In 2006, Jim Wright, Ahmed El Sharkawy and Karim Sarhan established Sharkawy & Sarhan. Their extensive experience and different backgrounds, combined to create a firm set up to provide high quality business law services. The Firm extended rapidly to become one of the leading firms in Egypt.
Sharkawy & Sarhan have acted on some of the largest and most complex transactions in the Egyptian market. As an independent law firm, we work together with the leading international law firms, which do not have presence in Egypt, to represent clients in trans-border transactions and matters. We are the best friend firm for most of the Magic Circle and Silver Circle firms. Through our excellent working relationships with leading international law firms, we provide seamlessly an integrated legal service to international clients. This is facilitated by the fact that many of our lawyers have worked at international law firms and had foreign legal training and education.
We are the Egyptian general corporate counsel to major companies including Nestle, Orange,BG, RWEDea, Shell, Showtime, Huntsman, Kohler,Ace Life Insurance, DuPont, EFG-Hermes, Suez Canal Container Terminals (subsidiary of Maersk) and Titan Cement. We are one of the two firms on the IFC panel for Egypt.
We offer the following:
A principled approach to the practice of law, including a commitment to integrity and confidentiality, and a scrupulousness regarding conflicts of interest to be expected of a leading trans-border firm.
Detailed knowledge of Egyptian law and its practical application in a business context. Our lawyers up-to-date on the latest developments in their areas of law.
A wealth of experience working with major global companies on complex transactions.
A proactive, pragmatic approach and a “hands-on” mentality to identify issues and solve problems.
A high degree of responsiveness from senior lawyers, in the time periods required to the particular needs of the client.
A continuous training program for all staff, designed to ensure that our people have the most recent legal knowledge and skills required to deliver a high quality service.
Sharkawy & Sarhan Advises Societe Générale on the Sale of its Egyptian Subsidiary
Sharkawy & Sarhan (“S&S”) advised Societe Générale on the sale of its entire stake in its listed Egyptian Subsidiary National Societe Générale Bank (“NSGB”) to Qatar National Bank. The value of the transaction amounted to USD 1.97 billion for the stake of Societe Générale which represents 77.17% of the shares of NSGB. The transaction is expected to be one of the largest transactions in Egypt this year.
S&S role included advising on and negotiating the Egyptian law aspects of the Share and Purchase Agreement, assisting in the legal due diligence, advising on the mandatory purchase offer requirements under the Capital Market Law, preparing the documents required for executing the transaction and obtaining the approval of the Egyptian Financial Supervisory Authority and the Egyptian Stock Exchange, and dealing with various regulators.
S&S role also includes advising Societe Générale on selling its stake in other non bank subsidiaries.
S&S team on this transaction included partners Ahmed El Sharkawy and Karim Sarhan, senior associate Radwa Sarhan, and associates Heba Raslan, Ahmed Farghal, Yosr Hamza and Esraa Abdelmoniem.
Allen & Overy acted as international counsel for Societe Générale.
This publication is intended for general guidance only. It is not intended to render professional legal advice. No reader should rely on any information contained in this publication. In case you have any questions on issues reported here please send an email to Radwa Sarhan (email@example.com), or Karim Sarhan (firstname.lastname@example.org). If you do not wish to receive this newsletter please let us know and we will remove you from our mailing list.
Recently, EFSA has taken a rigorous approach regarding the issuance and conversion of foreign depository receipts (“FDRs”) (including GDRs and ADRs). This came after the recent acquisition involving the Global Depository Receipts (“GDRs”) of Orascom for Construction and Industries (“Orascom”) by a Dutch company – OCI N.V. in consideration for a share swap to GDRs holders of OCI N.V. shares. EFSA issued three new decisions regulating FDRs in a stricter manner. Our reading to the new decisions suggests that recent transactions involving FDRs, in particular the acquisition of the OCI Egypt GDRs, has highlighted the rather scant regulatory regime of the FDRs corresponding to the shares listed on the Egyptian Stock Exchange (“EGX”).
EFSA has based its measures on three axes with a view of maintaining more control over FDRs and avoid structures utilizing EFSA’s lack of control over cross-jurisdictional FDR transactions.
First, Limiting the Maximum Portion of the Share Capital of an EGX Listed Company Traded in the Form of FDRs :
The board of EFSA issued its decision no. (8) (27 February 2013) providing that FDRs must not represent more than one third of the share capital of the issuing listed company. Speculations suggest that this decision has been in response to the recent acquisition by OCI N.V. of the OCI Egypt GDRs which utilized a structure where more than 75% of the share capital of OCI Egypt was acquired offshore in the form of GDRs outside EFSA’s supervision or control.
