On January 16, 2018, the new amendments to the Egyptian Companies’ Law were circulated. These new amendments effectively introduced the Sole Proprietorship (with limited liability) as a new recognized type of company aiming to encourage, promote and facilitate investment in Egypt.

Sole Proprietorship Company

According to the recent reform and with the aim to reach the specifications of global investment laws, the Egyptian legislator declared a milestone through the promulgation of Law No. 4 for the year 2018 amending the Companies Law No. 159/1981 to enhance the investment environment within Egypt. These new amendments have brought a radical change in the available corporate structure by adding the sole proprietorship company to the current structures. The capital of a sole proprietorship company -or the sole partnership in other jurisdictions- is owned by either a natural or juridical person and can be incorporated in the form of a limited liability company with an obligation of appointing an approved auditor. The liability of the sole proprietorship company is limited to its capital only with certain restrictions to split between the company’s capital and its founder’s personal wealth.  This limitation of liability encourages investors via retaining their control without fearing of high financial risks.

Benefits

1. Companies are now allowed to raise their capital through a resolution to be adopted by the Ordinary General Assembly, excluding companies listed in the Stock Exchange.

2. Eliminating the lock-up period during which the spun-off companies (which may now take multiple forms) are required to adhere to it before trading their shares.

3. Allowing for electronic attendance and signatures to replace physical attendance at the board of directors’ meetings.

Limitations 

The sole proprietorship company may not establish another sole proprietorship company or issue shares.

Recognition of Joint Venture and Shareholders Agreements 

The amendments allowed the founders to include their own agreement regulating their relationship during or after the incorporation. By this new rule, all the joint venture and shareholders agreements signed between the founders can be included in the company(ies) bylaws.

Accumulated Voting Power: The new amendments accord the shareholders the right to have the accumulated voting power in electing the board member by granting each shareholder a number of votes equal to his/her shares. Such votes can be distributed between the numbers of board member candidates’.

Dividing existing companies into two or more companies 

Article 135 of the new Law, added the ability to divide any existing company into two or more companies formed in accordance with the current law but excluding the sole proprietorship company, after following the required procedures.

For more information in regards to these amendments or requiring any help in establishing a sole proprietorship company, please do not hesitate to contact us with any queries at our main mail address: info@potentia-lf.com or our key contact: Islam Maklad, Managing Partner at islam.maklad@potentia-lf.com.