Lecture No.

6
Commercial Companies
Types of Companies Under Egyptian Law
Egyptian Law recognize seven types of companies:

1- General partnerships,
2- Limited Partnerships,
3- ‫شركة المحاصة‬A Joint Venture Company,
4- Partnerships limited by shares,
5- Limited Liability Company,
6- The One-Man Company
7- Joint Stock Company
These types are exclusive. Therefore, no company can be formed or incorporated under
Egyptian law and takes a form other than the above mentioned seven types. Moreover,
Egyptian law accepted the concept of One -Man Company after decades of resistance by
inserting the rules in the company law No. 159 for the year 1981 by inserting some
amendments to the code in 2018.
The above-mentioned types may be classified into three main categories.
1- Partnerships:
This category consists of general partnerships and limited partnerships and joint
venture companies. Partnerships are based on the personal consideration. The
personal consideration means that the partners in such type of companies
entered into the partnership based on their previous relationship and the trust
that they have in each other. The partnerships are usually formed by a small
number of partners.

2- Capital Companies
This category consists of joint stock companies. Capital companies are based on
the contribution in capital by the shareholders. It is based on the financial
consideration and the financial capability of each shareholder. Capital companies
are usually formed by a large number of shareholders who do not know each
other.

3- Hybrid Companies
This category consists of limited liability companies, One-Man Company and
partnerships limited by shares. They combine characteristics of partnerships and
capital companies.

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 Laws regulating companies in Egypt:

Companies Law No. 159 for 1981( “ Company law”) was issued to regulate and
organize joint stock company, limited liability companies and partnerships
limited by shares. The other types of companies i.e the general partnership and
limited partnerships, are regulated by regulation contained in the commercial
code issued in 1883.

In all cases, in order to incorporate a company under the Egyptian law, certain
procedures must be taken before the competent authorities depending on the
type of the company to be established.

Joint Stock companies

Formation of Joint Stock Companies:

a. Definition

The joint stock company (JSC) is a company the capital of which is divided into
shares of equal value; the liability of the shareholder is confined to the value of
the shares to which he subscribes, and he is not liable for the debts of the
company except within the limit of those shares.

The JSC must adopt a particular name, in the past the name must be derived
from its purpose but recently it may derive also from the founder’s name
companied with the purpose of the company.

b. Number of Shareholders:
The JSC must have at least three founders. The founders are jointly
responsible for the obligations they undertake. The JSC must have at least
three shareholders throughout its live, which is considered as a continuing
obligation. In case the number of shareholders at any certain point of time
fell below three, the Company Law provide a grace period for six months
after which the existing shareholder/s must increase the JSC’s shareholders
to three or to amend it to another type of companies which does not require
having three shareholders, otherwise the company must be dissolved.

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c. Capital of the JSC
The capital of the JSC is divided into nominal shares of equal values. Each
share may not be less than L.E 1 and not be exceed L.E 1000.

The JSC has three different types of capital which are the issued capital and
the authorization capital and the paid in capital.

 The Issued Capital is considered as the capital of the company, which

is used to carry out its activities.
In companies that put their shares to public subscription: the issued
capital shall not be less than one million Egyptian pounds. The
founders of the JSC should subscribe in the issued capital to the
amount not less than 50% of it.

In the companies that do not put shares to public subscription: the

issued capital may not be less than L.E 250,000.

The shareholder may subscribe in 10% for the period of the first three
month and after that period they should increase the percentage of
the paid capital to be 25%, and they should pay the rest of the issued
capital during the five years from the date of the establishment.

As we mentioned above, the capital of the JSC is divided into shares

equal in value. The shares in the JSC are categorized as follows:

(1) Negotiable shares and in-kind shares

The negotiable shares are given to the shareholders in return of
his cash contribution in the capital of the company, the negotiable
shares can be transferred at any time except for the shares of the
founders which cannot be transferred to a third party except after
the lapse of at least two financial years of the company.

The in-kind shares are the shares given to the shareholders in

return of his in-kind contribution in the capital of the JSC. The
transfer of the in-kind shares is restricted during the first two
financial years of the company. The in-kind contribution (a land
for example) must be evaluated in order to determine the in-kind
shares.

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(2) Capital shares and enjoyment shares:
The holder of the enjoyment shares shall not be entitled to
contribute and receive a portion in the result of the dissolution of
the company. His right shall be limited to receive dividends
throughout the life of the company and will not have the right to
share the outcome of the liquidation of the JSC.

(3) Common shares and preference shares:

The common shares are shares which has no extra benefit or
privilege while the preferred shares are shares which gives its
holder one privilege of the following: extra voting right, extra
dividends or extra right in the outcome of the liquidation of the
company.