Corporate M&A 2025 Comparisons

Over the past 12 months, Egypt’s M&A activity saw a 21% increase in its deal volume, with 46 transactions completed in the first half of 2024 compared to 38 during the same period in 2023, as reported by PwC in late 2024.

The top trends in Egypt in the past 12 months include deals in the financial technology, non-banking financial services, healthcare and energy sectors.

In the past 12 months, industries such as financial services, particularly non-banking financial services, tourism, real estate, infrastructure and healthcare have been the most active. Other key industries such as energy and power have been a significant source of inbound investment in Egypt, with current investments under way in renewable energy and green bonds.

Under Egyptian law, the process of any transaction is determined by the form of the company. In that regard, an acquisition may involve a transfer of quotas in limited liability companies (LLCs) or shares in joint stock companies (JSCs).

Acquiring quotas in an LLC requires a transfer agreement between the parties and its notarisation by a notary public, and the annotation of such transfer in the company’s corporate documents. On the other hand, a transfer of shares in a JSC  involves the Egyptian Stock Exchange (EGX) and the Financial Regulatory Authority (FRA) for the execution of the share transfer pursuant to the relevant laws. However, the acquisition of listed shares is either undertaken by way of a tender offer or through open-market transactions.

An acquisition of a private business can be undertaken in two different ways:

• spin-off (eg, horizontal spin-off) or split-off (eg, vertical split-off) to acquire the target business; or
• assignment of the contracts that relate to the business by way of subrogation.

In respect of an acquisition of assets, the structure is determined based on several elements, including the type and location of the assets and the legal system governing the company owning the assets.

There are also several elements that must be taken into consideration in structuring any acquisition and disposal transactions in Egypt, such as:

• the legal systems governing the target company, business or asset (if any);
• the country from which the target company, business or asset will be acquired;
• the location of the target company, business or asset; and
• whether the target shares in the JSC are centrally registered with the Misr for Central Clearing, Depository and Registry (MCDR).

The primary regulators for M&A activity in Egypt are as follows:

• the General Authority for Investment and Free Zones (GAFI);
• the FRA;
• the MCDR;
• the EGX; and
• the Egyptian Competition Authority (ECA).

Generally, foreign investments are subject to screening in Egypt based on specific criteria, including the investor’s nationality and the company’s activities, as the activities that can be carried out by non-Egyptian investors, as well as the investor’s nationality, may be restricted by relevant Egyptian laws and certain conditions may be required to be met.

Therefore, screening must be performed to ensure satisfaction of these conditions and requirements. Foreign ownership restrictions are applicable in several sectors and locations such as:

• importation activities for resale or trading purposes. These restrictions were recently relaxed, allowing majority foreign ownership for a period of ten years subject to renewal based on certain conditions;
• ownership of agricultural lands;
• commercial agencies or intermediary businesses; and
• carrying out business in the Sinai Peninsula.

Furthermore, in certain circumstances, the regulatory authorities may require foreign investors to fulfil certain conditions, such as:

• a minimum capital for obtaining certain approvals and licences;
• the creation of a minimum number of jobs for Egyptian nationals; and
• the use of a minimum percentage of local resources in their products.

The Egyptian Antitrust Law No 3 of 2005 as amended in 2022 (the “Antitrust Law”) requires the pre-approval of the ECA for any transaction that constitutes an “economic concentration” and meets the relevant criteria with respect to financial thresholds. Under the new amendments, an economic concentration is defined as any change of control or material influence as a result of a merger or acquisition or the establishment of a joint venture.

The pre-closing clearance regime for the aforementioned transactions was newly introduced in 2024 and became effective as of 1 June 2024, replacing the post-notification regime.

Furthermore, the notification and pre-approval of the FRA is required for any potential transaction that constitutes an “economic concentration” and fulfils the financial thresholds, if the persons concerned with the economic concentration exercise one of the activities under the FRA’s supervision, namely securities and capital markets activities, insurance, reinsurance or insurance brokerage activities, mortgage finance activities, financial leasing activities, securitisation and factoring activities, or microfinance activities. The FRA and ECA co-operate before clearing an economic concentration, in accordance with certain prescribed timelines under the law.

The Egyptian Labour Law No 12 of 2003 (the “Labour Law”) sets out the general legal rules governing the employment relationship.

