Doing Business In.. 2024

Last Updated July 02, 2024

Egypt

Law and Practice

Authors



Soliman, Hashish & Partners (SHP) is a full-service corporate law firm, recognised as a leading financial and corporate law firm in Egypt. SHP is renowned for its innovative, high-quality, and commercially astute approach to every task. SHP works exclusively with well-established multinational clients in a wide range of practice areas, including corporate, M&A, banking and finance, telecoms, media and technology, energy and electricity, construction, public procurement, dispute resolution, intellectual property rights and employment. SHP acts as local legal counsel to private and public sector entities, including governments, NGOs and leading multinational companies operating in a wide range of sectors. Over the years, SHP has represented over 1,000 leading multinational clients in Egypt’s largest mega projects and has established strong relationships with decision-makers in the public and private sectors.

The Egyptian legal system is primarily based on the French civil legal system, various other European codes, and religious law. In practice, religious law is applied only to personal status and family matters which are governed by the religious law of the individual concerned. The fundamental and organic law of Egypt is its Constitution, which was passed in a referendum in January 2014 and amended in April 2019.

The Egyptian judiciary is highly independent, and judges are immune to dismissal, subject to no other authority but the law, and equal in rights and duties.

The judicial order under the Egyptian system is outlined below.

Regular Courts

At the apex of the regular judiciary system in Egypt is the Court of Cassation, which was established in 1931 and is based in Cairo. The Court of Cassation is a court of law as opposed to a trial court and guarantees the uniformity and consistency of the implementation and interpretation of the law. Following this are the courts of appeal which have the competence to consider rulings by the courts of first instance falling under their jurisdiction, should these rulings be subject to appeal. Next are the first instance courts, also known as primary courts, which are strategically located in various district capitals. Complementing these are summary courts, which are found in central locations, coastal towns, and even within certain neighbourhoods. These courts’ jurisdictions are determined based on two main factors: the monetary value involved in the legal matter and the specific geographic area over which the court has authority.

State Council

The State Council is an independent judicial body competent to adjudicate administrative disputes and disciplinary proceedings. Article 172 of the Constitution establishes other jurisdictions. The judicial section consists of the Supreme Administrative Court, the Administrative Judiciary Court, the administrative courts, the disciplinary courts, and the State Commissioners’ Authority, each competent to consider such submissions in accordance with the law.

The Supreme Constitutional Court

The Supreme Constitutional Court is an autonomous and independent judicial body with its headquarters in Cairo. However, in cases of emergency, it may, upon the approval of its General Assembly, hold its sessions elsewhere in Egypt. The Supreme Constitutional Court is solely competent to decide on the constitutionality of laws and regulations, interpret legislative provisions, and adjudicate on disputes pertaining to the affairs of its members, on jurisdictional disputes between judicial bodies and entities that have judicial jurisdiction, on disputes pertaining to the implementation of two final contradictory judgments, one of which is rendered by a judicial body or an authority with judicial jurisdiction and the other is rendered by another, as well as on disputes pertaining to the execution of its judgments and decisions.

The State Lawsuits Authority

The State Lawsuits Authority is an Egyptian judicial institution that resembles, in respect of competencies, the Attorney General in common law disciplines and particularly the United States Solicitor General.

The Authority represents the interests of the state in a variety of areas before national and international courts and arbitral tribunals. Under the applicable law, the Egyptian State Lawsuits Authority is granted the power to plead on behalf of the state even if the state itself does not wish to do so and vice versa.

Foreign investments are subject to screening in Egypt based on specific criteria, including the investor’s nationality and the company’s activities, as activities carried out by non-Egyptian investors, as well as the investor’s nationality, may be restricted by relevant Egyptian laws and may require certain conditions to be met. Therefore, screening must be performed to ensure the satisfaction of these conditions and requirements. It is worth noting that foreign ownership restrictions are applicable in several sectors and locations such as:

  • importation activities for resale or trading purposes;
  • commercial agencies or intermediary businesses; and
  • carrying out business in the Sinai Peninsula.

It is worth noting that, a security clearance must be obtained for any foreigner to work or do business in Egypt. In practice, the General Authority for Investment and Free Zones (GAFI) usually approves changes in shareholding structures and the incorporation of companies without initially requiring a security clearance, 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 conditions of obtaining security clearance prior to incorporation with respect to some nationalities.

Aside from the security clearance, work permits must also be obtained for any foreign employees to be employed by the relevant company.

Prior to engaging in any business in Egypt, upon the incorporation application of the company, or upon the approval of a general assembly meeting for changes in the shareholding structure, a security clearance application is submitted to the relevant authority indicating all relevant data of the foreign investor.

