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Investment Laws

Investment Law No. 8 of 1997 and Companies Law No. 159 of 1981 and their amendments are two key laws that regulate the investment environment in Egypt:

Investment Incentives and Guarantees Law 8 of 1997:
Law 8 of 1997 repealed Investment Law 230 of 1989. It made one authority responsible for investor incentives and guarantees--the General Authority for Investment and Free Zones (GAFI). It also grouped some 20 exemptions and incentives under one law, and specified activities that would automatically accrue benefits to investors. It allows 100% foreign ownership of ventures and guarantees the right to remit income earned in Egypt and to repatriate capital.

Key provisions include: the guarantee against confiscation, sequestration and nationalization; the right to own land; the right to maintain foreign currency bank accounts; freedom from administrative attachment; the right to repatriate capital and profits; free hiring of Egyptian staff, absence of price control or restrictions, , and equal treatment regardless of nationality.

Under Law 8, investments are approved automatically for projects in 16 distinct fields, effectively creating a "positive list." These fields include land reclamation; fish, poultry and animal production; industry and mining; tourism (covering hotels, motels, tourist villages and transportation); maritime transportation; refrigerated transportation for agricultural products and processed food; air transportation and related services; housing; real estate development; oil production and related services; hospitals and medical centers that offer 10% of their services free of charge; water pumping stations; venture capital; computer software production; projects financed by the Social Fund for Development; leasing; and guarantees for subscription in securities.

Projects in the government-sponsored Toshka or " New Valley" development benefit from the greatest incentives. In June 1998, the government added the new industrial zones East of Oweinat and Northwest of the Gulf of Suez to the list.

Some projects still require prior approval from relevant ministries in addition to GAFI, including investments in Sinai; all military products and related industries; and tobacco and tobacco products. Law 15 of 1963 prohibits foreign ownership of areas designated as agricultural lands, except for desert reclamation projects.

In April 2000, new activities were added to the package of incentives to include development of new urban zones, software design and production of electronics, establishment and management of technology zones, credit classification, deductions, river transportation activities, management of industrial projects and utilities, and waste collection and treatment projects.

Law 8/1997 also establishes that a one-stop shop for investors will be located at the General Authority for Investment and Free Zones (GAFI) to facilitate and simplify approval, registration, licensing and certification for new projects instead of having to go to 25 separate ministries.

Companies Law 159 of 1981 and its Amendments:
Law 3 of 1998, amending law 159 of 1981, covers investors in any sector not covered by Law 8 of 1997; including shareholders, joint stock, and limited liability companies and representative and branch offices. It allows for automatic registration of a company upon presentation of the application to the Companies Department and for acquisition of legal status 15 days after annotation in the Commercial Register. The Administrative Authority can challenge the establishment of the company within 10 days of its notification in case of non-compliance with procedures; the company’s objective contradict with laws or public order; or lack of qualifications requisite to operating a business (Article 17 & 18).

Founders of joint stock companies must submit a bank certificate showing a 10% deposit of the issued capital to the Companies Department, and to be increased to 25% within three months (Article 32); as for the limited liability companies, the issued capital should be fully paid.

Law 3 of 1998 amending law 159 provides for the right of petition for denial of incorporation, removes the restriction that 49% of shareholders must be Egyptian, allows 100% foreign representation on the board of directors, and redefines accounting standards.


 
 
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