Egypt: Mergers & Acquisitions

The key laws relevant to M&A are the following:

1. The Companies Law No. 159 for the year 1981 and its Executive Regulations, as amended (the “Companies Law”);
2. The Capital Market Law No. 95 for the year 1992 and its Executive Regulations, as amended (“CML”) the Listing and Delisting Rules of the Egyptian Exchange and its executive procedures, as amended (“Listing Rules”); and
3. The Egyptian Competition Law No.3 for the year 2005 and its Executive Regulations as amended (“Competition Law”) ; and
4. The Investment Law No. 72 for the year 2017 and its Executive Regulations as amended (“Investment Law”)

The key regulatory authorities relevant to M&A are as follows:

1. The Financial Regulatory Authority (“FRA”);
2. The Egyptian Exchange (“EGX”);
3. The General Authority for Investment and Free Zones (“GAFI”); and

The Egyptian Competition Authority (“ECA”).

In addition to the above Key regulatory authorities, sector specific M&A transactions may require the approval of the competent regulatory authority as is the case of the Central Bank of Egypt for banking transactions and the National Telecommunication Regulatory Authority for the telecommunication related transactions.

The structural reform program developed by the Egyptian government in November 2016 and supported by the IMF Funding Agreement helped restore macroeconomic stability, boosted sustainable growth and increased employment opportunities.  Legal and institutional reforms as well as digitization of many governmental and financial services helped create a more welcoming investment and business environment, giving rise to an increase in foreign direct investments in Egypt during the course of 2019 and respectively 2020. We are also witnessing a significant increase in the M&A activity driven by both local players, multinational corporations as well as international financial institutions and private equity players.

With the privatization program’s successful kick start, the substantial list of planned offerings by the State during the course of 2020 alongside planned private sector IPOs, trading on the EGX is expected to steadily increase prompting economic growth and sustained development in the various fields of the economy ensuring a continued vibrant M&A activity.

Renewable energy, oil & gas, healthcare, education, banking and non-banking financial services.

1. Encouraging private sector participation, equity and foreign direct investments is essential to provide an attractive investment landscape in which the private sector takes the lead. Political, economic stability and predictability as to the applicable legal framework is necessary in order to provide the M&A players, whether private equity, funds, FDI’s or multinationals with the certainty needed to manage investment decisions and mitigate the risks effectively.
2. Ensuring that the current reform program continues at a steady pace and that the ensuing side effects, including inflationary pressures, can be absorbed and efficiently managed through social solidarity and protection programs adopted by the government.
3. There are fragmented businesses and sectors in Egypt that could be ripe for consolidation within strong holding local entities. Interest rate regimes and availability of acquisition finance options at reasonable terms could support rapid execution of M&A transactions leading to consolidation and growth.
4. Finally, the strategy adopted by the ECA will also make a difference in relation to market consolidation practices. Under the Competition Law, no prior approval is a priori required for an acquisition or a merger to take place, only a simple notification to ECA is required to be made within thirty days from the execution of the merger or the acquisition. Despite the foregoing, the ECA has recently adopted an expansive interpretation of the law and its authorities thereunder requiring main market players who are contemplating to merge or acquire a competing business to seek ECA prior approval since it could have harmful effects on completion and on consumer welfare. The ECA has taken proactive measures, requiring the parties in three major transactions to obtain its approval prior to consummating such transactions. The effect of such preapproval process on the M&A activity remains to be seen.

Acquisition of shares of a listed company or a company that has offered its shares to the public (“Publicly Traded Company”) are effected through the EGX as follows:

1. Acquisition of less than one thirdof the shares or voting rights of a Publicly Traded Company may be effected in the open market or as a protected transaction, subject to the prevailing rules of EGX or through launching a voluntary tender offer.
2. The CML provides specific cases, which trigger an obligation to launch a mandatory tender offer on 100% of the issued shares or voting rights (“MTO”) of a Publicly Traded Company. Such scenarios and possible exemptions are included in more detail under our response to question No. (25).

