Law No. 152 of 2020 Issuing the Law on Developing Medium, Small, and Micro Enterprises

Official Gazette - Issue No. 28 Rec. (W) on 15 July 2020

Law No. 152 of 2020 Issuing the Law on Developing Medium, Small, and Micro Enterprises

In the Name of the People President of the Republic The Parliament has decided the following Law, which we have issued:

(Article 1) The provisions of the accompanying Law regarding the development of medium, small, and micro enterprises shall be applied.

(Article 2) The Prime Minister shall issue the executive regulations for the accompanying Law within six months from the date of implementation of this Law. Until these regulations are issued, the existing regulations and decisions in force on the date of implementation of this Law shall continue to apply to the extent that they do not conflict with the provisions of the accompanying Law.

(Article 3) Law No. 141 of 2004 Issuing the Law on Developing Small Enterprises is repealed, as is everything that contradicts the provisions of the accompanying Law.

(Article 4) This Law shall be published in the Official Gazette and shall be implemented from the day following its publication. This Law shall be stamped with the State seal and executed as one of its laws. Issued at the Presidency on 22 Dhu al-Qi'dah, 1441 AH (Matching 13 July 2020 AD).

Abdel Fattah El-Sisi

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Official Gazette - Issue No. 28 Rec. (W) on 15 July 2020

Law on Developing Medium, Small, and Micro Enterprises Chapter One Definitions

Article (1): In the application of the provisions of this Law, the following words and expressions shall have the meanings indicated opposite each of them: 1 - Enterprises: Medium, small, and micro enterprises, regardless of their legal form. 2 - Competent Minister: The Prime Minister. 3 - The Agency: The Agency for Developing Medium, Small, and Micro Enterprises established by Prime Minister's Decision No. 947 of 2017. 4 - The Board: The Board of Directors of the Agency for Developing Medium, Small, and Micro Enterprises. 5 - Medium Enterprises: Any enterprise whose annual business volume is 50 million pounds and does not exceed 200 million pounds, or any newly established industrial enterprise whose paid-up capital or invested capital is 5 million pounds and does not exceed 15 million pounds, or any newly established non-industrial enterprise whose paid-up capital or invested capital is 3 million pounds and does not exceed 5 million pounds. 6 - Small Enterprises: Any enterprise whose annual business volume is one million pounds and is less than 50 million pounds, or any newly established industrial enterprise whose paid-up capital or invested capital is 50,000 pounds and is less than 5 million pounds, or any newly established non-industrial enterprise whose paid-up capital or invested capital is 50,000 pounds and is less than 3 million pounds.

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Official Gazette - Issue No. 28 Rec. (W) on 15 July 2020

7 - Micro Enterprises: Any enterprise whose annual business volume is less than one million pounds, or any newly established enterprise whose paid-up capital or invested capital is less than 50,000 pounds. 8 - Newly Established Enterprise: An enterprise that has not been established, registered, or commenced its activity for more than two years. 9 - Financing Provider: Banks, financing institutions, companies, financial institutions, and other entities licensed to engage in the activity of providing financing or credit facilities to enterprises, or where this activity is among their objectives according to prevailing legislation. 10 - Competent Authority: Entities having the authority to exploit and dispose of real estate allocated for the purposes of enterprises subject to the provisions of this Law. 11 - Allocation: The allocation of real estate by the Competent Authority to any of the enterprises subject to the provisions of this Law in any of the following forms: Sale, usufruct right, license of usufruct right, lease, or lease ending with ownership. 12 - Informal Economy Enterprises: Medium, small, or micro enterprises that conduct their activity without obtaining a construction or operation license, or any other license or approval necessary to conduct the activity, to be specified by a decision of the Prime Minister upon the proposal of the Agency. 13 - Related Legislations: Law No. 21 of 1958 regarding the regulation and encouragement of industry, the Agriculture Law issued by Law No. 53 of 1966, Law No. 34 of 1976 regarding the Commercial Register, Law No. 24 of 1977 regarding the Industrial Register, the Labor Law issued by Law No. 12 of 2003, the Income Tax Law issued by Law No. 91 of 2005, the Construction Law issued by Law No. 119 of 2008, the Tax on Built Properties Law issued by Law No. 196 of 2008, the Law Facilitating Procedures for Granting Licenses to Industrial Establishments issued by Law No. 15 of 2017, the Social Insurance and Pensions Law issued by Law No. 148 of 2019, the Public Places Law issued by Law No. 154 of 2019, and any other related legislations determined by a decision of the Prime Minister.

