Mergers and Acquisitions here in Cyprus have developed rapidly in the past decade as a result of the 2004 acceptance of Cyprus to the European Union as an official integrated member. various provisions have been established in order to facilitate the country’s harmonisation with the EU law and Mergers and Acquisitions was an important element of this directive.
The implementation of the EU Cross-Border Mergers Directive 2005/56/EC was key development in this sector. This directive the initial legislative step for simplifying a cross-border merger between corporate entities registered in Cyprus and respective entities incorporated in any other EU member state. In 2007, the Cyprus Companies Law, Cap. 113 was amended to include the new law N.186(I)/2007 which implemented the EU Directive 2005/56/EC, on cross border mergers of limited liability companies.
Accordingly, cross border mergers are possible between Cypriot companies limited by shares and companies registered in the EU. It is important to note that limited liability companies by guarantee and companies subject to liquidation are not permitted to take part in cross border merger.
EU Directive 2005/56/EC states that the Cross-Border Merger process is monitored entirely by the national applicable rules and regulations of the Member State, which mean that companies can benefit from the following under Cyprus law:
- Mergers & acquisitions are not subject to VAT in Cyprus
- 0% taxation of dividends
- 12.5% corporation tax ( among the lowest in Europe)
- Solid and transparent Cyprus legal system
- The Geographical location of Cyprus; situated between Asia, Africa and Europe making it favourable for conducting trading activities.
- Reduced administrative costs
Cyprus Companies Law, Cap. 113 (sections 198-202) governs mergers & acquisitions . Other important legislations are the Control of Concentration Between Enterprises Law (22(I)/ 1999) and the Safeguarding and Protection of Employees Rights in the Event of the Transfer of Undertakings, Businesses or Parts Thereof (104/(I)/2000). The first promotes fair competition and the second safeguards employees’ rights in the event of a transfer of undertakings.
To begin with the companies involved in the merger or acquisition must apply to the Cypriot Court and schedule a general meeting of the shareholders of both companies.
During the meeting, it will be determined whether or not it is required to arrange the liabilities between the shareholders and the creditors.Please not that In order for the merger or acquisition to take place the three quarters of Cypriot company’s management must approve the transaction and draft a scheme that will be presented to the auditors. Once the scheme is approved, the companies may file the last petition for approval with the Court. Note that the petition should be accompanied by a sworn statement of one director in each company. Following this a copy of the agreement must be submitted to the Registrar of Companies. Finally, the board of directors of each company will draft a resolution that will determine the re-organisation plan and each company will be obliged to follow this particular plan.
In the case of public companies, the merger procedure will be the same except for minor changes in the merger plan which must contain:
- the name;
- the form of the registered office of the companies;
- details about the transfer of shares and the amount of money;
- information about the allocation of shares;
- the exact date when the new shareholders will have the right to profits;
This is rapidly growing sector in Cyprus and the current economic environment is ripe with favourable opportunities for mergers and acquisitions under Cyprus law. Our highly experienced team at Vasiliou Law are confident that we can offer you transparent, comprehensive and specific services under this section of law.
Contact us today for more details