New Executive Regulations Issued fo

On 22 June 2017, the Minister of Trade and Industry issued new Executive Regulations (the “Regulations”)[1] for the Importers' Registry Law (the “Law”), which was amended in March 2017. The new Regulations, which replaced the previous regulations issued in 1982, introduced several changes to the requirements for registration in the importers' registry. Reflecting the recent amendments to the Law, the new Regulations significantly increase the minimum capital and annual turnover requirements for companies and individuals wishing to undertake import activities.

Background

Being listed on the Importers’ Registry (“Registry”) is an obligatory precondition for natural persons and companies wishing to import goods for the purpose of trade. The Register, which is controlled by the General Organization for Export and Import Control, aims to create a mechanism to assist the State in controlling importers and imported goods. The Law had not been amended since its promulgation in 1982, nearly 35 years ago, until the March 2017 amendments, which we discussed in the March 2017 issue of the Egypt Legal Update. While the Law was only amended, the Ministry of Trade opted for the overhaul of the old regulations in full. The following are the main changes that were introduced in the new Regulations.

Registration Conditions

The new Regulations were made in line with the March 2017 amendments to the Law. As such, the major changes can be found in the sections that list the documents that an individual or a company must present as part of the request to be added to the Registry – such registration remains valid for a period of 5 years. The Regulations stipulate that natural persons (i.e. individual traders) must submit their Commercial Register, evincing that their capital is not less than five hundred thousand EGP (compared to previous minimum capital requirement of ten thousand EGP). The new Regulations give individual traders who are already registered a period of six months to comply with the new requirements. Similarly, the new Regulations require an applicant to present a tax declaration that shows a minimum annual turnover of two million pounds and the delivery of cash insurance or bank letter in the amount of fifty thousand pounds – both requirements were not present in the old regulations. The new Regulations introduced a few other additional requirements for individual traders, such as the need to submit a certificate of import practice (which proves that its holder passed import training and qualification courses). As for companies, the regulation distinguished between the conditions for registering partnerships and limited liability companies on the one hand, and joint stock companies and limited partnerships by shares on the other. In accordance with the amendments to the Law in March 2017, the new Regulations stipulate that partnerships and limited liability companies must submit proof that their paid-up capital is not less than two million EGP (compared to fifteen thousand EGP in the repealed Regulations), and that their annual turnover is not less than five million EGP for the year prior to submission of request to be added to the Registry. Companies that already have an import license are exempted from the minimum annual turnover condition. As for joint stock companies and limited partnerships by shares, the Regulations stipulate that annual turnover must be at least five million EGP in the year preceding the application for registration, and that paid-up capital must not be less than five million EGP. The old regulations did not stipulate minimum capital or turnover requirements for these types of companies. Similar to the latest amendments to the Law, the new Regulations provide for a grace period of six months for companies to comply with minimum capital requirements, starting from the enactment of the Regulations. In implementation of the latest amendments to the Law, the new Regulations significantly changed the nationality requirements for joint stock companies and limited partnerships by shares. In contrast to the old regulations which required shares to be wholly owned by Egyptians, a majority of shares (at least 51%) must now be owned by Egyptians. The new Regulations also added some additional conditions, such as the need to submit a certificate of import practice, and that importing goods for trade is among the listed purposes of the company. In addition to amendments to the registration documents, the new Regulations approved significant increases in registration fees compared to the previous ones. The Regulations also stipulate that the right to recover insurance (which was increased by the amendments in March from three thousand to fifty thousand EGP) will be foregone if an importer is removed from the register as a result of a conviction or in other cases provided by the Law.

Conclusion

The new Regulations are in line with recent amendments to the Law, and will likely have the effect of limiting the number of companies and individuals who can undertake importing activities, as a result of increases in minimum capital and turnover requirements. On the other hand, the recent amendments to the Law are the first in nearly 35 years, a period that witnessed a significant increase in prices and changes in the market structure.   [1] Minister of Trade and Industry Decision No. 846/2017 enacting the Executive Regulations of the Importers’ Registry Law No. 121/1983, Egyptian Gazette, Issue No. 144, 22 June 2017.