Laws and decrees that most affect foreign businesses in Egypt

 

The legal environment is a major factor in an investor’s decision to set up shop in a foreign country and the ease of doing business once operable. This overview sheds light on the relevant laws that are most applicable to foreign investors in Egypt, focusing on the corporate, labour, investment and property laws of the country.

1. Corporate Law

All newly established corporate vehicles in Egypt are subject to the provisions of the Companies Law No. 159 of 1981 (Companies Law), as well as its amendments and executive regulations, which is the general law of application.

The Companies Law prescribes all corporate governance rules and regulations, specifically addressing matters pertaining to the company’s management, control, fiduciary duty and fiscal policies. The Companies Law further prescribes the operation of the firm’s corporate requirements, such as meetings of the board of directors, ordinary general assembly meetings and extraordinary general assembly meetings.

That said, depending on the company’s type of activity, certain companies may be formed under different laws that are specified for said activity, such as the Capital Markets Law No. 95 of 1992.

Foreign enterprises wishing to conduct business in Egypt may enter the local market by establishing either a permanent or temporary legal structure and are permitted to do so through the establishment of various types of entities under Egyptian law. Entities that have a permanent presence include: limited liability companies (LLCs), joint stock companies (JSCs) and sole person companies (SPCs). Entities that have a temporary presence include: foreign branch offices and foreign representative offices.

LLCs, JSCs and SPCs are the three forms typically preferred by foreign investors intending to incorporate a business in Egypt; however, JSCs have remained foreign entrants’ preferred choice since they may be fully controlled by a foreign entity. Nonetheless, LLCs and SPCs may be fully owned by foreigners as well.

1.1. Joint Stock Companies

JSCs are among the most commonly used legal vehicles in Egypt and are the favoured vehicle for establishing manufacturing projects that require major financial investments. The reason JSCs are preferred when an undertaking requires substantial investment is because there is no requirement for the company to pay the capital in full upon its establishment; the capital can be paid over a period of five years. Capital: A JSC may have authorised capital and must have issued actual and paid-in capital. The issued capital may not be less than LE250,000 ($14,000) for closed companies and LE50m ($2.8m) if the company intends to offer its shares to the public. At least 10% of the share capital must be paid-in at the incorporation stage and increases to 25% within three months following the incorporation. Full payment of the issued share capital must be effected within five years after incorporation.

In the case of holding companies established for purposes of stock dealings and investment, the issued capital shall not be less than LE5m ($281,000), of which a minimum of 25% must be paid upon incorporation and the remaining amount within five years after the date of incorporation. Public subscription: JSCs are permitted to offer shares to the public. Companies that are formed through public subscription must publicly offer a minimum of 49% of its shares for a period of at least one month, unless the Egyptian founding shareholders pay up this percentage of shares prior to the public offering. If the shares are to be publicly offered, these transactions must be handled through either a bank that is licensed to receive subscriptions, a company established for this sole purpose or one licensed by the Financial Regulatory Authority to deal in securities. Number of shareholders: A JSC must have a minimum of three founding shareholders at all times, whether natural persons or legal entities. There is no upper limit for the number of shareholders, but if the number reaches 100, the company is considered as having been offered to the public and the rules for public companies would then apply.

Generally speaking, there are no regulatory restrictions on foreign ownership of companies in Egypt. However, there are a few exceptions: restrictions on ownership apply to companies practising certain activities, including but not limited to operating importation or commercial agencies. Furthermore, ownership restrictions are applicable to companies practising its activities in certain geographical zones, such as those in the Sinai Peninsula.

Moreover, a company is capable of switching from a JSC to an SPC in the event that the number of founders or partners in the company are less than the legally prescribed minimum or in the event the company fails to meet the requirements specified by the law during the allotted period, in accordance with Amendment No. 4 of 2018 to the Companies Law. The latter is only feasible provided that the company does not engage in activities prohibited by the law for SPCs. Objectives: Subject to obtaining permits and licences for certain types of activities, there are no restrictions on the commercial objectives of a JSC, provided they are not contrary to public policy or morality. Management: JSCs are managed by a board of directors that consists of at least three members who have been appointed by its general assembly. The board of directors is entrusted with the day-to-day operations of the company and in this respect has the full authority to represent the company vis-à-vis third parties. The board’s authority, however, excludes matters that are explicitly reserved by law or by the company’s constitutive documents that stipulate such matters would need to be decided via general assembly.

