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Company Formation

Business organisations in Egypt are generally in the form of incorporated companies, partnership and sole proprietorship.

The unincorporated forms are generally used by Egyptian traders and are of limited interest to foreigners. Interest in a venture under the Investment Law is normally in the form of shares in joint stock or limited liability companies. Full ownership by an alien investor is allowed where the venture in question resides in a free zone. For investment outside a free zone, certain activities may be required to have Egyptian equity participation.

Company formation in Egypt is a fairly straightforward 6-stage process, which is as follows:

Obtain a certificate from an authorised bank, which takes a day and costs between 200 and 500 EGP, dependent on the bank.

Submit the company documents to the Department of Companies, where an invoice will be issued for all the fees due for the establishment of the company. The fees are as follows:

• Notary public: 0.25% of capital
• Establishment: 0.1% of capital
• Service charge: 0.1% of capital
• Commercial Syndicate fee: approx 130 EGP for companies with capital equalling or less than 500,000, or approx 250 EGP for companies with capital above 500,000
• Publication fee: approx 150 EGP for a limited liability company in Arabic, 300 EGP for a limited liability company in Arabic and English
• Chamber of Commerce fees: 0.2% of capital
• Commercial registration: approx 50 EGP
• Operation certificate issuance: approx 30 EGP

Notarise the company's contract at the one-stop shop. This takes one day.

Obtain certificate required for company registration at the Commercial Registry. This is issued after all the necessary documents have been submitted by the applicant. This takes one day.

Register for taxes at the one-stop shop. This takes 1-2 days.

Register employees with the National Authority of Social Insurance, which is a legal requirement. This takes 2 days.

Are there any incentives?

All foreign investment is governed by the Investment Law. The aim of this law is to offer preferential treatment, and nurture private sector investment in Egypt.

Foreign capital in the petroleum sector is governed by subjective concession agreements between foreign companies and the Egyptian General Petroleum Corporation. Other investments - such as land reclamation and cultivation, industry, tourism, housing and urban development - are, obviously, also welcomed.

The government gives priority to ventures that aim to increase exports, tourism or supplant the import of basic commodities. Egypt also encourages foreign businesspeople to develop luxury hotels and leisure facilities.

You will have to submit application for your project to the General Authority for Investment (GAI). They will evaluate your proposal. The objective of this evaluation is to determine whether your proposal offers sufficient benefit to the Egyptian economy, and justifies the special privileges available. The GAI will issue a decision on an application within twenty days of it being submitted.

Companies established under the Investment Law relish in a tax immunity of five to twenty years.

Egypt's policy is to offer fruitful incentives to encourage foreign business. In particular, on a venture that earns foreign capital and reduces the country's reliance on imports. Free zones have been established where projects can be set up without necessarily having Egyptian equity involvement. Other incentives awarded to businesspeople include immunity from price controls and guarantees against nationalisation and confiscation. Also, expropriation of assets is prohibited.

Further privatisation is expected through public floating of shares or the sale of public assets to private shareholders. Accordingly, opportunities for investors are expected to increase remarkably.

The Government now promotes manufacturing and additional infrastructure ventures to encourage private industrialisation. Additionally, it favours stock market initiatives to promote private economic diversification. These initiatives offer various opportunities to foreign businesspeople.

And finally, privatisation is usually considered to better efficiency and productivity. The government will interject to maintain these activities only if ventures transcend the competence of the private sector.

Incentives and government guarantees:

• Companies may not be confiscated or nationalised
• Companies and their assets cannot be sequestered, seized or expropriated by way of an administrative body
• No administrative body can interfere in setting prices or profits margins
• Profits are exempt from corporate income tax for five years, extended to 10 years for projects in free/industrial zones and new urban communities, as well as projects financed by the Social Fund for Development. Projects located in remote areas enjoy a twenty year tax holiday
• Projects are liable to a flat rate of 5% customs duties on equipment and machinery imported for a project. The Investment Authority must approve all imports. Procedures for such approvals are set out in the Executive Regulations for the Investment Law
• Projects are allowed to repatriate their capital and profits
• Projects are exempted from certain labour requirements under the Egyptian Companies Law and the Labour Law. Foreign experts' salaries are exempt from income tax if their stay in Egypt is for less than one year.

Projects carried out by companies in Egypt must come within the areas of investment permitted under the Investment Law. Investment fields include, among others:

• Manufacturing and mining
• Tourist and agricultural projects and transport services
• Overseas maritime transport
• Oil exploration services
• Housing and infrastructure projects
• Information technology
• Computer software and high-tech products

Any advice about representation?

There are a various moulds of business organisation in Egypt. An overseas business may establish in Egypt via a representative, or liaison or branch office, joint stock company, or a limited liability company. The common medium for foreign investment is a joint stock company or a limited liability company.

Having a local representative can be an invaluable asset to successfully establishing yourself in the market. Your delegate could, firstly, help to overcome any delays and/or hindrances. Secondly, you would need a local agent to bid for government tenders. And finally, as the Egyptian market matures, there is an increasing call for post-sales service - something that could be easily provided by such a representative.

As an investor from overseas, you may assign an agent from the private or public sector to represent your interests in Egypt. The assignment of a commercial agent is necessary for making tenders or for purchase offers to committees of public sector organisations and government agencies. Even though these agents are unneeded in the private sector, many foreign businesspeople have found it beneficial to delegate a local agent who can deal with problems related to communications, bureaucratic procedures, local business practices and marketing.

Offshore Companies

By choosing to incorporate an offshore company, business owners and  investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
  
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
  
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
  
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
  

Characteristics of an offshore company:

• Memorandum and Articles of Association
  
• Certificate of Incorporation
  
• Registered Office/Agent
  
• Shareholders / Members
  
• Directors / Managers
  
• Company secretary
  
• Statutory Register
  
• Bookkeeping
  

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

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