International companies planning to boost their global profile can set up a subsidiary overseas to “test the market”. But establishing a presence in a foreign country can be costly both in time and money. The risks come without any guarantee that the effort and financial outlay will bring success.
Egypt’s strategic location, which includes control of the globally-vital Suez Canal, attracts companies and corporations worldwide. Foreign entities must set up a subsidiary to hire staff there and operate payroll. The typical choice is a limited liability company, which generally protects the parent company and its shareholders from liability. The subsidiary complies with the Companies Law and Investment Law and needs approval from the General Authority for Investment and Free Zones (GAFI). However, expanding overseas is a significant step. If the move fails, companies face the extra expenditure and stress of closing their operation, selling property and paying off employees. It is easy to stumble while chasing two objectives – advancing your company at home while crossing the world into new territory.
The sensible alternative is to use a Professional Employer Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to locate the finest local talent and administer your payroll in Egypt. Your company will be up-and-running in days rather than weeks or months without any risks.
Companies planning to establish their presence in Egypt must decide on the business structure best suited to their vision for expansion. A popular choice is setting up a subsidiary as a limited liability company, which operates under the Companies Law and Investment Law after obtaining approval from the General Authority for Investment and Free Zones (GAFI).
In general, procedures and requirements for setting up a limited liability subsidiary include the following:
After incorporating the subsidiary, the employer must undertake other procedures to comply with payroll regulations. Essential requirements include:
A significant benefit for international companies establishing a subsidiary is that it is a separate legal entity from the foreign parent corporation. The parent company’s liability is generally restricted to the invested share capital; neither is it responsible for any debts or liabilities. The same applies to its shareholders, founders and members, whose liability is also confined to their contribution to the capital.
Establishing a subsidiary needs approval from the General Authority for Investment and Free Zones (GAFI) and is regulated under the Companies Law and Investment Law.
The subsidiary provides the parent company with the potential for further expansion throughout Middle East North Africa (MENA) region, the Mediterranean and the Near East and as a stepping stone into other regional economies. Additionally, the subsidiary can ‘test the market’ by following its business ideas and entering into different areas of operation for the owning company. The subsidiary can also draw up contracts and agreements independently with clients.
Other benefits for a subsidiary:
However, there is a more straightforward option to bypass the risks and costs of setting up a subsidiary in Egypt. Using a global PEO such as Bradford Jacobs means staff can be sourced, placed in their roles and be up and running within days rather than months. All the payroll, taxation and compliance difficulties are under control thanks to our EOR services.
Companies registered in Egypt are regulated by the Companies Law and Investment Law and need approval from the General Authority for Investment and Free Zones (GAFI). The Financial Regulatory Authority (FRA) must also give consent and permission if involved in the capital market.
The Companies law dictates that various procedures must be completed in establishing a limited liability company (LLC) as a subsidiary, including:
Registration and Documentation:
Accounts and Taxation:
For more information, download our free guide or get in touch with our consultants here