Any condition or agreement that violates the provisions of the Labour Law and/or derogates from the employee’s rights and entitlements shall be considered invalid. However, in the event that a rule and/or stipulation originating from either the employment contract, employment practice, or any other employer resolution or internal work regulation, grants the employee better rights and/or benefits not provided by the provisions of the Labour Law, said rule and/or stipulation shall remain valid.

The Egyptian Income Tax Law No 91 of 2005 provides that the monthly gross salaries of employees shall be subject to taxes, to be deducted from each employee’s monthly gross salary, based on the relevant tax bracket of each employee’s annual salary.

In accordance with the Egyptian Social Insurance and Pensions Law No 148 of 2019, all Egyptian entities are required to register with the Social Insurance Authority and insure their employees.

GAFI requires any foreign shareholder to submit an application for and obtain a security clearance, although in practice GAFI usually approves changes in shareholding structures and the incorporation of companies before the outcome of such security clearance procedure, with the exception of certain nationalities, such as China, Russia, Ukraine, Nigeria, Israel, Iran, Belarus, Bangladesh, Iraq and Palestine, as such restricted nationalities require an advance security clearance. However, GAFI has recently started to relax the condition of obtaining security clearance prior to certifying general assembly minutes approving new shareholders on a case-by-case basis.

A security clearance must be obtained for any foreigner to work or do business in Egypt. Furthermore, according to Law No 305 of 2015 on work permit procedures and requirements for foreigners, work permits must also be obtained for any foreign employees to be employed by the relevant company.

A national security review is also required in order to acquire businesses operating in certain sectors, such as hospitals and pharmaceutical manufacturing companies.

The most significant recent legal developments in Egypt include the following:

• The amendment of the Antitrust Law in December 2022 to replace the post-notification regime for a transaction with a pre-merger control system, whereby the ECA is given the authority to review and approve proposed mergers and acquisitions prior to entering into the transaction, and issuance of the Executive Regulations thereof in 2024 and effectiveness of the new merger control regime as of 1 June 2024.
• The FRA issued Decree No 286 of 2023 regarding the rules and procedures for the establishment and licensing of emerging financial technology companies to engage in non-banking financing activities including, inter alia, real estate financing, consumer financing and factoring.
• By virtue of Law No 173 of 2023, the foreign ownership restriction on importation has been lifted, permitting limited liability companies 51% of the quotas of which are owned by non-Egyptian partners to register in the Importers’ Registry, provided that the total duration of registration does not exceed ten years from the date of entry into force of said law.
• The FRA issued Decree No 57 of 2024, which establishes the rules for regulating the operation of Robo-Advisors for Investment, whereby a Robo-Advisor is an electronic system that provides financial advice to clients for the purpose of creating, managing and rebalancing an investment portfolio using AI algorithms.
• The FRA issued Decrees No 140 and No 148 of 2024 establishing special purpose acquisition companies (SPACs) in Egypt and recently approved the first application for a SPAC.

In light of the amendment of the Antitrust Law as highlighted in 3.1 Significant Court Decisions or Legal Developments, which introduced a pre-notification regime, in April 2024, the Egyptian Prime Minister issued Decree No 1120 of 2024, enacting the Executive Regulations of the Antitrust Law and thereby implementing the new amendments.

The new pre-merger control system, as highlighted in 2.4 Antitrust Regulations, went into effect as of 1 June 2024 and requires pre-approval from the ECA with respect to any transaction (eg, merger, acquisition, joint venture) that constitutes an “economic concentration” and meets the thresholds set out under the Antitrust Law, by means of a notification file with certain required documents attached. An economic concentration is defined as any change of control or material influence as a result of a merger or acquisition or the establishment of a joint venture.

In Egypt, stakebuilding is not explicitly regulated in Egypt. However, it is worth noting that a bidder may acquire less than 5% of the shares of the target company without triggering requirements to make the bid public, as highlighted below. However, if the bidder seeks to acquire 5% or more of the share capital of the target company, the bidder must notify the FRA and EGX and launch the tender offer as further highlighted below with respect to the disclosure requirements.

In addition to the disclosure requirements described below, shareholders of a company that, directly or indirectly, own 10% or more of the total share capital of a company whose shares are listed on the EGX are under certain disclosure obligations, including, inter alia, in the following cases:

• any decrease or increase by 5% or multiples thereof of its ownership of the listed securities representing the company’s capital or voting rights; and
• future investment plans and intended policies regarding the management of the company if the amount acquired reaches 25% or more of the company’s capital or voting rights.

