First, let us explain the meaning of a Special Purpose Acquisition Company (“SPAC”). An SPAC is essentially a shell company established to acquire companies by purchasing their shares.
This type of company was regulated in Egypt by virtue of the decree of the Financial Regulatory Authority (“FRA”) no. 171 of year 2021 dated November 17, 2021. This newly issued decree regulates the new type of companies, in particular its capital, establishment, and mechanism of acquisition of shares of targeted companies.
The establishment of an SPAC shall be complying with the regulations of the competent Authority to perform activities of venture capital provided that the issued and paid up capital of it shall not be less than EGP 10 million that shall be paid by sponsors
, the investors who incorporated the SPAC.
The decree provided that the acquisition of the targeted company shall take place within two years as of the date of the capital increase without counting the two years required for merger procedure, otherwise, the company shall refund the investment to the investors and the company shall be liquidated.
After the acquisition, SPAC shall be converted from a company targeting a company to a company performing the same activity of the latter.
The most significant advantages of SPACs are as follows:
- Makes public listing of companies easier, as the IPO original estimated time may be much less that public listing through an SPAC. This makes procedures easier and less time consuming.
- Protects the acquisition procedure against any uncertainty triggered in the local market (e.g. COVID-19 pandemic effects on market).
- Give the target company experienced management and enhanced market visibility.
However, in criticizing this type of Companies, we reach the following opinion:
- The reduced degree of oversight from regulators may reduce the degree of protection of investors which may ease the occurrence of fraud.
For any enquiries regarding SPACs or any other company type in Egypt, we kindly ask you to contact email@example.com