Introduction of Pre-Merger Approval in Egypt

On 29 December 2022, amendments to the Law on the Protection of Competition and Prohibition of Monopolistic Practices No. 3 of 2005 (the Egyptian Competition Law “ECL”) were published in the Egyptian Official Gazette. The amendments have entered into force as of the following day (i.e., Friday, 30 December 2022). Accordingly, M&A transactions that entail change in control or material influence that meet the thresholds stated in the Law require the approval of the Egyptian Competition Authority (“ECA”) before closing the transaction.

The amendments define the economic concentration as any change in control or material influence through a merger, an acquisition or a joint venture. The thresholds set in the law are as follows:

1. The combined annual turnover or combined assets of the merging parties in Egypt exceed 900 million EGP (around USD 40 Million) and for each or anyone of them at least 200 million EGP (around USD 4 Million) in the last year consolidated financial statements.
2. The combined annual turnover or combined assets of the merging parties globally exceed 7.5 billion EGP (around USD 300 Million) and for at least one of them an annual turnover of 200 million EGP (around USD 4 Million) to be achieved in Egypt in the last year consolidated financial statements.

The amendments have made the transaction subject to two phases approval process:

1. In phase 1 review, ECA has 30 working days that can be extended by 15 working days in case of remedies suggested by the parties for clearance.
2. In case ECA decided to refer the transaction to phase 2 review, the period is 60 working days which can be extended by 15 working days in case of remedies suggested by the parties.

It is worth mentioning that the new amendments do not apply to the banking sector and non-banking financial services. Any economic concentration in the banking sector shall be subject to the Central Bank of Egypt (“CBE”) approval only. According to Law No 194 for Year 2020, the banking sector includes the following activities:

• Banks.
• Currency Exchange Companies.
• Credit Score and Credit Rating Companies.
• Money Transfer Companies.
• Credit Guarantee Companies.
• Payment Systems Operators and Payment Service Providers.

As for the non- banking financial services, they shall be subject to the Egyptian Financial Regulatory Authority (“FRA”) approval after seeking ECA opinion on the matter. According to law No 10 for year 2009, the non-Banking financial activities include:

• Financial Leasing.
• Real Estate Finance.
• Insurance Services.
• Micro Finance Services.
• Capital Markets.
• Factoring and Securitization.
• Future Exchange Markets.

Under the new regime, the sanction for failure to submit the notification or executing the transaction after ECA rejection or failure to abide by ECA conditional approval is a fine ranging between a minimum of 1% and a maximum of 10% of the combined annual turnover or the combined assets or the transaction subject matter of the violation. In case the annual turnover cannot be calculated the fine is a minimum of EGP 30 million and a maximum of EGP 500 million.

The amendments also give ECA the right to take corrective measures in case of failure of submitting the notification or non-abiding by ECA decision and the agreement may be considered null and void.

The obligation of notification to ECA does not affect any other obligation of notification stated in other laws or international agreements.

Having immediate effect means that any ongoing transaction not closed before the publication of the law would be subject to the new regime of pre-merger approval. The Executive Regulations and the Guidelines on the implementation of the new amendments are yet to be issued by the ECA.

How can we help?

Our qualified members of the team are happy to provide legal assistance explaining the new amendments and submitting the filing notifications to ECA.