Decision of the Board of Directors No. 137 of 2018 Regarding Conditions for Granting and Renewing Licenses for Financial Leasing and Factoring Companies

Decision of the Board of Directors No. (137) of 2018 dated 13/9/2018 Regarding the Conditions for Granting and Renewing Licenses for Financial Leasing and Factoring Companies 1 As per the latest amendment dated 12/4/2023

Board of Directors of the General Authority for Financial Supervision Having reviewed Law No. 159 of 1981 concerning Joint Stock Companies, Commandite Companies, and Limited Liability Companies; And Law No. 95 of 1992 concerning the Capital Market, its amendments, executive regulations, and decisions issued to implement them; And Law No. 10 of 2009 concerning the regulation of supervision over non-banking financial markets and instruments; And Law No. 141 of 2014 concerning the regulation of microfinance activities; And Law No. 176 of 2018 concerning Financial Leasing and Factoring; And the Basic Statute of the General Authority for Financial Supervision issued by Presidential Decision No. 192 of 2009; And Board of Directors Decision No. 60 of 2017 concerning licensing companies to combine more than one financial activity (financial leasing, real estate financing, factoring) and conditions for practicing more than one activity; And Board of Directors Decision No. 53 of 2018 concerning conditions for granting and renewing licenses and share ownership rules for companies operating in non-banking financial activities; And Board of Directors Decision No. 106 of 2018 concerning conditions for registration, renewal, and deletion of institutional representatives of companies operating in non-banking activities in the GAFS registry; And the memorandum prepared by the Central Administration for Supervision of Financing Companies on 30/8/2018; And the approval of the Board of Directors in its session held on 13/9/2018; Has decided:

(Article One)
The provisions of this Decision shall apply to the preliminary approval for establishing companies wishing to engage in financial leasing or factoring activities, or combining more than one financial activity, as well as to the granting, renewal, and authorization to practice more than one financial activity subject to the Authority's supervision.

1 - The Decision was amended by the Authority's Board of Directors Decision No. 91 dated 12/4/2023.

(Article Two)
Conditions Required for Obtaining Preliminary Approval for Establishment Companies (under establishment) wishing to obtain preliminary approval to establish a company to engage in financial leasing, factoring, or more than one financial activity must comply with the following conditions:
.1 The company must be established as an Egyptian joint stock company.
.2 The company's issued and paid-up capital at establishment must not be less than the minimum prescribed for obtaining a license to practice the activity in accordance with this Decision.
.3 The company's purpose must be limited to engaging in financial leasing or factoring activities, and may include engaging in more than one financial activity (financial leasing, factoring, real estate financing). .4 Legal entities must constitute at least 50% of the company's capital, and financial institutions must hold at least 25% of the company's capital. .5 No founder or shareholder holding more than 10% of the capital may have been sentenced to a felony or a deprivation of liberty for an honor/integrity-related crime, or declared bankrupt, within the five years preceding the establishment application, unless their reputation has been restored. .6 The company must submit a feasibility study including a business plan and its vision for contributing to meeting market needs, launching new financial products, or expanding into new geographical areas. .7 No founder or shareholder may have been subject to administrative penalties or precautionary measures (except warnings and notices) by the competent administrative authority during the three years preceding the establishment application, unless the reasons for the measures were removed and six months have passed since such removal.

(Article Three)
Procedures for Applying for Preliminary Approval for Establishment The company (under establishment) shall submit an application for preliminary approval for establishment using the establishment application form prepared for this purpose through the company's institutional representative, which must include at least the following:
.1 Powers of attorney issued by the founders to the representative.
.2 The company's name, legal form, headquarters, and purpose.
.3 A declaration by the institutional representative that the company will be established in accordance with the provisions of Law No. 176 of 2018 on Financial Leasing and Factoring and decisions issued by the Board of Directors regarding this matter. .4 Draft articles of association and bylaws of the company. .5 Details of the authorized, issued, and paid-up capital. .6 List of shareholders and subscribers, their nationalities, and each one's percentage of ownership in the company's capital. .7 A declaration by the institutional representative confirming that no founder or shareholder has been sentenced to a felony or deprivation of liberty for an honor/integrity-related crime, declared bankrupt, or subjected to administrative penalties or precautionary measures. .8 An initial business plan for the company including its vision and strategies. .9 Receipt of payment for the service fee for reviewing the application for preliminary approval for establishment.

