Highlights

On 28 August 2024, the Egyptian Financial Regulatory Authority (“FRA”) issued decision no. 177 of 2024 (the “Decision”), outlining updated conditions for licensing and renewing licenses for companies engaged in non-banking financial activities. This Decision aims to regulate the licensing processes, ensuring companies comply with financial laws while fostering transparency and growth in the financial sector.

Key Provisions

1. Scope of Application:

• The Decision applies to all companies engaged in non-banking financial activities, including insurance companies, financial leasing, factoring, mortgage finance, consumer finance, and fintech, among others.
• It covers new licensing applications, license renewals, and the ownership structure requirements for such companies.

2. License Requirements:

• Companies must meet strict financial and operational criteria to obtain or renew their licenses. This includes ensuring a minimum capital investment and demonstrating expertise in the relevant non-banking financial fields.
• Companies must provide detailed financial and economic feasibility studies and comply with FRA’s governance standards, including board structure and management qualifications.

3. Ownership and Investment Rules:

• Companies must have at least 25% (twenty-five per cent) of their capital owned by a financial institution or qualified investor. A qualified investor is defined as one who holds at least EGP 5,000,000 (five million Egyptian pounds) in liquid assets and has relevant experience in financial activities.
• Any individual or entity owning more than 10% (ten per cent) of the company’s shares must obtain prior approval from the FRA.

4. Corporate Governance:

The Decision requires companies to have a clear corporate governance framework, ensuring accountability and transparency. For instance:

• At least 25% (twenty-five per cent) of the board must be composed of independent members.
• Cumulative voting methods must be used to elect board members.
• Women must represent no less than 25% (twenty-five per cent) of the board members.
• Companies must inform the FRA before changing the company’s board.

5. Timeframe:

• 6 (six) months to complete establishment procedures after preliminary approval (extendable).
• 3 (three) months to fulfil licensing requirements after commercial registration (extendable).
• 6 (six) months to start operations after obtaining the license (extendable).

Concerned Entities

The Decision impacts:

• Companies involved in non-banking financial services.
• Qualified investors and financial institutions holding or intending to acquire a significant share in such companies.
• Potential market entrants seeking new licenses to operate in Egypt’s non-banking financial sector.

Important Stipulations

• Companies must submit applications for renewal 6 (six) months prior to the license expiration date.
• The FRA reserves the right to suspend or revoke licenses if companies fail to comply with operational and financial criteria.
• If ownership transfers exceed 10% (ten per cent) of shares, companies must notify the FRA and seek approval to avoid penalties.