Venture Capital 2025 Comparisons

Over the past 12 months, Egypt’s venture capital (VC) landscape has continued to show resilience and adaptability, even amid global investment slowdowns and local economic challenges. One of the defining features of the current market structure is that acquisitions and capital injections often take place at the level of offshore Special Purpose Vehicles (SPVs), which are set up by the founders of Egyptian operating companies. This particular structure reflects the preference among investors for familiar legal frameworks and currency flexibility.

Additionally, while the traditional classification of funding rounds (Series A, B and beyond) remains part of the local investment language, their conventional definitions – widely recognised in more mature VC ecosystems – have become less indicative in the Egyptian market. This shift is primarily attributed to modifications in local investment practices, influenced significantly by recent currency devaluations. Consequently, these traditional classifications may not accurately represent a company’s actual stage of development or funding structure as they typically do in more developed VC environments.

Nevertheless, the market has seen substantial VC activity, particularly in more mature and growth-stage companies. These transactions demonstrate sustained interest from investors in Egypt’s innovation-driven sectors and highlight the potential of Egyptian startups to scale regionally and attract strategic capital.

In the past year, notable VC transactions in Egypt have included the following.

• In May 2025, Nawy, an Egyptian proptech startup, raised USD52 million in a Series A equity funding round led by Partech Africa, with participation from other investors. Nawy also secured USD23 million in debt financing from Egyptian banks and financial institutions.
• Also in May, MoneyFellows, an Egyptian fintech startup, raised USD13 million in a pre-Series C round led by Al Mada Ventures and DPI Venture Capital via the Nclude Fund, with the participation of other investors.

• USD16 million secured by Khazna in a pre-Series B funding round in February 2025. The round attracted investments from both new and existing backers, including global firms such as Quona and Speedinvest, as well as regional investors such as Aljazira Capital, anb Seed Fund, DisrupTech Ventures, ICU Ventures, Khwarizmi Ventures, and SANAD Fund for MSME.
• Also in February, UAE-based tech giant Dubizzle Group successfully acquired Hatla2ee, one of Egypt’s leading online car marketplaces for an undisclosed amount.

• In July 2024, a substantial funding round for fintech leader MNT-Halan successfully raised around USD157 million from International Finance Corporation (IFC), DPI (Development Partners International), Lorax Capital Partners, and funds managed by Apis Partners LLP, Lunate and GB Corp.
• In April 2024, Cairo-based fintech startup Bokra raised USD4.6 million in a pre-seed funding round led by DisrupTech Ventures and SS Capital, among other investors.
• In January 2024, Health-tech startup Yodawy secured USD10 million from Ezdehar’s Mid-Cap Fund II.
• In her speech at the Egypt’s Venture Investment Summit 2025, Minister of Planning, Economic Development and International Cooperation H.E. Dr Rania El Mashat stated that startups in Egypt have raised approximately USD2 billion in VC funding over the last five years. She also indicated that Egypt ranks third in Africa and the Middle East in terms of VC funding and deal execution.

Egypt has seen relatively larger transaction sizes concentrated among more mature companies in recent years. As stated in 1.1 VC Market, a key structural trend is the increasing use of offshore SPVs to facilitate 100% ownership of operating companies in Egypt – motivated by investor familiarity with international legal standards and ease of repatriation. This has prompted government initiatives such as the Ministerial Group for Entrepreneurship, established by Decree No 2878 of 2024 issued by the Prime Minister. The group is led by H.E. Dr Rania El Mashat, Minister of Planning, Economic Development and International Cooperation, to encourage direct investment structures within Egypt. Investors now prefer later-stage companies with proven financial health and clear paths to profitability.

In general, key changes in investment terms include:

• reduced valuations, leading to more “down-rounds”;
• increased investor protections, such as liquidation preference and anti-dilution rights; and
• more frequent use of milestone-based financing structures.