The board of directors shall be headed by a chairman who shall not only be appointed by the directors, but must also be among them. The board must have a minimum of three members at all times. The directors are permitted to hold three-year terms after they are appointed for an initial term of five years.

There are no nationality requirements for board members. There must be a means of employee participation in management, either through board membership, share ownership or the establishment an administrative committee from among the employees. In practice, this can raise some issues in labour-intensive companies. Profits: A JSC’s after-tax earnings for each fiscal year, as increased or reduced by any profit or loss that has been carried forward from previous years, shall be available for distribution in accordance with the conditions of the Companies Law and the statutes of the JSC.

Shareholders may decide at an ordinary general assembly whether to distribute all or part of the dividends as per the company’s audited financial statements, so long as such distribution will not affect the company’s financial obligations to third parties or its ability to conduct business.

The distribution of dividends should be made within 30 days from the date of the approval of the ordinary general assembly. Employees of a JSC shall be entitled to 10% of the dividends, which are approved to be distributed by the ordinary general assembly. The employees’ percentage of the dividends shall not exceed their total annual wages.

A JSC’s after-tax earnings for each fiscal year, as increased or reduced by any profit or loss that has been carried forward from previous years, shall be available for distribution in accordance with the requirements of Egyptian law and the JSC’s statutes, as follows:

• A JSC is required to establish, and must always maintain, a legal reserve equal to at least 5% of its issued capital funding until it reaches 50% of capital;

• After funding its legal reserve (if required), the balance of its after-tax earnings is considered the JSC’s distributable profits and may be distributed pursuant to a resolution of the general assembly;

• A JSC is required to allocate employee bonuses equivalent to a minimum of 10% of its distributable profits (if any) with a maximum equivalent to the aggregate annual payroll. Allocation of such amounts shall be determined by a board of directors’ resolution; and

• Distributable profits shall be distributed in order of priority: 1. An initial amount equivalent to a minimum of 5% of the distributable profits shall be distributed to shareholders as dividends and to the employees as bonuses. 2. An amount of up to 10% of the distributable profits may be paid to members of the board of directors as remuneration, however, shareholders can decide not to distribute dividends to the board of directors. 3. The balance of the distributable profits may be paid to the shareholders as additional dividends and to the employees as additional bonuses. It may also be carried forward to the following year as retained earnings or allocated to fund a special reserve to be used as determined by the general assembly upon a recommendation of the board of directors. In order for shareholders to receive their dividends, they should deposit their shares with the Central Depository if the shares are in a dematerialised form or surrender the coupons attached to the share certificates if the shares are in documentary form and the company issued the final share certificates. Dividends approved for distribution that are not claimed within five years from the date they are payable will be subject to the statute of limitations and paid to the State Treasury. Taxation & social insurance: For investment promotion purposes, a recently issued law amended the corporate income tax rate by reducing it from 25% to 22.5% of the company’s net profit. In addition, the tax rate applicable to dividend distributions is 10% and may be reduced to 5% if the shareholder receiving the dividend holds more than 25% of the capital share of the company distributing dividends, and holds its interest (i.e., shares or quotas) in the distributing company for a period of not less than two years. In cross-border situations, the rate may be further reduced in accordance to any applicable tax treaty.

All company employees shall be subject to Egyptian salary tax, and the company must implement the required monthly tax withholdings. Additionally, social insurance contributions are required for Egyptian employees by both employers and employees.

