Egypt: Corporate Governance

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This country-specific Q&A provides an overview to tax laws and regulations that may occur in Egypt.

This Q&A is part of the global guide to Corporate Governance. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/corporate-governance/

  1. What is the typical organizational structure of a company and does the structure typically differ if the company is public or private?

    Egyptian law identifies various forms of commercial enterprises. These are commercial companies divided into associations of persons (partnerships), and associations of capital (corporations), as well as sole proprietorships. The most important factor in distinguishing these legal forms is whether the partner in each form of company enjoys limited liability.

    The Egyptian Companies Law no. 159 of the year 1981 as recently amended in 2018 (the “Companies Law”) allows the incorporation of four different types of companies as association of capital. According to the said law, persons either Egyptians or foreigners, may incorporate any of the following forms of companies:

    - Joint Stock Company (“JSC”);
    - Limited Liability Company (“LLC”);
    - Company Limited by Shares; and
    - The One-Person Company.

    In accordance with the said law, all mentioned types of companies could be incorporated as a private company. However, public (listed) companies can only be in the form of JSC.

  2. Who are the key corporate actors (e.g., the governing body, management, shareholders and other key constituencies) and what are their primary roles? How are responsibilities divided between the governing body and management?

    Primarily, pursuant to the Companies Law, the key corporate actors differ in each company type, mostly distributed between two categories as follows:

    a. In the JSC:
    i. The general assembly of shareholders; and
    ii. the board of directors managing the operations of the company and the appointment of the management.

    b. In the LLC:
    i. the general assembly of quota-holders; and
    ii. the manager(s).
    c. In the one-person company, the shareholder and the manager.

    Secondly the primarily roles differ in the following manner and as elaborated in details in question 20 below:

    General Assembly of shareholders. where the shareholders maintain the authorities and rights over the company that are exercised via their right attendance of the Ordinary General Assembly Meeting (the “OGM”) and the Extra-ordinary general Assembly Meeting (the “EGM”) of the company and to vote on matters discussed therein mostly related to dividend distribution and any other amendment to the articles of association of the company.

    The Board of Directors/Manager. It is to be noted that the daily management of the company is carried out by the board of directors/managers appointed by the shareholders and the shareholders have the right to determine the authorities of the directors in the management of the company.

  3. What are the sources of corporate governance requirements?

    The Companies Law and its executive regulations, in addition to the Capital Market Law no. 95 of the year 1992 and its executive regulations determine the general framework for the corporate governance rules that all Egyptian companies incorporated pursuant to the Companies law shall apply.

    Moreover, there are additional sources of corporate governance requirements that differ according to the status of the company whether listed or unlisted.

    - Unlisted companies are subject to the guidelines issued by the Financial Regulatory Authority (“FRA”). Such rules are optional which are issued for guiding unlisted companies to establish sound corporate governance system and are not mandatory in their application.

    - Listed companies are subject to the Egyptian Stock Exchange listing rules and its executive regulations (“EGX Listing Rules”), such rules and all the decrees and resolutions issued by the board of FRA or EGX are mandatory.

  4. What is the purpose of a company?

    Pursuant to the rules of the Egyptian Law, the purpose of a company is the activity carried out by the company. The purpose/activity can be decided upon the discretion of the shareholders of the company, without restrictions, provided that, they do not conflict with public order or moral code in Egypt. Any amendment to such, shall be made through the convocation of an EGM to approve amending the articles of association.

    Furthermore, there are some exceptions as follows:

    - Certain activities (e.g. in the fields of satellite technology, remote sensing systems, construction and issuing newspapers) require additional approval from other governmental entities.

    - Only JSC can carry out the activities related to capital markets, insurance and banking deposit taking, investment of funds, securities brokerage.

    - One Shareholder Company is not entitled to carry out the following: incorporation of a one Shareholder Company, IPO, insurance and banking deposits, investment of funds, securities brokerage and investment on behalf of third parties.