Generally, investing in Egypt without obtaining a security clearance or any other necessary approvals for engaging in business may have legal ramifications, which could include legal penalties such as fines or other sanctions imposed by the relevant regulatory authority, restrictions on business operations and activities through a suspension imposed by the relevant governmental authority and the eventual disruption of any business plans the foreign investor may have made, severe financial losses, and contractual issues where certain contracts may be deemed null and void due to the lack of obtaining the necessary approvals, all of which may result in severe reputational damage to the business.

In certain circumstances, the regulatory authorities may require certain conditions such as:

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

Foreign investors have the right to appeal and review such decisions by way of referral to an administrative court, which has exclusive oversight over any administrative matter. Further, foreign investors may refer any dispute to international arbitration subject to certain conditions under the relevant Bilateral Investment Treaty (BIT), whereby any award issued in favour of investors will be enforceable vis-à-vis any assets owned by the Egyptian Government outside Egypt.

Both the Companies Law and the Trade Code provide several legal forms of business, similar to those legal forms that are available in North America and Europe, such as:

  • branch of a foreign company;
  • joint stock company (JSC);
  • limited liability company (LLC); and
  • one-person company (OPC).

The two most common types of companies selected by investors in Egypt are JSCs and LLCs, whereby the capital of a JSC shall be owned by at least three shareholders and constitute a minimum capital of EGP250,000. Whereas, for an LLC the minimum number of partners is two and no minimum capital is required. An LLC is usually the most recommended corporate vehicle because an LLC has a simplified corporate structure compared to a JSC.

However, it is worth noting that depending on the activity of the company, a specific corporate structure may be required for certain activities such as banking activities. Further, depending on the company’s activities, a company may be formed under different laws, such as the Capital Markets Law No 95 of 1992. 

An incorporation application is submitted to the General Authority for Investment and Free Zones (GAFI), which is the regulatory authority overseeing the incorporation of companies in Egypt. Attached to such incorporation applications are a set of documents including corporate documents related to the shareholders or partners, passports of the directors or shareholders, the auditor’s bank certificate and the lease agreement of the company’s premises.

The Articles of Association and/or statutes of the company are then issued by GAFI after the provision of the relevant details such as share capital, auditor’s information, address, duration of the company, directors/managers and the company’s commercial register.

The incorporation process may vary depending on the readiness of all necessary documents required to be submitted at the time of incorporation. However, once all documents are ready, the incorporation process usually takes from one to two weeks. However, GAFI offers VIP services for the incorporation process for an additional charge of EGP10,000 (equivalent to approximately USD206).

Foreign investments are subject to review and screening by GAFI. All companies incorporated in Egypt that are entirely or partially owned by non-Egyptian investors (collectively, non-Egyptian owned companies), regardless of the percentage of the ownership or the applicable legal regime, must regularly submit their Foreign Direct Investment (FDI) Data to GAFI, which includes information on, inter alia, foreign shareholders, corporate and financial information, pursuant to Decree No 2731 of 2019, as follows:

  • within 30 days of the incorporation date or the date of any change in the non-Egyptian-owned company’s capital, purpose, shareholding structure or board members (as the case may be);
  • within 45 days of the end of each quarter of the calendar year; and
  • within four months of the end of the relevant non-Egyptian-owned company’s financial year.

Further, failure to satisfy the FDI requirement will entail a penalty fine of EGP50,000 for non-Egyptian-owned companies, in accordance with the Investment Law No 72 of 2017.

The one-tier management structure, where one governing body is responsible for management and decision-making, is widely considered the most common management structure in Egypt. For example, a JSC primarily consists of the board of directors, which is responsible for overseeing the operations of the company and making major decisions; they are elected or appointed by the shareholders of such company. Further, the executive management may be chaired by a CEO or managing director who is responsible for the day-to-day operations of the company and executing resolutions and decisions taken by the board of directors. Further, the general assembly of the company generally has the authority to elect or dismiss directors, approve financial statements, increase the company’s capital and take other important decisions in relation to the company.

The Companies Law No 159 of 1981, in general, does not recognise the concept of piercing the corporate veil, therefore, the liability of shareholders in a JSC or allotment holders in an LLC is strictly limited to the paid-in capital.

However, the aforementioned rule is subject to certain exceptions, such as if the number of shareholders in a JSC becomes less than three, then the concept of piercing the corporate veil shall apply to the remaining shareholders in a JSC to legitimise their legal status by increasing the number of shareholders to reach the minimum required number.

The Egyptian Labour Law No 12 of 2003 (the “Labour Law”) provides for 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 a stipulation originating either from the employment contract, employment practice, or any other employer resolution or internal work regulation, grant the employee better rights and/or benefits not provided by the provisions of the Labour Law, the said rule and/or stipulation shall remain valid as it provides better benefits in the interests of the employee.

In accordance with the provisions of the Labour Law, an employer must conclude an employment contract with an employee. It must be drafted in Arabic and provided in three identical copies. The employment contract must include the following information:

  • employer’s name and place of employment;
  • employee’s name, qualifications, profession or craft, social insurance number and residence;
  • the nature and type of work to be carried out by the employee;
  • agreed salary, method and time of payment; and
  • any other benefits, in cash or kind.

