Legal Alert 109
14th April 2019 Deadline for Joint Stock Companies and Companies Limited by Shares to Register with the Central Depository System
The law governing commercial companies has been amended recently, to stimulate investment and economic growth, and to promote a paperless economy. In Q1 of 2018, Parliament approved amendments to Law No. 159 of 1981 through Law No. 4 of 2018, published them in the Official Gazette, and finally implemented these changes initially on January 16th 2019, which has then been extended by appropriate authorities until 14th April 2019.
One of these changes stipulates that join stock companies and companies limited by shares are now required, at the time of incorporation, to register their shares with the central depository system, Misr for Central Clearing, Depository and Registry.
Companies already set-up at the time this law was introduced have until the end of the working day on April 16th 2019 to register. If they fail to do so, they will not be able to utilize the services offered by General Authority for Investment (GAFI), such as notarizing Board of Director or General Assembly decisions, until they have complied with this requirement of the law. The company will also be unable to transfer shares or distribute dividends.
These amendments are considered significant positive changes for a number of reasons. First of all, they present an opportunity to move towards an electronic economy, as well as eliminating the risk of losing paperwork or using it illegitimately to commit fraud, for example. Having an electronic system will also reduce the costs of printing and issuing shares that are solely recorded on paper. Secondly, this facilitates and enhance the procedures, as the shares of a company will be safely stored with the central depository system, thus minimizing waiting-times, and allowing the economy to be stimulated seamlessly, particularly in the act of transfer of shares. This also creates a complete data-base, ensuring transparency and certainty for potential investors and business-owners, for example, it will now be much easier to signify which shares contain rights for third parties. Thirdly, this will make it easier to differentiate between companies that are making gains and those that are making losses. Fourthly, this transparency and ease in use will hopefully encourage the initiation of new companies, since they will be safe in the knowledge that procedures are transparent and fair for all. These benefits all fall under the over-arching aim of modernizing the economy and nurturing it so it can reach an international standard.
All in all, the spur of amendments and laws introduced in 2018 continue to create fertile and ready grounds for investment and growth. These changes are indeed reassuring, and admirable steps forward, towards a larger aim of reaching unprecedented growth.
We at Andersen Tax and Legal can assist you with any inquiries you may have, and can provide you with the requirements to be fully compliant with the changes above. Contact Us