Chapter Six: Rules for Ownership of Shares in Banks’ Capital, Mergers, Divisions, and Acquisitions

-1 Definitions:

The following words and phrases have the meanings indicated next to each of them when applying the provisions of these instructions:

1-1 Acquisition: Any transaction by which a natural or legal person (directly or indirectly) acquires a stake in the issued capital or voting rights of a bank, leading to actual control over the bank.

2-1 Division: The process of splitting one bank into two or more legal entities.

3-1 Merger: The process of merging two or more banks into a single legal entity.

4-1 Actual Control: The ability of the shareholder and related parties to appoint the majority of the bank's board of directors, or to control in any manner the decisions issued by the board of directors or the general assembly.

5-1 Related Parties: Entities that have an agreement for the purpose of acquiring or exercising actual control over a bank, natural persons and their relatives up to the second degree, as well as legal entities established for the purpose of exercising actual control over the same person, as well as a group of legal entities established for the purpose of exercising actual control over the same person, who have an agreement to exercise their rights in the general assembly or board of directors in a manner that leads to actual control over either of them.

6-1 Principal Shareholder: The shareholder who holds a stake of 10% or more of the issued capital of the bank or of the voting rights, or who has actual control over the bank, whether alone or with related parties.

7-1 Ultimate Beneficiary: Any natural person who ultimately and effectively owns shares of a bank or has actual control over them, whether directly or indirectly, and includes the natural person on whose behalf transactions are conducted.

8-1 Ownership: The natural or legal person applying to the Central Bank of Egypt for approval to become a shareholder.

-2 Ownership Rules:

1-2 Ownership/Increase of Existing Shares:

1-1-2 The applicant for ownership must submit an application to the Central Bank at least 60 days prior to completing the ownership of 10% or more of the issued capital or voting rights of any bank or any stake leading to actual control, as well as at each increase in the held stake. The application must include the approved form for this purpose and the following:

1-1-1-2 A report showing the financial position of the applicant for ownership.

2-1-1-2 The ownership structure of the applicant for ownership (in relation to legal entities, including related parties, to ensure identification of ultimate beneficiaries).

3-1-1-2 The reason for owning the shares and the objectives to be achieved.

4-1-1-2 The plans related to the management of the bank and the policy to be applied.

5-1-1-2 Any approvals obtained from other regulatory authorities (if any).

6-1-1-2 The percentage of their participation in any other companies or establishments.

7-1-1-2 Any other documents or data requested by the Central Bank.

2-1-2 The applicant for ownership must publish the application in two daily newspapers and on the applicant's website (if available) - after obtaining the Central Bank's no-objection - for at least 30 days from the date of submitting the application to the Central Bank, with reference to the right of any interested party to submit an objection to the Central Bank within 10 days from the date of publication, and the Central Bank may exempt from this clause.

3-1-2 The applicant for ownership must notify the Central Bank if it becomes apparent that any documents or data submitted were false, inaccurate, or in the event of a change in the submitted data, while providing justifications and the impact of such, and when the Central Bank requests any clarifications regarding these changes; the application will be considered incomplete until the requirements are met.

4-1-2 The Central Bank will issue a decision to accept or reject the ownership application within 60 days from the date of completion, and the ownership must be completed within 6 months from the date of notification of approval, otherwise the application will be considered expired. The Board of Directors may extend this period for a similar period with acceptable justifications.

5-1-2 The applicant for ownership who obtained approval must notify the Central Bank within a maximum of 7 working days from the date of completing the ownership.

6-1-2 The same rules apply to the ownership of international listing shares, and the funds obtained shall be transferred to the account of the beneficial owner.

7-1-2 In the event of non-compliance with obtaining the Central Bank's approval according to clauses 1-1-2, voting rights and dividends related to the shares held at the percentage held shall be suspended, and the holder must dispose of the excess percentage within 6 months from the date of its occurrence, otherwise the Central Bank may request the Financial Regulatory Authority to appoint a liquidation company to carry out the sale of the held shares, with the proceeds of the sale going to the shareholder after deducting expenses.

