With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary

Spain’s Labour and Social Security Inspectorate has inspected the “Big Four” firms to control working time and overtime, which employees claim is regularly exceeded. Spanish law requires companies to record workers’ start and end times each day to prevent employees from working longer than the stipulated day. Companies failing to comply can face fines and even criminal charges. The inspections could set a precedent for firms in the auditing and consultancy sectors.

In recent days, the press has reported on the “macro-inspection” carried out in the “Big Four” (the most important firms in the consultancy and auditing sector) by the labour authority, namely the Labour and Social Security Inspectorate (“Inspección de Trabajo y Seguridad Social”).

The aim of this inspection is, fundamentally, the control of working time, overtime and time recording, all aspects which, according to the workers themselves, are flagrantly breached by the aforementioned companies.

Thus, it seems to be a general trend that the employees of the “Big Four” work up to 12 hours a day (“from nine to nine”), which means approximately 4 hours of overtime a day; overtime that, to make matters worse, is not compensated either financially or by days off. Being forced to work during rest periods, such as weekends or holidays, is also common practice.

Given the situation and the facts described above, how can they be transferred to the legal plane? What breaches would the “Big Four” be committing, and what responsibilities would they have to face, in accordance with our Labour Law?

Well, firstly, since 2019, the year in which Royal Decree-Law 8/2019 of 8 March came into force, the company is obliged to keep a daily record of the working day, including the specific start and end times of each worker’s working day. The purpose of this measure is, precisely, to avoid what happens in the “Big Four”, that is, that employees work longer than the established working day, which, in the words of the Explanatory Memorandum of the aforementioned regulation, produces a clear negative effect on the labour market:

“The performance of working time in excess of the legally or conventionally established working day has a substantial impact on the precariousness of the labour market, by affecting two essential elements of the employment relationship, working time, with a relevant influence on the personal life of the worker by making it difficult to reconcile family life, and salary. It also impacts Social Security contributions, which are reduced as they are not paid for the salary corresponding to the working day”.

The daily record of each worker’s working day is thus an essential element for the purposes of calculating overtime, i.e., those hours worked over the maximum duration of the ordinary working day, and which must, in any event, be compensated, either financially or through equivalent paid rest periods; in addition to also having a quantitative limit, insofar as article 35.2 of the Workers’ Statute provides that the number of overtime hours may not exceed 80 per year.

No less important is the certainly novel “right to digital disconnection in the workplace”, which takes the form of the worker’s right to guarantee, outside the legally or conventionally established working time, respect for their rest time, leave and holidays, as well as their personal and family privacy, and which is recognized in article 88 of our current Personal Data Protection Act.

At this point, what happens then if the company transgresses the legal rules and limits on working hours, overtime, rest breaks, holidays, working time records and, in general, working time, as apparently occurs in the cases described at the beginning of this article?

Well, it faces a financial fine of 751 euros in the minimum grade, and up to 7,500 euros in the worst case, according to the Law on Infractions and Penalties in the Social Order.

In the worst-case scenario, a possible criminal liability could even be considered for allegedly committing an offense against workers’ rights. This is by no means a trivial matter, as our Criminal Code provides for such offenses to be punishable not only by a fine but also by imprisonment.

Conclusion

We are faced with the possibility that the Labour Inspectorate’s action with regard to the so-called “Big Four” will set a precedent with regard to the prohibition of endless working hours, so common in sectors such as auditing or consultancy, which will also benefit the working conditions of workers as a whole.

Under what conditions can company officers be dismissed in France?

This depends on the form of the company.

Let us take the most common forms of commercial companies in France.

The manager of a limited liability company (« société à responsabilité limitée », SARL) can only be dismissed for due reason, i.e. if he or she has committed a fault, or if his or her dismissal is necessary to protect the company’s interests.

In a public limited company (« société anonyme », SA), the members of the board of directors and the chairman of the board of directors can be dismissed “ad nutum”, i.e. at any time and without having to give any reason. This rule may not be departed from. The chief executive officer, on the other hand, can only be dismissed for due reason.

In simplified joint stock companies (« société par actions simplifiée », SAS), a company form created in 1994, officers are in principle be dismissed “ad nutum”, but the articles of association may derogate from this rule and provide that they may only be dismissed for due reason.

A recent decision of the Cour de cassation, the highest judicial court in France, is of particular interest.

It concerns simplified joint stock companies (“SAS”), the most successful company form in France: one in two newly created companies is an SAS.

