Egypt's Constitution in Arabic
Egypt's Constitution in English
Legal Forms in Arabic
Egypt Laws
Civil and Commercial Laws
Sales Tax
Labor Law
Arbitration
Egyptian Bar Association
N.B
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http://www.cso.gov.eg/index.aspx?lid=11
For Arabic legal forms and contracts, please click here
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LEGAL GUIDE TO INVESTING IN EGYPT
I. Egypt
Egypt is ranked
128 in the World Bank Report of 2014 on doing Business.
Population:
76.5 million (June 2006
estimate)
Currency: Egyptian Pound (EGP)
Language: Arabic (official).
Capital: Cairo
Legislative
Power: Egypt has a
legislature, made of the elected People's Assembly (Parliament).
Member of
International
Organizations:
Egypt is a
member of ABEDA, ACCT,
AfDB, AFESD,
AMF, AU, BSEC
(observer),
CAEU, COMESA, EBRD,
FAO, G-15,
G-24, G-77, IAEA, IBRD,
ICAO, ICC,
ICCt (signatory), ICRM,
IDA, IDB,
IFAD, IFC, IFRCS, IHO, ILO,
IMF, IMO,
IMSO, Interpol, IOC, IOM,
IPU, ISO,
ITSO, ITU, LAS, MIGA,
MINURCAT,
MINURSO, MONUC,
NAM, OAPEC,
OAS (observer), OIC,
OIF, OSCE
(partner), PCA, UN,
UNAMID,
UNCTAD, UNESCO,
UNHCR, UNIDO,
UNMIL, UNMIS,
UNOMIG, UNRWA,
UNWTO, UPU,
WCO, WFTU,
WHO, WIPO, WMO,
WTO (Source:
CIA World Factbook, as
of December
18, 2008)
II. The Legal System
The Egyptian Legal System is based on the
French Civil Code
(Code Napoleon), but later developed its own
legal principles. The Egyptian legal system,
is based on a civil code that covers
personal
rights, the law of contracts, obligations
and elements of tort law.
In addition, there are specific codes
dealing with other areas of law, such as
the Commercial Code, Companies Law,
Investment and Capital Markets Laws, and the Code of Civil Procedures.
Egyptian administrative law is closely
modeled on French
administrative law.
The Egyptian court systems are divided
into civil and administrative courts.
The civil courts have jurisdiction in
matters of private law, whereas the
administrative courts have jurisdiction
in matters of public law. The hierarchy
of the administrative courts is referred
to as the State Council (Conseil
d’Etat).
Egypt also has a written constitution
that sets out constitutional principles to
which all legislation should adhere. A
constitutional court handles
constitutional challenges to legislation
and conflicts between civil and
administrative court’s judgments. Egypt
has a recent Constitution click on this link to open the official constitution
webpage http://dostour.eg/
III. Foreign Investment
Foreign individuals or corporations
can make direct or portfolio investment in Egypt, either through investing in
bonds and stocks at the Egyptian Capital Market:
Portfolio
investment in stocks
is also available to foreign and local companies and individuals through the
Egyptian Stock Market and Registered Brokers at the Monetary Supervisory
Authority. Some of them have electronic trading platforms. Most of the Stocks
traded are T+2 settlement system. GDRs are also available for certain Blue
Chips. Asset Management Funds manage assets for local and foreign investors.
A foreign investor may also directly invest by
buying real estate or agriculture land, or through any of the alternatives of direct
investment in Egypt by incorporating an Egyptian Company in any of the
following forms:
1 Free Zones Investment
2 Inland Investment
3 Investment at the Special Economic Zones
4 Investment Zones
In order to carry out any activity in Egypt, the
foreign investors must either establish a branch, or
an Egyptian subsidiary (entity). The Egyptian
subsidiary can be fully-owned by foreigners
(except for some activity i.e. importation and
investment in Sinai and certain strategic areas that
require a prior approval from the relevant
authorities, however, limited liability companies must have an Egyptian
Manager, Importers other than investment companies must be fully owned by
Egyptians).
1)The Companies Law No. 159 of
1981 is the general Law governing business in
Egypt.
2)The Investment Guarantee and
Incentives Law No. 8 of 1997 is the Investment Law that allows
certain activities to be privileged.
3)According to the Income Tax Law
No 91 of 2005, the tax exemptions have been cancelled from
the Investment Law and the
Corporate Tax rate has been reduced to become 20% instead of
42%. The investors can establish
their projects either under the Investment Law or under the
Companies Law. The General
Authority for Investment and free zone (GAFI) acts as the official regulator
for project’s approval of their By-laws.
4)The above mentioned laws do not
cover the activities related to capital market, finance lease,
Insurance, ..etc. as it should be
practiced according to other Laws.
5)The companies shall comply with
the provisions of the laws, regulations and decisions in force and
shall be committed to obtain the
licenses necessary for practicing its activities.
Investment in
Egypt, whether for foreign investors or Egyptian investors, is
governed and
regulated by Companies Law No. 159 for 1981 (“Companies
Law”),
Investment Law No. 8 for 1997 (“Investment Law”), and Capital
Market Law No.
95 for 1992 (“Capital Market Law”).
In general,
foreign investors can invest in Egypt without any restrictions after
obtaining
security clearances from the national security agencies. However,
the following
activities are not open to direct investment by foreign investors:
Importing
for the purpose of trading in Egypt
Acting as a
commercial agent
In addition,
certain regulatory approvals are required for foreign and local
investments in
Egyptian banks and insurance companies. All foreign investment in the Sinai
region is also subject to regulatory approval. Foreign investment in certain
aviation activities is also
restricted.
IV. Investment Guarantees and Incentives
Pursuant to
the Investment Law, entities (whether partnerships or companies)
established in
Egypt as of the date of the coming into force of the law that are
active in
certain fields enjoy certain guarantees and benefits. The fields in
question
include the following: land reclamation, animal production,
manufacturing
and mining, hotels, motels, hotel apartments, tourist resorts,
tourist
transportation, cold storage and transportation of agricultural and
industrial
products, air transportation and services relating thereto directly,
maritime
transportation, petroleum services supporting drilling, exploration,
and
transportation and delivery of gas, housing projects for non-furnished and
non-office
rental, infrastructure projects for potable water, sewage, electricity
and
communications, hospitals, medical centers which provide 10% of their
capacity for
free treatment, and computer software programs and systems.
If an entity
has, in addition to the activities covered under the Investment
Law, other
activities, the guarantees and incentives would only be applicable
to the
activities covered under the law.
The guarantees
and benefits provided under the Investment Law include
without
limitation:
Immunity
from nationalization or expropriation;
Immunity
from administrative attachment or freezing of assets;
The right to
acquire ownership of land and buildings required for
carrying on
the activity in question or increasing its scope;
The right to
directly import equipment, raw materials, and
transportation
vehicles appropriate for the nature of its activity;
The right to
export directly;
Exemption
from certain provisions of the Companies Law (including
the
distribution of 10% of profits to employees);
Exemption
from stamp tax;
Exemption
from notarization and registration fees on the company’s
articles of
incorporation, and loan and mortgages agreements related to
its business,
for a period of five years starting from the date of its
registration
at the Commercial Registry;
Registration
of title of land required for the company’s activities is also
exempted from
the same taxes and fees; and
A unified
customs duty of 5% on import of all machinery, equipment,
and tools used
to set up the company.
The General
Authority for Investment and Free Zones (GAFI) has authority
over the
application of this law, and issues decrees for the establishment of
entities
benefiting from the Investment Law.
V. Exchange Controls
Egypt adopted,
in 1976, a liberal foreign exchange policy, enacting Foreign
Exchange Law
Number 97 of 1976. This has been replaced by Law Number
38 of 1994
which was consequently replaced with the Banking Law Number
88 of 2003.
The Law gives any natural or juristic person the right to retain
and transact
with foreign currency generated from operations in Egypt. Such
transactions
must be done through banks registered with the Central Bank of
Egypt (the
“CBE”) or franchised dealers.
VI. Legal Structures of Companies
Direct
investment in Egypt (except for Free Zone investment) is subject to the
general
corporate and commercial system in Egypt; and in certain cases, the
entity in
question may benefit from additional investment guarantees and
incentives
pursuant to the Investment Law if it invests in certain fields. The
most common
legal vehicles used by foreign investors in Egypt are:
Limited
liability companies
Joint stock
companies
Foreign
branch office
Representative Office
The following
is a brief summary of each vehicles and the limitations and
rules that
apply to each type of company.
Sole
Proprietorships, simple partnerships, and limited by shares, civil companies of
professionals (like lawyers, auditors) also may be incorporated by registration
of its contract at the Notary Public Office.
Limited
Liability Company
An Egyptian
limited liability company is a closed company where the liability
of each of its
partner is limited to the value of their stake in thecompany.
1)
Registration
Limited
liability companies have to be registered in the Commercial
Registry and
are subject to the supervision and inspection of GAFI.
Any amendments
to the articles of incorporation and by-laws must be
reported to
and approved by GAFI.
2) Scope of
Activities
Limited
liability companies are precluded from activities in the areas
of insurance,
banking, savings, and investment management. Apart
from the
preceding areas of activity, limited liability companies can
carry out
legal commercial activity similar to other business entities.
