Conducting a Commercial Activity Without the Required Licence: Liability of the Company and Its Manager

A company may be validly incorporated and registered in the Commercial Register yet still lack authority to commence actual operations before obtaining the licence, approval or permit required to conduct the commercial activity where the law so requires. This distinction is fundamental in practice: incorporation does not replace operating licences or sector-specific approvals, and merely including an activity within the company’s objects does not automatically authorise the company to carry it on.

The issue is particularly important for foreign companies and international investors who may assume that a certificate of incorporation or Commercial Register extract operates as a comprehensive Business Licence. In Egypt, the required licensing depends on the nature of the activity, project location, method of operation and the relevant regulated sector, and more than one authority may participate in the licensing framework. GAFI explains that post-incorporation services include obtaining the licences, approvals and permits necessary to carry on business, confirming that incorporation and operational licensing are separate stages.

What Is Meant by Conducting a Commercial Activity Without the Required Licence?

This occurs where a company or establishment begins an activity that, under applicable law or regulation, requires a prior licence, approval or permit, without that authorisation having been issued, or after it has expired, been cancelled or suspended, or beyond the authorised activity, location or capacity.

Egypt does not have one general “commercial licence” applicable to all companies. Licensing may relate to the premises or establishment, to the activity itself, or to a regulated sector such as industry, transport, tourism, energy, telecommunications, non-banking financial services, healthcare or other sectors.

The correct legal question is therefore not merely: “Is the company incorporated and registered?” but rather: Does the actual activity carried on by the company, at this location and in this manner, satisfy all required licences and approvals?

Company Incorporation Is Not the Same as Licensing to Carry on the Activity

Incorporating a company before the General Authority for Investment and Free Zones creates the legal person and defines its objects under the incorporation documents and articles, but it does not replace licences imposed by sector-specific laws.

For this reason, GAFI provides, through Investor Service Centers and its electronic platform, services for submitting and following up licence applications issued by multiple ministries and authorities and maintains a broad database of licences across different sectors.

In practice, a company may be entered in the Commercial Register and have the relevant activity included in its objects, yet still be legally unable to commence operations because a sector licence, facility licence, safety approval, environmental approval or operating permit has not yet been issued.

Conducting a Commercial Activity Without the Required Licence Under Egyptian Law

This matter is not governed by one statute applicable to all activities. Liability is determined by the legislation governing the specific activity.

Investment Law No. 72 of 2017

The Investment Law established a framework to facilitate issuance of approvals, permits and licences through Investor Service Centers and conferred on representatives of competent authorities within those centers powers to issue such approvals and licences in accordance with the laws governing each activity.

This procedural facilitation does not eliminate the licensing requirement itself. The investor remains required to satisfy the technical and regulatory conditions imposed by the competent authority.

For certain investment or strategic projects satisfying the statutory conditions, a single approval or “Golden Licence” may be issued under Article 20 of the Investment Law. It constitutes an integrated approval for establishing, operating and managing the project, including building licences and allocation of required real estate, and is effective in itself without further licensing procedures within the scope it covers. The Golden Licence is not a general regime automatically available to every company.

Industrial Establishment Licences

Industrial activities are governed by Law No. 15 of 2017 Facilitating Procedures for Granting Licences to Industrial Establishments and its Executive Regulations issued by Decree No. 1082 of 2017.

The system distinguishes between low-risk establishments subject to a notification-based licensing track and high-risk establishments requiring prior licensing and satisfaction of the relevant requirements before operation. The Industrial Development Authority confirms that this Law is the principal framework governing industrial operating licences and also identifies grounds for cancellation of industrial licences.

Shops and Activities Conducted from Commercial Premises

An establishment may also fall within Public Shops Law No. 154 of 2019 where applicable. In that case, licensing requirements specific to the type of shop, activity and location must be reviewed together with any other required sector-specific licences. The Public Shops Law is an independent regulatory regime for establishments within its scope and does not replace other sector licences.

How Should a Company Identify the Required Licence Before Starting Operations?

