Investment Law No 72/2017

On the 31st of May 2017, a new law was introduced to govern domestic and foreign investment projects, namely Law No 72/2017.

The New Investment Law replaces the Investment Guarantees and Incentives Law No 8 for 1997 and aims to serve as an incentive for all potential investors by facilitating the process of investing in Egypt. It should be noted however, that article 2 of the new law emphasizes that it does not override tax privileges, exemptions or safeguards granted to companies created before this law, until their
term expires.

The new law encourages fair competition, consideration of social and environmental issues, transparency, stability and, most importantly, the facilitation of investment procedures. It also introduces three forms of incentives:

General Incentives

Applicability: All investment projects, except for those set up in free zones and those issued a certificate by the Authority’s Chief Executive Office

Benefits
– For the first five years of registration, the documents, loan agreements and pledge contracts of such companies are exempt from stamp duty tax and notary public fees
– Projects are exempt from land registration fees
– Projects can enjoy a unified flat customs duty rate of 2% on all machines and equipment needed for establishing the project

Special Incentives

Applicability: Companies that fit into either sector (A) or (B) (as determined by the relevant Minister) and association projects issued a certificate by the Authority’s Chief Executive Officer and satisfy the
following conditions:

– Be incorporated (within a maximum of three years) to conduct the investment project
– Keep regular accounting books

Benefits
Investment projects established after this Law enters into force and
according to the investment map shall be granted an investment incentive
in the form of a deduction on taxable net profits, in the following manner:

– 50% deduction on the investment costs of projects set up in underdeveloped geographic locations (Sector (A) projects)

– 30 % deduction on investment costs for projects in Sector (B)
(labor intensive projects, small and medium enterprises, renewable energy projects, national and strategic projects, tourism projects, electricity generation and distribution projects, projects that export their production outside of Egypt, automotive projects, certain chemical industries, certain pharmaceutical industries, food and agricultural projects and, finally, the engineering, textile and leather industries).

Additional Incentives

Applicability: Companies issued a certificate by the Authority’s Chief
Executive Officer

Benefits

Allowing projects to have their own customs gates for imports and exports

– Government aid for the costs associated with introducing utilities to the land allocated to the project, and with the cost of technical training for employees

– Refunding half of the fees paid for the allocation of land for industrial projects if they commence production within two years of allocation. The cabinet may allocate free land for specific strategic projects
Finally, the law guarantees the following to all types of investments:
a) Fair and equal treatment to both foreign and Egyptian investors
b) Protection from coercive or discriminatory measures on any invested capital
c) Residency permits for foreign investors throughout the term of their investment project
d) Protection against nationalization – Article 4 states that investment projects will not be nationalized and can merely be used for the public utility if fair compensation is paid in advance.
e) Protection against the seizure of money without a court judgment, excluding amounts due for tax and social insurance contributions.
f) Protection against the withdrawal of licenses without obtaining approval from GAFI and giving the investor prior notice and time to cure the defect
g) The right to set up and fund projects from abroad using foreign currency
– as well as the right to transfer proceeds of liquidation aboard (without prejudice to the rights of third parties)
h) The facilitation of liquidation procedures, ensuring that they are concluded within 120 days
i) The importation of machines, equipment and raw materials needed for the purpose of establishing, expanding and operating the investment project without an import license. Projects also have the right to export products without a license
j) The right to have workforce which consists of up to 10% foreign workers. This number can be increased to 20% if it is not possible to find national workers with the required qualifications. Further exceptions can be made provided that training is offered to national laborers.

Finally, the law has also created a more rigorous corporate social

responsibility scheme, allowing projects to set aside up to 10% of their net income profit (deductible for annual corporate tax) to participate in one of the following fields:
– Environment protection and enhancement
– Health, social, and cultural services
– Vocational education.
– Research funding or leading awareness campaigns in collaboration with universities or scientific institutions
– Scientific training and research

Types of Investment in Egypt 

The New Investment Law provides for four types of investments: inland investments, investment zones, technological zones and the free zones

1 | Inland Investments

Internal or inland investments can be set up in any area other than in investment and free zones. Projects here must comply with all relevant laws, and they do not benefit from additional incentives other than the exceptions introduced in the New Investment Law. One of the methods of facilitation set up by the new law is that of “certification offices”.

These offices assure the quick issuance of the certificates required to confirm the status of investment projects.

Additional incentives include:
Investment projects established after this Law enters into force and according to the investment map shall be granted an investment incentive in the form of a deduction on taxable net profits, in the following manner:
– 50% deduction on investments made in underdeveloped areas
– Government support for the cost of introducing utilities to a new project
– Returning to investors half of the amounts paid to acquire land for
industrial projects if production begins within two years Additionally, inland projects can sometimes develop into private free zones if they prove to be active and half of their production is exported.

2 | Investment Zones

Investment zones were first introduced by Law No 19 of 2007 and later explained in Prime Minister Decree No 1675 of 2007, which currently regulates these zones.

GAFI emphasized that these zones are a key instrument in the government’s plan to support Egypt’s economic growth by facilitating interaction with investors. They aim to establish integrated clusters in all fields, widen the scope of economic and social development across the
country, and develop small and medium enterprises.