In practice, prior to launching an MTO, the acquirer often enters into a sale and purchase agreement with the majority shareholders. This provides the acquirer with more deal certainty, an opportunity to conduct due diligence, the classic contractual protections through representations and warranties as well as specific indemnities and acquiring control over the company. The CML and the Listing Rules regulate disclosures and obligations of all parties during the pre-launch process.

Publicly available information in relation to a target company that is not listed may be found in: (i) a company’s commercial register; a public document containing, among other information, the company’s name, principal office, branches, authorized and issued capital, duration, address, board members and their authorities as well as information regarding the existence of a fonds de commerce mortgage, and (ii) a company’s articles of association and statutes that are published in the Investment Bulletin. Both documents are in the Arabic language.

As for a Publicly Traded Company, in addition to the commercial register and articles of association that are publicly available, material resolutions of board meetings, general shareholders meetings and financial statements are also publicly available since such documents are published by the EGX on its screens. Furthermore, disclosures made by the Publicly Traded Company in accordance with applicable disclosure rules of the EGX provide further information about the company.

There is no general legal obligation on a target company, whether or not listed, to disclose diligence related information to a potential acquirer. In practice, such information is provided following a resolution taken by the target’s board of directors to provide diligence material to the acquirer, or based on the majority shareholder’s instructions in the case of closed companies, in both cases upon signature of a NDA.

The level of detail in due diligence usually depends on the acquirer’s choice and risk appetite, whether the target is listed or not, the size and value of the transaction and the domain of activity and complexity of the applicable regulatory framework. Private equity players and international direct investors customarily conduct full legal, financial, tax and technical due diligence prior to completing a substantial  acquisition.

In practice, we are more often requested to conduct full due diligence rather than high level due diligence. However, most acquirers request issuance of a key issues findings report rather than a full detailed diligence report.

The key decision-making organs in a target company are its board of directors and the general assembly of its shareholders. The board is responsible for the management and operation of the target company within its vested authorities, but may not, unless it is explicitly authorized to do so by the general assembly, decide on matters that fall within the prerogatives of the shareholders in the general assembly. Pursuant to Companies Law, the board of directors is authorized to increase the company’s issued capital within the authorized capital. However, the board of directors of a listed company may not exercise such an authority which falls within the authority of the ordinary general assembly of the shareholders.

The ordinary general assembly of shareholders is competent to decide on matters including approving the financial statements, increasing the issued capital, distribution of dividends and appointing the auditor. The extraordinary general assembly of shareholders is competent to decide on matters including amendment of the statutes of the target company, increasing its authorized capital or decreasing its capital, extending its term and entering into liquidation or a merger.

In general, directors must act in the company’s best interest and in good faith. In this regard, they have a duty to declare any conflict of interest they may have and accordingly must abstain from voting on any such matters.

Following the publication of FRA’s approval of an MTO, directors of the board are prohibited from taking any action that might have a material adverse effect on the Publicly Traded Company including but not limited to passing a resolution to increase its capital or issue convertible bonds.

Furthermore, pursuant to CML, the directors of the board of a Publicly Traded Company that are not related to the potential acquirer are required to issue their opinion in relation to the viability of the offer, its consequences and importance for the Publicly Traded Company, its shareholders and employees. Such opinion is to be disclosed by the Publicly Traded Company within the applicable period reflected under CML. Furthermore, when issuing their opinion, the directors of the board are under an obligation to act as a prudent person and in the best interest of the Publicly Traded Company, and issue their opinion without regard to any relationship that may exist with the potential acquirer or its related persons. The directors are also prohibited from taking any action that could impede the shareholders’ ability to reach a valuation of the shares subject of the tender offer pursuant to appropriate valuation principles.

As for duties of controlling shareholders of a target company, they must generally act in the best interest of the company and in compliance with its statutes and the provisions of applicable law. For example, both the Companies Law and the CML, provide for mechanisms for the suspension and nullification of general assembly resolutions taken in favor of or to the detriment of a specific group of shareholders.

