Floating Charges in Egypt Law10 Jun 2019 1155 Views
Egypt has finally passed The Security Over Movables Law in November 2015 which introduced a regime similar to fixed and floating charges as applicable under the UK law. The Executive Regulation (ER) of the Law was passed in December 2016. Taking into consideration novelty of the legislation, it has yet to be implemented on the ground and results to be evaluated. However, the main provisions of the Law can be discussed and outlined.
Movables subject to a security interest can be existing or future, tangible or intangible duly owned by the borrower; such movables may be pledged to secure an obligation, a debt, a loan or a credit instrument, provided such movables meet the following conditions: a) it can be legally tradable in Egypt; b) is in the possession of the borrower; and c) for the purpose of enforcement can be detached from other classes of assets. Creditors, benefiting from the security can be banks and other financial institutions holding licenses to operate in Egypt, licensed entities to undertake financial leasing activities and microfinance, institutions holding licenses to trade in movables as per regulations enforced by the EFSA and entities authorized to grant licenses in the field of intellectual property rights. It is important to note, that foreign banks and financial entities are excluded from the security regime.
Furthermore, borrowers are obliged to be resident in Egypt or the head office and/or branches to be domiciled in Egypt.
Another important novelty introduced is the establishment of the Electronic Register which will be responsible for registering securities once created, however, it is yet unclear when such a Register is to be established and fully operational. The main objective of such Electronic Register is to register the security to facilitate determination of the ranking priority of the creditor in relation to other creditors holding rights over the same movable. The ER leaves an option of a security interest to be taken without being registered. Furthermore, the Executive Regulation has introduced a specific set of rules for registering different types of assets including bank accounts, possessory pledges, ‘Fonds de Commerce Mortgage’, similar to a floating charge can be registered but firstly, must be registered with the Commercial Register pertinent to provisions of Law No. 11/1940.
Enforcement has also been set forth in details by the ER whereby a creditor can initiate a process of sale after five days from serving a notice to the borrower via registered mail and a notice to other creditors with duly registered rights over the same movable. Further, a creditor is entitled to request a judge of the Economic Court to issue a court order for the enforcement of sale.
Moreover, a creditor has the right to go ahead with the enforcement provided there are no other creditors with rights to the same movables and provided the borrower approves the sale transaction.
 By virtue of the Decree No. 108/2016 issued by the Ministry of Investment
 The Egyptian Financial Supervisory Authority