The Difference Between an Operating License and the Industrial Register for Industrial Establishments
Industrial activities constitute one of the most important pillars of the economy in the Arab Republic of Egypt, and in view of their economic importance, which necessitates the provision of facilitative measures for companies engaged in such industrial activities, and in implementation of the objective of promoting investment inside the country.
The Egyptian legislator has subjected these activities to a precise legal framework aimed at ensuring safe operation, protecting the environment from industrial pollution, and regulating the market, Among the facilitative guarantees established to ensure the proper conduct of production processes, enhance production efficiency, and improve economic performance are the Operating License and the Industrial Register.
The Operating License
It is issued by the Industrial Development Authority after verifying the safety of the factory, machinery, and equipment used in the production process, which is referred to as the technical file of the factory, in addition to other systems including, without limitation, fire safety systems, factory medical clinics, and environmental protection requirements.
Secondly, the industrial register, which aims to enable industrial establishments to benefit from State-supported incentives, including but not limited, customs exemptions and banking facilities.
The Operating License
It functions as the key to commencing operations, subject to verification of the safety of the production process of the factory, whereas the industrial register represents the legal identity of the factory and the gateway to benefiting from the incentives supported by the State for industrial establishments, as further clarified below.
Firstly: Operating License
An operating license is an official document or permit that authorizes an industrial establishment to lawfully carry out its activity, issued by the competent governmental authority, which in most cases is the Industrial Development Authority. The purpose of this license is to confirm that the industrial establishment is qualified to operate after fulfilling the required regulatory, technical, health, and security conditions.
The purpose behind the State requirement to obtain an operating license lies in organization and oversight to ensure that factories operate within a lawful framework and under the supervision of the competent authorities. This includes ensuring environmental safety and verifying compliance with environmental requirements, referred to as the environmental file of the factory, as well as ensuring occupational safety through verification of compliance with risk prevention requirements and fire safety systems as determined by the Civil Defence Authority, which is the competent authority to issue approvals in this regard. This ultimately aims to provide a safe working environment within the industrial establishment and to facilitate investment, thereby improving economic performance and attracting investors.
Secondly: Industrial Register
The industrial register is an official identification card for the industrial institution. It records the establishment with the governmental authority competent for industrial affairs and confirms that the establishment carries out an industrial activity. Industrial activity may not be lawfully practiced without registration therein, to enable industrial establishments to obtain and benefit from industrial incentives and support, ensure dealings with governmental authorities and banks, and regulate and monitor the industrial sector.
Registration for the industrial Register typically includes the name of the establishment, the name of the owner, the type of industrial activity, the location of the factory, production capacity, machinery and equipment, workforce size, and the date of commencement of operation. The register records production data and capacities and evidences compliance with applicable standards. The legal purpose for such registration is to grant industrial establishments legal status to practice the activity, facilitate access to governmental advantages, and ensure compliance with technical and environmental regulations to avoid legal accountability, Examples of establishments required for Registration include, but not limited, food factories, pharmaceutical manufacturing, metal industries, chemical industries, and building materials manufacturing.
The industrial register provides significant benefits to projects, including tax and customs incentives, facilitation of land allocation and utilities, financial support and banking facilities, access to governmental service approvals, enhancement of competitiveness, and attraction of investments. It constitutes an official registry in which industrial establishments are recorded with the competent administrative authority and includes their essential data.
Thirdly: Legal Risks of Operating Industrial Establishments Without a License
Operating an industrial establishment without an operating license exposes the owner to serious legal risks, including imprisonment, substantial financial fines, and administrative closure of the establishment, and the legislator has affirmed this position in Article (40) of Law No. 15 of 2017 stipulating that: “Any person who manages an industrial establishment subject to the prior licensing system, or operates it without a license, shall be punished by imprisonment for a period not exceeding one year and a fine of not less than one hundred thousand Egyptian Pounds and not exceeding five million Egyptian Pounds, or by either of these two penalties, in addition to the closure of the industrial establishment.”
Article (41) further provides that: “Any person who manages an industrial institutions subject to the notification licensing system, or operates it without prior notification to the competent administrative authority, shall be punished by a fine of not less than ten thousand (10.000) Egyptian Pounds and not exceeding two hundred thousand (200.000) Egyptian Pounds.Also the court may order the closure of the industrial establishment.”
Fourthly: The Difference Between the Operating License and the Industrial Register
The operating license authorizes the commencement of activity after fulfilment of the required conditions, whereas the industrial register constitutes the essential prerequisite for obtaining the operating license and for benefiting from the guarantees, incentives, and support issued by the State to facilitate industrial production. Accordingly, a clear distinction must be drawn between the industrial register and the operating license, and the confusion between them leads to project delays and may result in fines given that the industrial register represents the first step in establishing the legal entity of the project, while the operating license represents the final approval to commence actual production. Initiating the process of obtaining an operating license without first obtaining the industrial register obstructs the licensing process and suspends the project.
Fifth: Laws Regulating the Industrial Register and Operating License
The legislator has established a precise regulatory framework to maximize benefits and facilitate procedures for obtaining the industrial register and the operating license, primarily through: The Law on Facilitating the Issuance of Licenses for Industrial Establishments No. 15 of 2017, and The Law Establishing the Industrial Development Authority No. 95 of 2018.
Conclusion
In light of the foregoing, it is evident that the industrial register and the operating license are complementary but distinct concepts. The operating license constitutes the legal authorization to carry out the industrial activity, whereas the industrial register represents the regulatory instrument that establishes the existence of the establishment and its activity before the State. A precise understanding of the differences between them is essential for all those working in the industrial or legal fields, in order to avoid legal liability and ensure the lawfulness of industrial activity.