I. Entering The Egyptian Market
Foreign enterprises wishing to conduct business in Egypt may do
so by establishing a formal, permanent presence in Egypt. Egyptian
law permits foreign investors in Egypt to establish any of the
following types of companies:
- Limited Liability Company.
- Commandite Company Limited by Shares; or...
- Joint Stock Company.
A foreign investor may decide not have a permanent presence in
Egypt, instead setting up a branch or representative office, or
appointing a commercial agent to sell and distribute products in
the Egyptian market. Each of these business forms is discussed in
II. Conducting Business under the Investment Law
Foreign companies may incorporate as an entity in Egypt under
either the Commercial Companies Law or the Investment Guarantees
and Incentives Law No. 8 of 1997 (hereinafter referred to as the
"Investment Law"). The rules and regulations governing the
structure and incorporation procedures of entities under the
Investment Law are essentially identical to those under the
Commercial Companies Law. However, companies incorporated under the
Investment Law are licensed by a different authority and are
entitled, if their objects fall within the targeted industries, to
various tax and capital investment incentives.
The targeted sectors include: infrastructure; manufacturing and
mining; transport; software and computer systems development and
production; medical services; certain financial services; oil field
services; agriculture; reclamation of desert land; hotels and
tourism (Article 1 of the Investment Law). Investment guarantees
and incentives outlined in the Law are limited to commercial
activities falling within these sectors.
The investment guarantees afforded to qualifying companies
include: the prohibition of nationalization, confiscation and
freezing of assets; the prohibition of governmental interference in
the pricing of companies' products; the right to own buildings and
land for project purposes, regardless of the nationality and place
of residence of a qualifying company's shareholders/partners; the
ability to import all materials required for construction or
expansion of a project without the need for a special import
license or registration in the import register; and the ability to
export products without special licenses or registration in the
There are many tax incentives afforded to qualifying companies
under the Investment Law, including, inter alia, 5, 10, or 20 year
tax holidays, depending on where the company is set up; waiver of
certain fees and duties; fixed customs duties; and exemption from
tax of certain profits and dividends.
Article 28 of the Investment Law provides that the Council of
Ministers (the Cabinet) may grant and transfer state owned land to
companies incorporated under the Investment Law whose activities
are within one of the targeted sectors.
Beyond investment guarantees and financial incentives, the
Investment Law provides for the establishment of Free Trade Zone
Areas including privately run Free Trade Zones. (Article 29 of the
III. Establishing a Company under the Commercial Companies
A LCC may be formed with a minimum of two shareholders and a
maximum of 50 shareholders. If the number of shareholders should
fall below two at any time, the LCC will be deemed wound up by
operation of law. (Articles 59 and 60 of the Ministerial Decision
Implementing the Commercial Companies Law.) There is no minimum
Egyptian shareholding required to form a LCC.
The founding shareholders of the LCC must submit an application
requesting permission to incorporate a LCC. The Ministerial
Decision Implementing the Commercial Companies Law outlines the
mandatory provisions that must be included in the Memorandum of
The LLC is incorporated once it is registered in the Commercial
Register (Article 1 of Law 34 of 1976 governing the Register of
Commerce and Article 77 of the Commercial Companies Law). The LLC
must also maintain a Register of Partners in its head office, which
must contain the names, nationalities, domiciles and occupations of
the partners; the number of shares owned by each partner; the sum
paid by each; and the assignment or transfer of shares and related
relevant information (Article 275 of the Commercial Companies
The name of the LLC must be derived from the object of the
company and may include the name of one or more of its
partners/shareholders. Additionally, the words "Limited Liability
Company" must be included in the name (Article 61of Ministerial
Decision Implementing the Commercial Companies Law.)
The minimum share capital required to form an LLC is £E 50,000.
The capital must be divided into equal shares, either in cash or in
kind, and the value of each share must be at least £E 100. Each
partner/shareholder is liable to the extent of the value of his
shares and no share certificates are issued (Articles 67; 68 and 69
of Ministerial Decision Implementing the Commercial Companies
The management of an LLC may be vested in one or more managers.
