Egyptian Resorts Company’s board defeats attempt to unseat it

Court blocks GAFI’s forced board shake-up at ERC: The State Council’s Administrative Court has suspended a decision by the General Authority of Investment and FreeZones (GAFI) compelling the Egyptian Resorts Company to convene a general meeting and elect a new board.

An interim ruling (pdf) by the court found that GAFI’s directive lacked legal basis and blocked votes scheduled for 16 and 23 May (the latter in case quorum wasn’t reached at the first meeting), according to a regulatory disclosure (pdf). The appeal was filed and ruled on in just four days. GAFI’s Grievance Committee is set to convene today to discuss the legal status of its decision.

ERC is the developer behind Sahl Hasheesh, a high-profile Red Sea coast destination that’s over half the size of Manhattan.

Remnants of a grudge

The ruling freezes a long-running boardroom dispute between ERC’s management and a dissenting minority shareholder bloc — led by Tarek Muhammadi Mansour, Sahar Adel Suleiman, and Jehan Adel Suleiman — over the control of one of the country’s largest tourism land banks, a source with first-hand knowledge of the dispute tells EnterpriseAM. “While the dispute appears to be over the company's management, it is, in reality, a dispute over sale contracts,” the source says.

The real war is over the price of the dirt in Sahl Hasheesh. As a tourism developer, ERC can legally price land in USD, and that’s where the battle lines were drawn. The shareholder bloc behind the push has been fighting since 2019 to fix the exchange rate for their specific land-purchase contracts at EGP 10 to the USD, the source tells us. By forcing a board shuffle, the family-led insurgency, which holds a combined 24.95% stake (pdf) in ERC as of mid April, was looking to secure more favorable terms. The EGP was at 53.39 yesterday.

Why this would’ve worked: A board of directors has the power to settle disputes and approve contract amendments without a shareholder vote. In theory, a friendly board could choose to stop pursuing payments for land at a higher exchange rate. This would allow the group to settle their outstanding contractual obligations to the company at a sharp markdown, benefitting the family bloc at the expense of ERC’s broader shareholder base.

Close, but no cigar

The latest turn in the dispute began after the bloc failed to seize control during a grueling 14-hour general assembly in September 2025, when a new board was elected, Matouk Bassiouny & Hennawy (MBH) partner Amr Ehab tells EnterpriseAM. The bloc requested that ERC’s board call a new election in November that same year — the board rejected the request, saying there was no legal requirement for a re-do. Ehab represented ERC in the lawsuit.

What really happened is, they overplayed their hand. Banking on their size — which on that day combined the family bloc’s 24.95% stake with Beit El Khebra’s 23.54% stake to form a near-majority — the coalition attempted a boardroom bluff that was called out by management, according to board meeting minutes filed to the EGX (pdf). The bloc was circulating an unauthorized memo to remove the sitting board. Given that this must be done via secret ballot, the plan crashed into a technical wall because a big portion of the shareholders were attending remotely, and the online interface could not legally support a secret ballot for an unscheduled motion without prior clearance from GAFI.

The second obstacle was also procedural. Many of the signatures the bloc gathered for the motion to unseat the current board were backed by restricted powers of attorney (limited to attendance and voting) that did not cover the right to submit impromptu structural motions. After a heated discussion between a Beit El Khebra representative and the chairman, the bloc staged a tactical walkout and abstained from voting in a backfired bid to break quorum, which wiped their own numerical advantage and allowed current management to legally sweep and lock down new board seats.

The bloc then went to court four times to annul the September election results — and on four separate occasions, the Qena Economic Court refused the petition. The group then turned to the regulator. Their argument? ERC’s board had abdicated its duties and failed to exercise proper oversight.

The BoD said no, GAFI said… yes?

Typically, the regulator would first want to investigate the claim that the board had been derelict in carrying out its duties. The bloc first approached GAFI in December 2025 — the regulator replied in March 2026 that the filing was missing a document, which lawyers for the families submitted the same month. Just 45 days later, with no further contact, GAFI went straight to the EGX with an announcement calling the assembly for 16 May. “We were surprised [on 20 April] that the authority announced on the EGX a call for the assembly to convene [on 16 May] to elect a new board,” Ehab says. It was only then that ERC execs learned that the bloc had gone to GAFI, he adds.

ERC’s legal team went into emergency mode. Lawyers asked in April that GAFI’s Grievance Committee intervene and filed an appeal on Tuesday 5 May. Four days later, they were in court. Recognizing that a board shuffle, once done, would be nearly impossible to undo, the Administrative Court gave GAFI’s lawyers just three hours to review the file and respond. The court’s interim ruling was scathing, saying it found that since a valid board was already in place, GAFI had no grounds to say the board was in the wrong for refusing to call another election.

SOUND SMART- It’s not often the State Council (Maglis El Dowla) rules against a major watchdog in favor of a company — let alone this fast. “The speed of this ruling serves as a reassurance to EGX investors even when a regulator exceeds its statutory jurisdiction or commits a procedural impropriety, the judiciary will intervene to maintain corporate stability and protect stakeholders’ interests,” Ehab says.

Reclaiming the plots

Right on the heels of the judicial rescue, ERC’s board secured an unappealable — and unanimous — international arbitration award on 10 May to terminate 2015 land contracts in Sahl Hasheesh held by Tarek Mansour and Jehan Suleiman, forcing them to return the coastal plots to ERC, according to an EGX disclosure (pdf). ERC will refund the group USD 3.87 mn to claw back the plots into its own inventory, while the tribunal ordered the shareholders to pay USD 49.7k to cover ERC’s legal costs.

Why this doesn’t set a precedent

Pundits warn against reading the case as a binding legal precedent. “In Egypt, rulings are used as a trend rather than a binding precedent,” veteran lawyer and former MBH partner Islam Saeed tells EnterpriseAM, noting that a single first-instance procedural ruling “does not carry the weight of a formal legal precedent.” The decision still sends an important signal to the market that regulators cannot easily be used as a shortcut by activist shareholders seeking to bypass the Companies Law.

“This is a purely procedural matter regarding a specific error in process, rather than a substantive legal principle,” Saeed tells us, adding that the Administrative Court in question is “a court of first instance, not the Supreme Administrative Court … it cannot be signaled as a definitive precedent that would significantly impact other cases.”

What’s next

While the 16 May general meeting is dead, the legal status of GAFI’s decision remains in limbo, Ehab tells us. The court ruling currently acts as a stay of execution — it renders the decision “practically non-existent” but doesn’t technically erase it from the books, he says.

The final kill rests with the GAFI’s Grievance Committee, which is set to convene today (Thursday, 21 May). “The Grievance Committee might lean towards annulling GAFI’s decision,” Ehab tells us. If they do, the decision is formally annulled and binding on GAFI, effectively ending the threat. But, even if the committee rejects the grievance, the Administrative Court’s interim ruling holds on its own. The committee is a specialized three-member panel chaired by a member of the judiciary alongside a GAFI representative and an outside expert.

Editor’s note: GAFI did not respond to EnterpriseAM’s request for comment on this story, sent by email on May 13.