Egyptian Financial Supervisory Authority

Chairman of the Board of Directors

Board of Directors Decision No. (135) dated 27/11/2016

Regarding Controls on Acquisition or Control of Securities Brokerage Companies and Investment Fund Management Companies, and Rules for Regularizing Status Pursuant to Articles (328 bis, 328 bis A) of the Executive Bylaws of the Capital Market Law

The Board of Directors of the Egyptian Financial Supervisory Authority, Having reviewed the Law on Joint Stock Companies, Limited Partnerships by Shares, and Limited Liability Companies issued by Law No. (159) of 1981 and its Executive Bylaws; And the Capital Market Law issued by Law No. (95) of 1992, its Executive Bylaws, and the decisions issued in implementation thereof and their amendments; And the Central Depository and Registry of Securities Law issued by Law No. (93) of 2000 and its Executive Bylaws; And Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments; And the EFSA Statute issued by Presidential Decree No. (192) of 2009; And Presidential Decree No. (191) of 2009 regarding the rules governing the Egyptian Exchange and its financial affairs; And Investment Minister Decision No. (95) of 2016; And upon approval by the Board of Directors at its meeting held on 27/11/2016.

Has Decided

(Article One)

It is prohibited for any natural or legal person, Egyptian or non-Egyptian, to directly or indirectly acquire more than one-third of the issued capital or voting rights of any securities brokerage company or investment fund management company – whether providing it with securities listed on any Egyptian exchange or not representing more than 10% of the market size for either activity, or any percentage leading to actual control thereof – without obtaining the approval of the EFSA Board of Directors for the controls stipulated in this Decision, and any transaction violating this shall be null and void.

The market size for each activity shall be calculated for each data based on the last quarter preceding the application submission as follows:

1. Periodic financial statements of investment funds for the fund management activity.
2. Value of trading and transfer operations for Egyptian securities for the securities brokerage activity.

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(Article Two)

Subject to the provision of Article One, approval from the EFSA Board of Directors must be obtained in case of wishing to increase the shareholding or voting rights percentage to over 50% for the companies referred to in the preceding article, as well as in case of wishing to increase the shareholding or voting rights percentage to over two-thirds of the capital or voting rights of these companies. The increase request shall be submitted, examined, and decided upon in accordance with the controls stipulated in this Decision.

(Article Three)

For the application of the provisions of this Decision, actual control by a natural or legal person means owning any percentage directly or indirectly that enables them to appoint the majority of the company's board of directors members or control in any manner the decisions issued by its board or control the decisions issued by its general assembly.

The ownership of a natural person includes what they own in addition to their spouses and minor children.

The ownership of a legal person includes what it owns in addition to any of its board of directors members, whether natural or legal persons. It also includes any other legal person if under the actual control of those natural or legal persons, as well as the total ownership of any person from more than one natural or legal person who have an agreement to exercise their rights in the general assembly or board of directors in a manner leading to actual control of either.

Acquisition is considered direct in cases where shares of securities brokerage or investment fund management companies referred to in Article One are acquired by submitting an acquisition request to the persons participating in the aforementioned decisions.

Acquisition is considered indirect in cases where a percentage exceeding 50% of the shares or voting rights of an entity that itself owns – alone or with its related parties – more than one-third of the shares or voting rights of one of the securities brokerage or investment fund management companies referred to in Article One is acquired. Related parties of the entity refer to companies and entities in which the entity owns 50% or more of their shares or voting rights, or controls their board of directors or general assembly, or an agreement unites them imposing actual control on the company, as well as entities and companies that own 50% or more of the shares or voting rights of this entity or control its board of directors or general assembly.

In all cases, ownership or control calculations include ownership of Foreign Depositary Receipts corresponding to the shares of the companies referred to.

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(Article Four)

The acquisition applicant or their legal representative shall submit a request for approval to acquire more than one-third of the issued capital of any company referred to in Article One or own any percentage leading to actual control thereof to the Authority at least one month prior to the completion of the acquisition, on the form prepared for this purpose by the Authority, and attach the following:

1. The objectives the applicant aims to achieve and their plans for managing the company and the policy they intend to follow in handling its affairs.
2. Any agreement or coordination with natural or legal persons regarding how they will exercise their rights in the general assembly or board of directors.
3. A statement of the names of companies operating in the securities field in which the applicant, together with the persons participating in the aforementioned decisions, owns shares of the company's capital or voting rights – including the company targeted for acquisition, whether directly or indirectly, specifying the value and percentage of shareholding or participation.
4. A declaration by the acquisition applicant certifying the accuracy of all submitted documents and data.
5. Proof of payment for the examination and study services of the acquisition request.
   Submission of the following documents:

First: For a Natural Person:

(a) Statement of name, address, and a copy of the national ID or passport for foreigners.
(b) Statement of academic qualifications and professional experience, particularly in the capital market field.
(c) Criminal record certificate and a certificate regarding the issuance of bankruptcy judgments (or equivalent for foreigners).
(d) Statement of judgments issued against them during the five years preceding the application submission for any crimes or violations in the banking, securities, money laundering, terrorist financing, competition regulation, and anti-monopoly fields, or for crimes compromising honor or trust, or a decision certifying that no such judgments were issued against them.