Furthermore, related party transactions must be at arm’s length and must be authorized by the ordinary general assembly prior to entry into such transactions. Shareholders in Publicly Traded Company that are conflicted may not vote on such resolutions.

Principal shareholders of a Publicly Traded Company, holding more than one third of the shares, must notify the FRA immediately following receipt of notifications from a potential acquirer of its intention to launch an MTO, in cases where agreements exist between the principal shareholders and the potential acquirer that were not notified to the Publicly Traded Company. Furthermore, such principal shareholders are prohibited from selling their shares during the period from the date of announcing the MTO and until its execution except in response to the MTO.

Under Egyptian Law, employees and other stakeholders generally have no specific approvals or consultation rights in relation to an acquisition of a target company, whether or not listed.

Private transactions are often subject to satisfaction of certain conditions precedent agreed between the parties, which may include regulatory approvals required for execution or obtaining financing or third party approvals or the satisfaction of any other diligence related matters.

As for acquisitions of Publicly Traded Companies, pursuant to CML an MTO may not be conditional except in the following cases:

1. A share swap involving shares to be issued through a capital increase of a company, the MTO shall be conditional upon approval of the issuance of the capital increase shares by the relevant company;
2. Conditioning the completion of the MTO upon the acquisition of at least 75% of the capital or voting rights of the Publicly Traded Company, if the acquisition is made for the purposes of a merger, or at least 51% if the acquisition is made for the purpose of acquiring control of the Publicly Traded Company. In the event the shares offered for sale are less than the percentages set forth in the conditional MTO, the acquirer must first obtain FRA’s approval prior to executing the MTO below the thresholds outlined in the conditional MTO.

As for voluntary tender offers, the potential acquirer may condition its offer upon acquiring any given percentage, provided it falls below one third of the issued shares or voting rights of the Publicly Traded Company.

Exclusivity and confidentiality clauses are customarily included in non-binding offers submitted by a potential acquirer and in preliminary agreements entered between the parties.

Mechanisms for deal protection and cost recovery may be agreed between the parties in their preliminary agreements. Break-up fees is the most commonly used mechanism in Egypt.

The most common form of consideration in acquisition transactions is cash. Consideration may also be in the form of a share swap or in kind.

For Publicly Traded Companies, consideration may be cash or share swap or a mixture of both based on certain conditions.

1. Acquiring shares of a non-listed company does not oblige the acquirer to make any public disclosure. However, certain information will be required from the acquirer to register the transfer of shares and update the corporate documents of the target company.
2. For listed companies, the CML sets forth certain minority ownership thresholds at which the acquirer should make a disclosure to the EGX as follows:

   (i)      An acquirer acquiring, in an open market transaction, 5% (or its multiples) of the issued shares or the voting rights of a Publicly Traded Company, and less than one-third, whether through one transaction or a series of transactions, must notify EGX and FRA within two days of executing the relevant transaction. The Public disclosure must include details on the acquirer, its related parties, the percentage of shares held by such acquirer post completion, and the number and type of shares subject of the acquisition. If the acquirer acquires 25% or more of the issued shares or voting rights of a Publicly Traded Company but not exceeding one third, whether directly or through its related parties, its disclosure must include, details concerning its future investment plans, management plans and whether it has any intention to acquire more than 1/3 of issued shares or voting rights of the Publicly Traded Company.

   (ii)     The public disclosure requirement listed under (i) above also applies in the event that the acquirer is a director of the board or an employee of the Publicly Traded Company and has acquired 3% (or its multiples) of the issued shares or voting rights of the Publicly Traded Company.

3. If an acquirer wishes to acquire one third or more of the shares or voting rights of a Publicly Traded Company, the latter must submit to the FRA for its approval an MTO application to acquire up to 100% of the Publicly Traded Company’s shares or voting rights. Upon acceptance of the MTO application and information memorandum, the FRA should notify EGX of the MTO material terms, which are subsequently disclosed to the public on the EGX screens.