At least one manager must be of Egyptian nationality (Article 281
of the Ministerial Decision implementing the Commercial Companies
Law). The manager(s) must be named in the Memorandum of Association
but need not be a shareholder(s). The manager(s) may be appointed
for a definite term (which must be specified in the Memorandum of
Association) or for an indefinite term. The manager(s) shall have
full authority to represent the LLC vis a vis third parties, unless
such authority is limited or qualified by the Memorandum of
Association. A shareholders' resolution limiting the authority of
the manager(s) will not be valid unless it is entered in the
A supervisory board is required if the LLC has more than ten
shareholders of which at least three must be shareholders.
(Articles 120; 121; 122 and 123 of the Commercial Companies
An LLC may conduct a variety of business activities, with the
exception of insurance, banking, savings, receiving deposits or
investing funds on behalf of others. (Article 5 of the Commercial
The LLC is subject to the provisions of the Commercial Companies
Law relating to the employment of Egyptian personnel. Where the
LLC's share capital is £E 250,000 or more, it must distribute 10%
of the company's net profit to its employees up to a maximum amount
equal to the total annual payroll. LLC's incorporated under the
Investment Law whose objects are among the activities listed in
Article 1 of the Investment Law are exempt form this
B. Commandite Company Limited by Shares
Article 3 of the Commercial Companies Law defines a Commandite
Company Limited by Shares ("CCLS") as "a company whose capital is
composed of one or more shares owned by one or more joint partners,
as well as from shares of equal value subscribed for by one or more
shareholders whose shares are negotiable in the manner prescribed
At incorporation, a CCLS must have at least two founding
parties, one of which must be a joint partner (with unlimited
liability). The founding members of the CCLS must submit an
application to the appropriate authority requesting permission to
incorporate the company.
Where the CCLS is incorporated under the Investment Law, the
Investment Law provides certain guidelines concerning the
provisions that must be included in its Memorandum of
The minimum share capital required of a CCLS is £E 250,000
(Article 6(2) of the Ministerial Decision implementing the
Commercial Companies Law). The capital is divided into two
categories: (1) shares owned by joint partners, and (2) shares of
equal value subscribed to by shareholders. The joint partners have
unlimited liability while the shareholders' liability is limited to
the value of their respective shares (Article 3 of the Commercial
The Commercial Companies Law does not impose minimum Egyptian
shareholding requirements on the CCLS.
The management of the CCLS is run by one or more joint partners,
called partner manager(s). The name and scope of such partner
manager's authority must be included in the Memorandum of
Association (Article 110 of the Commercial Companies Law).
A CCLS must have a Supervisory Board made up of at least three
persons, whose purpose is to supervise the acts of the manager(s).
As such, this Supervisory Board may not be chosen from the partner
manager(s) (Article 112 of the Commercial Companies Law).
The CCLS is prohibited from conducting the business of
insurance, banking, or savings or investing funds on other people's
behalf (Article 5 of the Commercial Companies Law).
The CCLS is subject to the same provisions as the LLC concerning
the employment of Egyptian personnel.
C. Joint Stock Companies
Article 2 of the Commercial Companies Law defines a Joint Stock
Company ("JSC") as:
" . . . a company whose capital is divided into shares of equal
value, which shares are negotiable in the manner prescribed by law.
The liability of a shareholder is limited to the value of the
shares subscribed for by him. The Company name shall be derived
from the objects for which it is to be incorporated and may not
include the name of one or more of the shareholders."
JSC's must have at least three founding shareholders (Article 1
of the Ministerial Decision Implementing the Commercial Companies
Law). The name of the company must refer to the activities it
intends to undertake. At least 25% of the cash equity of the
company must be paid up prior to incorporation. Once the
incorporation application is approved by the authority, and the
company is listed in the Commercial Register incorporation is
The minimum share capital of a JSC is £E 500,000 if the JSC
offers its shares to the public and £E 250,000 if it is private
(Article 6(1) of the Ministerial Decision implementing the
Commercial Companies Law). The capital must be divided into shares
of equal value, with a nominal value of between £E 5 and £E 1,000.
All shares must be registered. A shareholder's liability is limited
to the value of the shares subscribed to by him. Share certificates
are issued in the name of each shareholder.
Upon incorporation or upon an increase in capital, a minimum of
49% of the share capital must be offered for one month to the
public and Egyptian natural and juridical persons, unless Egyptian
shareholders already hold 49%. The JSC is permitted to incorporate
if, after one month, the JSC is unable to obtain 49% Egyptian
shareholding (Article 37 of the Commercial Companies Law).
The JSC is managed by a Board of Directors. The Board must have
an odd number of directors, with three being the minimum allowed.