In addition to the above, due diligence exercises have become increasingly meticulous, in particular in the fintech sector. Given the detailed laws and regulations surrounding technology requirements for fintech, investors are now conducting more comprehensive due diligence, including technical due diligence to ensure compliance and mitigate risks. This shift is also driven by recent challenging transactions, prompting a move away from high-level due diligence to more thorough assessments. 

Fintech remains Egypt’s leading sector for VC activity, drawing substantial funding due to its high growth potential. Health-tech, logistics, edtech and agriculture technology have also attracted increased investor interest. Biotech, in particular, is gaining traction as a strategic sector with high acquisition potential once products are market ready. In the current macroeconomic environment, startups that generate foreign currency revenues have become particularly appealing.

In addition to the above, globally, appetite for marketplace acquisitions has shown signs of moderating. Despite this, Egypt’s VC landscape has seen noteworthy activity in the marketplace segment, with two acquisitions standing out.

In February 2025, UAE-based Dubizzle Group acquired Hatla2ee, Egypt’s leading online automotive marketplace. Similarly, in late 2021, South Africa’s SweepSouth acquired FilKhedma, a home services marketplace operating across major Egyptian cities. While two transactions alone may not necessarily establish a definitive trend, their significance in Egypt’s VC landscape cannot be overlooked.

In terms of exit dynamics, based on general observation of the market, sectors such as logistics and fintech (e-payments) tend to offer clearer acquisition pathways and have seen more exits, while edtech, fintech (BNPL) and biotech continue to attract new funding rounds, reflecting long-term growth expectations – even if exit timelines may extend further into the future. While this perspective reflects practical market experience, more detailed research by financial analysts and sector-focused institutions could offer a deeper understanding of underlying trends and investment patterns.

VC Activities Legal Forms

VC activities in Egypt have been regulated under Capital Market Law No 95 since 1992. Based on this law, companies conducting VC activities are classified as Companies Operating in the Field of Securities (COSF) and fall under the category of Non-Banking Financial Services (NBFS), supervised by the Financial Regulatory Authority (FRA). They must be established as Joint Stock Companies (JSCs) or Companies Limited by Shares (CLSs).

The law defines VC activities as providing financing, technical assistance, or participating in high-risk or underfunded projects, typically aiming to transform these projects into JSCs or CLSs. Companies wishing to conduct VC activities must obtain a licence from the FRA and be registered in the official VC Companies Register.

Over time, Egypt has introduced new structures to align with international fund models. In 2007, the closed-ended direct investment fund structure known as the Private Ownership Fund (POF) was introduced. This fund invests in listed and unlisted securities and can carry out VC activities. Despite being available for over a decade, to the best of our knowledge, only two such funds, Sawari Ventures Fund and Catalyst Fund, have been set up by the private sector.

In response to repeated demand among industry players for globally familiar structures, Ministerial Decree No. 113 of 2018, as amended (Decree 2018), authorised the use of CLSs for conducting private equity – and potentially VC – activities. The model resembles the international GP/LP structure, where the general partner (the GP) manages the fund and limited partners (the LPs) provide capital. While JSCs were added as an eligible legal form in 2022, no JSC has been licensed yet under this regime. To date, only a couple of GP/LPs – such as Avanz Capital – have received licences.

In addition to the above-mentioned formal venture capital structures regulated under the Capital Market Law, industry players may conduct VC activities through holding companies or ordinary companies established under Companies Law No 159 of 1981, as amended (the Companies Law). From a legal standpoint, there are no restrictions preventing these entities from investing in other companies.

Holding companies are defined by the Capital Market Law as: “companies (i) carrying out the activity of establishing or participating in companies undertaking NBFS activities; or (ii) have more than half of their investment portfolio consists of NBFS companies”. As such, they are regulated by the Capital Market Law, its Executive Regulation and the regulations issued by the FRA in this regard.

Ordinary companies incorporated under the Companies Law can invest in companies and, at the same time, remain outside the umbrella of the Capital Market Law as long as they do not fall within the definition of holding companies.

