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

Law No 159 of 1981 on Joint Stock and Limited Liability Companies.

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 LLC has a separate legal personality.

(Maximum) period of existence

Twenty-five years, renewable.

Governing document(s)

Articles of incorporation issued by virtue of a ministerial decree.

Liability of incorporators / shareholders

No liability beyond the company’s assets.

(Governing) bodies

General Authority for Investment and Free Zones (GAFI).

Other particularities

NA

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

The easiest legal form under Egyptian law for those purposes.

Can this type of entity be publicly listed or held?

No.

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 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

From the date of the translation between one (1) and three (3) business days.

Timing (estimate)

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

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

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.

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

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

Minimum number of incorporators / shareholders and residency requirements

Egyptian Law states that an LLC may be formed with a minimum of two (2) shareholders and a maximum of 50 shareholders.

There is no minimum Egyptian (or resident) shareholding required to form an LLC so it may be 100% owned by foreigners.

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

One (1) director (or more) with no residency requirements.

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

EGP 100 to be paid after incorporation.

No requirement to set up a bank account.

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 incorporated as part of the incorporation process.

What is the title of the applicable company registry?

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, 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?

An LLC is managed by one or more directors, however, there is no executive body.

A supervisory committee has to be established from among the shareholders in case the company has 10 or more partners.

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

The first director(s) is (are) named in the Articles of Association, then they are subject to a vote of confidence in the annual general assembly.

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?

The company can have non-executive directors if it so determines.

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

General assembly, of which there are two types:

• Ordinary General Assembly which has the authority to –
• Elect and remove directors.
• Monitor the work of the directors and consider their discharge if applicable.
• Approve of the financial statements.
• Approve the directors’ report 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 it’s 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 in 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 a quorum of any number of shares in the event that it fails to duly convene with a quorum on the first date set for it to convene. Adoption of resolutions or other actions requires 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% which may be increased in the by-laws in case the quorum is not achieved on the first date set for it to convene. Adoption of a resolution or other action requires two-thirds of the votes present except for resolutions on mergers, change of objects, dissolution, capital increases/decreases require which require 75%. The issuance of new preferred shares requires a majority of at least 75% of all issued shares (not just the shares present)

In all events, a general assembly is only valid if attended by at least one (1) director and the company’s auditor.

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

Not applicable.

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.

Is the entity permitted to determine its own financial year?

Yes.

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

Yes, a chartered accountant has to be retained 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. There are no requirements for appointment of officers or other employees unless the company chooses to have specific requirements.

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

Shares or parts.

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

No.

What documentation is required for the transfer of ownership interests?

A share transfer agreement, and the Articles of Incorporation would provide whether or not such an agreement needs to be notarised followed by an extraordinary general assembly to reflect the names of the new partners and their percentages, after which the ownership is inscribed in the company’s partners’ ledger.

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

The general assembly must be ratified by GAFI and an inscription in the partners’ ledger. If the Articles provide for a right of first refusal, a notice needs to be served to the company and in turn to the other partners who would either exercise or waive their right of first refusal.

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

Yes, on the share purchase agreement.

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

By virtue of the Articles of Incorporation and subsequent amendments.

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 valuation by GAFI. Companies can be financed by the partners’ current account or subordinated debts.

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

Capital reduction by a general assembly purchase is the only way permitted. There is no regulation governing the company’s repurchase of its stock.

Any requirements with respect to distributions to shareholders?

The annual net profit of a limited liability company has to be appropriated 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 the partners (and employees) as a first distribution. Of the remaining profit, a maximum of 10% is deducted as remuneration to the 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.
• Only in the case of LLCs with a capital of EGP 250,000 or more, 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. LLCs with a lesser capital are not required to make any payments to employees for dividend distribution.
• 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 restrictive a 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)?

General assembly ratification costs 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 additional 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 (GAI).
• 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 to adopt an approach that deals with the bankrupt as a criminal. However, it looks like the New Law is trying to change this entrenched belief by introducing new mechanisms like reorganisation and by mitigating strictness with the debtor like mitigating 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 gives 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). Also, the amendments include a harsher punishment for crimes related to financial malpractice, including any action that compromises trading fairness.

On the other hand, the law 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.