Juristic persons are allowed to act as directors, provided that a
natural person is appointed as representative to act on its behalf
on the Board. The directors shall hold a term of three years,
except for the initial directors, who are appointed for a term of 5
years (Article 77 of the Commercial Companies Law).
The majority of the Board of Directors must be Egyptian
nationals (Article 92 of the Commercial Companies Law). This
requirement does not apply to JSC's incorporated under the
Investment Law, whose corporate objects are among the activities
specified in Article 1 of the Investment Law.
If the JSC is undertaking the management or business of a public
utility, the Minister in charge must approve the appointment of
directors to the Board.
Directors are required to own a specified number of shares,
which must be deposited in an account, where they will remain
throughout his tenure, as a guarantee of his management. The value
of the shares must be at least £E 5,000 (Article 91 of the
Commercial Companies Law).
The Law requires a certain degree of personnel involvement in
the JSC. The Articles of Association must, therefore, provide for
participation by the personnel in the management of the JSC in one
of the specified forms. Additionally, the JSC must distribute a
share of its distributable profit to its personnel. This share
cannot be less than 10% of the JSC's profit or more than the total
payroll of the company (Article 41 of the Commercial Companies
The JSC must abide by the provisions of the Commercial Companies
Law requiring the employment of a certain percentage of Egyptian
personnel. Foreigners may be hired if it is impossible to find the
requisite number of qualified Egyptian employees and Ministerial
approval is obtained.
IV. Engaging a Commercial Agent
Foreign companies wishing to engage in any type of consulting or
other services, or to tender on government agency bids (except
sales to the Ministry of Defense) may do so only through a
registered local agent or intermediary. Law No. 120 for the year
1982 (hereinafter referred to as the "Commercial Agencies Law")
regulates commercial agencies.
A commercial agent must be either an Egyptian national or an
Egyptian juristic entity whose name has been registered at the
Commercial Agents and Intermediaries Register at the Ministry of
Economy and Foreign Trade ("MEFT"). Furthermore, the person/entity
must meet specific characteristics, which are set forth in Article
2 of the Commercial Agencies Law.
Once the parties enter into an agency agreement, the
agent/intermediary must register the agreement. The agency
agreement must include the territory covered by the agent, the
product or service that is the subject matter of the agency, the
agent's fee or rate of commission, the currency and mode of payment
of such fees and commissions, and the term of the agreement.
Furthermore, the Commercial Agencies Law requires that each agency
agreement contain a specific undertaking by the foreign principal
to inform the appropriate Egyptian embassy or consulate (in the
foreign principal's home country) of any amendments to the
The agency agreement does not have to be exclusive. The
Commercial Agencies Law does not limit the principal's right to
terminate (or not to renew) a commercial agency. However, Egyptian
law does include the "abuse of rights" doctrine, under which a
court may grant a commercial agent damages for the principal's
abusive exercise of the right to terminate (or not renew) the
agreement. The provisions of the commercial agency agreement
generally will govern and define the rights of the parties upon
termination or renewal.
Principals must report to the tax department details of payments
of commissions made to commercial agents and intermediaries within
one month of each payment and must adhere to the specific
withholding requirements provided for in Law No. 157 of 1981 ("The
Income Tax Law"). A foreign company with no presence in Egypt,
however, would not be under any obligation to withhold taxes on
payments made to its Egyptian commercial agent, because the tax
regulations do not have such extraterritorial effect.
V. Establishing a Branch or Representative Office
A foreign company may establish a, "representation, liaison,
scientific, or other office as long as the sole purpose of such
office is to carry out market surveys or to study the feasibility
of production without carrying on any commercial activity including
the activities of a commercial agent". (Article 173 of Law No. 159
of 1981 hereinafter referred to as the Commercial Companies
The representative office must be registered in the Register of
the Foreign Representative Offices kept by the Companies Department
at MEFT (Article 316 of the Ministerial Decision No.96 of 1982,
implementing the provisions of the Commercial Companies Law,
hereinafter referred to as "Ministerial Decision Implementing the
Commercial Companies Law"), as well as with the Imports and Exports
Authority (Article 21 of Ministerial Decision Implementing the
Commercial Companies Law).
