GAFI Publishes Several Decisions an

On 27 November 2018, the General Authority for Investment and Free Zones (“GAFI”) published in its Investment Gazette (“Gazette”) 29 decisions and circulars issued by the Ministry of Investment and International Cooperation (“MIIC”), GAFI, and GAFI’s Chairman. This bringing together of decisions and circulars affecting different types of companies could be seen as a step towards facilitating the access to regulations for investors. GAFI also published a few decisions and circulars on its website since then. We covered several of these decisions in previous issues of the Egypt Legal Update, including GAFI’s governance-related circulars. In this issue, we cover decisions and circulars concerning GAFI’s bimonthly meetings with investors and stakeholders, procedures for exiting from the Capital Market Law (“CML”) framework to that of the Companies Law or the Investment Law and vice versa, voluntary liquidation procedures, rules for one-person companies, disclosure requirements for companies in free zones, and GAFI’s updated fees for certain services.

Periodic Stakeholder Meetings with Investor Services Centres

In an attempt to promote relations between GAFI and investors, GAFI’s Chairman Decision No. 512 of 2018,[1] dated 3 September, assigns to the heads of Investor Services Centres, or their deputies, the task of convening meetings, every two weeks, with business associations, the Federation of Egyptian Chambers of Commerce, investors and a representative of the Federation of Egyptian Industries. The aim of said meetings is threefold: to keep the attendees up to date on GAFI’s latest developments, to discuss the issues generally facing the attendees, and to work towards solving these issues. The results of these meetings must be presented to the head of the Investor Services Department who, in turn, prepares a comprehensive report on these meetings.

Exiting the Capital Market Law Framework

GAFI’s Chairman Decision No. 546 of 2018[2] delineates the procedures for a company’s exit from the framework of the Capital Market Law (“CML”) No. 95 of 1992 and falling within the general framework of the Companies Law No. 159 of 1981 or that of the Investment Law No. 72 of 2017. This could be the case resulting from a company’s changing its activity so that it no longer practices licensed activities under the CML, a company falling subject to specific regulation of an investment field under the Investment Law, or the Financial Regulatory Authority (“FRA”) issuing regulations that exclude the company’s activity from its regulation. Companies which need to exit the CML framework and enter the Companies Law framework must submit a request to the Investment Services Department at GAFI according to a template. The request must include – among other things – an approval from FRA for exiting the CML framework, a company resolution agreeing to the same which must include a change of company purpose according to the new framework, and amended articles of association. GAFI and FRA are to coordinate in informing companies to include in the extraordinary general assembly resolution of exit an amendment of company purpose, as well as in exchanging a copy of the company’s file after its exit from the CML framework.

Exiting the Companies Law Framework

GAFI Decision No. 712 of 2018[3] includes the procedure for a company’s exit from the Companies Law or Investment Law framework to the CML framework. A request to exit must be submitted to GAFI including, among other things: an extraordinary general assembly resolution that is ratified by FRA, the initial approval of the latter for the practicing of the activity regulated by FRA, the extraordinary general assembly minutes for ratification by GAFI, a waiver of any exemptions, benefits or incentives under the framework that the company was subject to, proof of payment of dues to GAFI, and an exit fee. Following its exit, the company must submit to GAFI an excerpt of its commercial registration showing that it is now subject to the CML framework.