In SASs, it is the articles of association that determine the conditions under which the company is managed, and in particular the conditions for the dismissal of the officers.

The decision of the Court of Cassation of 12 October 2022 (No. 21-15.382) establishes a principle: although extra-statutory acts may supplement the articles of association, they may not derogate from them.

In this case, the articles of association of an SAS provided that the chief executive officer could be dismissed at any time, and without any reason being necessary, by decision of the partners or the sole partner, and that the dismissal of the CEO would not entitle him to any compensation.

A chief executive officer had been appointed by the sole shareholder. On the same day, the sole shareholder sent a letter to the CEO stating that if he was dismissed without due reason, he would receive a lump-sum compensation equal to six months’ remuneration.

A few years later, the company dismissed the officer, who demanded payment of his indemnity. When the company refused to pay him, the former CEO sued for payment of the indemnity.

The Court of Appeal and then the Court of Cassation ruled in favour of the company: the former officer was not entitled to the indemnity. For the Court of Cassation, the articles of association set the terms of dismissal of the chief executive officer, and it is the articles of association that take precedence. Although extra-statutory acts may supplement these articles, they may not derogate from them. And even if the extra-statutory act comes from the sole partner, or if all the partners have agreed to it.

Our recommendation

One must carefully analyse the articles of association and the extra-statutory acts such as shareholders’ agreements or agreements with the officer in order not to take risks when dismissing the officer of an SAS.

The Spanish government has recently approved two new rules on equal pay and equality plans which will come into force in January and April 2021 and affect all companies.

1. Royal Decree 901/2020, of October 13, which regulates the equality plans and their registration

An “equality plan” is understood to be that ordered set of measures adopted after carrying out a situation diagnosis, aimed at achieving equal treatment and opportunities between women and men in the company, and eliminating discrimination based on sex.

All companies that have 50 or more workers are obliged to draw up and apply an equality plan, its implementation being voluntary for other companies. In any case, equality plans, including previous diagnoses, must be subject to negotiation with the legal representation of the workers, in accordance with the procedure legally established for that purpose.

Regarding the content of the plans, they must include, among others, definition of quantitative and qualitative objectives, description of the specific measures to be adopted, identification of means and resources, calendar of actions, monitoring and evaluation systems, etc. In addition, they must be subject to mandatory registration in a public registry.

This new Royal Decree will enter into force on January 14, 2021.

2. Royal Decree 902/2020, of October 13, of equal pay between women and men

The purpose of this new Royal Decree is to implement specific measures that make it possible to enforce the right to equal treatment and non-discrimination between women and men in matters of remuneration.

For this, the companies and collective agreements must integrate and apply the so-called “principle of remuneration transparency“, which applied to the different aspects that determine the remuneration of workers, allows obtaining sufficient and significant information on the value attributed to such remuneration.

For the application of the aforementioned principle, the Royal Decree provides, fundamentally, two instruments:

• remuneration registry: All companies must have an accessible remuneration registry for the legal representation of workers. It must include the average values ​​of salaries, salary supplements and extra-salary perceptions of the entire workforce (including managers and senior positions) disaggregated by sex.
• remuneration audit: Those companies that draw up an equality plan must include a remuneration audit in it. Its purpose is to check if the company’s remuneration system complies with the effective application of the principle of equality, defining the needs to avoid, correct and prevent obstacles and difficulties that may exist.

The measures contained in this new standard will come into effect on April 14, 2021.

A recent Judgment of the Social Chamber (4th) of the Supreme Court has concluded that those commonly known as “riders” are false self-employed, that is, they are linked to the distribution platforms through a labour relationship.

This ruling took place on the occasion of the dispute between the company “Glovo” and one of its “riders”, who filed an appeal before the Supreme Court after obtaining a dismissal ruling from the Superior Court of Justice of Madrid.

The High Court bases its decision, particularly, on the concurrence of dependency and alienation of the “riders”, characteristic notes of the existence of an employment relationship. This is deduced from the existence of the following indications:

• “Glovo” geolocates the “riders” by GPS while they carry out their activity, recording the kilometres they travel, which implies business control over the performance of the service provided.
• “Glovo” establishes the conditions under which the service must be provided and gives instructions to the “riders”, who limit themselves to receiving orders.
• “Glovo” provides the “riders” with a credit card to buy the products of the final consumer, and provides them, if they need it, with a payment in advance of part of their remuneration, for them to be able to start their activity.
• “Glovo” exclusively makes all commercial decisions: it sets the price of the services provided, the form of payment and the remuneration of the “riders”.
• Furthermore, it is “Glovo”, and not the final clients of the platform, who pay the “riders”, and the company is also in charge of preparing each of the invoices.
• Although the “riders” use their own mobile phone and motorcycle, the truth is that the essential means of production of the activity are not the mobile phone and the motorcycle, but the digital platform of “Glovo”, which reflects that the “riders” are not the owners of the essential means of production.
• “Glovo” has the power to sanction its “riders” for different behaviours, which constitutes a manifestation of the managerial power of the employer.