Legal review begins with identifying the company’s actual activity rather than relying only on the description recorded in the Commercial Register.

For example, a company whose stated object is “trading and distribution” may in practice store materials subject to special requirements, operate a factory, provide a regulated service or open a retail outlet to the public. More than one licence may therefore be required.

The actual activity and the products or services to be offered.
The location from which the activity will be conducted and the nature of the premises.
Industrial, environmental, health or civil-defence requirements, as applicable.
Whether a sector-specific regulator has jurisdiction.
Whether the licence is issued to the company itself, the establishment or the particular location.
The licence term, renewal conditions, and any quantitative, technical or geographic limits.
Any additional approvals required before advertising, selling, producing or importing.

It is insufficient to rely on the licensing profile of another company carrying on a seemingly similar activity, because differences in location, legal form, technology or product type may change the licensing regime entirely.

Does Merely Filing a Licence Application Permit Operations to Begin?

As a general rule, filing an application does not authorise the company to commence the activity before the licence is issued, unless the governing law establishes a special regime permitting commencement by notification, temporary approval or trial operation.

Submission of the licence application.
Formal acceptance of the application file.
Obtaining preliminary approval.
Technical inspection.
Issuance of the final licence.
Lawful commencement of operations.

In industrial activities, for example, the process differs according to the establishment’s risk classification and the applicable licensing track.

Corporate Liability for Operating Without a Licence

The legal consequences depend on the legislation governing the particular activity. Depending on the applicable provision, they may include suspension of operations, closure of the establishment, cancellation or non-renewal of the licence, fines, or referral to the Public Prosecution where conducting the activity without a licence constitutes a criminal offence.

A single penalty should not be generalised across all sectors. The sanction applicable to an industrial establishment may differ from that applicable to a tourism establishment, financial activity or medical business.

Multiple violations may also arise where unlicensed operation is accompanied by other breaches, such as failure to satisfy safety or environmental requirements, use of premises for an unauthorised purpose, or circulation of products requiring separate approvals.

When Is the Company Manager Personally Liable?

Criminal liability does not transfer automatically to the manager or managing director merely because the company conducted an activity without a licence.

Criminal liability is personal. The legislation governing the specific activity must be reviewed to determine whether it penalises the person responsible for actual management and under what conditions.

The manager’s position becomes more serious where it is established that the manager ordered operations to begin despite knowing that the licence had not been issued, continued operating after a formal suspension or non-renewal notice, submitted false information to obtain the licence, deliberately exceeded the authorised scope, or obstructed inspection and concealed the true nature of the activity.

Managerial title alone is insufficient unless the specific provision attaches liability to actual management or the person is shown to have participated in the violation.

Does the Absence of a Licence Invalidate the Company’s Contracts?

Not necessarily. A regulatory violation relating to licensing does not automatically invalidate every contract entered into by the company with customers or suppliers. The effect depends on the nature of the licence, the provision requiring it, and whether the activity itself is prohibited without the licence or the violation concerns only the manner of operation.

Regulatory or criminal consequences may arise while certain contracts remain valid between their parties, whereas other contracts may be affected where legality of the activity or possession of the licence is an essential condition of performance.

Each contract should therefore be analysed independently rather than assuming that all company transactions are void.

Commercial and Operational Consequences for Companies

The impact of operating without the required licence may exceed the amount of any fine.

Suspension of operations may interrupt production lines, delay deliveries, expose the company to customer damages claims, and cause defaults under financing, lease and distribution agreements.

In contracts with major corporate counterparties, agreements often contain Representations & Warranties confirming that the supplier holds all required licences. If that representation proves inaccurate, rights of termination, damages or indemnity may arise.

Loss of a material licence may also constitute an Event of Default under a financing agreement, but this is a contractual consequence and does not arise automatically in every case.

Effect of Licensing Deficiencies on Investment and M&A Transactions

In M&A transactions, Legal Due Diligence should not be limited to reviewing the Commercial Register and the company’s incorporation documents.