1.2. Limited Liability Companies

This type of company is usually formed for small-scale projects that do not require major financing, such as firms that are involved in internal trade and service activities. An Egyptian LLC is a company that is closed due to the limited liability of its quota-holders equivalent to their quotas’ values in the capital of the company. Therefore, it may be defined as a private company whose owners are legally responsible for its debts to the extent of the amount of capital they invested. Capital: Unlike a JSC, there is no initial minimum capital required for LLCs, according to the Ministry of Investment Decree No. 90 of 2009. However, capital must be fully paid at the time of the incorporation of the company. Cash contributions are placed in a blocked bank account and released upon formation of the LLC. Any increase in the capital necessitates an extraordinary general assembly resolution. The company’s capital is divided into equal quotas – which are commonly called shares – either in cash or in kind, and the value of each share cannot be less than LE1 ($0.06). No share certificates are issued and the sale of shares is subject to the pre-emptive purchase rights of the remaining partners. Quota-holders & public subscriptions: Quotas must all be of equal value. LLCs must have a minimum of two quota-holders at all times and can maintain a maximum of 50 quota-holders. Quota-holders may be natural persons or legal entities. Although the law does not prescribe a minimum value for such quota, in practice they are commonly valued at LE100 ($5.62). Quotas in LLCs cannot be offered to the public. Changing designations: An LLC can switch or become an SPC in the event that the number of founders or partners is less than the legally prescribed minimum or in the event that they fail to meet the requirements specified by the law during the allotted period, in accordance with Amendment No. 4 of 2018 to the Companies’ Law, provided that the company does not engage in activities prohibited by the law for SPCs. Objectives: Unlike a JSC, an LLC is precluded from activities in certain areas, such as insurance, banking, savings, deposit taking, investment funds, securities brokerage and portfolio management. However, an LLC may undertake any other activity provided it can carry out commercial, industrial or service activities similar to other business entities, subject only to the general limitations of public policy or morality. Management: LLCs may be managed by one or more managers, to be appointed from among the quota-holders or others. Previously, the only restriction had been that one of the managers must carry Egyptian citizenship; however, Decree 295 of 2018, issued by the General Authority for Investment and Free Zones (GAFI), has removed this requirement to permit managers to be of any nationality. The decree does not come without exceptions, though, namely that it is not applicable to companies who operate as importation or commercial agencies, and also extends to those acting as commercial intermediaries.

The managers may be appointed for a definite term that has been specified in its articles of association or for an indefinite term. Moreover, a supervisory board is required if the LLC has more than 10 quota-holders. At least three members of this board must be quota-holders. Employee participation in management is not required. Profits: The rules governing distribution of profits are the same as those that apply to JSCs, except that profits are required to be distributed to employees only once the capital reaches LE250,000 ($14,000). Taxation & social insurance: A recently issued law amended the corporate income tax rate, reducing it from 25% to 22.5% of the company’s net profit.

All company employees shall be subject to Egyptian salary tax and the company must implement the required monthly tax withholdings. Social insurance contributions are required for Egyptian employees by both employers and employees. It is important to note that social insurance contributions increase on an annual basis.

2. Labour Law

In line with its obligations under the World Labour Organisation and the Arab Labour Organisation, of which Egypt is a member, the Egyptian Parliament enacted Labour Law No. 12 of 2003 (the Labour Law), superseding the former Labour Law No. 137 of 1981. Despite its progressive approach, the Labour Law remains much like its predecessor to a large extent – an employee-favoured law designed to protect the rights of the worker.

2.1. Employment Contracts

An employment contract may be drawn up for a definite or indefinite term. The Labour Law provides that a definite-term contract may be renewed upon the express mutual agreement of the parties for a consecutive definite term(s) without being construed as an indefinite-term contract. However, if the parties neglect to expressly renew the definite-term contract but still perform the same employment relationship, it shall then be construed as an indefinite-term contract.

If an employee is hired on a probationary basis, the contract of employment should expressly indicate the length of the probationary period, which shall not exceed three months.

2.2. Dismissal, Termination & Settlement

The Labour Law has introduced several new provisions, including those governing the termination of employment. Pursuant to Article 69, an employee may only be terminated on the grounds that he or she committed a grave fault or due to the non-performance of his or her obligations. Furthermore, Article 111 of the Labour Law requires the employer to serve a two-month-prior termination notice to the employee in question and provide three months’ notice if the employee has served more than 10 years at the company.