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14 - Regularization: The acquisition by informal economy enterprises of a license from the competent administrative authorities or from the Agency according to the governing laws before the expiration of the temporary license period. 15 - Entrepreneurship Enterprises: Enterprises that have not passed seven years from the date of commencing activity or production, whichever applies, which include a degree of novelty or innovation according to the controls determined by the Board of Directors. 16 - Accreditation Offices: Offices licensed by the Agency to examine the extent to which the project complies with requirements and the availability of necessary documents for the project to obtain a construction, operation, or expansion license, and to grant the license applicant an accreditation certificate to submit to the Agency and relevant authorities, or accreditation offices licensed by other authorities according to the provisions of prevailing legislation and entrusted by the Agency to do so. 17 - Business Incubators: Companies, establishments, associations, or other legal entities aiming to help newly established enterprises and entrepreneurship enterprises grow by providing various services, especially in the fields of financing, marketing, and management. 18 - Business Accelerators: Companies, establishments, associations, or other legal entities aiming to help enterprises and entrepreneurship enterprises that need guidance, counseling, and support, by providing various services, especially in the fields of financing, marketing, and management.

Article (2): By a decision of the Competent Minister, based on a recommendation from the Board of Directors and in agreement with the Central Bank of Egypt, the minimum and maximum limits for business volume and the value of paid-up capital and invested capital may be reduced by not exceeding (50%), or any other criteria may be added or determined to define enterprises, according to the nature of the relevant economic activity. The minimum and maximum limits for business volume and paid-up capital and invested capital may also be increased by not exceeding (10%) annually according to economic conditions.

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Chapter Two Facilitating Access to Financing (Chapter One) Temporary Allocation

Article (3): In the application of the provisions of this Chapter, the term "Enterprise" refers to enterprises for which real estate is allocated by the Competent Authority, and which express the desire to benefit from the temporary allocation system stipulated in this Chapter.

Article (4): For the purpose of facilitating financing for enterprises, the Competent Authority may, based on the enterprise's request, temporarily allocate the real estate in the name of the Financing Provider, with the enterprise bearing all obligations arising from the allocation contract. This provision shall apply to the transfer of an existing allocation. The allocation shall remain in the name of the enterprise upon the expiration of the temporary allocation in either of the two cases stipulated in the first paragraph of Article (13) of this Law.

Article (5): The temporary allocation system shall apply whether the allocation is by sale, sale of usufruct right, license of usufruct right, lease, or lease ending with ownership.

Article (6): Any disposition or arrangement of a real right on the real estate during the period of temporary allocation without the consent of the Financing Provider and the Competent Authority shall be void, and it shall not be publicized. Subject to the provision of the first paragraph, the enterprise may assign the allocation contract to a third party or to the same Financing Provider, allocating the real estate temporarily in its name.

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Article (7): If the enterprise breaches the terms of the contract with the Competent Authority or any of the terms of the financing contract, the Financing Provider, in whose name the real estate is allocated according to the temporary allocation system, may take execution procedures on the real estate according to the rules, procedures, and timeframes stipulated in Articles (8, 9, 10) of this Law.

