Egyptian legislation is based on a mixture of Islamic, English, and French law, and the establishment of Egyptian enterprises and their economic activities are regulated by various laws, in particular, on corporations, investments, and new companies, as well as on commercial law. A foreign investor has the right to establish enterprises in Egypt of such organizational and legal forms as:
- Sole Proprietorship – self-employed
- Joint Stock Company – Joint Stock Company
- Company Limited by Shares – closed joint-stock company with limited liability
- Branch of Foreign Company – a branch of a foreign company
A private entrepreneur (Sole Proprietorship) has the right to take part in any permitted business in Egypt, except for banking, insurance, and stock activities. But foreigners have the right to establish enterprises of this form only in the free zones of Egypt.
Joint Stock Company (Joint Stock Company) a company can be both an open and a closed company, characterized, respectively, as follows:
- the minimum capital of a public company is LE 500,000 (US $ 1 is equal to approximately 6 Egyptian pounds);
- the minimum capital of a closed company is LE 250,000;
- 10% of the capital of both a public and a closed company must be paid upon establishment by depositing these funds with one of the banks in Egypt before the company is entered into the commercial register of Egyptian companies;
- an open company has the right to offer its shares in subscription, and also has the right to trade its shares on the exchange;
- a closed company does not have the right to offer its shares for public subscription, and also does not have the right to trade its shares on the exchange;
- the minimum number of company founders is 3 (there is no maximum for shareholders);
- foreigners can own 100% of the shares in the company;
- it is allowed to issue only registered shares with the same value, which cannot be less than LE 5 and cannot exceed LE 1000;
- the liability of a company shareholder is limited to the value of the shares to which he subscribes, and he is not liable for the company’s debts above the market value of these shares;
- the company is managed by a Board of Directors. The number of which must be odd and at least three. Members of the Board of Directors must be shareholders of the company, and each of them must own a block of shares for at least LE 5000;
- if the company is incorporated for investment law (see below), the directors of the company can be of any nationality; otherwise, the majority of directors on the Board must be Egyptians;
- the company is entitled to participate in any permitted business in Egypt, including banking, insurance, and fund activities;
- the company is obliged to create and maintain a reserve fund of at least 5% of the issued capital.
A private limited company (Company Limited by Shares) is characterized as follows:
- the minimum capital of the company is LE 50,000;
- capital must be fully paid (before the company is entered into the commercial register of Egyptian companies) by depositing funds in one of the banks in Egypt;
- the minimum number of shareholders is 2, and the maximum is 50. Foreigners have the right to own all shares in the capital of the company;
- it is allowed to issue only registered shares of the same value, which cannot be less than LE 100. The company has no right to offer its shares in the public sale;
- the company can be managed by a single director, but if the number of shareholders of the company is more than 10, then the company must elect a Board of Directors, the number of which must be odd and not less than three. Members of the Board of Directors are not required to be shareholders of the company;
- at least one of the directors of the company must be an Egyptian citizen;
- the organization is entitled to participate in any permitted business in Egypt, except for banking, insurance, and stock activities.
A foreign company can open a Branch of a Foreign Company in Egypt, which is entitled to conduct commercial, financial, and industrial activities, subject to some restrictions on the conditions imposed by the Egyptian authorities. In practice, operating through a branch in Egypt does not bring significant advantages to a foreign company over operating through a regular local company. However, the branch has its organizational advantages:
- a branch can only consist of one foreign manager, but in this case, it must have an assistant – an Egyptian citizen;
- branch registration and closure procedures are fairly straightforward compared to conventional local businesses.
The registration of a branch and representative office of a foreign company in Egypt will require permission from the Ministry of Supply and Internal Trade, the ministry in charge of the activities of the branch, and the Directorate General for Free Zones and Investment (GAFI).
The legalized documents of the parent company must be approved by the Egyptian consulate in the applicant’s country and translated into Arabic in Egypt. The documents must be accompanied by a certificate from an Egyptian bank that the foreign company has transferred the capital of the branch or department (minimum LE 5,000) from abroad. After receiving the approval of all documents, which can take from two to three months, the branch can be formally opened by registering with the Egyptian commercial register.
Branches must operate following the Egyptian Currency Control Law, expenses must be paid in Egyptian pounds and foreign exchange must be made through the Egyptian banking system. Branches must maintain accounting records and file tax returns annually certified by a local auditor.
