Changing the legal form of companies (converting them)

A very important question is constantly asked: Is it permissible to turn an individual enterprise into a company

Answer: of course, it is not permissible to turn an individual enterprise into a company, but there is only one case, which is the death of the owner of the enterprise and the entry of his legitimate heirs as partners in a de facto company

The other topic is the transfer of entities or companies to other entities and changing their legal form

Here we will put on the research table the cases of converting companies and changing their legal form :

* Companies of persons (recommendation or solidarity) : it is permissible to switch between them from recommendation to solidarity and vice versa, provided that there are no contraindications that prevent changing the status of the recommended partner to solidarity

There is no objection to converting people's companies into money companies of both types, but there are some controls that must be observed such as :

- Evaluation of economic performance

- The number of partners is not less than 2 and not more than 50 partners .

- The liability has no minimum capital, the administrator is a director of the company .

- The number of shareholders shall not be less than 3 shareholders without a maximum limit .

- Its issued capital is not less than 250 thousand G .there are some companies in which the capital may increase.

- Shares are issued through the Financial Supervisory Authority, and shares are traded through the stock exchange.

- Management-based board of directors .

- Other than the registration in the central custody and Egypt for clearing

There are two cases :

The first case : either the company owner wishes to dispose of part of the capital, and the procedures for disposing of part of the company's capital include notifying the authority in advance of disposing of part of the capital, by the decision of the company owner, and undertaking to complete the disposal procedures within a period of 90 days, provided that the company's under liquidation is a sentence.

The second case : the death of the owner of the company and the reconciliation of its status and the agreement of the heirs to change its legal form and turn it into a liability or contribution, and the consent of the heirs to reconcile the status of the company by changing its legal form according to their agreement is within 6 months from the date of death.

There are two cases :

The first case : either by the desire of the partners to submit an application and evaluate the company to enter a new partner or partners in the company and change its legal entity from liability to a contribution,

The second case : if the number of partners exceeds 50 partners, the death of a partner or the sale of a partner's share to more than one buyer .

** The procedures for changing the legal form are similar to the procedures for transferring companies of persons

* The last and unique case is the change of the legal form from a joint stock company or a limited liability company or a recommendation of shares to a one-person company, if the number of founders or partners is reduced according to the minimum required according to the text of law 159 of 1981 amended by law 4 of 2018

The General Authority for investment said in its periodic book that this case applies if the necessary quorum for the number of founding partners is less than three in joint stock companies, or two in limited liability companies and recommending shares, and the company does not initiate within 6 months at most to reconcile its situation by completing the necessary quorum, and the remaining partners request to convert it into a one-person company.

With the availability of the following conditions for changing the legal form of a one-person company :

- The remaining number of shareholders allows changing the legal form of this type of company.

- The reason for the partner's exit should be the trading of shares and the transfer of ownership to only one shareholder in joint-stock companies or the devolution of all shares of the company in the hands of one heir, or the sale of shares to one partner so that this partner owns all the shares of the company, or the death of one of the partners and the refusal of the heirs to continue as partners in the company and settle their status with the remaining partner.

- Failure to complete the number of legal partners that must be available by entering the partner or shareholders of the company during the reconciliation period, which is 6 months at most.

- The remaining partner should request to change the legal form of the limited liability company to a one-person company, provided that the remaining partner is not a one-person company.

- The activity of the new company should not be one of the activities prohibited for one-person companies to practice.

- Obtaining the approval of the prime minister or the competent minister, as the case may be, to transform the company into a one-person company if the remaining shareholder or partner is a Public Law person.