Establishing companies in Egypt and branches for foreign companies

Business Law

Establishing companies in Egypt

and branches for foreign companies

First: The regulating rules for establishing companies in Egypt:

Trade law no. 18 of the year 1999 and companies' chapter from law of year 1883:
Trade law no. 18 has been issued in 1999 and it states on canceling Trade law that was issued in 1883 except the chapter related to the partnerships and this is the issued law in 1883, the procedures of establishing partnership companies shall be governed. Trade law shall handle all kinds of commercial business and commercial contracts and shall determine the commercial transactions and the tools to meet the commercial transactions including the commercial documents (Bills- Cheque- Typed of all bonds). Trade law states the obligations, responsibility and rights of traders and shall establish the provisions governing individual enterprises especially those who engage in trade generally, whether corporate or juridical person. The Trade Law shall set general provisions that regulates exercising commercial activity without determining specific commercial activities and shall set the provisions that are relating to liquidating the existing commercial activities, insolvency, and leaving the trade of the companies or individual entities, whether capital companies or partnership companies.
Companies law no. 159 of the year 1981:
Trade law no. 159 of the year 1981 shall regulate the composition standards and the procedures of the establishment of capital companies (Joint Stock company, limited partnership by shares and limited liability companies) as well as it shall regulate how the composition and distribution of capital profits and losses for these companies, the management and the responsibilities of the department in charge of administration how to manage the legal responsibilities arising from the establishment, how to take a decision, merging capital companies. Companies law shall not include the text of certain commercial activities; however, it shall exercise commercial activities under the umbrella of companies' law.
The investment guarantees and incentives law no. 8 of the year 1997:
The investment guarantees and incentives law no.8 of the year 1997 shall regulate what guarantees and incentives are granted to those who invest in the fields of investment generally, including the industrial investment activities specified in Article 1 of the Law, individual or companies' enterprises, whether they are capital companies or partnership companies, enjoy the benefits of the law, if the benefits of the law are:

First: Reclamation, Land Cultivation, Animal, Poultry and Fish Production:

Reclamation and cultivation of barren and desert lands or either of them.
Animal, poultry and fish production.
Genetic engineering at plants and animals' fields.

Second: Industry and Development of Industrial Zones:

Manufacturing and mining.
The integrated industrial development for industrial zones or completing the development or marketing or management of industrial zones established due to the prime minister’s decree.

Third: Tourist Investment:

Hotels, motels, hotel apartments, tourist villages, tourist camps and tourist transportation.
Touristic marketing and administration for hotels, hotels, apartments and touristic villages.
Establishing and administration of the integrated services of the Nile ports that is entailed for their functions and safety.
Establishing and administration of Golf yards, diving centers and other integral and related activities.
Projects of monuments & museums which help on publish of monuments culture.

Fourth: Transportation:

Refrigerated transportation of goods, refrigerators for the purposes of storing crops, manufactured products and foodstuffs, container stations and grain soils.
Air transport and directly related services.
Overseas maritime transport.
Transportation from/to urban zones.

Fifth: Specialized services:

Petroleum services in support of drilling, exploration as well as gas transport and delivery.
Hospitals, medical and therapeutic centers that offer 10 % of their capacities free of charge.
Development of new urban zones.
- Planning & establishing the new urban zones and supply them with infrastructure.
- All services projects' which practiced completely at the new urban zones.
The gathering of rubbish and wastes of production and services activities and their treatment.

Sixth: Infrastructure:

Infrastructure operation including potable water, sewage, electricity, roads and communications beside underground multi-story garages, underground trains and trains.

Seventh: Funding and financial Evaluation for Projects:

Financial Lease.
Underwriting Of Subscription to Securities.
Venture Capital.
Credit Classification.
Deductions.

Eighth: Computer System and Technological:

Software designing and producing the electronic content.
Designing and production of computers.
Designing and building data base.
Establishment, management of technological zones.

Ninth: Housing:

Housing complexes for the purposes of full, unfurnished lease for non-commercial uses.
Construction investment at the industrial zones or the urban zones or remote zones

Tenth: Social Monetary Projects

Projects concerning small or integrated industrials which is funded from social monetary fund.

Eleventh: Marketing and Promotion for investment fields:

Marketing and Promotion for attracting investors in reclamation, cultivation, touristic, and industrial development and dry, Nile and internal ports according to the roles declared by the minister in question.

