In the wake of the most recent amendment to the Investment Law No. 72 of 2017 (the “Investment Law”) by virtue of law No. 141 for 2019 published on July 31st, 2019 (the “Law”), adding to GAFI’s mandate the possibility, for statistical purposes, of requesting the information required to compute direct and indirect foreign investment based on survey forms to be issued by a prime ministerial decree, two Prime Ministerial Decrees have been published in the Official Gazette on November 6th, 2019 (to be in force as of November 7th, 2019); amending the Executive Regulations of the Investment Law.
Decrees No. 2731 and 2732 of 2019 (the “Decrees”) add new disclosure obligations for all public and private entities with foreign investment (the “Disclosure Obligation”) and sets forth the framework and forms for the same.
The highlights of the Decrees are as follows:
Private Entities subject to the Decree
Under the Decrees, the entities subject to the Disclosure Obligations are both public and private entities. Private entities are defined as (i) all companies having foreign investment participation which are already established or to be established in Egypt, regardless of the law in accordance to which they are established; and (ii) investment projects established under the Investment Law and which have a foreign investment participation (“Private Entities”). It is not clear under the Decrees whether representative offices and branches of foreign companies will be subject to the Disclosure Obligation.
Overview and timing of the Disclosure Obligation
According to the Decrees, Private Entities must electronically disclose to the General Authority for Investment and Free Zones (“GAFI”) the information and data required to calculate their direct and indirect foreign investment based on the forms issued by GAFI in this respect. Under the Decrees, a Disclosure Obligation is triggered and must be filed (i) within 30 days from the establishment of a Private Entity and any amendment to its capital, corporate object, shareholding or board composition; (ii) within 45 days from the lapse of a quarter (under the Decrees, a quarter lapses at the end of March, June, September and December of every year); and (iii) within 4 months from the lapse of a Private Entity’s financial year.
It should be taken into consideration that all information filed with GAFI under the Disclosure Obligation shall remain confidential by the Ministry of Investment and International Cooperation and shall only be used for statistical purposes.
Main Information Required for the Disclosure Obligation
The main information to be disclosed under (i) above is corporate information of the Private Entity, information regarding its foreign and national shareholding (i.e. nationality, number of shares owned, voting powers and the percentage of board representation), board composition and information regarding the Private Entity’s capital.
The main information to be disclosed under (ii) above is materially the same as the information provided under (i) in addition to shareholders’ ownership rights. Private Entities are also required to attach to this disclosure their quarterly financial statements, if any.
The main information to be disclosed under (iii) above is materially the same as the aforementioned in addition to the Private Entity’s immovable assets, long-term and short-term equity investments, long-term and short-term loans, current and long-term liabilities and operational data. Private Entities are also required to attach to this disclosure their audited annual financial statements and any other relevant documents.
Consequences of Breach
By virtue of the Law, in specific circumstances set forth under the Law, the actual manager of the Private Entity will be punished by a fine up to EGP 50,000 in case of a breach of the Disclosure Obligation by the Private Entity.
Market Reaction
The Decrees come in response to the noticeable decline (i.e. 23.5%) reported by the CBE in the volume of foreign investment in Egypt in the last two fiscal years.
