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Procedures for Enforcement on Registered Shares
6 min 1 sec Written by
ab.gomaa@tamimi.com 
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Despite the critical importance of enforcing judgments on registered shares, Egyptian law has only addressed the topic in Articles (399)[1] and (400)[2] of the Egyptian Civil and Commercial Procedure Law No. 13 of 1968 (the “ECCP Law”). This minimal reference essentially defers to the rules governing the seizure of a debtor’s property held by a third party, as well as the rules for selling shares established by the Capital Market Authority. This deferral has led to some ambiguity in the detailed procedures that must be followed for compulsory enforcement on registered shares. This article, therefore, aims to discuss these procedures, with a specific focus on the practical aspects.
The Egyptian legislator has established the same rules for the seizure of registered shares as those for the seizure of a debtor’s property held by a third party. According to Article (399) of the ECCP Law, the seizure of these shares also includes the seizure of their fruits, interests, and any amounts due up to the day of sale. This part of the procedure is clear and straightforward, as the procedures for the seizure of a debtor’s property held by a third party are well-defined in the Code of Civil Procedure.
Accordingly, the garnishee is obliged to file a report within fifteen days from the day following the date of his announcement of the seizure of the debtor with a third party, provided that the report is deposited in the registry of the clerk of the magistrate court to which the garnishee belongs, provided that the report includes the amount of the debt, its cause, and the reasons for its expiration, if it has expired, and shows all the seizures signed under his hand, and deposits the documents supporting the report or certified copies thereof, and if the seizure has movables in the garnishee’s possession he shall attach to the report a detailed statement thereof as stipulated in the fifth paragraph of Article (328)[3] and Article (339)[4] of the ECCP Law.[5]
If the garnishee fails to submit the declaration of indebtedness within the period specified in Article (339) of the law, or if the garnishee’s declaration is found to be contrary to the truth, or if they conceal the documents required to be deposited to confirm the declaration, the legislator grants the attaching creditor the right to collect their debt from the garnishee. This can be done through a lawsuit based on an enforcement order in which the creditor demands that the garnishee be compelled to pay the debt on behalf of the debtor, as stipulated in Article (343)[6] of the ECCP Law.
The attachment of a debtor’s assets held by a third party requires notifying the debtor within eight days. This notification must be made using the same attachment document that was served to the garnishee. The debtor must be served within the eight days following the service on the garnishee, plus any additional time for distance as specified in the ECCP Law. Failure to comply with these legal procedures results in a penalty: namely, the attachment is considered null and void, as stipulated in Article (332)[7] of the ECCP Law.
The preceding procedures constitute the attachment of shares. Like other forms of attachment of a debtor’s property held by a third party, the process for registered shares begins with a precautionary attachment and concludes with a sale[8]. The sale of registered shares is the part addressed by Article (400)[9] of the ECCP Law. the following points specify who is responsible for the sale but does not go into the detailed procedures. It requires the attaching creditor to submit an application to the enforcement judge to issue an order appointing a bank, broker, or financial agent to sell the shares owned by the debtor. The enforcement judge then issues this order, outlining the necessary procedures for advertising, executing the sale, and notifying the authorities legally responsible for monitoring and supervising the sale process.
Thus, it can be said that Article (400) of the ECCP Law implicitly refers to the procedures for selling registered shares followed by brokers. These procedures vary depending on the type of registered share, as the process for selling shares listed on the stock exchange differs from that for unlisted shares. We will detail this in the following two sections.
First: Procedures for Selling Registered Securities Listed on the Stock Exchange
The listing and trading of financial securities on the stock exchange are governed by the rules established by the Board of Directors of the Financial Regulatory Authority (the “FRA”). Transactions involving listed securities must be conducted through a licensed brokerage firm. After a listed financial security has been seized, a date is set for its sale, the sale must take place on the stock exchange, in the presence of the bailiff (representing the public authority) and the brokerage firm appointed by the enforcement judge. The judge will set the specific day and time for the sale of the seized shares[10].
Subsequently, on the designated day at the stock exchange, the creditor submits a request to the bailiff to complete the enforcement. Based on this request, the bailiff proceeds with a public sale, with the assistance of the appointed brokerage firm, while observing the procedures stipulated in the Capital Market Law No. 95 of 1992 and its executive regulations.
The brokerage firm is responsible for executing the order issued from the enforcement bailiff by setting the sale price (trading price) for the seized shares. This price must be the last price at which a transaction was executed, in accordance with the legal procedures outlined in Article (97/1)[11] of the Executive Regulations of the Capital Market Law. Moreover, the brokerage firm must publicly announce the sale on the trading board for at least half an hour before the sale is executed.
