ARTICLE
28 July 2020

How To Set Up A Limited Liability Company In Egypt?

SK
Sadany & Khalifa Law Firm

Contributor

Sadany&Khalifa Law Firm is one of Egypt’s pioneering law firms. Since its inception, the firm has worked tirelessly on providing innovative legal solutions that help clients reach their ideal outcomes. The Firm has vast expertise in offering legal consultation to both public and private sector companies, as well as to many government authorities and ministries. The Firm has represented hundreds of clients before arbitration tribunals in local and international disputes and before Egyptian courts of different degrees. Based on our conviction that the client’s best interest is our goal, and that clients are our partners for success, we are committed to developing our capacities and enhancing the skills needed to meet clients’ needs and guarantee their satisfaction.
The Limited Liability Company (LLC) is the most popular type formed by foreigners in Egypt due to its distinctive legal system, so the question is how to set up a limited liability company in Egypt?
Egypt Corporate/Commercial Law

The Limited Liability Company (LLC) is the most popular type formed by foreigners in Egypt due to its distinctive legal system, so the question is how to set up a limited liability company in Egypt?

The Companies Law No. 159 of 1981 governs the formation, acceptable activities, and dissolution of LLC's as follows:

  1. Registration:
  • Limited liability companies have to be registered in the Commercial Registry and are subject to the supervision and inspection of GAFI.
  1. Scope of Activities
  • Limited liability companies are precluded from activities in the areas of insurance, banking, savings, and investment management.
  • Apart from the preceding areas of activity, limited liability companies can carry out legal commercial activity similar to other business entities, subject only to the general limitations of applicable laws and regulations.
  1. Management and Control
  • There is no express provision indicating a maximum ceiling for ownership of capital by foreigners. Hence, a limited liability company may be 100% foreign owned.
  • However, it should be noted that, under Egyptian law, a limited liability company cannot be wholly owned by one entity. Consequently, there must be at least two partners. With respect to management, it is carried out by managers appointed by the partners.
  • The maximum number of shareholders allowed is 50. No restrictions exist regarding shareholders' residency location or nationality. Shareholders may be natural persons or corporate bodies.
  • There may be one or more managers. It should be noted that before the last amendments, it was a requirement to have at least one Egyptian manager, but after the amendments, such requirement is omitted.
  • A security check shall be carried out for the foreign manager.
  • No minimum capital is required in LLC, however it is worth noting that if the foreigner needs to obtain work permit, then he shall submit a bank certificate proving that his contribution in the capital of the company is 35000 USD; in order to be able to apply for a work permit.
  • The Memorandum of Association must name all of the managers and specify the definite term of appoint length or if an indefinite period.
  1. Capital
  • There is no minimum capital for a limited liability company. Shares can be issued for non-cash consideration with the approval of a partners' meeting.
  • Before the last amendments, it was a requisite to pay the total share capital in full upon incorporation, but now there is no need to pay the same.
  1. Taxes
  • Limited liability companies are subject to tax on companies' profits.
  1. Supervisory Board
  • If the number of partners in the LLC exceeds 10, a supervisory board consisting of at least three partners must be created. The supervisory board maintains the right to request access to all accounting records, requires reports from the managers, verify all available cash and assets, and review all of the LLC's financial statements before they are presented to the annual general meeting.
  1. Obligatory official documents
  • Opening an Insurance File; and
  • Issuing a Value Added Tax File.
  1. Required Documentation for the Company Formation
  1. A certificate of non-confusion of company name approved by the Commercial Register;
  2. Copies of relevant powers of attorney from all founders (minimum two founders) .It shall be noted that Original Powers of Attorney must be submitted for matching against the copies;
  3. Copies of valid personal ID of founders;
  4. An official original certificate obtained from the register of Accountants and Auditors to the effect that the company's auditor is entitled to review and approve the budgets of the company. In case the original was previously furnished to GAFI, a copy must be submitted;
  5. A copy of the Bar Association Card of the lawyer who signs the articles of association;
  6. A security check on foreign founders and managers;
  7. The name and address of the company's legal consultant (who must be a lawyer at least admitted before the Court of Appeal);
  8. Copies of the Birth Certificates for the managers; in order to be able to open an insurance file; and

In the event of sharing in-kind shares upon incorporation, the report provided by the experts specialized in the professions stated by the law, must be

Originally published 24 July, 2020

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.

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