The main legal framework regulating mergers and acquisitions in Cyprus is the Companies Law, Chapter 13 that contains provisions about mergers, divisions, transfer of assets and exchange of shares between two or more companies. Public mergers are regulated by Section 201A in the Cypriot Commercial Code. This section in the Commercial Law was modernized in 2003 so it can be lined to the new European standards. In 2007 Sections 201 one to ten have also been amended. These sections refer to cross border mergers between limited liability companies in Cyprus and the European Union. Other laws regarding the control of concentrations between companies and maintenance of employees’ rights have also been enabled.
The first step is for each company involved the merger or acquisition must apply to a Cypriot court and ask for a meeting to be scheduled between parties in both companies. 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 will file a last petition for approval with the court. The petition must be accompanied by a sworn statement of one director in each company. A copy after the scheme must also be submitted with the Cypriot Companies Registrar. The board of directors of each company will then draft a resolution with the reorganization plan and each company will implement its plan.
In case of public companies, the merger procedure will be the same with minor changes in the merger plan that must include the name, the form and the registered office of the companies. The plan must also contain information on the transfer of shares the amount of money, how the shares will be distributed and the date when the new shareholders will have the right to profits.
The main advantages of Cypriot mergers and acquisitions are usually from a taxation point of view. Profits generated by the dividends are exempt from the corporate tax, mergers and acquisitions are not subject to the value added tax in Cyprus, and profits derived from the transfer of immovable properties during the merger or acquisition are exempt from the capital gains tax in Cyprus. Also, the transfer of immovable properties is exempt from paying the transfer fee.
For relevant details about the legislation on mergers and acquisitions you can contact our law firm in Cyprus.
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