Criminal Risks in Corporate Commercial Activities in Egypt: Contracts, Sales, Competition, Taxation, Customs and Licensing

The legal risks associated with commercial activity are not confined to contractual disputes or administrative fines. Sales, supply, invoicing, importation and marketing transactions may give rise to criminal proceedings where the statutory elements of an offence are established. Liability varies according to the conduct, the capacity of the person involved and the applicable legislation. Neither the occurrence of harm nor an administrative violation, in itself, establishes a criminal offence or joint and several liability among all members of management.

This guide examines the Egyptian legal framework and the principal risks facing domestic and international companies. It also outlines practical steps for verifying documentation, responding to suspected violations, managing investigations and pursuing settlements where permitted by law.

First: Legal Characterisation and the Limits of Liability

Four potential legal avenues must be distinguished in relation to a single act: contractual liability for breach of a commercial obligation; non-contractual civil liability for harm; regulatory or administrative sanctions imposed by the competent authority; and criminal liability, which arises only under a statutory provision specifying the punishable conduct and the conditions for attributing liability. Some of these avenues may run concurrently, but establishing one does not automatically establish the others.

As a general principle, liability and punishment are personal. In the corporate context, it is necessary to identify the person who committed or participated in the act, their actual authority, and their knowledge or intent where required by the relevant provision. Special legislation may impose liability or sanctions on legal persons, or liability on the person exercising actual management, subject to specified conditions. Neither joint and several liability nor the conviction of a parent company may be presumed merely because of its economic relationship with an Egyptian subsidiary.

Second: Legislative and Regulatory Framework

Penal Code No. 58 of 1937, as amended: provisions governing fraud, forgery, the use of forged documents and other general offences, provided the constituent elements of each offence are established.
Law No. 48 of 1941 on the Suppression of Fraud and Deception, as amended: applies according to the nature of the goods and the fraud or deception concerned, taking account of sector-specific provisions.
Income Tax Law No. 91 of 2005, Value Added Tax Law No. 67 of 2016, and Unified Tax Procedures Law No. 206 of 2020, together with its Executive Regulations and amendments, including amendments published in 2025 and 2026; the law in force at the time of the relevant event must be consulted.
Customs Law No. 207 of 2020 and its Executive Regulations issued under Decree No. 430 of 2021, as amended.
Protection of Competition and Prohibition of Monopolistic Practices Law No. 3 of 2005, as amended, particularly the regulation of horizontal agreements under Article 6.
Consumer Protection Law No. 181 of 2018 and its Executive Regulations, including Articles 9 and 19 on misleading conduct and the reporting of product defects.
Law No. 182 of 2018 Regulating Contracts Concluded by Public Entities, where public procurement is involved, without conflating violations of that Law with competition offences.
Public Shops Law No. 154 of 2019 and Law No. 15 of 2017 on Facilitating Procedures for Granting Industrial Establishment Licences, together with relevant sector-specific licensing legislation.
Law No. 11 of 2018 Regulating Restructuring, Preventive Composition and Bankruptcy, and the relevant provisions of Commercial Law No. 17 of 1999, depending on the nature of the financial distress and the transaction under review.

Third: Fraud in Contracts, Sales and Commercial Documents

Late delivery of goods or failure to meet specifications may amount solely to a breach of contract giving rise to termination or damages. Not every breach constitutes criminal fraud: criminal characterisation depends on the use of fraudulent means and satisfaction of the elements required by the relevant provision. Similarly, not every inaccurate statement on an invoice constitutes forgery. The nature of the document, the manner in which the truth was altered, criminal intent and the other elements of the offence must be examined.

Where there is suspicion that false documents have been selected or assembled to obtain payment for fictitious supplies, the contract, purchase orders, delivery and acceptance records, correspondence, invoices, transfer statements and warehouse records should be preserved. It is also necessary to establish who created and approved each document and who benefited from it. Distinguishing an accounting error from fraudulent conduct is a matter of evidence, not a predetermined characterisation.

Fourth: Fictitious Invoices and Tax Evasion

A fictitious invoice may be used to record an expense that was never incurred or to deduct input tax in respect of a transaction that did not take place. Tax legislation and applicable provisions determine the conditions for deduction and proof, the forms of evasion and the applicable penalties. Merely describing an invoice as “inaccurate” does not, without establishing the elements of each offence, demonstrate criminal forgery or tax evasion.

