Daily News Egypt

Entrepreneurs do not understand their legal requirements: Levari founders - Daily News Egypt

Advertising Area




Advertising Area




Entrepreneurs do not understand their legal requirements: Levari founders

The legal information available is quite convoluted and entrepreneurs don’t have access to it, says Sherif Hefni, partner at Levari Law


Sherif Hefni – Partner, Levari in association with Pitmans LLP (Photo courtesy of Levari)
Sherif Hefni – Partner, Levari in association with Pitmans LLP
(Photo courtesy of Levari)

 

Levari is an international law firm located in Egypt that has been operating since 2012. The company specialises in corporate, commercial, banking, and finance law transactions and is headed by its two main founders and partners: Sherif Hefni (SH) and Mohamed Raslan (MR). Levari works in association with Pitmans, a law firm based in the City of London.

Hefni and Raslan discussed different aspects of their business, entrepreneurs and the obstacles that they face, as well as the British and Egyptian laws regarding start-ups, in an interview with the Daily News Egypt.

Why did you choose Egypt to start your business?

SH: Egypt for us represented a really good opportunity. It’s an emerging market and both of our backgrounds are in corporate law – I used to work in international law, Mohamed used to specialise in banking and finance law – so coming to Egypt we realised that there was about 12 international law firms here and Egypt is one of the main geographical locations in the Middle East and Africa. So when we decided to set up the law firm, we looked at the market as a whole and we realised there was great potential there and we needed to introduce different types of legal services, so we took the British standard of legal services and implemented it here. Moreover, we were able to implement certain legal plans and corporate packages for clients because the market needed it.

Who are your main clients here?

SH: There is a list of clients, amongst them are: the National Bank of Egypt UK, Ahli United Bank, Alghad Alarabi TV.  We also represent a company called Financial Advisory Services, which is a Canadian-based company, Offerna, and Flat 6 Labs and their subsidiaries are all our clients.

Do you have any further plans, are you thinking about expanding or creating new partnerships?

SH: Yes Levari has an expansion model based on a five year plan, so we’ve been here for two years and we’ve got another two years to build up a business in Cairo. Our business model is [based on] emerging markets, so even though we might go off in a bit of a tangent and open up somewhere like Abu Dhabi or Dubai in the next few years, but generally we concentrate on emerging markets, so we will eventually work throughout the Middle East, which will probably happen in the next three years’ time. In each country we will go to we’ll be looking for a local partner because it is very important to have a local partner involved with you as a law firm.

Where do you see your company in comparison to other law firms in Egypt?

SH: We see ourselves as one of the top ten law firms in Egypt providing specialist legal services in corporate, commercial, banking, and finance law.

When going through your website I noticed that you have a special model called the “entrepreneurship model”, so why are you focusing on supporting entrepreneurs?

SH: Mohamed and I are both corporate lawyers but, before Levari, Mohamed was working on banking and finance and I was working for another international law firm, and most of our career we spent representing the other side of the table – we mostly represented banks, private equity firms, venture capitalists – and that was fine because, at the end of the day, that paid the bills, but there’s something that we wanted to do, especially here in Egypt, which was to represent the other side of the table as well, and give them an opportunity to get access to legal services that they wouldn’t necessarily be able to afford. So we sat down together and we spoke to Flat 6 Labs and to lots of people that work in the entrepreneurial industry and we talked about the main things that they need,  finding that it was all about legal services, customer service, making sure the support is there.

We wanted to be different from the common theory that corporate lawyers are very mean and aggressive and we wanted to do something that would really help protect Egyptian companies especially the ones that are looking to grow and expand; so we created the Levari entrepreneurship model which allows start-ups to get free consultation with one of us; they get 50% off all our fees, we don’t charge for phone calls, email advice and in addition to that we put a payment plan in place for them so, if we’re for example doing a specific job that might be a little bit expensive, even with the 50% off, they don’t have to pay all at once – we’ll talk over three or six months and they’ll just pay a little bit every month.