3) Management
and Control
There is no
express provision indicating a maximum ceiling for
ownership of
capital by foreigners. Hence, a limited liability company
may be 100%
foreign owned. However, it should be noted that, under
Egyptian law,
a limited liability company cannot be wholly owned by
one entity.
Consequently, there must be at least two shareholders.
With respect
to management, it is carried out by managers appointed
by the
shareholders. There may be one or more managers. In all cases,
there must be
at least one Egyptian manager. Major decisions are
taken through
the shareholders’ meeting, wherein either a simple
majority or a
super majority may be required.
Managers and
persons who are considered representatives of the
company can be
held personally liable for breach of their fiduciary
duties and for
certain violations of the law by the company.
Parent
companies cannot be held liable because of their separate and
independent
legal personality.
4) Capital
Minimum
capital is 1000 EGP. Shares
can be issued
for non-cash consideration with the approval of a
shareholders'
meeting. However, a formal valuation is required in
certain cases
where the value of the capital exceeds LE 1,000,000.
5) Taxes
Limited
liability companies are subject to income and sales tax on companies’ profits
and sales.
6)
Profit-Sharing
As long as the
capital of the limited liability company does not reach
LE 250,000
(which is the minimum capital for a joint stock company),
there is no
obligation for the distribution of part of the profits to
employees. If
the capital reaches the aforementioned figure, 10% of
the net
profits is to be distributed to employees, provided that such
10% does not
exceed the annual total value of salaries and wages
payable to
such employees, provided that cash dividends has been distributed to
shareholders.
Joint Stock
Company
An Egyptian
joint stock company may be a closed company or a listed
Company (at
the stock exchange), where the liability of its shareholders is limited to the
value of their
shares in the
company and may not be extended to their personal money.
1) Registration
A joint stock
company must be registered in the Commercial Registry
and is subject
to the supervision and control of GAFI, like limited
liability
companies. The Egyptian Financial Supervisory Authority
(EFSA) should
be informed of the issuance of any stocks or bonds,
which should
only be issued if EFSA has not objected within three
weeks of its
notification. Public issues are supervised by EFSA.
Furthermore,
the registration of companies working in certain fields
such as
securities or factoring requires a license from EFSA. Any
amendments to
the articles of incorporation and by-laws must be
reported to,
and approved by GAFI (and the competent authority, in
the case of
banks and insurance companies). Moreover, The company
must keep
accounts and publish its semi-annual or annual audited
accounts and
financial statements, duly audited by a qualified Egyptian
auditor
registered at the legal auditor’s association.
2) Scope of
Activities
A joint stock
company can carry out all commercial activities.
3)
Management and Control
There must be
at least three shareholders. The management of the
company is
through a board of directors comprising at least
three directors
elected by the shareholders for a three-year term. The
first board of
directors is elected by the incorporating shareholders and
has a term of
five years. A corporate or other legal entity could be
elected as a
member of the board, in which case a representative of the
legal entity
is to be nominated to attend the board meetings.
Directors can
be held personally liable for breach of their fiduciary
duties. In
addition, persons who are considered legal representatives of
the company,
such as the chairman or the managing director, can be
held
personally liable for certain violations of the law by the company.
Parent
companies cannot be held liable because of their separate and
independent
legal personality.
4) Capital
Shares may be
closely held or offered to the public. The minimum
issued capital
required for a company not offering its shares to the
public is LE
250,000, of which 10% is to be paid at the time of
incorporation,
to be increased to 25% within three months, and the
remaining
amount of the nominal value of the shares is to be paid up
within five
years. The minimum capital of a joint stock company
offering its
shares for public subscription is LE 20,000,000, fully paid
up. However,
in case of holding companies established for the
purposes of
stock dealings and investment, the minimum capital is LE
5 million, of
which at least 25% must be paid on incorporation. The
remaining
amount of the issued capital is to be paid up within five
years of the
date of incorporation according to the procedure and at the
rate set by
the board of directors. The authorized capital is not to
exceed 10
times the issued capital. If the shares are to be offered to the
public, this
must be done through a bank licensed to receive
subscriptions,
a company established for this purpose, or a company
licensed by
EFSA to deal in securities. Shares can be issued for noncash
consideration
with the approval of an extraordinary general
shareholders'
meeting. However, a formal valuation is required in
certain cases
where the value of the capital exceeds LE 1,000,000.
In general,
there are no limitations to the percentage of the capital that
can be owned
by foreigners. However, there are some exceptions to the
previous rule.
For example (as mentioned earlier) certain regulatory
approvals are
required for foreign and local investments in Egyptian
banks and
insurance companies exceeding 10% of the issued shares. In
addition,
companies established for executing investment projects in
the Sinai
Peninsula must have at least 55% Egyptian capital.
5) Taxes
Joint stock
companies are subject to 20% income tax on company profits.
6)
Profit-Sharing
At least 10%
of the net profits are to be distributed to employees,
provided that cash
dividends has been distributed to shareholders, the amount to be distributed
shall not exceed the total value of the wages and salaries annually paid to the
company’s
employees, however,
the Labor Office has taken the
position that
foreign employees are not entitled to such a distribution.
Procedures for Incorporating a Company in
Egypt
No.
|
Procedure
|
Time to Complete
|
Associated Costs
|
1
|
Obtain
a Certificate of Non-Confusion from the Commercial Registry to reserve the
company name.
|
1 day
|
EGP 25
|
2
|
Obtain
a Bank Certificate from an authorized bank after deposit is made
|
7 days
|
EGP
300-500
|
3
|
Submit
documents to the Department of Companies and obtain invoice
|
1 day
|
see
comment
|
4
|
Notarize
company’s contract
|
1 day
|
included
in procedure 2
|
5
|
Obtain
the certificate of incorporation
|
1 day
|
no
charge
|
6
|
Register
for taxes
|
1 day
|
no
charge
|
7
|
Open a
company file and Register employees with the National Authority of Social
Insurance
|
2 days
|
no
charge
|
This information was collected by the World Bank as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 189 economies. The most recent round of data collection was completed in June 2013.
No.
|
Procedure
|
Time to
Complete
|
Associated
Costs
|
1
|
Obtain a Certificate of
Non-Confusion from the Commercial Registry to reserve the company name.
Entrepreneurs must reserve a company name at the General Authority for Free Zones and Investment (GAFI) one-stop shop. The Incorporation Department will first check the legality of the proposed company name. If the name is deemed to be legally admissible, the entrepreneur will then go upstairs to the Commercial Registry office in the GAFI one-stop shop to pay the required fees and obtain the certificate of non-confusion (shahadat adam al-iltibas) bearing the official government stamp (khetm el nesr). |
1 day
|
EGP 25
|
2
|
Obtain a Bank Certificate from
an authorized bank
The Bank of Alexandria branch at the General Authority for Free Zones and Investment (GAFI) issues and delivers the certificate in 1–2 days. The cost to open a bank account and obtain a bank certificate is between EGP 300 to EGP 500, depending on the bank. This certificate can also be obtained from other authorized banks. |
1 day
|
EGP 300-500
|
3
|
Submit
documents to the Department of Companies and obtain invoice
The founder submits the company documents at the reception desk of GAFI, where they are reviewed immediately by a lawyer. These documents include: 1. Original certificate of non confusion. 2. Original Bank Certificate of opening an account with an authorized bank. 3. A copy of the powers of attorney from the founders to their representative. 4. A copy of the founders' I.D. cards or passports. 5. Original certificate indicating that the company's auditor is listed at the Registry of accountants and auditors. 6. The application provided by GAFI. 7. Stamped articles of association. A registry employee reviews the documents, and issues a detailed invoice for all fees associated with the company's establishment.