Voluntary Liquidation

GAFI’s Chairman Decision No. 527 of 2018[4] lists the procedure for the voluntary liquidation of companies subject to the Companies Law, the Investment Law, and the Commercial or Civil Codes. The procedure is comprised of two stages: appointing a liquidator and entering that on the commercial register, and concluding the liquidation. The first stage entails submitting the company resolution deciding to liquidate, including the appointment of the liquidator, determining their task, and the duration. The file is then submitted to the relevant unit at GAFI’s legal department to complete the process of entering the liquidation on the commercial register and publishing the same in the Gazette. Upon the payment of the Gazette’s publication fee, the liquidator publishes an announcement of liquidation in a daily newspaper or electronically. The liquidation announcement must contain certain information, including the date for submitting requests to collect debts (which must be at least one month following the announcement). Government bodies such as tax, custom, and social insurance authorities are informed so that they may submit their debts within 120 days from being notified. The second stage includes submitting the company resolution approving the liquidator’s report, along with – among other things – a final liquidation account, proof of publication in the Gazette and a daily newspaper, and an attestation by the liquidator and the shareholders of their responsibility for the liquidation process. GAFI then issues an approval of liquidation addressed to the Commercial Registry to remove the company’s registration.

Rules for One-Person Companies

GAFI Circulars 8, 9 and 10 of 2018 all deal with one-person companies. Circular No. 8 of 2018[5] is regarding the compulsory winding up of a one-person company. The one-person company was introduced by an amendment to the Companies Law earlier this year, which also provided cases where a one-person company is to be wound up by force of law. GAFI Circular No. 8 of 2018 lists out the instances where a one-person company will be wound up. These include the loss of half of the capital (without taking a decision to continue in operation), the winding up of the corporate entity that is the owner of the one-person company, the death or loss of the owner’s capacity in any way, the change of form from a one-person company by the heirs of the owner, and the transfer of part of the capital without undertaking the relevant procedures to comply with the Law. GAFI Circular No. 9 of 2018[6] lists the procedures for the cases of the change of form of a one-person company so that more than one person has a share therein (such as in the case of transfer of capital to more than one person, or the death of the owner). It also provides conditions for the change of a company form from joint stock or LLC to one-person company. These include: (i) that the exit of the shareholders from a joint stock/LLC results from a trade of shares or inheritance whereby only one person ends up owning all shares, (ii) the remaining shareholder may not be a one-person company, (iii) the company’s activity must not be one that is prohibited for one-person companies to undertake (banking, insurance, receiving deposits), and (iv) public companies require an approval of the relevant minister. Finally, GAFI Circular No. 10 of 2018[7] refers to the one-person company’s ability to transfer all of its capital to another individual or corporate entity – a right provided in the Law. The Circular reiterates that the owner of a one-person company may be changed while retaining the company itself. The conditions for said transfer are reiterated and they are the same as in the Companies Law, namely that GAFI is notified at least 15 days prior to the transaction, that the original owner undertakes to enter the amendments on the company’s commercial register within 90 days. The Circular also contains GAFI’s template for the transfer of capital.

Implementation of Rule on Submittal of Financial Statements by Free Zone Companies

GAFI’s Chairman Decision No. 815 of 2018[8] instructs the authorities administering free zones to request that companies established in the free zones comply with Article (106) of the Investment Law’s executive regulations. Said Article mandates that free zone companies submit to their relevant free zone authority, the Ministry of Finance, and the Ministry of Investment, a copy of their financial statements and related explanations as ratified by an auditor within 90 days following the end of the fiscal year. Free zone authorities were also instructed to form inspection and audit committees to review the records and books of companies that fail to comply with this obligation in order to determine revenues. Free zone authorities have 15 days from the date of the company’s submission of its financial statements to review them and reach settlement of due fees.

Business Centres in Free Zones

GAFI’s Board of Directors Decision No. 231 of 2018[9] establishes a business centre in every free zone to provide their customers photocopying and computer-usage services. The fees charged are to follow those charged by the Investor Services Centres and which are approved by GAFI’s board of directors.

