New Companies Law To Align With Evolving Investment Climate: Report

January 19, 2025

 

The General Authority for Investment and Freezones (GAFI) is reportedly preparing a new companies law to replace the existing Companies Act, aiming to align with recent investment sector developments and the increasing use of electronic documents.

What to expect from the new law?

The authority is expected to put the draft legislation up for public consultation after Ramadan, Hossam Heiba, President of GAFI told Hapi Journal in an interview on January 14.

The Companies Act provides a regulatory framework for how companies in Egypt are incorporated, managed, and dissolved. The law also covers shareholder rights and the responsibilities of boards.

The new law will focus on streamlining company incorporation procedures, post-incorporation services like documenting board meetings and general assemblies, and recognizing electronic procedures and documents, that are not currently acknowledged under existing legislation, Heiba explained. This effort aims to simplify Egypt’s company formation process, which is currently more complex and time-consuming than global standards, he added.

The new law will select a single authority through which companies can register their establishment — a process that currently spans eight different entities.

“The process of establishing companies in Egypt currently differs from other countries, as it involves numerous procedures and requires fulfilling all founding requirements right from the beginning,” Heiba was quoted as saying.

“There will be a move to divide these procedures into two phases: the first will only involve the establishment of the company and give it a 12-month grace period to define its activities and meet the remaining requirements,” he said.

Heiba further emphasized that the law will ensure consistency with Egypt’s Capital Market Law No. 95, particularly in areas related to governance and corporate requirements. Post-establishment procedures will also be streamlined to make compliance more efficient for businesses.

GAFI, a subsidiary of the Ministry of Investment and Foreign Trade (MOI), is the primary government entity responsible for promoting and overseeing investment in Egypt.

Challenges with current procedures

An ex-researcher at the Information and Decision Support Center (IDSC), speaking anonymously to Business Monthly, revealed that current business startup procedures in Egypt have been a major barrier, leading many businesses to establish themselves abroad, particularly in countries like the UAE and Saudi Arabia.

He also highlighted the challenge of dealing with multiple entities. Simplifying this process by reducing the number to three or four would significantly improve efficiency, he stated.

“The digitizing processes is crucial,” the researcher said, citing examples from countries like Saudi Arabia, Morocco, and the UAE, as well as non-Middle Eastern nations like Vietnam and South Korea, which offer valuable benchmarks.

Ongoing digital transformation

Egypt has been undergoing a digital transformation to improve business efficiency. One example is the e-tax platform, launched in 2020, which allows businesses to file taxes electronically, reducing the need for in-person interactions and helping combat tax evasion. 

Over 4,000 taxpayers are currently registered on the platform. This initiative is in line with the Digital Egypt program, which aims to modernize public services and enhance government responsiveness.

Attracting investors

According to the 2020 Doing Business report, Egypt scored 60.1 points and ranked 114th out of 190 countries. The country performed well in the “starting a business” sub-indicator, with a strong score of 87.8 points, but faced challenges in areas such as enforcing contracts, trading across borders, and resolving insolvency.

To attract more investors, the Investment Law (Law 72 of 2017) granted the General Authority for Investment and Free Zones (GAFI) the authority to issue “golden licenses.” These licenses provide an all-inclusive approval for project establishment, operation, and management, streamlining processes by covering aspects such as building permits and real estate allocation, further enhancing Egypt’s appeal as an investment destination.

Big numbers

According to the Central Bank of Egypt (CBE), Egypt’s net Foreign Direct Investment (FDI) inflows reached $46.06 billion in FY 2023/2024, a remarkable 358.87% increase from the previous year’s $10.04 billion.

Additionally, data from the Cabinet indicates that 32,447 companies were established in Egypt during the 2022/2023 fiscal year.