The most important benefits that the Investment law provides are the following guarantees:

Companies or establishments shall not be nationalized, nor shall their property be confiscated.
Administrative Guardianship shall not be imposed on companies or establishments, nor shall their property and funds be distrained, seized, retained, in protective custody, blocked or confiscated.
No administrative authority shall interfere at company's pricing policy nor in determining company's profits.
No administrative authority shall cancel or suspend in whole or in part, a license granted to a company for the use of real estate except in case of a breach of the license conditions.
No criminal suit shall be initiated against any company without first taking the opinion of the authority firstly.
Disputes shall be settled amicably with the investor or according to the international conventions between Egypt and the country of the investor, or according to the convention concerned with the settlement of disputes as per Act No. 90 of 1971 or by arbitration.

Small enterprise development law no. 141 of the year 2004:
Small and Medium enterprise development law has been issued to facilitate the establishment of small and micro enterprises and to exempt them from some establishment fees, whereas the law established a standard for their capital of the enterprise or the micro company shall not exceed 50,000 Egyptian pounds, regarding the enterprises and small contracts that its capital's not less than 50,000 Egyptian pounds and shall not exceed One Million pounds and the number of employees shall not exceed fifty employees.
Social Fund for Development shall establish in its offices administrative units for serving the small enterprises and the micro enterprises. These units shall take all the necessary registration and licenses procedures to exercise the commercial activities within a duration that shall not exceed 30 days from the date of applying the full documents to the administrative body.

Second: Types of companies in Egypt:

Individual enterprise:

The basic concepts of individual enterprises:

The individual enterprises is an individual merchant enterprise that shall carry on a commercial activity in a store. The individual project shall not have a separate juridical personality than the individual merchant personality of the owner under the provisions of the Egyptian law because it shall be related to the ownership of the owner and his financial Conscience.
The natural owner person shall acquire the merchant status from the date of registry in the commercial register for the individual enterprises.
It shall be prohibited to register any of the employees of government and public sector or the members of the job syndicates as well as the employees of the commercial chambers like an individual merchant in the commercial registry and a minor who has attained the age of 18 years may be registered as an individual trader in the commercial register under a condition that he shall obtain a permission from the competent court to trade and does not engage in trade except within the limits of this permission.
The minimum of the capital of the individual enterprises under the umbrella of investment law no. 8 of the year 1997 shall be one hundred thousand pounds, except the service activities which are fully practices within the industrial zones and urban cities with a capital of ten thousand Egyptian pounds.
The owner of the individual enterprise shall be a natural person.

Person companies:

We shall take into consideration in the person companies the following provisions:

The number of the partners shall not be less than two partners; one of them shall be a joint partner.
The joint partner shall have a complete capacity whether in a joint liability company or limited partnership.
The commercial name of the person companied shall not include one name or more than the joint partners, Otherwise, all the company's debts will be held in its own assets.
Verification of the joint partners are not employed by the government or the public sector or the chambers of commerce or are members of the Bar Association from their cards.
If a minor partner is found, he shall be under the jurisdiction of his father or under the guardianship of a particular guardian by virtue of the competent court, it is required that the minor shall be a recommended partner and it is not permissible to be a joint Government employees, members of trade unions, public sector employees and chambers of commerce shall be restricted as partners with only limited partnership companies.
The activity of the company shall not be contrary to public order and morals.
The minimum of the capital of the person companies (Joint partner and limited ship partner) that is under the umbrella of the investment law shall be three hundred thousand pounds except the capital of the service activities that are fully exercise inside the industrial zone and urban cities, shall be thirty thousand Egyptian pounds.

The definition of Joint Partner Company:

Joint Partner Company shall consist of two partners or more and shall be jointly liable for the management work of the company and the resulting legal liability and representing the company before thirds party and judiciary and governmental agencies.
These kind of companies shall be characterized by several features that the partner’s share shall not be transferable and trading, the commercial name of the Joint Partner Company shall be consisted of the name of one of the partners hereinafter referred as (and associates) each partner in the joint partner company shall be considered as a merchant even if he has not acquired the status before, and jointly they shall be liable for all the debts of the company, where they are liable for all their financial liabilities for the debts of the company, if the company is insolvent, the partners shall be insolvent ipso facto.
Joint Partner company shall depend on the personality of the partner, which means that the partner which means that the partner cannot waive his share to others except with the permission of all partners as well as the share shall not be transferred to the heirs at death, he company expires only if the partners explicitly agree in the company contract to transfer the share to the heirs and with the consent of the other partners, However, the partner may waive its share to one of the partners

