EGYPT Law and Practice Contributed by: Alex Saleh, Asad Ahmad, Hegui Taha and Farida Koura, GLA & Company
• The joint venture must have independent resources, including financing, employees and assets. The joint venture must also have an independent management dedicated to handling the daily operations of the joint ven - ture. In addition, the joint venture must have sufficient separate resources, such as financ - ing, employees and assets enabling the joint venture to perform its activities independently. • The joint venture’s sales and purchases operations must not be limited to the control - ling persons. If the joint venture’s sales and purchases operations depend solely on the controlling persons, meaning that the joint venture has no or limited operations with other market players operating in the market, the joint venture is not deemed to be inde - pendent. The following must be taken into account. (a) Concerning sales: (i) if the joint venture achieves 50% or more of its total sales with third par - ties, this will typically be an indica - tion of the joint venture’s independ - ence; (ii) if the joint venture’s sales with third parties do not exceed 50% of its total sales, meaning that the majority of its sales are consistently with the controlling persons, an evaluation is needed to determine if the joint venture is engaging with the control - ling persons on a commercial basis, that is, under the same mechanisms and contractual terms as it does with other market players. The joint venture must therefore deal with third parties if they offer better prices or conditions than the controlling persons; and (iii) if the joint venture achieves less than 50% of its total sales with third par -
ties, the market structure should be assessed. For example, if the con - trolling persons of the joint venture hold more than 50% of the market share in the relevant market, the joint venture’s dependence on the con - trolling persons for sales does not affect its independence, due to the market structure. (i) if the joint venture relies on the controlling persons for the major - ity of its purchases, it is considered independent if it adds value to these purchases. For example, if the joint venture uses the raw materi - als that it purchases from its par - ents as production inputs for other products, the joint venture will be considered independent. However, if the joint venture purchases raw materials from its parents with the sole purpose of reselling them, the joint venture will not be considered independent. Except for where the joint venture distributes products of the controlling persons along with those of other market players through its own distribution channels and mechanisms, such as outlets, warehouses, transport fleets and sales personnel. In all cases, the independence of the joint ven - ture is not affected if all or the majority of its sales and purchases in the initial years or stages of its economic activity are with the controlling persons. In addition, the joint venture must be prepared to operate on a lasting basis. For example, if the duration of the joint venture’s operation is (b) Concerning purchasing:
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