Upon the completion of the sale, the enforcement bailiff draws up a deed of sale, including all the sale procedures, any objections or obstacles encountered, and the actions taken, the final sale price, and the name and signature of the person to whom the sale was awarded, or their representative, in accordance with Article (391)[12] of the ECCP Law.
Furthermore, the enforcement bailiff must cease the sale of shares if the proceeds from the sale of only a portion of the shares are sufficient to cover the debt and expenses, as stipulated by the legislator in Article (390) of the ECCP Law. The bailiff stops the sale by notifying the brokerage firm to halt the sale of the remaining shares. This cessation of the sale removes the effect of the attachment on the unsold financial securities, and the debtor regains the right to dispose of them.
Consequently, once the sale of the seized financial securities is complete, and the price is immediately paid by the purchasing brokerage firm on behalf of its client, the ownership of the sold securities is transferred to the buyer. For securities issued by a joint-stock company, the brokerage firm must notify the stock exchange of the sale to have it recorded on the same day. Stakeholders may be given a copy of the registration according to the system in effect at the stock exchange, as per Article (98)[13] of the Executive Regulations of the Capital Market Law. Thus, this registration transfers the ownership of the registered financial security, as per Article (100/1)[14] of the Executive Regulations.
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The legislator has granted the attachment of registered securities (shares and bonds) the same procedures as those used for the attachment of a debtor's property held by a third party. Moreover, special provisions regarding the mechanism of attachment and sale have been added, specifically in Articles 399 and 400 of the Civil and Commercial Procedure Code.
Second: Procedures for Selling Nominal Securities Not Listed on the Stock Exchange
Concerning the sale of shares not listed on a stock exchange must be conducted through a brokerage firm. This provision also applies to other non-listed, negotiable financial securities. Since the Capital Market Law and its executive regulations do not specify the procedures for trading unlisted financial securities, the Civil Procedures Law governs the sale of these securities as movable assets. This must be done while also complying with the requirement in Article (400) of the ECCP Law and the Executive Regulations of the Capital Market Law to utilize a broker.
On the designated day and place for the sale of seized, unlisted financial securities, the bailiff begins the public auction if the attaching creditor requests the sale. Otherwise, the bailiff will cancel the sale. Since Article (400) of the ECCP Law states that the enforcement judge—upon a request from the creditor—appoints a broker to conduct the sale, the bailiff coordinates with the appointed broker to sell the unlisted registered financial securities. They must follow the provisions of the ECCP Law while also considering the unique nature of registered financial securities compared to other movable assets.
The auction starts with the bailiff calling out the seized items, and bidding begins at the par value of the financial security. The bailiff is not bound by a specific price that must be reached for the security being sold; rather, they award the sale to the highest bidder.
When the auction is awarded, the bailiff prepares a deed of sale that includes all the same details mentioned for the sale of listed financial securities. In this case, the successful bidder must pay the price immediately, as stipulated in Article (389/1)[15] of the Civil Procedures Law. Failure to do so requires a resale at the bidder’s expense, regardless of the price. The rules for ceasing the sale—when the proceeds are sufficient to satisfy the rights of the attaching creditors—also apply to the sale of unlisted financial securities, as do the rules for attaching the proceeds held by the bailiff.
As soon as the auction is awarded to a purchasing brokerage firm on behalf of one of its clients and the price is paid immediately, ownership is transferred to the auction buyer, provided the securities were owned by the debtor and the attachment and sale procedures were formally and substantively valid. However, the sale must be announced on the stock exchange according to the rules set by the decisions of the Capital Market Authority. The purchasing brokerage firm must notify the stock exchange of the transaction through which the ownership of the sold securities was transferred so that the stock exchange can record it, as required by Article (99/1)[16] of the Executive Regulations.
In conclusion, we have reviewed the procedures outlined in the Civil Procedures Law for handling financial securities, from their attachment and the garnishee’s declaration of indebtedness to the commencement of enforcement procedures, the appointment of a brokerage firm, and the final sale. It is important in this regard to seek legal advice on the enforcement procedure to avoid any unnecessary delays/procedures in the process.
[1] Article 399: “As regards profits, nominal shares, dividends accrued and held by any corporate entity and rights of Minors, they shall be attached in accordance with the conditions laid down in respect of Distress upon the Debtor’s Property held by third parties. Attachment of the entitlements referred to in the preceding Paragraph shall lead to Attachment of their revenues and interest whether they are owed or still owing until the day of Sale.”