Thus, the Supreme Court concludes that “Glovo” is not limited to being a mere intermediary between “riders” (distributors) and businesses, but that it is a true company that provides delivery services, which sets the “riders” the essential conditions for the provision of the service, so that these remain incardinated in the organizational sphere of the employer, without having an autonomous business organization.

It should be borne in mind that this new pronouncement has important consequences, since the existence of a relationship of an employment nature between the “riders” and the digital distribution platforms such as “Glovo”, “Deliveroo” or “Just Eat”, obliges these companies to pay the contributions to the Social Security of the “riders”, corresponding to the last 4 years, plus a 20% surcharge and the corresponding financial penalty.

This criterion of the Supreme Court will undoubtedly affect other equivalent economic activities.

Today during Covid–19 circumstances Gig economy approach has become more necessity rather than theoretical possibility. But still transformation of Latvian business and employment market does not run so smooth. Why so?

At the end of year 2019 the State Labour Inspectorate of Latvia in cooperation with private partners released results of a research on new forms of employment presence and potential in Latvia (http://www.vdi.gov.lv/files/jnf_gala_zinojums.pdf). The results of this research as well of other international researches are rather controversial as do not conform to the real situation in the country.

Although the aforementioned researches claim that employers in Latvia are supporters of old-style employment and are not willing to change the practice, in fact the laws of Latvia in effect do not provide flexibility on the approach of employment.

Covid-19 has badly hit a lot of economies, and actually highlighted the largest challenges – employers to save their business would like to pay less, whereas employees need flexibility as they are required to work remotely and combine their private and work lives.

In this article an analysis of how general conditions of employment applicable today correspond to frame of main five aspects of a Gig economy will be provided.

Employment “one to one” or “one to many”

Gig economy considers that traditional employment has no longer place in our world. The employment should be available among one employer and many employees, many employers and many employees or one employee and many employers, thus employment being in each contractual relations part time, nevertheless all employees are jointly and severally liable for the result of work.

Labour Law of Latvia keeps traditions of employment – one employer and one employee. Likewise part time work is permitted just in statutorily listed cases like to replace an employee in long term absence, in case of increase of the workload in the company, in emergency cases, and in certain areas like culture, sports, banking, education and diplomacy. Moreover, length of a fixed-term employment may not exceed 5 years in total (including extensions). As a result of this majority of employments are open ended.

In order to solve the burden imposed by law, employers often use potential employees as external service providers based on a Service Agreement in this manner imitating self employment. Self employment for a payor is less expensive tax wise, which led authorities to introduce limiting measures for flexibility of entrepreneurs.
In the Law on Personal Income Tax criteria of employment per se where introduced. Namely, an agreement with an individual can be deemed as contractual relationships subject to payment of salary and accordingly payroll if at least one of the following conditions has been ascertained:

• the individual has economic dependence upon the party to whom he/she provides services;
• lack of assumption of financial risks in the fulfilment of work or no liability in respect to lost debtor debts;
• integration of the contracted individual into the company to which services are provided (e.g. existence of a work or recreational areas, a duty to observe internal rules of the company);
• availability of holidays and paid leave in accordance with schedules of the company;
• work shall be performed under management or control of the other contracting party – the customer, and the individual is deprived of possibility to involve in the service provision his/ her personnel or sub-contractors; or
• the individual is not owner of the assets used while rendering services to the company.

