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Joint Stock Companies To Undertake Direct Investment Activities

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The Egyptian government took initiative in 2018 to boost direct investments (“DI”) as part of its general direction to develop and stimulate investment. Whereby the Capital Market Law has been amended by way of Decree No. 113 for 2018 (“Decree 113/2018”) to allow limited partnerships by shares with a minimum capital of EGP 10 million to undertake DI activities.

On 30 January 2022, the Prime Minister issued Decree No. 401 for 2022 (the “New Decree”) with the aim to further expand the scope of application of Decree 113/2018. Following its implementation, DIs will no longer be limited to one type of companies.

The New Decree was issued and published in the Official Gazette on 30 January 2022 and came into force on 31 January 2022.

We shall delve into the key highlights of the New Decree as follows:

Key highlights of New Decree

It is important to highlight that the New Decree sheds some light on the definition of DI by stipulating that DI may be undertaken through investing in a company’s capital in either listed and/or unlisted securities or in limited partnership companies. The New Decree further added that companies may also invest in venture capital as part of their DI strategy.

The New Decree broadened the definition of the companies working in the securities field that may undertake DI activities. In this regard, the New Decree stipulates that, in addition to limited partnerships by shares, joint stock companies (the “JSCs”) may now also undertake DI activities provided that they fulfill the conditions outlined in Decree 113/2018 pertaining, inter alia, to capital, intended investments and management requirements.

In addition to the above and with regards to the management of DI activities in JSCs, the New Decree states that the managing director shall be the person responsible for managing the JSC and its investment activities.

Market Reaction

The New Decree reflects the Egyptian government’s keenness in boosting and stimulating investments. Seeing as JSCs are highly used as a common legal equity structure, we anticipate that DI would be accessible to a much higher range of investors and would be implemented more often.