The definition of Limited Partnership Company:

The provisions of Joint Partner company shall be applied on the Limited Partnership Company, which shall be related to its consent and distributing the profits, loses and amendment in the company contract, however it is unique to specific provisions as it shall include two types of partners , one of them are Joint partners, as the provisions of Joint Partner company shall be applied to them and they shall be liable for the debts of the company and the external management of the company which includes concluding contracts and representing the company before the administrative bodies ,judiciary and dealing with banks. And another kind the recommended partners that shall not acquire the merchant status, that shall not be liable for the debts of the company except within the limits of their share in the company's capital, they shall not interfere in the company’s management and they shall not do any of the external management work or they shall not be the managers of the companies, in case of not appointing a manager, the management of the company shall be restricted on the Joint Partner without recommended partners, the management work is restricted for the recommended partner and it shall be external management only that shall be related to the company , not the internal management work that occurs inside the company as it is purely used for the partners.
The name of the recommended partner shall not be mentioned in the commercial name of the company and in case its name is included in the name of the company its status shall be the center of the joint partner, that’s protection for the third party’s good will. The share of the partner shall not be transferred whether it was joint or recommended with the permission of all of the partners. It shall not be mentioned in the abstract of the company’s contract except the names of the Joint partners without the recommended partners; however it shall be mentioned with the amount of their shares in the capital of the company.

Capital companies:

The legal features of the capital companies with its kinds (Joint stock company, Limited liability company and limited partnership by shares):

The capital companies are the companies that its consideration shall be the financial consideration, in other words accumulating of the capital in order to invest in the commercial activities, thus these types of companies do not expire by death or the exit of the founders or shareholders like persons companies.
The capital companies shall be divided into three types: Limited liability companies, Joint stock companies with a large shareholding initial public offering and small shareholding with a closed subscription, and the third type is Partnership by shares that negotiable by the commercial ways unlike the shares of partner in the persons companies.
The origin of the capital companies is that the founders are not liable for their own financial liability for the debts of the company whereas the founders and subscribers shall be liable for the debts of the company within the value of their contribution only.
The founders shall have full capacity.
The founder shall not be employees of the government, public sector, chamber of commerce or members of the Bar association on the basis of their cards.
The activity of the company shall not be contrary to public order and morals.

The definition of the limited liability company:

The company may take a name of one of the partners as a commercial name for it, as it shall take specific name which means that the name shall be an innovative label, it shall take a name derived from its purpose, the minimum of the number of the founders shall be two and the number of the founders shall not exceed fifty from the natural persons or judiciary persons. The legal capacity shall be available for the natural persons, and there is no minimum for the capital whereas it shall be determined by the partners in the contract of the establishment of the company, and it shall be divided into fully paid equal shares at the establishment of the company, and the partners or some of them shall provide shares under a condition that the cash part of the capital is not less than 25% and determining the shares of the capital through a committee shall be created for this purpose in the general authority of free zones and investments.
The participation of foreigners shall reach 100%of the capital of the limited liability companies except for companies engaged in activities limited to Egyptians or which are required to practice a minimum rate of participation such as import activity.
Regarding what is related to the management, the management of the company shall be managed by one or more managers and at least one manager must be an Egyptian, in case that the number of the partners exceeds ten, a control board shall be formed f at least three non-executive partners.

The definition of the Joint Stock company:

The commercial name of the joint stock company shall be extracted from the purpose of its establishment, which means its activity only, it shall not include name of one of the founders or shareholders, and the minimum of the number of the founders shall be three whether they are natural persons or juridical persons and natural persons shall have legal capacity. The minimum of the capital of the company of the closed subscription shall be two thousand and fifty hundred pounds, 10% of the capital shall be paid at time of establishment and 25% shall be continued within 3 months from the date of the establishment, and the maximum authorized capital is ten times the issued capital.
The percentage of the foreigners participation shall be 100% of the joint stock company except the companies that practice the restricted activities to Egyptians or it shall be required to practice the same minimum of participation as the import activity. With regard to the management of the company shall appoint a board of directors that shall have a minimum number of three members. Some or all members of the board of directors shall be non-shareholders and all of them are foreigners. The company's system shall provide for the multiplicity of representatives of the legal person in the board of directors. Each representative shall be counted in the composition of the board, the quorum of its meetings and in the voting.
The minimum of the value of the share shall be five pounds and the maximum shall be one thousand pounds or the equivalent in foreign currencies. It shall include the basic system for the company to issue the shares of its holder that does not exceed 25% from the total number of shares of the company under a condition that it shall be fully paid.
The minors shall participate in the joint stock company as holders of the natural guardian's mandate with donation money from guardian to the minor or the minor under the guardianship of a specific guardian by the provision of the competent court. In case of the minor’s participation in private finance, permission also shall be obtained from the competent court.
The founder shall provide shares, and it shall be evaluated the internal shares in capital through a committee shall be created for this purpose in the general authority for investment and free zones under a condition that its percentage does not exceed 75% from the total capital.

