Limited Liability company:

General features:
Partners:

 from 2 to 50 partners.

 if there are more than 10 partners a supervisory council must

be set up of at least 3 partners.

Capital :

 no minimum capital.

 maybe in cash or in kind but no parts for services.

 the capital is divided into equal parts.

 must be fully paid.

Minimum value of part: 100.00 EGP.

Name: can include the partners name or the company’s activity or both ENDING with Ltd.

Registration: at the commercial registration office at the location oh headquarters.

Similarity with Personal & Capital companies:
Ltd is similar to partnerships in:

1. The assignment of parts to others is not free.

2. The capital of Ltd is not made through public subscription.

3. The contributions of partners aren’t negotiable in the stock market.

Ltd is similar to Joint stock companies in:

1. The partner's liability is limited to his part of contribution.

2. The management of Ltd is similar to the management of JSC.

3. A partner's contribution passes by inheritance to his successors.

Procedures of establishment:
1. 1st partners should determine the capital of the company.

2. The company's capital should be divided into equal parts.

3. Then the capital will be distributed among themselves.

4. All parts should be subscribed at the same time of concluding the contract.

Preferred parts:
In principle equal parts grant their holder equal rights but exceptionally:

1. The contract may grant some partners a greater percentage of profits.

2. Or to allow them to have priority in the redemption of the values of their parts before the liquidation of the company.

3. Preferred parts can be granted in the case of the increase of the capital

Rights of partners:
1. His liability is limited to his contribution.

2. He's entitled to an annual share of the company's profits.

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3. He's entitled to a portion of the company's asset upon its liquidation.

4. He has the right to take part in the management

and control of the company.

5. He has the right to sell his parts.

Transfer of parts:
1. When a partner wishes to transfer his parts, he should inform the managing director of the price offered to him so that the
partners may buy them for the same price offered and they have 1 month to decide  Right of 1st refusal.

2. But if the partners discover that the offered price was false ,then the partners will still have the right to restitute these parts
,either distribute parts among them in proportion to their contribution Right of restitution.

3. A partner can assign his parts to another partner without the right of restitution .

4. The assignment of a part means the transfer of the ownership from the assignor to assignee and that's not binding until it
reaches the company's register
Lecture 8:

General
assembly Achieve the purpose of the Company as provided
for in its contract.
Supervisory
council Achieve Profit & Distribute it among partners.

Managers Prepare the budget.

The supervisory council:
It Supervises the Managers ,so that they may not
mismanage the company for their own interest.

General assembly:
1) Ordinary GA:

- Must be held at least one per year.

- Approval of Budget, distribution of profits, formation of reserves…

- Q.A: 25% of parts.

- Q.V: Majority of attending parts.

- 2nd invitation is valid with any % if the 1st GA meeting wasn’t held.

2) Extraordinary GA:
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 - Held for exceptional matters related to the company’s contract.

- Such as: change of purpose, liquidation, increase or decrease of capital…

- Q.A: 50% of parts.

- Q.V: Numerical majority holding at least ¾ of company’s capital.

- 2nd invitation reduced to 25 % parts.

Sole person company

• Definition:

It is a limited liability company established by one person(natural/juristic) who exceptionally can be jointly liable for the
company.

• Establishment and capital:

-Minimum capital:50,000 EGP.

-The capital must be fully paid upon the establishment of the Co.

• Management and founder’s mandates:

-The founder of the Co runs all corporate aspects relating to the Co.

-The founder can’t conclude agreements that compromise the financial separation between the founder and the Co.

• Restrictions:

A sole person Co can’t undertake any of the following:

-founding of another sole Co.

-undergoing public subscription.

-borrowing through issuing securities….

• Obligatory liquidation of a sole person Co:

-losses exceed half the capital (unless the founder resolved the continuity of the Co).

-liquidation of the juristic person considered to be founder .