Fees
for company establishment:
• Notary public fee: 0.25% of capital ( minimum of EGP 10 and a maximum of EGP 1,000 ) • Establishment fees: 0.1% of capital (minimum of EGP 100 and maximum of EGP 1,000 according to Article 17 (d) of the Companies Law) • Commercial Syndicate fee: EGP 125 (for capital less than or equal to EGP 500,000) or EGP 250 (for capital more than EGP 500,000) • Publication fee: EGP 150 (for a limited liability company in Arabic) or EGP 300 (for a limited liability company in Arabic and English) • Chamber of Commerce fees: 0.2% of capital (minimum of EGP 24 and maximum of EGP 2,000) • Commercial registration: EGP 56 • Issuance of operation certificate: EGP 29 |
1 day
|
see comment
|
4
|
Notarize
company’s contract
The articles of association must be registered and certain documents deposited at the Investment Notarization Office on the first floor of the GAFI one-stop shop. No stamp duty is levied, according to the amendments (published on July 1, 2006) to the Stamp Duty Law (No. 111 of 1980). Required are the original copies of the articles of association and the powers of attorney. |
1 day
|
included in procedure 2
|
5
|
Obtain the certificate of
incorporation
When the articles of association are submitted, the competent authority must ratify them and issue a certificate of incorporation approving the establishment of the company. This certificate is issued within 24 hours. Further, the applicant obtains the approval of the Chamber of Commerce and fills an application in order to obtain an extract of the commercial registry (at this point the company becomes an established legal entity and does not need to wait the full 15 days to start business operations). Within the 15 days if the competent authority has no objection, the Department of Companies is thereafter responsible for publishing the notice of incorporation in the Investment Gazette at the company's expense. |
1 day
|
no charge
|
6
|
Register for taxes
Upon incorporation, the company can complete tax registration and obtain the tax card at the one-stop shop’s tax counter on the first floor. The tax cards are sent via courier to a central location in Cairo (located near the one-stop shop) for printing. If the request for a tax card is submitted before noon, the tax card will be printed out and issued on the same day. Requests submitted after noon will be processed on the following day. Upon obtaining the card, the company may choose to register for sales tax, provided that they have started production. Companies are obliged to register for sales tax only once they reach at least EGP 54,000 in sales for industrial activities and EGP 150,000 in sales for commercial activities. The required documents include the articles of association and the powers of attorney, the bank signature authentication (to be issued to the appropriate person by the manager having the power to sign on behalf of the company), the tax card, an original extract from the company’s commercial register, and the original copy of the company’s lease agreement for its premises. |
1 day
|
no charge
|
7
|
Open a company file and Register
employees with the National Authority of Social Insurance
Social insurance provides compensation for disability, retirement (pension), unemployment, and work-related injuries. By law, employers are required to subscribe to the social insurance system. Otherwise, they may be subject to sanctions. The following documents must be submitted to the competent authority’s office: Company’s commercial register. • Company’s tax card. • Company’s articles of incorporation. • Deed or lease agreement for company premises. • Employer to fill in Form No. 2. • Employer’s bank signature certificate. • Employer’s graduation certificate. • Employees’ to fill in Form No. 1. • Employees’ copy of identification card. • Employee’s graduation certificate. • Employees’ birth certificate (copy) if they do not have a social insurance number; or Form No. 6 for clearance/termination from employees’ previous jobs. The company premises are then subject to inspection by relevant authorities - such as the National Authority for Social Insurance and GAFI. Inspection takes place in practice only if there is any complaint filed against the company, or suspicion that the company is an image organization that does not actually conduct business as claimed in its submitted documents. Companies registering for sales tax will undergo inspection. |
Foreign
Branch Office
Under the
Companies Law, a foreign company may establish a branch office
in Egypt to
undertake certain commercial activities. Practically, the branch is
treated as an
Egyptian company in all matters except corporate governance.
1)
Registration
Any foreign
company, whatever its legal form, which carries out any
commercial,
financial, industrial or contracting activity in Egypt has to
be registered
as a branch in the Commercial Registry and GAFI.
2) Scope of
activity
A branch can
undertake any form of legal activity in Egypt for which it
is registered
in the Commercial Registry provided that it has a signed
contract with
an Egyptian entity to provide the services encompassed
by such
activity.
3)
Management and control
A branch can
be managed by a foreign manager. A branch is under the
full control
of its parent company. Branch offices’ activities are subject
to review by
GAFI to ensure compliance with laws and regulations.
4) Capital
Branch offices
are not subject to a requirement of a minimum capital
investment.
However, initial capital investments must be made in
foreign
currency transferred to Egypt through a registered Egyptian
bank.
5) Taxes
The net profit
of a branch is subject to corporate tax at the same rate as
Egyptian
companies.
6)
Profit-Sharing
Branches are
bound to distribute at least 10 % of their annual net
profits to
their employees (not exceeding the total annual wages and
salaries paid
to workers and employees of the branch).
Representative
Office
Pursuant to
the Companies Law and its Executive Regulations, a foreign
company may
establish a representative office in Egypt for the purpose of
performing
market study and research for the benefit of the foreign company.
1)
Registration
A
representative office must be registered with GAFI. Bank
representative
offices must be registered with the CBE. Furthermore, if
an office is
designated as a “technical” representative office, it must be
registered
with the Ministry responsible for its field of activity. For
example, a
technical office relating to pharmaceuticals must be
registered
with the Ministry of Health.
2) Scope of
activity
Pursuant to
Article 316 of the Regulations for Companies Law, the
sole
authorized activity for a representative office is to conduct market
research,
market surveys, and production studies. In the case of a
“technical”
representative office, the scope also includes technical
review of
products in the market.
3)
Management and control
Management can
be handled by a foreign manager for the
representative
office. A representative office is under the full control of
the parent
company. Activities of a representative office are subject to
review by GAFI
to ensure compliance with laws and regulations.
4) Capital
There is no
requirement for any capital investment. The parent
company pays
for the expenses of maintaining the representative
office.
5) Taxes
Since a
representative office is legally not involved in any commercial
activities, it
does not realize any profits and as such is not subject to
taxation.
Employees are subject to applicable taxes on their
employment
income.
6) Limitation
of Scope
Given that the
scope of activity for a representative office is very
limited, a
representative office may be useful to monitor commercial
activities
undertaken by some other form of business entity
undertaking
the actual commercial activity on behalf of the foreign
entity in
Egypt. For example, a foreign entity's representative office
may be used to
monitor the activities of a foreign entity’s distributor or
agent in
Egypt. The office may, indirectly, assist the distributor
through the
undertaking of market research and market surveys.
VII. Commercial Agreements
This section
deals with arrangements whereby foreign producers or suppliers
market their
products indirectly in Egypt. In other words, the producer does
not
incorporate or establish a separate Egyptian entity, but carries out its
marketing
activities through some form of representation in Egypt.
Agency
Agency
agreements are governed by Agency Law No. 120 of 1982 and the
new Egyptian
Commercial Law No. 17 of 1999.
Commercial
agents must be registered at the Commercial Agents' Registry,
which issues a
certificate confirming the registration. The agent must be
Egyptian or a
100% Egyptian owned company. The agency agreement must
be registered
with the Egyptian Chamber of Commerce.
A commercial
agent can obtain compensation if both:
The agency
agreement is terminated (or not renewed) without good
cause and
without notice (or at an unreasonable time), even if the
termination was
provided for in the terms of the agency agreement. All
contractual
provisions to the contrary are null and void; and
The agent
has not committed an error or omission in the course of its
duties, and
its activities are proven to have led to evident success in
promoting the
sales of the commodity or increasing the number of
customers for
the principal.
1 1
A Decree from
the Minister of Trade (Number 362 for the Year 2005) placed
pressure on
foreign principals who have ongoing disputes with local
commercial
agents to settle such disputes amicably. The Decree holds that no
new agent can
be registered unless compensation due to the terminated
commercial
agent is settled. If the terminated agent fails to notify the
competent
authority with a copy of the writ of its court action or request for
arbitration
within 60 days of initiating such action or arbitration, there is no
restriction on
the registration of a new agent.
Importation
Under Egyptian
law, the importation of goods or products from abroad
requires an
importation license. An importation license grants the licensee the
right to carry
out such importation activity. Similarly to commercial agents,
importation
licenses are only granted to Egyptian individuals or partnerships
wherein all
the partners are Egyptian, or companies wherein all the
shareholders
are Egyptian. It is the usual practice that the commercial agent
itself holds
the importation license. Thus, the commercial agent carries out the
marketing, as
well as the importation activities.
The importation
of foreign products from abroad by a person holding an
importation
license takes place through letters of credit that are opened for the
full value of
the imported products. In certain instances, the customer buying
the products
would itself have the importation license and would import
directly from
the foreign producer. Some parties, such as certain public sector
entities and
governmental organizations, may be exempt from importation
restrictions,
and may then be able to import directly from the foreign supplier.
In such cases,
payment by transfers or other means may be possible.
Distribution
A distributor
is a person who sells products in the country on its own account.
In other
words, a distributor would buy the products directly from the foreign
supplier or
from the foreign supplier’s agent and re-sell at a profit. There are
no specific
laws governing distribution and franchising agreements. These
are governed
by the general provisions of the Egyptian Civil Code and the
Commercial
Code. There is no need to register as a distributor, as long as the
distributor
does not carry out marketing activities on behalf of the foreign
supplier. In
other words, as long as the distributor is selling for its own
account, it
does not need to be registered as an agent. Thus, a foreign producer
may appoint a
distributor in Egypt that would buy the products directly from
the foreign
producer (with an importation license), who would pay for the
products and
re-sell the products for its own account, for its profit.
Alternatively,
the foreign producer may appoint both an agent and a
distributor,
which is common. The agent would carry out the marketing on
behalf of the
foreign producer as well as the importation process, and the
distributor(s)
would buy from the agent and re-sell for their own account.
There are no
nationality restrictions for distributors. The foreign producer
may itself
form part of the distributor entity that buys the product from the
agent and
resells within the country (by setting up a 100% owned subsidiary
or through a
joint venture). The distributor entity, in which the foreign
producer may
be involved, as mentioned earlier, may itself provide the aftersales
support and
maintenance. Naturally, the distributor is subject to taxation
on its net
profits.
Franchising
Franchising
agreements are treated the same way as distributor agreements
(See above, Distribution.)
In addition, if a franchise agreement involves a
transfer of
technology, it must be governed by Egyptian Law and any disputes
in connection
with that agreement must be resolved by the Egyptian courts or
by arbitration
in Egypt under the Egyptian Arbitration Law No. 27 of 1994.
Technology
Transfer and Licensing Agreements
The foreign
producer or supplier may also enter into a technology transfer or
licensing
agreement with an Egyptian enterprise. In such cases, an agent is
not required
as there is no marketing of foreign products within the country.
