Mergers & Acquisitions Comparative Guide

1 Deal structure

1.1 How are private and public M&A transactions typically structured in your jurisdiction?

In Cyprus, private M&A transactions are commonly structured as asset sales or share sales, while in some cases a court-sanctioned arrangement may also be suitable.

An asset sale involves the buyer acquiring specific assets of the target, such as:

• physical assets;
• intellectual property; and
• contracts.

The target, as the entity holding these assets, acts as the seller or assignor.

In a share sale, the buyer acquires shares from the shareholders of the target, thereby gaining control of the company and all of its assets, liabilities and operations. This differs from an asset sale in that:

• the entire company is transferred; and
• the company continues to exist under new ownership.

Corporate restructurings – including mergers, divisions or other corporate reorganisations – may be carried out under Articles 198–201 of the Companies Law (Cap 113). These provisions allow for a court-sanctioned compromise or arrangement that can facilitate the transfer of assets or liabilities of the transferring company to the acquiring company, either fully or partially. It may also provide for:

• the allocation or issuance of shares by the acquirer to persons entitled under the terms of the arrangement; and
• the dissolution of the transferring company.

For public companies listed on regulated markets, the Takeover Bids Law governs the takeover procedures covering both hostile and friendly takeovers, with the aim of ensuring equal and fair treatment of the shareholders. This law is enforced by the Cyprus Securities and Exchange Commission (CySEC).

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

In an asset sale, the buyer:

• selectively acquires specific assets of the target; and
• may choose to assume only certain liabilities.

The advantage of this structure is that the buyer has more control over what is acquired, avoiding unwanted liabilities, which can be particularly beneficial in dealing with potentially risky or troublesome obligations. However, the process can be more complex, requiring separate agreements for each asset; and certain assets such as real estate may require special formalities. The seller may also face higher tax liabilities due to the sale of individual assets.

A share sale, on the other hand, allows the buyer to acquire the target in its entirety. Thus, a thorough due diligence exercise is typically conducted, allowing the buyer to assess the company's financial, operational and legal standing. The key advantage here is straightforwardness: once the shares are transferred, the buyer takes control of the entire company, including its existing contracts and relationships.

The main differences between corporate restructurings under Articles 198–201 of the Companies Law (Cap 113), compared to an asset sale or a share sale, lie primarily in the applicable legal framework and procedural requirements. Unlike share or asset sales, which are contractual transactions between parties, restructurings under these provisions are subject to judicial oversight.

1.3 What factors commonly influence the choice of sale process/transaction structure?

Several key factors influence the choice of M&A transaction structure in Cyprus.

For private companies, the buyer typically has the option to choose between a share sale or an asset sale. In an asset sale, the buyer can selectively acquire assets and liabilities, minimising exposure to unwanted risks. In contrast, when opting for a share sale, the buyer inherits all liabilities of the target, which may not be the intention of the parties involved.

If the aim is for two or more companies to undergo a restructuring, such as a merger or other forms of corporate reorganisation, taking advantage of the possibilities offered under Articles 198–201 of the Companies Law (Cap 113) may be the most appropriate approach. However, this process requires the court's approval following a prescribed procedure, with the court overseeing the process to ensure that it has been properly followed.

For public companies whose securities are traded on regulated markets, the Takeover Bids Law typically applies, requiring that the parties involved adhere to its provisions.

Tax considerations also play a significant role in determining the appropriate transaction structure. While an asset sale may trigger capital gains taxes for the seller, a share sale or a court-sanctioned restructuring can often be more tax efficient, depending on the specific circumstances.

2 Initial steps

2.1 What documents are typically entered into during the initial preparatory stage of an M&A transaction?

During the early stage of an M&A transaction, the documents typically entered into by parties include:

• non-disclosure agreements;
• exclusivity agreements; and
• letters of intent.

2.2 Are break fees permitted in your jurisdiction (by a buyer and/or the target)? If so, under what conditions will they generally be payable? What restrictions and other considerations should be addressed in formulating break fees?

Break fees are generally permitted under Cyprus law, although they are not commonly used. These fees are typically payable when a party terminates the transaction under specified conditions. For break fees to be enforceable, they must:

• reflect a reasonable pre-estimate of the actual damages incurred due to the termination; and
• not be punitive, as penalty clauses are subject to restrictions pursuant to Article 74 of the Contract Law (Cap 149).

When formulating break fee clauses, factors such as the amount of the fee and the conditions under which payment is triggered should be carefully considered.

2.3 What are the most commonly used methods of financing transactions in your jurisdiction (debt/equity)?

The choice between debt and equity as methods of financing will depend on the nature of the transaction and the parties involved, so it is quite difficult to say whether one method is more common than the other.

Debt financing provides a company with capital without diluting the existing shareholders' ownership, as is the case with equity financing. However, it increases the company's liabilities, which poses a risk if the company becomes unable to meet its payment obligations. In contrast, equity financing does not create a liability on the company's balance sheet but results in ownership dilution, potentially reducing the control of existing shareholders. Unlike debt financing, dividends to equity investors are paid only if the company generates profits, presenting less financial risk for the company.

2.4 Which advisers and stakeholders should be involved in the initial preparatory stage of a transaction?

In addition to the executives of the parties involved, it is crucial that legal and financial advisors be engaged early in the M&A transaction process.

Lawyers play a key role in:

• structuring the deal effectively;
• drafting the necessary agreements (including those used in the preparatory stage, such as letters of intent, exclusivity agreements and non-disclosure agreements);
• facilitating productive negotiations; and
• providing timely advice on legal and compliance matters.

Financial advisers, such as auditors and tax specialists, are equally important for:

• assessing the financial aspects of the transaction; and
• ensuring that the deal is structured in a tax-efficient manner.

