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12 January
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The Requirements of listing Egyptian Companies in the Egyptian Stock Market

Posted by cxxsx
in Blog
شروط قيد أسهم الشركات - Requirements of listing company

The Egyptian Stock Exchange (EGX) is one of the main pillars of the Egyptian economy, playing a vital role in directing investments and supporting national companies, EGX has witnessed remarkable development to become a leading platform for trading securities in the Arab region and Africa, making it a focus of attention for local and foreign investors.

EGX is the sole official market for trading securities in the Arab Republic of Egypt. It is the platform where investors meet to exchange of stocks, bonds, sukuk and other securities. EGX also tries to provide a safe investment environment for individual and institutional investors alike, by ensuring transparency and efficiency in conducting financial transactions, and applying the latest laws, regulations and that guarantee the protection of market participants.

The importance of EGX and its impact on the Egyptian economy

The objectives of EGX go beyond being a mere market for trading financial securities, but rather seek to achieve broader economic and social objectives, the most prominent of which are the following:

  1. Supporting economic growth; as EGX contributes to financing investment projects, which helps the economy to grow.
  2. EGX attracts local and foreign investments, which contributes to diversifying funding sources and increasing foreign exchange reserves.
  3. The Stock Exchange helps Egyptian companies obtain the necessary funding for expansion and growth, which enhances their competitiveness.
  4. The Stock Exchange provides citizens within the Arab Republic of Egypt with various opportunities to invest, increase their savings and achieve profitable returns.

The legal form of companies listed in the stock exchange and types of shares

Joint stock companies list their shares, whether ordinary or preferred shares, in cash or in kind.

Firstly: General conditions for listing securities:

Article No. (6) of the Listing and Delisting Rules No. 11 of 2014 clarified the general conditions for listing the company’s shares in EGX:

  1. The securities shall be listed in the central depository and registration system.
  2. The company’s Articles of Incorporation (AoI) shall not include any restrictions on trading in the securities required to be listed, without prejudice to the restrictions contained in the legislation regulating certain activities or specific geographical areas.
  3. All listed securities of the same type shall be listed, as well as the subsequent issues and the priority right to subscribe in accordance with the provisions contained in these rules.
  4. The company requesting listing shall establish a website immediately upon listing any of its securities in EGX and prior to the trading therein, to publish the annual and periodic fiscal statements and the supplementary clarifications thereto, the auditors’ report.
  5. The listing application and its attachments shall be submitted by the legal representative of the company or by a listing agent accredited by EGX in accordance with the requirements specified by the Executive Procedures of these rules.
  6. The entity requesting listing its securities shall conclude a contract with EGX regulating the rights and obligations of each of them, including the obligations of the company requesting listing.
  7. The cumulative voting method shall be used in electing members of the Board of Directors (BOD), allowing for proportional representation in the membership of the BOD whenever possible.
  8. The percentage of women’s representation in the company’s BOD shall not be less than (25%) or at least Two female members.
  9. Prohibition of combining the position of Chairman of the BOD with the position of Managing Director or CEO of the company. The Financial Regulatory Authority (FRA) may make a temporary exception to this condition in light of the justifications submitted by the company and accepted by FRA.
  10. Joining the membership of the Investor Protection Fund from Non-Commercial Risks.

Secondly: The Requirements for listing shares of Egyptian companies:

Article No. (7) of the listing and delisting rules highlighted the conditions that shall be satisfied to list Egyptian companies, which are as follows:

1- General Requirements:

  • Compliance with Regulations: The company shall comply with the Egyptian Capital Market Law and the regulations issued by the EGX and FRA.
  • Public Offering: A part of its shares shall be offered to the public through an Initial Public Offering (IPO).

2- Financial Requirements:

The company will be required to show profitability over the period stipulated, by submitting the financial statements for Two fiscal years prior to the registration application, provided that they have been audited in accordance with Egyptian auditing standards by one of the auditors registered in FRA and certified by the company’s Ordinary General Assembly (OGM) and its Meeting Minutes authenticated by the competent authority.

Article No. (7) of Decree No. 11 of 2014 regarding the rules of Listing and Delisting has specified exceptions to Paragraph No. (5) and No. (8) regarding net insurance and providing funds, including but not limited to, the company requesting registration to submit financial statements for three actual fiscal years prior to the registration application, provided that the average annual net profits of the company generated from its activity achieving the company’s main purpose before deducting taxes for the last three years prior to the registration application, relative to the average paid-up capital for the same period, shall not be less than (5%), and provided that it does not incur net losses from its activity achieving its main purpose during any of the three (3) fiscal years prior to the registration application.

The Company profits:

Listing requires achieving a minimum profit rate of 5% of the company’s paid-up capital.

The Paid-up Capital:
  1. The issued capital shall be fully paid and not less than 100,000,000 EGP (One Hundred Million Egyptian pounds) or its equivalent in foreign currencies.
    Revenue and Net Profit:
  2. The company should attain the financial limits set for the EGX listing, such as revenue and net profit. These limits are supposed to ensure that the business model of the company is viable.
  3. Disclosure and Transparency: The Company shall follow strict rules of disclosure and transparency, which will provide correct, timely, and comprehensive information to the shareholders and public.

3- Shareholder Structure:

The minimum number of shareholders:

The number of shareholders in the company after the offering shall not be less than 300 shareholders, taking into account that the allocated shares shall be distributed according to the rules determined by EGX.

Public Participation:

Article No. (7) of the Listing and Delisting Rules specified in its first paragraph the percentage of shares owned by the company and intended to be offered on the stock exchange, provided that the percentage of shares intended to be offered shall not be less than (25%) of the total listed shares of the company, or a quarter of a thousand of the market capital freely traded on the stock exchange, with no less than (10%) of the company’s shares, or shares whose value is equivalent to (1%) of the market capital freely traded on the stock exchange.

In conclusion, the EGX represents a valuable investment opportunity but is also impacted by regional and global economic trends. Continued market reforms and political stability are key to enhancing its growth and positioning in the global financial markets.