Question time, therefore, it will not fully

Question 2a.

    In thecontext of the Employment Law, what are the differences between a contract of employmentand a consultation contract? If you were to join a company, which one would youprefer and why?a.     Startingoff simply, an employee is paid a wage or salary while a consultant is paid afee. Employees are under the supervision of the boss while consultants are not.Although working as a freelance consultant has its benefits in terms offlexibility, it lacks in job security and otherbenefits such as social insurance or pension contribution. Employees aresubject to a maximum of 8 hours a day, 6 days a week and are given 21 daysholiday in the first year of employment. They also benefit from medical andsocial insurance.

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Termination of an employee is restricted and can only be sentafter an attempt to reconcile. According to the Egyptian Business Law manual, “Since the enactment of LawNo. 231/1996 it is no longer necessary for Egyptians to obtain a special workpermit from the Ministry of Interior in order to work at representation officesand branch offices of foreign companies.” In terms of termination, it isdifficult for employers to fire an employee which makes it secure for theemployee. However, in order to get around this issue, employers hire employeeson a short-term basis where at the end of the short term agreement they areable to renew the contract if they see the employee is fit. b.

     In my opinion, working whether as aemployee or consultant would depend on my age at the time of employment. Firststarting out as a college graduate, I would prefer more job security over theflexibility that cme with being a consultant. Unfortunately, a recent trend inEgyptian labor contracts, contracts are mainly set for a definite period oftime, therefore, it will not fully give me the job security that I would hopefor but working as an employee will give me other benefits such as socialsecurity and During the later stage of my life, after I’ve worked a big portionof my life I would like to work as a consultant, as it gives me the option ofjob flexibility and I would work under the supervision of a boss.  b.               Alphais going to enter into an agreement with Beta for the sale of Auto Parts, whichdictates that Beta is to send Alpha 100 Spare parts in exchange for 10000 USDeach month. Alpha comes to you for advice and informs you that he would like toavoid the Court System and therefore he would like for any disputes to besettled by Mediation, he further informs you that he wants to do so in order tohave a judgment issued rapidly in case of a breach by Beta.  Please Advise.a.

    Mediationis a structured negotiation process in which an independent person known as amediator assists the parties to identify and assess options and negotiate anagreement to resolve their dispute. The mediator is able to provide advice toboth parties, however the mediator is not able to impose a decision to theparties involved (as it is a non-binding ADR). The concept of mediation is opento any contract and is of lower cost than going into the court system. Bymediating, both parties are able to save both time and money. Mediation alsooffers both parties more control over the outcome or suggestion, as it willoffer both parties the ability to find middle ground and compromise. Moreimportantly, the idea discussed within the session are confidential and if thecourt is involved in a later stage, the judge will not be informed of theinformation discussed within the session. If Alpha chooses to avoid the courtsystem as he wishes to avoid laws in the constitution, then he should insteadset an arbitration clause and state the area that he seems appropriate.

Arbitrationalso comes with the benefit that the arbitration agreement is seen separatelyfrom the rest of the contract (autonomy of the clause).   Question 3Question:ABC is an LLC formed by two members; A (an Egyptian Citizen) and B (FrenchCitizen) with a capital of 100,000 EGP. Due to some disputes between Mr. A andB Mr B comes to you for advice.

The contribution of each member is 50,000EGP.  ABC LLC is looking to purchase aplot of Land in the East Desert (not suitable for agriculture) for storagepurposes. This land is crucial for the company due to its position and isneeded to satisfy the company’s needs.a.        Is thispermissible under Egyptian Law?b.

               Mr. Bcomes to you for advice, what would you recommend to Mr. B regarding thisissue? Are there any considerations to keep in mind regarding this ownership?Answer:Thereare three laws governing the acquisition of land by foreign entities. Under Law143 stipulates, foreign entities are limited in freedom to the area available, andin this case as a foreigner, you are constrained by the number of “feddans” youare allowed access to. Unfortunately, land acquisition is available if and onlyif the foreigner owns at most 49% of the company. This restriction willcontinue on after the land has been acquired, therefore, even after buying theland you cannot change the ownership structure where the foreigner owns morethan 49% of the company.

In the circumstance where the company is liquidatedthe plot of land must go into the hands of the Egyptian partner. According toReuters, “The initial investment law stipulates investors get back halfof what they pay to acquire land for industrial projects if production beginswithin two years, and provides a 50 percent tax discount on investments made inunderdeveloped areas.” Althoughthis is good news for foreign investment, this only accounts for industrialprojects.

There are a couple options for youto discuss with your partner. The first is apparent, if you are willing tochange the ownership structure to 51-49 then the land you asked for will easilybe acquired. Although this is difficult to ask for it is an option that shouldbe brought up. The second option here is also quite simple and has many benefits.

This option will help if as a LLC you are planning on exporting the items inthe storage space abroad. In this case, you should think about opening up thestorage space in a free zone and enjoying the many benefits that come with thefree zone. A third option is to simply rent out the land for a long period oftime instead of buying it.

This option will help the company go around thetedious laws and regulations against foreign ownership. The World Bank definesfree trade zones as “small, fenced-in, duty-free areas, offeringwarehousing, storage, and distribution facilities for trade, transshipment, andre-export operations.Companiesoperating in a free zone are considered a separate “country” from Egypt, asthey are exempt from Egyptian tax laws, labor laws, company laws andcustoms.  In order to operate within afree zone a company must first register a head office in the area of its choiceoutside the free zone. When it comes to a public free zone, only a 1%administration fee is paid on the value of goods imported or exported.

(Business Law) You canalso take up a private free zone, which will allow you to operate anywhere inEgypt, provided that you meet some prerequisites. The following criteria mustbe met in order for a company to be set up as a Private Free Zone” (1) the”project has already started business”, (2) the exported share of productionamounts to at least 50%, and (3) certain building prerequisites are fulfilled.(Business Law) Within the zone, investorsenjoy duty-free facilities and other benefits, such as fiscal, legal, andadministrative advantages, and sound infrastructure within a limited area.  (Business Law)     


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