Regulation, licensing and registrationPrincipal regulatory bodies
What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?
The Financial Regulatory Authority (FRA) is the regulator of private equity funds in Egypt as well as fund managers. Non-bank custodians and management services companies are also regulated and supervised by the FRA.
The FRA is, by law, authorised to inspect all the documents of funds and their managers in Egypt.
With respect to joint stock company private equity funds (JSC PE Funds), the fund manager is required to notify the FRA and the board of directors of the fund of any violation to the limits set by the investment policy as they occur and to provide the FRA with biannual reports on the fund’s activities, results, and financial position.
The management services company is required to send to the certificate-holders quarterly reports on:
- the net asset value of the fund;
- the number of certificates issued and their net asset value along with their market value, if existent; and
- any dividends distributed since the last report sent to the certificate-holders.
The custodian is required to provide the FRA with quarterly reports on the securities kept therewith and owned by the fund.
In addition, the board of directors of the fund is required to provide the FRA with the following:
- quarterly reports on the fund performance and results including full and sufficient information on its financial situation (to be prepared on the basis of the financial statements prepared by the fund manager) as well as the procedures undertaken by the board to manage the risks associated with the fund;
- the annual financial statements prepared by the fund manager as well as the auditors’ report thereon at least two weeks prior to their submission to the general assembly of the fund company. The financial statements must be submitted to the general assembly within 90 days from the end of the financial year; and
- the board of directors’ report on the activities of the fund, which must include – but not be limited to – a description of the fund’s activities and its financial standing, a disclosure of all related party transactions, and a brief on the extent to which the fund is in compliance with the Corporate Governance Rules.
What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?
A private equity fund is required to obtain an initial approval for establishment. Once this is obtained, the founders may proceed with the incorporation of the fund. Afterwards, the fund must apply for licensing as a private equity fund.Registration of investment adviser
Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?
The fund manager is required to be licensed as such by the FRA to carry out fund management activities. Its directors and senior management must also meet minimum requirements of expertise. Without meeting such requirements, their appointment will not be approved by the FRA.Fund manager requirements
Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?
A fund management company is required to obtain a licence from the FRA to carry out its activities. To obtain such a licence, the fund management company must have a minimum capital of E£5 million and its board members and managers must have a minimum number of years of experience in the capital markets field set at five years and four years respectively.
In addition to the above, a fund management company must be 50 per cent owned by juristic persons, of which at least 25 per cent must be owned by financial institutions.
In 2019, the Egyptian regulator rendered two new decisions mandating women’s representation on the boards of directors of FRA-supervised companies as a prerequisite for listing on the Egyptian Stock Exchange and for granting initial approval on the incorporation of non-banking financial companies. The new requirement on the prerequisites for obtaining initial approval to incorporate non-bank financial companies as well as licences to undertake non-banking financial activities is that the company’s board of directors includes at least a female member. However, professional companies, which are to be identified in an FRA chairman’s decision, are exempt from this provision. The deadline for complying with this new requirement was either 31 December 2020 (when possible) or during the first board elections to be held.Political contributions
Describe any rules – or policies of public pension plans or other governmental entities – in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.
There is a sweeping ban on joint stock companies from making political contributions to any political parties. Further, donations of any sort may not exceed 7 per cent of the average profits of the company for the previous five years.Use of intermediaries and lobbyist registration
Describe any rules – or policies of public pension plans or other governmental entities – in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.
No specific rules are targeted to this particular case. There are general rules requiring companies engaged in the promotion of and subscription to funds to be licensed to carry out such activities.Bank participation
Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.