Generally, there are no public disclosure requirements imposed on target companies that are not listed on the EGX. It is customary, however, that the parties agree an announcement to be made to the public following completion of the transaction.

For a Publicly Traded Company, disclosure relating to a potential MTO falls in general upon the acquirer who should, pursuant to CML, immediately disclose its intention to launch an MTO to FRA and EGX in the following cases: (i) the potential acquirer has disclosed its intention to submit a tender offer and notified the Publicly Traded Company of same, (ii) satisfaction of the conditions set out under CML for launching an MTO,(iii) submission of applications to obtain regulatory approvals from the competent authorities, and (iv) rumors or speculative behavior or price movements related to the potential submission of a tender offer.

However, the CML also obliges a Publicly Traded Company to immediately disclose a potential MTO to FRA and EGX upon receipt of a written notification to that effect from a potential acquirer. The same disclosure is required if the Publicly Traded Company enters into any memorandum of understanding, letter of intent, agreement to undergo a due diligence or any similar agreements whether binding or non-binding. The Publicly Traded Company must also disclose to the FRA and EGX any information it has that may materially affect the target company or the price of its shares.

Moreover, the CML also imposes the same disclosure obligations in the same circumstances outlined above on the principal shareholders of a Publicly Traded Company holding more than one third of its issued capital or voting rights, upon receiving a written notification from a potential acquirer of its intention to launch an MTO, in cases where such shareholders have entered into a form of agreement with the potential acquirer that has not been disclosed to the Publicly Traded Company.

There is no maximum period for negotiations or due diligence.

However, upon disclosing its intention to submit a tender offer on a Publicly Traded Company, the potential acquirer must submit its offer within 60 business days; such period may be extended by an additional period not exceeding 60 business days upon approval by FRA.

In case the potential acquirer fails to submit a tender offer within the above mentioned periods or discloses its intention not to proceed with the tender offer, such potential acquirer shall be prohibited from (i) submitting any other tender offer for a period of six months and (ii) from acquiring such number of shares in the Publicly Traded Company that may trigger an MTO requirement, unless the FRA approves otherwise.

There is no maximum period for negotiations or due diligence.

However, upon disclosing its intention to submit a tender offer on a Publicly Traded Company, the potential acquirer must submit its offer within 60 business days; such period may be extended by an additional period not exceeding 60 business days upon approval by FRA.

In case the potential acquirer fails to submit a tender offer within the above mentioned periods or discloses its intention not to proceed with the tender offer, such potential acquirer shall be prohibited from (i) submitting any other tender offer for a period of six months and (ii) from acquiring such number of shares in the Publicly Traded Company that may trigger an MTO requirement, unless the FRA approves otherwise.

The concept of “financial assistance” is not recognized under Egyptian law. However, a target company may not provide financing to any of its shareholders, in the form of loans or guarantees, unless a general shareholders assembly, in which the relevant shareholder is not permitted to vote, authorizes such transaction. Dissenting shareholders have the right under the Companies Law to claim nullity of such a resolution, within one year from its approval by the general assembly, if it has been passed to favor a certain group of shareholders or to their detriment. Moreover, a target company is generally prohibited from granting cash loans of any type to any of its board members or providing any guarantee for any loan entered into by its board member with third parties.

Although pursuant to CML, a potential acquirer is required to confirm in his offering memorandum whether any guarantee or settlement of financing for the MTO is dependent in any form on the Publicly Traded Company’s financial resources and the effect of such financing on its assets and activities.

Egyptian Law recognizes the principle of autonomy of the parties and thus parties to an acquisition may generally choose to have their contractual relationship governed by the applicable law they deem appropriate. The most common choice of law to govern acquisitions in Egypt is Egyptian law. However, in certain cases, acquisition transactions are governed by foreign laws such as English Law or French law.

In case the acquisition triggers an MTO, the acquirer must prepare and submit to FRA for its approval a full MTO application.

Such application must contain certain information, including the objectives of the potential acquirer, the number and description of the shares already owned by the acquirer or its related parties in the Publicly Traded Company, the proposed purchase price as well as the other main terms of the tender offer.

