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Company Formation in Egypt

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Company Formation in Egypt

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Company Formation in Egypt

So you've decided to start a business in Egypt and researched your market. Now it's time to decide how you will register and set up a business in Egypt. What is the best, most viable option for your company, your products, and yourself. Which is the path of least resistance?

Here are your typical options when starting a business in Egypt:

Branches and Representative Offices

Branches are subject to exemption from taxation for a period of ten years if they exercise their activities in new urban communities and employ a certain percentage of Egyptian nationals as specified in the Companies Law. They must be registered on the Commercial Register at General Authority for Investments and Free Zones. Representative offices are prohibited from the exercise of any trading activity. Approval of the foundation of such offices may take as long as eight weeks. The registration is valid for five years.

Commercial Agency and Representation

A foreign company starting a business in Egypt may appoint a commercial agent to represent its interests in the country. Individuals born of Egyptian fathers and long-standing naturalized Egyptians may represent foreign principals in importing goods into Egypt. The appointment of local agents is obligatory for making tenders to the public sector.

Legal entities, commercial agents and mediators must be approved by and registered with the Ministry of Foreign Trade.

Yet, in compliance with the Egyptian government's efforts to attract foreign investment, an important exemption has been provided for investment projects, enabling them to import their requirements and export their products directly. The following types of indirect investment are available:

  • Agents

  • Commission agency

  • Contract agency

  • Agency agreements issued by non-Egyptian companies

  • Distributors

Contact the Egyptian British Chamber of Commerce in London for more information.

If you wish to set up a company in Egypt, the principal forms of companies are listed under the Corporate Law No. 159 of 1981. They are:

Joint Stock Company

Invested share capital is divided into shares of equal value; the liability of the shareholder is confined to the value of the shares to which he subscribes, and he is not liable for the debts of the company except within the limit of those shares. The JSC must have at least three founders. The founders are jointly responsible for the obligations they undertake.

Limited Liability Company

A company in which the number of shareholders does not exceed fifty. Each shareholder is only responsible within the limit of his portion of the shares. The foundation of the company, the increase of its capital or borrowing to its account is not permissible through public subscription. The LLC is not allowed to issue negotiable shares or bonds.

These two forms of companies are the preferred forms of incorporating a business in Egypt for foreign investors. Joint stock companies may be wholly controlled by a foreigner. Also, limited liability companies may be 100% foreign owned provided that at least one of the general managers is an Egyptian.

Other company types to form are:

Merger and Acquisition

Merger may take place by combining one or more companies into an existing company or by the consolidation of two or more companies. Merger and acquisition are also governed by local law.

Partnerships

  • Limited Partnership

  • Partnership Limited by Shares

Joint Ventures

A contractual or unincorporated joint venture is formed when two parties, one of whom is Egyptian, join with one another in a venture for their mutual benefit. If the parties choose not to set up a company for the venture's purposes, the legal aspects of their cooperation will be dictated by the contractual relationship between them. This form of business association is particularly popular in natural resources development projects.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

  • Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

  • Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

  • Patent License - The allowance of another party to use your patented product, design or process.

  • Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Egypt

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Egypt include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in Egypt: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

The doors are open for franchising in Egypt. The franchising market in Egypt has tremendous growth potential, mainly in the fast food sub-sector. This market has experienced remarkable expansion and market sources expect continued growth at an annual rate of 10 to 20 percent.

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