[2] Article 400: “Shares and bonds and other securities set forth in the foregoing two Articles shall be sold by a bank, broker or money changer to be nominated by the Execution Judge upon an Application filed by the Distrainer. The Execution Judge shall include in his Order the measures to be taken about Notification of Sale.”
[3] Article 328: “Attachment shall take place without prior Notification to the Debtor under a paper from an Executive Assistant served upon the Garnishee that includes the following: (1) Copy of the Judgment or the official Deed on which the Attachment is based or permission by the Judge for Attachment or the Order of the Judge to assess the Debt; (2) Statement of the original Garnished Amount, and interest and expenses thereof; (3) Forbidding that Garnishee to pay what he owes to the Judgment Debtor, or deliver the same to him, giving a description of the Distrainee sufficient to avoid any doubt. (4) Statement of the Elected Domicile of the Distrainer in the town where the Petty Court is located where the Domicile of the Garnishee is located. (5) Order to the Garnishee to report all the Properties under his possession within (15) fifteen days. If the summons does not include the aforementioned details in 1, 2 and 3 above, the Attachment shall be null and void. The Court Executive Assistant Department may not serve the Notice of Attachment unless the Distrainer deposits an amount sufficient to cover the fees of the report on the assets held by the Garnishee in the account of or at the treasury of the Petty Court within the Jurisdiction of which the Garnishee’s Domicile is located. Such deposit shall be indicated on the origin and copy of the Notice.”
[4] Article 339: “If the deposit has not been made in compliance with Articles (302) and (303) hereof, the Garnishee shall notify the Clerk’s Office of the competent Court, within (15) fifteen days from the date of notifying him of the Attachment, of the Debt he holds which belongs to the Debtor. The Distress Statement shall specify the amount of the Debt, reasons for creation thereof and causes of its extinguishment if the Debt has been extinguished. It shall also list all Attachments under his control. The Distrainee shall produce the supporting documents or authenticated copies thereof. If the Garnishee has any Moveables under his control, he shall attach a detailed statement of all Moveables. The Garnishee shall not be exempted from the obligation of compiling such report due to not being indebted to the Distrainee.”
[5] Professor Dr Osama Ahmed Shawky Al Meligy, Al Wagiz for Civil Procedures for Compulsory Enforcement in Egyptian Law of Civil and Commercial Procedure.
[6] Article 343: “If the Garnishee has not reported his Debt in compliance with the method and dates stipulated in Article (339) hereof, or if he makes a false statement in respect thereof, or if he keeps hiding the documents required to be produced for confirmation of the aforesaid statement, a Judgment may be issued holding him liable for the amount for which the Distress is levied by virtue of a case to be filed through the normal procedures. In all cases, the Garnishee shall be obligated to pay expenses and compensation as a result of his negligence or delay.”
[7] Article 332: “Notice of the Attachment shall be served on the Distrainee by virtue of the same Notice of Attachment after it has been served on the Garnishee. The Elected Domicile of the Distrainer in the town where the seat of the Court is located where the Distrainee’s Domicile is located.”
[8] Dr. Ahmed El-Meligy, The Comprehensive Encyclopedia of Enforcement, Part II, 3rd Edition 2005, p. 675.
[9] Article 400: “Shares and bonds and other securities set forth in the foregoing two Articles shall be sold by a bank, broker or money changer to be nominated by the Execution Judge upon an Application filed by the Distrainer. The Execution Judge shall include in his Order the measures to be taken about Notification of Sale.”
[10] Professor Dr. Osama Ahmed Shawky Meligy, Compulsory Enforcement on Securities, Dar Al-Nahda Al-Arabiya – 2022 Edition.
[11] Article 97/1: “You can trade any number of securities.”
[12] Article 390: “The Minutes of Sale shall specify contain all procedures of Sale, Objections and obstacles faced by the Executive Assistant, measures taken by him to deal with these Objections and obstacles, whether the Distrainee is present or absent, the price offered by the Auction Winner in the Auction and the name and signature of the Auction Winner.”
[13] Article 98: “The stock exchange administration registers the transactions executed by brokerage firms on the same day it is notified of them. The registration includes the names of the buyer and seller, full details of the security, and the price at which the transaction was executed. Interested parties may be given a copy of the registration according to the system in place at the exchange.”
[14] Article 100/1: “Ownership of registered securities listed on the stock exchange is transferred upon the completion of their trading registration through the designated channels.”
[15] Article 389/1: “If the Auction Winner does not pay the value immediately, the Sale shall be redone in the same way mentioned above at any price at his cost and the Sale Minutes shall constitute an Executive Deed against him and he shall bear the difference in price.”
[16] Article 99/1: “Each stock exchange registers the transactions it is notified of regarding the trading of securities not listed on that exchange.”
