Increasing and Reducing Share Capital in Egyptian Companies

Executive summary

• The articles may set authorised capital that exceeds the issued capital by not more than ten times its amount, and the board may increase issued capital within it without an extraordinary general assembly (EGA), if the issued capital is fully paid and the company is not listed on the stock exchange.
• Increasing the authorised capital and reducing capital are for the EGA, by three-quarters of the shares represented.
• Existing shareholders' pre-emption right over a cash increase has a minimum period of 30 days in the Companies Law regulations and 15 in the Capital Market Law regulations since 2024, and only the EGA can set it aside, for serious reasons confirmed by the auditor.
• Creditors whose rights arose before the reduction resolution was published may object to it, unless it results from a loss.
• In a limited liability company (LLC), a change in capital needs the numerical majority of partners holding three-quarters of it; in a one-person company, the founder decides.
• For an increase or a reduction, the amendment deed is released only after the Financial Regulatory Authority (FRA) has approved (2026 guide of the General Authority for Investment and Free Zones, GAFI).

Issued capital and authorised capital

Companies Law 159 of 1981 distinguishes issued capital, which is actually subscribed, from authorised capital, which the articles may set "exceeding the issued capital by not more than ten times its amount" (Article 32, as substituted by Law 3 of 1998). Issued capital must be subscribed in full, and each subscriber must pay at least 10% of the nominal value of cash shares, rising to 25% within three months of incorporation, with the balance paid within five years of that date.

Increasing capital: methods and decision-makers

The consideration for new shares may be cash, in-kind contributions, cash debts owed by the company to the subscriber, bonds converted into shares under their terms of issue, or founders' or profit shares converted into shares (Article 90 of the executive regulations). Reserves may also be converted into shares distributed free to shareholders (Article 91), and Article 40 of the law allows the legal reserve to be used "to increase capital". An in-kind contribution is valued, in a joint-stock company, by the report of a committee that GAFI forms and approves, which the general assembly then approves (Article 93); in an LLC, by an expert's valuation that the partners approve.

Article 33, whose first paragraph was substituted by Law 4 of 2018, provides: "The issued capital may be increased by resolution of the ordinary general assembly by a majority of the shares represented at the meeting; the issued capital may also be increased by resolution of the board of directors within the limits of the authorised capital, where one exists", and companies whose securities are listed on an Egyptian stock exchange are excluded from this. A board increase does not need the EGA to approve the amendment to the articles; the board makes it (Article 68(d)). A listed company increases its issued capital by resolution of the ordinary general assembly, not the board (Article 88 of the regulations); what capital-market rules require of it is outside the scope of this article. Increasing the authorised capital itself is for the EGA, by three-quarters of the shares represented (Article 70(c)).

In all cases, issued capital that is not fully paid may be increased only by EGA resolution, provided the subscribers to the increase pay at least the percentage required on the issued capital before the increase and pay the rest on the same dates as the balance of that capital (Article 33). Under its 2026 guide, GAFI asks, for a cash increase in a joint-stock company, for a bank certificate showing at least 10% of the increase paid where the issued capital is fully paid, or otherwise at least the percentage already paid on it. The resolution authorising the increase becomes void if the increase is not actually made "within the three years following the resolution authorising the increase, or within the period for paying up the issued capital before its increase, whichever is longer" (Article 33).

The pre-emption right

The articles must state the extent of existing shareholders' pre-emption right over the shares of a cash increase; it may not be confined to some shareholders, without prejudice to the rights of preference shares, and it may be traded during the subscription period, separately or with the original share (Article 96 of the regulations). Its minimum period is 30 days from the opening of subscription under Article 97 of the Companies Law regulations, and 15 days under Article 31 of the executive regulations of the Capital Market Law (Law 95 of 1992) since its amendment by Prime Ministerial Decree 2423 of 2024; it ends earlier once all existing shareholders have each taken up their share. Both are minimum periods, so allowing thirty days satisfies both texts until the Financial Regulatory Authority settles which governs an unlisted company. They are notified by an announcement in two daily newspapers, at least one in Arabic, at least seven days before subscription starts, or, if the company has not offered shares to public subscription, by registered letter at least two weeks before subscription opens (Article 99, as substituted by Decree 199 of 2019 of the Minister of Investment and International Cooperation).

