Egypt is fixing how deals get executed, but what pushes investors offshore runs deeper than the reforms on the table

The government is trying to make corporate transactions easier to execute, and it’s coming at the problem from two directions at once. The Investment Ministry is rewriting the executive regulations of Companies Law 159/1981 — the rulebook officials actually apply — to clear bottlenecks around capital increases, valuations, M&A, and convertible-equity financing. In parallel, a Senate-backed amendment bill has cleared committee, in what is arguably the biggest rewrite of the law since 1981.

But lawyers and former regulators who work these deals tell us there’s a catch: even together, the two efforts stop short of what actually sends Egyptian companies offshore. New regulations can smooth how a transaction moves through the system; the amendment bill retools pieces of the machinery; but neither introduces the share classes or the convertible instruments that a VC or PE deal is built on. For those, the fix sits deeper than anything currently on the table.

The two moving tracks interlock. Investment Minister Mohamed Farid says the executive-regulation overhaul will touch capital increases, general assemblies, valuations, and financing, along with M&A and convertible equity. The Senate bill, submitted by MP and former investment minister Sahar Nasr, sets the frame. It hands much of the detail — from the treasury-share program to a new appraiser registry to disclosure templates — straight back to those executive regulations. A more ambitious rethink runs underneath both: a new ground-up Companies Law that the General Authority for Investment and Free Zones (GAFI) began drafting in early 2025.

The rulebook underneath the law

The regulations matter because they are what a civil servant reaches for when the law meets a real transaction. “You find an amended provision in the law — the provision itself may be good, essentially similar to what exists in other countries — but the executive regulations remain outdated in some cases,” Islam Saeed, founding partner of Alphalex Legal and Tax, tells EnterpriseAM. “Civil servants are by default guided by the level closest to them, and that’s the regulations and circulars, not the law.”

The mismatch is not hypothetical. Farid’s own example: the law lowered the minimum nominal value of a share to EGP 0.10 while the regulations kept the old EGP 5 floor — so a company incorporates under one number, then has to call an extraordinary general assembly to split its shares down to the other. Gaps like this can persist for decades, he said, bouncing files needlessly between GAFI and the Financial Regulatory Authority (FRA) while the statute has already moved on.

And procedures, once added, tend to stay. Hossam Heiba, the former GAFI chief who is now Orbis Capital & Investment’s Managing Director, says administrative requirements are usually introduced for a good reason — protecting minorities, the state, or a specific activity — but calcify into obstacles when applied across the board. “What may be appropriate for one company or project can become an obstacle when applied to all projects,” he tells us. “You only see that after implementation.”

Valuation as a deal-breaker

Nowhere does that bite harder than in valuations, which capital increases, changes of legal form, and M&A can all trigger through GAFI’s economic-performance function. Heiba argues that role should be procedural, not technical: “Why should I intervene, as an administrative body, in the valuation itself? All I should look at is the procedure through which it was approved.” Ambiguity, in his read, pushes officials to protect themselves by asking for more. “There were gray areas in the law, so they were more cautious — and that held up the process unnecessarily.”

On that specific point, the Senate bill moves in his direction. It would take valuation of in-kind capital contributions out of a GAFI committee and hand it to appraisers licensed by the FRA, leaving the committee to verify rather than value, and shorten the review to 30 days from 60 — close to the procedural role Heiba says the state should play.

What it doesn’t fix is the constraint Saeed flags underneath: recognition. “If the assets being valued by GAFI for a corporate valuation — for example, for a merger, demerger or conversion into equity — include unregistered real estate, it won’t be recognized under current practice,” he says. With much of Egypt’s property stock unregistered, that turns strategic fast for real-estate-rich companies: “It becomes a major problem for companies trying to move from a family business to an institutionalized one, or looking to go public.”

