Board of Directors Decision No. (171) of 2021 Amending Decision No. (53) of 2018 on Licensing Controls and Share Ownership Rules for Non-Banking Financial Companies

Financial Regulatory Authority
Chairman of the Authority

Board of Directors Decision No. (171) of 2021 dated 2021/11/17 Amending Board of Directors Decision No. (53) of 2018 regarding controls for granting and continuing licenses and rules for owning shares of companies operating in non-banking financial activities

Board of Directors of the Financial Regulatory Authority Having reviewed Capital Market Law No. (95) of 1992 and its executive regulations; And Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments; And Presidential Decree No. (191) of 2009 on the provisions regulating the management and financial affairs of the Egyptian Exchange; And Board of Directors Decision No. (11) of 2014 regarding the rules for listing and delisting securities on the Egyptian Exchange; And Board of Directors Decision No. (121) of 2017 regarding the conditions and requirements for registration with the Authority for companies and entities wishing to list and offer their securities on the Egyptian Exchange and the approval of offering prospectuses; And Board of Directors Decision No. (53) of 2018 regarding controls for granting and continuing licenses and rules for owning shares of companies operating in non-banking financial activities; And Board of Directors Decision No. (149) of 2018 regarding the requirements and conditions for obtaining a license to practice direct investment activity; And Board of Directors Decision No. (2) of 2021 regarding supervisory controls in the field of combating money laundering and terrorist financing for entities operating in non-banking financial activities; And Board of Directors Decision No. (164) of 2021 regarding licensing venture capital companies to engage in Special Purpose Acquisition Company («SPAC») activity; And after the approval of the Authority's Board of Directors at its meeting held on 2021/11/17;

Decided
(Article One)
The rules contained in this Decision shall apply to the regulation of the practice of Special Purpose Acquisition Company («SPAC») activity, in accordance with the text of Clause (2) of Article Six of Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments.

(Article Two)
New articles numbered from (Twelve bis to Twelve bis 11) shall be added to the aforementioned Board of Directors Decision No. (53) of 2018, under the title (Rules Regulating the Practice of Special Purpose Acquisition Company «SPAC» Activity), as follows:

(Article Twelve bis):
For the purpose of applying the provisions of the rules regulating the practice of Special Purpose Acquisition Company activity, the following words and phrases shall have the meanings indicated opposite each:
1- Special Purpose Acquisition Company «SPAC»: A company established and licensed as a venture capital company in accordance with the applicable provisions in this regard, by specialized qualified investors, with the sole purpose of acquiring one or more target companies, and providing the necessary financing for this through offering a capital increase in a public offering and/or a private placement, hereinafter referred to as «the Company». 2- Founders/Sponsors: Investors who establish the Special Purpose Acquisition Company, possessing extensive experience and background in a specific activity or industry of the target company or companies to be acquired. 3- Target Company/Companies: The company or companies that the founders/sponsors of the Special Purpose Acquisition Company (SPAC) seek to acquire. 4- Private Investment in Public Equity (PIPE): A person other than the shareholders of the Special Purpose Acquisition Company who provides financing to it to achieve its objective, either by providing additional financing or by purchasing shares of shareholders wishing to exit the company. 5- Trust Account: A special account opened with a bank licensed by the Central Bank of Egypt, in which the entire capital of the Special Purpose Acquisition Company is held, including the proceeds of the offering covered through a public offering and/or a private placement, with the exception of expenses necessary for the establishment and licensing of the company, auditor's fees, and management services company fees.

(Article Twelve bis 1):
Companies wishing to engage in Special Purpose Acquisition Company (SPAC) activity must undertake establishment and licensing procedures from the Authority to engage in venture capital activity in accordance with the applicable provisions in this regard. The company's issued and paid-up capital must not be less than ten million Egyptian Pounds, to be paid by the Founders/Sponsors. The company is obligated to increase its capital through a public offering and/or a private placement based on the investment plan for acquiring the target company or companies. The company's articles of association must stipulate that the entire capital of the company shall be held in the Trust Account, with the exception of expenses necessary for the establishment and licensing of the company, auditor's fees, and management services company fees. The company's capital must be invested in low-risk financial instruments convertible to cash on demand. In all cases, the company's capital after its increase must not be less than one hundred million Egyptian Pounds.

(Article Twelve bis 2):
The company's purpose is limited to acquiring ownership percentages in entities or companies, and the company must commit to avoiding conflicts of interest when engaging in the activity.

(Article Twelve bis 3):
The company is obligated to submit a registration application to the Authority in accordance with Board of Directors Decision No. (121) of 2017 regarding the conditions and requirements for registration with the Authority for entities wishing to list and offer their securities on the Egyptian Exchange, taking into account the provisions of this Decision regulating the practice of Special Purpose Acquisition Company activity. The application must be accompanied by the prospectus or information memorandum for the company's capital increase. The company's shares must be listed on the Egyptian Exchange, and it is obligated to execute the offering within one month from the date of its registration with the Authority. In all cases, the provisions of Clauses (5, 7, 8) of Article (7) of the rules for listing and delisting securities on the Egyptian Exchange and the related provisions contained in the same article shall not apply to the company, nor shall the provision of Clause (2) of Article (51) of the same rules apply to it.

