FRA Further Amends Decision for Lic

On 13 June 2018, the Egyptian Gazette published the Financial Regulatory Authority’s (“FRA”) Board Decision No. 53 of 2018 (“Decision 53/2018”)[1] which re-regulated the issuance of licenses to finance companies other than banks, and the rules for trading their shares. The importance of that decision was that it comprehensively re-organized the regulatory regime for the establishment and licensing of securities companies operating in the non-banking financial field. It redefined and clarified what is meant by companies undertaking non-banking financial activities (referred to as "practicing companies") as those practicing in: (1) securities and the capital market; (2) insurance and related activities, (3) mortgages and related activities, (4) financial leasing, (5) factoring, and (6) microfinance. In that same Egyptian Gazette issue, FRA Decision No. 93 of 2018 (“Decision 93/2018”)[2] was published amending Decision 53/2018. Decision 93/2018 introduced two new obligations for companies applying for a non-banking finance license regarding cumulative voting and minimum proportional representation voting for the election of board members. It defined “cumulative voting” as a system of voting in which each shareholder is allowed a number of votes equal to the number of their shares and may give them all to one board member candidate or divide them among several; and “proportional representation” as a system of voting guaranteeing that each 10% of the shares is represented by a maximum of one board member. However, on 24 July 2018, a correction[3] was issued in Egyptian Gazette Issue No. 166, which referred to both Decisions 53/2018 and 93/2018. Previously the obligation to use cumulative voting and proportional representation imposed on non-bank financial companies was not applicable to companies that had obtained a preliminary operating license from the FRA at the time of the issuance of the decision. The effect of the published correction is that this obligation will now apply to those companies that had obtained a preliminary approval. In addition, following the correction, companies that were already established at the time of the issuance of the decision now have a year to comply with its rules. It is worth noting that this is an amendment to the provisions of Decision 53/2018, which should have been issued in the form of an amendment to the FRA decision rather than a correction in the Egyptian Gazette, which is usually reserved for typos or missing words.   [1] FRA Board of Directors Decision No. 53/2018 regulating the issuance of licenses to companies undertaking non-banking financial activities and the rules for trading their shares, Egyptian Gazette, Issue No. 136 (cont.) (a), June 13, 2018. [2] FRA Board of Directors Decision No. 93/2018 amending Decision No. 53/2018 regulating the issuance of licenses to companies undertaking non-banking financial activities and the rules for trading their shares, Egyptian Gazette, Issue No. 136 (cont.) (a), June 13, 2018. [3] Correction to FRA Board of Directors Decision No. 93/2018 amending Decision No. 53/2018 regulating the issuance of licenses to companies undertaking non-banking financial activities, Egyptian Gazette, Issue No. 166, 24 July 2018.