EGYPT Law and Practice Contributed by: Mohamed Hashish, Heba El Abd, Mariam Rabie, Mohamed Selim and Abdelaziz Mohamed, Soliman, Hashish & Partners
• importation activities conducted for resale or trad - ing purposes, noting, however, that these restric - tions were recently relaxed – now permitting major - ity foreign ownership for a period of ten years, subject to renewal pursuant to certain conditions; • commercial agencies or intermediary businesses; and • carrying out business in the Sinai Peninsula. It is worth noting that security clearance must be obtained for any foreigner to work or do business in Egypt. In practice, the General Authority for Invest - ment and Free Zones (GAFI) usually approves chang - es in shareholding structures and the incorporation of companies without initially requiring a security clear - ance, with the exception of certain nationalities which are subject to advanced examinations, such as China, Russia, Ukraine, Nigeria, Israel, Iran, Belarus, Bangla - desh, Iraq and Palestine, as such restricted nationali - ties require an advance security clearance. However, GAFI has recently started to relax the conditions of obtaining security clearance prior to incorporation with respect to some nationalities. Aside from the security clearance, work permits must also be obtained for any foreign employees to be employed by the relevant company. 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance Prior to engaging in any business in Egypt, upon the incorporation application of the company, or upon the approval of a general assembly meeting for changes in the shareholding structure, a security clearance application is submitted to the relevant authority indi - cating all relevant data of the foreign investor. Generally, investing in Egypt without obtaining a secu - rity clearance or any other necessary approvals for engaging in business may have legal ramifications, which could include legal penalties such as fines or other sanctions imposed by the relevant regulatory authority, restrictions on business operations and activities through a suspension imposed by the rel - evant governmental authority and the eventual disrup - tion of any business plans the foreign investor may have made, severe financial losses, and contractual issues where certain contracts may be deemed null
and void due to the lack of obtaining the necessary approvals, all of which may result in severe reputa - tional damage to the business. 2.3 Commitments Required From Foreign Investors In certain circumstances, the regulatory authorities may require certain conditions such as: • a minimum capital for obtaining certain approvals and licences; • the creation of a minimum number of jobs for Egyptian nationals; and • requiring foreign investors to use a minimum per - centage of local resources in their products. 2.4 Right to Appeal Foreign investors have the right to appeal and review such decisions by way of referral to an administra - tive court, which has exclusive oversight over any administrative matter. Further, foreign investors may refer any dispute to international arbitration subject to certain conditions under the relevant Bilateral Invest - ment Treaty (BIT), whereby any award issued in favour of investors will be enforceable vis-à-vis any assets owned by the Egyptian government outside Egypt. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity Both the Companies Law and the Trade Code provide several legal forms of business, similar to those legal forms that are available in North America and Europe, such as:
• branch of a foreign company; • joint stock company (JSC); • limited liability company (LLC); and • one-person company (OPC).
The two most common types of companies selected by investors in Egypt are JSCs and LLCs, where - by the capital of a JSC shall be owned by at least three shareholders and constitute a minimum capital of EGP250,000. Whereas, for an LLC the minimum number of partners is two and no minimum capital is required. An LLC is usually the most recommended
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