Respectively in case the State Revenue Service of Latvia (tax authority) detects presence of the criteria listed, it shall be entitled to reclassify the contractual relations of the seemingly independent parties into employment relations as a result of which remuneration paid to the individual would be subject to full payroll as any other salary gained on basis of Employment Agreement. The tax expense threshold the companies playing with by out of box employment results in significant difference:

• payroll in case of employment – progressive personal income tax between 20% to 23% depending on the income (at certain level the annual income of an individual may though be subject to maximum rate of the personal income tax – 31.4%); social security contributions of 35.09%; majority of these expenses being on the employer’s shoulders; whereas
• taxes applicable in case of self-employment – progressive personal income tax between 20% to 31.4% depending on the income; social security contributions of 32.15%, basis of these compulsory contributions being a freely chosen income; in this case if the contracted individual is a registered economic operator – the taxes are all his/her liability, whereas if the individual has not registered with tax authorities independent economic activity, the taxes shall be withheld at the moment of disbursement of the remuneration and paid into the State budget by the company contracting the individual.

In circumstances of Covid–19 the traditional employment scenarios chosen by entrepreneurs due to rather strict statutory rules have heavily impacted operation of businesses as employers had to either dismiss their employees or let them in idleness with crisis management allowance established by the State as support during Covid–19.

The outcome showed that applying of different type of “employment” structures, like contracting specialists on the need to basis or crowdsourcing of employees among numerous employers could have facilitated challenges the employers face today in many ways – provide availability of different specialists for the project/ time period required, limit expenses in respect to the employees whom the companies were forced to let in idleness, and alike, all of this still keeping the business running.

Employment volatility as new formula for flexibility

As described earlier, present requirements of the Labour Law of Latvia require employment relationships to be based on clear and sustainable rules thus ensuring predictable and long term support to the employees, both in terms of employment and social security.
The strict approach is even more secured by strict statutory conditions and notice periods under which an employee can be dismissed:

With a notice of immediate effect:

• while performing work the employee has acted unlawfully and therefore has lost trust of the employer;
• while performing the work employee is in a state of intoxication (e.g. alcohol, drugs, other); or
• the employee is unable to perform the contracted work due to a state of health, and this is confirmed by a medical opinion;

With a 10 days notice:

• in case employee has without justifiable reason materially violated the contracted work order;
• while performing the work the employee has acted contrary to good morals, and such action is incompatible with the continuation of the employment;
• the employee has grossly violated work safety rules and endangered safety and health of other persons; or
• due to temporary incapacity of the employee for work for more than 6 and up to 12 months;

With a one month notice:

• if the employee is in lack of sufficient professional skills to perform the contracted work;
• an employee previously employed in the particular position has been reinstated to work;
• in case of staff redundancy (presuming that employer will not hire immediately new employee in same position); or
• in case the employer is being liquidated.

Having seen the list of statutory conditions one would definitely agree that only few circumstances are of a regular character, meaning can be actually applied, whereas the rest are seldom met. Sure there is also available an exception out of this strongly established frame – to terminate employment without any specific reason if the employee and employer can reach a mutual agreement. However that may be a challenge – employees are not obliged to participate in negotiations with employers and can simply walk away.

So how much of volatility and flexibility can be reached in such strongly fixed statutory frame?
Practically not much.

Accordingly under Covid–19 circumstances companies have applied staff redundancy condition more than ever, which may not have been necessary if employment structures would be more flexible. Part of employees today let in idleness have started to look for new job even before the actual dismissal, because perception of stability and predictability is the driving force. This actually showing that although employment of a periodical character would not provide long term income and social security, with this approach the employees of Latvia would have been more used and resistant to fast changing circumstances and periods of actual idleness (meaning also – had some savings).

It appears that development of economy and business approaches runs on a speed of light, whereas statutory regulation does not manage to follow in those footsteps. The question is though do we need today law and regulation for each detail, if in practice changes come into our lives so fast. Maybe a better solution would be regulation on general principles and practically providing field of different approaches and solutions which would fit more each business segment and keep economy running also in such extraordinary circumstances as Covid-19.

A close cooperation among numerous employers

The Gig economy concept provides for presence of different types of cooperation among employers and employees, including crowdsourcing of personnel, sharing of working spaces, liaising business operations and sharing liability in respect to work performed.

Under present requirements of employment and tax laws of Latvia having shared workforce is rather complicated. The statutory restrictions keep accountability of employers at a very high level thus at the end of the day the approach of traditional employment – “one employer and one employee” – on Latvian market appears to be the easiest. Likewise the strict statutory rules have developed certain culture also on the employee side – “I have one master” seems the most correct and secure way and any other solutions are simply out of discussion.

As an example, it took years for the Latvian market to admit that employees can be also leased out. Due to long term difficulties with practical applicability of this concept and contractual split of liabilities between lessor and lessee in respect to the employee (being those days at full discretion of the contractual parties), not always being favourable for the employee, in year 2011 changes to the Labour Law were introduced. The amendments established precise definition on what a lease of employees is, the scope of liability and split of duties among the parties resulting therefrom. However not without creating new burdens.

