The Cyprus Companies law (CAP 113), which has incorporated the relevant provisions of the EU Cross-Border Mergers Directive (2005/56/EC), provides for the procedures that need to be followed regarding a cross border merger between companies for which a merger is permitted in accordance to the provisions of the national law of the member state in which they are incorporated.
It is important to note that limited liability companies by guarantee and companies subject to liquidation cannot take part in a cross-border merger.
A merger may occur in one of three different ways:
- One or more limited liability companies , on being dissolved without going into liquidation (the "Acquired Company") transfer all their assets and liabilities to another existing company (the "Acquiring Company") in exchange for the Acquired Company's members being issued with securities or shares in the Acquiring Company and, if applicable, a cash payment; or
- An Acquired Company or Companies, on being dissolved without going into liquidation, transfers all its/their assets and liabilities to another limited liability company that they form (the new company) in exchange for their members being issued with securities or shares representing the capital of the new company and, if applicable, a cash payment; or
- By the transfer of all the assets and liabilities of a limited liability company which is dissolved without going into liquidation to a limited liability company holding all the securities or shares representing its capital.
The above-mentioned cash payments should not exceed 10% of the nominal value or, in the absence of a nominal value, of the accounting par value of those securities or shares representing the capital of the company resulting from the cross-border merger (unless a higher cash amount is permitted by the national law of at least one of the merging companies).
(A) Documents and preliminary actions
The Directors of each of the Cypriot companies taking part in the cross-border merger must as a first step draw up the proposed terms of the cross-border merger and call for a board meeting for approving the merger plan which must then be also approved by the shareholders at a General Meeting. Notice of the general meeting should be duly given to the shareholder and the procedure to be followed will depend on the Articles of Association of the Cypriot companies.
- Proceedings prior to the
Prior to the date of General Meeting the following requirements must be satisfied:
- the date of the general meeting must be such that the cross border merger plan is filed with the Registrar of Companies (hereinafter the 'Registrar') and published in the Official Gazette of the Republic of Cyprus at least one (1) month before the date of the general meeting
- the Directors each of the Cypriot merging companies must draw up a report for each merging company which must be laid before the members and the employees or their representatives which must explain and justify the legal and economic grounds of the merger and the implications of the cross-border merger for the members, creditors and employees.
- for each of the Cypriot merging companies an independent expert's report must also be drawn up (but subject to the exception specified) which must also be made available to the members.
- In addition to the above each Cyprus merging company must keep at its registered office (a) the proposed merger plan (b) annual accounts and management reports for the last three financial years of the merging companies (c) interim accounts drawn up as at a date not earlier than the first day of the 3rd month preceding the date of the merger plan (d) directors reports for each merging company and (e) expert report for each merging company.
- The Cross border Merger
The cross border merger plan to be prepared must contain certain minimum information as specifically indicated in the law.
(B) General Meeting
The general meeting must review the Directors and Expert report and decide on the approval of the merger and the common cross border plan by virtue of a special resolution.
The general meeting must also state expressly, with the approval of the cross border merger, whether it accepts the possibility for the members of any other merging non Cypriot company to use the procedure envisaged by the national legislation of such other merging company, which permits the examination and amendment of the share exchange ratio or compensation to minority shareholders, without preventing the filing of the cross border merger.
(C) First application to the Court – Pre-merger Certificate
Once the cross border merger plan is approved (in accordance with the procedures discussed above) the Cyprus Company must make an application to the court with a supporting affidavit in order to obtain the issuance by the court of a certificate (in the form of a court order) which states indisputably that the pre-merger acts and formalities have taken place and are satisfied.
A similar pre-merger certificate must be obtained by each non-Cypriot company in its own jurisdiction.
(D) Second application to the Court - Completion of the cross border merger
The Cross border merger will be deemed to take effect on the effective date, as shall be determined by the competent Court of the surviving entity (the "Controlling Court").
If the Court is satisfied a Court Order shall be issued approving the completion of the merger and setting the date on which the cross border merger shall be deemed as taking effect.
In accordance with the Law an official copy of the Court Order approving the completion of the merger must be delivered the Cyprus Registrar of Companies for registration and publication in the Official Gazette of the Republic of Cyprus.
Simplification of procedure
Simplifications to the procedure are provided for in the Law in the instance that the cross border merger by acquisition takes place by a Cyprus Company which holds all the shares and securities granting a voting right in the general meeting of the company being acquired. In such an instance for example an independent expert report will not be required.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.