In all cases, said shareholders are under obligation to notify the EGX periodically at the beginning of January and July regarding their direct and indirect ownership of the company.

Generally, a company may introduce different rules in its articles of incorporation or by-laws, such as special rights granted to specific shareholders, different voting rights, or the right to veto decisions in the company. However, in all cases, such rules may not contradict the relevant laws in Egypt.

Generally, derivatives are not explicitly regulated under Egyptian law. However, Egyptian Capital Markets Law No 95 of 1992 (the “Capital Markets Law”) provides the regulatory framework for the use and trading of financial instruments, which encompasses derivatives, including options, futures and other derivative contracts. However, in all cases, the FRA’s approval is required for trading in any financial instrument. Accordingly, dealings in derivatives are subject to the control and oversight of the FRA and EGX.

It is worth noting that in recent years, the FRA has taken steps towards launching a derivatives market in Egypt. In December 2024, Dr Islam Azzam, the vice chairman of the FRA, announced that the FRA is expediting the establishment of the derivatives market in collaboration with the EGX, to mitigate the impact of price fluctuations, enabling businesses of all sizes to hedge against currency and interest rate risks, and to effectively manage the risks associated with a diverse range of investment instruments.

Derivatives are subject to the control and oversight of the FRA, EGX and ECA. As highlighted above, economic concentrations meeting the stipulated thresholds under the Antitrust Law must obtain the pre-approval of the ECA and/or FRA (as the case may be).

In a public tender offer, the file submitted by the bidder to the FRA for the potential offer must contain specific documents and information, including, inter alia, a memorandum containing certain information such as, inter alia, the objectives/purpose of the bidder with respect to the tender offer and the main aspect of the bidder’s plans for the target company for the 12 months following the successful completion of the transaction. The bidder is required to provide its plans and intentions with respect to, inter alia, any potential restructuring of the target company, any strategies for expansion on a global scale and any sale of shares, and its intentions towards the workers of the target company.

In the acquisition of private companies, on the other hand, the shareholder is not required to disclose its purpose or intention for the transaction. However, there may be such an obligation depending on the parties’ agreement prior to the execution of the transaction.

In a public tender offer for shares that are publicly listed, the target company or the shareholders of the target company are under obligation to disclose the tender offer as follows:

• (a) Disclosure by the target company: The target company shall disclose to the FRA and EGX the potential tender offer immediately upon (i) notification by the bidder of its intention to make a purchase offer, (ii) signing a memorandum of understanding, a letter of intent, an agreement to conduct an examination thereof, or any other binding or non-binding agreements or similar documents, or serious negotiations regarding a potential purchase offer, or (iii) a tangible impact on trading or the price of the shares of the target company as a result of the spread of speculation over a potential purchase offer.
• (b) Disclosure by the shareholders of the target company: Upon being notified by the bidder of its intention to submit the purchase offer, the shareholders of the target company owning more than one-third of the target company’s share capital shall immediately disclose to the FRA in any of the cases under (a) above, if there is an agreement between the shareholders and the bidder of which the target company was not notified.

On the other hand, the law does not require any public announcement with respect to shares that are not publicly listed. However, public announcement of a transaction may be required in cases such as, inter alia, the ECA’s announcement of an economic concentration to allow third parties to submit their views on the said transaction.

The failure to abide by the legally stipulated time limits of the disclosure or reporting requirements of tender offers may lead to the invalidity of the tender offer. Therefore, the disclosure obligations must be fulfilled within the legally prescribed timeline.

As a general rule under the Civil Code, the seller is not answerable for any defects of which the purchaser was aware at the time of the sale or any defects that could have been discovered by the purchaser by examining the subject of the sale with the care of a reasonable person, unless the purchaser proves that the seller affirmed the absence of those defects.

There is no typical scope of due diligence in Egypt as it depends on the level that the buyer is willing to conduct. However, conducting full due diligence is usually recommended in order to be in line with the general rule outlined above, including financial and legal due diligence. Buyers can rely on due diligence reports produced by the sellers if the sellers conduct the due diligence with the care of a reasonable person.

