Egypt: Cumulative Voting According to FRA’s New Decree4 Jun 2019 1340 Views
The Egyptian Financial Regulatory Authority (FRA) supervises & regulates all non-banking financial markets and instruments, including capital markets, futures exchanges, insurance activities, mortgage finance, financial leasing, factoring, securitization and microfinance.
Non-banking financial companies are mentioned in Article Two of the Decree No. 53 of the year 2018 which are:
- Activities of companies operating in the field of securities
- Insurance, reinsurance or insurance brokerage activities
- Mortgage finance activities
- Leasing activities
- Factoring activities
- Microfinance Activities
Recently, Decree No. 155 of the year 2018 was issued to amend the voting of the BoD to be cumulative voting in the above-mentioned companies in Egypt. Cumulative voting means that every shareholder shall be given a number of voting equal to the shares he owns to vote for the members of board of directors. In addition, every shareholder shall vote for one or more candidate in case of proportional representation.
Besides, the proportional representation is the guarantee that the minimum limit of the capital is being represented in the company’s BoD elections in the manner that does not exceed one seat in the BoD for each 10% of the company’s shares.
Article 4 of the abovementioned Decree states that each of the companies wishing to obtain a preliminary approval on the incorporation or wishing to obtain a license to exercise any of the non-bank financial activities shall be obliged to stipulate in the company’s Articles of Association the using of the cumulative voting system during electing the members of the Board of Directors, by which it is allowed to use the proportional representation in the Board of Directors membership whenever possible.
In addition to Article 8, which stipulates that during deciding on the applications of obtaining the FRA’s approval on ownership, compliance with the enforcement of the cumulative system of voting in electing shall be considered.
Thus, the abovementioned Decree does not apply to companies incorporated under the Companies’ Law No. 159 of the year 1981. The Decree addresses companies subject to Law 95 of the year 1992 and obliges the same to amend their Articles of Associations to comply.