In the realm of corporate governance, the principle of separate legal personality offers companies a shield that protects shareholders and directors from personal liability. However, Egyptian law, like many legal systems, draws a firm line when it comes to criminal behavior. That line becomes especially clear when corporate misconduct stems from decisions or omissions by individuals in managerial positions.

Recent jurisprudence and statutory reforms in Egypt have affirmed that the “actual manager” of a company, regardless of whether they hold a formal board title, can be held personally criminally liable for offenses committed by or through the company under their control. This concept has gained increasing importance in areas such as financial crime, cybercrime, and violations of labor, tax, and commercial regulations.

1- Who Is an Actual Manager ?

The term actual manager refers to any individual who exercises effective control and management of a company’s affairs, even if they are not officially registered as a director or officer. Courts focus on substance over form, evaluating the person’s role, actions, and influence in the company, rather than relying solely on the commercial register or formal job titles.

2- Penal Code: Managerial Accountability in Public and Private Sectors

The Egyptian Penal Code explicitly addresses the liability of managers and board members. Article 113 bis targets directors and managers of joint-stock companies who engage in embezzlement, abuse of authority, or other criminal breaches of trust. It criminalizes causing harm to shareholders, employees, creditors, or third parties through misuse of company funds or powers.

These provisions serve as the foundation for criminal prosecutions involving fraud, breach of fiduciary duty, or willful negligence by company officials.

3- Capital Market Law No. 95 of 1992: Financial Crimes and Market Integrity

This law regulates the securities market and imposes strict sanctions on misconduct by market participants. It applies particularly to public companies, listed entities, and financial intermediaries. Key points include:

A-    Insider trading, market manipulation, non-disclosure of material information, and fraudulent public offerings are criminal offenses.

B-    Executives and managers who commit, authorize, or fail to prevent such offenses due to gross negligence or willful blindness may be held personally liable.

C-    Penalties under the law include imprisonment and substantial fines, and the law applies even where acts are carried out by subordinates under a manager’s supervision.

The Executive Regulations further clarify that both legal persons (companies) and natural persons (managers) may be prosecuted where financial crimes occur under their watch.

4- Telecommunication Regulation Law No. 10 of 2003: Accountability in the Digital Age

With the rise of digital infrastructure, this law criminalizes a range of acts related to unauthorized telecom services, breach of privacy, and illegal content dissemination. In this context:

• Articles 72–76 establish strict liability for telecommunications service providers and their managers in cases of non-compliance.
• Managers can be prosecuted if they authorized, enabled, or failed to prevent the violation, especially where they had control over systems and personnel.

This framework has been increasingly invoked in cybercrime cases, including unauthorized surveillance, illegal VoIP services, and dissemination of unlicensed media content.

5- Judicial Trends: Expanding Managerial Responsibility

Egyptian courts, including the Court of Cassation, have repeatedly emphasized that managerial liability is functional, not formal. Whether dealing with consumer protection failures, tax evasion, labor law breaches (e.g., non-payment of wages or social insurance evasion), or intellectual property and trademark infringements, the courts look to the individual who made or failed to prevent the key decision, regardless of title. In cases where gross negligence or intentional misconduct is found, actual managers face criminal charges alongside, or even in place of, the company itself.

6- Implications for Corporate Leaders

The takeaway is clear: actual decision-makers must act diligently and transparently to avoid criminal exposure. Corporate governance policies, internal audits, and regulatory compliance procedures are not mere formalities, they are essential risk management tools that may protect not just the company, but the liberty and reputation of its leadership.

In Egypt’s evolving regulatory and enforcement landscape, it is no longer enough to say “I didn’t know.” Managers must prove they acted in good faith, within the bounds of the law, and with appropriate supervision and control over the company’s affairs.