The statutory protection level of employees on the Latvian market has always been very high and same became applicable in case of lease of workforce. No doubt employees have to be protected; however employee lease is a slightly different way of employment and therefore the regulation in place is still not always compatible with differentiation of employment schemes possible. Last but not least, another aspect complicating applicability of lease of employees is that lease of workforce is set as licensable operation. The procedure to obtain license is complicate enough and involves preparation of paper loads, moreover under statutory requirements a license must be obtained even if the employees are leased between related companies. Thus benefits of this employment structure are certainly disputable.

Crowdsourcing of employees is the next step; however theoretically possible already today. Individuals could become self employed specialists and enter into contracts with different companies, thus avoiding of the risk under Law on Personal Income Tax (described in this article earlier) to be recognized as employee of any of these companies provided of course that the individual assumes certain financial risks and does job with his/her own tools in majority. It can be considered also as mitigation of risks for both parties – the individual has certain financial and social security stability, as losing one customer would not heavily impact the individual’s income and life quality; whereas on the company’s side – expenses can be planned according to business plans and necessity. But not all individuals are today ready to work without strong supervision and assume full liability.

Covid-19 showed that flexibility should be introduced. Moreover a plan on mitigation of risks and business sustainability are not just nice words, it is a must have plan to be updated constantly for the companies to be ready for extraordinary situations. Likewise stability the employees consider they have due to open ended “one master” employment are very volatile, the risks are always out there and nothing should be deemed as for granted.

Nevertheless, pure employment issues are not the only challenges in the Gig economy approach.

Remote and digital employment – the skills for the future

Gig economy idea claims for flexibility and free choice of place to be, which for a traditional society like Latvia is a true challenge. Historically established traditions of frame and control in each aspect are still alive and part of the culture, whereas new generation which was born in years of independence already with their different view is considered as rebels.

Labor Law of Latvia states ten mandatory terms and conditions to be included in each that Employment Agreements:

• name, surname, ID number/ birth date, address of the employee; name, registration number, address of the employer;
• starting date of the employment;
• expected length of the employment (in case the agreement is concluded for certain period of time);
• place of work and/ or in case employee will be required to perform work duties in different places, this must be clearly indicated;
• the position employee is employed for indicating also code of the profession according to Classification of Professions established by the State;
• amount of remuneration agreed and date of payment thereof;
• contracted work time per day or per week;
• length of the annual paid leave;
• notice periods of the Employment Agreement;
• indication to Collective Agreement and internal procedures and policies of the company applicable to the said employment.

These mandatory aspects must be included in the agreement irrespective of whether they are statutorily fixed or can be changed upon agreement of the parties. Moreover, in case further changes in these terms shall be required the employer is obliged to inform the employee on that with one month prior written notice. Whereas coming into effect of the amendments to the agreement shall be absolutely subject to agreement between the parties or it triggers rights for the employer to unilaterally terminate employment (based though on staff reduction argument). Thus clear statement of where the work place is forms one of the key elements of the employment and changing it is rather inflexible.

But it must be also taken into account that historically the concept of a fixed work place is connected to certain additional and consequential aspects. Namely, performance of work in the work place indicated in the Employment Agreement is solely subject to payment of salary and if applicable – compensation for overtime, as a general rule – not less than in amount of 100% of the hourly or daily salary rate set. Whereas work outside the work place established by the Employment Agreement may be deemed one of two business trip types and statutory rule is to provide additional protection to employees when they have to perform their work outside used place, especially if this is away from home:

• Business trip A (komandējums) – a trip for a certain period of time based on order of the employer, to another location either inland or abroad to perform work duties or to promote qualification. This business trip is subject to compensation by the employer of daily allowance at least in the statutorily established amount, transportation and luggage expenses, expenses for accommodation, parking expenses, insurance expenses, participations fees at the events and alike;
• Business trip B (darba brauciens) – work of the employee, if it takes place while travelling in accordance with the concluded Employment Agreement/ job description, inland or abroad, if the work involves regular/ systematic trips and change of location. This business trip is subject to compensation by the employer of slightly less expenses than in case of the business trip A – transportation expenses, expenses for accommodation, parking expenses, insurance expenses, expenses for transportation of luggage and few more.

