EGYPT Law and Practice Contributed by: Arig Ali and Lana Abd El-Rassoul, Zaki Hashem, Attorneys at Law
LPs. This approach is consistent with interna - tional best practices, and is considered a posi - tive feature of the Egyptian regulatory frame - work. For portfolio companies, a progressive tax rate is applicable to small projects. In accordance with Law No 6 of 2025, projects with turnover of less than EGP20 million, as detailed in the law, benefit from reduced corporate tax rates rang - ing from 0.4% to 1.5%, based on turnover level. For example, enterprises with annual revenues of between EGP500,000 and EGP2 million are taxed at 0.5%. 4.3 Government Endorsement See 4.1 Subsidy Programmes . Incentive schemes for employees in Egyptian startups largely depend on the corporate struc - ture of the start-up. Where employees work for an offshore holding entity that owns the Egyp - tian operating company, global standards on equity-based incentives – such as stock options, restricted stock units or phantom shares – can be implemented in line with the legal and tax regimes of jurisdictions such as the Netherlands or Singapore. In these cases, it is common to see structured vesting schedules (eg, four-year vesting with a one-year cliff) and employee par - ticipation in long-term incentive plans designed to align interests with the growth of the com - pany. However, when employees are directly employed by an Egyptian operating company, the applica - ble local legal framework must be considered. Under Egyptian law, only companies legally 5. Employment Incentives 5.1 General
structured to issue shares are permitted to issue equity-based incentives in the form of stock options to employees. In contrast, LLCs are not legally structured to issue equity to employees, and typically rely on cash-based bonuses or profit-sharing arrangements as incentive tools. 5.2 Securities If the incentive is to be through ESOP in an Egyptian JSC, the law provides for three sys - tems to implement it: • Grant of free shares under this system, the beneficiaries are granted free shares distrib - uted over several years. The transfer and disposal of shares to the beneficiary are subject to a three-year lock-up period (this may be adjusted to one year, in line with the company’s vision). If the beneficiary leaves, resigns, or is dismissed before the end of the grant period, their right to the granted shares is forfeited. In the event of the beneficiary’s death, their heirs legally replace them. • Selling part of the company’s shares at dis - counted prices or with easy payment terms under this system, the sales contract between the company and the beneficiary governs their relationship. If the beneficiary resigns before paying the full price, they have the option to either pay the remaining amount or recover what they have paid based on the share price at the time of their resignation, within seven working days from the resigna - tion date. The shares in this case are subject to a lock-up period during which they cannot be sold, as determined by a decision by the extraordinary general meeting. • Promise to sell shares under this system, the beneficiary is granted the right to invest in certain number of the company’s shares at a specific price at the end of a set period. The beneficiary has no rights to the shares subject
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