The below official information was compiled exclusively from the Department of Registrar of Companies and Intellectual Property (DRCIP) and the Companies Law, Cap. 113. It aims to provide our clients a high level understanding on the subject matter.

Cyprus Cross-Border Mergers: A Strategic Overview

Cross-border mergers offer companies a strategic avenue to consolidate operations, expand market reach and optimize resources across jurisdictions. In Cyprus, the legal framework for such mergers is governed by the Companies Law, Cap. 113, aligning with EU directives to facilitate seamless cross-border corporate restructuring.

A cross-border merger involves the combination of companies from different EU member states into a single entity. The resulting company may be based in any of the participating jurisdictions. Cyprus companies can engage in cross-border mergers either as the absorbing company or the absorbed company, depending on the structure of the merger.

Types of Cross-Border Mergers

1. Cyprus Company as the Absorbing Entity

In this scenario, a Cyprus company absorbs one or more foreign companies, taking over their assets and liabilities. The foreign companies are dissolved without going into liquidation.

2. Cyprus Company as the Absorbed Entity

Here, a Cyprus company is merged into a foreign company, with the Cyprus entity being dissolved without liquidation.

3. Creation of a New Cyprus Company

Multiple companies, including at least one from Cyprus, merge to form a new Cyprus company. The original entities are dissolved without liquidation.

Legal Framework and Eligibility

Cross-border mergers in Cyprus are governed by the Companies Law, Cap. 113, which incorporates provisions from EU Directive 2005/56/EC, as amended by Directive 2017/1132/EU. The law outlines the procedures for mergers involving companies from different EU member states.

Eligibility Criteria:

• All companies incorporated or registered under the Companies Law, Cap. 113, are eligible to participate in cross-border mergers.
• Companies under liquidation or limited liability companies by guarantee are not eligible to engage in cross-border mergers.

Step-by-Step Process for Cross-Border Mergers

1. Drafting and Submitting Common Draft Terms

The directors of each participating company must prepare and submit the common draft terms of the merger. These terms should include:

• The form, name, and registered office of the merging companies.
• The exchange ratio for shares and any cash payments.
• The rights of shareholders and creditors.
• The impact on employees.
• The date from which the transactions will be treated for accounting purposes.

2. Approval by General Meeting

Each company must convene a general meeting to approve the common draft terms of the merger.

3. Issuance of Pre-Merger Certificate

Upon approval, a pre-merger certificate is issued, confirming that all legal requirements have been met.

4. Filing of Court Order

The final step involves filing the court order approving the completion of the cross-border merger with the Registrar of Companies. This order must be accompanied by:

• The common draft terms of the merger,
• The pre-merger certificate, and
• Any other required documentation.

Key Considerations

• Shareholder Rights: Ensure that the rights of minority shareholders are protected throughout the merger process.
• Employee Impact: Assess and address the implications of the merger on employees, including potential changes in employment terms.
• Creditors: Notify and address the concerns of creditors, as required by law.
• Legal Compliance: Adhere to all legal requirements under the Companies Law, Cap. 113, and relevant EU directives.

Additional Resources

For detailed guidance and the necessary forms, visit the official DRCIP website:

• Cross-Border Merger Guidance
• Companies Law, Cap. 113

STAVROUCPA can fully assist you during the step-by-step approach. Feel free to contact us at info@stavroucpa.com.