Consequently, there is no effective mechanism to quantify the number of entities undertaking VC activities on a de facto basis.

Decision-Making Process

In foreign jurisdictions, VC fund governance typically centres around the GP, entrusted with broad authority to manage the fund in accordance with pre-agreed policies laid out in the limited partnership agreement. In return, the GP bears unlimited liability – although this can be mitigated contractually – for the fund’s management.

Such straightforward delegation of authority has only been possible within Egypt’s regulatory framework since recent reforms. Before Decree 2018 allowing CLSs to carry out VC activities, it was not legally possible to replicate the traditional GP model. Since most Egyptian VC structures were created as JSCs, decision-making powers were distributed across corporate bodies such as the Board of the Directors and the General Assembly of Shareholders.

To address this, in practice, VC companies could enter into tailored management agreements granting broader powers to an appointed manager – often mirroring the role of a GP – subject to appropriate corporate authorisations. While this workaround provides some flexibility, it does not reflect the structures commonly encountered by foreign investors in other jurisdictions with more mature VC fund regulations.   

The corporate governance structure of a POF, or Private Ownership Fund, further illustrates the divergence from international VC models. A POF is governed by four main bodies: (i) the Board of Directors; (ii) the General Assembly of Founders; (iii) the Certificate Holders’ Assembly; and (iv) the fund’s Investment Manager. Each body has distinct powers, the rationale behind this being to contribute to a carefully balanced system of checks and responsibilities.

Documentation

In terms of documentation, POFs can only raise funds through an information memorandum (IM) to be approved by the FRA, a template of which is published by the latter. POFs are governed by their Articles of Association (AOA) and the IM, which must be updated annually. GP/LP structures as allowed under Decree 2018 also have a much simpler IM to be shared with the investors and the FRA (the template of which is annexed to Decree 2018), and, together with other VC structures, typically use AOA, Subscription Agreements (SSAs), Shareholders’ Agreements (SHAs), and management agreements. The GP/LP’s IM will determine the percentage and fields of the company’s investments, the maximum limit of investment in a single company, the circumstances in which it is permissible to acquire majority stakes in one company, and the extent to which it is permissible to exceed the percentage of investment in one company at the beginning of the investment.

VC structures in Egypt benefit from tax treatment that avoids double taxation, meaning that investment income is taxed only once, and not at the fund level and again at the level of the LPs. This approach is consistent with international best practices, and is considered a positive feature of the Egyptian regulatory framework.

Fund-manager compensation also aligns with international market norms, where managers typically earn an annual management fee (commonly 2% of committed capital) and carried interest (usually 20% of fund profits after capital has been returned and a hurdle rate met). A deal-by-deal distribution model tends to be preferred, usually coupled with contractual clawback arrangements.

That said, certain elements of the existing framework diverge from global fund structuring standards, and could have an impact on fund economics:

• capital contribution mechanics: these do not currently mirror the international model of flexible capital calls, which may create practical challenges for fund managers who need to align capital inflows with the timing of investment opportunities; and
• the profit distribution framework: the current regulatory framework does not incorporate the internationally recognised waterfall distribution model, nor does it provide for distribution in specie (ie, in-kind distribution of assets), which can be an important tool in maximising exit flexibility and investor returns.

As a result of these structural differences, GPs may be required to adopt contractual workarounds to deliver outcomes that align with the expectations of international LPs. While these arrangements can be effective in practice, they may create hesitation among some foreign investors who are more comfortable with familiar structures.

See 2.1 Fund Structure. There are several options for carrying out VC activities, each with their own advantages and disadvantages, depending on manager and investor objectives and preferences. However, other than ordinary companies which, de facto, practice VC activities as explained in 2.1 Fund Structure, all of these structures are regulated by the FRA. They must comply with regulations related to minimum capital requirements, governance, transparency and reporting, among others. Furthermore, all of them involve investors, which must meet certain criteria to be considered as Qualified Investors, as defined by the FRA, and who are by law required to form part of the shareholding structure of such companies. 

