The major legislation that regulates mergers and acquisitions in Cyprus is the Companies Law (Cap. 113). In particular, sections 198-202 contain provisions about mergers, reconstruction and amalgamation of companies, and exchange of shares between two or more companies. 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.
First of all, the companies involved in the merger or acquisition must apply to the Court and then schedule a general meeting of the shareholders of both companies. During the meeting, it is determined whether it is required to arrange the liabilities between the shareholders and the creditors. It should be pointed out that the merging company shall be wound up without going into liquidation and its assets must be transferred to the acquiring company.
According to the provisions of section 198, the merger or acquisition proceeds under the condition that the three-quarters of company’s management approve the transaction. Then a scheme is drafted and 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. Afterwards, 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.
It should be pointed out that regarding 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;
From a tax point of view, the primary benefit of mergers and acquisitions is that profits derived by the dividends are exempt from corporate tax. Moreover, mergers and acquisitions are not subject to VAT in Cyprus. Another considerable advantage is that profits generated from the transfer of immovable properties during the merger or acquisition are exempt from capital gains taxation. In addition, no transfer fee is required for the transfer of immovable properties.
The legal team of Michael Chambers & Co. LLC is able to assist you and provide you an adequate legal support on mergers and acquisitions. Our lawyers will inform you about all the necessary procedures you need to follow and the relevant advantages. If you wish to speak to one of our lawyers, then please contact us: [email protected]