  5. Is the typical governing body a single board or comprised of more than one board?

    The general rule in the Companies Law is a single board unless the shareholders agreed to form auxiliary administrative committee(s).

    However, in a LLC, if the quota-holders number exceeds 10, a supervisory board could be established as option to be determined by the quota-holders.

  6. How are members of the governing body appointed and removed from service?

    The members of the board of directors/managers are appointed and removed by virtue of a resolution from the OGM of the shareholders/quota-holders.

    Moreover, the general rule in relation to the nomination of board of directors is the parties can agree on a mechanism for nomination. However, according to the Companies’ Law and the recent decrees of the FRA regarding listed companies and the companies operating in non-banking financial activities, proportional representation is required with a minimum of 1 (one) representative for each 10% portion of the issued capital.

  7. Who typically serves on the governing body and are there requirements that govern board composition or impose qualifications for directors regarding independence, diversity or succession?

    The board of directors/managers shall be appointed in accordance with the articles of association of the company.

    For the individuals serving as members of the governing body, the Companies Law indicated specific parameters of directorship that shall be satisfied for the eligibility to appointment, those parameters are as follows:

    a. the Director must not have a criminal record;
    b. the Director must accept the appointment in writing; and
    c. the Director must not be a Board member in more than one joint stock company without the approval of the said companies.

    Furthermore, subject to the restrictions mentioned above and the restrictions on specific cases in relation to the capacity and profession of the nominated directors, for unlisted companies there are no mandatory requirements regarding the qualification of directors. However, the corporate governance guidelines provide that the majority of the board members shall be non-executive directors among them at least two independent directors.

    General Authority for Investment and Free Zones (“GAFI”) has recently issued a clear definition for the criteria of the independent director as follows: the independent director shall be non-executive, not shareholders, not representing any of the shareholders and does not have any material transactions with the company. Additionally, the independent director shall not receive any remuneration/salary, commission or fees from the company other than the remuneration as a board member. Moreover, the independent director shall not have any relation with any of its shareholders or board of directors up to the second degree. Furthermore, the independent director shall not have been part of the consultants of the company, key employees or auditors for the three years preceding the appointment. Finally, the independent director shall not be a member at the board for more than six years.

  8. What is the common approach to the leadership of the governing body?

    The board of directors may decide the allocation of authorities amongst its members by means of individual and collective signatory powers in relation to specific matters and thresholds that could be reflected on the commercial register for effectiveness vis-à-vis the public.

    In practice, the board constitutes of a chairperson, vice chairperson, and managing director nominated among the board members. The most common structure is the separation of the chairperson and the managing director of the company.

    Where the Chairperson is the authorized representative of the company in all judicial matters and before courts, hold the signatory powers and delegations thereto, and have exclusive role in procedural matters, i.e. calling and executing the board meetings, OGM and EGM.

    While on the other hand, the managing director holds extensive authorities to manage the day-to-day operations of the company.

  9. What is the typical committee structure of the governing body?

    The Companies Law does not require certain committees to be established, however, the corporate governance rules include guidance to the establishment of specialized committees supporting the board as follows:

    - Compliance;
    - Audit committee;
    - Risk management committee; and
    - Compensation.

  10. How are members of the governing body compensated?

    The board of directors/managers are remunerated through allowances and end of year compensation that are decided upon the discretion of the board subject to the articles of association of the company and the approval of the OGM of the company. Noting that in all cases, in accordance to the Companies Law, the dividend distribution to the board of directors/managers shall not exceed 10% of the net profit after deduction of the reserve capital, 10% dividend to shareholders and 10% to the employees of the company.

    Furthermore, the shareholders upon their discretion can determine certain amount to be paid for the attendance of the board meetings in addition to the reimbursement to any costs and expenses incurred for carrying out their role.