The employment contract may be concluded for either a definite or indefinite period. The Labour Law does not determine the maximum or minimum duration of the employment contract.

In the event that no written contract is concluded, the employee may provide evidence of the employment relationship by other means.

The maximum applicable working hours of employees shall not exceed eight hours per day or 48 hours per week excluding breaks. These maximum working hours are regulated by public order rules and cannot be superseded or extended by any form of agreement.

Overtime is only allowed in case of emergencies, unusual and/or exceptional circumstances in work conditions, provided that:

  • the employer obtains the prior written approval of the competent authority (ie, the Ministry of Manpower); and
  • the actual working hours per day shall not exceed ten hours and the employees shall be entitled to monetary compensation.

Overtime work shall be compensated as follows:

  • Overtime during working days: In addition to their regular pay, employees are entitled to receive a 35% increase in their salary for overtime during the day, and a 70% increase for overtime hours worked at night.
  • Overtime during weekends: In addition to their regular pay, employees are entitled to an additional 100% of their salary for overtime worked. The employer is also obliged to grant the employee a day off during the following week in place of the lost rest day.
  • Overtime during public holidays: In addition to their regular pay, employees are entitled to double their regular pay.

As a general rule, an employee may be dismissed if they commit one of the following acts, which shall be deemed a gross error (“Gross Error”), including, inter alia:

  • assumption of a false identity or submission of false documents;
  • failure to follow safety instructions;
  • absence from work without a legitimate reason for more than 20 intermittent days in the course of a year or more than ten consecutive days;
  • disclosure of the secrets of the establishment at which they work, leading to the occurrence of serious damage to the establishment;
  • competing with the employer in the same field;
  • visible intoxication or being under the influence of drugs during working hours;
  • acts of aggression against the employer or general manager and/or committing serious aggression against any superiors either during work hours or related to work; and
  • failure to observe the controls of the Labour Law relating to the right of employees to go on strike.

There are different procedures for terminating employment contracts, depending on whether they are fixed or permanent.

Termination of a Fixed-Term Employment Contract

An employer shall not have the right to terminate a fixed-term employment contract early unless the employee commits a Gross Error. The employer has the burden of proving that the employee committed a Gross Error.

If an employer terminates a fixed-term employment contract early without proving that the employee committed a Gross Error, the employee shall be entitled to compensation for the damages incurred as a result of such termination.

As a general rule, the employee shall not have the right to terminate a fixed-term employment contract early except in the following cases:

  • the employment contract explicitly states that the employee has the right to resign; or
  • if the employment relationship exceeds five years, the employee may have the right to terminate the employment relationship by providing three months’ notice in accordance with the Labour Law.

Termination of a Permanent Employment Contract

An employer shall not have the right to terminate a permanent employment contract unless the employee commits a Gross Error. The employer has the burden of proving that the employee has committed a Gross Error.

Further, if the employer wishes to terminate a permanent employment contract, they should provide the employee with two months’ notice if the employee’s period of service with the employer does not exceed ten years or three months’ notice if the employee’s period of service with the employer exceeds ten years.

If the employer terminates a permanent employment without proof of any Gross Error by the employee, the said employee shall be entitled to compensation that is equivalent to the salary of at least two months for each year of service in addition to any other financial entitlements (if any).

Under Egyptian Law, the employer shall have the right to completely or partially shut down the organisation or reduce its size by terminating the employment contracts of a number of employees to mitigate any economic crisis, provided that (i) a downsizing request is submitted to the competent authority for approval; and (ii) the competent syndication and the employees shall be notified of both the downsizing request and approval.

In this case, a dismissed employee shall be entitled to the following end-of-service indemnity:

  • an indemnity equivalent to one month of their salary for the first five years; and
  • an indemnity equivalent to one month and a half of their salary for the remaining period.

In the event that the employer does not obtain the relevant approval from the competent authorities on the downsizing and decides to reduce its size by terminating the employment contracts of a number of employees, the employees shall be entitled to monetary compensation, as the termination of the employment contracts in this case shall be deemed unfair dismissal.

The Egyptian Trade Union Law No 213 of 2017 grants the employees of an establishment the full right to establish, join or withdraw from a union committee, in accordance with the applicable Egyptian laws and internal regulations of the relevant union committee.

In order for a union committee to acquire legal personality and to be able to exercise its activities, it should be formed of at least 50 employees. As of the date on which the required documents are provided to the relevant administrative authority and provided that the establishment conditions are fully satisfied, the union committee shall be considered to be legally established under the Trade Union Law.

