Business Sector Min.: Egypt Plans to Upgrade Public Sector Companies

Dr. Hisham Tawfik, Minister of Business Sector, said that the state is conducting a comprehensive development process for the public sector companies, in order to stem losses and turn them into gains in the future after completing the huge reconstruction process.

Dr. Tawfik added, during his speech to the Economic Affairs Committee at the House of Representatives (HoR) headed by Ahmed Samir, today, that his ministry will discuss with the Prime Minister the draft law to amend some provisions of the Law No. 203 Public Business Sector Companies issued in 1991.

Dr. Tawfik stressed that the establishment of any new company, affiliated with the public sector, will not be allowed until a feasibility study has been drawn up to show the extent of its economic importance to make sure that it really serves one of the state's sectors.

The minister explained that during the fiscal year 2017/2018, the number of losing companies reached 48.

Assets of those companies amount for EGP 16 billion pounds in addition to EGP44 billion of debt. The companies were allowed to continue their losses over many years although they do not have the ability to pay these debts until now.

The minister revealed that the debt of some companies has reached billions, pointing out that the new legislation set a new mechanism for dealing with losing companies by presenting the matter to shareholders.

In the event of losing half of the capital, the shareholders have two options, the first one linked to pump new funds to the company, not to leave debts accumulating. The second option means the shareholders should take a decision to liquidate the losing company or merge it with another company.

The minister added that the government won't establish new companies to be losing in the future, emphasizing that the amendments of the Law of the Business Sector aimed at activating competition between the public and private sectors.

He explained that the amendment gives more freedom to the public sector to compete with the private sector and tackle a large squeeze.

He said that there is a lot of funds were spent to pay off the huge debts of the losing companies and to develop them to compete in all industries such as spinning, weaving, transportation, foreign trade, tourism, hotels, medicine and construction.

He indicated that the amendments achieve the sustainability of development as the state cannot spend billions of pounds in order to make the companies continue to lose in the future. The new plan guarantees the sustainability of development of the public sector companies.

He went on to say that the establishment of any companies will not be allowed without having a real feasibility study to reassure serving a sector that the state needs, adding: "if a newly established company loses its capital, the government either pumps new capital, closes, or merges that company with another sector."

The Minister of Business Affairs explained the philosophy of Article 3 of the law, making clear that this article aims to define terms of reference for both the chairman and managing director so that the board of directors does not turn into a mere subordinate or an instrument for the chairman of the company.

The new article achieves balance so the members of the board of directors are not considered as employees of the Chairman of the Board of Directors.

Article (3) provides that the management of the holding company shall be assumed by a board of directors that will be formed by a decision made by the general assembly.

The chairman proposes a nominee who will take the helm for three years and would have another term, provided that the formation reflects the ownership rights of the company.

The board of directors consists of an odd number of members determined by the charter of the company.

The board should not comprise less than five members and not more than nine ones.

It must be formed as follows: a non-executive chairman of the company's board of directors and members representing the company's shareholders according to the company's ownership structure taking into account the proportional representation rules determined by the executive regulations.

A member represents the Ministry of Finance appointed by the general assembly without prejudice to the authority of the legal person contributing the company to change its representatives during the term of the board.

The board also includes a representative of the trade union who will be chosen by the union's board of directors taking into account the nature of the company's activity.

The company's basic system must include additional independent members with experience in the board of directors, whose number does not exceed two ones and must be chosen by the general assembly based on the nomination of the competent minister.

Both a chairman and the members of the board of directors are not considered as employees for the company.

The decision of forming the board determines the members authorized to the administration.

The general assembly determines annually the fees and allowance of attendance of the chairman and members of the aforementioned board as well as the salaries and annual remuneration that the board of directors deserves.

The minister also provided an explanation of the amendments that occurred in the employees profits file, explaining the worker takes profits and his right comes before the shareholder.

The fourth paragraph of Article 32, , which the Minister spoke about, says it is permissible by the company's system to set aside a certain percentage of the net profits to be create other hedge funds provided unveiling the reasons for its formation and they be approved by the general assembly.

Article 33 stipulates that the company's employees shall have a share in the distributable annual profits according to a decision of the general assembly based on the proposal of the Board of Directors.

The rate of distributable profit should not be less than 10% and not more than 12%. The employees must get their quotas of profits in cash.

Article 34 stipulates that the basic regulations of the company should indicate how to determine and distribute the remuneration of members of the Board of Directors.

It is not permissible to estimate the remuneration of the board of more than 5% for holding companies and 10% for subsidiary companies, and that is from the company's annual distributable profits minus 5 % of the paid-up capital.