Investment business in Egypt

Which kind of companies foreigners can establish in Egypt?

Foreign enterprises or foreign individuals who wish to conduct business in Egypt, can do so by establishing a legal permanent entity for them in Egypt, the Egyptian law permits foreign investors to establish any type of the following companies types:
  1. Limited Liability Company (LLC)

  2. Companies Limited by Shares (CLS)

  3. Joint Stock Company (JSC)
If foreign investor doesn't desire to have a permanent presence for him in Egypt; he may set up a branch or representative office in Egypt, or appointing a commercial agent to sell and distribute products in the Egyptian market. All of these business forms are discussed in detail below.

How to make business under the investment law?

Foreign investors or foreign companies may be incorporated as a legal entity in Egypt under either the Commercial Companies Law No 159 of 1981 or The Law of Investment's Guarantees and Incentives No 8 of 1997 (hereinafter referred to as the “Investment Law”).

The rules and regulations governing the structure and incorporation procedures of entities under the Investment Law are identical with the rules governing it under the Commercial Companies Law. However, companies which are incorporated under the Investment Law are licensed by other authority, governed by various type of tax and by capital investment incentives.

The targeted sectors by the investment law include the following: (Article 1 of the Investment Law)

Investment guarantees and incentives outlined at law shall apply to all companies exercise their commercial activities in any of the previous sectors.

There is a lot of investment guarantees afforded for those companies serving mentioned sectors such as: There are many incentives afforded to the companies working under the Investment Law such as: applying a fixed customs tax, at a unified rate 5% of the value of all imported machines, equipments, and instruments necessary for their establishment.

Article 28 of the Investment Law provides that the cabinet may issues a decree granting state's land or lands owned by public juridical persons, free of charge, to the companies are incorporated under the Investment Law to serve the targeted sectors, in accordance with the prescribed procedures in the executive regulation of this law.

In addition to investment guarantees and its financial incentives, the Investment Law provided that the cabinet has the authority for the establishment of Free Zones, and the investment authority has the right to establish Private trade Free Zones in Egypt (Article 29 of the Investment Law).


Build a company under the commercial companies law

1. The Limited Liability Company (LLC)

a) Formation

LLC may be formed with a minimum of two share holders and a maximum of 50 shareholders. If the number of shareholders should fall below two at any time, the LLC will be deemed dissolved by force of law unless the company proceeds within a period of six months maximum to complete. (Articles 59 and 60 of the Ministerial Decision Implementing the Commercial Companies Law). There is no minimum Egyptian shareholding required to form a LLC.

The founding shareholders of the LLC must submit an application requesting a permission to incorporate a LLC.

The Ministerial Decision Implementing Commercial Companies Law outlines the mandatory provisions that must be included in the Memorandum of Association.

The LLC is incorporated once it is registered in the Commercial Register (Article 1 of Law 34 of 1976 governing the Register of Commerce and Article 77 of the Commercial Companies Law).

The LLC must also maintain a Register of Partners in its head office, which must contain names, nationalities, domiciles and occupations of the partners; the number of shares owned by each partner; the sum paid by each; and the assignment or transfer of shares and related relevant information (Article 275 of the Commercial Companies Law).

b) Capital

The minimum share capital required to form an LLC shall not be less than the minimum stated by the executive regulation.

The Capital must be divided into equal shares, either in cash or in kind but shall not be in the form of work that the shareholder would perform to the company.

The value of each share must be not less than 100 L.E each.

All portions shall be subscribed, and their value paid up in full for the account of the company under constitution in an account to be opened to this purpose at one of the authorized banks by a Ministerial Decree.

Each partner/shareholder shall be liable to the extent of the value of his shares and not be responsible for more than the value of his share (The Ministerial Decision of Implementing the Commercial Companies Law).

c) Management

The management of an LLC may be vested in one or more managers from among the partners or others. At least one of the managers shall be of Egyptian nationality (Article 281 of the Ministerial Decision implementing the Commercial Companies Law).

The manager(s) shall be nominated by the partners for a definite or an indefinite term.

The manager(s) nominated by the partners in the company's act of foundation without a definite period shall be considered nominated for the life time of the company unless otherwise prescribed in the contract.

The manager(s) shall have full authority to represent the LLC via third parties, unless such authority is limited or qualified by the Memorandum of Association.

A shareholders’ decision changing the manager(s) or limiting the authority of the manager(s) shall not be valid unless it is entered in the Commercial Register.

A supervisory board is required if the LLC has more than ten shareholders, it's consisting of at least three partners nominated by the company act of foundation.