Rather, the
Egyptian enterprise that is producing under license from the
foreign
enterprise would be marketing its own products. However, the
royalties
payable to the foreign enterprise are subject to Egyptian taxation at
the rate of
20%, and are to be withheld at the source. However, some double taxation
treaties to
which Egypt is a party (e.g., with the United States) reduce
the rate to
15%. (See Section XII for further detail on intellectual property
rights in
Egypt).
VIII. Free Zone Investment
The Investment
Law sets the framework for the establishment and
management of
general free zones in Egypt. These are created pursuant to
Cabinet
decrees (a number of free zones were already established and in
operation
prior to the law, including the Alexandria Free Zone and others).
GAFI sets the
policies for free zones and establishes the conditions for
granting
licenses for entities to operate in the free zones, and the regulations
for occupying
land and buildings therein. Each free zone has a Board of
Directors that
manages it, and licenses for operation are granted pursuant to
decrees of the
Chairman of the Board. Companies working in the fields of
fertilizers,
iron and steel and production, petrol production and liquefying and
transporting
natural gas do not benefit cannot be granted a private free zone
status [Article
10 of Law 114/2008].
Free zone projects
are not subject to taxes. However, an annual fee is payable.
The fee is 1%
of the value (CIF port of arrival) of goods entering the free
zone for
storage projects, and 1% of the added value (cost of manufacture or
assembly) of
goods exiting the free zone for manufacturing and assembly
projects.
Trade in transit products (with determined destination) is exempt
from this fee.
Projects whose main activity does not involve the entry or exit
of goods are
subject to an annual fee equal to 1% of total revenue realized by
the project as
set out in accounts certified by an auditing firm. The above fee
is in addition
to an annual service fee at the rate of 0.5 per mille of the capital
costs of the
project, with a minimum of US $100 and a maximum of US
$1,000. The
minimum and maximum are likely to change often and should be
checked per
annum. Oil refining projects are not subject to the 0.5 per mille
annual fee;
they are obliged to pay an annual services fee of 0.005% of the
project’s
investment costs with a cap of USD 100,000. Also, such projects are
not exempt
from taxes[Law No. 133/2010].
Free zone
projects are generally exempt from import/export regulations, and
all equipment,
machinery, and transportation required for the activities thereof
are exempt
from customs duties and sales tax (with the exception of cars).
In addition to
general free zones, GAFI may set up private free zones which,
if necessary,
may be limited to one project. It may also grant approval for the
transformation
of an in-land project to a private free zone (specific conditions
are set out in
the Executive Regulations to the Investment Law, including the
requirements
that the project is already active, and that it exports at least half
of its
production output).
Free Zones Investment System:
There are two types of the Free Zones:
Public Free Zone.
Private Free Zone.
Exemptions:
1)
The projects established in the free zones and
their profits shall not subject to the provisions of laws of taxes and duties
applicable in Egypt (so long as such projects limit their activities to that
included in their practice activity license).
2)
Goods exported abroad or imported by the free zones
projects toexercise their activities shall not subject to imports or exports
rules, or customs procedures related to exports and imports. It shall also not
subject to the customs taxes, sales tax or any other taxes or duties.
3)
Except for the passenger cars, all the equipment,
supplies, machines and transportation vehicles necessary for exercise the
activity licensed for the projects in the free zones shall not subject to the
customs taxes, sales tax or any other taxes or duties.
4)
The articles of incorporation of the companies and
establishments as well as the loan and mortgage contracts related to their
works shall be exempted from the stamp duty and the notarization &
registration fees for (5) years from the date of registering in the Commercial
Registry, the contracts of registration the land which are necessary for
establishing the companies and establishments, within the private free zone system,
shall also be exempted from the aforementioned tax and fees.
Guarantees & Incentives:
1)
The companies and establishments shall not be
nationalized or confiscated.
2)
Sequestration shall not be imposed administratively
on the companies and establishments nor shall their property and funds
be distained, seized, retained in protective
custody, frozen or confiscated.
3)
No administrative quarter shall interfere in
pricing the companies and establishments’ products, nor in determining their
profits.
4)
No administrative quarter shall cancel or
stop the license granted for using the realties of
which the usufruct rights is
licensed to the company or the establishment wholly
or partially, except in case of infringing the license conditions.
5)
Contracts of incorporation of
companies and establishments and loan and mortgage
contracts related to their business shall
be exempt from the stamp tax as well as
notarization and publication fees for a period of five (5) years. Contracts of
registration of lands necessary for the establishment
of companies and establishments shall also be exempted from the
above mentioned tax fees.
6)
The companies and establishments shall have the
rights to
possess and own building’s lands and properties as
necessary
for exercising their activities and expanding them,
whatever th
e nationality or place of residence of the
partners, or the
percentage of their partnership.
Free Zones’ projects are located in Egypt but are
considered offshore areas. Projects operating according to the Free Zones are
committed to export more than 50% of their total production.
7)
The companies and establishments shall have the
right to import
by themselves or via third parties whatever they
need for their establishment, expansion or operation, comprising production
inputs and requisites, materials, machines, equipment,
replacement and spare parts, and means of transport
as suitable
to the nature of their activities, without need for
recording
in the Register of Importers.
8)
The companies and establishments shall have the
right as
well to export their products by themselves or
through
middlemen without being licensed therefore
and without need for recording themselves in the
Register of Exporters.
Financial Liabilities of the free zones projects:
1)
Charges against services rendered by GAFI:
2)
Financial guarantee to cover the project
liabilities:
3)
Annual charges:
Free zones companies’ pays charges against services
at an annual rate
of 0.5% of the project investment costs at a
minimum amount of US $ 100 and maximum of US $ 1000 or its equivalent in
foreign currency.
Prior to issuance of the resolution licensing the
practice of the activity, the companies should provide GAFI with a financial
guarantee to cover its liabilities before GAFI
either in cash or by
L/G issued by a bank registered in CBE, the value
of L/G shall be
determined as follows:
•
For industrial projects
: 1% of the project investment costs at a
minimum of US $ 5000 and maximum of US $ 50000.
•
For storage projects
: 2% of the project investment costs at a
minimum of US $ 10000 and maximum of US $ 100000.
•
For other projects
: 1% of the project investment costs at a
minimum of US $ 10000 and maximum of US $ 100000.
The financial guarantee shall be abated by 15% in
case of cash p
ayment, provided that it does not fall below the
prescribed
minimum amount.
•
For industrial projects:
1% of the cost value of manufacturing portion intr
oduced there into or the assembly process made to
them.
•
For storage projects:
1% of the commodity value upon the entry of the
commodity (CIF) on their entry.
•
For service projects:
1% of total realized annual revenues to GAFI
as per the accounts approved by a public accountant
IX. Banking and Financial Facilities
Investment
banking services and products in Egypt are regulated by various
governmental
agencies. Banking and financial services activities require a
license from
the CBE. Investment banking services require a license or the
approval from
the Egyptian Financial Supervisory Authority (EFSA).
The following
laws and the executive regulations thereof regulate investment
banking
companies and activities:
Law No. 159
of 1981 on Commercial Companies
Law No. 88
of 2003 on Central Bank, Banking Sector and Money
Law No. 80
of 2002 on Anti Money Laundering
Law no. 95
of 1992 on Capital Markets
Law No. 93
of 2000 on Central Depository and Custody
The Egyptian
Commercial Code, Law No. 17 of 1999
Law No. 91
of 2005 on Income Tax
As a general
matter, cross border activities in Egypt should be conducted in a
way that would
not be considered a “public offering” of such product or
service in
Egypt (conducted on a one-on-one basis, without public advertising
and consistent
with private placement principles). There are no restrictions on
engaging in
investment banking activities for individuals or entities as long as
such is
included in the purposes or activities of such entities.
Interest rates
are determined by the CBE. However, a bank and its client may
contractually
agree on an interest rate that is higher than the declared rate of
interest.
Furthermore, the determination of fees and commissions is based on
agreement
between each bank and its clients.
All the
shareholding structures of Egyptian investment banks and capital
market related
companies are reported and approved as the case may be to
EFSA. In
addition, all the shareholding structures of Egyptian banks are
reported and
approved as the case may be to the CBE.
X. Labor Law and Employment
The Law
Governing Employment Matters
Employment
issues in Egypt are governed by the Egyptian Labor Law No. 12
for the year
2003 (“Labor Law”), which governs all employees working in
Egypt
regardless of their nationality. In addition to the Labor Law, several
ministerial
decrees also govern the employment relationship and are
considered
complementary to the Labor Law. The Labor Law and all relevant
ministerial
decrees aim at increasing private sector involvement and achieving
a balance
between employee and employer rights.
General
Considerations
Minimum
Wage
According to
Article (34) of the Labor Law, the National Counsel for Wages
undertakes to
set minimum wage levels taking into consideration the cost of
living and
striking a balance between wages and prices (currently EGP 1,200/month minimum
wage and EGP 42,000/month maximum). The Counsel also sets
the minimum
annual increase which must not be less than 7% of the basic
salary which
is used to calculate the social insurance.
Working
Hours
The working
hours according to the Labor Law are a maximum of 8 hours per
day or 48
hours per week in the case of a six-day work week. However, the
employee may,
from time to time, be required to work additional hours when
necessary.