According to the text published by the Egyptian Tax Authority, Article 73 of the Unified Tax Procedures Law regulates the attribution of liability for tax evasion committed by a legal person to persons within the specified categories who exercise actual management, while allowing them to establish that they had no knowledge of the conduct. Any subsequent amendment and its effective date must be verified before an accusation or legal opinion is formulated in relation to particular facts.

Under Article 74 of the same Law, criminal proceedings may not be instituted, nor investigative measures taken in respect of the offences covered by that provision, except upon a written request from the Minister or their delegate. The conditions and effects of settlement vary according to the type of tax, the offence and the rules in force; payment of the principal tax alone must not be assumed to extinguish all criminal consequences.

Fifth: Customs Risks in Import and Export Transactions

Risk areas include misdeclaration of customs value, origin or tariff classification; disposal of goods subject to special customs regimes contrary to their conditions; and submission of inaccurate documents. However, a classification error or professional disagreement over valuation does not amount to smuggling in every case. The characterisation depends on the acts specified by law and the evidence that they occurred.

Customs Law No. 207 of 2020 regulates smuggling offences, the procedures for instituting proceedings and settlements, subject to the applicable text and its amendments. Before quantifying any amounts or determining the effect of settlement, the date of the incident, type of goods, customs regime and amended provision must be reviewed. A single deadline or financial settlement amount cannot be applied indiscriminately to all cases.

In practice, the sale contract, Incoterms delivery terms, commercial invoice, bill of lading, certificate of origin, packing list, customs declaration and bank transfers should be cross-checked. A record should then be prepared identifying the source of each statement and the person responsible for submitting it.

Sixth: Competition and Prohibited Agreements

Within its scope of application, Article 6 of the Competition Law prohibits certain agreements or arrangements between competing persons in a relevant market concerning prohibited matters, including price-fixing, market allocation and bid coordination as provided by law. An agreement need not be in writing to be established; however, price similarities alone should not be regarded as conclusive evidence of collusion.

Employees’ participation in trade associations and industry meetings should be regulated, and exchanges of sensitive forward-looking information on prices, quantities and customers should be prohibited without specialist assessment. Vertical restraints in distribution agreements must also be distinguished from horizontal agreements between competitors, since each calls for a different analysis of the market and applicable provisions.

Seventh: Consumer Protection, Advertising and Defective Products

Article 9 of Consumer Protection Law No. 181 of 2018 prohibits misleading conduct concerning matters including a product’s nature, characteristics and price, as well as advertised discounts. Approval by an advertising agency or distributor does not automatically relieve a supplier of its legal obligations; each party’s position depends on its role and the applicable provision.

Under Article 19, a supplier must notify the Consumer Protection Agency of product defects within a maximum of seven days of discovering or becoming aware of them. Where a defect may harm consumer health or safety, notification must be immediate and the prescribed measures to suspend dealings and issue warnings must be taken. It is advisable to adopt a documented product recall plan and a system for following up consumer complaints.

Eighth: Licensing and Regulated Activities

Procedures and sanctions differ by activity. Public shops are subject to Law No. 154 of 2019, whereas industrial establishments are governed by the specific regime under Law No. 15 of 2017; other activities may require additional licences from sector-specific authorities. Depending on the applicable conditions, the regime may involve prior licensing or notification. It is therefore incorrect to suggest that every establishment operating before receipt of a “final licence” automatically commits the same offence.

Before commencing or expanding operations, a licensing matrix should be prepared identifying the competent authority, the authorised activity, premises, safety and environmental requirements, renewal dates, and the implications of any change in activity, location or production capacity.

Ninth: Disposal of Corporate Assets During Financial Distress

The sale of assets or repayment of particular debts during financial distress is not, in itself, a criminal offence. Civil or criminal consequences depend on the debtor’s status, the stage of bankruptcy or restructuring proceedings, the substance and consideration of the transaction, harm, and intent where required by law. Board minutes, asset valuations and the grounds for selecting creditors should be preserved. Asset transfers unsupported by genuine consideration or intended to prejudice creditors’ rights should be avoided.

Tenth: Liability of Managers, Agents and Foreign Companies

A manager does not incur liability merely by signing all the company’s transactions in an official capacity; nor does criminal liability automatically pass to a parent company or foreign investor. The particular statutory provision that may impose liability on the person exercising actual management or on a legal person must be analysed, together with the extent of knowledge, control and participation in the conduct.