MIIC’s Entrepreneurial Initiative

A nationwide, government-led initiative aimed at supporting Egyptian youth and entrepreneurs, the Fekretak Sherketak (Your Idea Your Company) Initiative was launched under the auspices of MIIC in September 2017, and it created an acceleration program, Falak Start-ups, through which interested entrepreneurs could apply to the entrepreneurial program.[10] MIIC Decision No. 208 of 2018,[11] dated 28 October, states that both MIIC and GAFI are to encourage and develop the Initiative as an incubator and accelerator for entrepreneurial companies and start-ups. In particular, GAFI is to take all necessary measures towards providing adeptly equipped spaces through which the Initiative’s services could be offered. The decision also reiterates the four main pillars of the Initiative – finance, start-up service centres, accelerators, and supportive legislation – and lists the activities that the Initiative could perform. These include the provision of the necessary support and consultancy – whether financial, marketing, legal, or otherwise – to all entrepreneurial companies and start-ups, at their different stages; the promotion of the start-ups and the entrepreneurs in different governorates, with priority given to governorates most in need; the liaison between the entrepreneurs and government entities; and the organization of workshops and training in different entrepreneurial fields and relevant skills, including team work and marketing. The decision also authorizes the Initiative with developing its own guidelines and internal regulations, and with developing the guidelines governing the operations of the Egyptian Entrepreneurship Investment Company (“EEIC”) and the selection of its appropriate investments in cooperation with the private sector, taking into account that the EEIC’s board of directors must include representatives of the private sector and that it must have an independent committee for investment. It is worth noting that the EEIC, which is also known as Egypt Ventures, was established a few months prior to the Initiative’s launch, in March 2017, in agreement with the Saudi Fund for Development, to act as a start-up fund.[12]

Updated Fees

GAFI’s Board of Directors issued two decisions amending fees that GAFI charges in exchange for some of its services – Decision No. 231 of 2018 and Decision No. 232 of 2018[13] – and one decision amending fees charged for some publications – Decision No. 233 of 2018.[14] The updated service fees include ones that are provided in free zones – such as application fees for initial approval to establish new projects (EGP 500), inspection fees (EGP 300-450 per inspection), and ratified official copy of any document (EGP 50 per paper). Others include fees for examining applications requesting stopping the decisions taken by a company’s general assembly (EGP 5000 per application), fees for examining applications regarding importing a private car for an investor in accordance with the Investment Law (EGP 10,000), and other committee-related fees that are determined by geographical location.   [1] GAFI Chairman Decision No. 512/2018 on periodic stakeholder meetings with Investor Services Centres, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [2] GAFI Chairman Decision No. 546/2018 delineating the procedures for a company’s exit from the framework of the Capital Market Law No. 95/1992, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [3] GAFI Decision No. 712/2018 includes the procedure for a company’s exit from the Companies Law or Investment Law framework, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [4] GAFI Chairman Decision No. 527/2018 lists the procedure for the voluntary liquidation of companies subject to the Companies Law, the Investment Law, and the Commercial or Civil Codes, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [5] GAFI Circular No. 8/2018 on the compulsory winding up of a one-person company, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [6] GAFI Circular No. 9/2018 lists the procedures for the cases of the change of form of a one-person company, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [7] GAFI Circular No. 10/2018 on the one-person company’s ability to transfer all of its capital to another individual or corporate entity, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic) [8] GAFI Chairman Decision No. 815/2018 instructing the authorities administering free zones to request from companies established in the free zones to comply with Article (106) of the Executive Regulations of the Investment Law, dated 12 December 2018. [9] GAFI Board of Directors Decision No. 231/2018 amending fees charged in exchange for some of GAFI’s services and establishing a business centre for its customers, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [10] Fekretak Sherketak official website, available through this link. [11] Minister of Investment and International Cooperation Decision No. 208/2018 encouraging the operations of the Fekretak Sherketak entrepreneurial initiative as an incubator and accelerator for companies and start-ups, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [12] Ministry of Investment and International Cooperation, Startup Funding, “Egypt Ventures – Investing in Youth”, available through this link. [13] GAFI Board of Directors Decision No. 232/2018 amending fees charged in exchange for some of GAFI’s services, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic). [14] GAFI Board of Directors Decision No. 233/2018 amending fees charged for some of GAFI’s publications, Investment Gazette, Issue No. 51080/2018, 27 November 2018, available through this link (in Arabic).