Annual
Leave
According to
Article (47) of the Labor Law, the duration of the employees’
annual leave
is 21 days per year for those who have worked one year in the
service of an
employer. For those who have worked more than 10 years in the
service of one
or more employers, the annual leave is 30 days. Also,
employees that
are over 50 years of age are entitled to annual leave of 30
days. As for
employees that have worked less than one year in the service of
an employer,
their annual leaves shall be pro-rata to their period of service,
provided that
they have spent 6 months in the service of the employer.
Sick Leave
According to
Article 54 of the Labor Law, if an employee is sick, he or she is
entitled to
sick leave as determined by the concerned medical authority.
During sick
leave, the employee shall be entitled to his or her salary as
stipulated in
the Social Insurance Law. An employee who has been proven to
be sick shall
be entitled to a paid sick leave at the rate of 75% of his or her
wage upon
which social insurance payments are calculated, for a period of 90
days, to be
increased to 85% thereafter for the following 90 days. Sick leaves
will be
payable to the employee for up to 180 days. The employee has the
right to
benefit from his/her accumulated annual leaves and also to convert
his/her annual
leaves into sick leaves if he/she has a balance of such leave.
Minimum
Number of Nationals
According to
the Companies Law, only 10% of the employees in a company
can be
foreigners, and their salaries shall not exceed 20% of the total salaries.
Furthermore,
according to the Investment Law, only 25% of the employees in
a company
established in any of the free zones can be foreigners.
Hiring and
Dismissal of Employees
Hiring
Pursuant to
the Labor Law, the employer has the right to collect personally
identifiable
information that may be used in connection with the application
for
employment, compensation, benefits, and other services offered by the
employer. The
employer should have a file for each employee including
certain
information which is required for appointment (i.e. the employee’s
qualifications,
certificates, his/her social status, and a copy of his/her ID or
passport, a
certificate from the employee’s former employer). The employer
should
maintain in such file information regarding the employee’s work
history, work
performance, and disciplinary history during his/her
employment
with the employer.
Employment
contracts, whether for foreigners or Egyptians, are required to be
in writing and
in Arabic.
Dismissal
If the
employer wishes to terminate a definite period employment contract at
any time
during its term, without a justified cause, (i.e., if the employee has
not committed
a grave fault as illustrated below), the employer will be liable
for the full
wage the employee would have been entitled to throughout the
entire period
of the contract. In this case, the applicable notice period will be
as agreed upon
in the definite period employment contract.
If an
indefinite period employment contract is terminated by the employer
without a
justified cause, the employer will be liable to compensate the
employee for
the harm caused because of the termination as follows: no less
than two
months’ full salary for each year of service, in addition to other
entitlements
(e.g., accrued leaves, bonus, etc.). In this case, a two months’
notice period
should be sent to the employee if the employee’s service with
the employer
has been less than ten years, and a three months’ notice period
should be sent
to the employee in case the employee’s service with the
employer has been
more than ten years.
According to
the Labor Law, the employer, in general, is not entitled to
terminate the
employment contract unless the employee breaches the contract
by committing
a “grave fault”, as explicitly stated in Article (69) of the Labor
Law. “Grave
Fault” circumstances include the following:
Assuming a
false identity or submitting forged documents;
Continually
violating safety instructions;
Absence from
work for more than 20 non-consecutive or ten
consecutive
days in any one year;
Divulging
the employer's secrets, causing a material loss;
Competing
with the employer in the same line of work;
Being
intoxicated during working hours; and
Assaulting
the employer, the general manager or any of his superiors
In addition,
the employer can terminate the employment contract for
professional
incompetence.
If the
employee is unfairly dismissed, he/she can claim compensation.
Compensation
for unfair dismissal is decided by the competent court, but
must not be
less than two months' full wages for each year of service, or in the
case of a
definite term agreement, the salary for the remainder of the contract
period.
Any employer
can declare redundancies for economic or other reasons,
including
reduction or cessation of activities, after obtaining the approval of a
committee
affiliated with the Ministry of Labor and Emigration.
Safety
Standards
In general,
the Labor Law stipulates that the provisions regulating emissions,
sound
pollution and matters of that nature that are outlined in the
Environmental
Law have to be respected by the employer. In particular,
Article (208)
to (211) of the Labor Law stipulates that the employer should
provide all
the necessary means to protect its employees from hazardous,
chemicals,
machinery, infections, noise and sound pollution at the work place.
Furthermore,
Articles (212) and (214) of the Labor Law provide that the
employer has
the obligation to equip the workplace with the necessary first
aid and fire
presentation measures.
Workers’
Unions
Any
establishment that hires more than fifty employees should have an
Employees’
Union to represent the establishment’s employees. However,
regarding
establishments that hire less than fifty employees, the negotiations
will be
carried by representatives of the General Union and the Employer’s
representatives.
The main
objectives of unions are as follows:
Settlement
of individual and group disputes related to its members;
Participation with the General Union in drafting collective employment
contracts;
Participation in the discussions related to the establishment’s production
plan and
assisting in the execution thereof;
Consultation
on penalties’ regulations and other internal regulations
related to the
establishment's employees at the time of drafting and
amendment;
Execution of
the service programs approved by the General Union; and
Contribution
to the social activity in which the employees participate.
XI. Work Permit Requirements
Foreign
employees may not work in Egypt unless they obtain a residency
permit, which
includes a work permit (called a non-tourist resident permit).
The required
documents for obtaining a resident permit in Egypt include:
Copies of
the letters of the Head of the Head of the Central Authority
for Employment
and Labor Market Information which are addressed to
the Passports,
Emigration and Nationality Administration and the
competent
administrative authorities for the approval of recruitment of
the employee
and granting him/her a work visa;
A copy of
the foreign employee’s passport;
A copy of
the employer’s Social Insurance Form 2 (most recent
version);
A letter
issued by the employer stating the total salaries and the number
of Egyptian
and foreign employees (in Arabic);
Experience
Certificate for the foreign employee comprising his/her
experience in
the field where he/she will be working, to be notarized by
the competent
authorities and the Egyptian Embassy in that country. An
official
Arabic translation is required;
Foreign
employees work permit forms numbers 1 (stamped by the
company’s
stamp) and 2;
A postal
order in the favor of the head of the competent governmental
authority of
an approximate value of LE 1,500 (some foreign employees
are exempt
from such fees);
Extract of
the commercial registration form and the tax card of the
Egyptian
company;
HIV test to
be taken in Egypt (some foreign employees are exempt from
taking the
test); and
An
acknowledgement (in Arabic) from the foreign employee stating that
he/she neither
previously worked in Egypt nor obtained a work permit
8
passport-size photographs of the foreign employee.
It should be
noted that foreign technical experts must have two Egyptian
employees as
assistants. Also, employees working in certain fields (such as
tourism and
education) need to submit additional documents and procure
specific
approvals in order to obtain a work permit.
Once all
required documents are submitted, the Labor Office will issue a
temporary slip
to be attached to the employee’s passport, which will allow the
employee to
start work. After security clearance procedures, which take
approximately
2 months, the work permit and the residence visa are issued.
The process of
obtaining work permits costs approximately LE 3,000.
It should be
noted that a work permit is always temporary. No permanent
work permit is
granted. The employee must renew it every year or every six
months,
depending on the term of the work permit.
XII. Taxation
Tax Law Number
91 for the year 2005 drastically simplified the Egyptian
taxation
system. Generally speaking, there are now two types of taxes
applicable in
Egypt:
An income
tax applicable to individuals; and
A tax on
company profits applicable to all types of juristic persons
(companies and
partnerships).
These two
types of taxes are briefly outlined below:
Income Tax
The tax on
income is in general applicable to the income of natural persons
resident in
Egypt for the majority of a year in a residence whether owned or
rented or if
he/she has a commercial office, a place of business, a factory or
other places
where a natural person undertakes work in Egypt or resides in
Egypt for more
than 183 continuous or interrupted days within 12 months.
Also, an
Egyptian who performs his duties outside Egypt and the source of his
income is the
Egyptian Treasury is liable to pay an income tax.
The tax covers
four sources of income:
income from
commercial and industrial activity;
Salaries and
wages;
income from
non-commercial professions; and
income
realized from real estate property.
Income from
Commercial and Industrial Activity
Tax from
commercial and industrial activity includes the net profit realized
from any
commercial or industrial activity, even if such activity is limited to
one
transaction. It also includes profits realized by brokers and agents and, in
general, all
profits realized by any person, agency, or office that acts as a
broker,
mediator, or agent for the sale, purchase, or lease of real estate
property or
any kinds of goods, services, or stocks. It also includes profits
realized from
real estate development, and rental of commercial and famished
property.
Salaries
and Wages
The salaries
and wages tax covers salaries, wages, bonuses, and annuities,
excluding
pensions and social insurance payments paid to individuals residing
in Egypt or
individuals residing abroad on account of services rendered in
Egypt.
Income from
Non-Commercial Professions
Tax on income
from non-commercial professions includes net profits realized
from the
professions where the income is basically generated by the
taxpayer’s
non-commercial work. This also includes profits realized from
professional
work abroad if the main or permanent center for the taxpayer’s
professional
practice is in Egypt. This category in effect also includes revenue
derived from
any profession or activity not expressly covered by the law, i.e.
this is the
default tax category.
Income
Realized from Real Estate Property
Tax on revenue
from real estate wealth includes revenue from exploitation of
agricultural
land and buildings.