Fund managers, who are responsible for managing the fund’s assets and operations, must also obtain a licence from the FRA and comply with its rules and regulations.

As is the case with investments in portfolio companies through offshore structures, most VC funds are established offshore in jurisdictions familiar to international investors, requiring parallel funds in Egypt for local LPs, notably state-owned banks and publicly owned insurance companies. Recently, a draft law approved by the Senate aims to introduce limited partnerships similar to UK structures, pending parliamentary approval.

That said, it is important to highlight that the VC environment in Egypt is shaped by a growing number of institutional and governmental initiatives aimed at supporting early-stage and SME (small and medium-sized company) investments. Notable efforts include the following.

• Avanz Capital, a fund-of-funds model that channels capital from domestic financial institutions into VC funds. The establishment of Avanz came in response to the need to expand the financing base to SMEs. The Central Bank of Egypt (CBE) urged banks to invest in: (i) direct investment funds; and (ii) funds of funds, which in turn both invest in SMEs, and to consider their contributions/investments in the share capital of such funds as part of a requirement for banks to allocate allocate 25% of their portfolio of facilities exclusively to SMEs, whether as an “Angel Investment”, “Venture Capital or as “Growth Funding”.
• Egypt Ventures, a government-backed fund investing directly in startups.
• The Micro, Small and Medium Enterprise Development Agency (MSMEDA), which collaborates with the World Bank to provide funding and capacity-building to entrepreneurs.
• The initiatives of the Technology Innovation and Entrepreneurship Center (TIEC), which stands out for its incubation programmes, broad geographic reach, and support in product development.

Additionally, as explained in more detail in 4.1 Subsidy Programmes, the government has significantly supported private accelerators such Plug and Play and 500 Global through premises provided by the Ministry of Communications, partial funding by the Information Technology Industry Development Agency (ITIDA), and cooperation from entities such as Ahly Bank.

Furthermore, the SME Law issued in mid-2020 came with very promising provisions which, to the best of our knowledge, have not caught the VC ecosystem’s attention. These provisions, if properly implemented, could have a very positive impact on the VC industry. The SME Law proposes monetary incentives to investment funds and companies established with the purpose of financing SMEs. This incentive will apply at the time of exit. The incentive programme is yet to be finalised by the Board of Directors of the SME Development Authority.

The FRA also launched its first regulatory sandbox in November 2024 to support financial innovation.

Due diligence practices in Egypt have matured significantly. In the past, investors often relied on high-level reviews. However, following several challenging investments, there is now a greater focus on detailed assessments, in particular in connection with intellectual property (IP) rights, ownership structures and regulatory licensing. This shift is contributing to more informed investment decisions and improved risk management. Consequently, due diligence over startups in Egypt currently requires meticulous planning, coordination and communication among all parties involved, alongside the engagement of qualified and experienced advisors, such as lawyers, accountants, and technical experts.

Furthermore, due to increased regulation in sectors such as fintech, which have stringent technology-related requirements, certain sectors, including e-payments and NBFS, require prior regulatory approval (from the CBE in the event of e-payment or the FRA for NBFS) before due diligence can proceed, affecting overall timelines.

Additionally, the Egyptian Competition Authority has recently issued guidelines governing the exchange of information between competitors during the due diligence process, particularly in the context of transactions that may result in economic concentration.

Engagement of Counsels

In investment rounds, it is customary for both the investor and the company to engage separate legal counsel. Where multiple investors are involved, each may also choose to retain its own advisor rather than appointing a single representative. While Egypt has a well-established community of experienced practitioners in private equity, the market for VC remains relatively nascent in terms of the number of professionals with deep, specialised VC expertise (whether legal, financial or technical). This evolving landscape may, at times, influence the pace and execution of financing rounds, particularly in the absence of dedicated, locally adapted VC templates such as those developed by the National Venture Capital Association (NVCA) and the British Venture Capital Association (BVCA).