The union committee shall be entitled to directly exercise and manage the following matters with the relevant employer:

  • resolving individual and collective disputes relating to their members;
  • collective labour agreements at the enterprise level;
  • participating with the general trade union in the preparation of draft collective labour agreements, organised primarily under the Labour Law;
  • participating in the discussion of projects of the production plans of the facility and assisting in their implementation;
  • participating in the implementation, development and/or amendment of internal regulations and guidelines relating to the regulation of labour and employees’ affairs in the establishment;
  • implementing the services programmes determined by the general trade union; and
  • organising and managing the union committee’s affairs and activities freely, without restriction to this right.

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 brackets of each employee’s annual salary.

Further, 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.

The social insurance contribution’s percentage is 29.75% of the monthly gross salary, capped at EGP9,400 (equivalent to approximately USD195), which is required to be paid to the Social Insurance Authority as follows:

  • 18.75% of the monthly gross salary shall be borne by the employer; and
  • 11% of the monthly gross salary shall be borne by the relevant employee.

Business in Egypt is generally subject to certain taxes such as:

  • corporate income tax at approximately 22.5%;
  • value-added tax (VAT) on goods and services at a 14% standard rate;
  • withholding tax on certain payments to non-residents such as dividends;
  • property taxes;
  • stamp duty on certain documentation, such as leases and deeds; and
  • capital gains tax on general profits from the sale of assets.

Under the Investment Law No 72 of 2017, there are a variety of general tax incentives foreign investors may benefit from, in addition to other additional incentives under the Investment Zones Incentives, such as the free zones or technological zones, which may enjoy certain incentives such as: reductions on corporate income tax; custom duties exemption on imported materials and equipment; and reduced VAT rates on certain goods and services. It is worth noting that such incentives vary from one investment zone to the other and the nature of the activities of the business, which shall be confirmed by a local tax adviser.

Tax consolidation is not currently regulated under Egyptian law.

In accordance with the Income Tax Law, the Egyptian thin capitalisation rules provide that the debt-to-equity ratio is 4:1. The debt interest paid by legal persons on loans and advances obtained and that are more than four times the average of equity rights according to the prepared financial statements, are not deductible costs.

Debt interest includes all amounts chargeable by the legal person in return for the loans, advances of any kind obtained thereby, bonds and bills. The loans and advances include, for the purposes of this item, bonds and any form of financing by debts through securities with fixed or variable interest. Equity includes the paid-up capital in addition to all reserves and dividends reduced by retained losses, provided that the difference of the adjusted account is not included in the reserves account and is determined to be non-taxable.

Under the Income Tax Law, if related companies place conditions in their commercial or financial transactions that differ from those between unrelated companies, that will reduce the tax base or transfer its burden from one taxable company to another exempt or non-taxable company, the Egyptian Tax Authority (ETA) shall be entitled to determine the taxable profit on the basis of the neutral price of the relevant transaction, which shall be deemed transfer pricing of transactions concluded between related companies under common ownership or control.

The ETA shall verify the proper application of neutral price (market price) by related persons in their transactions with respect to the exchange of goods, services, raw materials, capital equipment, the distribution of shared expenses, royalty returns and other commercial or financial transactions that are carried out.

A Transfer Pricing Decree was adopted in 2018 to provide new tax guidelines for cross-border transactions between related companies, requiring the submission of specific documents by the relevant companies.

As a general rule, the Egyptian Unified Tax Procedures Law No 206 of 2020 (“Unified Tax Law”) provides that financiers, taxpayers and others shall abide by specific requirements, including the following:

  • notifying of the commencement of the activity and registering with the ETA;
  • obligation to keep paper or electronic books and records within the prescribed legal period, and issue tax invoices in accordance with the provisions of laws and regulations;
  • enabling the ETA’s employees to perform their duties with regard to the procedures of review, examination, completion and control;
  • notifying the ETA of any changes in the activity or establishment within the specified legal period;
  • determining the responsible person(s) dealing with the ETA, whether the individual concerned or a legal representative thereof;
  • calculating the tax correctly in accordance with the laws and regulations;
  • paying tax in the manner and within the time limit specified; and
  • including the unified tax registration number in all correspondence and dealings with the ETA or third parties.

Further, legal persons who sell a commodity or provide a service shall register all their purchases and sales of goods and services on the electronic system, in a manner that ensures that the ETA can track the movement of transactions permanently, and to determine the size, value, parties involved, and other matters necessary for assessing and collecting the prescribed tax.

With respect to the amendments in late 2022 to the Antitrust Law No 3 of 2005, as amended, the pre-closing clearance for any transaction that constitutes an “economic concentration”, subject to meeting the relevant criteria with respect to financial thresholds, has been newly introduced, replacing the post-notification regime. Under the new amendments, economic concentration is defined as any change of control or material influence as a result of a merger or acquisition or establishment of a joint venture.