Article (8): The Financing Provider may, after fifteen days from the date of notifying the debtor enterprise of payment, request by a petition submitted to the Execution Judge of the court in whose jurisdiction the allocated real estate is located, an order to sell the right subject to temporary allocation. The order issued by the Judge for sale shall not be executed until five days have passed from the date of notifying the debtor, stating the place, date, and time of the sale. The Execution Judge shall appoint an agent to carry out the sale procedures in the decision issued for the sale, and the Competent Authority may be appointed to carry out the sale by public auction upon the request of the Financing Provider. The base price for the sale shall be determined by two valuation experts registered with the Central Bank of Egypt, upon request of the agent appointed to carry out the sale procedures. The sale shall be conducted at the time, place, and conditions determined by the Judge, and the announcement of the sale shall be made according to the procedures and controls determined by the executive regulations of this Law. The Judge shall issue an order approving the sale procedures and handing over the real estate to the successful bidder, and shall endorse this in the register stipulated in Article (14) of this Law.

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Article (9): If no one bids for the auction or if the highest bid does not reach the base price and is less than the dues of the Financing Provider, the Financing Provider may request that the sale be effected against it in exchange for discharging the enterprise's liability to the extent of its dues collected from the base price. In the event the sale is effected against the Financing Provider, these entities shall be bound by the controls determined by the Board of Directors regarding the period within which the right subject to allocation must be disposed of. The rules established in this regard in the Law Regulating the Central Bank, the Banking System, and Currency shall apply to banks.

Article (10): The Financing Provider shall be obliged to take execution procedures on the allocated real estate stipulated in Article (8) of this Law within a period not exceeding one year from the date of receiving notice from the Competent Authority of the enterprise's breach of the allocation contract terms, or from the date of notifying the Competent Authority of the enterprise's breach of the financing contract terms, unless otherwise agreed with the Competent Authority. The period stipulated in the first paragraph of this Article may be extended with the consent of the Competent Authority for a similar period if there are reasons justifying this. In all cases, the temporary allocation shall continue in favor of the Financing Provider until the sale is completed.

Article (11): The Competent Authority may, by a reasoned decision, carry out sale procedures on behalf of the Financing Provider after thirty days from the date of its official notice, in the event the Financing Provider refuses without acceptable justification to begin taking sale procedures within the timeframes stipulated in Article (10) of this Law. The Competent Authority shall be obliged to notify the Financing Provider of all procedures and the date of the sale session.

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Official Gazette - Issue No. 28 Rec. (W) on 15 July 2020

Article (12): The dues of the Financing Provider shall be paid from the proceeds of the sale after the Competent Authority has collected its rights arising from the allocation contract, in cases where the right subject to allocation is disposed of according to the provisions of this Law.

Article (13): The temporary allocation shall not end, nor may it be canceled or terminated, except with the consent of the Financing Provider or upon the settlement of all its dues arising from the financing contract. The Financing Provider may assign the temporary allocation established in its favor to another financing entity according to the procedures determined by the executive regulations of this Law. The assignment shall be effective against third parties without following any procedures determined by any other law.

Article (14): A register shall be established at the Agency and the Competent Authority to record decisions on temporary allocation and the data, procedures, and major dispositions related to real estate subject to the temporary allocation system. The Agency may entrust the establishment and operation of this register to one of the specialized entities or companies, all in the manner determined by the executive regulations of this Law.

(Chapter Two) Regulating the Priority of Financing Providers in Collecting Their Rights

Article (15): Without prejudice to the provisions of Article (12) of this Law, the priority established by law under Article (1139) of the Civil Code regarding amounts due to the Public Treasury from taxes, fees, and other rights of any kind, or established in other laws, shall not apply when the Financing Provider collects its rights resulting from the financing provided to enterprises subject to the provisions of this Law, except for taxes and fees collected by these enterprises from third parties in their capacity as collection and remittance entities.

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Article (16): As an exception to the provision of Article (15) of this Law, Financing Providers shall collect their rights for financing provided to distressed enterprises with the following priority: 1 - Before collecting amounts due to the Public Treasury from taxes, fees, and other rights established according to Article (1139) of the Civil Code and other laws. 2 - Before collecting amounts due to secured creditors whose rights were registered after the financing was granted to the distressed enterprise. 3 - Before collecting the Financing Provider and the Competent Authority under the temporary allocation system endorsed after the financing was granted to the distressed enterprise.