Investment zones come with fewer limitations than free zones, in addition to many incentives, for example exemption from stamp duty and documentation tax for the first five years of their registration, and prevention from being nationalized or confiscated.

It should also be noted that companies in investment zones are each managed by a board of directors, who have the exclusive power to approve investment projects. Consequently, no administrative party can freeze the company’s assets, intervene in their pricing or cancel the use of their real estate license.

There are currently 13 investment zones in different fields:

a) CBC Egypt for Industrial Development specializing in building materials, located in Giza
b) Polaris International Industrial Park, specializing in textile industries and located in Giza
c) The Industrial Development Group, which specializes in auto-feeding industries and is located in Giza
d) Pyramids Industrial Parks, which are made up of engineering industries in Sharqiya

e) Al-Tajamouat Industrial Park, which works with textiles and RMG in Sharqiya
f) Two Small and Medium Enterprises: Meet Ghamr in Dakahlia and Al-Saf in Giza
g) City of Scientific Research and Technology Applications for nanotechnology and biotechnology in Alexandria
h) Three higher education and scientific research industrial zones: Cairo University in Giza, Ain Shams University in Qalyubia and Fayyoum University in Fayoum
i) City of Scientific Research for Information Technology in Maadi
j) Cairo Airport Investment Zone, which provides commercial services in
Cairo Airport

3 | Technological Zones

The New Investment Law also permits the Prime Minister to license the establishment of Technological Zones. These are to cover the fields of communication and information technology, which includes designing and developing electronics, data centers, programming development,
technological education, and other related areas. Such zones are managed solely by a board of directors – again meaning that their approval for any projects will suffice. The New Investment Law
makes it clear that the tools and equipment required for the functioning of these zones are not subject to tax and custom duties. The board of directors is also responsible for setting the controls and criteria required to conduct activities, as well as approving the proposed activities within the boundaries of the zone. More information on the properties of technological zones can be found in our comparative tables below.

4 | Free Zones

In addition to the above, the new law has reintroduced private free zones after their ban in the 2015 amendments. Free zones consist of Egyptian shareholder companies, set up on Egyptian land, following the laws of the country namely:
– Obtaining a commercial register
– Obtaining a tax card
– Obtaining the correct operating and building licenses
– Fulfilling their income tax obligations
– Providing social insurance for their employees
They must also comply with Ministerial Decrees and Laws, as well as decisions issued by the National Bank with regards to currency use. In summary, they must comply with the laws and regulations found in:

a) Law No 72/2017 Promulgating the Investment Law Decree No 48/2008
b) Law No 21/1958 Article 23 on the regulation of Egyptian Industry
c) Decree No 770/2005 Article 51
d) Decree No 770/2005 Article 39

Free zones can be either public or private and can be established in most investment sectors excluding:

a) Oil, fertilizers and steel production
b) Transportation, liquidation or production of natural gas
c) Heavy energy usage systems
d) Alcohol and wine production
e) Production of weapons, ordnance or explosives

All products (with a few exceptions) imported or exported by projects inside free zone are not subject to importation and exportation regulations otherwise applied outside the free zones, nor are they subject to taxes such as custom duty taxes and VAT.

Likewise, investment projects established in these free zones will not be subject to taxes imposed on distribution of dividends. Instead, companies are to pay certain charges, as will be seen below. These charges will be paid to the National Bank through the Investment Authority, similar to the taxes that are paid to the Ministry of Finance from inland investment projects

Free zones also benefit from the following:

a) No limitations on transferring profits or investing money
b) The right to import and export without the need to maintain records in the Importers Register
c) All equipment, machinery, and transportation necessary to carry out activities in the free zones are exempt from customs duties, VAT and other taxes and duties (except for cars)
d) Any property or funds cannot be detained, seized, retained in protective custody, frozen or confiscated
e) No administrative body will interfere in the pricing of any products nor in
determining their profits.

Products from these projects are however, subject to the general rules applicable to importation from abroad. Products containing both local and foreign components will be taxed according to the value of their foreign components at the time of production. As the new law aims to be environmentally conscientious, any waste resulting from the operation of projects in the free zone are permitted into the country for the purposes of recycling (subject to their compliance with the safety methods described in the Law on the Environment promulgated by Law No 4 of 1994).

Setting up Free Zones in Egypt

Free zones are divided into public and private zones. There are nine public free zones throughout Egypt:
– Alexandria Public Free Zone
– Nasr City Public Free Zone
– Port Said Public Free Zone
– Damietta Public Free Zone
– Keft Public Free Zone
– Media Public Free Zone
– Shebin el-Koom Public Free Zone
– Suez Public Free Zone
– Ismalia Public Free Zone

Discussions are currently underway to add 3 new zones:

– Badr City Public Free Zone
– El Minya Public Free Zone
– Nuweiba Public Free Zone in South Sinai Governorate

These free zones are supplied with facilities and services such as electricity, water, sanitation, telecommunication, and natural gas. They were set up in the aforementioned places due to their proximity to sea and air ports as well as to large cities. The management of any public free zone is carried out by a Board of Directors. The Chairman of the board will be appointed by GAFI’s Chief Executive Officer, who is to be approved by the competent minister. Board members must disclose all their funds to the Supreme Council of Investment, and will be supervised by an independent
entity.