The issuance provisions of the decision explicitly state that it will come into effect as of the day following its publishing in the official gazette. It does not address, however, how the EGX will apply the new limitation to existing listed companies that already have listed FDRs in excess of one third of its issued capital.
Secondly, Restricting Egyptian Brokers and Portfolio Managers to Execute FDRs Trades only Through EFSA Pre-approved Brokers :
The board of EFSA issued its decision no. (9) (27 February 2013) requiring Egyptian brokerage companies to obtain a special license to trade in FDRs on behalf of their customers. These licensed brokers must abide by additional compliance and reporting obligations to obtain and maintain the FDRs trading license. Brokerage companies that do not have this special license from EFSA are absolutely banned from dealing in FDRs, whether directly or by using one of the EFSA pre-approved brokerage companies. Furthermore, Egyptian portfolio management companies are banned from making any trades over FDRs except through an EFSA pre-approved brokerage company.
The objective of this decision is to limit the Egyptian pipeline for FDR trades to be only through the EFSA pre-approved brokers that are subject to the additional compliance and reporting requirements enabling EFSA higher degree of supervision, tracking and control over the FDR trades coming out of the Egyptian market.
There is no explicit grace period for compliance with these new rules. In addition, the issuance provisions of the decision explicitly state that it will come into effect as of the day following its publishing in the official gazette, and hence it will take immediate effect.
Thirdly, Rules for Issuance and Conversion of FDRs Corresponding to EGX Listed Shares :
It was announced on 3rd of March 2013 that EFSA has circulated to both the EGX and the Egyptian central depository (Misr for Central Clearing Depository and Registry – “MCDR”) rules for issuance and conversion of FDRs corresponding to shares listed on the EGX. The circular is not published, but there is a press release on the website of EFSA briefing the salient principles set out by these rules. These new rules impose several controls targeting the issuing company, the offshore depository bank, and its local agent/custodian. These new controls revolve around imposing reporting, disclosure and compliance obligations on the issuing company, the offshore depository bank and its local agent/custodian.
Pursuant to Chapter 12 of the Executive Regulations of the Capital Market Law no. 95 for 1992 (the “Takeover Rules”), any purchaser who acquires or wishes to acquire one third of the share capital or voting powers of a public company, either directly or indirectly, is mandated to submit a mandatory tender offer (“MTO”) for all the shares of the target public company. In practice, EFSA and the EGX were using their authority to block any transaction that will result in exceeding the aforementioned thresholds until an MTO is made. Recently, EFSA was alerted to a gap in the Takeover Rules, whereby it was possible for a purchaser to acquire the majority of the shares of a public company by acquiring its offshore traded FDRs while the MTO is made only as a post acquisition step. The purpose of the new rules is to ensure that EFSA can impose an MTO prior to the acquisition of one third of the share capital or voting powers of a public company.
Accordingly, the recent rules referred to in the EFSA press release were issued specifically to fill in the regulatory gap in connection with offshore acquisition structures involving FDRs including, inter alia:
acquisitions through purchase offers on FDRs shall be ineffective, where the FDRs must first be converted into shares in order for the purchase offer to take place directly on the ordinary shares;
in case of acquisition on the FDRs, the depository bank and its local agent/custodian will have to keep the shares corresponding to the issued FDRs and will have to abide by the Takeover Rules before executing any conversion; and
MCDR will have to stop the registration of transfer of ownership and settlement of any transactions executed in breach of the Takeover Rules and will have to notify EFSA and the issuing company of the same.
Given that the language of the new rules for FDRs issuance and conversion are not yet available, the above are only the broad principles that were summarized in EFSA’s statement without much detail on the mechanisms of application thereof.
Although it is not yet clear how the abovementioned decisions/regulations will affect the acquisition transaction of OCI Egypt and the prospected mandatory tender offer for the remainder of its ordinary shares listed on the EGX; the ultimate effect of the rules is that it will not be possible to adopt a similar acquisition structure as the one followed in the OCI Egypt deal in the future.
This publication is intended for general guidance only. It is not intended to render professional legal advice. No reader should rely on any information contained in this publication. In case you have any questions on issues reported here, please send an email to Ahmed El Sharkawy (email@example.com), Amr A. Abbas (firstname.lastname@example.org), or Mohamed Nabil (email@example.com).