Article (17): The Financing Provider may, when financing distressed enterprises, agree with secured creditors whose rights were registered before the financing was granted to take precedence over them, provided that the agreement is fixed in date. In this case, the Financing Provider shall step into the shoes of the secured creditor, and this shall be endorsed in the margin of the registration without fees, according to the manner determined by the executive regulations of this Law.

Article (18): An enterprise shall be considered distressed in either of the following two cases:

• If bankruptcy is declared against it.
• If its financial circumstances become disturbed in a manner that foreshadows a stoppage of payments, and a report on the state of distress is issued by one of the accountants registered with the Central Bank of Egypt or the Financial Regulatory Authority, according to the rules and procedures determined by the executive regulations of this Law. It is required that the distress is not due to collusion or fraud, and does not constitute a case of fraudulent concealment.

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(Chapter Three) Regulating the Right of Usufruct on Real Estate Allocated for the Purposes of Medium, Small, and Micro Enterprises

Article (19): In cases where real estate is allocated by the sale of usufruct right and this right is mortgaged as security for financing enterprises subject to the provisions of this Law, this right shall not terminate except upon the expiration of the period prescribed for it, even if the usufructuary dies or the legal entity ceases to exist, whichever applies.

Article (20): The mortgage shall remain in favor of the secured creditor even if the contract for the sale of the usufruct right is determined to be void, terminated, or extinguished for any reason other than the expiration of the prescribed period, unless the Financing Provider had knowledge of the reason for voidance or termination at the time of concluding the mortgage contract.

Article (21): The secured creditor may request the Competent Authority to extend or renew the period of the usufruct right in exchange for conditions determined by it. The Competent Authority shall notify the applicant of its decision with reasons, all according to the procedures determined by the executive regulations of this Law. If the rejection decision issued by the Competent Authority is flawed by abuse of right, or if the secured creditor has an interest worthy of protection, the applicant may request the Agency to extend or renew. The Agency's decision shall be effective in this regard after the consent of the usufructuary, and the usufruct right shall remain in effect until a decision is made on this request. The executive regulations of this Law shall organize the rules and procedures for submitting the request and the controls for deciding on it. The provision of this Article shall apply to the Financing Provider under the temporary allocation system or to those who received this right from it according to the provisions of this Law.

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(Chapter Four) Payment of Distressed Enterprises' Dues to the Public Treasury

Article (22): The Board of Directors, after coordination with the Minister of Finance or the competent authority of the wholly state-owned company, whichever applies: 1 - Shall establish rules for granting timeframes for settling dues of the Public Treasury and wholly state-owned companies to distressed enterprises subject to the provisions of this Law. 2 - Shall establish rules for partial or full discharge of dues of the Public Treasury and wholly state-owned companies to distressed enterprises, including penalties for delay. Decisions on rescheduling, full, or partial discharge shall be issued by the Minister of Finance or the competent authority of the company according to the governing laws, whichever applies, upon the request of the Agency.

Chapter Three Incentives (Chapter One) Non-Tax Incentives for Medium, Small, and Micro Enterprises

Article (23): The Board of Directors may grant the incentives stipulated in Article (24) of this Law to enterprises conducting activity in any of the following fields and meeting the controls determined by it according to what is determined by the executive regulations of this Law:

• Enterprises operating in the informal sector that submit a request to regularize their status according to the controls and procedures stipulated in Chapter Six of this Law.
• Entrepreneurship enterprises.
• Digital transformation and artificial intelligence enterprises.

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• Industrial enterprises or enterprises working to deepen the local content in their products, or enterprises that replace and renew machines, equipment, and technological systems related to the production process.
• Enterprises that serve agricultural or animal production activities.
• Enterprises working in the field of information technology or related services.
• Enterprises that provide new innovations in the field of industry and technology systems.
• New and renewable energy enterprises. The Board of Directors may, by decision, establish new activities or fields whenever necessary.