(Article Twelve bis 4):
The acquisition process must be completed within two years from the date of completion of the company's capital increase through a public offering and/or a private placement, in accordance with the disclosure report approved by the Authority. The period required to complete merger procedures shall not be included in the calculation of the aforementioned two-year period. If the acquisition is not completed within the period mentioned in the preceding paragraph, the company is obligated to return the funds to investors, and the company's shares shall be compulsorily delisted, and the company shall be liquidated, taking into account Article Twelve bis (10) of this Decision. The acquisition of the target company or companies shall be in accordance with any of the following alternatives:
1- Acquisition of (100%) of the capital or voting rights, followed by a merger into the company.
2- Acquisition of a controlling percentage of the capital or voting rights exceeding the percentage required to make the merger decision referred to in Clause (1).
3- Acquisition of a percentage representing an absolute majority of the capital or voting rights.
Founders/Sponsors may not receive any incentives or benefits except after the completion of the acquisition of the target companies, as disclosed in the prospectus or information memorandum, as the case may be.

(Article Twelve bis 5):
The percentage of legal entities must not be less than (50%) of the company's capital, and the percentage of financial institutions and/or qualified investors must not be less than (25%) of its capital.
The contribution of Founders/Sponsors shall be (5%) of the company's capital after its increase, and their contribution must not be less than ten million Egyptian Pounds upon the company's establishment.
With the exception of expenses necessary for the establishment and licensing of the company, auditor's fees, and management services company fees, Founders/Sponsors shall bear all costs necessary for selecting the target company or companies and undertaking acquisition procedures. Founders/Sponsors must retain their shares in the company for a period of two years from the date of its establishment or until the completion of the acquisition, whichever is earlier, and for at least one year after the completion of the acquisition (DE-SPAC). The period required to complete merger procedures shall not be included in the calculation of this period. Founders/Sponsors are obligated to comply with the provisions of Board of Directors Decision No. (2) of 2021 regarding supervisory controls in the field of combating money laundering and terrorist financing for entities operating in non-banking financial activities.

(Article Twelve bis 6):
The company is obligated to contract with a company licensed to engage in management services activity, to calculate the net asset value of the company at book value and disclose it daily in accordance with the disclosure rules applicable to companies with securities listed on the Egyptian Exchange.

(Article Twelve bis 7):
The prospectus or information memorandum for the company's capital increase must include - at a minimum - the following data:
1- General information about the company.
2- Experience of the company's founders/sponsors.
3- Target sectors and investment controls.
4- Investment risks.
5- Redemption controls.
6- Regulatory framework for managing the company's capital, including funds collected from the offering.
7- Related persons and related parties.
8- Management services company.
9- Means of avoiding conflicts of interest.
10- Incentives and/or benefits to be granted to Founders/Sponsors.

(Article Twelve bis 8):
The company's board of directors shall be reconstituted in accordance with a decision issued by its general assembly after the completion of its capital increase procedures, and the corporate governance rules applicable to companies with securities listed on the Egyptian Exchange shall apply to it. It is stipulated that the company's managing director must be one of its founders, and the experience conditions required for a general partner (investment manager) in direct investment companies, as stipulated in Board of Directors Decision No. (149) of 2018 regarding the requirements and conditions for obtaining a license to practice direct investment activity, shall apply to him.

(Article Twelve bis 9):
The target company or companies to be acquired must comply with the listing rules of the Egyptian Exchange, provided that these companies are exempted from Clauses (5, 7, 8) of Article (7) of the rules for listing and delisting securities on the Egyptian Exchange and the related provisions contained in the same article if they are startup companies or companies operating in promising fields; such as technology and innovation (Innovation Companies) or in any other fields approved by the Authority in accordance with the justifications provided by the Founders/Sponsors. The company is obligated to evaluate the target company or companies by engaging an independent financial advisor registered with the Authority, while adhering to the financial valuation standards for entities issued by the Authority's Board of Directors. The value of the acquired company or companies must represent at least (80%) of the total available funds (offering proceeds + PIPEs - redemptions). Furthermore, the draft acquisition decision, including all details related to the activity of the target company or companies to be acquired, must be presented to the company's extraordinary general assembly. Founders and their related persons are not permitted to vote on this decision. Shareholders objecting to the acquisition decision at the general assembly meeting shall have the right to exit the company within thirty days from the date of voting on this decision through one of the following means:
1- Selling their shares on the Exchange.
2- The company purchasing their shares as treasury shares.
3- Additional investors (PIPEs) purchasing their shares.

(Article Twelve bis 10):
If the voting percentage approving the proposed acquisition does not reach the legally required percentage in this regard, the company's shares shall be compulsorily delisted, and the company must undertake liquidation procedures, unless either of the following two conditions is met:
1- The two-year period from the date of completion of the company's capital increase procedures has not expired.
2- The company meets the minimum capital required to conduct its activity after its capital increase, which is one hundred million Egyptian Pounds.

(Article Twelve bis 11):
A disclosure report detailing the transaction shall be published after obtaining the necessary approvals from the competent authority of the «SPAC» company and the target company or companies.
After the completion of the transaction through a merger into the company, the company transforms from a company holding offering proceeds into a company engaging in the activity of the acquired company.

(Article Three)
This Decision shall be published in the Official Gazette of Egypt and on the websites of the Authority and the Egyptian Exchange, and shall be effective from the day following its publication date in the Official Gazette of Egypt.

Chairman of the Authority's Board of Directors Mohamed Omran