In April 2024, the Egyptian Prime Minister issued Decree No 1120 of 2024, issuing the Executive Regulations of the Antitrust Law, whereby the application of the new amendments to the Antitrust Law have been introduced and the Egyptian Competition Authority is granted the authority to review and approve proposed mergers and acquisitions prior to entering into the transaction. The new pre-merger control system went into effect as of 1 June 2024.

The Antitrust Law primarily governs anti-competitive agreements and monopolistic practices, and prohibits agreements between competitors with the purpose of restricting competition such as price fixing and other forms of anti-competitive agreements. The Antitrust Law also sets penalties for any violation under the provisions thereof, such as nullity of certain agreements and fines on a case-by-case basis.

The Antitrust Law addresses the abuse of a dominant position by one entity or more within the market, such as unfair pricing, unwillingness to deal and discrimination.

According to the Intellectual Property Law No 82 of 2002 (the “Intellectual Property Law”), the following conditions must be met for an invention to be granted a patent:

  • novelty;
  • inventive step; and
  • capability of economic exploitation.

The owner of the patented innovation has the right to prohibit others from using the patent commercially once it has been registered. Generally, patent protection is valid for 20 years from the date of filing the application.

According to the Intellectual Property Law, a trademark is a logo, mark or word that is used by a certain person, company, or group to differentiate their products and/or services from others in the market. In accordance with the Intellectual Property Law, the trademark registration serves simply as a kind of ownership evidence that can be challenged. The first use of the mark in the market establishes ownership of the trademark in accordance with Egyptian law and as established and confirmed by precedent.

According to the Intellectual Property Law, the trademark’s protection period spans ten years, and can be extended for similar durations upon request by the owner during the final year of each protection period, provided that the corresponding registration fee is paid. However, if the owner fails to apply for renewal within six months after the protection period has ended, they can still apply for a renewal by paying the prescribed fee and an additional fee determined by the executive regulations of the Intellectual Property Law, not exceeding EGP500, otherwise the trademark shall be deleted.

According to the Intellectual Property Law, an industrial design is any arrangement of lines and each stereoscopic shape, with or without colours if it takes a distinctive appearance characterised by novelty and capable of industrial use. The Intellectual Property Law provides that the period of protection of the industrial design or model is ten years starting from the date of submitting the application for registration in Egypt. Protection is renewed for another five years if the owner of the design or model submits an application for renewal within the final year of the term. However, the owner has the right to apply for renewal within three months following the date of expiry of the protection period, otherwise the registration shall be cancelled.

The Intellectual Property Law stipulates that the registration of the industrial design or model grants the owners exclusive rights to prevent others from manufacturing, selling, or importing products that take the form of such design or model or include it. The right to prevent third parties from importing, selling, or distributing the aforementioned products shall be exhausted if the owner markets those products in any country or licenses others to do so.

Copyright constitutes the rights granted to authors and artists regarding their creative works under the Intellectual Property Law. A variety of works are protected by copyright under the aforementioned Law, including computer software, databases, advertisements, geographic maps, and technical drawings in addition to books, music, oil paintings, sculptures, and films. Copyright protection extends only to expressions and not to ideas, procedures, and methods of operation or mathematical concepts.

Moreover, there are neighbouring rights which are known as copyright-associated rights, and which enable innovators to spread their ideas and publish their works by providing performers, sound recording companies, and broadcasting organisations with legal protection. The protection of copyright and related rights extends to Egyptians and foreigners, both natural and legal persons, belonging to one of the member states of the World Trade Organisation. Under the aforementioned Article, protection is granted:

  • for performers: if one of the following conditions is met:
    1. if the performance takes place in a member state of the World Trade Organisation;
    2. if the performance is captured in sound recordings, the producer of which belongs to a member state of the World Trade Organisation, or the sound is first recorded in the territory of a member state of the organisation.
    3. if the performance is broadcast by a broadcasting organisation based in a member state of the World Trade Organisation, and the broadcast is broadcast from a transmitter also located in a member state.
  • for producers of phonograms: if the sound is first recorded in a Member State of the Organisation; and
  • for broadcasting organisations: if the headquarters of the broadcasting organisation is located in the territory of a member state of the World Trade Organisation, and the broadcasting programme has been broadcast from a transmitter also located in the territory of a member state of the organisation.

It is worth noting that plant varieties developed in Egypt or abroad, whether they are obtained in a biological or non-biological manner, shall enjoy protection in accordance with the provisions of the Intellectual Property Law upon their registration in the register of plant varieties that grant the right of protection. In order to enjoy protection, the variety must be characterised by novelty, distinction, homogeneity, and stability, and to bear its own name. The Intellectual Property Law stipulates that the period of protection of plant varieties shall be 25 years for trees and grapes, and 20 years for other agricultural crops.

Further, undisclosed information shall be protected in accordance with the provisions of the Intellectual Property Law, provided that the following conditions are met:

  • the information is confidential in nature, such that the details of the information or its composite components are not widely known or circulated among individuals in the specific industrial sector related to the information;
  • its commercial value is derived from its confidential status; and
  • its confidentiality relies on the effective measures undertaken by its lawful owner to maintain it.

