Decree No. 61 of 2020 dated 8 April 2020 (“Decree”) issued by the Egyptian Financial Regulatory Authority (the “FRA”) outlining the corporate governance rules and regulations of the consumer finance companies.
Main Points of the Decree:
• The majority of the board members should be non-executive ones; including a minimum of two independent members and at least one female board member.
• The Company should use the cumulative voting system in the appointment of the board members.
• It is prohibited for any individual to act as both the Chairman and Managing Director of the Company simultaneously unless there is a valid reason acceptable to the FRA and the shareholders.
2. Committees of the BoD:
The BoD should form several committees from its independent and non-executive board members in order to fulfill the BoD role in an effective way; including:
• Audit Committee: responsible of reviewing the internal auditing reports, setting the corrective measures and providing the BoD with suggestions related to the appointment of auditors.
• Risks Committee: responsible of setting the necessary measures and procedures to be followed in case of any risk and supporting the BoD to identify and asses the acceptable level of risks and ensure that the company does not exceed this level.
3. Conflict of Interest and Related Party Agreements:
The Decree provides for a number of rules that regulates entering into related party transaction and ensures no conflict of interest between the board members and the Company.
4. Disclosures and Transparency:
The Company should disclose to the FRA any fundamental events that it is exposed to and any changes to the board members or the committees of the BoD.
5. Regulatory Environment:
The Company should have an effective internal audit system in order to limit the risks and set the accountability rules and regulations.
6. Internal Audit Department:
The Company should have an internal audit department responsible for setting and testing the Company’s control procedures set in light of a risk assessment study of the Company.