-incapacity or death of the founder(unless the heirs resolved the continuity of the Co).

Joint Stock Co(JSC)

• General features:

-Article 25: It’s a Co whose capital is divided into shares that can be exchanged according to the law.

-Shareholders have under this Co a limited liability.

-The Co’s name( trade name)must reflect its object and founders name can be used.

Capital:

Issued capital:

-Must be fully paid.

-Every subscriber must pay at least 10% of the nominal value of his shares.

-Then to be increased to 25% during maximum 3 months.

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 -And the remainder to be paid in maximum five years from the date of establishment of the Co.

Authorized capital:

-Its value shouldn’t exceed 10 times the value of the issued capital.

Shares:

Nominal shares: -Includes the name of the shareholder.

-From 1 EGP to 1000 EGP.

Bearer shares:

-Doesn’t include the name of the shareholder.

-Can be issued within maximum 25% of the total number of shares.

Establishment of JSC:
1. Concluding the preliminary contract and statute of JSC:

• The preliminary contract or deed:

- is only signed by the founders to set down their commitment to work for the establishment of the JSC therefore it’s not
considered to be the JSC’s main contract.

-the preliminary contract must be incorporated in the company’s statute.

• The statute of JSC:

-Signed by the founders and subscribers.

-Includes the Co’s name , purpose ,term ,capital , rules related to GA and BOD…

2. Subscription to the capital:

-Invite people to join the company through publication of the prospectus.

-This prospectus must be approved by the Capital Market General Authority.

-Must be published in two wide daily newspapers at least one of them is in Arabic.

-The subscribers will deposit their money in a bank named by the minister of economy.

• Contributions:

1. Monetary: cash contributions.

2. Contribution in kind: 3 conditions must be satisfied to be accepted:

-The statute must include all information connected to it.

-A committee headed by a chief of justice must verify that its value is reasonably assessed.

-This assessment must be approved by the numerical majority of subscribers holding at least 2/3 of the cash shares excluding
the owners of the in kind contribution.

• Partners:

1. Founders:

-Not less than 3.

-They came up with the idea of establishing the JSC and they sign the preliminary contract.

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 2. Subscribers:

-Not less than 3.

-They only sign the company’s statute.

1)Shares:

• A share represents a shareholder's contribution in a company.

• A share is either given for a sum of money, or it may be given for a movable.

• A share has to have a definite nominal value.

• A share is indivisible.

• There are two types of shares:

1.Nominal share : bears the name of its holder and its ownership is transferred by entering such transfer in the books of the
company.

2.Bearer share: does not bear the name of its holder, but it belongs to whosoever has it.

Coupons each bearing the number of the share as well as its serial number are attached to the bearer share, and the bearer
presents these coupons to the company to receive the annual profit for that share.

2)Founders shares:

-No founders' shares may be issued except in return for an assignment of a commitment granted by the government or an
assignment of a moral right as provided for in Article 34 of the above- mentioned law like a patent or a trade name or other
similar moral rights.

-However ownership of such a share is transferable and it may be exchanged in the stock exchange. In which case its value would
be calculated on the basis of the annual percentage of profit that the share receives.

-Therefore, such Founders Shares may not be given in return for cash or a

contribution in kind.

-The holders of Founders' Shares may not in any way interfere in the management of the company. Should they be allowed to
attend the General Assembly but can’t vote.

-Cancellation of a Founders Shares:

Article 34 of the above mentioned Law provides for the possibility of the cancellation of a Founders share in return for an
equitable compensation. This article further provides that The General Assembly may after the lapse of one third of the term of
the company or the lapse of a maximum of ten fiscal years form the date of granting such shares , Such cancellation shall only be
affected in return for an equitable compensation that shall be determined by a committee headed by a Chief Justice from any
judiciary authority.

Moreover, the annual profit allocated for these shares must not exceed 10% of the net profit of the company after setting
aside the reserves provided for by the law and at least 5% as profit for the capital of the company.