Deductions
The categories
outlined above include a number of deductions, exemptions,
and the like,
and these should be reviewed individually. Income tax is payable
on the excess
of LE 5,000 of the total net income realized by the resident
taxpayer
during the year.
The tax rates
on the net annual income of natural persons are as follows:
More than LE
5,000 up to LE 20,000: 10%.
More than LE
20,000 up to LE 40,000: 15%.
More than LE
40,000 up to LE 10,000,000: 20%.
More than LE
10,000,000: 25%
Tax on
Company Profits
Tax on company
profits is applicable to the profit realized by all juristic
persons
operating in Egypt. This tax is also applicable to banks and public
sector
companies and units, as well as foreign banks and companies operating
in Egypt,
whether directly or through branches registered in the country. The
general tax
rate is:
Up to LE
10,000,000: 20% of the net profits.
More than LE
10,000,000: 25%.
There are two
exceptions to the general tax on profits:
The profits
realized by oil exploration and production companies are
subject to a
higher tax rate of 40.55%; and
The profits
realized by the Suez Canal Authority, the Egyptian
Petroleum
Authority, and the Central Bank of Egypt are subject to a
higher tax
rate of 40% of their profits.
Generally, the
profits of a foreign subsidiary need not be imputed to a tax
resident parent
company, because there are no controlled foreign company
rules.
General Tax
on Sales
In accordance
with Law Number 11 of 1991, a new general tax on sales is
applicable.
The tax applies to the sale of goods (some goods are exempted)
and certain
types of services (mainly tourist, telecommunications, and
entertainment
services). Goods imported from abroad for commercial
purposes are
also subject to the tax. The tax rate for goods ranges from 10%
(the general
rate) up to 50% for certain specified goods. The tax rate for
services
ranges from 5 to 10%. The tax is added to the price of the goods or
services in
question, i.e. is payable by the consumer at point of sale and
remitted by
the billing entity to the tax authorities.
Egypt does not
have transfer pricing rules. However, if the price is
substantially
below the market price and/or the price used in other
transactions,
it may give the impression of tax evasion.
XIII. Product Liability
The
manufacturer and/or seller can be liable on the grounds of:
Tort, for
damage caused as a result of a defective product;
Breach of
contract; or
Product
liability.
Tortious
liability
The
manufacturer of a defective product is liable in tort if a defective product
causes any
personal damage, injury or death. The statute of limitation is 3
years from the
date the claimant becomes aware of the damage and, in any
event, claims
are barred after 15 years from the date the tortious act occurred.
Contractual
liability (warranty against hidden defects)
A seller
warrants that the product sold conforms to the specifications
acknowledged
by the seller and is responsible for, and warrants the purchaser
against, any
hidden or latent defects for one year from the date of delivery to
the purchaser
(Civil Code).
The purchaser
must prove:
That the
product was defective;
That the
defect could not have been discovered by the purchaser at the
time of
delivery and that, if the purchaser had known of such defect, he
would not have
purchased the product; and
The actual
damage suffered and profits lost as a direct result of the
defect.
Commercial
Code
The Commercial
Code recognizes the notion of product liability of both
manufacturer
and seller. Any person suffering from direct material or physical
damage
resulting from a defective product, has the right to claim damages by
filing a
product liability claim against the manufacturer, distributor or both
severally. The
statute of limitations is the same as for tortious liability.
Consumer
Protection Law
The Consumer
Protection Law No. 67 of 2006 (the “CPL”) and its Executive
Regulations
set out obligations for suppliers of products and services (as
defined under
the CPL) and various guarantees for consumers. In the event of
a breach, the
Consumer Protection Authority can suspend the suppliers'
activities or
seize defective products until investigations are concluded or
court
judgments are passed.
XIV. Competition
The
Competition Law No. 3 of 2005 and its Executive Regulations establishes
the Egyptian
Competition Authority to monitor compliance. The Competition
Law prohibits,
among other things:
Agreements
or contracts between competing persons that are likely to:
o increase,
decrease or fix prices;
o divide
product markets or allocate them on certain grounds (for
example,
geographical areas);
o result in
concerted participation in tenders, auctions, negotiations and
other calls
for procurement;
o restrain
production, distribution or marketing operations, or limit the
service
distribution; and
o restrict
competition.
A person
holding a dominant position from abusing that position; and
Acts committed
outside Egypt that may prohibit, restrict or impair free
competition in
the Egyptian market.
Unilateral
(or single-firm) conduct
Single firm
conduct is likely to come under the abuse of a dominant position
under the
Competition Law. An entity holding at least 25% of the market
share enabling
it to affect the prices or what is on offer in the market is
considered as
having a dominant position if its competitors have unequal
power in the
market and are therefore unable to prevent this dominance
(Article 4 of
the Competition Law).
A person
holding a dominant position in a market is prohibited from
undertaking
specific practices that are considered detrimental to competition
(Article 8 of
the Competition Law). Such practices include:
Preventing
the manufacture, production or distribution of a product for a
certain period
(or periods) of time;
Refraining
from entering into transactions with any person or totally
ceasing to
deal with him in a manner that results in impairing that
person's
freedom to access or exit the market;
Limiting the
distribution of a specific product, to, for example, certain
geographic
areas or to a type of customer base;
Discriminating between sellers or buyers having similar commercial
positions in
relation to sale or purchase prices or the terms of the
transaction;
Refusing to
produce or provide a product that is circumstantially scarce
when its
production or provision is economically possible;
Selling
products at prices lower than their marginal cost or average
variable cost;
Obliging a
supplier in not dealing with a competitor; and
Imposing the
acceptance of obligations or the purchase of products that
are unrelated
in their nature to the original transactions or agreements or
as opposed to
relevant commercial custom.
Control
over Mergers and Acquisitions
Under the
Egyptian Companies Law, in a merger between Egyptian
companies,
prior approval is required from the Ministry of Investment. The
approval is
automatic and is not considered to be an impediment to the
merger.
Notification
to the Egyptian Competition Authority is required where either:
An entity
with a turnover exceeding LE 100,000,000 acquires assets or
merges into
another entity; or
The sum of
the respective annual turnover of the parties concerned with
an acquisition
(the sum of the annual turnover of the acquirer, the
acquired party
and all related parties in Egypt) exceeds LE 100,000,000.
The law
defines related parties as two or more separate legal entities, where
the majority
or the total of a related party's shares are owned by the other or
an entity
subject to the actual control of another entity.
The law does
not specify its application to foreign-to-foreign mergers, but it is
likely that
the notification requirement only applies where the:
Transaction
will have an impact on the Egyptian market.
The parties
operate directly or indirectly in the Egyptian market.
One or more
related parties of the acquirer or the acquired party are
Egyptian
entities.
If the parties
have no legal establishments (that is, subsidiaries or branches) in
Egypt, and
only sell through a distributor, no notification is required, even if
the
distributor's turnover is over LE 100,000,000 in the previous year. No
other foreign
exemptions exist.
XV. Intellectual Property
Intellectual
property rights and rules of protection are set out in The
Intellectual
Property Rights Law No. 82 of 2002 (“IPR Law”). The
following is a
summary of the main intellectual property rights capable of
protection.
Patents
Nature of
right. To be patentable, an invention must:
Be original
and novel;
Involve an
inventive step;
Be capable
of industrial application; and
Not be
specifically excluded by the IPR Law.
How
protected. Applications for registration must be made to the
Egyptian
Patent Office. The IPR Law sets out the rules for protection.
How
enforced. Criminal sanctions are imposed. Both the patent owner
and the
competent governmental body can bring a case in the courts
seeking
protection. In addition, the patent owner is entitled to civil
remedies, such
as damages or injunctions.
Length of
protection. Subject to certain exceptions, protection lasts for
a maximum of
20 years, provided that renewal fees are paid annually
from the fifth
year after filing.
Trade
marks
Nature of
right. Trade mark protection is available for trade, industrial
and service
marks. To be registered as a trade mark, a sign must:
Be capable
of graphical representation; and
Distinguish
the goods or services of one undertaking from
another.
How
protected. Applications for registration must be made to the
Egyptian
Authority for Commercial Registration (EACR). The IPR Law
sets out the
rules on protection. Unregistered marks can also be
protected
through unfair competition actions.
How
enforced. The methods of enforcement and the remedies available
are the same
as for patents (see above, Patents).
Length of
protection. Protection lasts indefinitely, subject to renewal
every ten
years.
Registered
designs
Nature of
right. To qualify for registration, a design must:
Be original
and novel;
Have an
individual character; and
Relate to
the appearance of all or part of a product resulting from
certain
features of that product or its ornamentation.
How
protected. Applications for registration must be made to the
EACR. The IPR
Law sets out the rules for protection.
How
enforced. The methods of enforcement and the remedies available
are the same
as for patents (see above, Patents).
Length of
protection. Protection lasts for a maximum of 15 years,
subject to the
payment of renewal fees after the first ten years.
Unregistered
designs
Nature of
right. To be protected, the design must relate to an aspect of
shape or
configuration of the whole or part of an article, and must not be
commonplace.
How
protected. There is no formal procedure for protecting
unregistered
designs.
How
enforced. The design owner must file an unfair competition claim.
In addition,
civil remedies such as damages and injunctions are
available for
the design owner.
Length of
protection. Protection lasts for an indefinite period.
Copyright
Nature of
right. Copyright subsists in original works, such as:
Literature
(including software and databases);
Drama;
Music;
Art;
Sound
recordings; and
Cinematographic
films.
