The Ordinary General Assembly Of Joint Stock Companies

Introduction

The Ordinary General Assembly ("OGM") is a meeting that must be held at least once a year to approve a company's financial statements. The Companies' Law No. 159 of 1981 and its Executive Regulations ("Companies' Law") regulate its competences, attendance requirements, quorum of validity, and documentation.

All types of capital companies in Egypt are required to convene an OGM. Depending on their activities, companies in Egypt may be regulated by the Capital Markets Law No. 95 of 1992 which is supervised by the Financial Regulatory Authority ("FRA"); Companies' Law; or Law No. 72 of 2017 (the "Investment Law"), both of which are supervised by the General Authority for Investments and Free Zones ("GAFI"), the competent authority before which ratifications and approvals takes place.

This guide covers the legal and procedural details of the OGMs of joint stock companies ("JSCs") in Egypt that are subject to the Companies' Law, with a particular focus on unlisted companies. JSCs may either be listed in the Egyptian Exchange ("EGX") or remain unlisted. Unlisted JSCs are typically preferred by investors due to their less complex procedures and more flexible requirements.

General Overview on the OGMs

The Companies' Law distinguishes JSCs by establishing multiple internal supervisory bodies, including:

1. The Board of Directors ("BoD"), responsible for the day-to-day management.
2. The OGM, responsible for general oversight and supervision.
3. The Extra-Ordinary General Assembly ("EGM"), which has specific powers relating to major changes in the JSCs and is also regulated by the Companies' Law.

The OGM holds broad powers and responsibilities, serving as the supreme authority over the BoD in governance matters. It is entrusted with overseeing the conduct of the BoD and with approving or rejecting its decisions and activities.

In the following sections, we will highlight:

1. The procedures for sending invitations.
2. The convening of OGM meetings.
3. The quorum requirements for both the first and second meetings, minimum voting thresholds, eligibility to attend, the documents to be provided to shareholders prior to the meeting, and the authentication of OGM resolutions before GAFI.

About the OGM

1. Who Has the Authority to Invite an OGM?

According to Article 61, "the OGM shall be convened upon the invitation of the Chairman of the BoD." This provision confirms that the authority to call for an OGM rests primarily with the Chairman.

Furthermore, Article 61 provides that, in cases where the Chairman fails to exercise this duty and authority, "The BoD may, pursuant to the second paragraph of the same Article, resolve to convene the General Assembly whenever necessary."

The third paragraph of Article 61 further stipulates that the BoD is obliged to convene the OGM upon the request of either the company's auditor or the shareholder(s) holding at least 5% (five per cent) of the company's capital.

For the protection of the minority shareholders' interests, Article 62 of the Companies' Law grants GAFI the extraordinary power to convene the OGM in cases where the Chairman or the BoD fail to do so.

Article 215 of the Executive Regulations of the Companies' Law elaborates on Articles 61 and 62, providing further clarification and interpretation regarding the issuance of the OGM invitations.

2. What Are the Methods of Sending the OGM Invitations?

The methods for sending invitations are outlined in the Executive Regulations of the Companies' Law. Specifically, Article 203 provides the following:

1. The invitation to the OGM must be published twice in daily newspapers, at least one (1) of which must be in Arabic. The second publication shall take place no fewer than five (5) days after the first.
2. The invitation must be sent to shareholders at the addresses recorded in the company's registers by registered mail.
3. The invitation may alternatively be delivered to shareholders by hand, against a signed acknowledgment of receipt.

3. What Information Must be Included in the Invitation?

The Executive Regulations of the Companies' Law specify that the following information must be included in meeting invitations:

1. Company information: name, legal form, registered address, capital, commercial register number, and the commercial registry office.
2. Meeting details: the date, time, and location of the meeting.
3. Meeting agenda: sufficient details on the matters to be discussed. An explanatory memorandum of the agenda and draft resolutions may be attached to the invitations.

It is worth noting that the Companies' Law expressly prohibits the discussion of any matters not listed in the meeting agenda, except in cases of serious issues that may arise during the meeting. The determination of whether a matter is sufficiently serious falls within the discretion of GAFI.

In practice, GAFI does not object to the inclusion of additional matters for discussion and resolution at the meeting, provided that 100% (one hundred per cent) of the company's shareholders are present and unanimously approve such matters.

4. Who Should Receive the Meeting Invitation?

1. GAFI.
2. FRA.
3. The company's auditor.
4. The company's shareholders.
5. The members of the BoD.

5. What is the Quorum of Validity and the Voting Requirements?

The Companies' Law and its Executive Regulations require certain conditions to be met for the validity of an OGM. These conditions are as follows:

1. The OGM must be held in accordance with the details set out in the invitation, whether regarding the date or the location of the meeting.
2. The OGM must be held in the city where the company's head office is located, or in any other city or country, provided that such location is specified in the company's Articles of Association ("AoA").
3. Shareholders representing the percentage of capital stipulated in the company's AoA must attend, provided that such percentage is not less than 25% (twenty-five per cent) and does not exceed 50% (fifty per cent) of the capital, in accordance with Article 67 of the Companies' Law.
4. Shareholders may attend in person or by proxy. Proxies must be duly established by a power of attorney or a proxyand shareholders who are not members of the BoD may not appoint a board member as their proxy.
5. The company's auditor must attend, either in person or through a proxy.
6. The BoD members must attend, with no fewer than the number required for the validity of its own meetings, in accordance with Article 60 of the Companies' Law. This means at least three (3) members of the BoD must be present, including the Chairman.
7. The Secretary of the meeting must be present.
8. Two (2) vote counters must be appointed.
9. The Chairman of the BoD must preside over the meeting.

