Egypt grows at a current 5+ GDP mark. Hence it is not surprising that the interest in Egypt goes beyond visiting the pyramids.
With a population of over 100 million and the reach to the MENA countries, more and more trips to Egypt have the mission to sign contracts and/or set up companies.
In Egypt, there are four types of possible legal forms of business:
• Joint stock company.
• Limited liability company.
• Representative office.
• Sole shareholder company.
For foreign investors the most common form is the LLC as it provides limited liability and any issued capital is accepted. Other factors to consider when determining the most suitable form of business to use are the purpose of the entity, the number of partners and capital invested are essential.
Joint stock company (JSC)
Generally there are no restrictions on the activities a JSC can undertake.
• A JSC may be 100% owned by foreign investors; however in order for a JSC to import goods for the purpose of trading in Egypt, it must be 51% at least owned by Egyptians
and having one Egyptian manager at least responsible for importation.
There should be at least three shareholders and three members of the Board of Directors. The board members can be individuals or corporates, however corporate members must have one or more individual representative.
• The minimum capital of JSC is 250,000 EGP or its equivalent in foreign currencies, where 10% of such capital (“Issued Capital”) is paid upon incorporation, increased to 25% within 3 months from the date of registering the company
in the commercial register (“Paid up Capital”), and the remaining amount must be paid within no later than 5 years from the date of registering the company in the commercial register. Noting that certain activities may require a higher minimum capital, for example the minimum required capital for importing JSCs is 5 Million EGP.
• JSCs can be registered in the Egyptian Stock Exchange.
• 10% of the company’s annual profits must be distributed among the employees.
• The establishment process approximately takes between 3 – 4 weeks from the date of submitting all the required documents to the General Authority for Investment & Free Zones (GAFI).
Limited liability company (LLC)
An LLC is permitted to engage in all business activities except activities of banking, insurance, saving, receiving or investment of funds for the favor of third parties, or any other activity explicitly restricted by the law.
– An LLC may be 100% owned by foreign investors; however in order for a LLC to import goods for the purpose of trading in Egypt, it must be 51% at least owned by Egyptians, and having one Egyptian manager at least responsible for importation.
– There should be at least two partners in an LLC.
– There are no nationality or residence restrictions regarding other managers.
– Partners can be individuals or legal entities.
– There are no minimum capital requirements; however, certain activities may require a certain minimum capital, for example the minimum required capital for importing LLCs is 2 Million EGP (although there is no need to physically deposit this capital).
– LLCs cannot be registered in the Egyptian Stock Exchange. If the capital of the company reach to EGP 250,000, 10% of the company’s annual net profits must be distributed on the employees.
– The establishment process approximately takes between 2 – 3 weeks from the date of submitting all the required documents to the General Authority for Investment & Free Zones (“GAFI”).
The activity of a representative office is limited to conducting market study without practicing any type of commercial activity. There are no partners required, however, a manager should be appointed by the head office abroad to perform the administrative work based on the responsibilities determined by the head office. This manager can be Egyptian or foreigner.
A foreign company can also operate in Egypt by establishing a foreign branch. The purpose of a branch is limited to implementing a specific contract in Egypt.
• No partners are required. However, the head office appoints a manager who is entitled to perform the administrative work based on the responsibilitiesdetermined by the head office. The manager may be Egyptian or foreigner.
• There are no capital requirements, only a deposit of USD amount equivalent to of EGP 5,000 in the representative office’s local bank account is required.
• The branch is entitled to deduct a head office charge of an amount up to 10% of its taxable income, which is not subject to Egyptian withholding tax. Other than this, the branch is subject to normal Egyptian taxes.
• The establishment of a branch can be challenging and it may take approximately 6-7 weeks from the date of submitting all the required documents to GAFI.
**Note: for the activity of importing their restriction that there must be 51% Egyptian shareholder.
We have done a practical revision of the legal forms available to set up a business in Egypt and noted that the most used form is the LLC. This being each business venture will need to be looked at in order to assess the best legal entity for the desired business operandi.