Establishment of the Companies in Egypt – Full Guide
In the light of the Egyptian State’s strategic vision for achieving the country’s comprehensive and sustainable economic development and urging foreign and national investors to inject their capital into the Egyptian market, the Egyptian Investment Act No. 72 of 2017 provided many guarantees and incentives. And this made the Arab Republic of Egypt the first place in Africa to host foreign direct investment (FDI), with investments of $5.9 billion in 2021. This is according to the World Investment Report 2021 of the United Nations Conference on Trade and Development (UNCTAD), The law dedicates the second chapter to investment guarantees and incentives, and the regulation clarifies the procedures and conditions for entitlement to each of the guarantees and incentives.
Types of companies in Egypt:-
Before the establishment of the company, it is necessary to know the appropriate legal form for the company’s activity. The Commercial Law and the Companies Law No. 159 of 1981 defined the types of commercial companies; there are seven types of commercial companies, they are the general partnership, the simple partnership, the joint venture, the joint-stock company, the partnership limited by shares, the limited liability company, and the one-person company. All types of companies can be divided into two categories:
First: Companies of persons:
A company that is based primarily on personal consideration, is usually created among a few persons who are brought together by kinship or friendship and who place their trust in each other so that each partner’s personality is considered by other partners. Because of the importance of personal consideration in this type of company, the company is originally dissolved by death, disqualification, or withdrawal from the company. Except with the consent of all partners, there are three types of companies of persons:-
1- General Partnership Company:-
It consists of two or more persons and the partners are jointly liable in all of its obligations, as they are all jointly and unlimitedly liable for the payment of the company’s obligations, and this responsibility extends to the partners’ own funds.
2- Limited Partnership (LP):
It is made up of two groups of partners: general partners and limited partners.
– Joint partners: They are like solidarity partners; Personal responsibility and solidarity with other joint partners for the company’s debts and obligations, that is, their responsibility is unlimited.
– Limited partners: Their liability for the company’s debts is as limited as their shares and does not extend to their own funds.
3- The joint venture:
they are hidden companies that do not exist except in relation to the partners. They do not exist in relation to others, and accordingly, they do not have a legal personality and have no legal existence, a trade name, or financial liability.
Second: Money companies in Egypt: –
It is a legal unit with a separate entity from its owners and is legally a moral person who owns the assets in its name rather than in the name of its shareholders, can sue others, and can sue others. Financial companies may be classified as:
1-Joint Stock Company:
It is the clear model for money companies, where capital consists of equal shares called shares and the liability of the partners (shareholders) is limited to the extent of their shares.
2- Limited Partnership in Shares:
These companies consist of two types of partners: Limited partners: they are only asked about the amount of the shares they offer, and these shares take the form of tradable shares that do not differ from the shares in joint-stock companies. Joint partners: the same applies to general partners in general partnership companies and limited partnership companies, and then their responsibility is absolute in all their money and they run the company.
3- Limited Liability Company In Egypt:
This type of company is very well received in working life because of the characteristics of this company, the most important of which is the limited responsibility of the partners despite their personal nature, and it does not require capital size, in addition to being suitable for SMEs.
A company with limited liability is of a mixed nature, combining the qualities of companies of persons and companies of funds. In terms of companies of persons, the number of partners is limited, with no more than 50 partners, the share of the partner is not tradable, recourse to public subscription is prohibited, there is the possibility that the partners may recover shares, as is the case with companies of funds in the limited liability of partners, and the company is not dissolved.
4- Sole Company/ Sole Proprietorships In Egypt:
A company whose capital is wholly owned by one person, whether it be a natural person, or a legal “other company,” in such a way that it is not incompatible with its purposes, and the founder of the company is only asked about its obligations within the limits of the capital allocated to it.
Sole companies are distinct from individual enterprises, since the responsibility of the individual owner of the founder is fully responsible for the debts of the company, while single-person companies have limited liability for the financial disclosure of the company without its own financial integrity, and this type was introduced by Act No. 4 of 2018; To encourage young investors to start their own businesses like Startup Company, where one person can start their own company. This is seen as a step towards strengthening SMEs.
Documents required for the establishment of the Companies in Egypt:
Documents required for the establishment of a financial company in Egypt:-
- In the case of companies with limited liability, the customer (investor) makes several proposals for the name of the company, one of which is adopted at the time of incorporation.
