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Legal Aspects on Doing Business in Egypt

Legal Aspects on Doing Business in Egypt. Most common ways to invest in Egypt. 1) Open a business in Egypt without partnering with others in a company. 1) Open a business in Egypt without partnering with others in a company

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Legal Aspects on Doing Business in Egypt

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  1. Legal Aspects on Doing Business in Egypt

  2. Most common ways to invest in Egypt

  3. 1) Open a business in Egypt without partnering with others in a company

  4. 1) Open a business in Egypt without partnering with others in a company • 2) Enter into a company either by establishing it with others or by buying shares in it

  5. 1) Open a business in Egypt without partnering with others in a company • 2) Enter into a company either by establishing it with others or by buying shares in it • 3) Enter into an agreement with an Egyptian partner in the private sector

  6. 1) Open a business in Egypt without partnering with others in a company • 2) Enter into a company either by establishing it with others or by buying shares in it • 3) Enter into an agreement with an Egyptian partner in the private sector • 4) Enter into an agreement with the Egyptian government

  7. Opening a Business in Egypt

  8. You can not send employees to work in Egypt. • There has to be legal grounds for working in Egypt

  9. Registering a Branch

  10. Things to be aware of: • 1) Existence of at least one current contract • 2) Scope of work is limited • 3) A Branch does not enjoy full independence from the mother company • 4) Up to 30% Tax rate • 5) Minimum capital of 5,000 EGP • 6) May be established within 20 business days

  11. Establishing a Representative Office

  12. Things to be aware of: • 1) Can not carry out commercial operations or commercial agency activities. Only market surveys and/or feasibility studies • 2) May hire employees • 3) Minimum capital of 5,000 EGP • 4) May be established within two months

  13. Enter into a company by either establishing it or buying shares in it

  14. Joint Stock Company (JSC) or Limited Liability Company (LLC)

  15. There is no limit on foreign shareholding

  16. There is no limit on foreign shareholdingThere are a few exceptions

  17. JSCs and LLCs enjoy limited liability

  18. “Of the 5 indicators covered in this subnational report, Egypt outperforms the average rank for the Middle East and North Africa on starting a business and trading across borders.” Doing Business in Egypt 2014 subnational report, page 2 A co-publication of the World Bank and IFC

  19. Buying shares in a company

  20. Shareholder rights include: • 1) Submitting complaints to the competent authorities, which could result in suspension of resolutions taken in shareholders meetings • 2) Withdrawal rights • 3) Preemptive rights • 4) Egyptian laws demand a substantial majority for certain resolutions to pass

  21. Enter into an agreement with an Egyptian partner in the private sector

  22. Things you should be aware of: • 1) There is a 20% withholding tax. Check for double taxation treaties.

  23. Things you should be aware of: • 1) There is a 20% withholding tax. Check for double taxation treaties. • 2) You may not send employees to Egypt to work on a business deal. Exceptions exist.

  24. Enter into an agreement with the Egyptian government

  25. There had been mainly 3 approaches for the government to enter into an agreement with a private company: • 1) issue a concession according to the provisions of the general public utilities legislation (law 129 of 1947 and law 61 of 1958).

  26. There had been mainly 3 approaches for the government to enter into an agreement with a private company: • 1) issue a concession according to the provisions of the general public utilities legislation (law 129 of 1947 and law 61 of 1958). • 2) The government passes a specific law for each project/concession.

  27. There had been mainly 3 approaches for the government to enter into an agreement with a private company: • 1) issue a concession according to the provisions of the general public utilities legislation (law 129 of 1947 and law 61 of 1958). • 2) The government passes a specific law for each project/concession. • 3) Through the Tenders and Bids Law (No. 89 of 1998).

  28. What you need to know about the Tenders Law • It allows Egyptian governmental entities, including governorates and local authorities to procure goods or acquire services from the private sector. • Tenders are publicized in the media, mainly in newspapers published in Egypt and/or abroad. • The Law allows governmental entities to procure goods or services by virtue of either a tender, competitive negotiation, or direct agreements.