This board of directors of the public free zone is authorized to issue final approval on projects within the zone (or within any private free zone located in their geographic domain), in addition to being responsible for issuing licenses to authorize these projects. These licenses must describe the purpose and term of the project as well as the amount of financial guarantee to be paid by the licensee. This license must also state the realestate properties needed to carry out the relevant project. To determine this, the investor must approach Zone Management within 30 days of receiving consent to conduct the project. Upon the termination of the project, the land allocated must be cleared of occupancy – which includes removing any buildings or facilities at the investor’s own expense.

Furthermore, GAFI may set up private free zones to hold one project each. GAFI Decree No 48/2008 Article 2 sets out that Large Industrial Projects may set up private free zones, as opposed to setting up within the boundaries of a public free zone, if the following conditions are satisfied:

a) There is no appropriate existing public free zone and the proposed private zone is adequate for the economies of the project. This includes geographical necessities, such as working close to raw materials, an export port, or a certain route or highway necessary for textile transport. Projects may also require private free zones due to the nature of their products or raw materials namely being of a large size, heavy weight or short shelf life.
b) The project is a holding or limited liability company. It can also be a branch of a foreign company or a branch of one of the companies operating in the domestic investment system.
c) The paid capital or issued capital for the project is no less than 10 million dollars. Investment costs should be no less than 20 million dollars, or the equivalent in foreign currency. The capital must be paid within three years of licensing.
d) The number of permanent employment is no less than 500 workers, employed within the first year of operation (a signed document will need to be provided to ensure this).
e) No less than 75% of goods must be exported, with the exception of ready-made clothing and furnishing, where 95% of goods must be exported. In the strategic and mining industries, export rates are to be decided by the relevant minister.
f) Proof of ownership for the project is presented, ensuring that the surface area of the site is no less than 20 meters squared.
g) Only 20% of the materials used can be locally sourced, however this excludes extracted raw mineral products.
h) The project provides a timeline scheduling the start of activity and showing commitment to the rules in this decree. This must also indicate that the project has not gone over the time limit specified except with the approval of the GAFI.
i) The project gains approval from the competent authority (such as the Ministry of Transport, the Petroleum Authority, the Port Authority) and the environmental agency to set up the project on its merits. This must take place before the decision to license is approved.
j) The project has an adequate power source and that it will comply with the resolutions of the Supreme Council of Energy.
k) It has received security clearances for foreign shareholders and partners, if applicable.
l) The project presents a letter of indemnity to GAFI with the value of 50,000 dollars for industrial projects and 100 000 dollars for service projects for the duration of their operation.

GAFI has also produced guides indicating the required documents and steps for setting up free zones:

1. The investor or their agent submits a ‘Form of Establishment of Project’ (available at GAFI).
2. The Permanent Technical Committee of the Free Zones Affairs grants preliminary approval on establishing the project.
3. The investor submits a check amounting to 10% of the rent value, with a minimum of $1000.
4. The investor fills in the security investigation forms for any foreign partners.
5. The investor submits a request and attaches a check with the rest of the rent value, as well as a pledge to leave the site if the request is denied.
6. The investor receives final approval from the board of directors of the respective public free zone.
7. The investor submits the company’s Articles of Incorporation.
8. The investor registers at the Commercial Register, obtains a tax card, and their company is published in the Investment Gazette.
9. The investor receives 3 draft copies of the decree issued to them by the head of the Free Zone.

Governing Authorities and their Responsibilities

The current law stipulates that the Supreme Council for Investment will be established under the chairmanship of the President of the Republic to carry out the following:

a) Take all necessary measures to set up a good climate for investment.
b) Develop the general framework for the legislative and administrative reform of the investment environment.
c) Adopt the policies and the investment plans which prioritize target investment projects.
d) Follow up the execution of investment plans and programs by the state’sauthorities.
e) Explore the investment opportunities available in each sector and examine the problem areas within them.
f) Monitor the development of Egypt’s ranking in international investment reports and indicators.
g) Follow up on the mechanisms for investment dispute resolution and the status of international arbitration cases.
h) Oversee the joint liability of all ministries, public authorities and government bodies concerned with investment.
i) Resolve any confusion which may raise among authorities in areas of investment. Secondly, having established its power to allocated state-owned land within the 2017 law, GAFI is given a number of additional duties. As a public economic authority, it reports to the Competent Minister and works

to regulate, encourage, advance, administer and promote investment in the country. One of the ways this is done is by delivering incorporation and post-incorporation services to joint-stock companies, partnerships limited by shares, and limited liability companies – including the automation and unification of their procedures. Moreover, GAFI is responsible for carrying out these procedures swiftly, and will often decide on the application for incorporation within one full business day from the date of submission, as well as ensuring the following services are provided to companies:

