Clients Alert – New Disclosure and Reporting Requirements on Egyptian Companies with Foreign Shareholder(s)
On November 6th, 2019, the Egyptian Prime Minister issued Decree no. 2731 to amend the Executive Regulations of the Egyptian Investment Law (“Decree”) which was entered into effect this month. The Decree imposes new disclosure/reporting requirements on the Egyptian companies with direct or indirect foreign shareholder(s).
The Decree requires from Egyptian companies with direct or indirect foreign shareholder(s) to provide the General Authority for Free Zones and Investment (“GAFI”) with all information about the foreign shareholder(s) (whether direct or ultimate beneficial shareholder(s)) and their respective shareholding percentages through the form provided by the Prime Ministerial Decree no. 2732 of 2019.
Such reports are required whether before the lapse of 30 days following the incorporation date and at each time a company requests an amendment to its capital, object, shareholders’ structure or board structure. Additionally, the grace period for complying with the notification requirement is 45 days from the lapse of each quarter.
In practice, the Egyptian companies established under the Companies Law no. 159 of 1981 are reluctant whether they fall under the scope of this Decree or not as the Decree is issued as an amendment to the Investment Law. However, in a recent meeting held with the Minister of Investment and International Cooperation (“Minister”), the Minister confirmed that all Egyptian Companies (regardless the law of its establishment or the percentage of the foreign shareholder(s)) are obliged to provide the requested information/reports about their foreign shareholder(s) percentages.
The Minister confirmed that the rationale behind this decree is purely to fulfill the Government’s statistical requirements in order to measure foreign direct investment and its effectiveness on the Egyptian economy.
The companies that fail to comply with the abovementioned obligation prescribed by the Decree will not benefit from the after establishment services and GAFI shall have the right to take all necessary measures against them such as paying fines up to EGP 50,000, according to law no. 141 of 2019 and the Prime Minister’s decrees no. 2731 and 2732 of 2019. This fine will be imposed starting from the next quarter. GAFI may also suspend its services to non-compliant companies.
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