2001年-世界发展银行全球_Corporate_Governance_Country_Assessment___Arab_Republic_of_Egypt_47页_427kb

Corporate Governance Assessment of the Arab Republic of Egypt (ROSC Report - September 2001)

Core Content Overview

This report is part of the World Bank-IMF Reports on the Observance of Standards and Codes (ROSC) program, benchmarking Egypt's corporate governance system against the OECD Principles of Corporate Governance. The assessment was conducted as an assisted self-assessment under the supervision of the Ministry of Economy and Foreign Trade (MOEFT) and involved various stakeholders, including the Capital Market Authority (CMA), Cairo and Alexandria Stock Exchange (CASE), Misr for Clearing, Settlement & Central Depository (MCSD), and legal, accounting, and auditing experts.

The report highlights the need for improvements in corporate governance in Egypt, particularly in areas such as disclosure of ownership and control structures, financial and non-financial information, regulator and private sector capacity building, effectiveness of shareholders' meetings, board of directors practices, and auditor professionalism.

Main Areas of Practice

A. Capital Market Overview

• The Cairo and Alexandria Stock Exchange (CASE) operates with two trading floors and three listing tiers.
• 87% of listed companies are on the unofficial tiers, mainly due to more flexible requirements.
• As of 2001, there were 1,076 listed companies, with 659 active in 2000.
• The market capitalization increased significantly from LE 10,804 million (1992) to LE 119,734 million (2000), representing 36.8% of GDP.
• Nine companies are traded abroad via Global Depository Receipts (GDRs), mostly in London and Luxembourg.
• 13 mergers and 83 acquisitions have taken place since 1996, with over one-third of acquirers being international.

A2. Legal, Regulatory Framework and Professional Bodies

• Corporate laws are based on French civil law, with increasing influence from Anglo-American common law through the Securities Depository Law and the proposed Capital Market Law.
• Key laws include:
  • Capital Market Law (CML 95/1992): Regulates the capital market and stock exchange.
  • Central Depository Law (CDL 93/2000): Supports shareholder record keeping, clearing, and settlement.
  • Companies Law (CL 159/1981): Governs joint stock companies, partnerships limited by shares, and limited liability companies.
  • Investment Law (IL 8/1997): Offers tax exemptions for investment in specific sectors.
  • Public Business Sector Law (PBSL 203/1991): Mandates the privatization of 314 public sector companies.
• The new Capital Market Law is expected to enhance minority shareholder rights, introduce class action lawsuits, and increase penalties for insider trading.
• The Capital Market Authority (CMA) is the regulatory body, reporting to the Ministry of Economy and Foreign Trade (MOEFT). It has 250 staff and is responsible for market oversight, enforcement, and legal implementation.

A3. Registration and Listing Requirements

• Companies must apply to the CMA for review before listing.
• The prospectus must be published in two morning dailies and distributed to shareholders.
• There are three listing tiers: official, unofficial schedule 1, and unofficial schedule 2.
• Public sector companies are automatically listed on the official schedule, while foreign securities are listed on the unofficial schedule.
• The unofficial schedule is preferred by 87% of companies due to more lenient requirements.

A4. Ownership Structure

• Domestic retail investors account for 51%, domestic institutional investors for 22%, and foreigners for 27%.
• The majority of foreign holdings are by UK and US investors.
• The government remains a majority shareholder in 16 companies and retains residual stakes in 25 privatized companies.
• Employee shareholdings of 5–10% are common in privatized firms.
• Pyramid structures and cross shareholdings are prevalent, often leading to concentrated beneficial ownership.

B. Shareholder Protections

B1. Basic Rights

• Listed shares are freely transferable.
• 62% of shares are materialized, but 93% of trading is dematerialized.
• Shareholders have the right to inspect balance sheets, profit and loss statements, and auditors' reports for the previous three years.
• Investor relations officers are not common, but senior officers handle external queries.

B2. Shareholder Meetings and Capital Structure Disclosure

• Annual General Meetings (AGMs) must be held within six months of the previous financial year.
• Summaries of financial statements and auditor reports must be published or sent to shareholders 15 days before the meeting.
• Quorum requires at least one quarter of capital represented.
• Shareholders representing 5% of capital can add items to the agenda up to three days before the meeting.
• Extraordinary meetings can be called by 10% of share capital or the board.
• Postal ballots are not permitted, and proxy voting is limited to 10% of total shares and 20% of represented shares.
• Voting is secret in certain cases, such as director elections or major shareholder requests.

B3. Equitable Treatment and Statutory Remedies

• The legal framework allows for multiple share classes, with equal treatment within each class.
• Bearer shares are limited to 25% of total capital and must be fully paid up.
• Preference shares have dividend and liquidation privileges, but non-voting preferred stock does not exist.
• Shareholders representing 5% of capital can request revocation of resolutions that unfairly benefit a group.
• Complaints can be filed with COOR and CMA for statutory remedies.
• Disputes are referred to arbitration, with final decisions typically made within 30 days.
• Litigation is costly and slow, often taking over four years.

B4. Participation in Fundamental Corporate Decisions

• Certain decisions require a two-thirds majority, including:
  • Granting distinctions to existing shareholders before a capital increase.
  • Disapplication of pre-emptive rights.
  • Adding to the corporate objective.
• A 75% majority is needed for:
  • Capital increases or reductions.
  • Changing the corporate purpose.
  • Prolonging or shortening the company's life.
  • Deciding on dissolution or merger.

B5. Market for Corporate Control

• Acquisitions resulting in 10% or more ownership require two weeks' notice to the company.
• The company must inform shareholders with 1% or more or publish the information in two newspapers within one week.
• The transaction must be completed within one month.
• If ownership exceeds 20%, a tender offer must be issued to all shareholders.
• The offered price must be at least the average closing price of the previous week.

B6. Insider Trading and Self-Dealing

• Insider trading is not specifically addressed in law, but is punishable under CML 95 Article 64.
• Penalties include fines of L.E. 20,000–50,000 (US$5,000–13,000) and prison terms of up to two years.
• The CMA and CASE jointly monitor insider trading and self-dealing.
• In 2000, 60 out of 330 trade cancellations were due to insider trading.
• Price manipulation can lead to suspension of trades and revocation of transactions.

B7. Related Party Transactions

• Directors and managers must disclose material interests in transactions, even if not executed.
• Disclosure is required in notes to financial statements.
• The board must notify the AGM of any related party transactions.
• Insufficient information exists on expropriation through below-market transfer pricing or intercompany asset transfers.
• Minority shareholders are often at risk of expropriation due to concentrated ownership.

C. The Role of Stakeholders in Corporate Governance

• Employees have the right to participate in profits (up to 10% of profits or one annual salary).
• Employee committees are used to handle employee-related matters, rather than direct board representation.
• Bond holders can form bond holders' associations (BHAs) and elect a legal representative to attend AGMs.
• The unified labor act (May 2001) and environmental law (1994) provide protections for employees and the environment.

Key Findings and Recommendations

• The Egyptian corporate governance system is still evolving.
• Disclosure of ownership and control structures is inadequate.
• Financial and non-financial disclosures need improvement.
• Capacity building for regulators and the private sector is essential.
• Shareholder meetings are not always effective.
• Board practices require reform.
• Auditor professionalism is not fully aligned with international standards.

Conclusion

The assessment identifies six key areas for improvement in Egypt's corporate governance framework, emphasizing the need for greater transparency, better legal protections, and enhanced stakeholder involvement. The proposed Capital Market Law aims to address many of these issues, particularly in enhancing minority shareholder rights and strengthening disclosure mechanisms.