A bank certificate with a deposit of at least 10% of the value of the capital exported to the contributing and recommending companies, completed to 25% within 3 months and completed to 100% within 5 years, taking into account the activities required by the law to exercise a minimum amount of the capital paid, and taking into account that the capital exported shall not be less than 250,000 pounds.
- A copy of power of attorney (see the original) in the event that the incorporation was done by an agent: from all founders in the cases of start-up companies, or from all companies in the cases of related limited companies (the number of partners is not less than three) two and not more than 50 partners ).
- The power of attorney shall provide for the establishment of companies and the signing of real estate incorporation contracts, and in the event that the agent is one of the partners, the authorization phrase (contracting with oneself and others in establishing companies).
- Valid and clear photocopies of the founders or partners (with the permissibility of requesting to see the original)
- – A national ID number for Egyptians.
- Passports for foreigners.
- An official extract from the register of accountants and auditors addressed to the Investment Authority stating the eligibility of the company’s auditor to review and approve the budgets of the money companies and submit a copy or approval of appointment in the event that this certificate was previously submitted to the Authority.
- A copy of the registration card in the Bar for the lawyer who ratifies the contract before the Bar Association. (At least a primary lawyer, and the lawyer’s letter is valid to date)
- Security inquiry forms about foreign founders or partners as a document + a copy of it on CD
- Determination of the name and address of the legal counsel of the company provided that the registration is not less than that of an appellate lawyer.- Valid and clear photocopies of the agent’s identity (see the original)
- An Egyptian national number.-
- A foreigner’s passport (a valid residence permit is required).
- Approval by the competent authority if any of the company’s purposes requires special consent under the applicable laws (prior consent).
- In the case of an in-kind share upon incorporation:
- – In the case of joint-stock companies/recommendations with shares: the original report of the committee formed by the General Authority for Investment and Free Zones evaluating the in-kind share shall be submitted.
- – In the case of a limited liability company: it is permissible to submit a report from experts from among the professions regulated by law, according to the nature of each share.
- If a company is established to operate the free zone system in accordance with the provisions of the Investment Act 72/2017, it requires the same documents as before, in addition to:
– In the case of a public free zone: The approval of the Authority shall be met prior to incorporation and approval shall be issued by the Board of Directors of the free zone to which the project is to be established.
– In the case of a private free zone of joint-stock or limited liability: Meeting Cabinet approval before incorporation.
- In the case of the establishment of a company of funds resulting from a change in the legal form of a company of persons in accordance with the provisions of Acts 72/2017 and 159/1981, the same documents are required in addition to:
– Assessment of the in-kind share (net assets and liabilities of the company). The decision of the constituted committee shall be made by a decision of the Chairman of the Board for this purpose.
– The contract for the formation and summary of the company of persons, as well as all subsequent contract amendments and summaries, are legally published by the court.
– Minutes of the Partners Group meeting containing the partners’ agreement to change the legal format prior to the evaluation.
- – Minutes of the meeting of the group of partners, which includes the approval of the partners on the value of the valuation product, which also includes the approval of the basic terms of the company after the transformation (the capital and its distribution among the partners and the activity … etc.)
- – In the event the partners wish to add a cash share, a bank certificate must be submitted, and the certificate is to deposit 10% of the cash share if the transformation is to a joint-stock company.
- – A preface that includes the history of the company from the beginning of the contract of its formation, including the amendments thereto, all the way to the minutes of the meeting of the group of partners, provided that it is on CD.
- – Up-to-date commercial register of the persons company.
In the case of establishing one or more money companies through the division of an existing company into more than one company:
- The decision of the chairman of the board of division.
- In-kind share evaluation report.
- The commercial register of the dividing company and the index by the division.
- A copy of the minutes of the extraordinary general assembly meeting of the company approving the division and approved by the Authority.
- A copy of the minutes of the company’s extraordinary general assembly meeting approving the outcome of the evaluation and approved by the Authority.
- Draft division contract approved by the Authority.
Documents required for the establishment of companies of persons in Egypt
- In the case of an agent, the power of attorney is provided for the establishment of companies and the signing of contracts of incorporation before the real estate month. In the case of an agent being a partner, the power of attorney is supplemented by the words “contract with the self and third parties in the founding of companies.”