  11. Are fiduciary duties owed by members of the governing body and to whom are they owed?

    A Director owes a "fiduciary duty" to the company to act honestly and in the company's best interest. The Egyptian Council of State has issued a ruling indicating that a Director is deemed an agent of the shareholders and owe a fiduciary duty to the company to act in bona fide. A Director may be liable for failing to act in accordance with this legal requirement. Some examples of the application of the Company Laws to the fiduciary duty required are as follows:

    a) The required disclosure of any director to the Board on any transaction where he may have an interest and no right to vote;

    b) The Board of Directors must advise the General Assembly prior to approving such a transaction; and

    c) A director may not trade in his favor or in favor of a third party on activities similar to the activities of the company or, otherwise, such activities will be deemed as transactions in favor of the company.

  12. Do members of the governing body have potential personal liability? If so, what are the key means for protecting against such potential liability?

    Members of board of directors/managers can be found criminally liable for breach of Statutory Duty.

    In accordance with the prevailing laws and regulations in Egypt, the Board of Directors is bound to conduct the necessary actions required to carry out the activities of the company. Thus, the Board of Directors is subject to several statutory duties spread out under various provisions of the laws and regulations. Among such duties are cases to which sanctions are explicitly prescribed as follows:

    a) In the event a Director resolves on matters related to distribution of dividends in violation of the law or Articles of Association of the company; or

    b) In the event a Director intentionally commit an act of forgery of documents of the company or, otherwise, present misleading documents to the General Assembly.

    For cases (a and b above) the Director will be subject to imprisonment of no less than two years and a fine anywhere between two thousand Egyptian pounds to ten thousand Egyptian pounds personally borne by the perpetrator;

    c) In the event a Director fails to observe the parameters of directorship; or

    d) Intentionally obstruct the invitation of the General Assembly.

    For cases (a and b above) the Director will be subject to sanctions of a fine of not less than two thousand Egyptian pounds and not exceeding ten thousand Egyptian pounds personally borne by the perpetrator.

    Additionally, members of board of directors/managers can also be found for criminal liability in different cases. The Penal Code provides various criminal sanctions for company-related actions and omissions. In this particular respect, Article 113 of the Penal Code reads as follows:

    "Each chairman, board member, director or worker of any private stock company, who misappropriates funds, property, documents or others that are held thereby as a result of his position, or lays his hands thereon without due right, or facilitates third parties to undertake same, by any way whatsoever, shall be penalized with imprisonment for a period not exceeding five years. Detention for a period not exceeding two years, and a fine not exceeding EGP 200, or either penalty shall be the punishment if the act of appropriation occurs without the intention to possess.”

    In light of the above, it is noteworthy that criminal liability is a personal liability. Therefore, the perpetrator of the crime (the respective director) and not the entire board would be charged of the crimes set out in the Penal Code have been committed by a single director.

  13. How are managers typically compensated?

    The management of a company is usually compensated in accordance with the compensation and remuneration scheme of each company; salary and applicable allowances according to the management level. However, in accordance to the provisions of the Companies Law, the profit share of the employees shall be 10% of the annual net profits of the company; such distributions shall not exceed the aggregate annual salary.

  14. How are members of management typically evaluated?

    Egyptian Law does not define specific criteria for assessing the management of companies. Nevertheless, in practice, the managers/directors are bound by contractual KPIs.

  15. Do members of management typically serve on the governing body?

    Pursuant to the Companies Law, the board of directors may delegate any of its members to carry out certain activities of the company or supervise a certain team. Moreover, the board may delegate among its members to carry out the management activities, i.e. the managing director. However, the executive regulation of the Companies law clearly prohibited the appointment of any of the board members for the time of serving on the board to any position or permanent job at the company.

  16. What are the required corporate disclosures, and how are they communicated?

    Pursuant to the Companies Law, board members are under obligation to disclose all related party transactions to the board meeting and refrain from voting on such matter. Moreover, according to article 220 of the executive regulations of the said law, the board of directors shall disclose to the shareholders a report on the activities of the company including, in particular, the related party transactions. Furthermore, all shareholders shall have access to all documents in relation to any item of any general assembly meeting. According to the Companies Law, any shareholder holding 10% or more of the capital shares of a company has the right to obtain all information required in relation to related party transactions.