Generally, the use of standstills and exclusivity agreements in Egypt is not explicitly regulated. However, such agreements may be used to provide a certain level of assurance for the parties involved. However, it is worth noting that in all cases such agreements must be in compliance with the applicable laws in Egypt, the relevant disclosure and transparency obligations under Egyptian laws and the company’s constitutional documents, which may restrict such actions.

As a general rule, a contract is created, subject to any special formalities that may be required by law for its conclusion, from the moment that two persons have exchanged two concordant intentions. Note that an intention may be declared verbally, in writing, by signs in general use, and also by such conduct as, in the circumstances of the case, leaves no doubt as to its true meaning. A declaration of intention may be implied when neither the law nor the parties require it to be expressed.

Generally, pursuant to the Civil Code, the contract is the law of the contracting parties, and it may not be revoked or modified except by agreement of the two parties, or for reasons determined by law.

In all cases, the definitive agreement must comply with Egyptian laws.

The timing of the process of acquiring or selling a business primarily depends on the mode of its execution and the parties’ agreement, without prejudice to any legally required timeline. In the acquisition of private companies, the process for the transfer of shares usually takes up to five days from the receipt by the broker of the share transfer documents.

However, in a public tender offer, the duration of the offer is typically within 30 days, including the period of review and approval of the FRA of the application made by the bidder and the launch of the tender offer by publication on the screens of the EGX.

The review process by the ECA and/or FRA (as the case may be) for clearing notifiable economic concentrations should also be taken into consideration, which may take up to 60 days as of the date of submitting the notification file to the relevant authority.

Under Egyptian law, with respect to companies subject to oversight by the FRA, a mandatory tender offer obligation is triggered when a person, whether directly or through its related parties:

• acquires one-third or more of the share capital or voting rights of the target company;
• holds more than one-third but not more than half of the share capital or voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake;
• exceeds half of the share capital or the voting rights of the target company at any given time;
• holds more than half but not more than two-thirds of the share capital or voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake;
• holds more than two-thirds but not more than three-quarters of the share capital or voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake; or
• exceeds three-quarters of the share capital or voting rights of the target company at any given time.

Exceptions

The FRA may exempt the following cases from the obligation to submit a mandatory tender offer, provided that the FRA is notified and does not object within 15 days from the date of notification:

• assignment of shares between parents and children;
• cases of inheritance, will and gift;
• transfer of ownership of securities pledged to Egyptian and foreign banks and financial institutions in settlement of their dues;
• if the acquisition is made by one of the financial institutions licensed to guarantee subscription operations in implementation of its obligation to guarantee subscription coverage;
• in the event that all shareholders of the company approve the sale;
• cases of transfer of ownership of all shares owned by the union of workers who are shareholders in subsidiaries of state-owned holding companies to restructure these companies and pump additional investments into them;
• implementation of mergers;
• restructuring of capital between related persons and/or a group of related companies;
• cases of purchasing treasury shares or reducing capital by cancelling treasury shares or distributing treasury shares as free shares;
• cases of increasing the capital of the company targeted by the offer, provided that this does not result from purchasing subscription rights in the capital increase;
• cases that result in a shareholder owning shares or controlling voting rights in one of the companies subject to the provisions of the Capital Markets Law, when this is done without their desire or will; and
• cases that result in a person, alone or with their related persons, owning part or all of the shares or voting rights owned by a major shareholder, alone or with their related persons, according to the economic considerations or necessities approved by the Council of Ministers, with a maximum of 50% of the shares or voting rights in the company.

Cash consideration is most commonly used as the form of consideration in Egypt. However, a consideration may be cash, a share swap, or a combination of cash and share swap. In practice, if the acquisition is carried out by way of open-market transactions, the consideration must be cash. Furthermore, in the case of a mandatory tender offer, the shareholders of the target company must be able to choose cash instead of shares as consideration.

Voluntary Tender Offers

In a voluntary tender offer, a bidder is free to make a tender offer to acquire the target company’s share capital and voting rights, as long as such share capital or voting rights do not exceed more than one-third of the capital or voting rights of the target company, or do not result in reaching a percentage that requires a mandatory tender offer.

In the event that the number of shares offered exceeds the voluntary tender offer threshold, the shares must be purchased from all shareholders that responded to the offer in proportion to what is offered by each of them to the total shares required to be purchased, taking into account rounding up fractions in favour of minority shareholders.

