EGYPT Law and Practice Contributed by: Nadia Abdallah, Zahra Ashraf, Beshoy Mounir and Yasmine Attia, Matouk Bassiouny & Hennawy
As per Article 49 of the ECL ER, “concerned parties” are defined to include the persons involved in the eco- nomic concentration (eg, the acquirer and the target in case of a stock acquisition) and their related par- ties (Concerned Parties). Persons shall be considered related parties when they are direct and indirect par- ents, subsidiaries, or sister companies of each other as per one of the criteria set forth under Article (5) of the ECL ER (Related Parties) based on ownership stake or control of management and/or decision- making. According to the provisions of the ECL, transactions (eg, acquisitions, mergers and joint ventures) that involve target companies that carry out activities sub- ject to the supervision and control of the FRA are not subject to the prior approval of the ECA. However, the parties of the economic concentration are obliged to notify the FRA of the economic concentration, and the FRA must consult the ECA for its opinion before approving the implementation of the economic con- centration. The envisioned transaction must satisfy the above requirements in order to be subject to the competition approval of the FRA. If the target has sub- sidiaries that carry out activities that are not licensed or are not subject to the supervision and control of the FRA, the indirect acquisition of such subsidiar- ies might require a separate ECA filing, subject to the satisfaction of the ECA filing requirements detailed above. Transactions that involve target companies that are licensed by the CBE and carry out activities subject to the supervision and control of the CBE are not subject to the prior approval of the ECA and do not fall under the jurisdiction of the ECA. However, if the target has subsidiaries that carry out activities that are not sub- ject to the provision of the CBE, the indirect acqui- sition of such subsidiaries might require a separate ECA filing, subject to the satisfaction of the ECA filing requirements detailed above. If the parties fail to notify the ECA or obtain its clear- ance, they will face a fine of not less than 1% and not more than 10% of the total annual turnover, the asset value of the Concerned Parties, or the transaction val- ue, whichever is higher. If the percentage cannot be calculated, the penalty shall be a fine of not less than
EGP30 million and not exceeding EGP500 million. In addition, the transaction documentation shall be deemed null and void and the parties will be required to reverse the transaction. To the extent an envisioned transaction meets the ECA filing requirements, the issuance of the ECA’s unconditional approval is to be included as a condition precedent in the relevant transaction documents, as the ECA pre-merger regime is suspensory. The Common Market for Eastern and Southern Africa (COMESA) Competition Commission Subject to the fulfilment of certain thresholds and triggering events under applicable COMESA regula- tions, the transaction might trigger the requirement for COMESA’s prior approval. In this respect, the COMESA Competition Regulation of December 2004 and its amendments (the COMESA Regulations) and the COMESA merger assessment guidelines of October 2014 (the Guidelines) provide that any direct or indirect acquisition or establishment of a Controlling Interest (as defined in the COMESA Regulations, Rules and Guidelines) by one or more persons in the whole or part of the business of a com- petitor, supplier, customer or other person as a result of the purchase of shares, assets or amalgamation must be notified to the COMESA Competition Com- mission (CCC) if the following filing requirements are satisfied: • both the Acquirer Group (defined below) and the Target Group (defined below) – or at least one of them – operate in two or more COMESA member states; and • the below financial thresholds are met: (a) the combined annual turnover or the combined value of assets, whichever is higher, of the parties (defined below) in the COMESA market (meaning the Acquirer Group and the Target Group) equals or exceeds USD50 million; or (b) the annual turnover or value of assets, which- ever is higher, in the COMESA market of each of at least two parties to the merger equals or exceeds USD10 million, unless each of the par- ties to a merger/acquisition achieves at least two-thirds of its aggregate turnover or assets in
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