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“Unlocking Opportunities: A Brief Overview of Egypt’s Legal Updates in 2023 for Foreign Investors”
Welcome to our comprehensive summary of the legal landscape in Egypt for the year 2023. This report aims to provide foreign investors with key insights into the latest updates, reforms, and opportunities within the Egyptian legal framework. As the country continues to evolve, understanding these changes is crucial for investors seeking to navigate the dynamic and promising landscape. Explore the highlights to discover the potential avenues for growth and investment in Egypt during this transformative year.
1- New Regulations on Residency Application Fees for Foreigners
Resolution No. 3326 of 2023 provides that foreigners applying to the Ministry of Interior’s General Administration of Passports, Immigration and Nationality for a residency permit for touristic or non-touristic purposes must provide a receipt stating they have converted all required fees from U.S. dollars or their equivalent in free currencies into Egyptian pounds. This receipt must be issued from an authorized Egyptian bank or currency exchange company.
In addition, the resolution gives foreigners residing in Egypt illegally a three-month grace period to “regularize their status and legitimize their residency” through an Egyptian sponsor and to pay the equivalent of US$1,000 in administrative fees to the General Administration of Passports, Immigration and Nationality.
2- Safeguarding Customer Data Confidentiality in the Non-banking Financial Sector
Egypt’s Financial Regulatory Authority (FRA) has issued Circular No. 4 of 2023, focusing on fortifying the confidentiality of customer data within the non-banking financial sector. The primary objective is to enhance customer protection and mitigate the risks of fraud. The circular outlined the following key measures:
All organizations and entities licensed for non-banking financial activities under the FRA’s jurisdiction are mandated to educate their clients on the importance of safeguarding their personal and financial information. This includes usernames and passwords utilized to access non-banking financial data, with communication taking place through both verbal and written channels.
Companies are obligated to send monthly alerts to clients via SMS or other communication channels, cautioning them against potential fraud risks associated with personal or financial information exposure.
The circular underscores that all FRA-licensed companies must explicitly instruct their employees not to solicit, trade, or disclose customer-related data through phone calls, social media, or unverified online links.
The chairman highlighted that this initiative is aligned with the FRA’s overarching goal of achieving a delicate balance between the rights of all stakeholders in non-banking financial markets. It signifies a crucial step toward sustaining the provision of non-banking financial services that foster financial inclusion and contribute to the accomplishment of sustainable development goals.
3- New Regulations for the Financial Evaluation of Startups
The Egyptian Financial Regulatory Authority (FRA) has recently implemented fresh regulations concerning the financial evaluation of startups. These comprehensive rules address various stages, spanning from pre-profitability phases to post-investor exit strategies.
A notable inclusion in these regulations is the incorporation of the venture capital valuation method as a new mechanism. This method involves a calculated approach to estimate a startup’s theoretical worth, considering factors such as the projected exit value – an anticipation of the enterprise’s valuation in the foreseeable future.
The updated rules mandate a thorough evaluation of startups, encompassing an assessment of their strengths and weaknesses, adherence to governance principles, and credit trustworthiness. Furthermore, additional requirements have been introduced, including the assessment of tangible and intangible assets and an examination of their potential for future profitability.
Mohamed Farid, Chairman of the FRA, emphasized that these new regulations are designed to meet startups’ financing needs, enabling them to secure funding through diverse channels. This, in turn, facilitates their expansion, entry into new markets, and the introduction of new products, activities, and solutions.
4- Egyptian Companies fully owned by Foreigners are now eligible to register in the Egyptian Importer Register
Law No. 173 of 2023 was officially published in the Official Gazette, effecting amendments to the Importers Register Law No. 121 of 1982.