Mandatory Tender Offers

As highlighted in 6.2 Mandatory Offer Threshold, a mandatory tender offer obligation is fulfilled when a person, whether directly or through its related parties:

• acquires one-third or more of the share capital or voting rights of the target company;
• holds more than one-third but not more than half of the share capital or the voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake;
• exceeds half of the share capital or voting rights of the target company at any given time;
• holds more than half but not more than two-thirds of the share capital or voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake;
• holds more than two-thirds but not more than three-quarters of the share capital or voting rights of the target company, and within 12 consecutive months, its ownership exceeds 5% above its existing stake; or
• exceeds three-quarters of the share capital or voting rights of the target company at any given time.

Furthermore, if the bidder seeks to continue listing the target company on the EGX, the bidder is required to submit a mandatory tender offer for 100% of the ordinary shares of the target company, subtracting 10% for the minimum free float shares required to remain listed on the EGX. However, if the bidder seeks to delist the target company from the EGX, the mandatory tender offer must cover 100% of the ordinary shares.

Generally, the minimum acceptance threshold for a public tender offer is set to ensure that the bidder can secure control over the target company while also protecting the interests of minority shareholders. In that regard, the law does not provide a specific fixed percentage for the minimum acceptance condition for tender offers. However, the threshold is typically set at 51% of the target company’s shares as the minimum acceptance required, unless specified otherwise in the offer terms. Generally, the determination of the minimum acceptance threshold is left for the bidder to decide.

In a public tender offer, the bidder must submit certain documents and information to the FRA and EGX, including, inter alia, a letter from an Egyptian bank confirming the availability of the bidder’s funds for the offer, and a memorandum which must contain, inter alia, information regarding the financing of the purchase offer.

Under Egyptian law, a bidder may seek certain deal security measures to protect its interests during the tender offer process. These measures may include conditions precedent in the tender offer, such as conditions relating to the achievement of necessary regulatory approvals, including, inter alia, that of the ECA, FRA or EGX.

The bidder may seek veto rights with respect to reserved matters as to be stipulated under the target company’s constitutional documents or convertible securities. Furthermore, the bidder may seek representation on the board of directors of the company pursuant to the articles of association of the company. The constitutional documents may also include the right of first refusal with respect to disposal of shares in the target.

Under Egyptian law, shareholders are generally allowed to vote by proxy during any general meetings of the company pursuant to the Companies Law, provided that such proxy is appointed by way of a formal written document or a power of attorney signed by the shareholder.

However, it is worth noting that the shareholder may only appoint one proxy to represent them at the meeting. Furthermore, proxies may generally only exercise voting rights that are specifically granted to them by the shareholder as specifically instructed in the written authorisation.

Egyptian law does not provide for a squeeze-out mechanism to majority shareholders; however, the Capital Markets Law allows for minority shareholders owning 3% of the target company’s share capital or voting rights, or minority shareholders representing a minimum of 100 shareholders representing no less than 2% of the free float shares, to request the FRA, within 12 months following the majority shareholder’s acquisition of shares in the target company, to oblige the majority shareholders to submit a mandatory tender offer for the minority shares.

Under Egyptian law, obtaining irrevocable commitments to tender or vote from principal shareholders of the target company during a public offer or acquisition is not explicitly regulated. However, such commitments may be secured in practice so long as this is within the framework of Egyptian laws.

Before a bid is made public, the bidder may approach the target company to engage in negotiations, or to notify the target company of its intention to announce a public tender offer, or the bidder and the target company may sign a memorandum of understanding. Accordingly, the target company must immediately inform the FRA and EGX of the bidder’s intention to make the potential offer. Furthermore, the bidder is obligated to submit the necessary filing application with the FRA to launch the tender offer.

Upon accepting the application from the bidder, the FRA must notify the EGX of the main terms contained in the application and the information memorandum. Upon such notification, the EGX shall post it on its screens. Accordingly, the bid is made public once posted on the screens of the EGX.