2-2 Ownership for Involuntary Reasons:

1-2-2 If a natural or legal person and related parties acquire a stake of 10% or more of the issued capital of the bank or voting rights, or any percentage leading to actual control, for an involuntary reason such as inheritance, will, or as a result of the cancellation of shares offered in a public offering due to an increase in capital, or as a result of merger, acquisition, or division, an application for continuation of ownership must be submitted using the approved form for this purpose within 30 days from the date the applicant becomes aware of what led to the increase in the percentage, and the relevant rules in clause 1-2 apply.

2-2-2 In the event of non-approval of the requested application, the holder must dispose of the excess portion of the issued capital or voting rights that resulted as follows:

1-2-2-2 Within 6 months from the date of issuing the rejection decision if the ownership was by inheritance or will.

2-2-2-2 Within 3 months from the date of issuing the rejection decision if the ownership was as a result of a public offering due to an increase in capital, or as a result of merger, acquisition, division, or other involuntary reasons.

The Central Bank may extend these periods for similar periods based on acceptable justifications.

3-2-2 In the event of not submitting an application for continuation of ownership according to clause 1-2-2, the shares resulting from the increase in the issued capital or voting rights must be disposed of within a period not exceeding one year from the date of occurrence of this increase, and the Board of Directors of the Central Bank may extend this period for a similar period in case of difficulty in selling the shares within the stipulated period.

4-2-2 In the event of non-compliance with the provisions of clauses 1-2-2, 2-2-2, and 3-2-2, voting rights and dividends related to the shares held at the permitted percentage shall be suspended, and the holder must dispose of the excess percentage within 6 months from the end of the period referred to in clause 3-2-2, otherwise the Central Bank may request the Financial Regulatory Authority to appoint a liquidation company to carry out the sale of the held shares, with the proceeds of the sale going to the shareholder after deducting expenses.

3-2 Shareholders' Obligations:

1-3-2 Principal shareholders must notify the Central Bank when their stake exceeds the limit approved for this purpose within a period not exceeding 15 days from the date they are notified of the excess percentage according to the approved form.

2-3-2 Every natural or legal person and related parties who own 5% or more of the issued capital or voting rights of any bank, and not exceeding 10%, must notify the Central Bank using the approved form for this purpose within 15 days at most from the date of completing the ownership.

3-3-2 Principal shareholders must notify the Central Bank in any of the following cases within 15 days:

1-3-3-2 Any change in the previously submitted data to the Central Bank in the framework of ownership applications, with providing justifications and the impact of such.

2-3-3-2 Deterioration of the financial position of the principal shareholder or any of the related parties, including cases of default, bankruptcy, or liquidation.

3-3-3-2 A fundamental change in the ownership structure or the administrative structure of the principal shareholder or related parties.

4-3-3-2 The principal shareholder or any of the related parties losing one of the conditions of their qualification as a principal shareholder.

In the event that any of the cases mentioned in clause 3-3-2 occurs, the Central Bank may take the appropriate action, including directing principal shareholders to dispose of their shares.

4-2 Banks' Obligations:

1-4-2 The bank must disclose every shareholder who owns alone or with related parties 5% or more of the issued capital of the bank, in the supplementary notes to the financial statements.

2-4-2 Banks must notify the Central Bank in the following cases (according to the approved form for this purpose) within a period not exceeding 15 days from the date of their occurrence:

1-2-4-2 Ownership by a natural or legal person and related parties of more than 10% of the issued capital of the bank or voting rights without obtaining the Central Bank's approval.

2-2-4-2 Ownership by a natural or legal person and related parties of more than 5% of the issued capital of the bank or voting rights, or ownership of any stake leading to actual control, as well as at each increase or decrease after this limit by a percentage equal to or more than 1%.

3-2-4-2 Excess of ownership by any of the principal shareholders over the permitted limit.

3-4-2 Banks must suspend voting rights and dividends related to the shares held at the percentage held in the event that the provisions of clauses 7-1-2 and 4-2-2 are met, and notify the Central Bank thereof.

4-4-2 Banks must notify the Central Bank immediately in the event that any of the cases mentioned in clause 3-3-2 are met, as well as any related developments.

5-4-2 Banks must establish a register containing data of shareholding, with updating it and providing the Central Bank with a copy monthly, and this register must include at a minimum:

1-5-4-2 Names, addresses, and identification numbers (such as national ID card number, commercial registry number, or tax number) for each shareholder and related parties who own more than 5% of the issued capital, as well as for all ultimate beneficiaries.