M&A doesn’t answer to one rulebook

Fixing the regulations only gets a deal so far, because a deal rarely lives under one statute. “Look at a legislative triangle — the Companies Law, the Capital Markets Law and the Income Tax Law,” Saeed says. “The three overlap inside the same transaction, especially when there’s a merger or capital increase.” The valuation behind an acquisition or merger can carry its own tax bill. Egypt scrapped capital-gains tax on trades in EGX-listed securities, Saeed says, but it can still apply to sales of unlisted shares and corporate restructurings, including mergers and demergers. If a restructuring values a company above book value, the difference can create a tax liability for the target company; that charge may instead be deferred where assets and liabilities continue to be carried at book value for tax purposes, subject to conditions including a three-year lockup on the post-transaction shareholding structure.

It’s the same math that helps drive companies offshore: Our earlier reporting on why Egyptian startups incorporate abroad found investors using foreign structures partly to avoid Egypt’s 22.5% capital-gains tax on exits. “One law may make the transaction difficult, another may create unaffordable implications that stop it, or force it to be done in a form that isn’t attractive to investors, all while safeguarding the state’s rights," Saeed says.

His fix is bigger than any one regulation. “We need a ministerial committee to take a strategic view of these business laws and carry out a comprehensive legislative overhaul in one go that keeps pace with the global culture and ‘DNA’ of M&A and group restructuring,” Saeed says. Some coordination is already underway. Heiba says GAFI and the FRA had begun aligning on capital increases, M&A, and valuations during his tenure, and he expects it to matter more soon: “The next stage will have mergers and acquisitions. We need procedures and laws that let that happen faster and more simply than today.”

What better plumbing can’t fix

Then comes the constraint no regulation touches: what an investor is allowed to own. “We don’t have in Egypt today a flexible share-class regime in the way you would typically see in a VC or PE market. All we have are ordinary and preferred shares — and even preferred shares carry major limitations that greatly reduce their use,” Saeed says. “This is one of the things that hinders startups and private-equity models.” Share classes — which can give different investors different economic and voting rights — are part of the basic architecture of VC and PE transactions, while Egypt’s framework remains, in Saeed’s repeated word, “conventional”: outdated not just against New York or London, but against the region.

The gap has a track record, and a cost. Regulators were already working in 2022 to make founder-control clauses, drag- and tag-along rights, preferred shares, and convertible notes workable onshore. A year later, our look at why Egyptian startups incorporate abroad found exactly these instruments among the reasons founders preferred foreign holding structures. The ministry now says its June package will make convertible notes and shareholder agreements easier to use and change how startups are valued in capital increases, but Saeed is blunt about the ceiling: “The regulations operate inside the framework of the law.” And the Senate bill, for all its reach, doesn’t add share classes either.

The bigger rewrite

That is what makes the replacement law the real event. The draft Heiba worked on at GAFI focused on the structural questions neither the regulations nor the current bill reach: a single incorporation authority instead of the several that register companies today; a push toward the one-person company to retire obsolete forms; governance updated to match the FRA’s; and an end-to-end digital platform for the whole company lifecycle. It also looked at letting shareholders write agreed rights straight into a company’s charter. “I have shareholders who’ve agreed things among themselves — what stops me from putting those provisions into the articles of incorporation?” Heiba says. He is careful to add that he doesn’t know what the ministry’s current draft contains, and Saeed notes neither has seen the full amendments, “only news.”

Why it matters: Between the executive-regulation overhaul and the Nasr bill, the near-term reforms could reshape how companies recapitalize, take on investors, merge, and restructure well before any ground-up law arrives — and the valuation shift alone removes a real chokepoint. But the reforms that would keep the next generation of startups and PE deals onshore sit deeper than either.

What’s next: Saeed’s own metaphor sizes the moment. “It’s as if the law is a gearbox that moves the market,” he says. “Right now I’m not changing the gears, I’m changing the oil and the lubrication so it runs faster and smoother.” Watch three things: whether the Nasr bill clears the full Senate and House and how much of it lands in the executive regulations; when the ministry issues its own amendments and whether the draft is published; and whether any version finally puts share classes and convertible instruments into the law itself.