3) Bonds:

-A company wishing to increase its capital may turn to borrowing by issuing bonds.

-However bonds may not be issued except upon the approval of The General Assembly and in general after the full capital of the
company has been paid up. The value of these bonds must not exceed the net value of the assets of the company as determined
by the auditor in accordance with the last budget approved by the General Assembly.

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 -Bonds are exchangeable through the commercial channels just as shares are. But the exchange of bonds differs according to
their type. If they are nominal then transfer of ownership may not be affected except after registration of such transfer in the
books of the company, and if they were to bearer then they would be exchanged through the normal channels.

-Rights of a bondholder:

-A bondholder may not interfere in the management of the company He may neither attend its General Assembly nor vote in
it.

-His only right is the restitution of the value of a bond: A bondholder is a creditor. Therefore he may claim the value of the
loan at the end of its term. All a company's funds and assets guarantee this right of restitution. Therefore in the case of liquidation
of a company the shareholders may not take any of its assets before the bondholders receive their dues in full, or else the latter
would have the right to claim their dues from them.

4)Preferential shares:

• These are shares:

1. that either grant their owners priority in receiving a certain percentage of the profit.

2. or that grant them priority in sharing the assets of the company upon its liquidation.

3. or that grant their owners more votes in the deliberations of The General Assembly.

• The approval of the extraordinary GA by ¾ super majority of the shares is a must for the JSC may to issue preferential
shares.

• 5)Dividend shares:

• -No company is entitled to issue dividend shares unless its statute provides for the redemption of the shares before the
end of the term of the company in cases where the activities of a company are limited to a concession for the exploitation
of a natural resource or of a public utility for a set term or for any other sort of exploitation of consumable asset.

• -These dividend shares which have been redeemed grant their owner the right to continue to be a shareholder in the
company, to attend its General Assemblies, to vote in them and to get a share of the profits.

• -But ordinary shareholders receive a certain portion of the profit before granting anything to the dividend shareholders.
Moreover a dividend shareholder may not get any part of the assets of the company upon its liquidation except after the
ordinary shareholders have redeemed the nominal.

• The most important rights of a shareholder :

• -is that of getting a share of the annual profit of the company .

• -and his right to a share in its assets upon its liquidation.

• -furthermore the liability of the shareholder is limited to the value of the shares that he has bought or subscribed to.

• -he has the right to Assign his Shares.

• -he has the right to attend the General Assemblies, to vote in them and to question the Board of Directors:

• this right is two folds: The right to attend, and the right to vote, which do not necessarily require his attendance. For
Article 59 of Law No 159 for 1981 provides that a shareholder may attend the meeting in person or he may give a power
of attorney to another shareholder to represent him. For a power of attorney to be valid it has to be in writing and to be
given to a fellow shareholder.

• -during the General Assembly every shareholder has the right to discuss the report of the Board of Directors, the budget
and the profit and loss account.
Lecture 10
Management of JSC
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 General
assembly
BOD
Managing director
and Chairman
Formation
- The statute of the company provides for the number of members of this Board but can’t be less than three. The members of The
Board of Directors shall choose from among them a chairman who shall preside over their meetings, represent the company
before the courts and call the Board to a meeting whenever necessary.
-It is common practice that the Board chooses one of its members to manage the affairs of the company who would be called the
Managing Director. He may be someone other than the chairman in cases where the Chairman does not have sufficient time . The
Board of Directors shall decide the mandate and remuneration of the Managing Director. Therefore, it may also dismiss him or
restrict his powers and mandate.
-The decisions of the Board of Directors are passed by the majority of votes of the members attending or represented in the
Meeting. In case of a tie then the chairman shall cast the deciding vote.
-The members of The Board of Directors are elected by the General Assembly.
-The law also provides that the term of membership in the Board of Directors shall be for three years with the exception of the
first Board of Directors appointed by the first General Assembly the term of which shall be five years.
Prerogatives
First: Administrative prerogatives:

These prerogatives deal with the administrative and technical operation of the company, which require the appointment of the
necessary staff and personnel to carry out that task and achieve the object of the company. The Board of Directors also appoints
the technical managers to be in charge of the various kinds of activities of the company, such as production, export, collection of
dues…etc.