2-5-4-2 The start/end date of shareholding.

3-5-4-2 The number of shares owned by each shareholder and their category (if any).

4-5-4-2 The percentage of the issued capital owned by each shareholder.

5-5-4-2 The percentage of voting rights owned by each shareholder.

6-4-2 Banks must take the appropriate procedures and keep the necessary documents to identify ultimate beneficiaries, register them in the shareholders' register, and the ultimate beneficiary is determined as follows:

1-6-4-2 Whoever owns or controls a stake of 10% or more of the issued capital or voting rights of the legal entity shareholder in the bank, directly or indirectly, from a chain of entities or legal arrangements, alone or with related parties, and the tracing of the ultimate beneficiary is from any number of legal entities or legal arrangements.

2-6-4-2 In cases where the ultimate beneficiary cannot be determined according to the previous clause, the ultimate beneficiary is the natural person who exercises - directly or indirectly - actual control by fact or by law over another entity or legal arrangement established. If this is not possible, the natural person managing another entity or legal arrangement established is considered the ultimate beneficiary. In such cases, the Central Bank must be notified of the procedures taken in this regard, including all information related to the identification of the ultimate beneficiary, details of the procedures taken in this regard, and any other data or documents requested by the Central Bank.

-3 Study of Ownership/Acquisition/Merger/Division Applications:

1-3 The Central Bank will review the applications submitted upon their completion of the requirements stipulated in these instructions, from among studying the following considerations at a minimum according to circumstances:

1-1-3 Previous reputation.

2-1-3 Availability of sufficient financial capacity to support the bank's needs.

3-1-3 Legality of the sources of funds.

4-1-3 No criminal judgments or penalties have been issued due to committing crimes against property or honor.

5-1-3 The participation percentage of each shareholder and related parties in other financial institutions inside and outside the Arab Republic of Egypt.

6-1-3 Listing on local or international lists related to combating money laundering and financing terrorism or otherwise.

7-1-3 Ownership structure - including related parties - to ensure identification of ultimate beneficiaries.

8-1-3 Supervision and oversight by the competent regulatory authority in the state where the headquarters is located, if the applicant for ownership is a bank or foreign financial institution, and that this authority applies consolidated supervision rules, and expresses its approval of the ownership application and does not object to the application of the principle of joint supervision.

9-1-3 Ensuring that the objectives the applicant seeks to achieve are compatible with the bank's management and the policy they intend to follow in managing its affairs will not affect the bank's management or impact the interests of depositors or the general economic interest.

10-1-3 Credit rating by international rating institutions (if any).

11-1-3 Impact of the transaction on competition in the banking sector, according to the unit of competition protection at the Central Bank and the instructions issued in this regard.

12-1-3 Procedures related to employees of the concerned banks and protecting their rights.

-4 Due Diligence

1-4 The applicant for acquisition/merger/division must submit an application to obtain the approval of the Board of Directors of the Central Bank to proceed with due diligence procedures, attaching a signed information memorandum agreement between the concerned parties, as well as the following:

1-1-4 A copy of the articles of association of the entity applying for due diligence, including the names, nationalities, and addresses of the founders, and the share of each of them in the capital.

2-1-4 A brief introduction to the entity applying for due diligence.

3-1-4 A certificate stating that no judgments of insolvency, bankruptcy, or any crime against property or honor have been issued against any of the founders of the entity applying for due diligence.

4-1-4 Ownership structure of the entity applying for due diligence - including related parties - to ensure identification of ultimate beneficiaries.

5-1-4 A copy of the financial statements and the auditor's report for the entity applying for due diligence for the last 3 financial years.

6-1-4 A declaration stating that none of the founders, principal shareholders, members of the board of directors, or ultimate beneficiaries of the entity applying for due diligence are listed in lists related to sanctions (local or international).

7-1-4 What indicates supervision and oversight by the competent regulatory authority in the state where the headquarters is located, if the applicant for due diligence is a bank or foreign financial institution.

8-1-4 A certificate indicating the credit rating of the entity applying for due diligence by international rating institutions (if any).

9-1-4 A brief introduction to those in charge of the due diligence process and their previous work experience.

10-1-4 Any other documents or data requested by the Central Bank.

