Management of Joint Stock Companies in Egypt
The main differences between the two types of businesses are the speed at which they can be established, the amount of capital they must have, and the limitations they have on performing certain activities. For example, forming a JSC is more di...
You should know that doing business in Egypt needs a legal presence in the form of a corporation, a branch, or a representative office, whether you are a foreign investor or an Egyptian business owner. The Joint Stock Companies, Limited Liability Companies, and Sole Membership Companies Act of 1981 (the "Companies Law") defines six types of commercial companies, including limited liability companies ("LLC") and joint stock companies ("JSC").
The main differences between the two types of businesses are the speed at which they can be established, the amount of capital they must have, and the limitations they have on performing certain activities. For example, forming a JSC is more difficult than forming an LCC since an LLC has no minimum capital requirement, while forming a JSC requires a minimum capital of EGP 250,000.
Large corporations, on the other hand, choose to form JSCs because LLCs are forbidden from engaging in such operations, including, though not limited to, companies that provide sporting facilities, sell shares for public subscription, and engage in banking activities. Given that JSCs are typically large entities with a large number of shareholders, they must be managed by specific administrative bodies as specified by the Companies Law. As a result, we will provide insights into the three bodies that oversee and supervise the activities of the JSCs in Egypt in this article.
A Board of Directors (the "BoD") will oversee the JSC's operations. However, the General Assembly of the shareholders has superior oversight of the BoD's activities, either by the Ordinary General Assembly (the "OGM") or the Extraordinary General Assembly (the "EGM"), with the BoD playing an integrated position. The law and the company's articles of association give each of the above bodies their own powers and authorities.
The General Assembly, the Board of Directors, and the employees or agents appointed by each of these two bodies have the authority to perform legal actions on behalf of the corporation, according to the provisions of this statute, the company's contract, and its internal regulations, according to Article 53 of the Companies Law. With the exception of what is omitted in a particular clause of the law or the company's articles of association, or acts that fall under the jurisdiction of the General Assembly, the BoD has all powers relevant to managing the company and carrying out all required work to achieve its aim.
Nonetheless, the General Assembly may discuss any act of management if the BoD is unable to vote on it due to a lack of quorum, the inability to achieve a majority that supports the decision, or the lack of legitimacy of a number of its members or their intention not to attend. The General Assembly may also approve or reject any work issued by the BoD, as well as make recommendations about work that falls under the latter's purview.
The OGM is made up of all of the JSC's members, and it has the power to elect and fire the BoD, as well as supervise and discharge the latter's function, authorize the auditor's reports, approve benefit distribution, ratify the company's financial statements, and the BoD's report on the company's activities. The OGM shall meet at least once a year, and the BoD shall invite the OGM to meet whenever it deems appropriate, or when the auditor or shareholders representing at least 5% of the capital request it.
The EGM, the second body, meets at the invitation of the Board of Directors or at the request of shareholders representing 10% of the company's shares. The EGM has the authority to change the company's articles of association, such as changing the company's name, type, or adding or removing a function, among other things. Consider extending the company's lifespan, shortening it, dissolving it ahead of schedule, or changing the percentage of failure that results in the company's compulsory dissolution or merger.
Finally, the BoD is responsible for the company's management on a constant and frequent basis; in reality, it has real sovereignty over the company, despite the fact that the General Assembly oversees its operations. The Board of Directors shall be composed of at least three members, including a chairperson, and shall be appointed for three years, with the exception of the first BoD, who may be appointed for five years. Depending on the nature of the company's business, the BoD may distribute the work among all of its members. Delegate one or more members to the actual management of the company by authorizing one of its members or a committee of its members to carry out one or more particular tasks, supervise one aspect of the company's operation, or exercise any of the powers delegated to it. It's worth noting that, according to article (85) of the Companies Law, the company's chairperson or chief executive must represent it in court.