Expected Timeline

The duration of financing rounds in Egypt can vary widely depending on the maturity of the company, deal complexity, and number of stakeholders involved. VC transactions no longer take a few months to be concluded. Currently, VC transactions – particularly those involving international investors and multiple legal layers – may extend to twelve to fifteen months. This extended timeline, driven primarily by rigorous due diligence requirements and negotiations and execution of agreements overriding any existing contractual arrangements concluded between the founders, among themselves, or with early investors, has resulted in more frequent use of tranche-based funding structures.

Facilitation of New Investor Entry

When investments are structured directly at the level of Egyptian companies, it is common for savvy founders to anticipate future funding rounds during their initial negotiations with early investors. At this stage, they often seek to include clauses in the original agreements that facilitate the entry of future investors – such as provisions requiring existing shareholders to waive their pre-emption rights in capital increases dedicated to onboarding new investors (subject to certain contractually agreed criteria). This approach ensures that future investors can acquire their desired stake in the company without being constrained by proportionate participation rights.

In light of prevailing offshore acquisition trends, many investment structures tend to reflect international standards. Domestically, however, share classes and preferences are governed by the Companies Law, which provides an exhaustive list of permissible preferences – namely, voting rights, dividend entitlements and liquidation proceeds. The law further prohibits combining voting and liquidation preferences, and mandates equal treatment of shares within the same class in terms of rights, obligations, and limitations.

While the law does not impose a specific cap on the extent of preferential rights an investor may enjoy, it has been observed that requests for preferences exceeding twice the rights of ordinary shares may meet with some resistance at implementation level.

Also, Egyptian limited liability companies (LLCs) cannot issue preferential shares, which may prove impractical for portfolio companies if they are established as such.

In offshore jurisdictions, early-stage financing rounds are frequently structured using convertible instruments such as SAFEs (Simple Agreements for Future Equity) or convertible notes – tools that offer flexibility and efficiency for both investors and founders. In contrast, Egyptian onshore transactions remain anchored in conventional legal documentation, including SHAs, SSAs, and disclosure letters. This divergence is largely due to the limited enforceability of non-traditional instruments under Egyptian law, which necessitates careful reliance on well-drafted, formal agreements.

In response to repeated calls from industry players for more flexible investment tools, a recent decree marks a promising development in Egypt’s legal framework. It now permits the registration of convertible instruments with the Misr Central Clearing, Depository and Registry (MCDR) and allows for an exception to the general prohibition on executing cashless transactions at the time of debt-to-equity conversion. While this is a welcome step toward aligning local practice with international norms, the underlying legal mechanism required to operationalise such conversions is yet to be put in place, leaving some uncertainty around implementation.

At present, Egypt lacks a centralised body responsible for developing standardised VC documentation, similar to the role played by the BVCA in the UK or NVCA in the US. While there was an early attempt by Cairo Angels – an angel investment network that has since ceased operations – to lead an initiative for market-standard documents, the fruits of these efforts remain incomplete, and the initiative has yet to gain traction in the wider VC ecosystem.

Looking forward, there is cautious optimism that this gap may soon being addressed. The Memorandum of Understanding signed in 2025 between MSMEDA and the Egyptian Private Equity and Venture Capital Association (EPEVCA) could potentially serve as a vehicle to revive and support institutional efforts to establish locally adapted, standardised VC documentation – an essential step toward a more coherent and investor-friendly ecosystem. While no formal commitments have been made, it is hoped that this collaboration might help catalyse progress in this direction.

Since many acquisitions are made offshore, they generally follow established offshore market practices and standards. VC investors commonly secure liquidation preferences, anti-dilution and pre-emptive rights. Please see 3.7 Contractual Protection for more details.

Typically, since investments in Egyptian startups involve offshore SPVs – commonly located in jurisdictions such as the Netherlands and, more recently, Singapore – the governance standards of these jurisdictions apply, supplemented by robust oversight mechanisms directed from the offshore parent entity to the Egyptian subsidiaries with clear contractual protections rights for the investors.

