Latest Insights

Interested in starting a new business in Egypt?

Read this brief legal guide

Soliman, Hashish & Partners is constantly in the media spotlight!

Read more

Scholarship for studying the Master of Laws in International Trade Law at International Training Centre of ILO

Read more

Covid-19 Legal Alerts

Soliman, Hashish & PartnersInsightsBriefingsCorporateIssuance of the new amendments of the Egyptian Importation Registrar Law

Mohamed Hashish Managing Partner

  • +20225162131 Ext. 101
  • +2 010 0047 0077
  • m.hashish@shandpartners.com

Issuance of the new amendments of the Egyptian Importation Registrar Law

Categories
Briefings Corporate

Introduction

For the first time in Egypt and as an important step towards the liberalization of the Egyptian market, the Importation Registrar Law No. 121 of 1982 (the “Importation Registrar Law”) was amended on March 04, 2017 by Law No. 7 of 2017 (the “Amendments”), which Amendments were published in the Official Gazette on March 7, 2017 and entered into force as of March 8, 2017, whereby:

  1. production and services companies operating in Egypt are now not required to be registered with the Importation Registrar in order for the said companies to import anything that is essential for their operation in Egypt in accordance with Article 2 bis of the amended Importation Registrar Law and, therefore, up to 100% of the entire capital of the said companies can be held by non-Egyptian investors to the extent allowed under Egyptian law; and
  2. non-Egyptian investors are now allowed to hold or acquire up to 49% of the share capital in any company carrying out importation business for re-sale purposes in Egypt.

Background

According to item (e) under the second paragraph of Article 2 of the Importation Registrar Law (before the Amendments), “all shares or allotments in joint stock companies and limited companies by shares shall be owned by Egyptians etc.” (the “Restrictions”), which is one of the conditions that were required in order for a company to be eligible for registration with the Importation Registrar in Egypt. This being said that the entire share capital in companies carrying out importation activities for re-sale purposes was required to be held directly by Egyptians.

In light of the above, before 2014, it was practically possible to establish or restructure companies carrying out importation activities for re-sale purposes with indirect foreign shareholders at the second tier (or higher than the second tier) without facing any issues.

However, in 2014, a dispute arose among the General Authority for Free Zone and Investment (“GAFI”) and the General Authority for Importation and Exportation Control (“GAIEC”) regarding the interpretation of the Restrictions, and then GAIEC started applying the Restrictions to all ultimate shareholders (but not only at the first level of the shareholding structure) without having any valid legal ground.

Importation Business Options

According to the new Amendments, non-Egyptian investors are now allowed to hold or acquire up to 49% of the share capital in any company carrying out importation business for re-sale purposes in Egypt through one of the following three options:

  1. Incorporation of  a new company (“NewCo”) in a form of Joint Stock Company or Limited Liability Company:
  • The NewCo’s issued capital shall be at least EGP 5,000,000 (five million Egyptian Pounds) for Joint Stock Company and EGP 2,000,000 (two million Egyptian Pounds) for Limited Liability Company;
  • The NewCo shall only be qualified for registration with the Importation Registry after one (1) year from the date of its registration with the Commercial Registry unless the said NewCo is registered with the Importation Registry before the effective date of the Executive Regulation that will be issued for the new Amendments;
  • The NewCo’s turnover for the financial year that is prior to the date of the registration application shall be at least EGP 5,000,000 (five million Egyptian Pounds) in accordance with its tax declaration that was submitted to the General Tax Authority;
  • The NewCo’s manager(s) who is/are responsible for the importation business shall be Egyptian(s);
  • at least fifty one percent (51%) of the NewCo’s share capital shall be owned by Egyptians. However, the new Amendments does not explicitly apply this condition to all ultimate shareholders and, therefore, non-Egyptian investors may indirectly acquire the remaining 51% at the second or third teir; and
  • Upon the registration application, the NewCo shall submit a security (e.g. Letter of Credit or cash deposit) of EGP 200,000 (two hundred thousand Egyptian Pounds) as a security for its compliance with the provision of the Importation Registry Law.

2. Amending the business activities of an existing Joint Stock Company or Limited Liability Company:

If there is a non-Egyptian investor who already has a local subsidiary in Egypt, whether in a form of Joint Stock Company or Limited Liability Company, and the requirements that are outlined in Item (i) above are being satisfied by the said subsidiary, then it is possible to amend the business activities of such subsidiary to include importation business for re-sale purposes in order to apply for the registration with the Importation Registry.

3. Acquisition of any limited liability company or joint stock company that is already registered with the Importation Registry:

Given that the NewCo shall remain registered with the Commercial Registry for not less than a year, then non-Egyptian investors may (i) directly acquire up to 49%; and (ii) indirectly acquire the remaining 51% of the share capital in any existing Limited Liability Company or Joint Stock Company that is already registered with the Importation Registry (the “AcquiredCo”) noting that it is preferable that the AcquiredCo should be having the required minimum capital as explained under item (i) above, otherwise, the said AcquiredCo shall be required to increase its issued capital by no later than:

  • six (6) months as of the effective date of the Executive Regulation of the new Amendments for limited liability company, or
  • six (6) months as of the effective date of the new Amendments for joint stock company (i.e. as of March 8, 2017).

Member of