The right can be set aside only by EGA resolution at the board's request, "for the serious reasons it gives and which the auditor confirms in a report", with all or part of the increase then offered directly to public subscription (Article 98) or in a private subscription to one or more named persons or entities, in which case the votes of those to whom it is addressed and their related parties are excluded unless all existing shareholders agree (Article 32 of the Capital Market Law regulations).

Reducing capital and protecting creditors

Issued capital is reduced by EGA resolution, by three-quarters of the shares represented, on the board's proposal, accompanied by an auditor's report "on whether there are serious reasons calling for the reduction", even if the capital being reduced is not fully paid up (Article 70(c) of the law and Article 105 of the regulations). The reduction is made by lowering the nominal value per share, by reducing the number of shares in the same proportion for every shareholder, or by the company buying some of its shares through an offer to all shareholders announced in the Investment Gazette or in two daily newspapers, one in Arabic, and then cancelling them (Articles 106 to 111), without taking capital or the share's value below its minimum (Article 107). The board then records the steps taken in minutes that GAFI checks, and the amendment is published in the Investment Gazette at the company's expense (Article 112).

The regulations do not require the company to notify creditors individually; the publication is what counts: creditors whose rights arose before the reduction resolution was published, and the representative of the holders of bonds issued before it, may object unless the reduction results from a loss the company has sustained (Article 113). The company may repay the objectors or provide the security needed for payment when due, and a creditor who does not accept its offer may go to court for a judgment protecting their rights. A creditor whose right arose after publication cannot object.

The LLC and the one-person company

LLC partners set the capital in the memorandum of association, with no general minimum (Article 67 of the regulations), and "the memorandum may not be amended, nor its capital increased or reduced, except with the approval of the numerical majority of partners holding three-quarters of the capital" (Article 127). The memorandum can no longer provide otherwise, since Law 4 of 2018 deleted the words "unless the memorandum provides otherwise".

The one-person company, added by Law 4 of 2018, follows the LLC rules where there is no special provision (Article 129 bis), but on capital there is one: its founder carries out the "increase or reduction of the company's capital to not less than the minimum laid down in the executive regulations", which takes effect against third parties only from its entry in the Commercial Register (Article 129 bis (3)); the minimum has been EGP 1,000 since Prime Ministerial Decree 2928 of 2022. It may not use public subscription, at incorporation or on an increase, nor divide its capital into tradeable shares (Article 129 bis (2)). For a cash increase in either form, GAFI requires a bank certificate showing the whole increase paid.

Registration with GAFI and the Commercial Register

GAFI approves the general assembly's minutes and the amendment deed; the deed is then certified at the Bar Association, notarised at the Real Estate Publicity and Notarisation office and entered in the Commercial Register. For an increase or a reduction, the minutes and the amendment deed are released only after the FRA's approval is received, and prior approval from the Economic Performance Sector is needed for a reduction and for an increase out of profits, reserves or credit balances (GAFI Investor Services Centre guide 2026). The guide's service fee is EGP 405 per copy of the EGA minutes, the same for the amendment deed, and the same for the certificate of share issue addressed to the FRA; for a board increase, EGP 1,205 for the two board minutes and the amendment deed, and EGP 405 for the certificate.

What this requires

• Check what the articles say about the pre-emption right, and how existing shareholders are to be notified, before any cash increase.
• Before a board resolution, confirm that the issued capital is fully paid and the increase stays within the authorised capital, and carry the increase out before its resolution lapses.
• Obtain the bank certificate and, where needed, the Economic Performance Sector's approval before applying to GAFI.
• Prepare the auditor's report before calling the assembly on a reduction, and identify the creditors whose rights arose before the resolution is published.
• In an LLC, check the numerical majority of partners as well as the three-quarters of capital.

For the EGA's quorum and majority outside capital matters, see Ordinary and extraordinary general assemblies.

The firm's Corporate Legal Department prepares the documents for a capital increase or reduction and follows them through GAFI and the Financial Regulatory Authority to entry in the Commercial Register.

Mahmoud Nassef, Founder Partner
Chartered Accountant, Ministry of Finance, Egypt

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.