On 7 March 2017 the Egyptian Parliament issued Law No. 7 of 2017 amending Law No. 121 of 1982 establishing the Importers Register. Most of the amendments are related to importers’ registration requirements and the sanctions for violating the requirements.
Implications for businesses operating in Egypt
Significant changes have been made according to the new amendments including:
- Companies no longer need to be wholly owned by Egyptians. The amendments only require that 51% of the shares or quotas of the companies to be owned by Egyptians while the other 49% can be owned by non-Egyptian share/quota holders.
- To have been established for at least one year prior to the date of submission for registration, where its turnover in the preceding year is at least EGP 5 million.
- The paid quotas in capital for a limited liability company is no less than EGP 2 million, while it should no be less than EGP 5 million for joint stock companies.
- The manager responsible for importing must be an Egyptian national.
- The manager must not have been previously convicted by a final judgment in any felony or any other crime including those crimes committed in violation to the Competition Law, Consumer Law, Antifraud law, tax laws, banking laws and commercial laws unless the crimes have been settled.
All other registration requirements remain the same.
Actions to consider
All businesses engaged in imports for retail (not for production) in Egypt must adjust their ongoing structures and business based on the terms of these amendments. The law has mostly granted a period of six (6) months to undertake those adjustments. This would include, among other things, increasing the shareholding amounts and payment of importation insurance.
Moreover, companies in Egypt can now avoid the nominee shareholding structure and rely on 49% direct investment in their import companies in Egypt.
It is important to note that unless all existing and new companies comply with the said amendments, their import license will be rescinded. Moreover, severe penalties are now in force in order to limit any manipulation in the importation process or violation of any of the applicable laws.
Conclusion
The amendments to the law are a positive development. It is not certain yet whether an importation company can have non-Egyptian managers so long as they are not directly engaged in imports.
In all cases, the amendments seem to be of a positive value and addresses main concerns to businesses in Egypt. Moreover, by raising the threshold for obtaining the imports license, the government is attempting to limit the number of importers and to screen non-genuine importers from engaging in this business.
Finally, the sanctions imposed are expected to be quite deterrent to importers from engaging into any violation of any of the identified laws.
For additional information, please contact Mohamad Talaat or Mohamed ElFar of our Cairo office.
