EGYPT Law and Practice Contributed by: Mohamed Hashish, Heba El Abd and Mariam Rabie, Soliman, Hashish & Partners
8.3 Business Judgement Rule Generally, there is no business judgement rule that is explicitly regulated in Egypt; however, the Companies Law provides that the managers and the chair of the board of directors shall represent the company before courts. This being said, the general assembly representing the shareholders of the company has the authority to oppose any management actions taken by the board of directors, or to approve any of the board’s actions, or to issue recommendations concerning the board’s actions. In this regard, it is worth noting that as per the Com - panies Law, any resolution issued for the benefit or to the detriment of a specific shareholder or to benefit a board member or others without taking the com - pany’s interest into consideration may be annulled. Note that the annulment may be requested only by the shareholders that had objected to the resolution in the meetings’ minutes or that were absent for a plausible reason, and in this case, the annulment shall be effec - tive for all shareholders. Furthermore, the shareholders/quota-holders repre - sented by the general assembly shall have the right to dismiss the board members and sue them for responsibility upon the approval of the shareholders/ quota-holders owning at least half of the capital of the company. 8.4 Independent Outside Advice In Egypt, directors mainly seek legal, tax and finan - cial advice for the purpose of mitigating any risks that may be associated with their actions while pursuing the management of the company, as well as ensur - ing compliance with the law regarding the aforemen - tioned. 8.5 Conflicts of Interest The Companies Law requires that every board mem - ber or manager who has a conflict of interest with the company shall inform the board of it and record the same in the relevant minutes of the board meeting. In such a case, the conflicted board member shall not be permitted to participate in the vote regarding any decision relating to this matter. Furthermore, the
board of directors must inform the general assembly of the aforementioned matter before it votes on such decisions.
9. Defensive Measures 9.1 Hostile Tender Offers
The Capital Markets Law in Egypt differentiates between voluntary and mandatory/hostile tender offers based on the threshold of the shares subject to the transaction. In this regard, the Capital Markets Law provides for cases whereby a mandatory/hostile tender offer is obligatory, as follows: • the direct or indirect acquisition of more than one- third of the capital or voting rights but less than half of the capital or voting rights; • the direct or indirect acquisition of more than half of the capital or voting rights but less than two- thirds of the capital or voting rights; • the direct or indirect acquisition of more than two- thirds of the capital or voting rights but less than three-quarters of the capital or voting rights, if within 12 consecutive months the acquirer increases its ownership percentage in the target company by more than 5% of the capital or voting rights. How - ever, the obligation to submit a mandatory purchase offer applies if its ownership percentage at any time reaches one-third, half or two-thirds of the capital or voting rights. 9.2 Directors’ Use of Defensive Measures The Capital Markets Law and its Executive Regula - tions prohibit defensive measures generally, as in accordance with the Executive Regulations of the Capital Markets Law, as of the date of the FRA’s approval of the initial tender offer and until its result, the board of directors of the target company and its managers are prohibited from any action or conduct that would constitute a material adverse event, which includes the following: • increasing the capital or issuing convertible bonds if such increase or issuance would make the acqui - sition burdensome or impossible, unless the deci - sion to do so was made at least 30 days prior to
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