    For listed companies, the EGX listing rules require disclosures including:

    - Any amendments to the disclosures made at the time of listing;

    - Any arbitral award or court judgment that affects the financial status of the company or the rights of the shareholders;

    - Any judgment of imprisonment to any of the board members of the company;

    - Related party transactions;

    - Trading of shares by principal shareholders and their related parties in case of increase or decrease of the ownership by 5% or its multiples;

    - In case of ownership by any of the principal shareholders or their related parties to 25% of the capital of the company or voting rights, they shall disclose their future investment plans in the company;

    - In case of purchase or disposal of 3% of the capital of the company or voting rights by a board member, they shall disclose their future investment plans in the company;

    - Periodical disclosures of the listed companies including but not limited to, capital structure, number of shareholders, board structure, treasury shares status and any amendments to the articles of association;

    - Disclosure letter of the outcome of the independent financial consultant on the fair value;

    - Disclose minutes of meeting of the EGM and OGM;

    - Resolutions related to the dividend distribution; and

    - Any material events including but not limited to; potential issuance of guarantees, debentures or mortgages, any resolution that may result in cancellation of registered stock, any potential amendment to the capital structure exceeding 5% of the shareholders’ rights and any transactions the value of which exceeds 5% of the revenues of the previous year.

  17. How do the governing body and the equity holders of the company communicate or otherwise engage with one another?

    The shareholders of the company receive annual reports reflecting the status of the company. The shareholders may also request to call a special EGM or OGM to discuss specific matters. Furthermore, the board of directors/managers may call for meetings on need basis.

  18. Are dual or multi-class capital structures permitted and how common are they?

    The Companies Law allows the issuance of preferential shares at incorporation or the amendment of the articles of association to include preferred shares after incorporation provided the prior approval of the EGM by approval of at least ¾ of the shareholders of the company is obtained. Preferences can be granted regarding the following terms:

    - voting (provided that voting preference may not exceed a maximum number of two votes,)

    - dividends; or

    - liquidation proceeds.

    However, it is not permissible for voting and liquidation proceed preferences to be combined.

  19. What percentage of public equity is held by institutional investors versus retail investors?

    In accordance to the EGX website market watch on 17 April 2019, the institutions investors represent 81.06% of the ownership of listed shares of companies, compared to 18.93% owned by individuals.

  20. What matters are subject to approval by the shareholders and what are the typical quorum requirements and approval standards? How do shareholders approve matters (e.g., voted at a meeting, written consent)?

    A joint stock company incorporated under the Egyptian law has two main management bodies, namely, the general meeting of the shareholders of the company and the board of directors of the company.
    According to the Companies Law, the shareholders of the company exercise their rights to manage the company by participation and voting in the general assembly of the company. Such general meeting has two different categories of meetings; the OGM and the EGM.

    The board of directors have the right to manage and represent the company in accordance to the provisions of the Companies Law, articles of association of the company and the internal regulations of the company.

    I. General Meeting of the Shareholders:
    In principle, all shareholders of the company enjoy the right to attend the general meetings of the company. The quorum for convening, resolutions, and competencies differ according to the category of the meeting as follows:

    a) Ordinary General Meeting (“OGM”):

    1. Quorum for convening
    The OGM shall be convened at least once per annum. The OGM shall be convened at the attendance of at least 25% of the share capital of the company or any other percent agreed upon by the shareholders in the articles of association of the company. In all cases, the quorum for convening the OGM shall not exceed 50% of the share capital of the company.

    2. Resolutions
    Resolutions of the OGM are passed by the approval of the absolute majority of the share capital attending the meeting.

