Highlights
On 28 August 2024, the Egyptian Financial Regulatory Authority (“FRA”) issued decree no. 178 of 2024 (the “Decree”), which entered into force the following day of its publication. This Decree governs the acquisition, control, and mergers of companies engaged in non-banking financial activities. It introduces new approval requirements designed to enhance transparency and promote competitive practices within Egypt’s non-banking financial sector.
Key Provisions
1. Scope of Application:
The Decree applies to companies involved in non-banking financial activities, such as insurance, financial leasing, factoring, mortgage, and consumer finance. It also covers entities seeking ownership control or planning mergers within this sector. Actions include establishing new entities, acquiring shares, issuing shares due to mergers, capital amendments, or restructuring require FRA approval, particularly for share acquisitions, ownership control, and mergers.
2. Approval for Acquisitions and Control:
Entities intending to acquire a stake of 10% (ten per cent) or more in a company operating in non-banking financial activities must submit a formal request to the FRA. Approval is necessary for direct and indirect acquisitions or mergers. Companies are required to disclose all shareholder and governance changes during the approval process.
3. Ownership Restrictions:
Entities seeking to own or control more than 10% (ten per cent) of a company’s share capital must obtain prior approval from the FRA. If ownership or control exceeds 25% (twenty-five per cent), additional documentation must be submitted to the FRA. This includes the rationale behind the acquisition or control, the future investment plan, and, if the applicant is a foreign financial entity, documentation proving that it is subject to the supervision of a regulatory authority in its home country. This regulatory authority must have functions similar to those of the Central Bank of Egypt or the FRA in the relevant field of activity.
4. Merger Requirements:
Companies planning to merge must submit comprehensive documentation to the FRA, including the rationale for the merger, draft resolutions, and auditors’ reports on the companies involved. The FRA will assess factors such as market impact, competition, and shareholder interests during the approval process.
5. Review Process and Duration:
The FRA will issue its decision within 45 (forty-five) days of receiving a complete application. The decision remains valid for 6 (six) months, during which the applicant must finalise the acquisition or control; it may be extended once for an additional 6 (six) months. The FRA’s decision will consider factors such as the applicant’s financial capability, business experience, potential impacts on market competition, and the applicant’s legal and financial track record. The FRA must seek the opinion of the Egyptian Competition Authority when considering applications for ownership or control that could impact market competition, especially if any of the cases stipulated in Article 19 of Law No. 3 of 2005 and Article 53 of its Executive Regulations occur.
Concerned Entities
The Decision impacts:
Important Stipulations