If the investment is directly at the level of Egyptian-incorporated entities, governance practices will depend on the company’s legal form. LLCs, preferred by startups for their simplicity – so long as no sector-specific law applies requiring a vehicle other than an LLC – lack boards of directors; instead, governance is managed through a manager(s) which is/are normally from among the founders, a set of reserved matters and Key Performance Indicators (KPIs) established for the appointed managers. JSCs include formal board representation requirements along with reserved matters. Although effective structures for passive investors, CLSs remain under-utilised despite their longstanding legal availability.

If the transaction is structured through an offshore SPV, standard contractual protections rights as adopted offshore will typically be followed. If the transaction is structured directly through an Egyptian entity, a similar comprehensive set of contractual protections will usually be negotiated, although it should be noted that, under Egyptian law, the remedy for breach is generally limited to damages, and there is no specific performance remedy within the same meaning as that which exists offshore. This limitation is particularly relevant for exit-related provisions such as tag-along and drag-along rights and call/put options.

Standard documentation mainly includes the following:

• Investor’s management rights, such as a list of reserved matters which require investor consent and typically cover: (i) issuance of new securities or changes in share capital (to protect against dilution); (ii) creation of encumbrances or third-party rights over company assets; (iii) approval of the annual budget and business plan; (iv) incurrence of debt over a certain threshold; (v) changes in the company’s business; and (vi) amendment to management or board structure, among others.
• Exit provisions such as: (i) lock-up provisions on founders and other anchor investors; (ii) tag-along and drag-along rights; (iii) restrictions on changes of control; (iv) limitations on transfer to competitors; and (v) call or put options as deadlock resolution mechanisms or for if certain KPIs are not met by the founders.
• Non-compete provisions, which may be considered more aggressive than what is typically seen offshore, reflecting investor concerns about founder re-entry into the market.
• Standard representations and warranties, covering both core (eg, authority, ownership) and business-specific (eg, compliance, IP, financials) matters.
• Investors’ information, inspection and reporting rights.
• KPIs for the company’s managers, which are either included in the SHA or documented separately.

In Egypt, there is a strong preference to reflect SHA terms – particularly governance-related terms – in the company’s AOA to the extent legally possible. Alternatively, parties may agree to ratify the SHA through necessary corporate procedures and treat it as a part of the AOA.

Government support includes both financial and regulatory incentives. Under the SME Law, tax incentives are available to funds that invest in qualifying SMEs.

The government actively supports the VC ecosystem through a number of initiatives. These efforts, aimed at improving access to capital, streamlining regulatory approvals, and modernising the legal framework to make Egypt a more attractive destination for early-stage investment, include the following.

• ITIDA initiatives – in collaboration with global accelerators, venture capital firms and local stakeholders, ITIDA plays a pivotal role in equipping Egyptian startups with the tools, mentorship and resources necessary to thrive in competitive markets.

1. Scale Up Program launched in partnership with 500 Global: now approaching its third season, this seven-week programme is scheduled from 1 May to 10 July 2025, and targets Egyptian startups at the Pre-Series A and Series A stages. Participants benefit from tailored mentorship, proven growth frameworks and access to 500 Global’s extensive investor network. Additionally, they receive a year of complimentary office space at the Creativa Innovation Hub in Giza, fostering collaboration and innovation. This partnership underscores ITIDA’s commitment to empowering entrepreneurs and positioning Egypt as a hub for scalable, tech-driven businesses.
2. Plug and Play Cairo Program: similarly, ITIDA has joined forces with Plug and Play, one of the world’s largest innovation platforms. This programme offers startups practical workshops, expert mentorship, and access to regional and international investment opportunities. Participants are also provided with office space at the Creativa Innovation Hub in Heliopolis. These efforts aim to accelerate the growth of Egyptian startups while connecting them to global markets.
• MSMEDA and EPEAVC collaboration – in addition to the above, in February 2025, MSMEDA and the Egyptian Private Equity and Venture Capital Association (EPEAVC) signed a Memorandum of Understanding to bolster Egypt’s entrepreneurial ecosystem. This collaboration focuses on launching specialised support and training programmes aimed at enhancing the capabilities of investors and investment managers in direct investment and venture capital.
• MSMEDA and World Bank collaboration – partnerships with MSMEDA and the World Bank offer additional capacity-building and funding support for high-potential ventures.
• Ministerial Group for Entrepreneurship – most importantly, keen to ameliorate the VC ecosystem, the Ministerial Group for Entrepreneurship is currently working on a Startup Charter. The objective of this policy framework is to offer clarity for both founders and investors, outlining key incentives, regulatory processes and protections. It plays a vital role in lowering entry barriers and improving transparency.