Unjustified termination would entitle the terminated employee to claim damages against the employer. In the event that a court rules in favour of the employee, the damages awarded would not be less than two full months worth of his or her salary for each year of service, in addition to any other legal entitlements that the party may be entitled to as compensation. Salary, in this respect, would extend to include all related acquired rights, such as allowances and bonuses. Moreover, pursuant to Law No. 180 of 2008, which amends certain provisions of the Labour Law, the unlawfully terminated employee is entitled to request the court to issue an urgent order against the employer for payment of a 12-month salary, pending a judgment on the merits of the employee’s case for unjustified termination.

Amicable termination settlements seek to put a termination package in place for the employee, which would ordinarily include a final resignation and release form. However, it should be noted that pursuant to Article 119 of the Labour Law, the employee has the right to withdraw his resignation within one week of its acceptance by the employer, and in such a case the resignation would be considered null and void. This rule aims to give the employee the chance to reconsider the impact of such resignation in an attempt to protect his or her best interests. Accordingly, the employer should consider the resignation effective upon the lapse of a one-week period.

2.3. Health Care & Pension

All private sector companies in Egypt are required to provide free health care coverage for their Egyptian employees, either through the Medical Insurance Plan of the Ministry of Social Insurance or privately. They are also obligated to contribute to the Pension Insurance Fund of the Ministry of Social Insurance.

3. Investment Law

Nearly two years to the day after the Egypt Economic Development Conference was held in Sharm El Sheikh on March 13, 2015, the House of Representatives – the country’s Parliament – passed the new Investment Law No. 72 of 2017 on May 7, 2017 (Law No. 72) as part of the ongoing efforts to bring more foreign direct investment into the country.

The investment law includes newly offered guarantees and incentives for investors that have been established for the purpose of attracting local and foreign investments to Egypt. Egyptian, Arab and foreign investors are entitled to benefit from guarantees and incentives under the investment law.

3.1. Guarantees & Incentives

Law No. 72 introduces new safeguards and rights that create a smoother and more efficient process in the running of investment projects, and the executive regulations of the investment law outline the necessary conditions for pursuing investment activities. The law governs a number of investment activities in various economic sectors, including manufacturing, agriculture, trade, education, health, transport, tourism, housing, construction, sports, electricity, energy, natural resources, water, communications and technology. The law allows for the competent minister to include other sectors after consulting with the relevant authorities.

The law grants various incentives and guarantees to those engaged in investment activities, while also allowing for the establishment of investment, technological and free zones, which are governed by special provisions that set them apart from general internal investment in Egypt. Additionally, the one-stop-shop Investor Service Centre helps create an investor-friendly environment. Legal guarantees: The law implements a series of safeguards for investors. It outlines that:

• All investors are explicitly guaranteed fair and just treatment;

• All foreign investors are given the same treatment as local investors;

• Exceptionally, foreign investors can be granted preferential treatment in application of the principle of reciprocity;

• The invested funds will not be governed by any arbitrary procedures or discriminatory decisions, as all decisions related to the affairs of the investment project shall be justified and passed on to concerned parties in the manner regulated by the provisions of the Law No. 72;

• Investment projects may not be nationalised, and companies and establishments may not be expropriated. The expropriation of an investments project’s property may exceptionally take place in the case of a public utility, but not without fair compensation paid in advance without delay. The amount paid shall equal the fair economic value of the expropriated property on the day preceding the expropriation decision date;

• Investment projects may not be administratively attached, sequestrated or frozen, except by a final court order or irrevocable judgment. An exception can occur in the case of debts owed to the Tax and Social Insurance Authorities, which may be collected through all types of attachment, without prejudice to the contracts concluded by the state or the public legal persons with the investor; and

