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EFSA Issues New Rules Concerning Fa

EFSA Issues New Rules Concerning Factoring
Factoring is the financial service which allows specialized companies – licensed by the financial supervisor – to purchase future financial claims from various commercial entities, thus allowing those entities to use the resources back into their commercial activities. Factoring was originally supervised by the Investment Authority until 2009 when the Egyptian Financial Supervisory Authority (“EFSA”) was established and such supervision was transferred to it. EFSA originally issued Decision No. 120 of 2010 to organize factoring, and has a new Decision No. 100 of 2011 to tighten the licensing conditions for factoring companies as follows.
New Conditions
According to the new rules the factoring company must satisfy the following conditions:
  • It must be a joint stock company.
  • It must have as one of its founders a financial institutions (bank, insurance company, securities firm, …) with at least 20% equity stake.
  • It may not undertake any other activity other than factoring except with the prior permission of EFSA.
Moreover, obtaining EFSA’s permission for undertaking other activities requires the company to have an issued and paid-up capital no less than that required for all other activities, to hold separate accounts for factoring, to have a licensed managing director or manager for factoring, and to have quarterly financial statements prepared for the factoring operation in accordance with the Egyptian Accounting Standards.
Factoring is the financial service which allows specialized companies – licensed by the financial supervisor – to purchase future financial claims from various commercial entities, thus allowing those entities to use the resources back into their commercial activities. Factoring was originally supervised by the Investment Authority until 2009 when the Egyptian Financial Supervisory Authority (“EFSA”) was established and such supervision was transferred to it. EFSA originally issued Decision No. 120 of 2010 to organize factoring, and has a new Decision No. 100 of 2011 to tighten the licensing conditions for factoring companies as follows.
New Conditions
According to the new rules the factoring company must satisfy the following conditions:
  • It must be a joint stock company.
  • It must have as one of its founders a financial institutions (bank, insurance company, securities firm, …) with at least 20% equity stake.
  • It may not undertake any other activity other than factoring except with the prior permission of EFSA.
Moreover, obtaining EFSA’s permission for undertaking other activities requires the company to have an issued and paid-up capital no less than that required for all other activities, to hold separate accounts for factoring, to have a licensed managing director or manager for factoring, and to have quarterly financial statements prepared for the factoring operation in accordance with the Egyptian Accounting Standards.