A Licensing Matrix should be prepared identifying each activity and location, the relevant licence, issuing authority, expiry date, renewal status, and any observations or violations.

Require completion of licensing as a condition precedent to closing.
Hold back part of the purchase price.
Obtain a specific warranty from the seller.
Require indemnification for historical violations.
Reassess the target company’s valuation.

Special Considerations for International Investors and Companies

Foreign companies should distinguish clearly between Corporate Incorporation and Operational Licensing.

A certificate of incorporation and company registration do not mean that a project is ready for commercial operation. Likewise, a licence issued to a foreign parent company does not automatically extend to its Egyptian branch or subsidiary.

It is also important to determine whether the activity requires a partner or manager with specified qualifications, capital or technical requirements, or security, professional or sector-specific approvals.

GAFI provides an electronic platform for filing and following up a broad range of licences issued by different Egyptian authorities, helping investors identify the competent authority before commencing operations.

Common Errors

One of the most common errors is assuming that adding an activity to the Commercial Register is sufficient to carry it on, or that preliminary approval is equivalent to a final licence.

Other errors include operating an additional branch or site under a licence issued for another location, continuing operations after licence expiry, or changing the nature of the activity without notifying the competent authority.

A further risk arises where a consultant or landlord handles licensing procedures and management assumes that all approvals have been issued without verifying original documents, scope and validity dates.

Practical Best Practices

Companies should maintain a central licence register recording the issuing authority, licence number, covered activity and location, issue and expiry dates, renewal deadlines, and any continuing conditions or obligations.

Operational and commercial teams should be prohibited from launching a new activity, opening a branch or adding a regulated product until written Legal & Regulatory Clearance has been obtained.

For multi-site projects, periodic licensing reviews are preferable to a one-time incorporation review because expansion, changes in production lines, increased capacity or changes in use of premises may trigger new regulatory requirements.

When Is Specialist Legal Counsel or Local Counsel in Egypt Necessary?

Local Counsel is particularly important before commencing operations where the business model is subject to more than one regulator or where a foreign company is unfamiliar with the boundary between incorporation and licensing.

Receipt of a warning, suspension order or closure decision.
Expiry of a licence while operations continue.
Addition of a new activity or location.
A dispute with an administrative authority over licensing requirements.
Acquisition of an existing company.
A financing or supply agreement requiring maintenance of specified licences.
Investigation of a manager’s liability for prior unlicensed operations.

How Can Specialist Legal Support Help?

Effective legal support begins with mapping the licences and approvals required according to the activity, location and regulator, then identifying what must be completed before operations commence and what may be finalised during later project stages.

For regulatory compliance, legal counsel can review the current licensing position, prepare a Licensing Gap Analysis, identify non-compliance and design a remediation plan.

For risk management and contract drafting, supplier, contractor and distributor agreements can include clear representations concerning licences and allocate responsibility for obtaining, renewing and maintaining them and for the consequences of loss.

For dispute prevention, legal review can cover expansion decisions, changes in activity and branch openings before implementation to ensure the existing licence is not exceeded.

Where a dispute arises, the work may extend to negotiation, settlement, litigation and arbitration where applicable to the contractual relationship, challenges to administrative decisions where legally available, and management of the contractual consequences of the violation.

Representation before Egyptian authorities may also involve coordination with the General Authority for Investment and Free Zones, Industrial Development Authority, local authorities and competent sector regulators depending on the activity.

Conclusion

Conducting a commercial activity without the required licence is not merely an administrative deficiency that can safely be ignored until paperwork is completed. It may directly affect project continuity, the company’s regulatory standing, management liability, and financing, supply and investment agreements.

The practical rule is that incorporation creates the legal entity, while conducting the activity requires compliance with the licensing regime applicable to that activity.

If your company is preparing to launch a new activity, add a branch or production line, or faces a regulatory observation concerning licences, El Rouby Law Firm can review the required licensing and approval structure and assess legal risk before operations begin or during remediation.