GAFI’s Manual for Valuations Relate

The General Authority for Investment and Free Zones (“GAFI”) recently published on its website its Chairman Decision No. 853 of 2019,[1] which provides that its accompanying Manual on the Regulations and Procedures for Valuations (the “Manual”) would go into effect on 1 July 2019, repealing all other regulations or procedures that contradict the Manual. The Manual specifically addresses GAFI’s valuations of in-kind contributions to a company’s capital and its valuations of company assets and liabilities for the purposes of change of legal form, mergers, and demergers. Apart from reiterating the provisions in the Companies Law No. 159 of 1981 and its Executive Regulations as they pertain to each of these four cases, the Manual lists the required documents when submitting a valuation request to GAFI as well as the procedures that will be undertaken for said valuation in each specific case. Worth noting are the following points in the 35-paged Manual:

• Valuations of in-kind contributions are made at market value. Valuations of company assets and liabilities for the purposes of change of legal form and of demergers are made at either market or book value. In contrast, valuations of company assets and liabilities in cases of mergers are made at market value, but exceptions could be made if the companies undergoing the merger request that they are made at book value (which entail other sets of regulations).

• Valuations must comply with the Egyptian Standards for Real Estate Valuation and the Financial Valuations Standards.

• The valuation report produced by GAFI (to verify the validity of initial estimations of in-kind contributions or of initial estimations of company assets and liabilities for mergers, demergers or change of form) is only valid for six months. It could be used only once throughout this period for submission to the relevant department at GAFI and only for the purposes for which it was produced (i.e., one of the four aforementioned purposes), with a possibility of a 3-month extension if approved by GAFI’s Chairman.

• Valuation reports produced by a number of governmental agencies could be sufficient for GAFI’s purposes. Examples of these agencies include the General Authority of Government Services, the Industrial Development Authority, the Supreme Committee for Pricing State-Owned Lands at the Ministry of Agriculture, the New Urban Communities Authority, the General Authority for Tourism Development, and the Accountability State Authority. The validity period and regulations that apply to GAFI’s valuation reports also apply to these.

• Companies could request, at an additional fee, a reexamination from GAFI for the latter’s valuation report within 30 days of the report’s date. Companies could also petition these reports.

  [1] GAFI Chairman Decision No. 853/2019 with the Manual on the Regulations and Procedures for Valuations, available through this link (in Arabic).