Insights: Local Mergers under Cyprus Law

Mergers result in the transfer of the assets and liabilities of one company to another and the dissolution of the first company without it going into liquidation.

A merger between Cyprus companies is defined by section 30 of the Income Tax Law (Law 118(I)/2002) as an act where:

• one or more companies, on their dissolution without going into liquidation, transfer all of their assets and liabilities to another existing company in exchange for the issue to their shareholders of shares in the capital of the receiving company and potentially in exchange for cash, not exceeding 10% of the nominal value of the shares or, in the absence of a nominal value, of the accounting par value of the shares;
• two or more companies, on their dissolution without going into liquidation, transfer all of their assets and liabilities to a new company that they establish in exchange for their shareholders being issued with shares in the new company’s capital and, potentially, in exchange for cash, which should not exceed 10% of the nominal value of the shares or, in the absence of a nominal value, of the accounting par value of the shares; or
• a limited liability company, on its dissolution without going into liquidation, transfers all of its assets and liabilities to a company holding all the shares representing its capital.

Local mergers must receive court approval (a merger order) before they can be conducted. The formalities which are required to be satisfied in order to obtain a merger order inlcude:

• passing of a resolution of the absorbing company’s board approving the merger and the proposed deed of arrangement
• approval by the shareholders
• entering into a deed of arrangement
• preparation of accounts
• obtaining the consent of creditors, if relevant.

If court issues a merger order, then this must filed with the Registrar of Companies. The Registrar of Companies will subsequently issuing a certificate of dissolution of the company being absorbed and dissolved.

The certificate of dissolution will state that the merger has been completed and the date on which it has become effective.The merger is effective only when the Registrar of Companies processes the documents filed.

How can we help?

We have acted or advised in relation to numerous mergers and acquisitions, of both local and international character. We can assist and provide advice with regards to all aspects of mergers. In particular we can assist in:

• structuring and control of mergers, acquisitions and joint ventures;
• cross-border transactions;
• contract drafting and review;
• legal, financial and tax due diligence;
• share and asset acquisition and management;
• corporate dispute resolution.

Theodorou Law is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law.