The primary focus of the amendment lies in the explicit exemption granted to Egyptian Companies fully owned by Foreigners from the mandatory 51% Egyptian shareholding requirement. However, it’s noteworthy that the amendment introduces a time-bound provision concerning the validity of registration. Specifically, Egyptian Companies fully owned by Foreigners may not remain registered in the Importers Register for a cumulative period exceeding 10 years from the effective date of the Amendment (“Registration Period”). The Amendment allows for a one-time extension of the Registration Period, subject to a decree issued by the Council of Ministers based on the recommendation of the Minister of Foreign Trade.
It’s crucial to emphasize that, despite this exemption, these companies are still obligated to adhere to the remaining registration conditions outlined in Article 2 of the Law. Such prerequisites encompass, among others, a minimum capital requirement of EGP 2 million for Limited Liability Companies (LLC) and EGP 5 million for Joint Stock Companies (JSC). Other conditions include the lapse of one (1) year from the date of incorporation, achieving a turnover of EGP 5 million in the year preceding registration, and the mandatory appointment of a qualified importation manager, who must be an Egyptian national.
5- Digital Bank Regulation in Egypt
The Central Bank of Egypt (CBE) has issued comprehensive regulations governing the licensing, registration, and supervision of digital banks, marking a significant stride in aligning with global advancements in the financial technology industry and addressing the evolving needs of customers in the Egyptian market, as per the CBE’s official statement.
Key highlights of the regulations include:
- Digital banks must meet licensing requirements, ensuring that the issued and paid-up capital is not less than 2 billion EGP, unless the bank exclusively engages in financing large companies.
- For Foreign Digital Bank Branches, the stipulated issued and paid-up capital is not less than 60 million USD or its equivalent in other currencies.
- Digital banks are authorized to finance large companies, contingent on an increased capital of 4 billion EGP. The largest shareholder in such cases must be an institution with a substantial track record in similar activities, constituting at least 30% of the total capital value.
- Submission of a detailed feasibility study is mandatory, encompassing identification of target segments, planned products, as well as comprehensive information technology and cybersecurity plans and strategies.
- Digital banks are subject to the same oversight and supervision rules as traditional banks operating in Egypt. They must adhere to the laws governing anti-money laundering and countering terrorist financing, along with other requirements tailored to the nature of their operations.
Previously, six banks operating in the Egyptian market, including government banks such as the National Bank of Egypt and Banque Misr, as well as Gulf banks like Qatar National Bank of Egypt (QNB), Arab Banking Corporation (ABC), Emirates NBD, and Faisal Islamic Bank, have applied for licenses to establish digital banks.
Download a copy of the rules through this link: https://lnkd.in/d7ppufH7
6- Citizenship By Investment in Egypt Updates
The Egyptian Prime Minister Mustafa Kamal Madbouly has issued Decree No. 876 of 2023, establishing the minimum price threshold for acquiring Egyptian citizenship through:
- Real Estate Investment at US$300,000 (Article 1)
- Establishing or participating in an investment project with a minimum investment of $350,000, accompanied by an additional $100,000 deposited as direct revenue in foreign currency, transferred to the state’s public treasury and non-refundable (Article 1(2))
- Depositing $250,000 in the Egyptian Central Bank, also constituting a non-refundable deposit (Article 1(4)).
In addition to a Bank deposit: A transfer of $ 500,000, refundable in the local currency after 3 years, without interest.
Conclusion
Resolution No. 3326 of 2023 provides that foreigners applying to the Ministry of Interior’s General Administration of Passports, Immigration and Nationality for a residency permit for touristic or non-touristic purposes must provide a receipt stating they have converted all required fees from U.S. dollars or their equivalent in free currencies into Egyptian pounds. This receipt must be issued from an authorized Egyptian bank or currency exchange company.
In addition, the resolution gives foreigners residing in Egypt illegally a three-month grace period to “regularize their status and legitimize their residency” through an Egyptian sponsor and to pay the equivalent of US$1,000 in administrative fees to the General Administration of Passports, Immigration and Nationality.
How can we help?
At Emara & Soliman we provide advisory services on legal and regulatory compliance matters regarding your company operations in Egypt. Please do not hesitate to get in touch with us with any queries or comments.