At the end of the day it is significant for the employer to precisely establish whether this is employment at another place as provides Employment Agreement or one of the business trips, accordingly precisely detecting which business trip type is applied as on this depends the overall amount of expenses to be compensated for the employee. And even more, certain aspects as for instance whether the employee can return to the residence place at the end of the day can decrease the amount of compensation to be paid. Accordingly applying of a fixed place of work may be financial wise more advantageous for the employer than flexibility of location for the employee.

Another challenge of the work outside the office premises is compliance with work and health safety rules. When the work is performed in office premises of the employer it is mandatory obligation of the employer to ensure safe and healthy work conditions for its employees that including air conditions, work place suitable to spend hours in performing duties, safe and suitable tools for work and alike. Likewise the employer is in charge of running trainings for employees in this respect.

Before extraordinary Covid–19 circumstances remote work was present in Latvia; however it was merely optional and applied in exceptional cases. Each case requiring ongoing remote work was true stress to employers, because the only way how to mitigate responsibility of the employer in respect to work safety was to conclude an additional agreement, with the employee probably stating that it has been initiative of the employee to work remotely and employer has agreed to that, thus the liability in respect to the work safety (and health) condition being transferred fully to the employee.

Co-working spaces as a first change in culture had shaken not only the traditional approach of what a work place should be, but also the statutory frame. Due to various forms of employment becoming more and more relevant, including remote work, when the employee works at home or elsewhere outside the company, necessity for adaption of the work safety regulation to current trends became inevitable.
As a result in October 2019 amendments to the Labour Protection Law were adopted.
The new regulation coming into effect on July 1, 2020 finally declares what is a remote work, excluding therefrom work which is related to regular travelling. The new rules also establish obligation for the remote work performer to cooperate and exchange information with the employer in evaluation of work safety risks in the environment the employee is going to perform the work, if such circumstances can endanger or impact safety and health of the employee. The support in evaluation of the work safety must be provided by the employer irrespective of number of locations the employee would decide to perform the work at. And the employer will be responsible for the recordkeeping in respect to such work place evaluations. Nevertheless the part of law in respect to liability has not changed overall – the employer remains responsible for work and health safety at work of the persons employed/ contracted.

It can be already today predicted that practicalities of the newly established approach will cause a lot of tricky and disputable situations. In a culture where employees are not keen to take responsibility, the new regulation will trigger employee claims to finance and ensure working conditions per individual choice and ambitions unless the employers will develop precise internal policies and procedures on conditions and equipment company deems sufficient and appropriate for the particular position in which the employee is employed.

Hence the statutory regulation obviously needs more of development and tests in deployment before Gig economy approach can be deemed as fitting the culture and expectations of the society and aligning the statutory rules.

For performance of the work duties especially information and communications technologies (ICT) are required

And finally – under the Gig economy performance of work remotely would not be possible without proper gadgets – PCs, smartphones, tablets etc.

When it comes to extraordinary circumstances like Covid-19 our very well digitalized society appears to be well skilled mainly in using digital social media, but as far as it concerns doing work, not yet so sophisticated. Lockdown discovered that a lot of inhabitants of Latvia have very poor ICT with limited functionality, low security level and even outdated. When using such equipment for performance of work duties the productivity is under question, cooperation of employees limps, reaching results takes longer time. But even more – data (especially confidential information) of the employer is endangered when poor ICT solutions are used.

If we take a look at digitalization of Latvia, although not much internationally advertised, it is at a high level.
Already today Latvian society has access to:

• Latvia has one of the fastest internet connections in the world;
• registration of corporate changes with the Company Register by submitting electronically signed documents (www.ur.gov.lv; www.latvija.lv);
• complying with tax reporting requirements via electronic tool of the State Revenue Service, providing all communication with the tax authority also electronically (eds.vid.gov.lv);
• signing majority of documents (public and private) electronically with secure digital signature and a time stamp (granted based on and connected with ID and passport of an individual) issued by LVRTC – one of the leading electronic communication service providers in Latvia (www.eparaksts.lv). This signature is recognized and can be combined with similar electronic signatures of other countries, e.g. Lithuania and Estonia. Even more – since some time mobile version of the secure electronic signature (and time stamp) is available, which means that any documents can be signed also in a smart phone;
• notaries of Latvia perform their duties and execute documents electronically with secure digital signature and a time stamp;
• State and majority of municipal authorities are welcoming electronic communication;

and many more electronic solutions.