The definition of the limited partnership by shares:

The commercial name shall include one name or more from the Joint Partners and the minimum of the number of the founders shall be two natural persons or juridical persons with the availability of the legal capacity of the natural persons. The minimum of the issued capital shall be Two hundred and fifty thousand pounds, paying 10% at the time of establishment and the rest shall be paid till 25% within 2 months or more from the date of establishment and the maximum of the authorized capital is ten times the issued capital.
The participation of the foreigners shall reach 100% except the companies that practice the restricted activities to Egyptians or it shall be required to practice the same minimum of participation. The joint partner shall be liable for the management of the company and a department report shall be provided to the Supervisory Board and the monitor for the manager’s work or the managers of the Supervisory Board whereas the minimum of the number of members of the Supervisory Board shall be three and Some or all members of the Supervisory Board may be from non-directors or partners.
The minimum value of the share shall be five Egyptian pounds, and the maximum value of the share shall be one thousand pounds. The minimum value of the cash shares shall not be less than 25% of the issued capital and the maximum value of the shares in kind shall be 75% of the issued capital.

Third: The required documents for establishing companies in Egypt:

A company registry application.
The possession contract or the allocating dead of the project land (or present an act for presenting it during one year from the establishing date).
A Legalized power of attorney from Real Estate publicity Department (for Egyptian companies) or a legalized power of attorney at the Egyptian Consulate (For foreigner companies).
A copy of the identity cards or the passports of the partners or the owner and the birth certificate for minors if any.
Criminal declaration in case the company includes foreigners.
In case of establishing persons companies: Providing the origin of the company’s contract signed by the partner, the criminal record of the partners, And the receipt of electricity bill payment for the headquarters of the company with a new date that does not exceed 3 months with the name of the tenant partner.
In case the company is located in Sinai, a map of the company's location is submitted in addition to the approval of the chairman of GAFI.
For Industrial Projects: A prior approval has to be obtained from General Authority for Industrial Development before establishment.
For Capital Companies:
- Non confusion certificate includes the company name.
- A bank certificate proving that 10% of the issued capital has been deposited .In case of limited liability companies, the amount of capital is paid in full.
- In case the company's auditor is dealing with GAFI for the first time, a certificate from the Ministry of Finance (General Registry of Accountants and Auditors) is required which states that he has the right to sign capital companies' balance sheets.

Fourth: Establishing Branches of foreign companies in Egypt:

For approval on registration and/or cancellation of registration of branches of foreign companies in the com- metrical register in accordance with the provisions of the Commercial register Law 34 of the year 1976 and the Corporation Law 159 of the 1981.

The required documents for establishing Branches of foreign companies in Egypt:

A letter from the director of the Commercial Register Office addressing head of the Investment Service complex.
Photocopy of the statute of the mother company abroad.
A copy of the decision issued by the mother company abroad to open a branch in Egypt.
A copy of the decision issued by the mother company abroad to appoint a Branch Manager in Egypt.
A copy of the decision issued by the mother company abroad that no other branch has previously been opened in Egypt.
A photocopy of a bank certificate proving the transfer of what is equivalent to L.E5000 (five thousand Egypt- tian pounds) in free currency at the official rate under the name of the branch.
A copy of the lease contract or the title deed of the premises.
A copy of the construction contract or agreement concluded for the execution of any operation in Egypt.

The contract should state a set objective, duration and value.

All documents should be translated and notarized by the Egyptian embassy abroad as well as the Egyptian Ministry of Foreign Affairs.
For construction contracts related to construction activities, a certificate of pre-qualification must be submitted proving experience in the field requested to be registered. The certificate should be presented in English and coupled with a certified Arabic translation.