    3. Competencies:
    The OGM has the following competencies:

    • Appointment and removal of the board of directors;
    • Monitoring the performance of the board of directors and their discharge of liability;
    • Approval of the financial statements of the company;
    • Approval of board of directors report on the activities of the company;
    • Appointment and removal of the auditor;
    • Determination of the remuneration of the board of directors;
    • Determination of the financial year of the company;
    • Approval on any profit distribution;
    • Cease of accumulation of reserved capital in case it reaches 50% of the issued capital;
    • Approval on the formation of any other reserved capital beside the legal reserves and regulatory reserves;
    • Usage of the regulatory reserves for the benefit of the shareholders or the company, in case it is not designated to certain objectives;
    • Disposal of reserves and allocated amounts in any matters other than the designated;
    • Approval to distribute part of the profits generated from the disposal of asset or damages thereof;
    • Approve related parties transactions; approval shall be for each agreement per se;
    • Approval of issuance of debentures and any guarantees thereto;
    • Review the resolutions of the debentures holders group;
    • Appointment of managing director and determining his authority;
    • Determining the powers of the board of the company;
    • Approve any action undertaken by the board;
    • Appointment of the liquidator;
    • Extension of the liquidation period;
    • Approval of the liquidation closing statement;
    • Any other topic referred to the OGM by the board, the competent authority, or any topic proposed by shareholders’ owning 5% of the issued capital of the company.

    b) Extra-ordinary General Meeting (the “EGM”):
    1. Quorum for convening:
    The EGM shall be convened at the attendance of at least 50% of the share capital of the company or any other percent agreed upon by the shareholders in the articles of association of the company.

    2. Resolutions:
    In principal, resolutions of the EGM are passed by the approval of two-thirds of the share capital attending the meeting. However, for the exceptional cases mentioned in class (B) of the competencies below, approval of 75% of the share capital attending the meeting is required to pass a resolution.

    3. Competencies:
    The EGM competencies are two different classes based on the required voting quota for approving their resolutions.

    Class (A) competencies:

    • An increase of obligations of the shareholders, noting that any OGM resolution contemplating effects on the fundamental rights of the shareholders;
    • To add objects complementary, associated, or close to the purpose of the Company.
    • Extending the duration of the Company shortening it, or dissolving it before time, or changing the rate of loss that would result in mandatory dissolving the Company or to merge the Company in or with another Company.
    • In case of loss of 50% of the issued share capital of the company, the EGM has the sole discretion to decide on continuation or dissolution of the company; and
    • Amendment of the articles of association of the company.

    Class (B) competencies:

    • Capital increase, a reduction thereof;
    • Dissolution of the company prior to the time limit;
    • Change in the original object thereof, and
    • Company merger.

    II. Board of directors (the “BOD”)
    1. Quorum for convening:
    The BOD shall be composed of at least three directors and a maximum of 13 directors. A BOD meeting shall not convene with less than three directors understanding that and the articles of association of the company can include higher quorum for holding the BOD meeting.

    2. Resolutions:
    Resolutions of the BOD are passed by the approval of the majority of the directors attending the meeting.

    3. Competencies:
    All actions to manage the company and represent it within the authorities granted to the board by the OGM of the company.

  21. Are shareholder proposals permitted and what requirements must be met for shareholders to make a proposal?

    The chairman shall call for OGM upon the request of the auditor of the company or the request of 5% of its shareholders. In case of shareholders’ request, the request shall be supported with the reasoning in addition to the deposit of the shares at the company headquarter or any authorized bank.

    The chairman shall call for an EGM upon the request of 10% of the shareholders. In such case, the request shall be supported the with reason in addition to the deposit of the shares at the company headquarter or any authorized bank.

    Furthermore, the shareholders have the right to ask any questions or clarifications on any of the matters on the agenda of either the OGM or the EGM. Such right shall be exercised through the submission of written questions and clarifications to the company by virtue of a registered mail to be delivered to the company at least 3 days prior to the date of the meeting of the OGM and/or EGM.