-5 Rules for Acquisition Applications:

1-5 The applicant for acquisition must submit an application to obtain the Central Bank's approval (according to the approved form for this purpose) after conducting due diligence.

2-5 The application will be studied by the Central Bank taking into consideration what is mentioned in clause 3.

3-5 The banks concerned with the acquisition process must notify the Central Bank if it becomes apparent that false, misleading, or inaccurate information was submitted or in the event of a change in the data that was submitted, while providing the impact, justification, and all relevant details, and the Central Bank may consider the application incomplete in this case.

4-5 The Board of Directors of the Central Bank will issue its decision regarding the acquisition process within 60 days from the date of submitting the application with all required documents.

5-5 The banks concerned with the acquisition process must make all necessary documents and information available to the independent valuation office and the legal and financial advisor to enable them to complete the financial and legal due diligence, while ensuring the signing of agreements necessary to preserve data confidentiality.

6-5 The applicant for ownership must publish the application in two daily newspapers and on the applicant's website (if available) - after obtaining the Central Bank's no-objection - for at least 30 days from the date of submitting the application to the Central Bank, with reference to the right of any interested party to submit an objection to the Central Bank within 10 days from the date of publication, and the Central Bank may exempt from this clause.

1-6 Preliminary Approval Procedures

1-1-6 The banks concerned with the merger/division process must appoint a representative to represent them in the procedures, and submit an application to the Central Bank (according to the approved form for this purpose) to obtain preliminary approval to proceed with the procedures.

2-1-6 In the event of establishing a new bank as a result of merger or division, documents proving the approved form for this purpose must be attached.

3-1-6 The applicant for ownership must publish the application in two daily newspapers and on the applicant's website (if available) - for at least 30 days after obtaining the Central Bank's no-objection - from the date of submitting the application to the Central Bank, with reference to the right of any interested party to submit an objection to the Central Bank within 10 days from the date of publication, and the Central Bank may exempt from this clause.

4-1-6 The banks concerned with the merger/division process must make all necessary documents and information available to the independent valuation office and the legal and financial advisor to enable them to complete the financial and legal due diligence, while ensuring the signing of agreements necessary to preserve data confidentiality.

5-1-6 The Board of Directors of the Central Bank will issue its decision regarding the preliminary application for the merger/division process, including any conditions or corrective procedures to be complied with, and notify those concerned within 60 days from the date of completion of the application with all required documents.

2-6 Final Approval Procedures

1-2-6 The banks that obtained preliminary approval to proceed with merger/division procedures must submit an application to obtain the Central Bank's final approval (according to the approved form for this purpose) within a period of 6 months from the date of issuing the preliminary approval - and the Board of Directors of the Central Bank may extend it for a similar period - with the following documents:

1-1-2-6 A certified copy from the notary public of the resolution of the extraordinary general assembly of each of the constituent banks required by law for the concerned banks to approve the contracts, or the approval of the parent bank in the case of foreign banks.

2-1-2-6 A copy of the amended articles of association of the merging bank or the articles of association of the new bank.

3-1-2-6 A copy of the last financial statements certified by the auditors of the banks concerned with the merger/division process at the date immediately preceding the general assembly's decision to approve the process.

4-1-2-6 The auditors' report for the banks concerned with the merger/division process, submitted to shareholders according to the law.

5-1-2-6 The procedures taken towards the transfer of dissenting shareholders (if any).

6-1-2-6 A copy of the relevant contracts, including the name of the merging bank in case of amendment or the name of the new bank resulting from the process.

7-1-2-6 Any other documents or data requested by the Central Bank.

2-2-6 Shareholders who objected to the merger decision in the extraordinary general assembly of any of the banks participating in the merger, or who did not attend the meeting with a valid excuse, may request the bank to repurchase their shares, by written request to the bank within 15 days from the date of publication of the merger decision, for the agreed value, and the value of the shares shall be estimated according to the merger contract.

3-2-6 The banks concerned with the merger/division process submitting the application must notify the Central Bank if it becomes apparent that false, misleading, or inaccurate information was submitted or in the event of a change in the data that was submitted, while providing the impact, justification, and all relevant details, and the Central Bank may consider the application incomplete in this case.

4-2-6 The Board of Directors of the Central Bank will issue its decision regarding the merger/division process and the establishment of the new banks and the application of the existing banks according to circumstances within 60 days from the date of submitting the application with all required documents, and the Central Bank will approve the amendment of the articles of association of the merging bank or the articles of association of the new bank, according to circumstances, as well as approve the management contracts (if any).