- Personal proof (valid and clear) of the partners with a request for access to the original:
- A national ID number for Egyptians.
- Passports for foreigners.
- A copy of the Bar Association’s Registration Carnet of a Lawyer Ratifying the Contract before the Bar Association. (Initial counsel at least, with counsel’s carnation as of date)
Security query models for foreign partners as document + photo on CD
Personal proof of agent (valid and clear), (see original)
A national ID number for Egyptians.
- Passports for foreigners.
Consent of the competent authority if any of the company’s purposes requires special consent under the provisions of the applicable laws (prior consent).
- If there is an in-kind share at incorporation:
- To submit the assessment report on the in-kind share of experienced persons in a legally regulated profession, depending on the nature of each share.
- If companies are established to operate the public free zones system in accordance with the provisions of the Investment Act 72/2017, they require the same pre-presentation documents as well as:
– The approval of the Authority shall be met prior to incorporation and approval shall be issued by the Board of Directors of the free zone to which the project is to be established.
– In the case of the incorporation of companies of persons (de facto) as a result of the death of the owner of an individual enterprise, the same documents as before require presentation in addition to:
– A recent extract from the business register of the individual facility.
– The submission of the death certificate of the owner of the business and the information of an heirloom containing the heirs of the owner of the business.
- In the event that there are minors among the heirs, the court’s approval is submitted to allow the minor to enter into the establishment of a company from his own inherited money.
- A report for evaluating the tangible assets of a sole proprietorship (land – real estate – buildings – machines – equipment – inventory) approved by experts according to the nature of those assets, supported by documents supporting ownership.
- Submit the original minutes of the meeting of the group of partners in the company under incorporation, which includes the approval of the evaluation report and the distribution of the evaluation outcome to the heirs according to the inheritance notification, in addition to approving any other data of the company under incorporation.
Fees for establishing companies in Egypt:
Fees for incorporation of companies vary according to the type of company and the law to which it is subject to incorporation:
1- Bar Association attestation fee (in the case of the company’s capital equal to 20,000 or more)
– Value for service in accordance with Law 72 of 2017, one percent of the issued capital, with a maximum of 25000 pounds and a minimum of 250 pounds + 50 pounds of attorney’s stamp.
– Value for service in accordance with Law 159/1981, one percent of the issued capital, with a maximum of 25000 pounds and a minimum of 250 pounds + 50 pounds of attorney’s stamp.
2- Fee for documenting the company’s contract
– Value for service in accordance with Law 72 of 2017: none.
– Value for service in accordance with Law 159/1981, a quarter of a percent of the issued capital, with a maximum of 1,000 pounds and a minimum of 10 pounds
3- Registration fee in the commercial register
– The value of the service fee according to Law 72 of 2017, 63.25 pounds, and in the case of a branch, the registration fee in the commercial registry for the branch is added 297.75 pounds
– The value of the service fee according to Law 159/1981 63.25 pounds, and in the case of a branch, the registration fee in the commercial registry for the branch is added 297.75 pounds
4- Issuance of shares for joint-stock companies and limited by shares “joint-stock companies and limited by shares”
– Value for service in accordance with Law 72 of 2017: receive a service of half a thousand (0.050%) of the issued capital, with a maximum of ten thousand pounds.
– Value for service in accordance with Law 159/1981: for a service of half a thousand (0.050%) of the issued capital, with a maximum of ten thousand pounds.
5- Fee for obtaining a practicing certificate
– Value for the service in accordance with Law 72 of 2017, an annual subscription of two per thousand of the paid-up capital with a maximum of 2000 pounds and a minimum of 24 pounds + 200 pounds in return for the practicing certificate.
– Value for service in accordance with Law 159/1981, an annual subscription of two per thousand of the paid-up capital, with a maximum of 2000 pounds and a minimum of 24 pounds + 200 pounds in return for the practicing certificate.
6- Drawing of the Trade Union:
– Value for service in accordance with Act No. 72 of 2017: No
– Value for service in accordance with 159/1981 law: 125 pounds where the capital is less than 500,000 pounds, 250 pounds if the capital is 500,000 pounds or more.
