Egypt Nears Amendments to Executive Regulations of Companies Law, Including Convertible Bonds
Egypt is close to approving substantial amendments to the executive regulations of the Companies Law covering more than 10 articles, granting recognition to convertible bonds and shareholders' agreements.
Egypt is close to approving substantial amendments to the executive regulations of Companies Law No. 159 of 1981, covering more than 10 articles of those regulations, according to the legal affairs platform Hapi Journal.
The expected amendments include explicit recognition of convertible bonds, which are used to convert debt into equity shares in the company, a financing instrument used by startups to enable investors to defer company valuation until a subsequent funding round. Furthermore, shareholders' agreements will become binding on founding shareholders in regulatory procedures, giving agreements signed by founders and investors a clearer legal effect.
Community dialogue on the draft amendments has been completed with the participation of startups, law firms, and accounting firms. Discussions focused on the practical implications of convertible bonds and the binding nature of shareholders' agreements during official transactions.
These amendments come as part of a broader push to reform the corporate climate in Egypt, following previous reforms that included facilitating digital incorporation and reducing the duration of merger valuation reviews, according to previous reports. Egyptian authorities aim to improve the startup financing environment, support entrepreneurship, and attract investment.
What do these terms mean?
Executive Regulations: Detailed rules issued by the competent authority to explain how to practically apply the provisions of the law and define its procedures.
Convertible Bond: A debt-based financing instrument that grants its holder the right to later convert the amount into company shares during an upcoming funding round.
Shareholders' Agreement: A contract signed by partners in a company to define their rights, duties, and how their relationship is managed.
Startups: Newly established companies that grow rapidly and rely on innovation, typically requiring funding from investors in their early stages.
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