• Investors receive more protection and security as compared to the previous law, as governmental and regulatory authorities may not revoke the investment project licence or suspend it, and may not cancel land allocation except after giving notice to the investor of a breach, hearing his or her views and giving the investor a period that does not exceed 60 days to remedy the breach. If the breach was not rectified after the given period, the opinion of GAFI must be sought before issuing any decision against the investor, and GAFI shall express its opinion within seven days from the date of receiving the request. The investor retains the right to appeal any decision handed down before the GAFI Appeals Committee and then the courts, if necessary. New rights for investors: The new law also offers expanded legal rights to investors, allowing for a smoother, more efficient running of their investment projects. Additional rights include:

• Investors being entitled to set up, operate, expand and finance their projects in foreign currency transferred in from outside Egypt, without restrictions;

• Investors being entitled to own, manage, use and dispose of the project, to make profits from the project and to transfer such profits abroad. Additionally, the investor may liquidate the project and transfer the proceeds of such liquidation in whole or in part abroad without prejudice to the rights of third parties;

• Foreign Investors being permitted to freely dispose of their assets, liquidate their projects and convert proceeds in local currency to foreign currency through registered banks and repatriate their profits, sale proceeds and/or capital, in foreign currency, without restrictions or delays;

• Investment projects having the right to import – whether directly or through third parties – the raw materials, production supplies, machinery, spare parts and transportation equipment that suit the nature of their activity and which are required for the establishment, expansion or operation thereof, without the need to be registered in the importers register; and

• Investment projects having the right to export their products, directly or through an intermediary, without a licence and without the need to be registered in the exporters register. Incentives for new projects: Under Law No. 72 all investment projects – other than free zone projects – benefit from general incentives, which are as follows:

• An exemption from stamp tax, as well as notarisation and publication fees for companies and establishments’ incorporation contracts. The exemption from the aforementioned fees also extends to loan and mortgage contracts that pertain to the company’s business; however, the exemption is no longer applicable after five years from the date of registration in the Commercial Register;

• An exemption from the stamp tax, as well as notarisation and publication fees for land registration contracts that are required to set up the companies and establishments;

• A unified Customs tax bracket in the amount of 2% of the value of all imported machinery, equipment and devices required for the setup or completion of companies of investments projects subject to the provisions of this law – except for projects established under the free zone regime. This unified Customs tax bracket also applies to all machinery, equipment and devices imported by companies operating in the public utility sector that are required for the establishment or completion of those companies; and

• An exemption from Customs duties when importing casts, moulds and other similar production supplies that are intended for temporary use in manufacturing products and which will be re-exported abroad after use. Special incentives: All investment projects set up after the issuance of Law No. 72 will receive a special incentive in the form of a discount on the company’s taxable net profit or costs, as follows: (a) Sector A investment projects are all works in underdeveloped geographic zones that urgently need development in accordance with the investment map, such as: the economic zone of the Suez Canal, the economic zone of the Golden Triangle and others that shall be determined by a decision of the Council of Ministers. These are commonly characterised by their lack of economic development, high unemployment rates, high rates of poverty, as well as being densely populated with high illiteracy, and poor accessibility to quality education and health services. Investment projects in such zones shall receive an investment incentive in the form of a 50% discount on their taxable net profits. (b) Sector B investment projects are undertakings in the remaining areas of Egypt, which will benefit from a 30% discount on investment costs. The discount period should not exceed seven years from the company’s activity start date and shall not exceed 80% of the capital paid-up until the activity start date. Investment projects may make use of foreign employees, provided they do not exceed 10% of the workforce. If the project’s employment needs cannot be met by local workers, then the maximum foreign workers allowed can be increased to 20% of the according to the procedures outlined in the Executive Regulations of the Investment Law. Foreign employees may transfer their remuneration abroad.

3.2. Dispute Resolution

The amended investment law introduced further changes to facilitate and expedite dispute resolutions, allowing parties to resolve all disputes arising out of investment contracts via arbitration. First, the new law established a Ministerial Committee for Investment Contracts Disputes Resolution, which is responsible for dispute resolution specific to investment contractual obligations of which the state or an affiliate is a party. Second, the Ministerial Committee for Investment Disputes Resolution was established to focus solely on assessing disputes between the government and investors regarding the implementation of the new law. A ministerial decree also created a grievance committee that is responsible for receiving complaints regarding the implementation of the new investment law in Egypt.