Article (24): The Board of Directors may grant any of the following incentives to the enterprises stipulated in Article (23) of this Law: 1 - Refund of the value of utility connections to the land allocated to the project or part of it, after its operation. 2 - Granting enterprises timeframes for settling the value of utility connections, including full or partial exemption from late payment interest. 3 - The state bearing a portion of the cost of technical training for workers. 4 - Allocation of land free of charge or for a nominal fee. 5 - Refund of not more than half the value of the land allocated to the project. 6 - Exemption from providing necessary guarantees until the commencement of activity when allocating real estate necessary for the project, or reduction of the value of these guarantees. 7 - Refund of exhibition participation fees, or bearing them fully or partially.

The Board of Directors may also, for the purposes of developing the enterprises stipulated in Article (23) of this Law and enhancing their competitive capacity, establish cash incentive programs according to the standards it determines, within the limits of what is annually allocated from the General State Budget for this purpose, and not exceeding three-tenths of one percent (0.03) of the Gross Domestic Product, with a minimum of 1.5 billion pounds annually, according to the bases and standards determined by the executive regulations of this Law.

Article (25): Entrepreneurship enterprises shall be exempt from registration fees for patents, utility models, and integrated circuit design layouts stipulated in Chapters One and Two of Book One of the Intellectual Property Protection Law issued by Law No. 82 of 2002. The state shall provide the necessary technical assistance for registering patents that represent a significant development in the relevant field according to the standards issued by a decision of the Board of Directors after obtaining the opinion of the Competent Minister for scientific research affairs.

Article (26): What is determined of facilitated financing for medium, small, and micro enterprises shall be included in the State's annual plan, and the sources of this financing shall be determined in this plan. What the state allocates in appropriations resulting from the above, whether under Chapter Four "Capital Transfers" or Chapter Two "Current Expenditures," shall be included in the General State Budget.

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(Chapter Two) Tax Incentives for Medium, Small, and Micro Enterprises

Article (27): Enterprises and informal economy enterprises that submit a request to regularize their status according to the provisions of Chapter Six of this Law shall be exempt from stamp duty and notarization and registration fees for company and establishment establishment contracts, credit facilities contracts, and mortgages related to their activities, and other guarantees provided by enterprises to obtain financing, for a period of five years from the date of their registration in the Commercial Register. Contracts for the registration of land necessary for establishing these enterprises shall also be exempt from the aforementioned tax and fees.

Article (28): A uniform customs duty rate of (2%) of the value shall be collected on all machinery, equipment, and devices imported by enterprises for their establishment, excluding passenger cars, effective from the date of implementation of this Law and according to the controls and procedures issued by a decision of the Minister of Finance after presentation to the Board of Directors.

Article (29): Capital profits resulting from the disposal of assets, machines, or production equipment of enterprises subject to the provisions of this Law shall be exempt from the due tax if the proceeds of the sale are used to purchase new assets, machines, or production equipment within one year from the date of disposal, according to the conditions and controls determined by the executive regulations of this Law.

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Article (30): The Council of Ministers may, upon the proposal of the Board of Directors, grant full or partial exemption from the tax on built properties on units specific to small and micro establishments for a period or periods determined by the Board of Directors or the Council of Ministers.

Article (31): Profit distributions resulting from the activity of a single-person company of enterprises subject to the provisions of this Law shall not be subject to the tax established in this regard according to the Law Regulating Income Tax, provided that the sole partner is a natural person.

(Chapter Three) Incentives for Companies and Establishments Supporting Small, Micro Enterprises, and Entrepreneurship

Article (32): The Board of Directors may grant any of the incentives stipulated in items 1 to 7 of Article (24) of this Law to supporting companies and establishments that do not fall within the category of medium, small, and micro enterprises, only to the extent of the activities that support enterprises subject to the provisions of this Law and contribute to developing a stimulating environment for them. This shall apply in any of the following cases according to the controls and conditions determined by the Board of Directors: 1 - Establishing industrial, production, craft, or service complexes that include spaces for small and micro enterprises. 2 - Business incubators and accelerators that provide their services to enterprises, especially newly established enterprises and entrepreneurship enterprises.