How
protected. Protection subsists automatically from the moment the
work is
created. The rules on protection are set out in the IPR Law.
How
enforced. The methods of enforcement and the remedies available
are the same
as for patents (see above, Patents).
Length of
protection. Protection lasts for:
Literary,
dramatic, musical and artistic works: 50 years after the
death of the
author;
Cinematographic films: 50 years after the death of the last
surviving
author of the film.
In relation
to neighboring rights, protection lasts for:
Producers of
sound recordings: 50 years from the year of
publication or
recording;
Broadcasting
organizations: 50 years from the first broadcast;
Performers:
50 years from the first performance or recording.
Confidential
information
Nature of
right. This is protected under the IPR Law. To be protected,
the
information must be:
confidential
in nature and not in the public domain or common
knowledge; and
communicated
in circumstances importing an obligation of
confidence.
How
protected. There is no formal procedure for protection.
How
enforced. The injured party must bring a court action for breach
of confidence
based on breach of confidentiality. Criminal sanctions
are imposed.
The copyright owner is entitled to civil remedies, such as
damages or
injunctions.
Length of
protection. There is no fixed term, but the information must
remain
confidential for it to be protected.
Integrated
circuits and their topography
Nature of
right. To be protected, an integrated circuit must be:
Original and
novel; and
Non-obvious.
How
protected. Applications for registration must be made to the
Egyptian
Patent Office.
How
enforced. The methods of enforcement and the remedies available
are the same as
for patents (see above, Patents).
Length of
protection. Protection lasts ten years from the date of filing
in Egypt or
the first exploitation in Egypt or abroad, whichever is
earlier. A
maximum term of 15 years from the design date is imposed.
XVI. Customs
Customs are
regulated under Egyptian law No. 66 for the Year 1963. Imports
are subject to
custom tariffs at variable rates depending on the product. No
custom tariffs
are collected for exports. The competent authority in
implementing
the law and regulating the customs field is the Egyptian
Customs
Authority as a part of the Ministry of Finance. The Ministry of
Finance issues
decrees dealing with custom tariffs for each imported product.
XVII. Dispute Resolution
Overview of
Court System
The Egyptian
Court system is composed of a number of tiers: Courts of First
Instance,
Court of Appeal, and the Court of Cassation. Large commercial
disputes in
civil and commercial matters are heard before the First Instance
Full Court,
and appeals from there are heard before the Court of Appeal. The
branches of
the First Instance Full Court and Court of Appeal used are those
with local
jurisdiction depending on where the defendant is domiciled (for
example,
Cairo, Giza and Alexandria). Further appeals can be made before
the Court of
Cassation. In 2008, special economic courts were set up to
expedite
litigation in commercial disputes (Law No. 120 of 2008). These
courts became
active towards the end of 2008 and early indications are quite
positive.
Commercial
disputes arising from administrative contracts (that is, contracts
concluded with
governmental authorities relating to public works) are heard
in the first
instance before the Administrative Court (equivalent to the Court
of Appeal in
the civil and commercial jurisdictions) and appeals from there
are heard
before the High Administrative Court (equivalent to the Court of
Cassation).
Conflicts in jurisdiction and contradictory judgments (between
the civil and
commercial court system and the administrative court system)
are resolved
before the Constitutional Court.
Some
investment disputes are subject to optional amicable settlement. Such is
the case, for
example, with the ministerial committee that has been formed in
order to
amicably settle investment disputes arising from contracts concluded
between
private investors and any State or governmental entity. Also, investor
complaints
regarding obstacles imposed by the State or governmental
authorities
hindering their investments can be submitted before a ministerial
committee that
has the power to issue binding decrees removing such
obstructions
and therefore settling potential disputes. Further, the Investors’
Dispute
Resolution Center has been established under the auspices of GAFI to
amicably
settle corporate and investment related disputes arising between
company
shareholders, partners or companies. It should be stressed; however,
that recourse
to such committees is optional and is by no means a prerequisite
for
litigation, arbitration or any other dispute resolution mechanism.
Enforcement
of Local Judgments
Enforcement is
made by obtaining a writ of execution from the Execution
Judge and the
judgment is enforced through court bailiffs. Numerous
methods are
available to delay execution, including a contestation case (which
temporarily
stops execution for a few months) and third party recovery claims
in relation to
secured assets. Delays can be up to one year or more in some
cases.
Enforcement
of Foreign Judgments
Egyptian
courts will generally recognize and enforce foreign judgments if the
following
conditions are satisfied: (a) Egyptian courts do not have jurisdiction
over the
dispute, and the foreign court which rendered the judgment has
jurisdiction
pursuant to its rules on international jurisdiction; (b) the parties
have been
notified of the proceedings and validly represented before the
competent
court; (c) the judgment or award is final and binding pursuant to
the rules
prevailing under the law of the foreign court; and (d) the foreign
judgment is
not in conflict with a prior award or judgment rendered by
Egyptian
courts and is not in contravention of the prevailing public policy
considerations.
Arbitration
Since the
introduction of the Arbitration Law (Law No. 27 of 1994),
arbitration
has become an important and effective means of dispute resolution
in Egypt. The
trend has been an increasing resort to arbitration in commercial
disputes.
Arbitration is, in many cases, preferred to court litigation,
particularly
when the parties are seeking a relatively speedy resolution, and
can afford the
much higher arbitration costs.
The most
prominent arbitration organization in Egypt is the Cairo Regional
Center for
International Commercial Arbitration (CRCICA). The CRCICA
basically
applies the United Nations Commission on International Trade Law
(UNCITRAL)
Arbitration Rules.
An agreement
to arbitrate must be in writing. No separate agreement is
required.
Judges have generally accepted and supported arbitral proceedings
and an
arbitral award. The Arbitration Law makes it clear that courts shall not
accept a case
if there is an agreement to arbitrate (unless the defendant waives
its right to
arbitration). The court rules these cases inadmissible.
Enforcement
of Arbitral Awards
Arbitration
awards are final, binding and subject to no appeal on the merits.
However,
awards can be challenged in actions of nullity, and can be declared
null and void.
Grounds for nullity are set out in the Arbitration Law, and
include lack
of jurisdiction, breach of public policy, failure to grant a party a
right of
defense, and excluding the application of the agreed law governing
the merits of
the claim.
Enforcement is
made through depositing the award with the courts and
obtaining a
writ of execution. An arbitration award is then enforceable in the
same way as a
court judgment, through court bailiffs. There are procedures
that need to
be undertaken, and a 90-day period to grant the other party the
right to bring
a nullity action. A nullity action does not stop enforcement.
There are
procedural defenses to delay enforcement for some time, perhaps
even a year or
longer, but ultimately an award that is not annulled will be
enforced in
due course.
At the end of
2008, the Ministry of Justice imposed some new regulations
governing the
deposit of awards for enforcement. These regulations
potentially
cast serious doubt over enforceability. The author of this article
believes that
these regulations are contrary to the Arbitration Law and
therefore
unconstitutional. It is hoped these regulations will be withdrawn
before long.
Enforcement
of Foreign Arbitral Awards
Under the New
York Convention on the Recognition and Enforcement of
Foreign
Arbitral Awards (1958) to which Egypt is a signatory, a foreign
arbitration
award is enforceable in a similar way to an award issued in Egypt,
by deposit and
obtaining a writ of execution. At the stage of recognition or
enforcement,
arbitral awards, like foreign judgments, are not reviewed on
their merits.
Mediation
Apart from
arbitration, there is no formal statutory recognition of other
alternative
dispute resolution mechanisms (for example, mediation). The
CRCICA has
rules for mediation and conciliation, but these processes are
only subject
to contractual enforcement. Recently, interest has grown in
mediation and
the Egyptian ADR Association was established in 2007.
However,
mediation remains subject to contractual agreement, and is not
formally
governed by legislation.
XVIII. Limitation of Scope
The
information provided herein is general and for informational purposes.
The information
is provided as of January 2014, and is subject to change and
updates as a
result of new legislation, laws, statutes, regulations, rules,
decrees,
ordinances, and other applicable governmental laws. The
information
does not purpose to be exhaustive and should not be relied upon
as a
substitute for legal advice on any specific matter.
Shaheen Law
Office
Tel (202)
01222 473006
Firm
Overview:
Profile
Prepared by:
Mohamed E.
Shaheen
Partner
Shaheen Law
Office
Agents
for
("SLO")
Address: 3 Abou El Feda St, Zamalek,
Cairo, Egypt.
Tel: 002 01222473006
Email: mshaheen2000@gmail.com
2014
Table of
Content
No
|
Subject
|
Page
|
I
|
Statement
of Confidentiality and Non-Disclosure
|
3
|
II
|
Expression
of Interest
|
3
|
III
|
SLo
Background
|
3
|
1
2
3
4
5
6
|
Specialty
and Services
SLO
Memberships and Associations
SLO's
Clients
SLO's
representative and Experience
Scope
of Work
Disclaimer
|
4
4
5
5
5-6
6
|
I – Statement of Confidentiality and Non- Disclosure
This document contains
proprietary and confidential information. All such information submitted to
your company is provided in reliance upon its consent not to use and/or disclose
any information contained herein except in the context of its dealings with SLO
exclusively.