(Articles 120; 121; 122 and 123 of the Commercial Companies Law)

d) Objects

An LLC may conduct a variety of business activities, with the exception of insurance, banking, savings, receiving deposits or investing funds on behalf of others. (Article 5 of the Commercial Companies Law.)

e) Personnel
Requirements

The LLC is subject to the provisions of the Commercial Companies Law relating to the employment of Egyptian personnel. Where the LLC’s share capital is 250,000 L.E. or more, it must distribute 10% of the company’s net profit to its employees up to a maximum amount equal to the total annual payroll.

LLC’s incorporated under the Investment Law whose objects are among the activities listed in Article 1 of the Investment Law are exempt form this requirement

f) Company title

The company may adopt a particular name, which may be derived out from its purpose; and may include the name of one or more of its partners.

But in all such cases, the phrase" LLC" shall be added.


2. The Company Limited by Shares (CLS)

a) Formation

Article 3 of the Commercial Companies Law defines a Company Limited by Shares (CLS) as “a company whose capital is composed of one or more shares owned by one or more joint partners (a natural person or a moral person whose purpose include the foundation of such companies), as well as from shares of equal value subscribed in by one or more shareholders and shall be negotiable in the manner prescribed by law.”

At incorporation, a CLS shall consist from at least two founding parties; one of them is a joint partner (with unlimited liability) and the other one is a shareholder partner whom is only responsible within the value of the share he subscribes in.

The founding members of the CLS shall submit an application to the appropriate authority requesting permission to incorporate the company.

Where the CLS is incorporated under the Investment Law, the Investment Law provides certain guidelines which concerning the provisions that must be included in its Memorandum of Association.

b) Capital

The minimum issued capital required of a CLS shall not be less than 250,000 L.E, and under any circumstances the paid cash amount on foundation shall not be less than 25% of the capital at the time of foundation. (Article (6) of the Ministerial Decision of implementing the Commercial Companies Law).

The capital is divided into two categories of shares: (1) shares owned by joint partners & (2) shares of equal value subscribed to by shareholders.

The company statutes shall determine the nominal value of the share which should not to be less than 5L.E or more than 1000L.E.

The joint partners have unlimited liability while the shareholders’ liability is limited to the value of their respective shares (Article 3 of the Commercial Companies Law)

The Commercial Companies Law does not impose minimum Egyptian shareholding requirements on the CLS.

c) Management

The management of the CLS is run by one or more joint partners, called partner manager(s). The name and scope of such partner manager’s authority must be included in the Memorandum of Association (Article 110 and 111 of the Commercial Companies Law).

A CLS must have a Supervisory Board made up of at least three persons from the shareholders or others, whose purpose is to supervise the acts of the manager(s). The Supervisory Board may not be chosen from the partner manager(s) (Article 112 of the Commercial Companies Law).

d) Objects

The CLS is prohibited from conducting the business of insurance, banking, or savings or investing funds on other people’s behalf (Article 5 of the Commercial Companies Law).

e) Personnel
Requirements

The CLS is subject to the same provisions as the LLC concerning the employment of Egyptian personnel.

f) Company title

The company title shall derive out from the name or names of one or more of the joint partners in exclusion of the other partners.

3. The Joint Stock Companies (JSC)

a) Formation

Article 2 of the Commercial Companies Law defines a Joint Stock Company (JSC) as:

A company whose capital is divided into equal values shares which are to be negotiated in the manner prescribed by law.

The liability of a shareholder is limited to the value of the shares subscribed in by him.

JSC’s shall not compose from less than three founding shareholders (Article1 of the Ministerial Decision of Implementing the Commercial Companies Law).

Once the incorporation application is approved by the authority, and the company is listed in the Commercial Register incorporation is complete.

b) Capital

The minimum issued capital of a JSC is 500,000 L.E. if the JSC offers its shares to the public and 250,000 L.E. if it's private (Article 6(1) of the Ministerial Decision of implementing Commercial Companies Law).

The capital shall be divided into shares of equal value, with a nominal value of between 5 L.E. and 1,000 L.E and all shares must be registered.

At least 25% of the cash equity of the company must be paid up prior to incorporation for the ones don't floating its shares to the public subscriptions.

Upon incorporation or upon an increase in capital of the companies floating shares for public subscription, a minimum of 49% of the share capital must be offered for one month to the public and Egyptian natural and juridical persons, unless Egyptian shareholders already hold 49%. The JSC is permitted to incorporate if, after one month, the JSC is unable to obtain 49% Egyptian shareholding (Article 37 of the Commercial Companies Law).

A shareholder’s liability is limited to the value of the shares subscribed in by him. Share certificates are issued in the name of each shareholder.

c) Management

The JSC is managed by a Board of Directors. The Board must have an odd number of directors not less than three.

Juristic persons are allowed to act as directors, provided that a natural person is appointed as representative to act on its behalf on the Board.

