The liability of the legal representative of Egyptian Companies under the Law No. 72 of 2017 promulgating the Investment Law (New Investment Law)

After the revolution which led to the enactment of a new Constitution and new regime, now Egypt is starting its legal reform. One of the first steps of this legal reform is the enactment of the New Investment Law. In spite of the fact that the executive regulation of the New Investment Law has not been enacted yet, corporate lawyers, chamber of commerce, and foreign direct investors start studying the provisions and the impact of this New Investment Law.

The legal committee of the German Chamber of Commerce assigned me to study the responsibility of the legal representative of the Egyptian Companies in light of the New Investment Law. In order to draft this article, I will, first of all, define the legal representative as per the Egyptian Law. Second, I will state the related articles at the New Investment Law. Third, The liability as per the New Investment Law.

First: Defining the legal representative:

The legal representative of a corporate in Egypt depends on the type of the company as follows:

• In a joint stock company (SA), the Chairman of the board of directors is the legal representative. In some instance, there is a joint liability of all board directors.
• In a limited liability company (LLC), the appointed manager nominated at the commercial registry is the legal representative.
• In a partnership or limited partnership, all joint active partners are considered as the legal representative.

Second: the related provisions at the New Investment Law:

The New Investment Law provided for Article 92 in this regard. This Article stated literally the following:  

Third: The liability of the legal representative as per the New Investment Law:

From the outset, there are 2 types of liability in any judicial regime; namely, a criminal liability which may lead to jail or to pay a fine, and a civil liability which will lead to pay indemnity to cure the harm. For instance, if a car hits a person in the street, the driver of the car is criminally liable while the owner of the car is civilly liable and has to pay the indemnity According to the aforementioned articles, there are two types of liability (civil and criminal).

In the Egyptian legal system, if a company had committed a tax crime, the legal representative shall be criminally liable. On the other hand, Article 92 of the New Investment Law provided for a new provision deleting what is called the presumed liability of the legal representative. Now, in order to confirm that the legal representative of an investment company is criminally liable, it has to be proven that:

• The legal representative is aware of the crime;
• The legal representative has directed his will towards the commitment of such crime; and
• The legal representative has to secure an interest for himself or for others.

Accordingly, Article 92 has deleted the presumed liability and that the 3 conditions have to be proven in order to declare the legal representative liable.

Moreover, in the event the liability of the legal representative is not established in the manner specified in the previous paragraph, the legal entity shall be liable to a fine no less than four times and no more than ten times the legally prescribed fine for the crime. In case of reoccurrence of the crime, a judgment shall be passed terminating the license or dissolving the legal person, as the case may be. The judgment shall be published in 2 widely circulating newspapers at the legal person’s expense.

In brief, Article 92 of the New Investment Law has deleted the presumed liability of the legal representative and the legal representative shall not be criminally liable unless it is proven that the 3 mentioned conditions have occurred.