The recipient of this
document agrees not to duplicate or distribute or permit others or its
employees or representatives to duplicate or distribute any information
contained herein in whole or in part without SLO prior express written consent.
By acceptance of this
document, the recipient hereby agrees to be bound by the aforementioned
Statement of Confidentiality and Non- Disclosure and should so bound its
employees and representatives.
II- Expression of Interest
We hereby express our
interest in providing our legal support to corporate clients on following
assumptions:
a-
That we do not have any conflict of interest with any foreign or local
company or branch engaged in such transactions.
b-
That a duly authorized representative of the client or its local office
in Cairo agrees in a written lawyer retainer contract with SLO under which the
client shall agree on SLO’s fees, to be proposed in due course, in consideration
for legal assistance to be rendered by SLO within the scope of work mentioned
in your Request for Expressions of Interest.
III- SLO’s Background
SLO is an Egyptian Law office
located in Zamalek, Cairo, Egypt with strong network of local and regional
correspondent offices active in the entire middle-east and north African
jurisdictions, providing legal services to leading multi-national corporations
in the region since 2000. For more information concerning our legal services
please visit:
In 2009, Shaheen Law Office,
managed by Attorney Mohamed E. Shaheen, has become an agent for De Vittori of
Switzerland, international business lawyers and consultants with offices active
in over 200 jurisdictions, which has enriched the strong liaison with leading
international legal and consultancy firms. For more information please visit:
1- Specialty and Services
SLO provides
full-integrated corporate legal services in terms of legal consultancy,
litigation, mediation and international arbitration, on and off shore
companies, real estate, insurance and investment funds, international finance
transactions, major corporate and investment contracts, banking, representing
both debtors and creditors in matters involving credit transactions, foreign
currency transactions, financial restructuring operations, portfolio investments and capital market
transactions, banking, loans and syndications, factoring, letters of credit and guarantee, mortgages
and pledges, aircraft financing and leasing, Global Depository Receipts, ADRs,
and Global Share Investment Programs, aviation, labor, taxation, financial
lease, tourism and hotels management agreements, maritime, insurance and real
estate contracts, securitization, registration and mortgage. Advising on
pre-contract negotiations, obtaining and registering official authorizations
and licenses. Corporate Governance and corporate transactions, including
shareholders agreements, joint venture and partnership agreements, preparing
and drafting of articles of incorporation, statutes and by-laws, supply,
technical assistance, management, employment, sale and lease, license,
franchise, transfer of technology, anti-dumping and unfair competition,
construction contracts, major industrial agreements, and commercial agency and
distribution agreements.
In addition to
Commercial International Arbitration, International and local Litigation,
commercial and trade criminal cases and appearing before Courts of First
Instance, Courts of Appeal and Supreme Courts.
Our firm offers premier legal and procedural services
related to intellectual and industrial property registration and protection
including copyright, trademarks, patents, and industrial designs, filing and
defending against oppositions, performing searches, drafting and registering
assignment and licensing agreements, and litigating infringement and unfair
competition cases. In addition we provide commercial information including due
diligence, legal audit, fraud and anti-counterfeit investigation and litigation
services.
For more information, please visit Business in Egypt
section in our website:
2- SLO Memberships and Associations
MELC and its team of lawyers are active members in the
following associations:
International Bar Association, Egyptian Bar
Association, Association of European Lawyers, INTA, AIPPI, PTMG, les, Arab
Lawyers Association, Egyptian Society for International Law, Egyptian
Association for Protection of the Industrial Property.
Further,
MELC's Partner, Mohamed Shaheen is Agent for and in association with De
Vittorri of Switzerland, International Business and Legal Consultants.
3- SLO’s Clients
Mohamed Shaheen and SLO served
leading multi-national corporations including: AK Asset Management, Atos
Origin, BMW, Boots Company, Beecham Group PLC, Barella, Borak Holding, British
International School, Capital Driling, Ezz Group, Elite International Trading,
Glaxo Group, Government of Singapore Investment Corporation GSIC, OER Likon AG,
Passific International, Reckitt Benckiser, PI Capital, Smithkline Beecham
Corporation, Stofford-Miller Limited, Sapesco, Sahara Oil & Gas, Trust
Group for Securities, Unilever PLC, Valve & Tools, Just Falafel, Torab and
Motion Pictures.
4- SLO’s Representative and
Experience
MELC's Partner Mohamed E.
Shaheen, Attorney at Law, shall be handling your potential account with MELC.
For more information about Mohamed Shaheen and our
team of lawyers, please visit:
Mohamed Shaheen
was acting lawyer in the following transactions:
4-1 Legal Due Diligence on Pico Oil Group, Egyptian United Bank,
Cairo International Airport, National Bank for Development for the account of:
SOG, Egyptian Gulf Bank, Fraport and Commercial International Bank.
4-2Negotiation and Drafting of Fraport Management
Agreement with Cairo International Airport.
4-3Drafting of Waste Management Agreement between
Ama Arab, Municipality of Rome and Arab Contractors Joint Venture and Dakahlia
Governorate.
4-4Drafting of Egytian Cotton International
Marketing Contract between Weber- Schandwick Promo Seven and the Ministry of
Exterior.
4-5Representing the International Finance
Corporation, World Bank Group with the Egyptian Institute of Directors, the
Ministry of Investment of the Government of Egypt, in the Corporate Governance
Project for the Middle East and North Africa.
4-6Representing Egypt as delegate and legal advisor
in the United Nations conference on clean development mechanism in Tunisia.
4-7Drafting of management contract for Hostmark
Hotels Chain.
4-8Member of the defense team in Ghurgada Airport
Arbitration case with Artoc-Swiss.
5- Scope of Work
This Document is proposed on the assumption that the
subject matter and the scope of the potential work required from SLO and its
representative is:
5-1
Undertaking of legal due diligence reporting of all legal and
contractual issues associated to a public owned enterprise on behalf of a
private commercial foreign company in the context of a transaction in Egypt or
any market where we practice.
5-2
Drafting or reviewing all corporate, business and commercial legal and
contractual documents and agreements in relation to the transaction or project.
5-3
Provide the potential client with legal advise and consultancy on
corporate, business and commercial under Egyptian Law and Jurisdiction,
including evaluation of bids, bids preparation and revision, negotiations,
tender documents, and all other corporate, commercial and business legal issues
related thereto.
6- Disclaimer
This document is prepared by
SLO solely for the intended Client as mentioned above and for its exclusive use
for sole purpose of the afore mentioned transactions and may not be read as
extending by implication or otherwise, to any other matter and may not be
distributed to any third party without SLO prior written consent. SLO has
assumed that it has at this stage of the potential transaction obtained
information from newspapers which could be expected to be supplied at this
early stage and that SLO has not independently verified such information. SLO,
in preparing this document, have neither raised queries nor otherwise
investigated any information in relation to the potential transaction, and
accordingly expresses no legal opinion or offer to contract. This document is
not and nor is not to be intended to be a recommendation as to whether SLO
should be retained or appointed to handle or to complete the potential
transaction. SLO liability in relation to this document shall not increase due
to any contractual liability of any other party.
3 comments:
there are of course several other laws and decrees, should you need any further rule or regulation, please do not hesitate to contact me.
Great idea and very useful, it would be great if you added something about employment law as so many people are unaware of the rights they should receive and many are equally unaware of what action they can take if not treated fairly by an employer. Whilst the doors of freedom are open and people have the chance to take their rights, the advice you offer here can help to guide them in the right direction, well done.
Thanks for your comment Dee i really appreciate it :-)
your comment is noted and currently working on it and shall post it as soon as possible.. to help employees know their rights..it a good idea..
Labor law is employment law in Egypt, which is posted hereinabove..
however, i will write something focused on employees rights and obligations in more details for you...or anyone interest in the subject..I am sure there should be a lot of interested employees and employers alike...
to give you a general idea, employees are entitled for compensation in the event of unjustifiable or for no reason termination by employer...
in practice, the fired employee should file a complaint to the competent employment office, usually it is the office which is located in the city where the head office of his employer is located...in fact there are offices in all the major cities within Egypt...
the office form a committee of five persons representing all stakeholders, i.e, labor unions, employers associations...etc
in most of the cases i worked in, the committee rules in favor of the employee...the compensation for termination is approximately about the salary of a month in each year of service the employee has spent in office before being fired...
going to this committee is mandatory before going any court....
however, if the employee or employer is not satisfied with the final decision of the committee he can file a lawsuit against the company and its chairman in his capacity as Chairman of the concerned company....
also in practice in most of the cases I have presented the court also renders its judgment in favor of the employees.....as they sought to be the weaker party of the employment or labor relationship....
of course the employment contract may have specific terms and conditions, which should be applied by the committee and the court in the event it does not conflict or contradict with the employment or labor law....
that was the general framework assuming the employee has not committed a crime or a wrongdoing indicated in the employment contract or the labor law...
for specific conditions or circumstances you should have a look on the labor law under egyptian laws and regulation pages in this blog...
any concerned employee or employer should not rely on the above general concepts or information without consulting his lawyer who must be licensed, specialized and experienced in the subject matter and jurisdiction in question..
i hope that the above meet with your satisfaction, i promise to finish writing something more detailed and post it as soon as i possible can....
should you need any further query or legal information, please do not hesitate to contact me.
best regards,
mohamed E. shaheen
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