Financial Companies

There are many legislations regulating financial companies in the Arab Republic of Egypt, namely Law No. 159 of 1981 and its executive regulations, Law No. 72 of 2017, Law No. 95 of 1992, and decrees issued by the General Authority for Investment and Free Zones (GAFI). These legislations helped attract foreign investment and more local investment. In this article, we enumerate the nature of financial companies, their types, and the method of establishing and liquidating them.

What are financial companies?

Financial Companies in Egyptian legislation are companies based on financial considerations and no personal considerations are involved. Financial Companies are represented by joint stock companies (JSC), limited liability companies (LLC), one-person companies (OPC), and partnerships limited by shares.

1- The Joint Stock Companies:

It is one of the types of financial companies whose capital consists of shares, the type and nature of shares vary from cash or in-kind shares, and differ if the share is ordinary or preferred share of a special nature.

Each shareholder is not responsible for the company’s debts except to the extent of the shares he/she owns.

Among the requirements for joint stock companies are the following:

• Its capital shall not be less than 250,000 EGP (Two Hundred and Fifty Thousand Egyptian Pounds).
• The number of founders shall not be less than three, whether natural or judicial persons at least and may increase for an unlimited number of shareholders.
• Issuing a bank certificate stating that the company’s capital has been deposited, whether partially or fully so that it is not less than 10% of the company’s issued capital and shall be completed to become 25% of the capital within three months from the date of the company’s incorporation, and 75% of the entire capital is completed to become 100% within five years from the date of incorporation

The types of capital in joint stock companies are:

1. Issued capital, which is the company’s capital, which consists of the value of the company’s actual shares, and paid-up capital, which is paid by shareholders from the issued capital.
2. Authorized capital, which is ten times greater than the issued capital.

The shareholders, through incorporation, the Constituent Assembly, or the General Assembly, whether Ordinary or Extra-Ordinary, in accordance with Article (21) of the company’s Articles of Incorporation, elect a board of directors for the company, the number of its members shall not be less than three members and maybe more, as per what is stipulated in the company’s Articles of Incorporation, and the tasks assigned to the Board of Directors are to manage the company’s affairs in accordance with the authorities entrusted to it by the law or the company’s General Assembly.

The powers and authorities in the joint-stock companies are divided between the Board of Directors and the General Assembly, as regulated by law and stipulated in the company’s Articles of Incorporation.

2- The Limited Liability Companies:

It is one of the financial companies whose capital consists of quotas, and each partner is asked only for his/her quota, and the type of quota varies, whether in cash or in kind.

Among the requirements for the limited liability companies is that the number of partners shall not be less than two and not more than fifty, whether natural or judicial persons, and there is no minimum limit for the company’s capital according to a decree of the Minister of Investment on 28/5/2009 after the minimum was previously according to a decree of the Minister of Investment on 3/2/2008 in the amount of Two Hundred Egyptian Pounds.

Upon incorporation, it is not required to deposit the capital, but when increasing the capital, the full amount of the increase shall be deposited. The Extra-Ordinary General Assembly convenes or upon incorporation to appoint a manager or managers to manage the company. If there are multiple managers in the limited liability company, the assembly may decide to appoint a board of directors to manage the company.

3- The One-Person Company:

Law No. 4 of 2018 was issued with some amendments to Law No. 159 of 1981, including the establishment of a one-person company, which is a company with one owner who owns all of its quotas, whether a natural or judicial person.

Its capital is not less than 1000 L.E (One Thousand Egyptian pounds), fully deposited in a bank, and a certificate shall be issued to be submitted upon incorporation

4- Partnerships Limited by Shares:

It is one of the financial companies and has a special nature as it is a mixture between a limited partnership and a joint stock company. Accordingly, one of the company’s requirements is that it consists of two founders, one of whom is a joint person, and the minimum capital is 250,000 L.E (Two Hundred and Fifty Thousand Egyptian Pound), including the quotas of joint partners.

The nature of the partnership limited by shares is that the joint persons in the company are responsible for all the company’s funds, unlike the shareholders, who are only responsible for the value of their shares.

Steps to Establish Financial Companies

Resorting to the Investor Services Center with some documents, including the following:

1. Non-confusion certificate.
2. A certificate of depositing part or all of the capital. This applies to joint stock companies and limited partnerships with shares. As for a one-person company, the capital shall be fully deposited.
3. Powers of attorney for the founders. As for one person, power of attorney for the owner only.
4. A copy of the ID for Egyptian founders or a copy of the passports for foreigners.
5. Security inquiry forms in the case of foreign natural or judicial persons.

The liquidation of financial companies

Liquidation shall be done in two stages as follows:

• The first liquidation takes place by convening an Extra-Ordinary General Assembly in which a liquidator is appointed, his duties and fees are determined, and the duration of the liquidation is determined. As for the one-person company, it takes place through an owner’s decision.
• Final liquidation takes place through an Ordinary Assembly with the results of the liquidation and a decision to remove the commercial register, while the one-person company takes place through an owner’s decision.