Disclosure to the FRA and EGX

In a public tender offer, the persons concerned with the potential tender offer are under obligation to disclose the offer as follows:

• (a) Disclosures by the bidder: The bidder shall immediately disclose to the FRA and EGX the potential tender offer on the occurrence of any of the following: (i) the bidder announces its intention to the target company, (ii) the fulfilment of the conditions of a mandatory tender offer, (iii) submitting requests for approval from the competent authorities, and (iv) the spread of any rumours, speculation or unusual movement in the market indicating a potential offer.
• (b) Disclosures by the target company: The target company shall disclose to the FRA and EGX the potential tender offer immediately upon (i) notification by the bidder of its intention to make the purchase offer, (ii) signing a memorandum of understanding, a letter of intent, an agreement to conduct an examination thereof, or any other binding or non-binding agreements or similar documents, or serious negotiations regarding a potential purchase offer, and (iii) a tangible impact on trading or the price of the shares of the target company as a result of the spread of speculation over a potential purchase offer.
• (c) Disclosure by the shareholders of the target company: Upon being notified by the bidder of its intention to submit the purchase offer, the shareholders of the target company owning more than one-third of the target company’s share capital shall immediately disclose to the FRA in the occurrence of any of the cases under (b) above, if there is an agreement between the shareholders and the bidder of which the target company was not notified.

Disclosure to the ECA

Any potential transaction must be disclosed/notified to the ECA in all cases for its pre-approval before implementation of any such transaction as highlighted above with respect to the ECA’s pre-approval of any transaction that constitutes an economic concentration as defined above and fulfils the notification thresholds pursuant to the Antitrust Law, as further highlighted above.

In a public tender offer, the file submitted by the bidder to the FRA and EGX for the potential offer does not explicitly require financial statements to be produced. However, the file submitted must contain specific documents and information, including, inter alia, a summary of the financial statements of the bidder for the last three years, or from the date of establishment, whichever is less, unless the purchase offer is a cash offer. In all cases, the FRA provides the form required to be submitted by the bidder, which specifies all required data therein.

It is also worth noting that if a transaction is deemed an economic concentration notifiable to the ECA, the notification form to be submitted to the ECA requires, inter alia, financial statements of the parties that the economic concentration concerns and their related parties.

In a public tender offer, the file submitted by the bidder to the FRA and EGX for the potential offer does not explicitly require transaction documents in full. However, the file submitted must contain specific documents and information, including, inter alia, a memorandum which requires, inter alia, information on agreements or understandings relating to the purchase offer to which the bidder is a party or of which it is aware, and descriptions of the parties to such agreements or understandings.

It is also worth noting that if a transaction is deemed an economic concentration notifiable to the ECA, the notification form to be submitted to the ECA requires, inter alia, a copy of all transaction documents.

There are two main categories of private company in Egypt: partnerships and corporations. There are two types of partnerships: (i) general partnership (GP) and (ii) limited partnership (LP). However, corporations are classified into the following four types: (i) JSC, (ii) LLC, (iii) one-person company (OPC) and (iv) Partnership Limited by Shares.

This being said, the two most common types of company provided under the Companies Law are (i) the JSC, the capital of which is divided into shares owned by its shareholders, and which is managed by at least three board members, and (ii) the LLC, the capital of which is divided into quotas owned by quota-holders, and which is managed by at least one manager. It is worth noting that noting that the articles of incorporation of a JSC may provide for minimum representation of the shareholders on the board of directors.

It is worth noting that Egyptian law does not recognise the concept of the stakeholders in the companies in Egypt. In this regard, the members of the board of directors/managers have all the powers related to the management of the company and undertake all necessary actions to achieve its purpose, except for those actions or transactions specifically excluded by law or the company’s by-laws that fall within the jurisdiction of the general assembly which is represented by the shareholders or quota-holders of the company, as the case may be.

This being said, the board of directors or managers of the company answer to the general assembly of the company, given that the general assembly has the authority to oppose any management actions, to approve any actions taken by the board of directors or managers, or to issue recommendations concerning the actions that fall within their jurisdiction. Furthermore, the board of directors is required to prepare a report on the company’s activity throughout the year, to be referred to and approved by the general assembly.

Furthermore, every shareholder has the right to attend the general assembly meetings, having the right to discuss the matters on the agenda and to cross-question the board of directors, accordingly, noting that the shareholders may present whatever questions before the general assembly convenes by at least three days, and the board of directors should respond to these enquiries and cross-questions to the extent that would be prejudicial to the company’s interests.

The board of directors may form one or more independent committees that consist of the board’s non-executive and independent members, such that each committee is assigned with specific tasks for a period of time. The competent regulator in Egypt has issued circular book No 21 of 2019 regulating the formation of board committees, whereby each committee must consist of at least three members. Committees may be merged depending on the nature of the company’s activity and its needs. The board committees shall refer their reports to the board of directors for the board of directors to take the necessary resolutions.

