EGYPT Law and Practice Contributed by: Arig Ali and Lana Abd El-Rassoul, Zaki Hashem, Attorneys at Law
ance companies. Recently, a draft law approved by the Senate aims to introduce limited partner - ships similar to UK structures, pending parlia - mentary approval. That said, it is important to highlight that the VC environment in Egypt is shaped by a grow - ing number of institutional and governmental initiatives aimed at supporting early-stage and SME (small and medium-sized company) invest - ments. Notable efforts include the following. • Avanz Capital, a fund-of-funds model that channels capital from domestic financial institutions into VC funds. The establish - ment of Avanz came in response to the need to expand the financing base to SMEs. The Central Bank of Egypt (CBE) urged banks to invest in: (i) direct investment funds; and (ii) funds of funds, which in turn both invest in SMEs, and to consider their contributions/ investments in the share capital of such funds as part of a requirement for banks to allocate allocate 25% of their portfolio of facilities exclusively to SMEs, whether as an “Angel Investment” , “Venture Capital or as“ Growth Funding”. • Egypt Ventures, a government-backed fund investing directly in startups. • The Micro, Small and Medium Enterprise Development Agency (MSMEDA), which collaborates with the World Bank to provide funding and capacity-building to entrepre - neurs. • The initiatives of the Technology Innovation and Entrepreneurship Center (TIEC), which stands out for its incubation programmes, broad geographic reach, and support in prod - uct development. Additionally, as explained in more detail in 4.1 Subsidy Programmes , the government has sig -
nificantly supported private accelerators such Plug and Play and 500 Global through premises provided by the Ministry of Communications, partial funding by the Information Technol - ogy Industry Development Agency (ITIDA), and cooperation from entities such as Ahly Bank. Furthermore, the SME Law issued in mid-2020 came with very promising provisions which, to the best of our knowledge, have not caught the VC ecosystem’s attention. These provisions, if properly implemented, could have a very posi - tive impact on the VC industry. The SME Law proposes monetary incentives to investment funds and companies established with the pur - pose of financing SMEs. This incentive will apply at the time of exit. The incentive programme is yet to be finalised by the Board of Directors of the SME Development Authority. The FRA also launched its first regulatory sand - box in November 2024 to support financial inno - vation. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Due diligence practices in Egypt have matured significantly. In the past, investors often relied on high-level reviews. However, following several challenging investments, there is now a greater focus on detailed assessments, in particular in connection with intellectual property (IP) rights, ownership structures and regulatory licensing. This shift is contributing to more informed invest - ment decisions and improved risk management. Consequently, due diligence over startups in Egypt currently requires meticulous planning, coordination and communication among all parties involved, alongside the engagement of
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