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How to establish a company in Egypt?

Establish a company in Egypt

Do you want to start a company in Egypt?

In this article, we will show you how to establish a company in Egypt and the types of companies you can register.

 

Overview of the economy in Egypt

Due to its important location between the east and the west, Egypt is considered one of the most attractive destinations for investment. To all investors and startups and small business all over the world who want to start a company in Egypt, there is a great investment environment to start a company which is affected by many factors, including but not limited: infrastructure, workforce, national security, political instability, taxes, rule of law, property right, government regulations, government transparency and government accountability, Egypt issues laws and rules that govern the economic and political conditions, as it is well-known that stability is a very important factor in the investment, which affect the investment environment for investors, startups and small business who want to invest and start a company in Egypt, rather than this environment will enlarge the investment opportunities and provide the required security thereto.

The Companies Law No. 159 of 1981 is one of these laws that regulate the company formation, the ways of investments, kinds of companies, the requirements, and the procedures for establishing a company in Egypt. 

 

Types of Companies You Can Register

The main authority that governs establishing all types of companies in Egypt is the General Authority for Investment and Free Zones.

The Companies’ law No. 159 of 1981, the New Investment Law No. 72 of 2017, and the Capital Market Law with their executive regulations and modifications are the governing laws that regulate and manage the establishment of a company from the beginning till its dissolution.

The most widespread types of companies in Egypt under Law No. 159 of 1981, are as follows:

  1. Joint Stock Company (JSC)
  2. Limited Liability Company (LLC)
  3. Branch of a Foreign Company
  4. One Person Company

 

The main features of each company will be shown as follows:

Joint Stock Company (JSC)

A joint-stock company (JSC) is a company whose capital is divided into shares of equal values, the liability of the shareholder is confined to the value of their shares, rather than that he is not liable for the debts of the company except within the limit of those shares. It may be a closed company or a listed company. The company shall have a trading name derived from the purpose of its establishment. The trade name of the company shall include the name or title of one or more of its founders.

Incorporation:

  • Trade Name Clearance Certificate which checks the name of the company taken by other company or not shall be submitted for.
  • A joint-stock company shall be registered in the Commercial Registry and it will be subjected to the supervision and control of GAFI.
  • The Company name shall be derived from the purposes for which it is to be incorporated and may include the name of one or more of the shareholders.
  • 10% of the capital shall be paid prior to the incorporation and shall be provided by bank certificate from an authorized bank by The Central Bank of Egypt.

 

Purposes:

A joint-stock company activity like any other business entity provided by applicable laws and regulations.

 

Management:

  • A JSC shall have a minimum of three founding shareholders.
  • The management of the company shall be proceeding by a board of directors comprising of at least three members elected by the partners for a limited duration.

 

Capital:

  • The required minimum issued capital is 250,000 L.E for a company in the event if it is not offering the shares to the public (closed or private joint-stock company), 10% is to be paid at the time of incorporation.
  • A percentage of 25% from the issued capital shall be paid within three months from incorporation, and the remaining amount of the nominal value of the shares shall be paid within five years.
  • An amount of LE 500,000 from the minimum capital of a joint-stock company that offering its shares for public subscription shall be paid.
  • Holding company’s establishment for the purposes of stock dealings and investment, the minimum capital is LE 5 million, of which at least 25% must be paid on incorporation and the authorized capital must not exceed ten times the issued capital.

 

Taxes:

Taxes paid on company profits for JSC.

 

Limited Liability Company (LLC)

  • The Limited Liability Company is a closed company due to the limited liability of its partners to the value of their shares in the company.
  • The company shall have a trading name for the purpose of its establishment and the name of the company may include the name or title of one or more of its founders.

 

Incorporation:

  • Limited liability companies have to be registered in the Commercial Registry and are subject to the supervision and inspection of GAFI.
  • The LLC is incorporated once it is registered in the Commercial Register.

 

Purposes:

  • Limited liability companies are prohibited to carry out some activities in some areas like insurance, banking, savings, invest money for others, and investment management.
  • Apart from the preceding areas of activity, limited liability companies can carry out legal commercial activity similar to other business entities, subject only to the general limitations of applicable laws and regulations.  

 

Management:

  • A limited liability company may be owned by foreign (100%) and there is no express provision indicating a maximum ceiling for ownership of capital by foreigners.
  • A limited liability company cannot be owned by one entity, under Egyptian law. Consequently, at least two partners are a must. With respect to management, thus the appointment of the managers is by the partners.
  • There may be one or more managers, and also there must be at least one Egyptian manager.