The directors shall hold a term of three years, except for the initial directors, who may be appointed by the founders for a maximum duration of 5 years (Article 77 of the Commercial Companies Law).

This requirement does not apply to JSC’s incorporated under the Investment Law, whose corporate objects are among the activities specified in Article 1 of the Investment Law (Article 14 of The Investment Law).

If the JSC is undertaking the management or business of a public utility, the Minister in charge must approve the appointment of directors to the Board.

Directors must own a specified number of shares which must be not less than 5,000 L.E, and must be deposited in an account where they will remain throughout his tenure, as a guarantee of his management. (Article 91 of the Commercial Companies Law).

d) Personnel
Requirements

The Law requires a certain degree of personnel involvement in the JSC.

Therefore, The Articles of Association of the company must provide for the participation by the personnel in the management of the JSC in one of the specified forms by law.

Additionally, the JSC must distribute a share of its distributable profit to its personnel, and this share cannot be less than 10% of the JSC’s profit or more than the total payroll of the company (Article 41 of Commercial Companies Law).

The JSC must abide by the provisions of the Commercial Companies Law requiring the employment of a certain percentage of Egyptian personnel.

Foreigners may be hired if it is impossible to find the requisite number of qualified Egyptian employees and Ministerial approval is obtained.

e) Company title

The Company name shall be derived from the objects of which it is to be incorporated and may not include the name of one or more of the shareholders.



The Investment & Real Estate market in Egypt

Egypt has been considered for a long period, a popular travel destination, but today, due to encouraging economic trends, the property market in Egypt is becoming more popular as a location amongst worldwide purchasers, and recent years have seen a big growth in the real-estate market in Egypt.

Real estate investment in Egypt, as in many other markets depends on the success of Egypt in increasing the tourism industry.

Now, there are a lot of new opportunities in the real estate market in Egypt which attract overseas investors who looking for secure investment with good growth potential at cheap prices, due to the increasing of tourists' numbers in Egypt during the last years.

Due to the recent reforms to streamline the purchasing procedures in Egypt, the country now attracts more overseas properties' purchasers than ever before, specially with the relatively simple purchase systems and a low tax than it in many countries and with no capital gains or inheritance tax on the property.

Why you should start your real estate investment in Egypt? The answer of this question you will find it in the following points: Foreign ownership laws in Egypt

Previously, The Egyptian Law No. 230 for the year 1996; was the applicable law in the matters of foreigners' ownership and in realestate utilization rights in whole of Egypt.

The previous law was required foreigners' commitment to follow a Several of rules & legal procedures and regulatory steps to grant them the right to buy, sell & own real estates in Egypt, and this law is still the applicable law in a lot of the regions & governorates in Egypt such as : Cairo, Alex, Luxor, Port Said …etc .

But, on the fifth of April 2005, the Egyptian government issued a new decree no (548) for the year 2005 to be the applicable law for foreigners' ownership & realestate utilization rights in large regions of Egypt.

The new decree of law is granted foreigners the right to enjoy all the rights granted for the Egyptians citizens in purchase, sale and possession of real estate, buildings and lands in the new urban communities, the Touristy governates and areas, such as: Hurghada Touristy Area, The Red Sea Governate, Sidi Abd el Rahman (the touristy area) and some other regions of the Arab Republic of Egypt.

The decree of The Prime Minister, No. 548 of 2005 For ownership and realestate utilization rights for non-Egyptians In some regions of Egypt

(Preamble item)

After reviewing the law number (230) for the year 1996 governing the non-Egyptians citizens ownership for buildings and grounds in Egypt, the Prime Minister's issued the decree No. 548 of 2005 for ownership and realestate utilization rights for non-Egyptians for residential units in some regions of Egypt.

(First item)

After having the agreement of the foreigners' ownership office in Egypt; foreigners may enjoy all the rights granted for the Egyptians citizens in purchase, sale, and possession of real estate, buildings and lands in the new urban communities, the touristy governates and areas in Egypt such as:
  1. The touristy area of (Sidi Abd El Rahman).

  2. The touristy area of (Hurghada).

  3. The touristy area of (The Red Sea).

  4. The touristy area of (Ras El Hekma).
(Second item)

After having the agreement of the foreigners' ownership office in Egypt, Foreigners may enjoy all (utilization rights) for the residential units or the apartments for a maximum period of 99 year in (Sharm el Sheikh City).

(Third item)

All foreigners who had acquired ownership rights or utilization rights over units or buildings under this Decision, they have all legal right to (sell or rent out) those units, buildings immediately after they obtained its ownership or utilization right on it. All the legalization and registration offices in Egypt shall record any of those actions through (10) days from the date of submission of all required necessary documents.

(Forth item)

This Decision must be published in the Egyptian newspaper (El Waqaea El Misria) and it shall be valid from the next day of publication.