EGYPT Law and Practice Contributed by: Arig Ali and Lana Abd El-Rassoul, Zaki Hashem, Attorneys at Law
While the law does not impose a specific cap on the extent of preferential rights an investor may enjoy, it has been observed that requests for preferences exceeding twice the rights of ordinary shares may meet with some resistance at implementation level. Also, Egyptian limited liability companies (LLCs) cannot issue preferential shares, which may prove impractical for portfolio companies if they In offshore jurisdictions, early-stage financing rounds are frequently structured using convert - ible instruments such as SAFEs (Simple Agree - ments for Future Equity) or convertible notes – tools that offer flexibility and efficiency for both investors and founders. In contrast, Egyptian onshore transactions remain anchored in con - ventional legal documentation, including SHAs, SSAs, and disclosure letters. This divergence is largely due to the limited enforceability of non-traditional instruments under Egyptian law, which necessitates careful reliance on well- drafted, formal agreements. In response to repeated calls from industry players for more flexible investment tools, a recent decree marks a promising development in Egypt’s legal framework. It now permits the registration of convertible instruments with the Misr Central Clearing, Depository and Registry (MCDR) and allows for an exception to the gen - eral prohibition on executing cashless transac - tions at the time of debt-to-equity conversion. While this is a welcome step toward aligning local practice with international norms, the underlying legal mechanism required to operationalise such conversions is yet to be put in place, leaving some uncertainty around implementation. are established as such. 3.4 Documentation
At present, Egypt lacks a centralised body responsible for developing standardised VC documentation, similar to the role played by the BVCA in the UK or NVCA in the US. While there was an early attempt by Cairo Angels – an angel investment network that has since ceased oper - ations – to lead an initiative for market-standard documents, the fruits of these efforts remain incomplete, and the initiative has yet to gain traction in the wider VC ecosystem. Looking forward, there is cautious optimism that this gap may soon being addressed. The Memorandum of Understanding signed in 2025 between MSMEDA and the Egyptian Private Equity and Venture Capital Association (EPEV - CA) could potentially serve as a vehicle to revive and support institutional efforts to establish locally adapted, standardised VC documenta - tion – an essential step toward a more coherent and investor-friendly ecosystem. While no formal commitments have been made, it is hoped that this collaboration might help catalyse progress in this direction. 3.5 Investor Safeguards Since many acquisitions are made offshore, they generally follow established offshore market practices and standards. VC investors commonly secure liquidation preferences, anti- dilution and pre-emptive rights. Please see 3.7 Contractual Protection for more details. 3.6 Corporate Governance Typically, since investments in Egyptian startups involve offshore SPVs – commonly located in jurisdictions such as the Netherlands and, more recently, Singapore – the governance standards of these jurisdictions apply, supplemented by robust oversight mechanisms directed from the offshore parent entity to the Egyptian subsidiar -
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