a) Simplified procedures related to the general assemblies and boards of directors of new companies.
b) Digitized books and documents to stay in line with technological advancements.
c) Developed, standardizes and simplified procedures for capital increase or decrease. On a more general scale, GAFI is also to:
a) Draft an investment plan (in cooperation with all the state’s competent authorities).
b) Develop plans, studies, and regulations that would attract and encourage national and foreign investment in various fields, pursuant to the national
investment plan.
c) Create a database and map for the available investment opportunities and the target investment projects and activities.
d) Issue certificates needed by investors to enjoy the incentives and safeguards granted by this law.
e) Develop an investment promotion plan and take all necessary measures
to publish the plan both locally and abroad.
f) Standardize all official forms related to investment affairs, in coordination with the competent authorities, and offer these forms online and through other channels.
g) Develop a management system for free and investment zones.
h) Explore and provide suggestions for existing legislation.
i) Hold conferences, seminars, workshops and exhibitions connected with investment affairs, both locally and abroad.

The new law also facilitates licensing procedures by offering two new routes for registration:
1. Applying directly to the Investors Service Center at GAFI or
2. Using one of the private Approval Offices. Approval Offices are authorized by GAFI to review and confirm the completeness of their applications in order to attain the licenses required to set up, operate or expand a project. Approval Offices are to issue, to issue certificates (valid for two years) confirming that the investor financially and technically complies with all terms and conditions required by the law and that all their documents have been submitted. The investor is to then submit
this certificate to the authorities, which have a maximum of 10 days to accept or refuse the application.

Certificates are then submitted to the competent authorities and their representatives at the Investors Services Center. Essentially, the new law gives GAFI the authority to function as a one-stopshop for investors to obtain all licenses and approvals they may need to set up and operate a project, including allocating state-owned land. Since one of the center’s functions is to speed up the licensing process, a time limit of two days has been implemented to give feedback to investors

on their company’s compliance and completeness (but there is no time limit on the issuance of final approval or licenses). The center can also object to the certificate within ten business days. Additionally, the center also has the power to ratify board and shareholder meeting minutes, capital increase and reductions, liquidation, and all other company-related matters. It should also be noted that strategic as well as PPP (public-private partnerships) projects in infrastructure, renewable energy, transportation or ports can also be set up with the issuance of a single license from the Cabinet. Finally, Competent Authorities now have the power to examine the investment application submitted through the Investor Service Center,however objections can only be made within sixty days. The new law also ensures that GAFI can carry out these duties by prescribing a structured system of management, namely that the Board of Directors must
be headed by the Competent Minister, that it must include representatives from relevant authorities and bodies, as well as have members who are experienced in the area of private investment and in the law. The law also
includes requirements that the board should meet at least once a month in order to complete its tasks. With GAFI functioning as a facilitator between the investor and the system
of investment, the investor must also provide the right documents and paperwork to initiate the process. Below are the steps necessary to create a Joint-Stock Company, a Partnership Limited by Shares, or a Limited Liability Company:
Documents Required:
– Photocopies of the power of attorney from each of the investors or partners
– Photocopies of the national IDs or passports of each of the investors or partners
– A bank certificate proving the availability of at least 10% of the project’s capital for joint stock companies and partnerships limited by shares, or 100% for limited liability companies
– A copy of the party’s legal counsel’s Egyptian Bar Association identification card
– Original certificate indicating that the company’s auditor is listed at the registry of accountants and auditors
– Application to GAFI as well as a financial Letter of Indemnity on behalf of GAFI according to the type of activity and its investment costs
– The company’s Articles of Incorporation

Allocation of Property

This new system permits investors to obtain real estate properties required for pursuing or expanding activity, regardless of participation or capital. GAFI is to issue an updated and detailed map specifying all available properties. These properties are then allocated upon the approval of the Council of Ministers and the President of the Republic. Properties allocated can include state private property, so long as the investor indicates in his application the purpose and size of the project. If more than one investor competes for a certain plot, whether by way of sale, lease, lease-to-own, or license, those who meet the technical and financial requirements will be selected based on a points system.
As for the sale price, rent, or consideration of usufruct of the property, it is to be estimated by either the General Authority of Government Services, the Supreme Committee for Pricing of State-Owned Lands at the Ministry of Agriculture, New Urban Communities Authority, Tourism Development Authority, or the Industrial Development Authority. The chosen authority, based on the nature of the target activity, will have one of its experienced representatives finalize the estimation within 30 days of receiving an application for estimation. The law ensures that decisions will not be terminated unless in the following situations:
a) Failure to receive the real estate property within 90 days of receiving approval.
b) Failure to start the project within 90 days from the date of receiving the property (without a valid excuse).
c) Violation of the conditions governing the payment of the financial dues and the payment dates.
d) Changing the purpose for which the real-estate property was allocated, pledging the property, or establishing rights on the property without proper written consent from the Administrative Authority.
e) Committing material violation of the terms of the contract or the license for usufruct at any point and then failing to rectify the causes of the breach.