Second: Financial Prerogatives:

At the end of every fiscal year the Board of Directors prepares the financial statements of the company in time to allow for the
holding of a General Assembly within three months at the end of the year. The Board of Directors also prepares a report of its
activities for that fiscal year and the financial position of the company at its end.

Powers:
- The Law does not stipulate the extent of the powers of the Board of Directors. This is usually provided for in the statute, which
commonly grants The Board of Directors a broad scope of powers for the management of the company, with the exception of the
powers explicitly granted to The General Assembly. Should the powers of The Board of Directors not be defined in the statute of
the company then it would have full authority in the management of the company with the exception of donations.

- The Board of Directors may not in any case engage in any activity beyond the purpose for which the company was established.

- Moreover the statute of the company may restrict the powers of the Board of Directors by necessitating obtaining the
approval of the General Assembly in cases of loans or mortgages beyond a certain sum.

Liability
Civil Liability of the Board of Directors:

A member of the Board of Directors is a representative of the company. Thus he is not personally liable for the contracts or
commitments that he concludes on its behalf, it is the company itself that shall be liable for such contracts and commitments.

However a member of the Board of directors shall be personally liable for committing an act of negligence or of error in his
management of the company. He shall also be liable for violating the law or the statute of the company. Such a violation would
inflict damage either on the company, or on the shareholders or on third parties.

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The Liability Legal Action:

The law provides that whenever the act for which they are liable has been presented to the General Assembly through a report of
the Board of Directors or the auditor, then the legal action for such an act would lapse after one year from the date of the General
Assembly's approval of the report of the Board of Directors. However if the act for which they are liable constitutes a felony or a
misdemeanor, the legal action may not lapse unless the public action lapses.

Lecture 11
Auditor
Every joint stock company shall have one or more auditors to be appointed by the General Assembly, which would also
determine his fees. As an exception to this rule the first auditor of the joint stock company shall be appointed by the founders.

Powers and Duties of the Auditor:

First: Examination of the books, records and documents of the company:

The Board of Directors must take all the necessary measures to ensure that the auditor performs his tasks.

Second: Ensuring the validity of the General Assembly's meetings:

The Board of Directors has to provide the auditor with a copy of the notifications and invitations sent to the shareholders to
attend the General Assembly and the auditor has to sign the minutes of the meeting.

Third: Presenting an annual report on the activities of the company:

In the General Assembly the auditor must express his opinion regarding anything that is related to his work as an auditor for
the company particularly as regards approving the budget.
Fourth : The auditor also prepares a report on the activities of the company and reads that report to the General Assembly.
This report should include the following:

A- Whether he has received all the information and data necessary for him to conduct his work.

B- Whether he believes that the company keeps regular and accurate

books and accounts.

C- Whether the budget, profit, loss accounts and the report conform

to the accounts and summaries.

D- Whether in his opinion these accounts include all the

requirements provided for by the law and the statute of the company.

E- Whether the inventory has been properly conducted.

F- Whether the data and information mentioned in the report of the

Board Directors presented to the General Assembly conforms to the

books of the company.

G- Whether during the past fiscal year of the company any violations

of the statute of the company or any of the provisions of the law have

occurred in such a way so as to affect the activities of the company or

its financial status.

General assembly(GA)
-In principle the Board of Directors should invite the General Assembly to meet at least once a year.

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 Should it fail to do so or could it not do so for any reason then the auditor shall invite the General Assembly instead.

-There are three types of GA in a JSC:

1)The founders GA.

2)Ordinary GA.

