How to set up a company in Egypt

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Egypt

Which corporate form is recommended for setting up a sole shareholder subsidiary company in Egypt and why?

In 2018, the Egyptian legislature enacted Law No. 4 of 2018, amending the Companies Law No. 159 of 1981 ("Companies Law"). Under this amendment, Egypt adopted for the first time the concept of the one person company with limited liability ("OPC").

Accordingly, any sole foreign investor who desires to invest in Egypt or open a subsidiary may choose to establish an OPC, which has the following advantages:

  • only one owner may establish the OPC without the need for other partners. Either a natural or a juristic person can own an OPC;
  • the OPC will leverage the limited liability privilege similar to the limited liability companies. This means that, with a few exceptions, the liability of the sole owner of the company is limited to the paid-in capital;
  • the decision making within the company is straightforward because the sole owner of the OPC exercises all the powers that are granted to the board of directors and the general assembly in limited liability companies ("LLCs"). His decisions do not need the approval of any other partners nor board members.


That said, the OPC is not allowed to:

  • incorporate another OPC, and
  • conduct some business activities (same as LLCs) such as insurance, banking, savings, receiving funds, and investment management. Thus, due diligence must be conducted regarding the company's activities before its incorporation to determine the appropriate legal form.

What are the requirements for capital and ownership of quotas or shares by foreign companies in Egypt?

One Person Company (OPC)

The minimum capital required for an OPC is EGP 50,000 (EUR 2,666), and the company's capital shall be paid in full upon the company's establishment. The paid-in capital may be withdrawn after incorporation to be used in the company's activities.

Compared to:

Joint Stock Company (JSC)

  • The minimum capital required is EGP 250,000 (EUR 13,333); however, the minimum capital may be higher depending on the company's activity, and the decrees issued regulating such activity.
  • Regarding the JSC whose shares are offered to a public subscription, the required minimum capital is EGP 500.000 (EUR 26,667).


Limited Liability Company (LLC)

No minimum capital is required for LLCs with at least two partners. The quota-holders in the LLC may freely determine the nominal capital.

For all forms of companies

The nominal capital of the companies mentioned above may be held entirely by foreigners or foreign companies without limitation unless otherwise required by law for certain activities, e.g., importation of goods and commercial agencies.

What are the requirements for the corporate governance of the company in Egypt?

OPC

  • The owner of the OPC has all the powers and competencies to run the company, including appointing managers, the auditor, etc.
  • The OPC shall be managed by a manager appointed by the sole owner.
  • The manager does not need to be an Egyptian national.
  • The manager's powers shall be determined by the owner in the bylaws of the company.
  • The manager and his powers could be changed under a resolution issued by the owner.
  • The OPC does not have a general assembly so that the sole owner may resolve all issues without any formalities.


Compared to:

LLC

  • The company's general assembly has all powers and competencies to run the company, including appointing managers, auditors, etc.
  • The LLC may be managed by one or more managers.
  • The company's bylaws shall determine the manager's powers in case of more than one manager.
  • The manager may be changed by way of a general assembly resolution.
  • The general assembly may form a board of directors for the LLC if it has more than one manager.

JSC

  • The company's general assembly has all powers and competencies to run the company, including appointing managers, auditors, etc.
  • The JSC has to have a board of directors composed of three directors at least. Moreover, the board of directors may appoint a managing director to run the company and handle day-to-day issues.
  • An ordinary general assembly meeting may change the board of directors.


For all forms of companies:

  • a security check for foreign partners, shareholders, managers, and directors must be obtained from the competent department at GAFI;
  • an entity may conduct business while the security check is pending. However, and by way of exception, some foreign nationalities require the security check to be issued before starting the incorporation of the legal entity;
  • work and residence permits for the foreign managers and employees must be obtained;
  • there are some restrictions regarding managers' and directors' appointments, as some activities under Egyptian law require the manager to be an Egyptian (such as in trading companies and commercial agencies).

What are the legal requirements a foreign company should comply with when incorporating a subsidiary in Egypt?

To incorporate a company in Egypt, the founder(s) should satisfy the following requirements:

  • issue a power of attorney to the founding person(s) or attorney;
  • deposit the required minimum capital at the bank;
  • nominate a manager for the company;
  • nominate an auditor for the company;
  • nominate a legal counsel for the company;
  • obtain the required approvals on the company's activities, if any;
  • submit the foreign managers' security checks and the company's foreign partners to the competent department at the General Authority for Foreign Investment (GAFI);
  • submit the bylaws of the founding partners or shareholders, if the partner or the shareholder is a legal person;
  • determine the company's activities, which shall be consistent with the parent company's activities.


Note: These listed requirements may be updated from time to time.

What is the process for the incorporation of the subsidiary in Egypt?

  • Preparing the required documents: a bi-lingual power of attorney ("PoA") and a certified copy of the Commercial Register of the juristic person incorporating the OPC, both legalized by the Egyptian Consulate and simple copies of the passports of the manager, if a non-Egyptian, or I.D. card, if Egyptian.
  • Visiting GAFI to review and submit the documents to the competent department.
  • GAFI will confirm the name of the company and issue a Non-Confusion Certificate.
  • The attorney with the PoA shall cooperate with GAFI's officer to draft the company's bylaws to be incorporated. At this stage, the founders' representative shall name the company's managers, auditor, and legal counsel.
  • Open the bank account and transfer the nominal capital.
  • The auditor's certificate and the date validated lease agreement notarized at the notary public office will be issued.
  • The documents will be submitted to the security office in GAFI to obtain the Security Clearance required for the non-Egyptian partner and the non-Egyptian manager.
  • Finally, the founders' representative shall receive the company's bylaws, the commercial registry, and the tax card.
  • The time frame for the incorporation at GAFI can take 2 to 10 days. However, the preparation and legalization of the required documents and the Bank Certificate's issuance may take up to 3 months.

What are the usual challenges for foreign companies setting up a subsidiary in Egypt?

  • The banks will require the juristic person incorporating the OPC to prove who is/are its ultimate beneficiary owner(s) ("UBO") to open the bank account. For that, the sole owner has to deliver certified copies of the C.R.s or the Articles of Association (AoA), latter if the C.R. does not provide the names of the UBOs, legalized by the Egyptian Consulate.
  • All foreign investments and foreign investors are subject to a mandatory security clearance during the company's incorporation period in Egypt. (More information hereto in our article on foreign direct investments.).
  • Some business activities, such as importing and commercial agencies, are limited to companies whose capital should be owned by an Egyptian majority.
  • To invest in some regions in Egypt, such as Sinai, the foreign investor must seek special approvals from the competent authorities. Furthermore, it is not allowed for foreigners to own real estate in such regions.
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