The general laws regulating data protection in Egypt are the Constitution, the Penal Code No 58 of 1937, and the Anti-Cybercrime Law No 175 of 2018 (“Cybercrime Law”). It is worth noting that the main legislation governing personal data is the Data Protection Law No 151 of 2020 (“Data Protection Law”) which applies to any personal data that is subject to any electronic processing whether partially or entirely, with the exception of certain data that is processed by the Central Bank of Egypt. The Data Protection Law prohibits personal data from being collected, processed, or disclosed by any means except with the explicit consent of the data subject. Further, the Data Protection Law places restrictions and conditions on the transfer of any “personal data” abroad, which is subject to a license from the Data Protection Centre (DPC) and a certain level of protection not less than the one provided for under the Data Protection Law. However, it is worth noting that the applicability of the Data Protection Law is subject to the issuance of the Executive Regulations, which have not yet been issued.

The Data Protection Law applies to any processor, controller or handler, whether corporate or natural, who breaches the Data Protection Law if they are:

  • an Egyptian national inside or outside Egypt;
  • a non-Egyptian residing within Egypt; or
  • a non-Egyptian outside Egypt if the act is punishable in any form in the country where it occurred and the data subject who is affected by the breach is an Egyptian national or a non-Egyptian residing in Egypt.

The DPC is the regulatory authority empowered by virtue of the Data Protection Law to oversee and enforce the Data Protection Law, including the issuance of required licences, authorisations and certifications in accordance with the Data Protection Law. However, the DPC is not yet operational and is subject to the issuance of the Executive Regulation of the Data Protection Law, which has not yet been issued.

A new Labour Law is set to be introduced with aims of creating an attractive climate for investment by establishing a balance between the two parties to the production process, adopting a new economic policy in the field of employment, expediting the settlement of labour disputes and achieving prompt justice. The new Labour Law also aims to link wages to production to reassure national and foreign investors and maximise the role of mechanisms of consultation, negotiation and dialogue between the parties to the employment relationship. Moreover, the new Labour Law regulates working hours and rest periods for workers in the private sector, controls for reducing the maximum working hours, and the conditions for accruing weekly breaks.

Furthermore, it is worth noting that it has been reported that the Egyptian government is currently in the process of preparing an all-new Arbitration Law that will be proposed to the Egyptian House of Representatives.

Soliman, Hashish & Partners

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New Cairo
Cairo
Egypt

+202 2812 4499

+202 3536 5787

info@shandpartners.com www.shandpartners.com
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Soliman, Hashish & Partners (SHP) is a full-service corporate law firm, recognised as a leading financial and corporate law firm in Egypt by Chambers and Partners. SHP provides exceptional legal services and offers a creative, quality and business-aware approach to all assignments. SHP works exclusively with well-structured multinational clients within a plethora of practice areas, including corporate, M&A, banking and finance, TMT, energy and electricity, construction, public procurement, dispute resolution, IP rights and employment. SHP acts as local legal counsel to private and public sector entities, including governments, NGOs and leading multinational companies operating in a wide range of sectors. Over the years, SHP has represented over 1,000 leading multinational clients in Egypt’s largest mega projects and established strong relationships with decision-makers in public and private sectors.

Over the past few years, the Egyptian government has been significantly improving the business environment in the country, which has resulted in various changes to the legal framework governing the establishment and operation of businesses in Egypt. Egypt has attracted more foreign direct investment (FDI) across multiple industries, predominantly within the financial services, technology and infrastructure sectors. Egypt was ranked 3rd in the top 17 African Tech Ecosystems of the Future for the year 2021/2022, according to the fDi Report 2021 African Tech Ecosystems of the Future 2021/2022. Egypt was also recognised as one of the top five destinations globally for greenfield FDI in 2016, with Cairo ranked among the top 10 cities hosting start-ups in 2016. Egypt is also at the top of all ranked MENA countries by capital investment in 2020, acquiring 12% capital investment with a total value of USD13.7 billion, where financial services were among the top five sectors in 2019.

Despite international and local crises faced by the country over the years (including revolutions, COVID-19, the Russia-Ukraine war, inflation, foreign currency shortages and the threat of potential recession), Egypt has continued to implement its best efforts to improve the legal environment to attract foreign investors and regulate certain activities under the current climate.

Investment in Egypt

According to Investment Law No 72 of 2017 (“Investment Law”) and Prime Minister’s Decree No 56 of 2022, companies with the aim of establishing strategic or national projects that contribute to the development or partnership projects between the private sector and the state, the public sector, or the public business sector in the areas of public utilities and infrastructure, new or renewable energy, or roads, transportation, or ports, have the opportunity to apply for a single license for the establishment, operation, and management of the project (the “Golden License”). Such Golden License shall be sufficient for the operation of an investment project with no need to apply for any further licenses or approvals. The Golden License Committee at the General Authority for Investment and Free Zones (GAFI) shall be responsible for the co-ordination with all the relevant governmental authorities in Egypt in order to obtain all the licenses and approvals required by law for the establishment of the investment project.

