Company Reorganizations: Mergers & Acquisitions - Cyprus

Company Reorganizations: Mergers & Acquisitions - Cyprus

Sections 198-201 Cyprus Companies Law, CAP 113, provide for such reorganization of companies. The procedure described therein is fairly straightforward and easy to follow. The provisions recognize mergers, divisions, partial divisions, transfers of assets and exchange of shares in two or more companies intending to merge together. A short description of the procedure to be followed is described herein below:

The proposed scheme is set out by the auditors.

The cooperation of the auditors will be needed throughout the process. The auditors will be responsible for the scheme's approval by the Tax Authorities which in turn will confirm that there will be no tax complications with the proposed reorganization/ amalgamation.

The Board of Directors of each company involved in the reorganization/ amalgamation should pass a resolution setting out the reorganization plan as prepared by the auditors, resolving that each company proceeds with the reorganization plan and that each company should take all necessary steps to implement the reorganization.

Each of the companies involved in the reorganization should then apply to the court, asking the court to convene meetings of the parties concerned. (creditors and/or members).

The general meeting of the shareholders and/or other parties as the court directs for approval of the scheme is then held. For the scheme to be approved, a majority representing 3/4 in value of those of shareholders present and voting in the general meeting is needed.

Once the general meeting approves the scheme, a petition is presented to court for final approval of the scheme. The petition of each company involved in the scheme is accompanied by an affidavit (to be sworn in court by a director of each company).

Upon its approval by the court, the scheme is binding on the company and on all parties concerned.

A true copy of the order sanctioning the scheme must then be delivered to the Registrar of Companies for registration.

Reorganizations falling within the scope of the law result to profits that are exempt from corporate income tax, provided that they do not result to the acknowledgment of income neither at the company nor at the shareholders' level. Further, reorganizations fall outside the scope of VAT, there is a stamp duty exemption on agreements concluded for reorganization purposes and there is a capital gains tax exemption on profits deriving from the transfer of immovable assets in the course of reorganization as well as a transfer fees exemption on the transfer of immovable assets.

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