Furthermore, an information memorandum prepared by the potential acquirer and approved by its legal advisor and financial adviser must accompany the application. Such information memorandum must contain sufficient information to allow the shareholders of the Publicly Traded Company to make an informed decision regarding the tender offer as detailed under the CML.

In addition to the above, the application for a tender offer and the memorandum of information must be accompanied by certain documents including in principle:

1. a draft of the tender offer in accordance with the template issued by FRA;
2. a letter from a certified bank confirming the availability of funds for the transaction. In case the acquisition is executed against share swap, an undertaking from a custodian confirming custody of the offeror’s shares throughout the period of the tender offer;
3. an undertaking from the applicant to notify the Egyptian Competition Authority of the transaction according to the Competition Law;
4. a report from an independent financial advisor pertaining to the share price of the Publicly Traded Company, in case of a share swap or a mixed tender offer;
5. all legally required preliminary approvals from the competent authorities, if any;
6. Publicly Traded Company’s share closing price for the six months preceding the submission of the tender offer and the tender offer prices for the same for the 12 months preceding the submission of such offer; and
7. all documents identifying the acquirer in accordance with chapter 13 of the executive regulations of the Capital Market Law.

The FRA may request additional information or documents, as it deems necessary. Upon accepting the application, FRA must notify the EGX of the main terms contained in the application and the information memorandum, and upon such notification EGX shall post it on its screens.

Transfer of listed shares is evidenced by a statement of account issued by MCDR and reflecting credit of the acquired shares in the buyer’s account. Transfer of unlisted shares is effected through the EGX and evidenced by an EGX transfer of title certificate and a statement of account issued by MCDR.

As for the transfer of quotas of limited liability companies, such transfer is evidenced by registering such transfer in the Quotas Ledger of the company.

Capital gains realized from the sale of unlisted Egyptian shares and quotas of limited liability companies by both resident and non-resident shareholders are subject to capital gains tax at the standard corporate tax rate of 22.5%.

According to article 56 bis of the Income Tax Law No.91/2005, capital gains realized from the sale of listed Egyptian shares are subject to 10% withholding tax. The application of this article had been suspended for two years as of May 17, 2015. Such suspension was further extended for a period of three additional years, ending on May 16, 2020. Accordingly, no capital gains tax is currently collected with respect to sale of shares of companies listed on the EGX. To date the government has not announced whether it plans to extend such suspension, maintain such withholding tax, or replace it.

Further, recently the transfer of listed and unlisted shares have become subject to stamp duty taxes. Article 83 bis was added to the Stamp Tax Law No. 111 of 1980, and provides that a proportional stamp duty shall be imposed on the purchase or sale of all securities whether such securities are Egyptian or foreign securities, listed or not listed, without deducting any costs as follows:

1. 25 per thousand to be borne by the seller and 1.25 per thousand to be borne by the buyer, as of the date of coming into force of this law until 31 May 2018.
2. 50 per thousand to be borne by seller and 1.50 per thousand to be borne by the buyer, as of 1 June 2018 until 31 May 2019.
3. 50 per thousand to be borne by the seller and 1.50 per thousand to be borne by the buyer, as of 1 June 2019.

Article 83 bis (1) states that acquisitions and exits concluded in one transaction are subject to the tax set out in article 83 bis at the rate of 3 per thousand without deducting any costs in the two following cases:

1. If the transaction is concluded on 33% or more of the shares or voting rights of a resident company; whether in terms of the number of shares or their value.
2. If the transaction is concluded on 33% or more of the assets or liabilities of a resident company by another resident company in return for shares in the purchasing company.
   In both cases, the seller bears the tax at 3 per thousand and the purchaser bears the tax at 3 per thousand.

Hostile acquisitions are uncommon in Egypt.

During a period of fifteen (15) business days from the date of disclosure made to EGX of the material information and terms set forth in the application for a tender offer (i.e. the MTO notice)_, the Publicly Traded Company is obliged to issue a statement expressing the opinion of its directors that are not related to the potential acquirer in relation to the viability of the offer, its consequences and importance for the Publicly Traded Company, its shareholders and employees.