5-2-6 In the event of establishing a new bank as a result of merger or division, documents proving the approved form for this purpose must be attached.

6-2-6 The decisions of cancellation and implementation must be published in the Official Gazette and on the electronic website of both the Central Bank and the concerned banks within 10 days from the date of issuance of the Central Bank's decision.

7-2-6 The merging bank/new bank must, according to circumstances, announce the issuance of the Central Bank's final decision and its effective date in two widely circulated daily newspapers within two weeks of receiving this decision.

8-2-6 In the event that the merging bank and the merged bank are wholly owned (directly or indirectly) by the same shareholders, the final approval must be applied for directly.

-7 Other Rules Related to Acquisition/Merger:

1-7 In the event of the existence of a supplementary pension fund for employees in the acquired/merged bank and the acquiring/merging bank, alternative to Law No. 64 of 1980 concerning supplementary social insurance systems, the entire reserves of the workers' fund in the acquired/merged bank shall be transferred to the workers' fund in the acquiring/merging bank, according to Article 10 of the aforementioned law, without prejudice to the acquired rights of pensioners, insured persons, and their beneficiaries.

2-7 In the event of the existence of a supplementary pension fund in the acquired/merged bank and the workers of the acquired/merging bank are not subject to the general social insurance system (alone or in addition to the supplementary insurance funds system according to the law of supplementary insurance funds issued by Law No. 54 of 1975), the supplementary social insurance fund related to the workers in the acquired/merged bank shall be liquidated, and its reserves shall go to the general social insurance fund for workers in the public and private sector, and the general social insurance fund for workers in the public and private sector is obliged to utilize these reserves as follows:

1-2-7 Covering the amounts needed to meet the rights of pensioners whose entitlement arose before the date of acquisition/merger, without any prejudice to these rights, including the right to the supplementary fund system of the acquired/merged bank, and the periodic increase of pensions according to Article 4 of Decision No. 2671 of the Chairman of the Council of Ministers dated 2007 concerning the rules followed in cases of transition between alternative supplementary social insurance systems and general social insurance systems.

2-2-7 Meeting the rights and benefits of workers continuing to work after the date of acquisition/merger according to Article 4 of Decision No. 2671 of the Chairman of the Council of Ministers dated 2007 concerning the rules followed in cases of transition between alternative supplementary social insurance systems and general social insurance systems.

3-7 In the event that the workers of the acquired/merged bank are subject to the general social insurance system and the workers of the acquiring/merging bank are subject to a supplementary insurance system, the pension reserve shall be transferred from the general system to the supplementary system according to Article 5 of Decision No. 2671 of the Chairman of the Council of Ministers dated 2007 mentioned above.

In all cases, the rules of the supplementary insurance system for workers in the acquired/merged bank shall apply until the day preceding the date of acquisition/merger, and the rules applied in the acquiring/merging bank shall apply to all workers in the acquired/merged bank from the date of acquisition/merger, and the acquiring/merging bank is obliged in the two cases mentioned in clauses 1-7 and 2-7 to do the following:

1-3-7 Covering any deficit in the funds needed to meet the entitlements of pensioners and beneficiaries, as well as workers continuing to work according to the provisions of this article.

2-3-7 Providing health care benefits for pensioners at least equal to the benefits they enjoyed before the date of acquisition/merger.

4-7 If both funds in the acquiring/merging bank and the acquired/merged bank are subject to the law of supplementary insurance funds issued by Law No. 54 of 1975, the procedures necessary for the transfer of rights and obligations of the supplementary fund for workers in the acquired/merged bank or the merger of the supplementary fund for workers in the acquired/merged bank into the supplementary fund for workers in the acquiring/merging bank must be taken according to Article 30 of this law or liquidation according to Article 32 of the aforementioned law, before the date of acquisition/merger.

5-7 The supplementary insurance fund in the acquired/merged bank is obliged to liquidate its shares and take the necessary procedures according to this article and the law of supplementary insurance funds issued by Law No. 54 of 1975 or Law No. 64 of 1980 concerning alternative supplementary social insurance systems, according to circumstances, before the date of acquisition/merger.