CBE Sets New Ownership Rules for Credit Guarantee Companies
The Central Bank of Egypt has introduced new rules governing ownership of shares in credit guarantee companies, setting limits on stakes and voting rights, prior approval requirements, beneficial ownership rules and disclosure obligations.
Ownership Limits and Prior Approval
The rules allow Egyptians and non-Egyptians to own capital in credit guarantee companies. Any individual or legal entity must notify the Central Bank of Egypt if its ownership, alone or through related parties, exceeds 10% of issued capital or voting rights, provided it does not exceed 20%. The notification must be made within 15 days of completing the acquisition.
Ownership above 20%, or any stake resulting in effective control of a company, requires prior approval from the CBE Board before the acquisition. The same approval is required for every subsequent increase in the authorized stake.
Applications must include a report on the applicant’s financial solvency, the reasons and objectives behind the acquisition, plans for managing the company and the intended management policy, as well as the applicant’s holdings and those of related parties in other entities. The CBE may also request additional information and documents.
Banks seeking to acquire shares in credit guarantee companies must likewise obtain the CBE’s prior approval.
Involuntary Transfers and Compliance
The rules establish procedures for ownership transfers resulting from inheritance, wills, public offerings, mergers, acquisitions or demergers when such transfers push ownership above 20%.
The concerned party must apply to retain the stake within 30 days of becoming aware of the transfer. Anyone receiving more than 20% through inheritance or a will has up to one year to regularize the position, with the CBE Board able to extend the period for another year if the shares cannot be sold.
Applicants must be notified of approval or rejection within 60 days. An ownership approval remains valid for six months and may be extended for another six months.
If continued ownership is rejected, the excess stake must be sold within one year in voluntary ownership cases, or within three months where the transfer resulted from inheritance, a will, merger, acquisition, demerger, public offering or another involuntary event.
Voting rights and dividends attached to shares exceeding the authorized threshold are suspended in cases of non-compliance, while the excess stake must be disposed of within six months.
Beneficial Ownership and Disclosure
Approval requires a transparent ownership structure that allows the CBE to identify the ultimate beneficial owner, including anyone directly or indirectly owning or controlling more than 20% of issued capital or voting rights through entities or legal arrangements.
Where the beneficial owner cannot be identified, the rules refer to the individual exercising effective direct or indirect control. If that is also impossible, the individual managing the relevant entity or legal arrangement is considered. Companies must provide the CBE with the measures and correspondence used to establish the beneficial owner, along with any requested documents.
Approval also depends on adequate financial capacity and relevant experience, verification of funding sources, preservation of competition, and ensuring that the applicant’s objectives and management plans do not adversely affect the company or its customers.
Applicants must also have no final conviction for offenses involving honor or integrity, or offenses covered by Central Bank and Banking System Law No. 194 of 2020 and its amendments or the Anti-Money Laundering Law No. 80 of 2002.
Companies must notify the CBE within 15 days of ownership changes, including holdings exceeding 10%, changes of 5% in ownership, effective control and changes in the beneficial owner. They must also maintain a shareholder register containing identification and ownership details for shareholders and beneficial owners holding more than 10% or exercising effective control, update it within 15 days of learning of any change, and submit the shareholder structure to the CBE twice a year.