As stated in 2.2 Fund Economics, at the level of VC funds or companies, unlike private equity activities, VC structures in Egypt benefit from tax treatment that avoids double taxation, meaning that investment income is taxed only once and not at the fund level and again at the level of the LPs. This approach is consistent with international best practices, and is considered a positive feature of the Egyptian regulatory framework.

For portfolio companies, a progressive tax rate is applicable to small projects. In accordance with Law No 6 of 2025, projects with turnover of less than EGP20 million, as detailed in the law, benefit from reduced corporate tax rates ranging from 0.4% to 1.5%, based on turnover level. For example, enterprises with annual revenues of between EGP500,000 and EGP2 million are taxed at 0.5%.

See 4.1 Subsidy Programmes.

Incentive schemes for employees in Egyptian startups largely depend on the corporate structure of the start-up. Where employees work for an offshore holding entity that owns the Egyptian operating company, global standards on equity-based incentives – such as stock options, restricted stock units or phantom shares – can be implemented in line with the legal and tax regimes of jurisdictions such as the Netherlands or Singapore. In these cases, it is common to see structured vesting schedules (eg, four-year vesting with a one-year cliff) and employee participation in long-term incentive plans designed to align interests with the growth of the company.

However, when employees are directly employed by an Egyptian operating company, the applicable local legal framework must be considered. Under Egyptian law, only companies legally structured to issue shares are permitted to issue equity-based incentives in the form of stock options to employees. In contrast, LLCs are not legally structured to issue equity to employees, and typically rely on cash-based bonuses or profit-sharing arrangements as incentive tools.

If the incentive is to be through ESOP in an Egyptian JSC, the law provides for three systems to implement it:

• Grant of free shares: under this system, the beneficiaries are granted free shares distributed over several years. The transfer and disposal of shares to the beneficiary are subject to a three-year lock-up period (this may be adjusted to one year, in line with the company’s vision). If the beneficiary leaves, resigns, or is dismissed before the end of the grant period, their right to the granted shares is forfeited. In the event of the beneficiary’s death, their heirs legally replace them.
• Selling part of the company’s shares at discounted prices or with easy payment terms: under this system, the sales contract between the company and the beneficiary governs their relationship. If the beneficiary resigns before paying the full price, they have the option to either pay the remaining amount or recover what they have paid based on the share price at the time of their resignation, within seven working days from the resignation date. The shares in this case are subject to a lock-up period during which they cannot be sold, as determined by a decision by the extraordinary general meeting.
• Promise to sell shares: under this system, the beneficiary is granted the right to invest in certain number of the company’s shares at a specific price at the end of a set period. The beneficiary has no rights to the shares subject to the promise to sell until they meet the conditions and pay the full price. For the promise to sell to be valid, all essential elements and terms of the sale must be agreed upon, including the sales price and other conditions set by the company for the beneficiaries.

There is no preferential tax treatment under Egyptian law for stock-based incentives or bonuses. Any gains realised from an ESOP are subject to salary tax at the time of exercise or grant (depending on the structure), and any capital gains from a subsequent share sale are taxed according to standard capital gains tax rules. Similarly, bonuses are treated as ordinary employment income and taxed accordingly.