Irrespective of that the mindset of “paper prevails over other solutions” is still there in society. Attack of Covid-19 literally pushed the society towards digitalization in mindset too and actually understanding that tools and solutions required for remote business handing and employment are already there, now we only need to understand what would be the procedures to correctly implement those in real time and every day, because:

• the old processes employees and employers are used to, do not work anymore;
• both parties – employees and employers lack clarity on how to manage work with no stress or at least at proportionate stress level;
• the remote work requires new skills not only for employees but also for management. How about control over employee work, what are the ways to manage it if all the team is not in one room;
• no matter how digitally developed is the country each individual is though on different level of development in this respect, and this becomes true challenge when it comes to day-to-day remote work and cooperation;
• and last but not least – the employers have invested in tools and equipment within on prems concept, whereas remote work needs different type of investment, more developed tools and IT security guarantees.

This means that each company needs an actual transformation plan irrespective of the business it operates in. The digitalization is inevitable, it is a rational optimization of resources used, development of new skills and taking each employee on a whole new level of professional performance – individually and team wise. For companies digitalization increases competitiveness and readiness to unexpected circumstances and sustainability of business operation.

So summarizing all the aspects analyzed during this article, Covid-19 has made people think not only, what is actual value of the employment and how one can concurrently protect employees and its business, but also how much of processes we can transform in an e-approach immediately and where we still need know-how and investment.
Transforming into a Gig economy requires much more than overnight meditation with one thought – this shall pass. It is a new way of living.

On March 31, 2020 the details of emergency measures where shared in a press conference and the scheme was published simultaneously. This memo sets out the main lines of the NOW scheme.

Loss of turnover

Under the NOW scheme, employers can apply for an allowance for labour costs if they expect a loss of turnover of at least 20%. The loss of turnover of at least 20% must occur over a three-month period starting on the first day of the months March, April or May 2020. It must always relate to a consecutive period of three months.

The turnover is compared with 25% of the turnover from January to December 2019.

The loss of turnover is determined at group level. If a group as a whole has a loss of turnover of less than 20%, no compensation will be paid to any individual parts of that group that are still inactive. Net turnover is taken as the net turnover, i.e. the income from the supply of goods and services from the business of the legal entity less discounts and the like and tax levied on the turnover.

Wages and salaries

The employer must pay the wages to the employees in full, but can apply to the UWV (social security insurer for employees) for an allowance for labour costs. On the other hand, the employee must also be fully available to perform work.

The NOW scheme also covers employees with employees with a flexible contract insofar as they continue to be employed and receive wages from the employer during the subsidy period. The wage bill of all employees with a social security wage (virtually all) are eligible for the subsidy. These are, for example, employees with a so-called fictitious employment contract for employee insurance, but not voluntarily insured persons.

Wages up to € 9,538 gross per month are considered, the amount surpassing the same is not considered for the subsidy. Additional charges and costs such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also compensated. A lump-sum surcharge for employer charges of 30% applies.

Advance payment

 The advance payment provided under the NOW is, in principle, based on the wage bill for the January 2020 return period. If there are no wage data for January 2020, the UWV will assume November 2019. If there are no data for this period either, no subsidy can be granted.

If the wage bill for the months March-April-May is lower, the amount of the subsidy will be reduced by 90% of the amount by which the wage bill fell. The settlement is an incentive to keep employees employed as much as possible for the hours they worked before the severe drop in turnover.

Calculation

The amount of the allowance for wage costs depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. For example: If 100% of the turnover is lost, the allowance amounts to 90% of the wage and salary bill of the employer and if 50% of the turnover is lost, the allowance amounts to 45% of the wage and salary bill of the employer.

Extension of the arrangement

It was previously announced that the period of the allowance, which is 3 months, may be extended once for a further period of 3 months. The Cabinet now announces that this extension has not yet been decided; it will be decided before 1 June 2020, so that any second tranche will be in line with the first application period ending on 31 May 2020. In case of extension, further conditions may be added to the scheme.

Prohibition of dismissal

When applying on the grounds of the NOW, the employer undertakes in advance not to apply for dismissal on the grounds of business economics for his employees during the period for which the allowance is received. The employer is therefore expected not to apply to the UWV for permission to terminate an employment contract on the grounds of business economics in the period from 18 March to 31 May 2020 inclusive. The prohibition on dismissal does not apply to dismissal applications submitted to the UWV in the period from 1 March to 17 March 2020.