What do you gain by doing this?

SH: Well obviously giving 50% off and doing this extra bit of work doesn’t really make the firm a lot of money, it just covers the costs, but it’s something good I believe that we bring into the community here in Egypt and it’s something that other law firms should really consider doing. I suppose we also gain a better reputation.

MR: And because they need support to grow and then when they grow we can charge them.

What if they fail?

SH: That’s fine but at least they would’ve had dealings with us and if one of those entrepreneurs fails and they want to set up a different company, generally there’s a 99% chance that they’ll come back to us, as we’re the only ones that really helped them in a good and decent way; we didn’t try to rip them off. And as Mohamed said the more they grow, the more we will also grow with them, it’s just natural.

Mohamed Raslan – Partner, Levari in association with Pitmans LLP (Photo courtesy of Levari)
Mohamed Raslan – Partner, Levari in association with Pitmans LLP
(Photo courtesy of Levari)

From your experience as entrepreneurs and from the cases that you work on, what do you think are the main obstacles that entrepreneurs face?

SH: one of the main obstacles that a lot of entrepreneurs face is that they don’t understand the legal requirements that are currently present, so they don’t have the awareness of the basic legal structure such as the kind of company they should set up, how to set up a company and the minimum requirements needed; since they don’t have the necessary information sometimes they either don’t make a decision so they end up just working themselves in their individual capacity, or they listen to someone that did something or another and set a wrong type of company that causes them problems in the future.

The second thing is that they don’t really understand the commitment once you set up a company, because in Egypt there are certain legal administrative tasks that need to be done every year. For example a start-up company will work for two or three years and then get an investment and the investor will look at the company and realise that, for the past three years, nothing has been done and this causes a problem for investors because then they have to hire lawyers to bring the company back up to a good legal standard.

MR: I’d like to add the IP [intellectual property] requirements because most of them do not register or apply for a patent or a trademark registration and even they don’t cover themselves by adding this to the employment contracts with their employees and this is part of the evaluation in the future that could cost them a lot.

So basically what start-ups do is that they start a company without consulting a lawyer or do they get bad consultation?

SH: It’s a bit difficult to say whether they get bad consultation or not, I think it’s one of those aspects that they don’t have access to the information. Generally we always advise people to get independent advice and to speak to a law firm that specialises in corporate law and knows exactly what you need to do. We’ve met so many companies that have a wrong legal structure which is why when we sit with start-ups we usually try to understand what their business model is, and that is really important because it will have a direct effect on the type of company they set up and their future goals. The other thing is about liability, people don’t understand that different companies pose different liabilities on the individuals so there’s a risk factor there. I’d say that it’s not so much that they get wrong legal advice but it’s that the information available is quite convoluted and they don’t have access to it clearly and because of that they sometimes unfortunately make wrong decisions, as you would when you don’t have the right information.

How does the British law support start-ups and entrepreneurs?

SH: We have to differentiate between two things; the legal aspect and the application of the technicality of it. In England they have the common law which is very flexible as it allows you to do generally anything that you want to do. In Egypt we have written laws that say you can only do this and you can’t go anything outside; common law is the opposite so with regards to start-ups in England, it’s not about what the law has done, it’s what the government has done, and they’ve made things a lot easier and faster. The first thing that they did was that they allowed access to information for all; if you go on any government website all the information is there and it’s not written in legal language, it’s written in simple language. Also they have something called the “Citizen Advice Bureau” which is a phone number you can call to ask for information.

The other thing is that they removed the barriers to entry, so for example anyone can set up a UK company in 48 hours for £80 online and it’s done. Having these things means that anyone at any time can set up a company and do whatever they want to do. The law itself has been recently changed, the law evolves in England, and it depends on the government, what they want to do and how they want to implement it. Generally speaking, English law is very flexible so it allows you a lot more freedom to do what you want to do with the company or to determine how the company works; this includes things like shares, shares transfers and having also different rights and voting preferences.