  22. May shareholders call special meetings or act by written consent?

    The shareholders can call upon special meetings in the following manner:

    The chairman shall call for OGM upon the request of the auditor of the company or at the request of 5% of its shareholders. In the event of shareholders’ request, the request shall be supported with the reasoning in addition to the deposit of the shares at the company headquarter or any authorized bank. The chairman shall call for EGM upon the request of 10% of the shareholders. In such case, the request shall be supported with the reasoning in addition to the deposit of the shares at the company headquarter or any authorized bank.

  23. Is shareholder activism common and what are the recent trends?

    The concept of the shareholders activism according to the United States and Europe practice is not common in Egypt and rarely occurs.

    In practice, shareholders participation and activity in private (unlisted) companies are usually stemmed out from the leverage of each of the shareholders to negotiate the terms of the shareholders agreement commonly concluded between the shareholders. Thus, creating contractual framework for the participation and influence the decisions of the company. In this regards, the most common contractual terms are the veto power granted to certain shareholders in the following matters; disposal of assets of the company, capital increase, change of activity or amendments to the articles of association of the company.

    On the other hand, the law has introduced law driven protection mechanism for the protection of the minority shareholders. In relation to the listed companies, the Capital Market Law contains several means for the protection of minority shareholders including the right of shareholders owning 5% or more of listed companies to cease the implementation of the OGM or EGM decisions that have been issued in favor of or against a group of shareholders. Furthermore, the listing rules included among the minority protection means, the mandatory tender offer (“MTO”). The MTO occurs in case a person wishes to acquire more than one-third (1/3) of the share capital of companies listed on a stock exchange; such person shall be obliged to submit MTO addressed to all shareholders of the company for the acquisition of up to 100% of the capital. Such obligation is applicable if the acquisition of shares is through a shareholder and/or their related parties to more than third of the capital shares of the company or voting powers of the company unless an exemption was granted from such requirement by the FRA as mentioned below.

  24. What is the role of shareholders in electing the governing body?

    The OGM has the sole authority to appoint the board members.

    Moreover, regarding the nomination of the board of directors, the general rule is that the parties can agree on a mechanism for the nomination. However, according to the Companies’ Law and the recent decrees of the FRA for the listed companies and the companies operating in non-banking financial activities, cumulative voting for board members shall be included in the company articles of association while the proportional representation is optional and without a minimum level or a particular formula.

  25. Are shareholder meetings required to be held annually or otherwise, and what information needs to be presented?

    The OGM meeting of the company shall be held annually to discuss the and approve the annual reports of the company, i.e. the report is to be prepared by the board of the company, the financial statements, the appointment and removal of board of directors and their remuneration, the appointment and removal of the auditor and his remuneration, the dividends distribution and the related parties transactions.

  26. Do any organizations advise or counsel shareholders on whether to approve matters?

    Generally, there is no competent organization specialized in advising the shareholders. However, according to the size and interest of the shareholder in the company, they may refer to financial, tax and legal consultations independently.

  27. What role do other stakeholders, including debt holders, employees, suppliers and customers and the government, typically play in the corporate governance of a company?

    Generally, the stakeholders do not have direct mean to intervene in the governance of the company; however, the Companies Law grants to specific stakeholders including the following:

    - Employees: subject to the satisfaction of certain conditions, companies shall distribute 10% of its annual net profit to their employees; such distributions shall not exceed the aggregate annual salary;

    - Debt holders:

    • in case of distribution of dividends to shareholders that impacts the ability of the company to pay its debts, the debt holders are entitled to annul the resolution of dividend distribution; and
    • the consent of debt holders is required for the demerger.

    - Government: GAFI is entitled to attend the general meetings of the company and may call, in special cases, for a general meeting of shareholders to supervise and observe the compliance of the company with the applicable rules and regulations.

  28. What consideration is given to environmental and social issues, including climate change, sustainability and product safety issues, and are there any legal disclosure obligations regarding the same?

