Company Formation and Registration in Egypt

user Youssry Saleh & Partners calender 16 Nov 2022 views 134 Views
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Due to its strategic location between the East and the West and its vast population, Egypt is considered one of the most attractive destinations for investment. And hence, all investors, startups, and small businesses all over the world who want to open and register a company in Egypt recognize that there is a great investment environment.

The Companies’ Law No. 159 of the year 1981, the New Investment Law No. 72 of the year 2017, and the Capital Market Law with their Executive Regulations and adaptation are the governing laws that regulate and manage the establishment of a company in Egypt from the beginning until its dissolution. Meanwhile, the central authority governing all types of companies in Egypt is the General Authority for Investment and Free Zones.

The most widespread types of companies in Egypt under Companies Law No. 159 of the year 1981 are as follows:

  1. Limited Liability Company (LLC);
  2. One Person Company with limited liability;
  3. Joint Stock Company.

 The main features of each company will be shown as follows:

1-Limited liability Company (LLC):

Establishment

  • The Limited Liability Company is a closed company due to the limited liability of its partners to the value of their shares in the company as the company shall have a trading name for the purpose of its establishment and the name of the company may include the name or title of one or more of its founders.
  • An LLC must be registered in the commercial register at the General Authority for Investments and Free Zones (GAFI) as it is subject to its supervision. Any amendments to the articles of incorporation must be reported to GAFI and approved by it. The LLC is incorporated once it is registered in the Commercial Register.
  • The founders of the LLC must submit an application requesting permission to incorporate an LLC. The Ministerial Decision Implementing the Commercial Companies Law outlines the mandatory provisions that must be included in the Memorandum of Association.

To determine the scope of the activities of an LLC, you must be aware of the following:

  • According to Law No.159 of the year 1981, the LLC is prohibited to carry out some activities in some areas like insurance, banking, saving, investing money for others, and investment management.
  • Apart from the preceding areas of activity, LLC can carry out legal commercial activity similar to other business entities, subject only to the general limitations of applicable laws and regulations.

To manage an LLC, you must be aware of the following:

  • There are no minimum Egyptian partners required to form an LLC so it may be 100% owned by foreigners due to the absence of a provision regarding this matter.
  • According to Egyptian Law, an LLC may be formed with a minimum of two partners and a maximum of 50 partners. Moreover, it is possible to appoint more than one manager.
  • The Managers may be appointed for a definite term (which must be specified in the Memorandum of Association) or for an indefinite term. The managers shall have full authority to represent the LLC before third parties unless such authority is limited or qualified by the Memorandum of Association).

Capital:

The minimum share capital required to form an LLC is 1000 LE. The capital must be divided into equal shares either in cash or in kind, and the value of each share must be at least 10 LE.

2-One Person Company:

Introducing the One-Person Company is a new type of company in the Companies Law No.159 of the year 1981 after making its last amendments in 2018; as by this type of company, the small investor becomes able to establish a company in Egypt on his own, a company in a unique form of companies.

One Person-Company is a company that is owned by a single person, whether natural or legal, within the purposes that it is established for, and the owner of the company shall be liable only for the company’s obligations unless within the allocated shared capital.

Advantages of One Person company:

The One-Person company needs only one partner or founder, so the opportunity for the small investors to own a company without the need to obtain a certain number of partners or shareholders since a one-person company is the owner-partner which is liable for its share only by the amount of the company’s capital.

Another advantage of the One-Person company is that the decision is made within the company as the owner of one person exercises all the powers granted to the board of directors and the powers of the ordinary and extraordinary general assembly, being the only partner.

Establishment and work of a one-person company:

  • Establish a one-person company by one natural or legal entity only.
  • The founder shall establish a company in Egypt by himself or by his representative by submitting an application to the General Authority for Investments and Free Zones (GAFI).
  • The company shall have its regulation including its name, purposes, the data of its founder, duration, and managing system, the address of its head office, branches, the amount of its capital, and the company liquidation. And any data mentioned by the Executive Regulations.
  • An approval from the Prime Minister or the competent minister if the founder of the company is a public law person.
  • The amount of 50,000 EGP (minimum capital) must be paid in full during the incorporation process of the company.
  • In case if the founder dealt with the capital to a natural or legal entity, it is a must to amend the company’s data and the commercial register within a period not exceeding three months from the date of the deal, in accordance with the procedures and rules specified by the Regulations. In all cases, the act shall not be effective against third parties except from the date of registration in the commercial register.

3-Joint Stock Company (JSC):

A joint stock company (JSC) is a company the capital of which is divided into shares of equal value, the liability of the shareholders is confined to the value of their shares, rather than that he is not liable for the debts of the company except within the limit of those shares.

Moreover, it may be a closed company or a listed company. The company shall have a trading name derived from the purpose of its establishment. The trade name of the company shall include the name or title of one or more of its founders.

Establishment:

  • A joint stock company activity provided like any other business entity by applicable laws and regulations.
  • The required minimum issued capital is 250,000 LE for a company in the event that it is not offering the shares to the public (closed or private joint stock company), pay 10% of the issued capital at the time of establishment.
  • Pay a percentage of 25% from the issued capital within three months of the establishment, and pay the remaining amount of the nominal value of the shares within five years.
  • Pay an amount of 500,000 LE from the minimum capital of a joint stock company that offers its shares for public subscription.
  • Holding a company’s establishment for the purposes of stock dealings and investment, pay the minimum capital is LE 5 million, of which at least 25% on the establishment, and the authorized capital must not exceed ten times the issued capital.