Partner Contribution – Challenge Law Firm
Egypt, situated in a strategic geopolitical location which gives it an ideal advantage of access to the markets through various trade agreements i.e. Pan Arab Free Trade Agreement/ Greater Arab Free Trade Agreement (GAFTA), Common Market for Eastern and Southern Africa (COMESA), Egypt-MERCOSUR Free Trade Agreement etc. Being a party to such trade agreements gives Egypt access to 1.5 billion consumers of which 100 million consumers are in Egypt.
Further, the international reports indicate that Egypt continues to progress i.e. according to the World Bank Report, Egypt ranked 114th out of 190 countries instead of 120 in 2019. In facilitating start-ups, Egypt ranked 90 in 2020 instead of 109 in 2019; In Protecting Minority Investors, Egypt jumped 15 positions from 72 to 57 due to legislative reforms. The reports, also, expect the Egyptian economy to grow at 6% in 2021 instead of 5.8% in2020.
To have a Legal presence in Egypt, one of the following entities may be established:
- Limited Liability Company “LLC”;
- Joint Stock Company “JSC”;
- Sole Individual Limited Company;
- Representative Office;
We will concentrate on the most common two preferred types by investors:
Limited Liability Company’s Characteristics:
- It should consist of, at least, two partners.
- Capital shall be divided into allocations.
- The partners may be individuals or legal entities.
- It will be managed by a Manager or group of Managers.
- There is no minimum capital requirement. In the past, the capital should be fully deposited before establishment however, this condition has been lifted to ease the establishment process. Except for certain activities i.e. importation
- It may be fully owned by foreigners except for importation purposes. In past importations, the purpose was limited to only Egyptians however, the condition has been lifted to encourage investment in Egypt. Currently, foreigners may establish a company with the purpose of which is importation provided that the percentage of foreigners’ participation should not be more than 49%.
- There is no Egyptian Manager.
- The liability of the partner vis-à-vis third parties will be limited to his/her allocation.
Investors preferred this type to examine the market, first, before expanding.
Joint Stock Company “JSC” Characteristics:
- It should consist of, at least, three shareholders;
- Capital shall be divided into shares;
- The shareholders may be individuals or legal entities;
- It will be managed by a board of directors to be elected by the shareholders;
- The minimum capital is EGP 250.000 and for certain purposes, the capital should be raised to EGP 500.000. The capital will not fully be deposited upon the establishment. 10% will be added before establishment to be raised to 25% within three months of the establishment to be fully deposited within five years.
- May be fully owned by foreigners except for importation purposes.
- The liability of the partner vis-à-vis third parties will be limited to his/her shares.
Both entities are subject to an annual tax of 22.5 % on the net profits.