    Egypt issued a law in 2017 updating the licensing system in Egypt; such law focuses on the environmental aspect as one of the main pillars of sustainable development. The law for the Facilitation of Industrial Licenses no. 15 of 2017 included the environmental impact in different matters as follows:

    - an environmental study of the industrial project is required for the issuance of any construction license or carrying out construction works;

    - high risk facilities require an environmental impact assessment study for the issuance of a pre-license and environmental file in case of notification; and

    - ISO international standards on health and safety.

  29. How are the interests of shareholders and other stakeholders factored into decisions of the governing body?

    Pursuant to the Companies Law, Capital Market law and their executive regulations, the governing body; namely board of directors shall obtain the approval of shareholders on any matters that affect the rights of shareholders as prescribed in details in question 20 above.

  30. Do public companies typically provide earnings guidance on either a quarterly or annual basis?

    The Listed companies are required to publish their financial accounts quarterly on the EGC website.

    Furthermore, the company is obliged to publish the end of year audited financial statement in two newspapers. Moreover, the governing body must discloses in the annual OGM of the company, the earnings among the discussion of the financial statement, board report, and dividends.

    However, the listed companies have no obligation to issue any periodical forecast, guidance or disclosures about the future earnings of the company.

  31. May public companies engage in share buybacks and under what circumstances?

    Generally, under Egyptian Law, in a listed company, the concept of the buyback is not defined per se. However, a company acquiring some of its shares by itself is considered dealing with treasury shares. Consequently, the exercise of a buyback options result in the creation of treasury shares. Such purchase of treasury shares shall be in compliance with the EGX rules as follows:

    • A listed company wishing to acquire its shares should submit to EGX on the required EGX forms, 3 days prior to the date of the contemplated transaction, the reasons for such acquisition, the number and the price of such treasury shares, the type of the transaction, the brokerage company, the contemplated date of the transaction, the source of funding such transaction and its anticipated effects on the performance indicators of the company, along with a summary of its board decision;
    • - In case the purchase price exceeds the: (i) average shares trading price in the last 10 trading sessions preceding the date of convening the board of directors meeting approving the purchase of the treasury shares, or (ii) average shares trading price of the last three months whichever is higher; a study prepared by an Independent Financial Advisor (“IFA”) determining the fair value of the shares should be attached to the above mentioned notification submitted to EGX;

      - A recent certificate issued by the company’s auditor stating that the company is financially capable of purchasing treasury shares;

    • The transaction shall be executed pursuant to the following:
    • - The shares subject of the transaction shall be domestic shares.
      - The treasury shares should not exceed 10% of the total shares listed on EGX.
      - The transaction shall not result in decreasing the free trade shares at the stock market to less than 10% of the company shares.
      - The execution shall be through the open market in accordance with the trading regulations.
      - The transaction shall be executed through the transaction market for five business days.
      - The company should keep the treasury shares for at least three months after the purchase date and shall dispose of the treasury shares within one year maximum from the date of their acquisition. In case one year lapsed before the disposal of such shares, the company shall decrease the issued capital in accordance to the procedures set out in the Capital Markets Law.
      - The execution of the transaction shall be in accordance to the EGX rules to guarantee equality between traders and maintain stability.

    • At the end of each day where part of the transaction is executed, the company should disclose to the EGX a summary of the percentage disposed or purchased of the treasury shares and the EGX displays the same on its website.
    • In case 50% of the transaction (declared amount) is not successfully implemented, the company shall not apply for the purchase of treasury shares for a period of six months from (i) the date of the execution, or (ii) the date of disclosure of subsequent financial statement. In all cases, the period between the execution and the latest disclosure of financial statement shall not be less than two months.
    • In all cases, if the transaction increases the voting rights of the shareholder and its related parties, the general assembly of the company shall approve the acquisition.
  32. What do you believe will be the three most significant issues influencing corporate governance trends over the next two years?

    The most corporate governance trends are as follows:

    a. Minority shareholders protection;

    b. Registration of all shares of JSC with Misr for Central Depository and Register; and

    c. Facilitation of the procedures of incorporation and enhancing the investment environment