7- Establishment fee:
– Value for service in accordance with Act No. 72 of 2017: No
– For one service per 1,000 (0.001) of capital exported up to £ 1,000 and a minimum of £ 100 “does not apply to limited liability companies”
– Value for service in accordance with Law 159/1981: Establishment 1 per 1,000 of capital exported up to a maximum of one thousand grams and a minimum of one hundred grams “does not apply to limited liability companies”
– Financial Market Certificate for Contributing Companies and Recommendation of Shares 100 Pounds.
8-Central registration fee for joint-stock companies and limited by shares.
– Value for service in accordance with Law 72 of 2017: the service fee is half a thousand of the issued capital, with a maximum of ten thousand pounds.
– Value for service in accordance with Law 159/1981: the service fee is half a thousand of the issued capital, with a maximum of ten thousand pounds.
9- Drawing a true copy of the contract and certificate of incorporation: 600 pounds for one copy
10- Fee for a certificate of non-ambiguity trade name: 114 Egyptian pounds “collected in the case of a limited liability company within the fees paid at the establishment of the company”
11- A fee of half of the capital is paid without a maximum in the case of free zone companies, and it is obtained with the knowledge of the real estate registry.
Is it permissible for foreigners to establish companies in Egypt?
Egyptian legislatures have permitted foreigners (non-Egyptians) to establish and own projects by 100%. These projects emanate from the state’s investment plan. The executive regulations of the law specify investment activities, as for other commercial activities, the law may require a specific ownership percentage for Egyptians.
The law also permits foreign companies that do not have their management center or main activity center in Egypt, to have a center to conduct their business, whether the center is a branch, an industrial house, a management office, or otherwise, which is what is called the branches and representation offices of foreign companies.
The commercial agencies managed by these companies in Egypt shall have the same rulings as branches, houses or offices in any of the following cases:
- (a) If the foreign companies manage them themselves or entrust their management to their employees.
- (b) If the agent has the authority to enter into contracts on behalf of the company.
- (C) If the agent has in the hands of the company’s goods or products, he will dispose of them in accordance with the company’s orders and in implementation of its contracts.
Other than in previous cases, commercial agents are not considered branches of foreign companies.
Important Advice for appropriate corporate incorporation:
We draw the attention of company founders to the fact that there are three main laws regulating the issue of establishing companies in Egypt, which are Investment Law No. 72 of 2017 and its amendments, Companies Law No. 159 of 1981 and its amendments, and Trade Law No. 17 of 1999 and its amendments, in addition to the provisions of the company’s contract in the Egyptian civil law Each of them has different provisions, and the executive regulations of the Investment Law limited the investment sectors and activities to thirteen sectors, namely the industry sector, agriculture, animal production, poultry and fish production, education sector, transport sector, tourism sector, housing and construction sector, sports sector, and electricity sector. Energy, petroleum and natural resources sector, water sector, communications and information technology sector.
The companies established in accordance with the Investment Law No. 72 of 2017 enjoy many investment guarantees that encourage investment and instill peace in the minds of the dealers. These companies were also granted many investment incentives, by shortening the periods of licenses or administrative approvals, with the intention of estimating time, speed and confidence through specialized mechanisms. Efficient and simple at the same time.
There are also some activities that the law requires to take a certain legal form, for example, investment in the trade or sports sector and integrated tourism development. The law requires that the company take the form of a joint-stock company.
Then comes the next stage of incorporation, which is fulfilling the conditions and controls for conducting the company’s activity, and obtaining the necessary licenses before starting the activity. The procedures vary according to the company’s activity and the party concerned with issuing the license. Otherwise, the company commits a crime or violation that exposes its owner or responsible manager to imprisonment or a fine, for example companies working in the ICT sector requires a license from the Information Technology Industry Development Authority.
On the other hand, the form of the company affects the limits of the partners’ liability for the company’s debts. If the company takes the form of a person’s companies (the general partnership, the limited partnership company, the joint venture company), the joint partners are fully responsible for the company’s debts, even if it is from his own financial liability. As for the money companies (Joint company, limited liability company, partnership limited by shares) The partners are responsible for the company’s debts within the limits of its financial liability and the company’s capital only.
Shura Law firm offers establishment of companies services for foreigners with professionalism and experience, and we’re happy to have you communicate with us in 30 minutes free consultation via Zoom – book your appointment now.