A company cannot exempt itself from liability imposed by law merely through a contractual clause with an independent distributor or agent. Nevertheless, compliance, audit rights, reporting, termination and indemnity provisions can allocate contractual obligations and reduce risk, without preventing the authorities from investigating persons against whom relevant evidence exists.

Eleventh: Practical Steps Where a Violation Is Suspected

Suspend the suspected activity if its continuation could perpetuate the violation, after assessing the implications for regulatory and contractual obligations.
Issue preservation instructions covering hard-copy and electronic documents, access logs and correspondence, and prohibit their alteration or destruction.
Establish a reasonably independent investigation team comprising legal, finance and compliance personnel, and engage a forensic accountant or technical expert where necessary.
Prepare a chronology distinguishing facts established by documents, statements made by employees and matters still under investigation.
Identify immediate reporting, product recall or return-amendment obligations; assess requirements for a competent authority’s request before proceedings can be initiated and any settlement available by law.
Assess conflicts of interest between the company and any manager or employee under investigation, and make representation and defence decisions accordingly.

Twelfth: A Compliance Programme Proportionate to Company Size

A clear policy segregating responsibility for issuing purchase orders, receiving goods, making payments and posting accounting entries.
Three-way matching of purchase orders, delivery and acceptance records, and invoices, with periodic sample checks of suppliers.
An up-to-date register of licences and tax and customs obligations, including review of origin, valuation and discount documentation.
Written guidance on communications with competitors and participation in tenders and industry meetings.
Prior legal review of advertising claims and a mechanism for receiving product-defect reports and organising recalls.
An internal reporting channel and investigation procedures that preserve evidence and prevent retaliation against whistleblowers in accordance with applicable law.

Thirteenth: When Does a Company Need Specialist Legal Counsel or Local Counsel in Egypt?

Early legal intervention is important when a company receives a notice from the Tax Authority, Customs Authority, Competition Authority or Consumer Protection Agency; when goods are seized or a manager is summoned for questioning; or when the company enters a major tender, launches a distribution model involving market restrictions or operates a facility subject to multiple licensing authorities.

For international companies, Local Counsel can align a global compliance model with Egyptian law and identify the obligations of a branch, subsidiary and relevant individuals, while reviewing data-sharing risks, cross-border investigations and obligations arising under foreign law where applicable.

How Can Specialist Legal Support Help?

Specialist legal support can review supply chains, contracts, invoices and licences from a criminal-risk perspective; design investigation and evidence-preservation procedures; coordinate with forensic accountants; assess statutory settlement or reconciliation options; and represent interested parties before the competent authorities and courts, as appropriate. These services are risk-management tools, not a guarantee against prosecution or of any particular judicial outcome.

Conclusion

Effective governance in commercial transactions requires more than including compliance clauses in contracts. It requires reliable documentation, implementation controls, independent review and practical response mechanisms when violations arise. El Rouby Law Firm provides legal support to domestic and international companies in Egypt on contracts, compliance, and commercial and criminal disputes arising from economic activity, having regard to the circumstances of each matter.

Frequently Asked Questions

Can a company manager be held personally liable for tax evasion committed within the company?

A person exercising actual management may incur liability under the conditions of Article 73 of the Unified Tax Procedures Law and the text in force at the time of the event. Job title alone is insufficient, subject to the person’s right to establish lack of knowledge as provided in that Article.

Does every fictitious invoice constitute both forgery and tax evasion?

No. The substance of the transaction, use of the invoice, intent, and elements of the tax and criminal provisions must each be examined separately. Accounting or tax consequences may also arise without every criminal characterisation being established.

Can customs smuggling offences be settled?

The Customs Law provides for the possibility of settlement in specified offences, subject to the conditions, timing and financial consideration prescribed by the applicable provisions. The facts and any legislative amendments must be examined before a settlement application is submitted.

Do distribution-agreement clauses exempt a company from offences committed by its distributor?

Contractual clauses do not displace mandatory criminal-liability rules. They may, however, govern obligations, audit rights and indemnity claims. Each party’s liability remains dependent on the applicable provision and the facts.

Are all commercial and industrial establishments licensed in the same way?

No. Competent authorities and procedures differ between public shops, industrial establishments and sector-specific activities. A notification regime may apply to one activity, whereas another requires prior licensing.