3)Extraordinary GA.

1)Founders GA meeting:
- It meets after the completion of the founding procedures.

-This General Assembly appoints the Co’s first BOD and auditor.

2)Ordinary GA
1-It must be held at least once a year within a maximum of three months from the end of the fiscal year of the company.

2- In charge of the election and dismissal of the members of the Board of Directors and the auditor.

3-Approving the budget and the profit and loss accounts.

4 -Approving the report of The Board of Directors on the activities and business of the company.

5-Approving the distribution of profits.

• Quorum of attendance:

- Shareholders representing at least one quarter of the capital of the company must attend unless the statute of the Company
provides for a higher percentage not exceeding half of the capital.

- Should there be no quorum in such an ordinary General Assembly then a second General Assembly meeting would be held
within the next 30 days upon a second invitation. This second General Assembly's meeting is valid whatever the percentage of the
capital of the company is attending.

• Quorum of Voting:

Decisions of the General Assembly are adopted by the absolute majority of shares represented in the General Assembly.

3)Extraordinary GA
-The only responsibility of an extraordinary General Assembly is to amend the statute of the company.

• Quorum of attendance:

50% of shares.

• Quorum of voting:

-In principle the approval of 2/3 of shares represented in the meeting in case of for example : adding activities related to the main
objective of the company or increasing the term.

-Exceptionally in five events:

1.While increasing or decreasing the capital of the company

2. liquidation before its term,

3. change the object of the company

4. merging it

5. issuing preferential shares

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- Then in such cases the majority necessary to make the decision valid is the approval of 3/4 of the shares represented in the
extraordinary General Assembly.

Procedures commonly applied in GA meetings

-The General Assembly is made up of the shareholders regardless of the shares they hold.

- A shareholder does not necessarily have to attend the General Assembly in person. He may give a power of attorney or proxy to
another shareholder to represent him.

-Bond holders and holders of founders' shares are not part of the General Assembly.

-The Board of Directors must be represented in the General Assembly by a number of members that may not be less than that
provided for the validity of a Board of Directors meeting.

-The Board of Directors may also call for a meeting of the General Assembly in cases where shareholders representing at least 5%
of the capitol of the company request it.

-The General Assembly may not discuss any issue that is not on its agenda sent or published with the invitation. However the
General Assembly has the right to discuss any serious incident that may be revealed in the meeting.

-The members of the Board of Directors are obliged to respond to all the questions of the shareholders.

-Decisions of the General Assembly are passed by the majority of votes provided for in the statute of the company or by law.
Those decisions shall be binding to all shareholders even those who did not attend the General Assembly or were not represented
in it, or who are against it.

Distribution of dividends
-The profits distributed to the shareholders represent the net profit achieved by the company and should be distributed as
follows:

• First: at least 5% of the net profit of the company shall be set aside as a legally required reserve. The deduction of such
reserves would be halted once the reserves reach a sum equal to half the issued capital of the company.

• Second: At least 5% of the profit shall be distributed to shareholders as

a first portion of profit for and to the employees.

• Third: Maximum10% of the balance of the net profit shall be distributed among the members of the Board of Directors.

• Fourth: The balance of the net profit after the above mentioned deductions should be distributed to the shareholders and
the employees, and the latter’s share of the profits can maximum be 10% of the net profit of the company provided that
this sum does not exceed the total annual wages of all employees at the company.

JSC’s termination:
Joint stock companies are terminated for the same causes of termination of other companies:

such as the end of its term, or the loss of the greater part of its capital, or the fulfillment of the object for which it was
established or for its merger.

-Partners may agree to terminate the company before its term. But for joint stock companies this termination does not require
the unanimous agreement of all the partners, and the General Assembly may take a decision to this effect.

-It is common that most statutes of joint stock companies provide for the termination of a company before its term in the case of
the loss of half its capital, unless the extraordinary General Assembly decides otherwise.

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