Senate committee backs Companies Law overhaul

Newly-proposed amendments to the Companies Law could give EGX-listed companies new flexibility over their own shares. Boards would lose a favorite tool for stonewalling shareholders and in-kind asset valuations would move out of the General Authority for Investment and Freezones’ (Gafi) hands to licensed appraisers registered with the Financial Regulatory Authority (FRA) if the amendments are passed. The package of proposed amendments (pdf), submitted by MP and former investment and international cooperation minister Sahar Nasr, was approved by a joint Senate committee last week.

REFRESHER- The Companies Law No. 159 of 81 (pdf) — the primary legislative framework governing joint-stock companies, limited liability, and single-shareholder companies — was first issued in 1981 and has been amended several times since. The most recent amendment was in 2018, when single-shareholder companies and regulated shareholders’ agreements were introduced for the first time, among other changes.

The headline change for listed companies: buybacks. Firms could repurchase up to 20% of their own shares — double the current 10% cap — and hold them for up to two years, up from one. That turns treasury shares from a short-term exercise into a usable corporate finance tool, giving companies room to hold, reuse, and deploy stock over a longer period. The amendments would nudge Egypt closer to its regional peers — Saudi Arabia relaxed its buyback regime in late-2024, while the UAE continues to cap repurchases at 10%.

Boards would lose the ability to derail general assemblies by not showing up. Annual general meetings could proceed and exercise their full powers as long as the shareholder quorum is met, even if board attendance falls short, while directors who skip without a valid excuse could face fines. Under the current law, an assembly cannot validly convene unless a minimum number of board members attend — a requirement the committee’s report says some boards have used to dodge shareholder scrutiny.

Remember the ERC showdown? This law would have made for a different battleground. The Egyptian Resorts Company’s dispute ultimately turned on quorum mechanics as much as shareholder numbers, with a minority shareholder bloc seeking to use a general assembly to force a board reshuffle. Under the new framework, board attendance would be far less effective as a lever for shaping or stalling the outcome of an assembly.

Valuing in-kind capital contributions could become faster and more specialized. Valuation duties would shift from a Gafi committee to licensed appraisers registered with the FRA, leaving the committee to focus solely on verification, thereby raising the bar for quality. The inspection timeline would also be shortened to 30 days, down from 60.

The amendments take aim at two longstanding market frictions. The first is trading flexibility — the two-year lock-up on founder shares and shares issued against in-kind contributions would be relaxed, with the details left to the executive regulations. The second is disclosure — companies would have to submit quarterly financial statements to the FRA on top of annual filings.

The bill would also give some dormant penalties a much-needed update. Fines under the Companies Law have barely budged since 1981, leaving some violations punishable by a maximum of just EGP 10k. The amendments would raise penalties for serious offenses — including publishing false information in share and bond prospectuses — to EGP 2 mn. Fines for procedural violations would increase to EGP 250k, according to the committee’s report.

Introducing two new articles: The first would require companies to follow governance rules set by the competent minister — including female board representation — and report annually on their compliance. The second new article would create an FRA registry for auditors of companies with issued capital above EGP 10 mn, though the Senate committee has recommended dropping this article and leaving the matter to executive regulations.

What’s next: The recommendation should now go to a full Senate vote and then to the House of Representatives before the president ratifies it into law. Executive regulations — governing the treasury share program, a new FRA appraisers registry, and quarterly disclosure templates — should follow, but no fixed dates were given.