It is worth noting that the Companies Law requires that every board member/manager who has a conflict of interest with the company must inform the board of it and record the same in the relevant minutes of the board meeting. In such a case, the conflicted board member is not permitted to participate in the vote regarding any decision relating to this matter. Furthermore, the board of directors must inform the general assembly of the aforementioned matter before it votes on such decisions.

Generally, there is no business judgement rule that is explicitly regulated in Egypt; however, the Companies Law provides that the managers and the chair of the board of directors shall represent the company before courts.

This being said, the general assembly representing the shareholders of the company has the authority to oppose any management actions taken by the board of directors, or to approve any of the board’s actions, or to issue recommendations concerning the board’s actions.

In this regard, it is worth noting that as per the Companies Law, any resolution issued for the benefit or to the detriment of a specific shareholder or to benefit a board member or others without taking the company’s interest into consideration may be annulled. Note that the annulment may be requested only by the shareholders that had objected to the resolution in the meetings’ minutes or that were absent for a plausible reason, and in this case, the annulment shall be effective for all shareholders.

Furthermore, the shareholders/quota-holders represented by the general assembly shall have the right to dismiss the board members and sue them for responsibility upon the approval of the shareholders/quota-holders owning at least half of the capital of the company.

In Egypt, directors mainly seek legal, tax and financial advice for the purpose of mitigating any risks that may be associated with their actions while pursuing the management of the company, as well as ensuring compliance with the law regarding the aforementioned.

The Companies Law requires that every board member or manager who has a conflict of interest with the company shall inform the board of it and record the same in the relevant minutes of the board meeting. In such a case, the conflicted board member shall not be permitted to participate in the vote regarding any decision relating to this matter. Furthermore, the board of directors must inform the general assembly of the aforementioned matter before it votes on such decisions.

The Capital Markets Law in Egypt differentiates between voluntary and mandatory/hostile tender offers based on the threshold of the shares subject to the transaction. In this regard, the Capital Markets Law provides for cases whereby a mandatory/hostile tender offer is obligatory, as follows:

• the direct or indirect acquisition of more than one-third of the capital or voting rights but less than half of the capital or voting rights;
• the direct or indirect acquisition of more than half of the capital or voting rights but less than two-thirds of the capital or voting rights;
• the direct or indirect acquisition of more than two-thirds of the capital or voting rights but less than three-quarters of the capital or voting rights,

if within 12 consecutive months the acquirer increases its ownership percentage in the target company by more than 5% of the capital or voting rights. However, the obligation to submit a mandatory purchase offer applies if its ownership percentage at any time reaches one-third, half or two-thirds of the capital or voting rights.

The Capital Markets Law and its Executive Regulations prohibit defensive measures generally, as in accordance with the Executive Regulations of the Capital Markets Law, as of the date of the FRA’s approval of the initial tender offer and until its result, the board of directors of the target company and its managers are prohibited from any action or conduct that would constitute a material adverse event, which includes the following:

• increasing the capital or issuing convertible bonds if such increase or issuance would make the acquisition burdensome or impossible, unless the decision to do so was made at least 30 days prior to the date of publication of the FRA’s initial approval of the tender offer; or
• engaging in actions or transactions that would materially affect the company’s assets, increase its financial obligations, or hinder the future development of its activities, unless these actions or transactions were carried out in the ordinary course of business prior to the FRA’s initial approval of the tender offer.

However, in general, pursuant to the Companies Law, the company’s articles of association may require obtaining the board of directors’ approval for the transfer of shares.

Generally, defensive measures are prohibited. However, the company’s articles of association may require the board of directors’ approval for the transfer of shares. See 9.2 Directors’ Use of Defensive Measures.

Generally, defensive measures are prohibited. However, the company’s articles of association may require the board of directors’ approval for the transfer of shares. See 9.2 Directors’ Use of Defensive Measures.

In accordance with the Companies Law, the company’s articles of association may require the approval of the board of directors prior to the sale of shares.

As a general rule under the Civil Code, the seller is not answerable for any defects of which the purchaser was aware at the time of the sale or any defects that could have been discovered by the purchaser by examining the subject of the sale with the care of a reasonable person, unless the purchaser proves that the seller affirmed the absence of those defects. Furthermore, the sellers are usually liable for binding provisions under pre-contractual document, and in all cases, they are also liable for any misleading statements.