Settlement of Investment Disputes

Amicable Settlement

The New Investment Law introduces three committees that deal with different types of complaints, as well as a new arbitration and mediation center. The three committees settle disputes between investors and the Authority, the state or any of its branches. Their decisions are binding on the state and its branches but not on investors. Failure to enforce decisions made by these committees will hold the state departments liable to civil penalties, however, none of these new methods are to prejudice the right of investors to resort to the judicial system for dispute settlement. In the following page you will find an overview of the various means of dispute settlement available, with a particular focus on the new committees presented by the New Investment Law.

 

Issue Committee Result
Complaints filed against the resolutions issued in accordance with the law and regarding the issuance of approvals, permits, and licenses The Grievance Committee The committee is to respond within 30 days from the hearing/ submissions closing
date
Issues with applications, complaints, or disputes submitted or referred to the state or one of its branches, authorities, or companies Ministerial Committee on Investmen Dispute Resolution Competent administrative authority is to submit memoranda relevant to the request and the committee is to settle matters within 30 days
Disputes arising from investment contracts with the state or one of its branches,
authorities, or companies
Ministerial Committee on Investment Contracts Dispute Resolution The committee is to examine and explore the dispute arising between the parties and then execute the necessary settlement, with the consent of the contracting parties. The settlement is to then be presented to the Council of Ministers and, upon their approval, becomes enforceable and bindingon the administrative
authorities.

 

Arbitration

Finally, the new law allows for arbitration either through the traditional method or through the newly created “Egyptian Center for Arbitration and Mediation”, an independent entity based in Cairo. This center is available for investors to settle disputes between them and other investors or the state. The formation of this new method of arbitration avoids unfair rulings that previously occurred, and ensures that civil liability will only be found if the individual was aware of their crime. The center is managed by a board of five directors appointed by the Prime Minister every five years. This board is to issue the articles of association for the center as well as its arbitration and mediation rules.

Litigation

Egypt operates under a civil law system of codified laws, largely derived from the French Napoleonic Code. The Egyptian Civil Code of 1948 remains the primary source of legal rules applicable to contracts and is influenced by the French Civil Code and Islamic (Shariah) law. The Civil and Commercial Procedural Code regulates litigation procedures across all court levels since they are the same in all cities. Despite this, court jurisdiction varies from one local court to another according to the nature of the dispute.

There are three tiers to the courts of general jurisdiction, namely:
1. The District Courts (al-Mahākim al-Juz’iyya) and primary courts (alMahākim al-‘Ibtida’iyya or al-Mahākim al-Kuliyya) act as courts of first instance. Their jurisdiction is primarily based on the monetary value being disputed.
2. The Courts of Appeal (Mahākim al-‘Isti’nāf) form the second instance of litigation.
3. The Court of Cassation (Mahkamat al-Naqd), which is solely concerned with reviewing questions of law, is the highest court in the hierarchy of adjudication.

In the last decade, specialized Economic Courts were created as part of the courts of general jurisdiction to ensure the efficient resolution of disputes in commercial matters. These courts have exclusive jurisdiction over civil disputes arising out of the application of 13 particular laws which include those regulating the capital market, investment, financial leases, unfair competition and anti-trust, companies, transfer of technology, commercial agency, intellectual property, insolvency and the banking system. To complement this, they were also given exclusive jurisdiction over crimes related to economic activity, including insurance, financial leases, capital markets, investment, intellectual property, telecommunications, unfair competition and antitrust, consumer protection and electronic signature. Administrative courts also exist within the country, however they form an independent court system, organized under the Council of State (Majlis alDawla). Their area of jurisdiction concerns matters related to public and governmental entities. Administrative law mainly consists of case-law from
rulings in the administrative courts.

Court Proceedings in Egypt

Below are the steps generally taken to initiate court proceedings:
1. Filing the claim statement with the competent court.
2. This statement is subsequently served upon the defendant(s) through a court bailiff.
3. The court bailiff serves a formal notice notifying the defendant of the claim, and the time and date of the hearing, together with a copy of the statement of claim.

Costs

The average cost of litigation in the Egyptian cities measured is 23.6% of the claim value, significantly lower than the global average of 35.1% and below the regional average of 24.6%. Additionally, enforcement fees are regulated nationally by the Ministry of Justice as set by the Law on Court Fees, and it is therefore identical across all cities. Egypt’s court fees, at 1.3% of the claim value, are among the lowest in the world. Court fees associated with filing a case are fixed, while the enforcement fees are largely based on a percentage of the claim value.

