Capital requirements, shareholder structure and SPAC founders’ regulatory responsibilities were announced, as well as changes to the rules for listing and delisting of securities on the Egyptian Exchange (EGX)
Only 3 weeks after its announcement that it allow the establishment and licensing of special-purpose acquisition companies (SPAC), Egypt’s Financial Regulatory Authority (FRA) has released the official rules and regulations for SPACs.
Capital requirements, shareholder structure and SPAC founders’ regulatory responsibilities were announced, as well as changes to the rules for listing and delisting of securities on the Egyptian Exchange (EGX) that will support SPACs entry into the exchange.
To establish a SPAC, investors must obtain a venture capital license. Afterwards, a board of directors will need to be appointed, with a chairman who complies with the FRA’s regulations and guidelines for private equity firms.
The company can then raise capital from other investors before listing on the EGX and placing the funds raised into an interest-bearing bank deposit for a maximum of two years while it looks for a company to acquire or merge with.
Minimum capital requirements are EGP 10 million, with Head of FRA Mohamed Omran adding that SPACs must commit to increasing its capital within a month from the date of its registration with the authority to issue shares and begin raising capital.
To complete an acquisition or merger, Egyptian SPACs must have at least EGP 100 million in capital, a minimum of 80% of the SPAC’s capital must be used to acquire a target company.
Until they merge with a target company, SPACs will be exempt from some of the measures imposed on listed companies, including requirements to submit financial statements.
Omran explained in a statement that at least 25% of a SPAC’s shares (pre-merger) must be held by institutional investors, with sponsors holding at least 5% of the company’s equity post-fundraising and committing at least EGP 10 million in capital.
Founders’ ownership structure and determined the percentage of legal persons’ ownership to not be less than 50% of the company’s capital.
Companies targeted for SPAC acquisition are required to meet EGX’s rules for listing, while emerging companies in tech, innovation and digital technologies are exempt from the provisions of items (5, 7, 8) of Article (7) of the rules for listing and delisting securities in the stock exchange.
If the SPAC fails to close an acquisition within the two-year window, it is liquidated and the funds are returned to investors along with any gains made while they were deposited.