Directors’ Liability in Egypy

The liability of directors and managers in Egypt is governed by several overlapping statutes: the Companies Law No. 159 of 1981 (as amended, most recently by Law No. 4 of 2018), the Capital Market Law No. 95 of 1992 for listed companies, the Investment Law No. 72 of 2017, the Civil Code No. 131 of 1948, the Penal Code No. 58 of 1937 and the Restructuring and Bankruptcy Law No. 11 of 2018.

Who the “director” or “legal representative” is depends on the form:

• Joint Stock Company (JSC / sharikat musahama) — managed by a board of at least three directors; the chairman represents the company.
• Limited Liability Company (LLC / sharikat mas’uliyya mahduda) — one or more managers named in the commercial register.
• One-Person Company (OPC) — managed by its sole shareholder or an appointed manager.
• Partnerships — all active partners.

Directors are liable toward the company, the shareholders, and third parties for (i) breaches of the law or the articles of association, (ii) mismanagement, and (iii) gross negligence or wilful misconduct. Egyptian jurisprudence treats this as a joint and several liability where directors have acted collectively, though each director may rebut liability by proving they objected, were absent, or had no knowledge of the wrongful act.

Importantly, Article 92 of the Investment Law No. 72 of 2017 removed the old legal presumption of liability for the legal representative in offences committed in the company’s name: the prosecution must now prove knowledge, intent, and personal benefit.

Four categories of claimants: 

• The company itself – acting through a General Assembly resolution (the typical route where the board is conflicted) or, where only some directors are implicated, through a decision of the remaining board members.
• Individual shareholders, for damages suffered personally (distinct from the company’s loss).
• Shareholders may also bring a derivative action on the company’s behalf when the board fails to act. This remedy is protected by Article 160 of Law 159 of 198, which  voids any clause in the articles of association purporting to exempt directors from liability
• Third parties (creditors, counterparties, employees) who have suffered direct damage.

Egyptian law does not require a fixed ownership threshold (e.g., 25%) for a derivative action — a single shareholder may initiate such a claim, subject to demonstrating standing and damage.

Criminal exposure is broader than in many civil-law jurisdictions and is spread across multiple statutes:

• Companies Law No. 159/1981: targets specific offences including the distribution of fictitious dividends, publishing false financial statements, forgery in corporate documents, and obstruction of the General Assembly. Penalties typically run from EGP 2,000 to EGP 10,000, and in some cases, imprisonment of not less than two years.
• Penal Code: covers general offences (fraud, breach of trust, forgery). Notably, Article 113 bis targets directors and managers of joint-stock companies who engage in embezzlement, abuse of authority, or other criminal breaches of trust.
• Capital Market Law No. 95/1992: covers false prospectuses, insider trading, market manipulation, and disclosure violations.
• Investment Law No. 72/2017 (Article 92): where an offence is committed in the name of the legal entity, the director is only criminally liable on proof of knowledge, intent and personal Benefit. Where that threshold is not met, the company itself faces a fine of four to ten times the statutory amount, with licence revocation or dissolution on recidivism.
• Tax, Anti-Money Laundering, Customs, Labour and Social Insurance laws: each carries its own criminal provisions targeting the “person in charge of actual management.”
• Bankruptcy Law No. 11/2018: criminal bankruptcy offences (fraudulent or negligent bankruptcy) apply to directors who mismanaged the company in the period preceeding insolvency.

A notable trend: Egyptian courts increasingly apply the “actual manager” (al-mudir al-fi’li) doctrine, extending criminal liability to whoever effectively controls the company, even without a formal title.

Criminal proceedings are monopolized by the Public Prosecution (al-Niyaba al-’Amma), which opens an investigation either on its own motion or after a complaint. Complaints can come from:

• Shareholders, the company itself, creditors, or any third party;
• Regulators such as the Financial Regulatory Authority (FRA) for capital-market offences, GAFI for investment-law matters, the Egyptian Tax Authority, the Central Bank, and the Money Laundering Unit;
• For certain offences (e.g., cheque-related fraud), a private complaint is a precondition to prosecution.

