Business Organizations > Joint Stock Companies

The rules and regulations governing Joint Stock Companies are more comprehensive than those for Limited Liability Companies. Joint Stock Companies that offer their shares to the public are subject to additional Regulation.

Founders

A founder is the one who actually participate in incorporating a company in addition of having the intent of being liable for the consequences of incorporation. Any one shall sign the statute of a company, request licensing its incorporation or introduce share in kind at the time of its incorporation is considered to be a founder.

Constitutive Documents

Egypt has a streamlined procedure for forming Joint Stock Companies. The company's founders or their deputy need to notify the Companies Department of the pending formation of a company attaching:

• The constitutive documents of the company to be formed (the Articles of Association and Statues). Model Articles of Association and Statutes have been issued by Ministerial Decree
• A certificate from an authorized bank to the effect that the required capital has been deposited in a blocked account. This capital is then released upon the company's formation; and
• A receipt for payment of incorporation fees equal to 0.1% of the Company's issued capital (with a minimum of LE 100 and a maximum of LE 1,000).

Upon submission of these documents and notification to the Companies Department, a certificate is issued to the founders, confirming that complete documentation has been received. This certificate is registered in the Commercial Register and a company acquires its legal status upon the lapse of 15 days from such registration date.

The Companies Department may object within 10 days from the date of the Company's registration in the Commercial Register, only if:

• The Article of Association or Statutes deviate from the models with respect to mandatory requirements or violate any law;
• the purpose of the company violate any law or public order; or
• One of the founders is not qualified to be a founder under the law.
  

Finally, the company's Articles of Association and Statutes must be published in the relevant Companies Bulletin.

Minimum Share Capital

The minimum share capital for a Joint Stock Company whose shares are not open to public subscription is LE 250, 000. If the shares are offered to the public, the minimum share capital is LE 5000,000.

Only 10% of the issued capital must be paid in upon incorporation with an additional 15% to be paid up within three months from the incorporation date of the company . The reminder of the issued capital shall be paid within 5 years from the incorporation date of the company.

The shareholders of a Joint Stock Company may increase its issued capital up to its authorized capital by a board of directors' Resolution provided that its existing issued capital is fully paid. The shareholders of a Joint Stock Company may increase its issued capital by way of an Extraordinary General Assembly Resolution without the requirement of having the existing issued capital fully paid.

Value of Shares

The nominal value of shares must not be less than LE 5 or more than LE 1,000. Preferred shares may also be issued but shares from the same kind should have the same rights, privileges and restrictions.

The Capital Market Law authorizes the issuance of bearer shares, subject to certain restrictions. Bearer shares carry no vote at the General Assembly.

Bearer shares may not exceed 25% of the issued and outstanding shares of a Joint Stock Company. The full nominal value of bearer shares must be paid up at the time of incorporation.

Number of Shareholders

There must be a minimum of three founding shareholders whether natural persons or legal entities.

There is no maximum limit to the number of shareholders, however, if the number of shareholders reaches 100, the company would be considered to be offered to the public with those rules applicable to public companies applied to it.

Purpose

Provided they do not conflict with public policy or public morality, there are no restrictions on a Joint Stock Company's intended commercial purposes.

However, to benefit from the incentives and guarantees granted under the Investment Law ,Joint Stock Companies established under the Investment Law must have as their purposes one of the objectives specifically listed in the Investment Law or such other qualifying purposes as may be provided for by the Cabinet of Ministers.

Name

The name of the company should indicate the activity or objects of the company. It shall not include the name of any shareholder unless such name is a registered trade name.

Bonds

A Joints Stock Company may issue nominal bonds, however such bonds must be of equal value and have equal rights with respect to each security of the same series.
Bonds that are convertible into shares may also be issued. Existing shareholders have a priority right to subscribe to these bonds. Bonds may also be issued to the public after the approval of GAFI.

Transfer of Shares

Founding stakes and shares issued in return for in-kind (i.e. non-cash) contributions may not be transferred (except to other founders) until the financial statements of two full fiscal years are published.

Nominal shares may not be transferred except after being registered in the commercial register. Nevertheless, nominal shares might promptly transferred if the increase in the capital of the company is due to converting bonds issued by the company into shares.

Management

A Joint Stock Company is managed by its Board of Directors. The Board of Directors must have at least three members. The Board of Directors must be composed of an odd number of members.

Companies established under the Investment Law are not under the aforementioned requirements. There are no nationality requirements for board members.

Profits

A Joint stock Company's profit after-tax earnings for each fiscal year, as reduced by any loss of the company that is carried forward from prior years and after funding its legal and regular reserve (if required), is available for distribution in pursuant to a resolution of the General Assembly.

1. The Joint Stock Company is required to establish, and must always maintain, a legal reserve equal to at least 5% of its issued capital.

2. A joint Stock Company is required to allocate employees' share in profit equal to a minimum of 10% of its distributable profits (if any) with a maximum equal to the gross annual payrolls of its employees. Allocation of such amounts should be determined by the General Assembly on the recommendation of the Board of Directors.

3. Distributable profits are distributed in order of priority as follows:

• An initial amount from the distributable profits equal to a minimum of 5% of the capital are distributed to shareholders and to the employees.
• An amount of equal to a maximum of ten percent (10%) of the distributable profit may be paid to members of the Board of Directors as a bonus.
• The balance of the distributable profits may be paid to the shareholders as additional dividends and to the employees as additional employee bonus. It may also be carried forward to the following year as retained earnings or allocated to fund a special reserve to be used as determined by the General Assembly on the recommendation of the Board of Directors.

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