Dr. Mohammed Omran – FRA’s Chairman announced the issuance of a decision by FRA’s Board of Directors in its last session. The said decision sets the rules for granting licenses to companies operating in non-banking financial activities. The decision stipulates that approving the establishment or granting license for operating companies will be in light of the market need and based on a market study adopted by FRA’s Board of Directors or introducing new products or developing existing products, as the case may be, and taking into account the availability of other requirements to be complied with in accordance with the legislation governing each activity.
He added that FRA’s BOD decision no. 53 of 2018 obligates companies wishing to obtain preliminary approval to be established or to obtain a license to engage in a non-banking financial activity to submit the company’s technical and economic feasibility study and the products or services it provides. In addition, its founders shall include legal persons not less than 50% of the company’s capital. Also, the percentage of the financial institutions in the company’s capital shall not be less than 25%. As for the companies operating in securities and in the activity of rating and classification of securities, the percentage of the shares owned by international entities in the field of ratings shall not be less than 10% of the capital. In addition, the requirements related to Company’s ownership structure will remain one of the conditions for the continued license of Companies engaged in non-banking financial services.
The Board’s decision also obliges companies wishing to obtain initial approval or license to complete the establishment procedures within a period not exceeding six months from the date of FRA’s approval. Besides, the Authority may extend this period for a further period of three months. The company shall start its activities, complete the needed supplies , assign the team work and actual commencement of the activity within six months at most from the date of obtaining the license and may be extended in the light of the company’s submission of justifications accepted by the Authority otherwise the initial approval or license was deemed not to be.
The Authority has stipulated that the legal person who may participate in the establishment of companies operating in non-banking financial activities , as well principal shareholders or board members shall not be subjected to any criminal proceedings in respect of any of the crimes stipulated in the laws and regulations governing FRA’s activities or having final judicial rulings in any of these crimes – and the crimes stated by the Central Bank Law or the Anti-Money Laundering Law during three years preceding establishment request unless it has been reconciled. In addition, the experience and conditions related to Board members or those responsible for company’s management shall be met for continuing the license of the company engaged in non-banking financial services.
FRA’s Chairman noted that the decision placed a commitment on every natural or legal person who owns 5% of the capital or voting rights of one of the operating companies to notify the Authority within two weeks from the date of his ownership of this percentage. The Authority also prohibited the natural person – without inheritance or will – to acquire 10% of the issued capital of the company operating in non-banking financial activities or voting rights by increasing its ownership by 5% and its multiples thereof only after obtaining the prior approval of the Authority. Also, the said decision stressed that it is not permissible to transfer the ownership of the shares of the operating companies in a period starting from the date of establishment until granting the license without the prior approval of the Authority and the new shareholder shall meet the same requirements.
Requests for transfer the ownership of shares of operating companies shall be submitted to the Authority together with a number of amendments, such as the disclosure of the final beneficiary of ownership, any agreement or coordination between natural or legal persons concerning exercising their rights in the General Assembly or the Board of Directors of the company in question of ownership besides a statement of qualifications and experience of the natural persons. In case of ownership requests with a percentage of 25% or more of the capital or voting rights. A future investment plan and company’s directions shall be submitted in relation to the company’s management and the policy it intends to pursue in managing its affairs as well as the objectives of the ownership. The Authority is keen to verify the CV of the applicant’s behavior in the foreign market if it is a bank or a foreign financial institution , then it must submit a proof that it is subjected to the supervision of the regulatory authority ( like the Central Bank of Egypt or FRA ) in the country where the main headquarter is located . Also, sanctions and measures certificate shall be submitted and it shall be signed by the regulatory body in which the legal person requesting ownership is subjected to in event of being a foreign bank or a foreign financial institution.
Dr. Omran explained that the seventh article of the said decision reveals the determinants that are taken into consideration upon deciding on ownership requests , including the availability of elements of eligibility, competence and practical experience in the field of the company’s work in light of the percentage of ownership required for natural persons, besides the percentage of the applicant and associated parties in the company to be acquired and other companies operating in the same activity and the impact of this on the control in light of the percentage of required ownership, in addition to the issuance of final judicial rulings against the applicant to declare bankruptcy or conviction of a crime or by one of the offenses restricting freedom stated in the laws under FRA’s supervision , the law of the Central Bank, the banking system and the AML / CFT law. Also, FRA shall conduct investigations or requests to initiate criminal proceedings for serious violations of the laws under FRA’s supervision whether against the natural person who demanded ownership or against the Chairman of the Board of Directors or the Managing Director of the company seeking ownership.
In all cases, the approval of FRA’s Board of Directors shall be obtained in case of ownership requests for a person and his related group of a company representing 10% or more of the market size for any activity, this is in case the acquisition percentage is for one third of the capital or half of the capital or two thirds of the capital or three quarters of the capital or voting rights, where the market size of each activity is calculated according to the latest annual data prior to the ownership request