Some offences under the Companies Law and CML require a formal request from the competent minister or regulator before prosecution can begin.

• Civil liability of directors under the Companies Law: if the act has been presented to the general assembly, liability prescribes after one year from the date of the General Assembly’s decision. Where the act constitutes a criminal offence, the general prescription periods for the relevant criminal offences apply instead.
• Civil claims generally: the Civil Code sets a 15-years period for contractual claims and 3 years from knowledge of damage (with an absolute cap of 15 years from the wrongful act) for tort claims.
• Commercial obligations (Trade Code No. 17/1999): commercial obligations prescribe after 7 years from the date the obligation falls due.
• Criminal statute of limitations: the Penal Code establishes three tiers: 1 year for contraventions, 3 years for misdemeanours, and 10 years for felonies. Certain offences — notably corruption of public officials and money-laundering connected to public funds — are imprescriptible under recent amendments. Tax offences prescribe after 5 years from the expiry of the filing deadline, with a longer period applying in fraud cases.

Egyptian law does not specifically regulate D&O insurance, but such cover is permissible under the general rules of the Civil Code and the Unified Insurance Law No. 155 of 2024 (which replaced Law No. 10 of 1981). In practice, D&O policies are actively marketed in Egypt by both local insurers and branches of international carriers, particularly for listed companies, banks and multinational subsidiaries.

Two limits apply as mandatory rules of Egyptian law that no policy can override:

Criminal fines and penalties are personal by operation of Egyptian public policy - they cannot be shifted to an insurer and must be borne by the director individually.

Intentional and fraudulent acts are not insurable (Article 27 of the Unified Insurance Law No. 155 of 2024) - a mandatory rule that applies even if the policy provides otherwise. 

A standard D&O policy will typically cover defence costs, civil damages, and settlements arising from negligence-based claims.

The Companies Law itself does not distinguish between these categories for liability purposes - every person registered as a director is fully liable externally, regardless of internal allocation of duties.

However, for listed companies and regulated financial institutions, the Egyptian Corporate Governance Code (issued by the FRA, with the most recent comprehensive version dated 2016 and updated for listed companies) distinguishes between executive, non-executive, and independent directors, and requires a minimum number of independent directors on the board and on key committees. Breach of these governance rules can itself trigger FRA sanctions, but does not alter the civil/criminal liability framework under the Companies Law - the distinction matters in practice because courts do look at a director’s actual role, knowledge, and ability to object when apportioning fault.

Shareholder liability in Egypt is, as a rule, limited to the value of the contribution. While the legal framework remains relatively restrictive in extending liability to shareholders, several important exceptions have emerged:

• Bankruptcy Law No. 11/2018, Article 198(3): if the company’s assets are inadequate to cover at least 20% of its debts, the court may order all or some of the board members or directors, to pay all or part of the company’s debt, unless they demonstrate they exercised the caution of a careful person. This applies to directors but, combined with the “actual manager” doctrine, this provision has been applied against controlling parent companies that effectively directed the subsidiary’s management.
• Piercing the corporate veil: the 2018 amendments to the Companies Law, for the first time in Egypt, recognize the concept of piercing the corporate veil for corporate shareholders in specific scenarios (e.g., falling below minimum founder thresholds, commingling of assets, using the subsidiary for fraudulent purposes).
• “De facto manager / actual manager” doctrine: a holding company that habitually directs operational decisions of a subsidiary can be treated as the real manager and exposed to the same civil and criminal liability as a registered director.
• Tort liability under the Civil Code: a parent company that directly causes harm (e.g., by instructing an unlawful act) can be sued on general tort principles.
• Group taxation and labour law also contain specific provisions allowing authorities to reach a parent company for unpaid taxes or employee dues in fraud or sham-structure cases.

This overview is intended as a high-level analysis and does not constitute legal advice. Certain areas — particularly the “actual manager” doctrine and veil-piercing jurisprudence — remain evolving, and outcomes will depend on the specific facts, as well as the company’s legal form and regulatory context.