Enforcement of judgments

Foreign judgments can be enforced in Egypt under the procedural code, however the courts will only examine final judgements. Prior to this however,
the following requirements must be fulfilled:
– The reciprocal treatment of judgments by Egyptian courts. If there is no reciprocity the court will tend to review the merits of the case as if it had original jurisdiction over the dispute
– Egyptian courts do not have jurisdiction over the dispute, whereas the foreign courts do
– Correct procedures were followed in the international court proceedings. Egyptian courts will essentially verify that the parties to the dispute were duly notified and properly represented in the proceedings
– The foreign judgment is final and has res judicata effect
– The foreign judgment does not conflict with a previous judgment rendered by an Egyptian court in the same dispute, and is not contrary to public order or public morals as understood by Egyptian law

Laws Related to Investment Law

In the past year, a number of new laws have set the scene and have created a ground ready and fertile for new investments and growth. This was accomplished through the introduction of a number of laws and regulations, all resulting, whether directly or indirectly, in the creation of new and attractive opportunities for foreign investors. These laws and changes include updates in financial leasing laws, the introduction of the new consumer law, the new public procurement law, and the imposition of new fee brackets for registration on the stock exchange. Moreover, two new laws governing much-needed technological advancements are those concerning the incorporation of e-signatures and the new cybercrimes law. Together, the formation of these laws can be drawn out in a timeline, showing that Egypt has made efforts to attract investment and has indeed become ready for investors.

1 | Updates in Financial Leasing Laws

In August 2018, President Abdel Fattah el Sisi ratified Law No. 176 of the year 2018 regulating financial leasing and factoring activities, replacing both the old financial leasing law (Law No. 95 of 1995) and ministerial decree No. 446 of 2003. The new law lays down the rules and procedures for licensing financial leasing companies. Financial leasing companies own assets and provide financial leases, meaning that they lease them to companies for their use, control, and a share in any economic risk entailed. In fact, the law clearly sets out which contracts are deemed leasing contracts. The initial contract must include that after a certain leasing period, the lessee can own the asset for a pre-determined price. Contracts without this option are not considered financial leasing contracts under the new law. Moreover, the asset must be central to the business of the lessee.

Of course, one of the key requirements for obtaining a license under the new law is that the activities of these companies must be limited to financial leasing or factoring activities or both. Moreover, such companies must be joint stock companies with a minimum paid initial capital of ten million Egyptian pounds, or their equivalent in foreign currency. The law also requires that shareholders with more than 10% shares, board
members, and managers have a good reputation with no criminal record or declarations of bankruptcy in the five years preceding the establishment of the company. The managers must have past experience in the sector. The company must also have the necessary technology to maintain its activities. Moreover, one of the new provisions of the law is that it gives employees of the Financial Regulation Authority judicial seizure status, allowing them to impose this law. Failure of an entity to provide these employees of the paperwork they ask for could lead to a fine or imprisonment. The law also gives financial leasing companies the right to inspect the asset regularly and ensure that the lessee is using it for its planned purpose. The law warns the lessee against selling part of or the whole asset to the third party without receiving written permission from the financial leasing company, deeming any action to that effect null, and giving the right to the company to retrieve the asset from the third party. The lessee will also face a fine of no less than half the value of the asset as well as possible imprisonment. The law also provides appropriate mechanisms for receiving complaints from lessees against such companies. In turn, companies can appeal against decisions taken by the authority. If the issue is taken to court, the Economic Court will have jurisdiction. Pre-existing companies are required to change their status to comply with the requirements within 6 months and earn the new license under the new law. The FRA may approve to extend this period for up to two times. After this period, the old license will be revoked and the FRA will decide a set period of time to liquidise their assets and give them to a company licensed under the new law. Continuing business activities without a license would lead to both a fine and imprisonment. All in all, this law is part of a grand scheme of laws aimed at development and growth. This new law supports small businesses, as it regulates their provision of assets necessary for the businesses – especially since they would usually not be able to obtain these benefits from traditional banks. This encourages both foreign and internal investment, creating new employment opportunities.

2 | New Consumer Law

In September 2018, President Abdel Fatah el Sisi ratified the new Consumer Protection Law. Its Executive Regulations were introduced in April 2019. Its key attributes are protecting consumers from unsafe products and implementing the rights of citizens to allow them to know the details of the services they use, or the goods they consume. The new law cancels the previous one, No. 67/2006, and replaces its provisions with those more protective of consumers. Indeed, the old law can be criticized for not providing consumers with enough protection.
In its emphasis on providing consumers with more information, it obligates businesses to inform the consumer of all information relevant to the product, including its source and main features in a clear manner. The business will otherwise face a fine between 10,000 EGP and 50,000 EGP. The seller must also make clear their information, including their address, contract information, and trademark. In fact, all messages aimed at the consumer, including advertisements, data, information, bills and receipts must be written either in Arabic or in Arabic and another language. Moreover, a fine no lower than 50,000 EGP but no higher than 1m EGP is imposed for creating misleading advertisements. Business will also face the same fine for providing products, or advertising for them in a way that incites racism or religious hatred.

Businesses must also provide invoices to consumers for goods and services, in addition to providing spare parts for the products they sell, or made available to consumers even after their warranty period has ended. The new law also creates a list (Article 9) warning business of providing misleading information as to the nature or components of the goods, the source of the goods as well as their production and expiry dates, the relevant trademarks, and the producer of the goods.