The FRA may also require that the Publicly Traded Company’s directors that are not related to the potential acquirer appoint an independent financial advisor to evaluate the tender offer in the following circumstances:

1. the offeror and its related parties already own 20% of the share capital of the Publicly Traded Company;
2. the offeror is a board member or in the top management of the Publicly Traded Company;
3. the acquisition is to be made by means of a share swap or a mixed tender offer; and
4. such other cases in which FRA deems that such report is necessary for the protection of the Publicly Traded Company’s shareholders, the interests of the market and its stability.

A. Pursuant to CML, an obligation to launch an MTO for up to 100% of the shares and convertible bonds of a Publicly Traded Company is triggered in the following cases:

1. if a party, directly or indirectly, alone or through related parties, wishes to acquire one third or more of the issued shares or voting rights of the Publicly Traded Company.
2. if a shareholder who holds, alone or together with its related parties, one third or more and less than half the shares or voting rights increases its shares or voting rights in the Publicly Traded Company by more than (5%) of the issued shares or voting rights during any twelve consecutive months. In all cases, the obligation to launch an MTO shall remain valid and will be triggered in case the ownership of shares or voting rights exceeds 50% at any time;
3. if a shareholder, who holds, whether directly or together with its related parties, more than half and not more than two thirds/66.6% of the issued shares or voting rights increases its shares or voting rights by more than (5%) of the issued shares or voting rights during any 12 consecutive months.
4. if a shareholder who holds, alone or together with its related parties, more than [two thirds 66.66] of the issued shares or voting rights and less than 75% of the shares or voting rights increases its shares or voting rights in the Publicly Traded Company by more than (5%) of the issued shares or voting rights during any twelve consecutive months. In all cases, the obligation to launch an MTO shall remain valid and will be triggered in case the ownership of shares or voting rights exceeds 75% at any time.

As an exception to the above, the FRA may exempt the party in default from the MTO requirement if the excess shares purchased by the defaulting party, or through its related parties, are disposed of within a preset period of time determined by the FRA. The FRA may also take measures against the defaulting party including freezing the excess shares or prohibiting exercise of voting or any other measure it deems appropriate until the defaulting party submits the MTO.

B. In addition to the forgoing, the CML has listed certain cases in which, following the notification to the FRA, the obligation to launch an MTO does not apply as follows:

1. the Transaction is concluded between ascendants and descendants of natural persons;
2. succession by inheritance, will or donation;
3. execution of a merger in accordance with Egyptian law;
4. sale of pledged securities by a bank in accordance with the provisions of the Banking Law;
5. capital restructuring between related parties and/or related group of companies;
6. if the acquisition is executed by a financial institution licensed to undertake underwriting activities in the course of executing its obligation of underwriting;
7. capital reduction resulting from the treasury shares cancellation;
8. all shareholders of the target company approving the sale;
9. capital increase of the target company provided such increase is not arising from the purchase of subscription rights in the capital increase; and
10. the transfer of all shares owned by any employees union in a Publicly Traded Company that has an affiliate status under the Public Enterprise Law No. 203 for the year 1991 executed for the purposes of restructuring and procuring additional financing for such companies.

There are many rights and protections granted to minority shareholders under applicable Egyptian laws. The most notable rights include the following:

