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Private equity funds are pools of capital to invest in companies for a high rate of return. In recent years, PE firms have pocketed huge—and controversial—sums, while stalking ever larger acquisition targets. 

PE funds in Egypt will diversify risk and capitalize on the benefits of a professionally managed investment vehicle.

If you are interested in setting up a private equity (PE) fund in Egypt, read this resource.

Key regulator

All structures that have anything to do with the establishment and management of investment funds in Egypt (including asset management companies) are supervised by FRA.

Legal form for private equity funds

A PE fund in Egypt can be established in the form of a JSC, usually with the aim of joining the efforts of investors in order to realize new business opportunities or increase the profitability of an existing business. At a certain stage, a large business that claims quality growth, chooses ways and opportunities for this, corporate investment is a necessary action that works to optimize financial flows and the structure of property rights. 

There are practically no restrictions on the number of founders of a private equity fund in Egypt. Investors' liability is limited to their contributions. In this manner, Egyptian private equity funds must be managed by an external licensed fund manager. Participation in management is conducted through the general meeting, and the participants have the number of votes in proportion to their shares in the authorized capital. 

It is clear that the fewer the number of participants, the easier it is for them to agree on the adoption of a particular decision. However, two participants can argue. Therefore, it is essential to foresee the list of participants and their shares in the authorized capital in advance, which will make the dispute resolution procedure a lot easier. You can also hire a person trusted by all parties - a person who will not make any decisions, but will be able to determine the right side in case of a conflict.

Conducting private equity business in Egypt is also possible through a CLS. This structure offers investors limited liability, provided that they do not interfere with making managerial decisions. It is beneficial to use this type of funds to optimize the operating activities and generate income from trading in the stock and financial markets. It is an effective solution for quick operations with assets allowing you to manage the assets and liabilities of the company.

Minimal Capital

PE Funds setting up in Egypt is quite easy if you meet requirements to the capital at the very beginning. 

A JSC must have a capital of at least £ 5 million, and its charter must follow a specific model provided by the regulator. Obtaining an Egyptian PE manager license is mandatory.

Unlike JSC, CLS companies have to obtain a license to conduct a private equity business in Egypt. The minimum capital for them is £ 10 million.

Keep records in order

For the convenience of conducting joint activities, JSCs have to choose an authorized person who will keep records of the receipt of contributions and their use for certain purposes, calculate losses or profits, inform all participants about the procedure for carrying out joint activities, and be responsible for the results of joint activities. All these functions and rights should be specified in the contract.  It is also advisable to hire an independent custodian who is responsible for storing electronic books of investment certificate holders submitting reports on the securities held by the fund.

CLS Companies can ignore the above requirements.

Important:

When registering an Egyptian private equity fund, information about investors, and the number of their capital obligations should not be publicly available. However, they must be available to the regulator at any time upon request.

Reporting

In addition, if you are interested in opening PE fund in Egypt, please be informed that the board of directors of the fund needs to report to the regulator about the following:

  • the fund’s financial position, as well as risk management measures;
  • the annual financial and audit reports;
  • report with disclosure of all related transactions and compliance with corporate governance rules.

AML policy

Private equity funds are required to comply with the new anti-money laundering rules issued by the Egyptian regulator for non-bank financial companies. These rules include strict requirements for:

  • KYC;
  • internal guidance on AML;
  • notifications about all suspicious transactions;
  • keeping records related to KYC processes.

Start a private equity deal in Egypt

PE funds as JSC invest in securities in Egypt. Microfinance investment funds are eligible to receive microfinance from licensed microfinance companies and associations.

If you are planning to start a business in Egypt, please contact legal advisors from IQ Decision UK at the contacts listed on the website for a personal consultation on legal issues of establishing an investment fund in Egypt.