Answer ... The Control of Concentrations Between Undertakings Law applies to concentrations between undertakings resulting in a change of control on a lasting basis.
Such concentrations include mergers of two or more previously independent undertakings or parts thereof, and acquisitions by one or more persons already controlling at least one undertaking, or by one or more undertakings, directly or indirectly, whether by purchase of securities or assets, by agreement or otherwise, of control of one or more other undertakings.
Joint ventures performing all functions of an autonomous economic entity on a lasting basis are also caught under the law.
Answer ... ‘Control’ is defined as control stemming from any rights, agreements or other means which, either severally or jointly, confer the possibility of exercising decisive influence over an undertaking, particularly through:
- ownership or enjoyment rights over the whole or part of the assets of the undertaking; or
- rights or contracts that confer the possibility of decisive influence on the composition, meetings or decisions of the bodies of an undertaking.
Answer ... Minority interests are caught by Cyprus merger control where they confer, either severally or jointly with other rights, the possibility of exercising decisive influence over an undertaking. The contractual arrangements arising from the transaction documents and constitutional documents of the target undertaking or joint venture are of tantamount importance in determining whether any rights resulting in a change of control are in place.
De facto control could satisfy the control test, while the ability to veto certain types of decisions could also be deemed as falling under such rights conferring the possibility of exercising decisive influence over an undertaking.
Answer ... Fully functional joint ventures are subject to notification to the competent authority under the Control of Concentrations Between Undertakings Law. The decisional practice of the Commission for the Protection of Competition (CPC) has adhered to the judgment of the Court of Justice of the European Union in Austria Asphalt (Case C-248/16, Austria Asphalt GmbH & Co OG v Bundeskartellanwalt, judgment of 7 September 2017, ECLI:EU:C:2017:643). As such, when there is a change from sole to joint control over an existing undertaking, the criterion of a concentration is fulfilled only where the resulting joint venture performs all functions of an autonomous economic entity on a lasting basis.
A joint venture that is genuinely fully functional must be able to operate independently of its parents on an identifiable market. In order to do so, the joint venture must have a management dedicated to its day-to-day operations and access to sufficient resources, including finance, staff, and assets (tangible and intangible) in order to conduct its business activities on a lasting basis.
Answer ... Foreign-to-foreign mergers are caught under the Control of Concentrations Between Undertakings Law. The test as to whether a foreign-to-foreign merger constitutes a concentration of major importance is satisfied where the jurisdictional thresholds are met, without any additional local effects requirement.
Answer ... For the purposes of the Control of Concentrations Between Undertakings Law, a concentration of undertakings is deemed to be of major importance and therefore meet the jurisdictional thresholds if:
- the aggregate turnover achieved by at least two of the undertakings concerned exceeds, in relation to each one of them, €3.5 million;
- at least two of the undertakings concerned achieve a turnover in Cyprus; and
- at least €3.5 million of the aggregate turnover of all undertakings concerned is achieved in Cyprus.
Turnovers comprise the amounts derived from the sale of products and the provision of services by the undertakings concerned during the preceding financial year and corresponding to the ordinary activities of the undertakings, after deduction of sales rebates, value added tax and other taxes directly related to turnover.
Turnovers are calculated for groups of undertakings and are derived from the last audited financial statements of each of the undertakings concerned (or consolidated financial statements at a group level).
By derogation from the above calculation of turnover, in calculating turnover relating to credit institutions and insurance companies, the following calculation methodologies shall respectively apply:
- for a bank or other credit institution, one-tenth of the balance sheet of the last financial year; and
- for an insurance company, the total value of gross premiums during the last financial year, which shall comprise all amounts received or receivable in respect of insurance contracts concluded by it or on its behalf, including outgoing reinsurance premiums and after deduction of taxes and para-fiscal contributions or levies charged by reference to the amounts of individual premiums or the total volume of premiums.
The value of assets also derives from the last audited financial statements of each undertaking concerned (or consolidated financial statements at a group level).
The market share percentage of each undertaking concerned is calculated after defining the relevant product and geographic market against the total of such market. One party could satisfy the thresholds by itself, provided that at least two of the undertakings concerned achieve a turnover in Cyprus.
Other than the special turnover calculation rules for credit institutions and insurance undertakings, there are no sector-specific rules.
Answer ... Notification is not required where:
a credit or financial institution or an insurance company whose normal activities include transactions and dealing in securities, on its own account or for the account of third parties, holds on a temporary basis securities that it has acquired in an undertaking with a view to reselling them, provided that:
- the institution or insurance company does not exercise voting rights in respect of those securities with a view to determining the competitive behaviour of that undertaking, or exercises such voting rights only with a view to facilitating the disposal of all or part of that undertaking or of its assets or the disposal of those securities; and
- any such disposal takes place within one year of the date of acquisition – a period which can be extended by the CPC on request, where it can be shown that the disposal was not reasonably possible within the specified period;
- control is exercised by a person authorised under the legislation relating to liquidation, bankruptcy or any other similar procedure;
- the concentration of undertakings between one or more persons already controlling at least one or more undertakings is carried out by investment companies;
- property is transferred due to death by a will or by intestate devolution; or
- there is a concentration between two or more undertakings, each of which is a subsidiary of the same entity.
The exemption relating to investment companies refers to those companies whose sole objective is to acquire holdings in other undertakings, and to manage such holdings and turn them to profit, without involving themselves directly or indirectly in the management of those undertakings.