According to Decree No 56 of 2022, the Golden License shall be granted by a decision of the Prime Minister for investment projects that satisfy at least two of the following required conditions:

  • The investment project shall contribute to the growth of exports through exporting no less than 50% of its products abroad annually, within three years from the commencement of its activity.
  • The investment project shall aim to reduce imports, industrial domestication, as well as deepening local components in its products, provided that the percentage of local components in its products, including raw materials and production requirements, constitutes at least 50%, and further provided that the aforementioned percentage be calculated by subtracting the value of the imported components from the product cost.
  • The financing of the investment project shall be primarily dependent on the foreign currency transferred from abroad through any bank registered with the Central Bank of Egypt (CBE).
  • The establishment of the investment project in one of the undeveloped areas, including, inter alia, Southern Giza Governorate, the governorates of the Suez Canal Region: Port Said, Ismailia and Suez (east of the canal), border governorates, including the Red Sea Governorate to the south of Safaga, and Upper Egypt governorates.
  • The investment project shall contribute directly to fields of technology transfer and localisation in Egypt, innovation support, and scientific research development.
  • The main objective of the investment project shall be securing strategic goods for the country, thereby reducing reliance on imports.
  • The investment project shall lessen environmental impact via reducing gas and temperature emissions and climate improvement.
  • The investment project shall offer a labour-intensive investment project by employing not less than 500 Egyptian nationals.

It is worth noting that as of March 2024, a total of 29 Golden Licenses have been issued by GAFI, of which six Golden Licenses were granted in 2024.

Furthermore, recent amendments have been made to the Investment Law’s Executive Regulations by virtue of Decree No 2140 of 2023 to promote foreign direct investment. This includes the Private Free Zones regime, including the incorporation of a provision permitting the Cabinet to approve the establishment of any projects in the Private Free Zone, upon a proposal from the competent minister after GAFI conducts an assessment of the project, subject to various conditions. Furthermore, the aforementioned Decree lifted some of the requirements for establishing projects in the Private Free Zones, including:

  • the requirement to check initially whether there is a location in the Public Free Zone that would accommodate the project;
  • the minimum capital requirement of USD10 million, and the investment costs thereof not being less than USD20 million or its equivalent in the free currency;
  • the minimum area requirement for the project being 20,000 square metres; and
  • a minimum requirement of 500 employees. In addition, this Decree has introduced provisions regarding the inclusion of the services industry under the Private Free Zone system.

Merger Control

The amendments made to the Anti-Trust Law No 5 of 2003 (the “Antitrust Law”) in December 2022 replaced the post-notification regime for a transaction with the newly introduced pre-merger control system, whereby the Egyptian Competition Authority (ECA) is given the authority to review and approve proposed mergers and acquisitions prior to entering into the transaction. 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 went into effect as of 1 June 2024 and requires pre-approval from the ECA for transactions that constitute “economic concentration” between the contracting parties (namely, a change in control or material influence of a person resulting from a merger, acquisition or joint venture), subject to meeting the relevant criteria with respect to financial thresholds.

It is worth noting that any transaction that constitutes an “economic concentration” shall be subject to the pre-closing clearance requirement from the ECA. By virtue of the new amendments, economic concentration is defined as any change of control or material influence as a result of a merger or acquisition or establishment of a joint venture.

Fintech

It is worth noting that Fintech has been newly introduced in 2020 in Egypt as part of the issuance of the new Banking Law No 194 of 2020 with the purpose of promoting financial inclusion and the digitalisation of the financial sector in Egypt. However, the applicability of obtaining a fintech license for the banking sector is still pending the issuance of further regulations in this regard by the CBE. Fintech has since been further regulated in the Non-Banking Financial Services (NBFS) by the issuance of the new Fintech Law No 5 of 2022 and its Executive Regulation, which facilitate the integration of technologies into NBFS and the regulatory framework for the licensing scheme for such services from the Financial Regulatory Authority (FRA). These services include, inter alia, insurtech, microfinance, robo-advisory, artificial intelligence, mobile applications and digital platforms.

In July 2023, the CBE issued regulations regarding the licensing and regulatory framework for digital banks in Egypt, which shall effectively allow for the establishment and operation of digital banks, in an effort to support innovation and transformation of the digital economy, whilst representing an important step in aligning with global developments in the financial technology industry.