With respect to the implementation of employee incentive plans by Egyptian companies – and their interaction with investment rounds – as noted in 5.1 General – the prevailing practice is for most VC investments and corporate structures to be established offshore, with the Egyptian entity functioning primarily as the operating company. In such structures, incentive plans are typically administered at the level of the offshore parent and governed by the legal and tax frameworks of jurisdictions of incorporation such as the Netherlands or Singapore. Nevertheless, in instances where the incentive plan is to be implemented at the level of the Egyptian entity, it is our understanding that investors generally require the ESOP pool to be established prior to their entry. This approach ensures that any resulting dilution is borne by the founders and early shareholders, rather than by incoming investors.

Typical rights include lockups, call options, put options, drag-along rights, tag-along rights and rights of first refusal. Limited exit avenues have increased reliance on contractual exits and acquisitions. However, in Egypt, breaches of contractual provisions – such as call options or tag-along rights – typically lead only to claims for monetary damages. Specific enforcement mechanisms, such as share-transfer orders or injunctions, are not commonly available under local law. As a result, many investors prefer to invest via an offshore vehicle that owns the Egyptian operating entity.

IPO exits remain largely theoretical in Egypt’s current VC landscape. The Nilex exchange has seen limited activity, and only one SPAC transaction took place in 2024. As such, trade sales – particularly via offshore SPV structures – remain the predominant route for VC exits.

In Egypt, the secondary market for private equity and VC investments is still in its early stages. Unlike more developed offshore markets, where secondary transactions are increasing, Egypt has seen limited activity in this area. A notable attempt was made by an Egypt-founded VC fund to establish a secondary market practice. However, the discounts offered on the secondary stakes were not attractive enough to entice investors seeking to exit their positions, leading to minimal participation. This contrasts with global trends, where the secondary market has matured significantly, providing liquidity options for investors.

With respect to companies conducting VC activities, for the POF and GP/LP allowed under Decree 2018, see 2.1 Fund Structure in relation to the information memorandum (IM). Additionally, certain criteria are required for founders of NBFS companies, such as a holding company (at least 25% of the capital must be owned by financial institutions and two-thirds by Qualified Investors), as well as criteria required from investors (see 2.3 Fund Regulation).

If the investment is made at the level of the portfolio companies, the offering of their securities does not require an IM as they are closed entities. However, if they are structured as LLCs, the Companies Law provides that they can have no more than 50 partners.

Foreign investments face ongoing regulatory challenges, including currency restrictions and sector-specific acquisition requirements, despite recent improvements to the regulatory framework.

Law No 175 of 2022, amending certain provisions of Egyptian Competition Law No 3 of 2005, introduced a pre-merger control regime extending the powers of the Egyptian Competition Authority to pre-approve acquisitions that meet various criteria in terms of turnover and control. This regime was implemented as of 1 June 2024, when Prime Minister’s Decree No 1120 of 2024 amending certain provisions of the Executive Regulations of Competition Law entered into force. Failure to obtain this approval may result in financial penalties.

Certain sectors also require specific regulatory approvals/notifications when acquisitions are carried out. For example, in the e-payment sector, Banking Law No 194 of 2020 imposes different obligations on both acquirers and targets in connection with transfer of ownership. If the stake to be acquired exceeds 5% of the issued share capital of an e-payment company, the acquirer is subject to a post-acquisition notification obligation from the CBE. If the stake exceeds 10% of the issued share capital, or voting rights, or any percentage that leads to control of the e-payment company, prior approval of the acquisition from the CBE will be required. Failure to observe these conditions may result in penalties, financial or other. According to FRA Decree No 178 of 2024, similar rules apply to acquisitions of NBFS companies, but under the umbrella of the FRA. Additionally, as stated in 3.1 Due Diligence, conducting a due diligence exercise on e-payment or NBFS targets requires prior regulatory approval.

As for currency restrictions, it should be noted that there are no restrictions on the repatriation of funds. However, this is dependent on the availability of foreign currency in the investor’s Egyptian bank, and is subject to the CBE’s priority guidelines.