Second: For a Legal Person:

(a) Statement of name and address.
(b) Legal form and activity practiced, the country of establishment, and nationality.
(c) Ownership structure of the legal person and names of owners of more than 10% of its capital. In the case of companies or investment funds, a statement including anyone owning 10% or more of ownership or voting rights. In this case, the statement must include the legal person's ownership percentage in the company's capital or voting rights exceeding 10%, and the data specified in items (a) and (b) above must also be submitted for this legal person. (d) Copy of the articles of association and commercial registry extract or equivalent for foreign legal persons. (e) Copy of financial statements (independent and consolidated as applicable) for the last financial year and auditors' estimates thereon, or from establishment if earlier, with an official Arabic translation for foreign legal persons. (f) Certificate regarding the issuance of bankruptcy judgments (or equivalent for foreign legal persons), as well as a statement of judgments issued against them during the five years preceding the application submission for any crimes or violations in the banking, securities, money laundering, terrorist financing, competition regulation, and anti-monopoly fields, or a decision certifying that no such judgments were issued against them. (g) If the request involves appointing foreign owning entities, it shall be specified in the country where their main center is located, along with proof of their supervision by a regulatory authority in the country of their main center with competencies similar to the Egyptian Central Bank or the Authority in the capital market field. (h) Sanctions or measures imposed by the relevant regulatory authority on the legal person applicant if it is a foreign bank or financial institution.

If the ownership structure of the legal person includes an investment fund (waqf) at 10% or more, which constitutes a legal relationship arising from a settlor who entrusts a trustee to manage assets owned by the settlor for the benefit of one or more beneficiaries, and the legal relationship may specify a supervisor for the fund and define its competencies, the following documents and information must be submitted:

• The agreement contract governing the legal relationship of the legal person, including the following:
  a. The purpose of its establishment or type, its service, nationality, and governing law. b. Name of the settlor or settlors.
  c. Name of the trustee or trustees (waqf supervisor) on the fund, their license number, the regulatory authority they are subject to, and the scope of authority granted to them regarding the management and expenditure of the fund's assets and properties.

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(Article Five)

The competent department of the Authority shall examine the request and verify the legally stipulated requirements or those stipulated in this Decision. Upon completion of the aforementioned documents and commitments, a memorandum detailing all submitted documents and data shall be prepared in accordance with this Decision for presentation to the Board of Directors to review the acquisition request.

(Article Six)

The Board of Directors shall consider the following controls in its decision regarding the request for approval to acquire ownership:

1. The acquisition applicant's and their related parties' contribution to the target company and other companies.
2. The brand in the same activity and its impact on activity concentration and risks in the capital market.
3. The added value from the acquisition applicant's entry into the company and their plan regarding it.
4. The availability of qualification, competence, and practical experience elements in the company's field of work.
5. The extent to which another shareholder (related to them under Article Three) holds an equal or larger share than the share to be acquired.
6. The extent to which completing the acquisition affects activity concentration and risks in the field of work of the target company.

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(Article Seven)

The acquisition applicant shall be notified of the Authority's decision by the Authority's management within two weeks from the date of the decision. In case of rejection, the applicant shall not be permitted to submit a new request after six months have passed from the date of the Authority's rejection.

Approval shall be valid for a maximum of two months from the date of issuance and may be extended for another period only upon submission of a commitment by the applicant that no changes will occur in the submitted data or decisions.

(Article Eight)

If a natural person acquires by inheritance or bequest any securities brokerage company or investment fund management company representing more than 10% of the market size for either activity, or any percentage leading to actual control thereof, they shall be required to regularize their status by submitting a request to the Authority on the form prepared for this purpose within one month from the date of learning of the inheritance or bequest, accompanied by the following:

1. The documents stipulated in item (a) of Article Four of this Decision within one month from the date of learning of the inheritance or bequest.
2. Submission of their plan for disposing of the inherited shares or quotas, or part thereof, to reduce their ownership percentage below the threshold stipulated in the preceding article, or submission of a request to continue ownership conditional upon the approval of the Board of Directors and compliance with Article Six of this Decision.

In all cases, failure by the natural person to regularize their status within sixty days from the date this increase accrued to them shall result in the loss of voting rights in the general assembly or board of directors for the portion exceeding the aforementioned threshold.

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(Article Nine)

The provisions of this Decision shall not prejudice any disclosures and requirements that must be fulfilled pursuant to the provisions of Chapter Twelve of the Executive Bylaws when the acquisition request relates to a company whose shares are listed on any Egyptian exchange or whose shares were offered in a public offering or public placement.

(Article Ten)

The competent departments of the Authority shall implement each as it pertains to them.

(Article Eleven)

This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from the day following its publication date.

Chairman of the Board of Directors
Sherif Samy

Egyptian Financial Supervisory Authority
Chairman's Office
47076

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