(Article Four)
Conditions Required for Obtaining a License and Professional Competence and Experience Criteria Required for Board of Directors Members Companies wishing to obtain a license to engage in financial leasing or factoring must comply with the following conditions:
.1 The company's legal form must be an Egyptian joint stock company.
.2 The company's issued and paid-up capital must not be less than seventy-five million Egyptian pounds in cash or its equivalent in foreign currencies at the exchange rate issued by the Central Bank of Egypt2. .3 The company's purpose must be limited to practicing financial leasing or factoring activities. .4 No shareholder holding more than 10% of the capital, board member, or manager may have been sentenced to a felony or deprivation of liberty for an honor/integrity-related crime, or declared bankrupt, within the five years preceding the license application, unless their reputation has been restored. 2 Decision No. 91 dated 12/4/2023 replaced the previous decision, stipulating that licensed companies engaging in financial leasing or factoring concurrently or successively must complete the transition within a period not exceeding one year from the effective date of this Decision, which may be extended by the Board of Directors for up to two years based on the company's justified request. .5 At least two-thirds of the board members must have practical experience of at least five years in banking financial, non-banking financial, or legal work. .6 Board members must hold a suitable higher educational qualification. .7 The board composition must include at least two independent members in accordance with the conditions stipulated in Article 13 of this Decision. .8 The Managing Director or Executive Director must have practical experience of at least ten years in banking, financial, non-banking financial, or legal work after obtaining a suitable higher qualification, and must be dedicated full-time to the company's management affairs. .9 Managers of Finance, Credit, Risk, Internal Audit departments, and branch managers must have practical experience of at least seven years in banking, financial, or legal work after obtaining a suitable higher qualification, and each must be dedicated full-time to their management duties. .10 The Managing Director or Executive Director and the aforementioned department and branch managers must pass a personal interview for approval to assume the assigned role. .11 The company must have an independent headquarters dedicated to practicing the activity, equipped with the necessary facilities, technological infrastructure, and information systems.

(Article Five)
Procedures for Applying for a License
The applying company shall complete the license application form prepared for this purpose, which must include at least the following information:
.1 Applicant's name, title, nationality, and chosen domicile.
.2 Company name, legal form, headquarters, and purpose.
.3 Details of the authorized, issued, and paid-up capital.
.4 List of shareholders and subscribers (natural or legal persons) owning 10% or more of the company's capital, including their nationality and ownership percentage.
List of the names of the Chairman, board members, Managing Director or Executive Director, and managers, along with their nationalities.
.1 The company's initial contract and bylaws.
.2 A recent copy of the company's commercial register.
.3 A copy of the document proving occupancy of the company's headquarters.
.4 Details of participations representing at least 10% in any other financial institutions operating in Egypt owned by founders or shareholders whose ownership exceeds 10% of the company's shares.
.5 A certificate confirming no bankruptcy or insolvency judgment has been issued against any shareholder, Chairman, board members, or managers, unless their reputation has been restored. Non-Egyptians may submit a substitute declaration certified by the relevant authority and authenticated by the Egyptian Ministry of Foreign Affairs or one of its consulates in their country. .6 Copies of educational qualification certificates and statements of practical experience for the Chairman, board members, Managing Director (or Executive Director), and managers of Finance, Credit, Risk, Internal Audit departments, and branch managers. .7 Copies of national ID cards for the Chairman, board members, and Managing Director or Executive Director, and passport copies for foreigners. .8 Declarations from the Chairman, board members, and managers confirming that no felony or deprivation of liberty sentence for an honor/integrity-related crime, or bankruptcy judgment, has been issued against any shareholder holding more than 10% of the capital, board members, or managers within the five years preceding the license application, unless their reputation has been restored. Non-Egyptians may submit a substitute declaration certified by the relevant authority and authenticated by the Egyptian Ministry of Foreign Affairs or one of its consulates in their country.

(Article Six)
Preliminary Approval for Adding an Activity

(Article Seven)
Licensing Conditions for Financing Companies Practicing More Than One Financial Activity

(Article Eight)
Documents and Data Required for Licensing to Practice More Than One Financial Activity

(Article Nine)
Licensing Conditions for Companies, Associations, and Local Institutions Practicing Microfinance to Engage in Financial Leasing

(Article Ten)
Licensing Procedures for Companies, Associations, and Local Institutions Practicing Microfinance to Engage in Financial Leasing

(Article Eleven)
Duration of License Granting

(Article Twelve)
Fees and Service Charges

(Article Thirteen)
Definition of an Independent Board Member

(Article Fourteen)
Compliance Requirements

(Article Fifteen)

(Article Sixteen)