If a request for dismissal is nevertheless made and this request is not withdrawn (or not withdrawn on time), a correction will be made when the subsidy is determined. When the subsidy is determined, the wages of the employees for whom dismissal has been requested will be determined. This wage is then increased by 50%. This wage plus the 50% increase is deducted from the total wage sum on which the final amount of the subsidy is based.

Submitting the request

The UWV will be charged with processing the application. The applications are expected to be submitted on 6 April next. The first advance payments will be made within 2 to 4 weeks. This advance payment will in any case amount to 80% of the grant.

With the new Labour Law (Law No. 14/2025), the Egyptian legislature has enacted provisions that affect, among other things, the termination of employment relationships. With this reform, the Egyptian government aims to strengthen the enforceability of employee rights. To this end, it is relying on more precise legal definitions, new formal requirements, institutionalized termination of employment relationships, and more accessible legal protection. These new regulations are explained in more detail below.

Distinction between fixed-term and permanent employment relationships

The New Labour Law continues to distinguish between fixed-term and permanent employment relationships. An employment relationship is considered permanent if

• no written contract has been concluded,
• neither the term nor the end date is specified in the written contract, or
• the employee continues to work one day after the contractually agreed end date without a new (written and fixed term) contract being concluded.

A fixed-term employment relationship exists if the written employment contract contains a specific end date.

New: Foreign employees can now also be hired permanently – previously, they could only be hired on a fixed-term basis.

New formal requirements for written employment contracts

In the future, employers must draw up four original copies of each employment contract, sign them, and distribute them as follows:

• to the employee,
• to the social security institution,
• to the responsible employment office, and
• one copy that remains with the employer.

Contracts may be drafted in two languages; however, only the Arabic version is legally binding and authoritative in the event of disputes over interpretation.

Termination of employment (dismissal)

Fixed-term contracts

• The employment relationship generally ends upon expiry of the agreed term.
• Employees may now terminate their employment after five years of service with three months’ notice without having to give reasons or pay compensation.
• Employers may continue to terminate employment without notice for good cause (Art. 148). However, if the employer terminates the contract prematurely without just cause, they owe

o    a severance payment of one month’s salary per year of employment, as well as

o    compensation for the remaining term of the contract.

This provision protects employees with multiple fixed-term contracts and creates incentives not to terminate contracts lightly.

Permanent contracts

Ordinary termination: Notice period now three months (instead of two previously) if the employee has been with the company for less than ten years.

Termination without notice is permissible if the employer, among other things

• fails to pay wages,
• physically attacks or threatens the employee, or
• tolerates obviously unsafe working conditions.

In this case, the termination is considered unlawful dismissal by the employer (Art. 168), resulting in all compensation claims.

Formal requirements and right of revocation

The termination must be made in writing and must now also be certified by the responsible employment office.

If the employer does not respond within ten days, the termination is deemed to have been accepted.

Within the same ten-day period, the employee may revoke the termination in writing (also certified by the responsible employment office).

Employer’s right of termination

Dismissals for economic reasons are only permissible if a state committee has reviewed and approved the reasons (restructuring, downsizing, closure).

Severance pay in the event of termination by the employer

Dismissed employees receive:

• 1 month’s salary per year of service for the first five years,
• 1.5 months’ salary per year of service from the sixth year onwards.

If the employee resigns because they would have to work under significantly changed conditions following restructuring, they are entitled to the same compensation.

The New Labour Law promises more effective enforcement of these employee rights, as it provides for the establishment of a specialized labour court. In the future, employees will be able to obtain compensation more quickly before this court.

Rights during the notice period

Employees are entitled to take one day per week (or up to eight hours) off during the notice period to look for new jobs.

If the employer terminates the employment relationship prematurely and waives the employment until the end of the notice period, they must pay the full wage for the remaining period.

If the employee resigns, the employment relationship ends with the actual departure; continued payment of wages does not apply.

Prohibition of discrimination

Terminations are not permitted on the grounds of

• race, gender, marital status, pregnancy, religion, or political opinion,
• trade union membership or activity,
• Exercising the office of employee representative or candidacy for such office,
• filing complaints or lawsuits against the employer.

Conclusion

The New Labour Law No. 14/2025 comes into force on 1 September 2025. It tightens the formal and documentation requirements for dismissals, reduces discretionary leeway, and clearly strengthens employee protection. For multinational companies, the reform also creates a clearer and more predictable legal situation for personnel management, dispute resolution, and staff reductions. Those who adapt their contract templates, HR processes, and budgets now will minimize both legal risks and costs in the future.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).