3.3. Free Zones

Egyptian, Arab and foreign investors may undertake projects in Egyptian free zones regulated by the investment law. Free zone companies can engage in either industrial or service activities. Most goods and materials imported into a free zone are not subject to import duties or regulations. There are two types of free zones – public and private. Public free zones: Public free zones are established by the Council of Ministers following a proposal by the competent minister and after receiving approval by GAFI’s board of directors to perform licensed projects, regardless of their legal form. Public free zones are mainly aimed at export. A decision by the Council of Ministers to establish a public free zone shall state the public free zone’s location and its boundaries.

Projects established in public free zones are subject to a fee equal to 2% of the commodity value upon ingress for warehousing projects, and a fee equal to 1% of the commodity value upon egress of manufacturing and assembling projects. That said, transit goods trade shall be exempt from this duty; however, projects established in public free zones are subject to a fee of 1% of the total revenue of the project in which the main activity does not require the ingress or egress of goods, based on the financial statements reviewed by a certified accountant. Incentives & tax breaks: Free zone companies are not subject to income tax, and are incorporated for the purpose of exporting the products or services manufactured or provided in the free zone. Under the free zone system, qualifying companies are granted Customs duties and tax exemptions. Both types of free zone companies are exempt from local taxes and Customs.

In all cases, however, projects established in either public or private free zones shall pay annual fees to GAFI for which the services may not exceed 0.001% of the capital, at a maximum of LE100,000 ($5620).

4. Anti-Cybercrime Law

On August 14, 2018 the Anti-Cybercrime Law No. 175 of 2018 came into effect. The law applies to natural and legal persons, company managers, service providers, web administrators and state officials. The Anti-Cybercrime Law has a wide scope covering a number of matters, including but not limited to online crimes and subject-matter censorship. That said, what the law considers to be prohibited content is not coherently defined. Part three of the Anti-Cybercrime Law is composed of eight chapters that indicate the types of offences considered under the law. Most notably these include: offences against the integrity of information networks, systems and technology (chapter 1); crimes related to the invasion of privacy and illegal content (chapter 3); and the criminal liability of legal persons (chapter 8).

Furthermore, the Anti-Cybercrime Law incorporates data protection aspects for crimes of privacy infringement and subject matter-related breaches – for instance, content breaching the country’s morality principles. Additionally, breaches include content that poses a threat to the country’s national security, clearly defined in Article 1 (25) of the Anti-Cybercrime Law.

The legislation was also enacted as a supplement to the existing press and media laws, namely to impose penalties on those operating unlicensed online activities in addition to those in breach of content that violates the law, for example, the publication of false news.

5. Property Law

This section highlights special requirements and restrictions related to foreign ownership of property in Egypt.

5.1. Law No. 230 of 1996

Pursuant to Law No. 230 of 1996 regulating the ownership of built real estate and vacant land by non-Egyptians (Law No. 230), a foreigner who acquires ownership of vacant land is obliged to commence construction within a period of five years from the date the land purchase agreement was notarised. In the event the five-year period lapses without commencing construction works, the prohibition to dispose of the vacant land shall be extended to a similar period as that of the delay in construction.

In principle, foreigners who acquire ownership of a building in accordance with Law No. 230 may not dispose of said building before the lapse of five years from the date of acquiring it.

5.2. Decree No. 350 of 2007

This prime ministerial decree states that all companies and entities shall have the right to own the land and property necessary for conducting their business or expanding their activities, irrespective of their partners’ or shareholders’ nationalities, residencies and stakes in the company.

This is applicable with the exception of land in strategic areas, such as those adjacent to the western, eastern and southern borders of Egypt; islands located in the Red and Mediterranean Seas; and the Suez Canal area. The decree prohibits foreign companies and entities from owning any land or property in the Sinai Peninsula, including land falling within the geographical scope of Ismailia, Suez and Port Said governorates.

