Sweeping amendments to Companies Act regs coming
LEGISLATION WATCH- Look out for sweeping amendments to the Companies Act now in the pipeline. The Investment Ministry has finished drafting amendments to the executive regulations of the Companies Act and has forwarded a draft of the changes to the State Council for review. As such, the new rules would go into effect without discussion in the House of Representatives, needing only the be published in the Official Gazette. Among the highlights:
Companies will no longer be allowed to hold on to treasury stocks for over a year. After the year is out, companies must either divest the shares or distribute them to employees as part of a profit-sharing mechanism, according to a ministry statement. Companies can hold on to treasury shares if they undergo a capital decrease.
The amendments would also limit share buybacks to 10% of the company’s shares and allow a weighted voting system when shareholders vote on board members.
Other amendments facilitate spinning off corporations, by allowing the company greater flexibility in dividing assets and shares. They also “facilitate trading of shares in newly spun-off companies,” though the statement does not elaborate on this point.
Other features of the changes: The amendments also bar sole-proprietorship companies from establishing subsidiaries that are also sole proprietorships. Another change would mandate the establishment of a single electronic platform to provide key investor services, such as establishing companies.
The amendments are the most sweeping changes to the regs of the Companies Act in 35 years, with 51 articles being amended, said Investment Minister Sahar Nasr. The draft is currently with the Egyptian Council of State (Maglis El Dowla) and will be issued once the review is completed. Amendments to the law itself that tweak how sole proprietorships are handled and give measures of protection for companies against whistleblowers were signed into law by President Abdel Fattah El Sisi last week.