Egyptian law provides two categories of commercial structures that a foreign entrepreneur can set up in Egypt without the need for an Egyptian partner, as follows:
Branch and Representative Offices
In the event that a foreign entrepreneur owns a company that has a local commercial agent, a representative office may be set up that is exempt from income tax, contingent upon the representative office restricting its activities to investigating the possibility of production in Egypt. Such a company may register a branch office to carry out a contract that it has to perform in Egypt.
Companies
Egyptian law recognises three types of companies under the Companies Law No. 159 of 1981 or Investment Law No. 72 of 2017, all of which can be owned and managed by foreign entrepreneurs, namely, joint stock companies, limited liability companies, and single shareholder limited liability companies. The following table indicates the main differences between the three types of companies:
| Scope | Joint Stock Companies | Limited Liability Companies | Single Shareholder Limited Liability Companies |
| Minimum number of partners/shareholders | 3 | 2 (Max. 50) | 1 |
| Management | Board of Directors | One or more directors | One or more directors |
| Change to signature matrix | Board of Directors resolution | General assembly resolution | Resolution by the owner |
| Change to bylaws | General assembly resolution | General assembly resolution | Resolution by the owner |
| Requirement to hold an annual general assembly | Yes | Yes | No |
| Dividend tax | Yes | Yes | Yes |
| Winding up | General assembly resolution | General assembly resolution | Resolution by the owner |
| Change of ownership | Shares can only be sold through the stock exchange | Stocks can be sold by virtue of a notarised contract or a simple contract | A company can be sold by virtue of a notarised contract |
Practical Considerations
Start-ups typically prefer Limited Liability Companies or Single Shareholder Limited Liability Companies due to their flexibility, simplified governance, and relatively low compliance requirements. Conversely, Joint Stock Companies are more suitable for larger entities intending to raise capital, issue shares, or list on the Egyptian Exchange. Furthermore, branch offices are often used for short-term project execution, while representative offices serve as initial market entry vehicles.
Legal Framework for Foreign Investment
Foreign investment in Egypt is regulated primarily by the Investment Law No. 72 of 2017 and Companies Law No. 159 of 1981, along with sector-specific regulations. Egypt actively promotes foreign direct investment through incentives, while maintaining some restrictions on minimum capital and the percentage of national ownership in certain business sectors.
Investment Framework
The foreign entrepreneur should be aware of the following:
- Full Foreign Ownership: Foreign investors can establish companies in most sectors without Egyptian partners.
- Exceptions: Certain activities require wholly or majority Egyptian ownership, such as the media and press, and commercial agencies.
- Regulatory Oversight: The General Authority for Investment and Free Zones (“GAFI”) acts as the main regulatory body for company registration, investment facilitation, and dispute resolution, mainly through the Investor Dispute Settlement Center and mediation mechanisms.
Sector-Specific Restrictions
- Media and Press: Requires special approval from the Supreme Council for Media Regulation. Additionally, foreign shareholders may not own a high percentage of shares or a percentage that gives them the right to manage in media institutions.
- Oil, Gas, and Mining: Typically conducted through production-sharing agreements with state entities such as the Egyptian General Petroleum Corporation(“EGPC”).
- Real Estate and Land Ownership:
Foreigners can own up to two residential properties, each not exceeding 4,000 sqm. Additional properties or larger areas require the Council of Ministers’ approval.
Additionally, foreign ownership is restricted in border areas, Sinai, and other strategic locations. However, foreign investors may acquire land in free zones and investment zones, subject to GAFI approval and specific regulations. Furthermore, foreigners cannot own agricultural land.
- Licensing and approvals: Foreign investors must inquire about the specific approvals required by the relevant government authorities
Merger Control and Competition Regulations
Egypt has implemented a mandatory pre-merger notification regime, requiring approval from the Egyptian Competition Authority (“ECA”) before completing certain transactions, as follows:
- Companies shall notify ECA before finalising transactions that exceed specific financial thresholds.
- Thresholds for notification:
- Domestic Transactions: Combined turnover/assets in Egypt shall exceed EGP 900 million, with at least one of the involved entities having a minimum turnover of EGP 200 million within the jurisdiction.
- Global Transactions: In the event that at least one participating entity generates EGP 200 million in turnover within Egypt, and the combined worldwide turnover of the involved entities surpasses EGP 7.5 billion.
National Security & Strategic Considerations
Egypt has established national security review mechanisms to oversee foreign investments, particularly in sensitive sectors such as telecommunications, banking, and defense-related industries. The Egyptian Supreme Cybersecurity Council plays a pivotal role in monitoring and regulating these investments to ensure they align with national security interests.
Free Zones & Investment Incentives
Egypt provides various incentives to foreign investors, especially in Free Zones, Special Economic Zones, and companies incorporated under Investment Law No. 72 of 2017.
For more information and updates, contact the author of this article, Amir Marghany from Marghany Advocates, the LEX Africa member for Egypt, on Amir@Marghany.com or visit https://www.marghany.com/