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Article (33): For the purpose of providing diverse financing sources for entrepreneurship enterprises subject to the provisions of this Law, the Board of Directors shall establish programs to grant cash incentives to investment funds and companies whose objectives include financing enterprises. This incentive shall be due upon their disposal of all their shares or stakes in these enterprises, according to the rules and controls determined by the Board of Directors. These programs shall be within the limits of financial resources allocated in the General State Budget according to the provisions of the last paragraph of Article (24) of this Law.

Article (34): To benefit from the incentive programs referred to in Article (33) of this Law, the following conditions must be met in investment funds and companies whose objectives include financing enterprises: 1 - The contribution to the enterprise's capital must be in cash. 2 - The holding period of stakes or shares in the enterprise must not be less than two years. 3 - The contribution must not exceed 51% of the enterprise's capital. 4 - The incentive granted must not exceed the amount of the company's or investment fund's contribution or participation in the enterprise. 5 - The company or investment fund must not be a financial institution subject to the Law Regulating the Banking Sector.

The following conditions must also be met in the entrepreneurship enterprise in which the contribution is made: 1 - The enterprise must operate in one of the fields determined by the Board of Directors. 2 - The enterprise must not be a company whose shares are listed on the stock exchange, or an enterprise operating in the field of investment portfolio management, real estate and land development, insurance, construction, or infrastructure.

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3 - Financing through this method must not exceed 20 million pounds annually per enterprise. The Board of Directors may increase the maximum limit for financing stipulated in item (3) of the second paragraph of this Article every three years by not exceeding (20%). The Board of Directors may establish other controls and conditions for benefiting from the cash incentive programs stipulated in this Article.

Article (35): Eighty percent (80%) of the provisions established by companies or entities whose objectives include guaranteeing credit risks after the implementation of the provisions of this Law, within the limits of their activity related to the provisions of this Law, shall be considered deductible expenses according to the provisions of the Income Tax Law issued by Law No. 91 of 2005. A decision of the Prime Minister, upon the proposal of the Board of Directors and with the approval of the Minister of Finance, shall be issued regarding the technical controls for establishing these provisions.

(Chapter Four) Cases of Non-Entitlement to Incentives

Article (36): Enterprises, companies, and supporting establishments addressed by the provisions of Chapter Three of this Chapter shall not enjoy the benefits and incentives established for them according to this Law in either of the following two cases: 1 - If the owner of the enterprise, any shareholder in it, and any enterprises that do not fall within the category of medium, small, and micro enterprises or the supporting establishment are related parties to the enterprise. Related parties, according to the provisions of this paragraph, mean natural persons and any of their relatives or relatives by marriage up to the fourth degree,

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and legal persons, entities, unions, associations, and financial conglomerates consisting of two or more persons where the majority of their shares or capital stakes are directly or indirectly owned by the other party or owned by a single person. Persons subject to the actual control of another person or persons who agree among themselves when voting at the general assembly or board of directors meetings of the company are also considered related parties. 2 - If any act or behavior is committed with the intent to obtain any of the incentives established in this Law unlawfully, including splitting or fragmenting the activity existing at the time of the issuance of this Law without an economic justification, with the intent to benefit from the incentives or simplified tax treatment contained therein. The occurrence of either of the two cases stipulated in the first paragraph shall result in the loss of entitlement to the incentives contained in this Chapter and the obligation of the enterprise to repay the value of the incentives granted in violation thereof. The provision of item (1) of the first paragraph shall not apply if the enterprises or establishments and supporting companies are related parties according to the text of Articles (33, 34) of this Law.

Article (37): It is not permissible to combine the incentives established in this Chapter with the incentives established under the Law on...