Perhaps two of the most important reforms that have come with this law are those concerning real estate. Article 15 stipulates against two actions that were previously harmful to consumers. Firstly, it prohibits the advertising or the contracting of sale of property or land before obtaining the relevant license (as per Law No. 119/2008 on Unified Building). This is to prevent agents or owners from selling land based on a yet-to-beimposed plans or blueprints. Secondly, the law now prohibits the common practice of real estate agencies, wherein they often stipulated in their contracts with new land owners that they were to receive a percentage of any further sale of the land or property. This percentage often went up to 10%, and was a way for agencies to continue making money off of consumers, even after they had already purchased the land.

Any clause stipulating for such behavior will be considered void. The new law contains a number of provisions concerning e-commerce. Article 36 stipulates that the business must, before carrying out the contract, provide the consumer information regarding the business itself, the product, the warranty, the post-sale services, and the delivery date and location. The new law has indeed met its aims of protecting consumers through ensuring that they obtain all the information and rights regarding the goods and services easily, further implementing this by imposing high fines on businesses should they fail to do so. The law is relevant and up-to-date both in how it addresses e-commerce and in its realization of the issues surrounding real estate, and fixes them, effectively protecting the consumer from possible deception or abuse by real estate agencies. It provides certainty  for both consumers and companies, creating a dynamic atmosphere for investment.

3 | New Public Procurement Law

The new tenders and bids law of 2018 was introduced in October of that year to cancel that of 1998 and govern business transactions that involve the state.
The law first starts by defining a number of aims. Among these aims is the correct organization and execution of contracts in general, ensuring that such matters are as economically beneficial as possible.

The law also aims to encourage relevant entities to constantly create new and innovative methods and solutions. Moreover, it clearly lays out that it attempts to create a good climate in which small and medium sized enterprises can grow. To fulfil these aims, Articles 3-5 of the law create new authorities to oversee such tenders and bids, as well as handle any complaints rendered to them. Moreover, Article 7 clarifies that any buying or leasing of real or personal property, as well as any contract for services, must generally be subject to a public tender.

If an entity has no legal personality, it will also have to carry out any buying or leasing through a public tender, and more specifically through a limited tender, a local tender, or a direct agreement. Some of the methods above are new ways to carry out bids and tenders; such as the two-stage tender and the option of direct agreement. Two-stage tenders can be used in cases which the authority finds the subject of the tender complicated or difficult to specify, allowing the parties to communicate with one another. As for the direct agreement stipulated above, the law allows for entities to contract for goods or services without a tender or bid and through direct agreement in the following cases:
– If the matter is time-sensitive
– If only one entity is capable to provide the service

– If the service was previously carried out without a contract and the entities
wish to continue working together contractually
– If the subject matter supports the political, social, and economic goals of the state
– In cases where there is no time to carry out official tender procedures Direct agreement can then take place through the approval of the head of the authority so long as the value of the matter does not exceed EGP 1 million in the cases of buying or leasing, EGP 5 million in cases of contracting for services.

However, if the matter exceeds EGP 10 million or EGP 20 million respectively, it would require the approval of the competent minister or  governor. Article 8-27 govern how an agreement is presented and then carried forward. While many of these rules are carried over from the new law, a few new ones include:

– Expedited measures for time-sensitive tenders or bids
– Warnings against meddling in a tender or bid by visiting the headquarters of the bidders
– Reducing the temporary insurance amount in tenders from 2% to 1.5% Most importantly, the law then proceeds to go into a number of new measures prohibiting and allowing certain practices in order to make bids and tenders more efficient.
Most importantly, the law then proceeds to go into a number of new measures prohibiting and allowing certain practices in order to make bids and tenders more efficient. For instance, article 33 warns entities against entering into more than one bid or tender. Article 35 further stipulates that if the prices in a bud or tender seem too low, authorities will step in to inspect the integrity of the matter.

Furthermore, as mentioned above, the law tightly regulates the circumstances under which a tender or bid may be cancelled. Articles 37 and 38 explain that tenders can only be cancelled if any illegal acts are carried out, such as collusion between bidders, acts of corruption or monopolisation, or mistakes in the rules of the bid or tender. All in all, the new law creates certainty for investors as well as opens up opportunities for them. It clarifies matters which had been previously unclear, such as the cancellation of a tender or bid, as well as introduces new and updated methods to carry out such transactions. Contracts which the state is a part of must be concluded fairly and in full transparency – and the new law ensures just that.

4 | New Fee Brackets for Registration on Egyptian Stock Exchange

Egyptian Stock Exchange In a continuing effort to make investing and building a business in Egypt easier and simpler, Ministerial Decree No. 2125 of the year 2018 was published in the Official Gazette on October 18, 2018. The decree amends the fees charged on companies to register on the Egyptian Stock Exchange. Article 1 of the new decree divides companies into five brackets based on their capital:

 

Bracket Capital EGP Yearly Registration Fee
1 12,500,000 and below 0.2% of capital
2 12,500,000 – 100,000,000 0.15% of capital
3 100,000,000 – 300,000,000 0.075% of capital
4 300,000,000 – 500,000,000 0.005% of capital
5 500,000,000 and above 0.0025% of capital

 

In general, registering in the stock market has a number of benefits. To start off, registering in the stock market makes companies more approachable and appealing to investors, who will know that the rights and obligations they are owed are laid out clearly. The registered company will therefore benefit by being exposed to a variety of investors, whether they be natural persons or other companies. It also markets the firm, as it will gain credibility for being listed on the stock exchange.