Following approval of the registration application, all foreign
companies conducting commercial, financial, industrial or
contracting activities in Egypt must register their office in the
Commercial Register. Once registered at the Commercial Register,
the foreign branch must also be registered in a centralized
register of foreign companies kept at the Commercial Companies
Article 170 of the Commercial Companies Law provides that branch
offices are subject to certain provisions of the law pertaining to
the percentage of Egyptian personnel that must be employed.
Article 313 of the Ministerial Decision Implementing the
Commercial Companies Law provides that the branch office must
distribute at least 10% of its net profits to its employees, up to
a maximum of the total annual payroll.
The branch office is subject to corporate income tax at the rate
of 40% on profits that are generated from its operations in Egypt.
(Branches of foreign companies and consulting engineers working in
new communities and reconstruction projects enjoy a tax holiday
from certain Egyptian taxes.)
VI. The Commercial Register Law
The process of registration, be it for agents or companies, is
governed by the Commercial Register Law. The basic rule is that
anyone carrying on a commercial activity must register in the
The Commercial Register Law provides that all registrations must
be renewed every 5 years. Once a person, company, or partnership is
registered, it must put its trade name, place of registration and
registration number on the front of its premises and on all its
correspondence (Article 5 of Commercial Register Law).
The penalties for violating the provisions of the Commercial
Register Law are set forth in the Ministerial Decision Implementing
that Law and range from a fine of £E 10-100 to three months - two
years imprisonment and/or a fine between £E 100 - £E 500. (Articles
18 and 19 of the Ministerial Decision Implementing the Commercial
VII. Public Sector Procurement
Procurement by the Egyptian Government and its agencies is
governed by the Tenders and Auctions Law No. 90 for the year 1983
(hereinafter referred to as the Tenders Law). Article 1 of the
Tenders Law provides that government procurement of movables,
services, and contracts for public works and transportation is to
be conducted by way of public tender advertised for in accordance
with the provisions of this law. Article 1, however, carves out an
exception to this general rule and provides the procuring ministry
or agency with the discretion, under specific criteria, to procure
by way of:
- (i) limited tender;
- (ii) local tender;
- (iii) sole sourcing; or
- (iv) direct purchasing.
Article 59 of the Tenders Law provides that the tenderer
(whether a natural or corporate person) for a public tender must be
a resident of Egypt or must have an Egyptian agent.
It is worth noting however, that the Cabinet approved a new
tenders law. One of the aims of the law is to make the awarding of
public sector contracts more transparent. In addition, it is
believed that criteria for awarding the contracts will include both
cost of production and the attainment of the requisite technical
standard. However, the law maintains the preference for local
bidders, whereby a local bidder will be considered to have the
lowest bid so long as its bid is not more than 15% higher than that
of a foreign bidder.
VIII. Ministry Of Defense Procurement
Article 8 of the Tenders Law provides that the Ministry of
Defense (MOD) may, when necessary, procure by way of local tender,
direct contracting or sole sourcing. The MOD has adopted a policy
prohibiting the use of any commercial agent, consultant,
intermediary, or sales representative in connection with the
purchase of military equipment.
A breach of the MOD's policy would probably be characterized as
a contractual breach of an administrative contract, assuming the
MOD includes a certificate or provision in the contract to the
effect that commissions and fees have not been included in the
contract price. The consequences of such a breach could range from
deducting the value of the commission or other compensation paid in
violation of its policy to annulling the contract or having it
completed at the contractor's expense. Serious violators may also
have their names stricken from the list of approved suppliers.
The Egyptian Cabinet approved a new unified corporate and income
tax law on November 24, 2004. The new tax law (No.91/2005) was
passed on June 8, 2005. It basically replaces Law 157 of 1981 and
its successive amendments. It also replaces law 187 of 1993.
It became effective starting July 1, 2005 for personal income.
The corporate income tax became effective starting January 1st,
Standard Corporate Income Tax
Suez Canal Profits
Industrial & Export Companies
Egyptian Petroleum Authority
Oil Exploration & Production Companies
Central Bank of Egypt
Oil Exploration & Production Companies
The new tax law impacted the investment law tax incentives
provisions. The new tax law revoked articles 16, 17, 18, 19, 21,
22, 23-bis, 24, 25 and 26 of the Investment Guarantees and
Incentives Law 8 of 1997.
Under the new tax law, exemptions as prescribed in the said
articles shall remain valid for companies and establishments whose
exemption period started before the effective date of the law,
until the end of the period determined. Those companies that did
not commence activities must do so within 3 years in order to avail
themselves of those exemptions.