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Corporate Governance in Egypt


It is well established that the provisions of Egyptian laws provide various legal vehicles, however, the highly recommended legal forms are as follows: 

 Joint Stock Company (“JSC”); 

 Limited Liability Company (“LLC”);  

One-Person Company (“OPC”); and  

Branch of a Foreign Company (“BFC”) 

JSC shall be managed by the board of directors and the board shall be chaired by its chairman, in return, other legal forms mentioned above shall be managed by one or multiple managers. 

Typically, the capital structure shall be constituted of either ordinary shares (cash or in-kind) and/or preferred shares, and the latter shall grant its holder(s) various privileges pertaining to voting, dividends, or balances of liquidation.  

Undoubtedly, the provisions of law No. 159 for 1981 (“Companies Law”) and it’s executive regulations, as amended, Investment law No.72 for 2017 (“Investment Law”) and it’s executive regulations, law No. 95 for 1992 and its executive regulations, as amended, Corporate Governance Guide, Listing Rules, as amended and all circulars issued by the General Authority for Investment and Free Zones (“GAFI”) are deemed as the principal sources of corporate governance requirements and practices, in which entities shall comply and come in line with all provisions of the above-mentioned sources of corporate governance. 

In recent years, the regulatory and legislative authorities seek to facilitate all obstacles pertinent to corporate governance, in doing so, it is permitted to convene general assembly meetings via modern communication means to mitigate the risk of pandemics, the management of either LLC or OPC has not entailed the presence of an Egyptian national manager and one of the main developments that have been issued recently is the pre-closing approval issued by the Egyptian Competition Authority (“ECA”) regarding Merger and Acquisition (“M&A”)  transactions, provided that a transaction constitutes an economic concentration and exceeds the estimated turnover thresholds. However, there is a lack of electronic investment services in Egypt. 

Legally, the board shall be constituted of a number of board members not less than three board members at least, the board shall nominate from among its members the chairman of the board and its deputy, and the chairman may serve as a managing director as well. Moreover, it is impermissible to appoint a public servant as a board member unless upon the concerned minister’s approval in this regard and the board member shall not carry out any technical or managerial work for any other corporation, unless after obtaining the initial approval in this respect. Most importantly, the board member shall not be subject to a penalty for a crime or delinquency relating to theft or abuse of trust, or forgery or bankruptcy. Furthermore, the board of listed entities and entities operating in the field of non-banking financial activities shall comprise of a female representation at the rate of not less than 25% or two female board members at least. In all cases, the election of independent and non-executive board members shall observe that the member has the ability to allocate the time, exert all best endeavours in favour of the entity, and avert a conflict of interests with any other entity. 

Pursuant to the Egyptian jurisprudence, the remuneration of the board shall not be determined at a rate higher than 10% of the net distributable dividends after allocating all of the prescribed and required consumptions and the distribution of a dividend not less than 5% of the capital on the shareholders and personnel unless a higher percentage is stated in the statute. Moreover, the general assembly shall determine all salaries, allowances, and any other benefits pertaining to the board members, however, wages and remunerations pertaining to the managing director shall be undertaken through a decision issued by the board of directors meeting. The board’s remuneration is duly regulated under the entity’s statute along with the provisions of Companies Law.  

It is worth mentioning that shareholder activism is not common in Egypt, however, we recently witnessed that a recent fund has been formed to act as an equity activist, and the latter is limited to a certain extent pertaining to corporate governance aspects, for instance, board representation and scrutiny of related party transaction.     

The Corporate Governance Guide provides and recommends the full adherence of an entity in the contributions to economic and social growth, which urges to work in a responsible manner towards all stakeholders and the society in which the entity operates and its impact on the surrounding environment. Moreover, the entity shall issue an annual report comprising a summary of the board’s report, financial statements, and any other info that might be vital for shareholders and stakeholders. In the same context, under the Companies Law, the change of the entity’s form should not entail prejudice of the rights of its creditors, as well as, creditors of the entity may demand from the concerned court to invalidate any decision(s) if the entity’s profits distribution has affected the creditors’ obligations. Furthermore, employees of the entity are entitled to a share of the distributable profits to be approved by the general assembly upon a proposal issued by the board. 

The FRA recently issued its decree concerning the ESG requirements, whereby, listed entities in the EGX are obliged with the ESG requirements, additionally, the following are deemed as the key legal obligations including but not limited to: 

Operations and environmental controls, by providing details as to whether the entity has adopted an official ESG policy, whether this relates to the local subsidiary or parent company, whether the entity carries out an assessment of the ESG risks arising from its economic activities, adopts a defined policy for the recycling of waste or use of water of energy, or has specific targets for the reduction of greenhouse gases; 

Carbon emissions, including details as to whether the entity calculates its yearly carbon emissions; 

Electricity sourcing, including details of the entity’s energy consumption, sources, and saving; 

Waste management, including details of the entity’s waste, produced yearly and its recycling status by type and volume; 

Data protection, and whether the entity adopts any framework, measures, or international recommendations regarding data protection. 

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