1. Shareholders owning five percent (5%) of a company’s share capital have the right to include certain matters that may affect their interests in the agenda of an ordinary general assembly meeting, while, shareholders owning at least 5% of a company’s share capital may call for such assembly to convene;
2. Provided compelling reasons exist, shareholders owning ten percent (10%) of the company’s capital may call for an extraordinary general meeting to convene;
3. GAFI’s board of directors may, upon compelling reasons given by shareholders owning a minimum of five percent (5%) of a company’s share capital, suspend resolutions of the general assembly of the company if such resolutions (i) are issued in favor of a specific group of shareholders; (ii) may be to the detriment of a specific group of shareholders; and/or (iii) profit certain board members or others;
4. All shareholders must be notified of general assembly meetings in the manner and timing set by applicable law and are entitled to attend and vote in such meetings. Shareholders are permitted to access all documents and files to be discussed at a general assembly meeting;
5. Any resolution adopted at a general assembly meeting that may affect a shareholder’s basic rights or increase its liabilities shall be null and void;
6. Shareholders holding at least (10%) of the share capital of a company are entitled to request information or documents relating to transactions undertaken by the company and related parties agreements. In the event the company refuses to provide such information, the said shareholder(s) may submit a request to GAFI demanding delivery of the requested documents;
7. A founder of a company, for a period of five years following its incorporation, or any of its board members, at any time, may not enter into an agreement presented to the board for approval, unless the ordinary general assembly pre-authorizes such contract. Any contract concluded to the contrary is deemed null and void; and
8. Shareholders holding at least (20%) of the capital of a bank and shareholders holding at least (10%) of the capital of a joint stock company are entitled to request GAFI to conduct an inspection on a company in the event they believe a material violation was committed by any of its board members or auditors. GAFI may also undertake such inspection at its discretion.

Also, Companies Law was recently amended to allow for pro rata representation and cumulative voting for election of board members to be provided for in the company’s statutes. Pro-rata representation may provide for minimum representation of shareholders on the board by a maximum of 1 seat for each 10% of the capital. Cumulative voting grants each shareholder a number of votes equivalent to the number of its owned shares for the election of the board members. Both mechanisms are voluntary for companies established pursuant to the Companies Law or Investment Law. Listed companies, however, are obliged pursuant to applicable FRA decrees to adopt the cumulative voting mechanism for election of board members and amend their statutes to that effect.

Finally, for preserving minority rights, in certain cases the target company or the majority shareholder is obligated to acquire the minority stakes. For more details please refer to following question.

1. For the purpose of preserving the rights of minority shareholders, the CML provides for instances where the FRA may require that the majority shareholders launch an MTO to acquire the minorities.

   For example, CML provides that if a party, alone or through related parties, acquires 90% or more of the issued shares and voting rights of a Publicly Traded Company, any of the remaining shareholders holding 3% of the issued shares or a number of shareholders of at least 100 representing not less that 2% of the free float may, during the 12 months following the acquisition by the majority shareholder of the above mentioned percentage, request FRA to notify the majority shareholder to launch a tender offer to acquire the minority shareholders. If such a request is accepted by the FRA, it shall notify the majority shareholder who shall be obliged to submit a mandatory tender offer file during the period determined by FRA.

   Furthermore, the CML obliges the majority shareholders and/or entities having actual control of a Publicly Traded Company to disclose to FRA certain specific actions that may affect the minority shareholders’ rights prior to their execution, including for example a decision to merge the Publicly Traded Company in another company under their control or a decision to dispose of its principal assets to another company. The FRA is granted the prerogative under the CML to assess such actions and their implications on minority shareholders and may decide that an MTO should be launched by the majority shareholder and/or the entities controlling the Publicly Traded Company.

2. There are other examples where the majority shareholders are also obliged to buy out the minority. Pursuant to Companies Law, the shareholders who have voted against a resolution approving a merger may during a period not exceeding thirty days from the publication of the merger decision request that their shares be bought out. The value of shares or quotas in the company may be determined by agreement of the parties or determined by the court taking into consideration the value of the assets of the relevant company.

   In case of a voluntary decision to delist taken by a 75% vote of the shareholders of a Publicly Traded Company in an extraordinary general shareholders meeting, shareholders who object to such a decision in accordance with the provisions of applicable law may force the company to buy their shares at a price determined in accordance with the Listing Rules.

3. Finally, other than the above mentioned cases, where the minority shareholders may force the majority shareholder to acquire their shares, there are no statutory provisions under Egyptian law that explicitly oblige minority shareholders to sell their shares to a majority shareholder. In other words, there are no squeeze out mechanisms under Egyptian law.