Companies Law: Amendment of Timelin

A decision issued by the Minister of Investment on 22 May 2017 changes the minimum time for issuing invitations for company general assembly meetings from 15 to 21 days (the “Decision”).[1]

Background

In 1999, the Organisation for Economic Co-operation and Development (“OECD”) devised Corporate Governance Principles as part of efforts to ensure international economic stability and sound financial systems. The OECD Principles – amended twice since then: in 2004 and 2015 – are designed to help policy makers evaluate and improve the legal, regulatory, and institutional framework for corporate governance. They are also used as an internationally recognized benchmark for assessing and improving corporate governance by organizations such as the World Bank and the Basel Committee on Banking Supervision. Under the OECD Principles, basic shareholder rights include the right to obtain relevant material information regarding the corporation on a timely and regular basis, and to participate effectively and vote in general shareholder meetings. Shareholders must be furnished with sufficient and timely information concerning the date, location and agenda of general meetings, and the issues to be decided. Procedures should also allow for the equitable treatment of all shareholders regardless of their location, and must not make it unduly difficult or expensive to attend general meetings or cast votes. Sending voting materials too close to the time of general shareholder meetings is considered as hindering the ability of shareholders to exercise these rights as it does not allow investors adequate time to study agenda items, consult on them, and reach a position. Along the same lines, the World Bank issues a yearly Doing Business report which measures regulations that enhance business activity and those that constrain it using indicators that are compared across 190 countries. The ten Doing Business indicators are (the ease of): starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The methodology by which this data is collected from all 190 countries is through a questionnaire that is filled by lawyers, answered based on company laws, capital market regulations, civil procedure codes and rules of evidence. The ranking of economies on the strength of minority investor protections is determined by assessing each country’s distance from threshold scores for shareholder protection. One of the specific questions on the questionnaire is whether a detailed notice of general shareholder’s meetings is required to be sent 21 days before the meeting. Prior to this most recent Decision by the Minister of Investment, the answer to this question for Egypt was in the negative.

The Decision

The executive regulations of the Companies Law No. 159 of 1981 provide the manner in which shareholders must be informed of general assembly meetings. An invitation to convene a meeting must be published twice in two daily papers five days apart from each other. Notice of invitation must also be sent by regular mail to shareholders at their registered addresses. Companies that have not offered their shares through a public offering are allowed to send the invitation notice to shareholders by registered mail, without publishing in a daily paper, or deliver the same in person against a receipt. The information to be included in the notice is explicitly detailed and it includes: company name and address, company type, issued and paid capital, commercial register number, date time and place of convening, a determination of whether the meeting is for an ordinary or extraordinary general assembly, and a detailed agenda. The timeline provided in the executive regulations for notifying shareholders of a general assembly meeting used to be 15 days prior to the meeting date, and 7 days in the event that quorum is not reached for the first meeting and a second must be held. The present Decision by the Ministry of Investment has amended the 15-day minimum to 21 days, in what seems to be directly aimed at raising Egypt’s ranking on the World Bank’s Doing Business Report.   [1] Ministry of Investment and International Cooperation Decision No. 94/2017 amending certain provisions of the Executive Regulations of the Companies Law No. 159/1981 Issued by Decision No. 96/1982, Egyptian Gazette, Issue 17 (cont.) (c), 22 May 2017.