms (5 years for first board)
• Regular meetings (at least quarterly)

Managers (LLCs)

• One or more managers
• Can be partners or third parties
• Powers defined in Articles of Association

Shareholder Rights

• Right to attend and vote at general assemblies
• Access to financial statements and company records
• Preemptive rights in capital increases

Annual General Meetings

SAEs and LLCs must hold annual general meetings within 3 months of the fiscal year-end to:

• Approve financial statements
• Appoint auditors
• Elect board members/managers (if applicable)
• Approve profit distributions

Foreign Investment Regulations

Egypt has taken steps to attract foreign investment, but some restrictions remain:

• Ownership Limits: Some sectors restrict foreign ownership to 49% (e.g., importation for resale).
• Sinai Peninsula: Special rules apply, requiring 55% Egyptian ownership.
• Approvals: Certain acquisitions may require government approval.
• Currency Controls: While relaxed in recent years, some restrictions on foreign currency transactions exist.

Investment Incentives

The Investment Law offers various incentives for qualifying projects:

• Tax exemptions or reductions
• Customs duty exemptions on imported equipment
• Land allocation at discounted prices
• Streamlined licensing procedures

Taxation and Incentives

Understanding Egypt’s tax system is crucial for business planning:

Key Taxes

1. Corporate Income Tax: 22.5% on net profits
2. Value Added Tax (VAT): Standard rate of 14%
3. Withholding Tax: 10% on dividends paid to non-residents (may be reduced by tax treaties)
4. Stamp Duty: Varies based on transaction type

Tax Incentives

• Special economic zones offer reduced tax rates
• R&D expenses may be tax-deductible
• Accelerated depreciation for certain assets

Tip: Consult with a local tax advisor to optimize your tax strategy and ensure compliance.

Labor Laws and Employee Protection

Egypt’s Labor Law No. 12 of 2003 governs employment relationships:

Key Provisions

• Working Hours: 8 hours per day, 48 hours per week
• Overtime: Paid at 135% of normal rate (175% on weekends, 200% on holidays)
• Annual Leave: 21 days per year, increasing with seniority
• Maternity Leave: 90 days paid leave
• Termination: Specific grounds required for termination, severance pay mandated

Employee Representation

• Workers have the right to form and join trade unions
• Companies with 50+ employees must have a joint consultative committee

Anti-Corruption and Economic Crime

Egypt has strengthened its anti-corruption framework in recent years:

• Anti-Bribery Laws: Prohibit offering or accepting bribes to/from public officials
• Money Laundering: Strict regulations on financial institutions to prevent money laundering
• Whistleblower Protection: Limited protections exist, but new laws are under consideration

Best Practices

1. Implement robust internal controls and compliance programs
2. Conduct thorough due diligence on business partners
3. Provide regular anti-corruption training to employees
4. Establish clear reporting mechanisms for suspected violations

Mergers, Acquisitions, and Competition Law

Egypt’s merger control regime requires notification to the Egyptian Competition Authority (ECA) for transactions meeting certain thresholds:

• Combined turnover in Egypt exceeds EGP 100 million
• Market share of combined entity exceeds 25%

Key Considerations

• Timing: File within 30 days of signing the agreement
• Waiting Period: ECA has 60 days to review (extendable)
• Sanctions: Failure to notify can result in fines up to 1% of turnover

Winding Up and Liquidation

Companies may be dissolved voluntarily or by court order. The liquidation process involves:

1. Appointing a liquidator
2. Notifying creditors and settling debts
3. Distributing remaining assets to shareholders
4. Final general assembly to approve liquidation report
5. Deregistration from Commercial Registry

Important: Directors remain liable for company obligations until liquidation is complete.

The Path Forward: Navigating Egypt’s Evolving Business Landscape

As Egypt continues to reform its business environment, staying informed of legal and regulatory changes is crucial. Key trends to watch include:

• Ongoing economic reforms and privatization efforts
• Expansion of digital government services
• Growing emphasis on environmental and social governance (ESG)
• Increased focus on developing SMEs and entrepreneurship

By understanding and navigating Egypt’s corporate law framework, new businesses can position themselves for success in this dynamic market. Remember to seek professional legal and tax advice tailored to your specific business needs and goals.