Do you think that there are some similarities between the Egyptian and British laws?

SH: I have to say no, it’s a completely different system.

MR: the British law is a common law system, in Egypt it’s a civil law system.

SH: it’s a completely different way and approach as a whole and generally the law and the government don’t really get involved with private businesses, they leave them to grow organically and develop, so it’s very different from here.

In your opinion are the current Egyptian laws consistent with the government’s intent of helping the establishment and development of start-ups?

MR: Unfortunately it’s not like that. In terms of incorporation we say that it’s a ‘one-stop shop’ however it’s not like that because we have different employees at GAFI [General Investment Authority for Investment and Free Zones] reporting to different entities such as the Notary authority. In Egypt it takes at least one week to incorporate a company. Also in Egypt you have to have a lawyer and an auditor in order to be able to set up a company and sign your contract. Moreover we don’t have here the concept of the sole partnership company; a lot of investors have seen that as negative because they have to have another shareholder that they don’t know. An example related to that was with one of our clients where he had to give a 1% share of his company to his manager as he didn’t know anyone else in Egypt, that was just to fill the requirement of having two shareholders; and in this case if the manager leaves he will still have a share in the company. Furthermore they don’t have the right to incorporate individual entities, only Egyptians are allowed to do that, however we don’t advise Egyptians to do it because of the liability, as it comes to them in their personal capacities, so it’s not recommended from a legal perspective to have this type of company.

What do you think are the main points that should be considered in the unified investment law that is to be passed?

MR: First of all the points that we just discussed like being flexible to attract investors. I’m not sure how this works but they should consider some tax exemptions, consider being a real “one-stop shop”, so GAFI should have all the required licenses and this will require the registrar to have a look at different laws that are still being applied in Egypt, so it’s not only the investment law, it will also affect other laws like the tax law and the real estate law because in Egypt to have a land for your project you have to go to the Ministry of Housing; so it’s not GAFI and it’s not related to GAFI, so you have to just take this authority from this ministry and give it to GAFI and this has not been discussed in the new investment law, so they have to amend this law first because of the conflict of laws.

SH: they should also consider minority shareholders protection.

What do you gain from your partnership with Pitmans?

SH: One of the most important things that we gain is that we share resources and – in the legal industry – resources are the most vital and expensive thing that you can have, so we share our knowledge, experience, our market industry, and market experience. So, when our Middle Eastern clients need specific UK specialisation, we’re able to provide that. For instance, a lot of contracts that we work on with banks are under English law. So, for example, Mohamed and one of our partners in London Patrick Long work together as a team to review bank contracts, one is in Egypt and the other is in the UK and it’s all done in Cairo; so the banks can come here and talk to us about it and that’s a service that we provide that I don’t think anyone else in Egypt provides.  Pitmans is a lot bigger than us, they have about 46 Partners and 190 lawyers, so we get access to these lawyers when we need them. We are two separate law firms but we work as one team when it comes to our clients; and it’s the same thing when our clients in the UK need advice about something in Egypt; they can go into the office there, they’ll call us and we’ll do a conference call and we all sit down together and talk about it, which is another type of service that we provide to our clients.

What are your upcoming events?

SH: Every year Levari holds an event; an annual evening reception that addresses the issues in the market that have been raised by its clients, different law firms and banks and it will be held this  November with the aim of addressing the value banks will get if they fund technological companies. Technological start-up companies find it very difficult to raise finance from banks, as they don’t have tangible assets and only have IP, but banks mostly refuse to give loans to entrepreneurs who don’t have tangible assets. For example companies like souq.com and dubizzle are working very well as they’re multimillion dollar companies but they probably still can’t get loans from banks; which is strange. So what we’ll try to do is to put those different sides together and raise awareness on that issue.

Advertising Area



https://wwww.dailynewssegypt.com/2014/10/26/entrepreneurs-understand-legal-requirements-levari-founders/
Breaking News

No current breaking news

Receive our daily newsletter
Subscribe