Most foreign companies operating in Egypt are joint-stock or limited liability companies. There are also sole proprietorships but they are less common.
Egyptian private company sales transactions are structured in accordance with the Companies Act and the target unit to be sold (i.e. assets or shares). In this article, we will analyze some local rules governing M&A transactions in Egypt.
Acquisition of a company or company shares in Egypt
In order to transfer shares and assets in Egypt, Egyptian laws prevail.
Normally, the sale of a company shares in Egypt in a joint-stock company is carried out through a licensed brokerage firm, which takes care of all the necessary operations through the Egyptian stock exchange. This process usually takes some 5 business days or more.
At least three shareholders are required to form a joint stock company in Egypt. At least 25% of the issued capital (minimum US50,000) must be paid at the time of incorporation and the rest will be paid within ten years. The incorporation must be approved by the Capital Markets Authority (CMA).
At least 49% of the company must be available to the Egyptian public on the Egyptian Stock Exchange, and Egyptian employees must be present in company management. In companies with import operations, Egyptian citizens should own 51% of the share capital. In addition, a minimum 10% of net profits have to be distributed among employees.
Additional restrictions on foreign ownership are applied in a range of industries. This means that the company should be wholly owned by individuals or legal entities who are citizens of Egypt.
Limited liabilities have no access to such industries as banking, finance, or insurance business.
Permission from local authorities
To transfer business ownership in Egypt you will need to obtain additionals consent or permit. Here’re just a few examples::
- to acquire 10% of voting rights or shares of a holding company, the consent of the Financial Regulation Authority is required;
- the consent of the Main Investment and Free Zone Authority will be needed for companies established in the free zone;
- permission from the Central Bank of Egypt is a must when the owner of an Egyptian licensed bank is being changed.
In addition, in some situations, before operating on the Sinai Peninsula, a company must obtain permission to transfer shares from the board of directors of the Sinai Agency.
Legal assistance in companies purchase/sale in Egypt
Legal aspects of regulating M&A transactions in Egypt are mandatory if you intend to conclude a deal to buy and sell a business in this jurisdiction. Each individual case requires a selective and personalized approach. Do not hesitate to sign up for a consultation with our experienced legal advisors in the M&A transactions regulation in Egypt.