Resolutions of the OGM are passed by an absolute majority 50%+1 of the shares present and represented at the meeting.

6. What Are the Statutory Deadlines for Issuing the Invitations?

Pursuant to the third paragraph of Article 202 of the Executive Regulations (as amended by Ministerial Decree No. 94 of 2017), the invitation must be sent at least twenty-one (21) days prior to the scheduled date of the first meeting of the General Assembly. This period is calculated exclusive of both the date of issuance and the date of conveying the meeting.

The purpose of this statutory notice period is to provide shareholders with sufficient time to review the matters to be discussed at the meeting and to prepare any related proposals or questions.

In practice, however, GAFI adopts a more lenient approach to this timeline where the meeting will be attended by 100% (one hundred per cent) of the company's shareholders.

7. Resolutions on Which Board Members Are Prohibited from Voting

Article 74 of the Companies' Law provides that: "Members of the BoD may not participate in voting on General Assembly resolutions relating to the determination of their salaries and remunerations, or the discharge and release of their liability for management."

Accordingly, if Board members hold shares in the company, they are not permitted to vote on the resolutions referred to in this Article. Their shares must be excluded from the vote, and such resolutions shall be decided exclusively by shareholders who are not members of the BoD.

8. Methods for Holding the OGM

As a general rule under the Companies' Law, the OGM must be held in person within the city where the company's head office is located, or in another city, whether in Egypt or abroad, provided that such city is specified in the company's AoA.

However, pursuant to the Prime Ministerial Decrees No. 606 and 718 of 2020, issued in response to the COVID-19 pandemic, GAFI issued Decree No. 160 of 2020, which in its first Article states: "Attendance of BoDs, OGMs, and EGMs of companies subject to the provisions of Law No. 159 of 1981 and the Investment Law through modern communication technologies, whether visual or audio, shall be deemed valid physical attendance and shall be subject to the applicable provisions."

Accordingly, it is now permissible to hold General Assemblies through modern communication technologies, provided that the meeting proceedings are recorded and a compact disc containing the full proceedings of the meeting is submitted. Notably, this decree remains in force and has not been amended or repealed to date.

9. When Is a Second OGM Convened?

A second meeting is convened where the quorum required for the validity of the first meeting is not met. The Companies's Law stipulates that the notification of the second meeting entailing (i) the date, (ii) time, and (iii) location of the meeting, without the need to issue a new invitation.

Article 213 of the Executive Regulations of the Companies' Law adds that, in addition to the attendees listed in the stakeholders section, the meeting must be also be attended and signed by:

1. The Chairman of the meeting.
2. The meeting Secretary.
3. The vote counters (both the secretary and vote counters appointed by the Chairman of the meeting).

The second meeting is deemed valid regardless of the number of shares represented therein.

10. What Documents Should be Provided to the Shareholders Prior to the OGM?

The Executive Regulations of the Companies' Law set out the documents and records that the BoD must publish or send with the OGM invitation, as well as those that must be made available to shareholders at the company's head office at least five (5) days before the OGM, in accordance with Articles 218 to 221 of the Executive Regulations.

The BoD must comply with these provisions, as they relate to the rights of shareholders attending the OGM—rights which are protected by the Companies' Law and its Executive Regulations.

Ratification of OGM Resolutions by GAFI

According to Article 75 of the Companies' Law and Article 214 of its Executive Regulations, a company must submit the documents related to the OGM to GAFI within a maximum of one (1) month from the meeting date. This submission is required for the ratification of the OGM resolutions, which thereafter become binding on third parties and enforceable before all governmental and non-governmental entities.

When submitting the OGM documents to GAFI for ratification, the company must attach all original documents relating to the conveying procedures, together with the supporting documents for the adopted resolutions, in order for ratification to be granted.

However, Decree No. 270 of 2023, issued by the Chief Executive Officer of GAFI, reduced the number of documents required for ratification of OGM minutes by waiving the submission of those listed in Article 1 of the Decree, namely:

• Ratification request.
• Nomination letters from legal entities appointing their representatives to the BoD.
• Acceptance declarations of BoD members.
• Resignations of BoD members.
• Auditor appointment acceptance declaration.
• Auditor resignation.
• Auditor death certificate (if any).
• Proxies for attending the meeting.
• Proof of title or lease for the company's premises or branch.

Article 2 of the Decree added a new paragraph to the Chairman's declaration, which now reads:
"The Chairman of the meeting declares that all documents and records supporting the matters presented during the meeting are retained at the company's head office, that they are consistent with the law and the company's AoA and its amendments, and undertakes to submit them upon request."

In practice, it has been observed that some companies fail to prepare or retain these documents at their premises. This practice is highly risky, given that the Chairman of the meeting expressly declares that such documents are maintained at the company and thereby assumes full responsibility for any consequences arising from a failure to provide them when requested by GAFI.

As the competent administrative authority, GAFI has the right to request submission of these documents at any time, whether in response to a shareholder's complaint, a request from an interested party, or for any other reason.

Accordingly, companies are strongly advised to prepare and retain at their premises all documents and records relating to the General Assembly procedures and the resolutions adopted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.