How to start a business in Egypt

Mohamed Hashish By:

Mohamed Hashish
Partner
E. m.hashish@shandpartners.com
M. +2 010 0047 0077
T. +202 3537 3777 (Ext. 101)

 

There is a number of laws governing doing business in Egypt including, inter alia, (i) the Trade Code No. 17 of 1999 (the “Trade Code”); (ii) the Companies Law No. 159 of 1981 (the “Companies Law”) and the Executive Regulation thereof; (iii) the Investment Law No. 72 of 2017 (the “Investment Law”); and (iv) the Commercial Registry Law No. 34 of 1976 (the “Commercial Registry Law”).

The Companies law and Trade Code provide several legal forms of businesses similar to those legal forms that are available in North Africa and Europe.

Non-Egyptian investors have a number of alternatives to plan for or start business in the Egyptian market as follows:

For the pre-investment phase:

Non-Egyptian investors are entitled by virtue of the Companies Law to open a representative office in Egypt for the purpose of studying the Egyptian market and/or potentials of productions.

However, representative offices are not allowed throughout their operation in Egypt to do any kind of business.

For the direct investment phase:

Non-Egyptian investors may establish any of the following types of companies for doing business in the Egyptian Market:

Branch of foreign company:

The Companies Law allows non-Egyptian companies to open their branches in Egypt in order to perform works of contractual nature. However, the said branch must be registered with the competent Commercial Registration Office, which registration usually takes up to three (3) working days.

In order for a foreign company to open a branch in Egypt, such foreign company must be awarded a contract, such as a construction contract, for carry out specific scope of work in Egypt.

The foreign company must also appoint a manager of any nationality thereof to represent the said foreign company in Egypt.

Joint Stock Company (the “JSC”):

The Companies Law allows non-Egyptian investors to incorporation JSC, which resembles a U.S. corporation or a French societe anonyme.

The incorporation of a non-publicly listed JSC requires a minimum of three (3) founders and a minimum capital of EGP 250,000 rather than the Egyptian Stock Exchange.

In general, there are no restrictions on the nationality of the founders.

Subscribers are obliged to subscribe to 10% of the issued capital during the formation process of the JSC and subscription should reach 25% during the three (3) months after formation thereof. The remaining unpaid capital should be subscribed within a period of five (5) years.

The JSC must be managed by a Board of Directors, which Board must compose of at least three (3) members of any nationality.

A Limited Liability Company (the “LLC”):

The LLC corresponds to the French societe a responsibilite limitee (S.A.R.L.), is like an incorporated partnership or a U.S. closed corporation or a British private limited company.

There is no minimum capital required under Egyptian law with respect to the incorporation of LLC. However, the issued capital of LLC shall be paid in full upon application for incorporation.

The establishment of a LLC requires a minimum of two (2) partners and up to a maximum of fifty (50) partners. Furthermore, there are no restrictions on the nationality of the partners.

LLC may be managed by one manger. However, at least one manager should be of Egyptian nationality. It is worth noting that the powers of such Egyptian manager may always be limited.

Finally, LLC shall in general comply with the same provisions of Corporate Governance that apply to JSC.

It is worth noting that Egyptian law does not recognize the concept of piercing the corporate veil and, therefore, the liability of shareholders in JSC or allotment holders in LLC is only limited to the paid-in capital.

 

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