  29. Mixed opinions on the Tenders Law

  30. The Law Regulating Partnership with the Private Sector in Infrastructure Projects, Services and Public Utilities was promulgated in 2010 • The Tender Law was not abolished • PPP Law deals with all types of long term arrangements between public authorities and private institutions – not PPP projects only • PPP Law specific: Duration - Minimum Agreement Value

  31. Protections provided to investors in the PPP Law • Article 8 • “In case of the occurrence of unforeseen circumstances after execution of the PPP contract, including amendments to laws or regulations that were enforceable at the time of execution of the PPP contract, it may be agreed to amend the PPP contract in accordance with the conditions and rules stipulated in the PPP contract”

  32. Protections provided to investors in the PPP Law • Article 10 • “….The PPP contract shall include provisions regulating the ownership of the project facilities and assets for the PPP contract duration and upon its expiry or early termination.”

  33. Protections provided to investors in the PPP Law • Article 11 • “No seizure or executive procedures shall be undertaken with regard to facilities, tools, machinery, or equipment allocated for the implementation of a PPP contract and for the operation or utilization of the project subject of the PPP contract.”

  34. Protections provided to investors in the PPP Law • Article 15 • “The Supreme Committee for PPP Affairs is competent for the following: • D. Issuing the rules and general criteria for the PPP, and endorsing standard PPP contracts for use in different sectors.”

  35. Protections provided to investors in the PPP Law • Article 16 • “The PPP Central Unit….shall also be competent to receive, investigate, and provide advice concerning complaints of investors participating in PPP projects in preparation for submitting such complaints to the Supreme Committee for PPP Affairs.”

  36. Protections provided to investors in the PPP Law • Article 34 • “The PPP contract must include, in particular, the following: • I. determination of the basis of risk allocation in respect of change in law, sudden accidents, force majeure, or discovery of antiquities, as the case may be, and the resultant compensation; • K. cases where the Administrative Authority has the right to unilaterally terminate the PPP contract, as well as the financial obligations resulting from the use of such right;”

  37. Protections provided to investors in the PPP Law • Article 35 • “After the approval of the Supreme Committee for PPP affairs, it may be agreed to resolve disputes resulting from PPP contract through arbitration…”

  38. Protections provided to investors in the PPP Law • Article 37 • “Without prejudice to Articles 7 and 8 of this Law, any articles of the PPP contract or its supplementary agreements shall not be amended unless approved by its parties.”

  39. Protections provided to investors in the PPP Law • Article 39 • “A petition committee shall be formed chaired by the Minister of Finance….. • The petition committee shall be competent to consider all petitions and complaints submitted by investors during the procedure of tendering, entering into and executing PPP contracts.”

  40. Finally, lets talk about 3 more issues

  41. Arbitration and Enforcement of International Arbitration and Foreign Judgments

  42. Tenders Law and PPP Law: Arbitration may be chosen • The Cairo Regional Center for International Commercial Arbitration (CRCICA) • Egypt is a signatory country to the New York Convention of 1956 on the Recognition and Enforcement of Foreign Arbitral Awards • Foreign Judgments

  43. Enforcement of An Arbitration Award and Foreign Judgment • Must obtain an exequatur. To obtain it, the normal procedures for initiating a lawsuit must be followed.

  44. Enforcement of An Arbitration Award and Foreign Judgment • Reciprocity • Competence/Jurisdiction • Due process • Final judgment • No conflict of judgments • Award or judgment does not contravene public policy, order or morality in Egypt

  45. Force Majeure • Definition of force majeure in Egyptian laws is broad, which is an advantage. • The notion of economic equilibrium is recognized by Egyptian civil law.

  46. According to Egyptian Investment Law, Government: • Guarantees against confiscation, sequestration and nationalization; provides the right to own land; the right to maintain foreign currency bank accounts; freedom from administrative attachment; and the right to repatriate capital and profits, among other rights.

  47. Karim Salemk.salem@ak-p-law.com

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