Financial Regulatory Authority

FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

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Board of Directors Decision No. (137) of 2018 dated 13/9/2018

Regarding the Conditions for Granting and Renewing Licenses for

Financial Leasing and Factoring Companies

Board of Directors of the Financial Regulatory Authority

After reviewing the Companies Law No. 159 of 1981;
and the Capital Market Law No. 95 of 1992, its amendments, executive regulations, and decisions issued pursuant to them;
and Law No. 10 of 2009 regulating supervision over non-banking financial markets and instruments;
and Law No. 141 of 2014 regulating microfinance activities;
and the Financial Leasing and Factoring Law issued under Law No. 176 of 2018;
and the Authority's Statute issued by Presidential Decision No. 192 of 2009;
and Board Decision No. 60 of 2017 regarding licensing companies to combine multiple financial activities (financial leasing, real estate financing, factoring) and conditions for practicing multiple activities;
and Board Decision No. 53 of 2018 regarding conditions for granting and maintaining licenses and rules for shareability of shares of companies operating in non-banking financial activities;
and Board Decision No. 106 of 2018 regarding conditions for registration, renewal, and deletion of institutional agents of companies operating in non-banking activities in the Authority's registry;
and the memo issued by the Central Directorate for Supervision of Financing Companies on 30/8/2018;
and the approval of the Authority's Board of Directors in its meeting held on 13/9/2018.

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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 multiple financial activities, as well as to granting, maintaining, and authorizing the practice of multiple financial activities subject to the Authority's supervision.

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(Article Two)

Conditions Required for Obtaining Preliminary Approval for Establishment

Companies (under establishment) wishing to obtain preliminary approval for establishing a company to engage in any of the financial leasing, factoring, or multiple financial activities 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 required to obtain a license to practice the activity according to this Decision.
3. The company's object must be limited to engaging in any of the financial leasing or factoring activities, and may include engaging in multiple financial activities (financial leasing, factoring, real estate financing).
4. Legal entities must constitute at least 50% of the company's capital among its founders, 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 must have been convicted of a criminal or imprisonment penalty for an honor or 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 its business plan, vision for contributing to meeting market needs, launching new financial products, or expanding into new geographic areas.
7. No founder or shareholder must have been subject to administrative penalties or precautionary measures (excluding disqualification and disbarment) by the competent administrative authority during the three years preceding the establishment application, unless the grounds for such measures have been removed and six months have passed since their removal.

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(Article Three)

Procedures for Submitting an Application 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 agent, which must specifically include the following:

1. Powers of attorney issued by the founders to the agent.

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(Article Four)

Conditions Required for Obtaining a License

Professional Experience and Competence Criteria Required for Board Members

Companies wishing to obtain a license to engage in financial leasing or factoring activities 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 at establishment must not be less than ten million Egyptian pounds in cash or its equivalent in foreign currencies.
3. The company's object must be limited to practicing the financial leasing activity or the factoring activity.
4. No shareholder holding more than 10% of the capital, board member, or manager must have been convicted of a criminal or imprisonment penalty for an honor or integrity-related crime, or declared bankrupt, within the five years preceding the license application, unless their reputation has been restored.
5. At least two-thirds of the board members must have practical experience of less than five years in one of the fields of banking financial work, non-banking financial work, or legal work.

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(Article Five)

Procedures for Submitting a License Application

The company shall apply for the license using the license application form prepared for this purpose, which must include at least the following information:

1. Name, title, nationality, and chosen domicile of the applicant.
2. Company name, legal form, headquarters, and object.
3. Details of the licensed, issued, and paid-up capital.
4. Names of shareholders and subscribers (natural or legal persons) owning 10% or more of the company's capital, along with their nationality and shareholding percentage.
5. Names of the Chairman, board members, Managing Director or CEO, and managers, along with their nationalities.

The license application shall be submitted on the prepared form, accompanied by the following documents:

1. The company's preliminary contract and articles of association.

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(Article Six)

Preliminary Approval for Adding an Activity

Licensed entities practicing one of the financial activities (real estate financing, financial leasing, factoring) must, when combining one of these activities, submit an application from the company's legal representative to obtain preliminary approval for adding the activity, which must include the company's vision and plan for adding one or all of these activities.

Furthermore, licensed entities practicing microfinance must, when adding microfinance financial leasing, submit an application to the Authority from the entity's legal representative to obtain preliminary approval for practicing the activity, which must include the entity's vision and plan for the activity.

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(Article Seven)

Licensing Conditions for Financing Companies

to Practice Multiple Financial Activities

Companies wishing to obtain a license to practice multiple financial activities must meet the following conditions:

1. The company's object must be to practice all or some of the financial leasing, real estate financing, and factoring activities, and must not include any other activities.
2. The company's capital must not be less than the minimum required for the activities to be practiced collectively.
3. The company's board of directors must consist of at least five members, and the board composition must include at least two independent members.

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(Article Eight)

Required Documents and Data for Licensing to Practice Multiple Financial Activities

The license application shall be submitted on the prepared form, accompanied by the documents required for licensing the financial activities:

1. The company's organizational structure indicating any practice of each of the required financial activities.
2. Copies of the academic qualification certificates and practical experience certificates of the executives for the required financial activities.
3. A feasibility study including the company's plan, vision, and strategies for practicing the required financial activities collectively.
4. Receipt of payment for the service fee for studying the application to obtain approval for adding a financial activity or licensing multiple financial activities.

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(Article Nine)

Licensing Conditions for Companies, Associations, and Civil Institutions

Practicing Microfinance to Engage in Financial Leasing

Companies, associations, and civil institutions operating and licensed to practice microfinance that wish to engage in financial leasing must comply with the following conditions:

1. The value of the microfinance portfolio of the company, association, or civil institution, based on the latest audited financial statements, must not be less than five million Egyptian pounds.
2. The maximum value of financing contracts and financing purposes must not exceed the limits stipulated in Law No. 141 of 2014.
3. The company, association, or civil institution must not have committed any violation of Law No. 141 of 2014 or its executive decisions, and must not have been subject to any administrative penalties or precautionary measures (excluding disqualification and disbarment) by the Authority during the three years preceding the activity application, unless the grounds have been removed and six months have passed since their removal.
4. The company, association, or civil institution must submit a business plan including mechanisms for practicing microfinance financial leasing in addition to its existing activity.
5. The Managing Director, Chairman of the association or civil institution, and responsible managers must have practical experience of at least seven years in one of the fields of banking, financial, or legal work, following the acquisition of a higher qualification in the same field.

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(Article Ten)

Licensing Procedures for Companies, Associations, and Civil Institutions

Practicing Microfinance to Engage in Financial Leasing

The license application shall be submitted on the prepared form, accompanied by the following documents:

1. Copy of the latest audited financial statements of the entity practicing microfinance.
2. Copy of the license to practice microfinance.

Smart Village, Building no. B-136, Giza
Postal Code: 12577
Tel.: (00202) 35345350 - Fax.: (00202) 35370036
www.FRA.gov.eg
Smart Village, Building no. B-136, Giza, Egypt
Postal Code: 12577
Tel.: +202 35345350 - Fax.: +202 35370036
info@fra.gov.eg