This being said, pursuant to the Civil Code, if a party does not perform its contractual obligations, the other party is entitled to request the defaulting party to perform its obligations. If the defaulting party does not perform its obligations, the affected party may claim damages.

Accordingly, in light of the above, litigation is frequent in M&A deals, given that the buyer may claim damages for any defects discovered after the transaction, or in the event of any misleading information, in addition to the possibility of claiming damages in the event of non-performance of the contractual obligations.

Litigation usually takes place after the transaction, whereby the dispute involves claiming damages relating to the obligations stipulated in the pre-contractual document or the contract. The parties may claim damages for defects discovered after the transaction, or in the event of any misleading information, in addition to the possibility of claiming damages in the event of non-performance of the contractual obligations.

The damages are assessed by the court on a case-by-case basis, based on the value of the losses suffered and any deprived profits that the defaulted party would have expected at the time of concluding the contract, unless otherwise agreed upon in the contract or stipulated by the law.

The details of disputes between parties regarding broken transactions are not publicly available.

In Egypt, shareholder activism is not explicitly regulated, and accordingly it has not been common in Egypt; however, shareholders’ rights are provided for under the Companies Law and the Capital Markets Law, allowing accordingly the shareholders to pursue their activism independently and protecting the minority shareholders as well.

In this regard, generally, the company’s resolutions are issued upon the approval of the shareholders of the company. Every shareholder shall have the right to attend the general assembly regardless of the number of shares owned, discuss the matters on the agenda and vote accordingly. Furthermore, shareholders owning at least 5% of the total shares of the company shall have the right to make a request calling for an ordinary general shareholders’ meeting subject to determining the agenda of the meeting; an extraordinary general shareholders’ meeting may be called to convene upon the request of shareholders owning at least 10% of the total shares of the company.

This being said, the Companies Law requires a quorum for the validity of the general assembly meetings, whereby, for the ordinary general shareholders’ meetings, the attendance of shareholders owning at least 25% of the total shares of the company is required, unless the company’s articles of association require a higher percentage that does not exceed 50% of the total shares of the company. The resolutions shall be issued if approved by the absolute majority of the attending shareholders.

As for extraordinary general shareholders’ meetings, unless otherwise stipulated in the company’s articles of association, the Companies Law requires the attendance of shareholders owning at least 50% of the total shares of the company. The resolutions shall be issued if approved by shareholders owning at least two-thirds of the total shares of the company; however, if the resolutions relate to an increase of the authorised capital, a decrease of the capital, the liquidation of the company, changing the objective of the company, or merging or splitting up the company, the resolutions shall be issued if approved by at least three-quarters of the shares represented in the meeting.

The shareholders may request the annulment of a resolution if the resolution in question is issued in violation of the provisions of the Companies Law or the company’s articles of association, or if the resolution is issued for the benefit or detriment of certain shareholders, or brings special benefit to the members of the board of directors or others without the consideration of the company’s interests; however, in all cases, the Companies Law specifies that the annulment may only be requested by those shareholders who had objected to the resolution during the meeting, or who did not attend for a plausible reason. In addition, the shareholders shall have the right to have access to the company’s records and documents and to make copies accordingly.

Additionally, shareholders may insert into a shareholders’ agreement and/or include in the company’s articles of association reserved matters that require and shall only be implemented if approved by the affirmative votes of all shareholders.

Due to the lack of activist shareholder background, shareholders in Egypt do not typically push for M&A transactions, spin-offs or major divestitures. Such decisions are usually driven by controlling shareholders. However, unless otherwise stipulated in the company’s articles of association, the Companies Law requires that resolutions relating to the increase of the authorised capital, the decrease of the capital, the liquidation of the company, changing the objective of the company, or merging or splitting up the company shall be issued if approved by at least three-quarters of the shares represented in the meeting.

Shareholder activism is not common in Egypt, in light of the fact that Egyptian laws do regulate or provide for shareholder activism explicitly; accordingly, there tends to be no interference with the completion of announced transactions.

However, generally, it is worth noting that with respect to the new merger control regime, the ECA publishes on its website contemplated economic concentrations to allow third parties to submit their views on said transactions.