The Pillar's Guide to Companies Management
By: Farida El Hawal - Junior Associate - firstname.lastname@example.org
After successfully establishing your company, you are now qualified to perform business in Egypt. However, there are some more things you need to be aware of while running your company. The Egyptian Law provides some instructions to follow while managing a company.
In Egypt, we have 2 main types of companies; Companies of a personal nature, and companies with a fiscal nature. Our main focus shall be the latter, under which we have the Limited Liability Company (LLC), the Joint Stock Company (JSC) and the Sole Owner Company, which is only owned by one person, and its management is similar to the LLC.
In this article, we will break down some facts about managing your business. We will explain the two levels of management in the Limited Liability Company and the Joint Stock Company.
A) Company Upper Management:
All companies (Whether Limited Liability or Joint Stock) are owned by their shareholders who compose the general assembly of partners. There are some decisions that need the written approval of the shareholders (the parties can give this written approval written during the shareholders meetings) and they are as follows:
· Changing in any respect its Articles or the rights attaching to any of its Shares;
· Allow the registration of any person as a shareholder of the Company.
· increase the amount of its issued share capital, grant any option or other interest over or in its share capital, redeem or purchase any of its own shares or effect any other reorganization of its share capital;
· The pass of any resolution on liquidation or present any petition for its administration; merge with any other company or business undertaking.
· Make any loan or grant any credit or give any guarantee or indemnity.
· Approving or amending the Business Plan in respect of any financial year and changing the nature of the Company’s business.
And when the partners of the company wish to take a decision in a certain matter, they meet according to the rules of Law no 158 for 1981 or Law no 72 for 2017.They either held an Ordinary General Assembly Meeting or an Extra Ordinary General Assembly Meeting, and the difference between them is as follows;
1. Ordinary General Assembly Meeting (OGM)
The ordinary meetings shall be held at least once per year of one must be during the three months following the fiscal year. Other ordinary general assembly meeting shall be held if it is necessary. The ordinary General Assembly shall convene as per the invitation of a Director, or upon the request of any Shareholder, on the Business Day and timing specified in the invitation. The invitation shall include an agenda indicating the items to be discussed and shall be written in Arabic language.
2. Extra Ordinary General Assembly Meeting (EGM)
The Extraordinary General Assembly shall convene as per the invitation of a Director, or upon the request of any Shareholder, on the Business Day and timing specified in the invitation.
The resolutions of the Extraordinary General Assembly shall be taken by a majority of 2/3 of the Shares present in the meeting, with except to the resolutions which must be taken by 3/4 (three quarters) of the Company’s shares present in the meeting as mandated by the law.
B) On the next level of management, we shall differentiate between a limited liability company and a joint stock company.
1) Limited liability Company:
During incorporation, the shareholders appoint a director(s) to perform the management of the day to day operations of the company and he could be one of the founders that represent it before all the entities.
Shareholders can appoint managers who may be one or more with at least one manager who is Egyptian, the manager has to be named in the memorandum of association also, Managers may be appointed for definite period (that shall be mentioned in the memorandum of association) or infinite period. The managers will have the full authority to represent the LLC before third parties.
When parties decided to appoint the general manager there are some conditions that has to be satisfied.
i. The appointment of the General Manager:
The general assembly would be responsible for the hiring of the general manager. Before the appointment of the general manager, acknowledgment is required that they haven’t been subject to a penalty for a crime or delinquency relating to theft or abuse of trust or forgery or bankruptcy, acknowledge that the person is not working for the government or public sector.
ii. Duties of the directors:
· Make or dispose of any investments having value exceeding Dispose of any asset having a value exceeding Grant, create or propose to grant or create any employee share option or share incentive plan;
· Approve, and subsequently amend, the agreed Business Plans;
· Approve the Annual Budget; .Grant of a license with respect to any of the Company’s intellectual property rights;
· Commence litigation by the Company, except against an existing or previous Shareholder;
· Define and approve (and amend) the role, responsibility, authority and compensation Matrix of the Chief Financial Officer (or the like) and Chief Executive Officer (or the like)
· Opening and closing any Company bank accounts and determining the authorized Signatories thereon;
iii. Dismissal of the General Manager:
· There are two cases in which the manager of the LLC can be dismissed, the manager(s) may be dismissed with approval of the partners who own the majority of the capital. Any of the partners may request the competent court to issue a ruling for the removal of the company's manager, due to strong reasons justifying such removals.
iv. Changing the general manager:
· The General Manager may be changed through submitting a resignation from the old Manager and submitting the acceptance letter from the new Manager.
2) Joint Stock Company
The joint stock is different than Limited Liability Company in its management, as the Joint Stock Company is managed by a Board of Directors (BOD) who are appointed by the shareholders, and there are some conditions are required to appoint the board of directors.
i. The appointment of the board of directors:
The member of the Board of Directors shall release a written acknowledgment of the appointment.he shall be fully competent. And not be a public servant unless he is subject to the approval of the competent minister. A member of the board of directors of any joint stock company shall not be sentenced to a criminal penalty or a misdemeanor penalty for theft, erection, breach of trust, forgery, and negligence.
ii. Duties of the Board of directors:
The Board of Directors shall have all the powers related to the management of the Company and shall carry out all the necessary work to achieve its purpose except as specified in the Law or the Company’s Articles.
The director of the board shall represent the Company before the courts and others.
To delegate one or more members to the actual management work. The Board shall determine the authorities of the managing director and shall require the managing director to be full time for the administration.
They may appoint a general manager of the company from non-members and may be invited to attend its meetings without having a numbered vote.
The board of directors shall appoint from among a director and a term of appointment not exceeding the term of his membership in the board.
The implementation of decisions issued by the General Assembly and has no right to amend or cancel them.
iii. The election of the board of directors:
· In the of the company the board of directors are to be appointed during incorporation, however through the journey of the company, the board of directors are appointed through election process stated in the company articles of association.
· Appointment of a Board Member must be conducted through cumulative voting. Under cumulative voting principle, whenever a JSC elects new Board Members, each shareholder will have a number of votes equal to the number of new Board Members to be elected times the number of voting shares held by such shareholder and such shareholder may cash all or some of his/her votes for any candidate.
iv. The dismissal of the board of directors:
· The director shall be removed by the members of the board because and The Ordinary General assemble may dismiss the director or one of its members at any time, even if this is not on the agenda.
· Exempt members may not be re-elected before the expiry of five years from the date of issuance of the dismissal decision.
In the end, managing a company in compliance with the law is not as complicated as it may seem. As long as you consult the proper experienced corporate lawyer, things will run very smoothly.