 

Capital:

The minimum share capital required to form an LLC is LE 1,000. The capital must be divided into equal shares, either in cash or in kind, and the value of each share must be at least LE 10.

 

Taxes

Taxes paid on company profits for JSC.

 

Profit-Sharing

  • In case of the capital of the limited liability company does not reach LE 250,000, the company is not obliged to distribute part of the profits to the employees.
  • If the capital reaches the abovementioned capital, 10% of the net profits are to be distributed to employees, provided that such 10% does not exceed the annual total value of salaries and wages payable to the employees.

 

Branch of a foreign company

  • A branch of a foreign company can be only registered in Egypt to carry out construction works or generally work of contractual nature according to a contract concluded with any Egyptian entity either the Egyptian Government, Public Sector, or Private Company.
  • Although the branch can engage in commercial, financial, industrial, and contractual activities, the activities that the branch will carry out will be limited to those stated in its contract in Egypt, which means that the branch is treated as an Egyptian company in all matters except corporate governance.

 

Registration of a branch of a foreign company:

Any foreign company has to register the branch in the Commercial Registry and General Authority for Investment and Free Zones whatever its legal form, which carries out any commercial, financial, industrial, or contracting activity in Egypt.

 

Purposes:

A branch can undertake any form of legal activity in Egypt for which it is registered in the Commercial Registry provided that it has a signed contract with an Egyptian entity either the public sector or private sector to provide the services encompassed by such activity, the activities that the branch will carry out will be limited to those stated in its contract in Egypt.

 

Management:

The branch of a foreign company can be managed by a foreign manager. And the branch will be under the full control of its parent company. Branch offices’ activities are subject to review by General Authority for Investment and Free Zones to ensure compliance with laws and regulations.

 

Capital:

There are no requirements for the minimum capital investment for the branch. However, the initial capital investments must be made in foreign currency transferred to Egypt through a registered Egyptian bank.

 

Taxes:

The net profit of a branch is subject to corporate tax at the same rate as Egyptian companies.

 

Profit-Sharing:

Branches are bound to distribute at least 10 % of their annual net profits to their employees (not exceeding the total annual wages and salaries paid to workers and employees of the branch).

 

One Person Company

 The One Person Company is a new type of companies that were introduced in the Companies Law No. 159 of 1981 after its last amendments were made in 2018; as by this type of companies, the small investor becomes able to establish, on his own, a company in a unique form of companies.

  • One Person Company is a company that is owned by a single person, whether natural or a legal entity, within the purposes that it’s established for, and the owner of the company shall be liable only for the company’s obligations unless within the allocated shared capital.

 

Advantages of One Person Company:

  • The one-person company needs only one partner or founder, so the opportunity to the small investors to own a company without the need to obtain a certain number of partners or shareholders. Since a one-person company is the owner-partner in which is liable for his share only by the amount of the company’s capital.
  • There is another advantage for the One Person Company is that the decision-making within the company as the owner of a one-person company exercises all the powers granted to the board of directors and the powers of the ordinary and extraordinary general assembly, being the only partner.

 

Establishment and work of a one-person company

  • One-person company shall be established by one natural or legal entity only. Thereafter, any more partner in the company shall not be a one-person company.
  • The founder shall establish the company by himself or by his representative through submitting an application to the Authority. Each company shall have its regulation including its name, purposes, the data of its founder, duration, and how it will be managed, the address of its head office, branches, the amount of its capital, and the company liquidation. And any data mentioned by the Executive Regulations.
  • An approval from the prime minister or the competent minister if the founder of the company is a public law person.
  • The company’s capital shall be paid in full prior to the establishment of the company.
  • In case of the founder dealt with the capital to a natural or legal entity, it is a must to amend the company’s data and the commercial register within a period not exceeding three months from the date of the deal, in accordance with the procedures and rules specified by the Regulations. In all cases, the act shall not be effective against third parties except the date of registration in the commercial register.

 

The main required documents to establish a company in Egypt

  1. A trade name clearance certificate from GAFI.
  2. A bank certificate by the capital depositing.
  3. Power of attorneys and it’s original for establishment.
  4. Copies of the IDs for partners and Egyptian managers and passports for foreign managers.
  5. An original copy of the auditor account