The company can in turn use this to encourage their employees by offering them stocks in the company, thus increasing their loyalty. Further, this makes actions like mergers and acquisitions easier, as the shares of companies will be listed clearly. In a wider sense, these new regulations benefit the Egyptian Stock Exchange as a whole by breaking down the fees imposed on companies, therefore making registration more realistic and viable as well as encouraging companies to seize these benefits and in turn benefit the economy. However, this decree is especially impactful when it comes to small and medium-sized enterprises, which will now have a bigger chance at being able to register. Article 2 of the decree stipulates that SMEs will only incur a reduced annual fee of 50% of the fees above. Placing SMEs on the stock exchange will help them grow faster, cultivating their potential for creating jobs and fostering competition. Encouraging SMEs is an important step in a growing economy with a vast labor market.

5 | Technology Legislation Developments

a) GAFI Incorporates E-Signatures for Company Formation

For the first time in Egypt, electronic signatures have become an integral part of legal and official procedures in the public sector. The Ministry for Investment and International Cooperation has announced that The General Authority for Investments and Free Zones (GAFI) has made it possible to sign company formation documents using electronic signature. Such paperwork includes contracts and official forms, which previously could only be accepted if signed by hand.
E-signatures consist of a unique set of digitalized numbers or letters used to identify an individual. They are similar to traditional manual signatures in that they are a means of safeguarding against fraud as they can be used to differentiate individuals. However, their main benefit is that they can be used online without requiring physical presence. For that reason, e-signatures are a safer substitute for traditional signatures, as they provide the same benefits but with added modernity and practicality.

These new developments come as part of the efforts associated with facilitating and updating the links between the public and the private sector, where the availability of signing through e-signature should make setting up companies easier. This goes hand in hand with the new investment law, Law No. 72 of the year 2017, which calls for a more modern and digitalized registration system. Giving e-signatures legal status means that one can now set up a company entirely through GAFI’s online system, without ever having to physically visit the GAFI, or any other governmental authority. Entrepreneurs and business people alike can now log on to the GAFI website, submit the required paperwork, pay the allocated fees by credit or debit card, sign everything electronically, and then receive the completed and authenticated paperwork pertaining the creation of their new company.

All in all, this is one of many steps required to ensure that Egypt is ready for advanced, modern transactions. The introduction of this law was a welcome step given the need to upgrade Egypt’s legal incorporation system as well as the need to cut on time, effort, and paperwork in tomorrow’s paperless economy

b) New Cyber Crimes Law

To top off a year of innovative and advanced legal instruments, the AntiCyber and Information Technology Crimes Law (Law No. 175 of the year 2018) has been ratified and published in the official Gazette. The new law addresses issues such as hacking state information systems, committing crimes through information systems, technology, or e-mail, or publishing material online that threatens the country’s security or economy. It is a much-needed update from the out dated its 2004 counterpart, which only

addressed telecommunications. This made the law inadequate to address modern cybercrimes, which often gave judges difficulty in finding the appropriate legislation to fit alleged crimes. This undermined key principles such as legal certainty and fairness. Now, this law, even if not directly nor clearly an economic law, can be used to provide assurance for investors and potential business people, as it is a key tool in any modern legal system. The law, made up of 45 articles, revolves around ensuring the safe and secure use of technology – not around restraining its users.

Most importantly, we find that such a law is essential from a professional perspective: after a spur of new laws aimed and protecting investment and growth in a modern, paperless economy, the platform behind all of these changes, technology, must be protected in the highest regard. To start off, the law strictly prohibits any sort of activity that promotes terrorist support. The law then moves on to address hacking: anyone convicted of hacking into state-owned systems would be subject to a fine of EGP 50,000 – 200,000 as well as a two-year prison sentence. Hacking other individuals’ or organizations websites or account would lead to similar penalties. Similarly,
using someone else’s name to operate an e-mail, website, or other private account may lead to a fine between 10,000 – 30,000 and/or three-month imprisonment. In fact, individuals may be penalized for altering or otherwise disrupting an individual’s or organization’s website. Individuals may also be banned from travel if they are the subject of investigations concerning cyber-crimes. Moreover, the law penalizes anyone who uses the internet to make unfair gain. It also imposes a fine of EGP 50,000 – 250,000 and/or a one-year prison sentence on anyone who gains illegal access to information. The second half off of the law concerns using technology to gain access to bank information or hack credit or debit cards. This also includes penalizing any disrespect of privacy through leaking contact information. This part is key to ensuring that this law is adequate in addressing crimes that modern courts are faced with but cannot adequately address using current laws. The law also addresses those involved in the above crimes through selling, making, or providing in any way certain machines without authorization from the relevant entity. In conclusion, the new law serves as a much-needed update in a wide framework of laws that directly and indirectly touch on the investment atmosphere in Egypt. Its provisions provide more legal certainty for internet users, ensuring that decisions and verdicts can be fairer and more grounded on sound legislation.

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