6. Government Procurement

The Law Regulating Contracts Concluded by Public Bodies No. 182 of 2018 (Public Bodies Contracts Law) was issued on October 3, 2018 to create a better business environment and to more effectively regulate public sector procurement and public contracts.

The new law repealed the Tenders & Bid Law No. 89 of 1998, but all operations already initiated or contracted prior to the date of implementation of the Public Bodies Contracts Law shall continue to be subject to the provisions of the abrogated Tenders & Bid Law of 1998 until the completion of the contract.

The new Public Bodies Contracts Law aims to:

• Apply criteria for openness, transparency, integrity, freedom of competition, equality and equal opportunity, and avoid conflicts of interest;

• Reinforce the principal of governance;

• Develop methods of buying and selling that keep pace with economic developments, and meet the needs of administrative authorities effectively;

• Create an appropriate environment in which small and medium-sized enterprises can compete;

• Provide fair treatment throughout the business community and prevent practices of collusion, fraud, corruption and monopoly;

• Transition towards modern management methods and the use of information technology within procedures;

• Reach a level of efficient and effective public expenditure;

• Regulate procedures for the planning and enforcement of public contracts, and monitor such enforcement; and

• Encourage those subject to the provisions of this law to adopt innovative solutions, initiatives and technologies when contracting, as well as adopt sustainable contracting policies.

6.1. Government Contracts

The Public Bodies Contracts Law provides for two main procurement methods: public tenders and public practices’ negotiations. Public tenders follow the principles of open competitive bidding, where two proposals are to be submitted – a technical proposal and a financial proposal. Public practices’ negotiations, meanwhile, are equivalent to a bid or auction.

These two methods are used for the procurement of goods and works. When it comes to consulting services, in the absence of a distinct procurement method, the aforementioned procurement processes also apply. Rules & exceptions to contracting methods: Contracts governed by the provisions of the Public Bodies Contracts Law must abide by the following conditions and be conducted via the following methods: (a) Contracting for the purchase or the lease of movable goods or real estate, or contracting for contracting activities or for receiving technical services or works are awarded by way of a public bid. An exception may be made by a decree from the competent administrative authority based on a recommendation by the Bureau for Contracts.

This type of contracting is conducted through one of the following methods: general practice, limited practice, a limited bid, a two-stage bid, a local bid or a direct agreement. (b) Contracting for the sale or lease of movable goods, real estate or projects that do not have a legal personality are awarded through an open public tender or a sealed-envelope tender. Licensing to use or exploit real estate and projects are awarded in the same manner. An exception may be made by a decree from the competent administrative authority based on a recommendation by the Bureau for Contracts. This type of contracting is conducted through one of the following methods: a limited tender, a local tender or a direct agreement. The administrative authority may fulfil its needs by following any of the contracting methods mentioned in section (a) in order to reach a framework agreement that is in accordance with the provisions of Article 65 of the Public Bodies Contracts Law, noted below. Moreover, the contracting methods outlined in sections (a) and (b) cannot be substituted for any other type of contracting method.

The administrative authority may, in accordance with Article 65 of the law, submit its needs or the needs of one or more administrative bodies through following the method of bid, limited practice, general practice or direct agreement in any of the following cases:

• Where there is a need for frequent contracting of items, for the implementation of works or services, or for the introduction of consultancy studies;

• Where the administrative authority shall, in accordance with the normal course of events, expect the nature of the items, works, services or consultancy studies required to be urgently established in the future, without knowing exactly the timing of their delivery, implementation or quantities; or

• Other cases in which the administrative authority considers appropriate to follow this type of contracting, including targeting the development of some industries or the characterisation of needs.

OBG would like to thank Helmy, Hamza & Partners for its contribution to THE REPORT Egypt 2019

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Egypt 2019

Legal Framework chapter from The Report: Egypt 2019

Articles from this chapter

This chapter includes the following articles.
Cover of The Report: Egypt 2019

The Report

This article is from the Legal Framework chapter of The Report: Egypt 2019. Explore other chapters from this report.