Furthermore, in January 2024, the FRA issued Decree No 286 of 2023 (the Decree) regarding the rules and procedures for the establishment and licensing of emerging financial technology companies to engage in non-banking financing activities. The Decree applies to a variety of non-banking financing activities, including, inter alia, real-estate financing, consumer financing and factoring. The Decree stipulates the conditions required to enable the incorporation of a non-banking financing company, as well as the procedures for obtaining the required license to engage in their activities.

Data Protection

In 2020, Egypt introduced the Law on the Protection of Personal Data No 151 of 2020 (“Data Protection Law”), which regulates personal data that is processed electronically. Prior to the issuance of the Data Protection Law, data protection was only governed by the Constitution, the Penal Code No 58 of 1937 (the “Penal Code”) and Law No 175 of 2018 on Anti-Cyber and Information Technology Crimes (the “Cybersecurity Law”). The Data Protection Law is a reflection of the European General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR), as it aims to establish various standards and rules that safeguard data protection and the rights of individuals in Egypt. However, the Executive Regulations of the Data Protection Law have not been issued to date. There are certain types of personal data that are not subject to the Data Protection Law, including, inter alia, data held by the CBE.

It is worth noting that the Data Protection Law applies to any controller, processor or handler (natural or juristic) of personal data. It also applies to any of the aforementioned persons who breach the Data Protection Law if they are:

  • an Egyptian national inside or outside Egypt;
  • a non-Egyptian residing within Egypt; or
  • a non-Egyptian outside Egypt if the act is punishable in any form in the country where it occurred and the data subject who is affected by the breach is an Egyptian national or a non-Egyptian residing in Egypt.

The Data Protection Law sets out the requirements related to processing, handling and controlling any personal data, which in principle is primarily based on the element of consent of the data subject and licensing from the Data Protection Centre. It is worth noting that the Data Protection Centre is the regulatory authority overseeing the application and enforceability of the Data Protection Law. However, the Data Protection Centre has not been established yet, and the regulations regarding the issuance of the said licenses are subject to the issuance of the Executive Regulations. Also, the Data Protection Law regulates the transfer of personal data abroad and sets out certain conditions and standards for allowing the transfer of personal data outside of Egypt.

Banking, Finance and Exchange Control

It is worth noting that the Egyptian Pound has encountered various devaluations throughout 2022 in order to secure IMF loans.

Despite the fact that investors are freely allowed by law and the relevant and applicable Bilateral Investment Treaty to transfer dividends to their home country, the current shortage and unavailability of foreign currency in Egypt has made it difficult to transfer such proceeds and dividends of the investors to their home country and therefore, most foreign investors secure their own source of foreign currency, as each bank is currently applying a list of priorities for exchanging Egyptian Pounds with any foreign currency, which differs from one bank to the other.       

Imports

As of December 2022, the CBE abolished the system of requiring importers to obtain letters of credit for their purchases and returned to the cash-against-documents system for importing goods. This change alleviates the previously higher costs and time burdens on importers.

In conclusion, different legal developments have taken place across different regulations and sectors in Egypt. These measures reflect the Egyptian government’s aim to foster a stable and well-regulated economy, not only for Egyptians, but also to promote foreign direct investment in Egypt. Notably, reports indicate that further changes are anticipated in the coming years, including the introduction of new labour and arbitration laws.

Soliman, Hashish & Partners

2nd Floor
Plot No 15
Ninetieth Street
New Cairo
Cairo
Egypt

+202 2812 4499

+202 3536 5787

info@shandpartners.com www.shandpartners.com
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Law and Practice

Authors



Soliman, Hashish & Partners (SHP) is a full-service corporate law firm, recognised as a leading financial and corporate law firm in Egypt. SHP is renowned for its innovative, high-quality, and commercially astute approach to every task. SHP works exclusively with well-established multinational clients in a wide range of practice areas, including corporate, M&A, banking and finance, telecoms, media and technology, energy and electricity, construction, public procurement, dispute resolution, intellectual property rights and employment. SHP acts as local legal counsel to private and public sector entities, including governments, NGOs and leading multinational companies operating in a wide range of sectors. Over the years, SHP has represented over 1,000 leading multinational clients in Egypt’s largest mega projects and has established strong relationships with decision-makers in the public and private sectors.

Trends and Developments

Authors



Soliman, Hashish & Partners (SHP) is a full-service corporate law firm, recognised as a leading financial and corporate law firm in Egypt by Chambers and Partners. SHP provides exceptional legal services and offers a creative, quality and business-aware approach to all assignments. SHP works exclusively with well-structured multinational clients within a plethora of practice areas, including corporate, M&A, banking and finance, TMT, energy and electricity, construction, public procurement, dispute resolution, IP rights and employment. SHP acts as local legal counsel to private and public sector entities, including governments, NGOs and leading multinational companies operating in a wide range of sectors. Over the years, SHP has represented over 1,000 leading multinational clients in Egypt’s largest mega projects and established strong relationships with decision-makers in public and private sectors.

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