Depending on the complexity and the nature of the transaction, industry-specific consultants or technical experts may also be required, especially when specialised knowledge is needed to evaluate the assets, technology or certain operations of the target.

2.5 Can the target in a private M&A transaction pay adviser costs or is this limited by rules against financial assistance or similar?

Under Article 53 of the Companies Law (Cap 113), a company is generally prohibited from providing financial assistance to any person for the acquisition of its own shares. This includes both direct and indirect support, such as:

• loans;
• guarantees; or
• other means that facilitate the purchase of the company's shares.

In the context of a private M&A transaction, the target may pay its own adviser costs (eg, legal or financial adviser fees). The crucial factor in determining whether payment of adviser costs amounts to financial assistance is to assess whether the payment is intended to reduce the acquirer's costs. If the target assumes adviser fees that would otherwise be borne by the acquirer, this could potentially be viewed as indirect financial assistance, depending on the specific circumstances of the transaction. If there is any doubt that certain payments may constitute financial assistance, it is advisable to utilise the whitewash procedure by obtaining the necessary shareholder approvals.

3 Due diligence

3.1 Are there any jurisdiction-specific points relating to the following aspects of the target that a buyer should consider when conducting due diligence on the target? (a) Commercial/corporate, (b) Financial, (c) Litigation, (d) Tax, (e) Employment, (f) Intellectual property and IT, (g) Data protection, (h) Cybersecurity and (i) Real estate.

Cyprus follows a common law legal system, with its Companies Law (Cap 113) being heavily based on English law. As a member of the European Union, Cyprus also adheres to EU law. Additionally, Cyprus has its own corporate, tax, real estate and employment laws – all of which must be considered when conducting due diligence on a Cyprus company.

3.2 What public searches are commonly conducted as part of due diligence in your jurisdiction?

In Cyprus, one of the most critical searches in a due diligence process is a search with the Cyprus registrar of companies, providing information about the company's:

• registration details;
• shareholders;
• directors; and
• capital structure.

However, if the company has failed to meet its obligation to submit to the Cyprus registrar of companies the required notifications of changes that took place, there is a risk that the records will not reflect the company's actual status, making them potentially outdated or inaccurate.

Regarding litigation, Cyprus does not maintain a public database for searching pending lawsuits or legal claims against a company. Any such information must be obtained directly from the target.

For real estate matters, searches can be conducted at the Land Registry to confirm:

• property ownership;
• encumbrances; and
• mortgages.

However, access to such records is restricted: only the property owner or its authorised representative can obtain such information, with third parties generally being restricted from conducting these searches independently.

3.3 Is pre-sale vendor legal due diligence common in your jurisdiction? If so, do the relevant forms typically give reliance and with what liability cap?

Pre-sale vendor legal due diligence is not very common in Cyprus. Buyers often conduct their own independent due diligence, even if a vendor report is available, to ensure full verification of the target's legal and financial standing.

4 Regulatory framework

4.1 What kinds of (sector-specific and non-sector specific) regulatory approvals must be obtained before a transaction can close in your jurisdiction?

Private transactions involving non-regulated entities typically do not require prior approval from regulatory bodies, unless the merger control thresholds defined under the Control of Concentrations Between Undertakings Law (83(I)/2014) are triggered. Where such thresholds are met, clearance from the Commission for the Protection of Competition (CPC) is required. The primary purpose of this clearance is to ensure that the transaction does not:

• distort market competition; or
• create monopolistic conditions.

In contrast, sector-specific approvals are necessary for transactions involving regulated entities or activities within certain regulated industries. The regulatory authorities overseeing these sectors may require that certain changes – such as changes in ownership or control of an entity – be properly notified or approved before the respective transaction can proceed. For example:

• certain transactions involving companies in the banking sector may require notification to or approval from the Central Bank of Cyprus (CBC); and
• the Cyprus Securities and Exchange Commission (CySEC), as the regulatory authority for the capital markets, oversees takeover bids for listed companies in accordance with the Takeover Bids Law.

Corporate restructurings – including mergers, divisions or other reorganisations carried out under Articles 198–201 of the Companies Law (Cap 113) – require the sanction of the court.

The examples provided above are not exhaustive. Transactions involving entities in other regulated industries – such as energy, telecommunications and healthcare – may also require specific regulatory approvals.

4.2 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have?

Private transactions involving non-regulated entities are generally not subject to regulatory supervision, except where the merger control thresholds under the Control of Concentrations Between Undertakings Law are met. In such case, notification must be submitted to the CPC. The CPC's primary role is to assess whether the proposed merger or acquisition could significantly distort competition in the market. Its powers, as defined in the law, include, among others, the authority to:

• approve, block or impose conditions on the transaction under review to prevent anti-competitive effects; and
• impose fines in case of non-compliance.

For transactions within certain regulated sectors – such as banking, capital markets and energy – the applicable regulatory framework:

• designates the responsible regulatory body (eg, the CBC, CySEC or the Cyprus Energy Regulatory Authority); and
• defines the powers granted to it.

4.3 What transfer taxes apply and who typically bears them?

In Cyprus, the tax implications of an M&A transaction depend on how the deal is structured, making it essential to assess each transaction individually. Different taxes may apply and various exemptions or reliefs may be available based on the specific circumstances.

Stamp duty is governed by the Stamp Duty Law, which imposes stamp duty on documents specifically listed therein, regardless of where they are executed, provided that they relate to either:

• assets located in Cyprus; or
• acts to be performed in Cyprus.

The stamp duty payable depends on:

• the transaction value; and
• the nature of the agreement.

Unless otherwise agreed, the purchaser typically bears the cost.

Another important tax consideration is capital gains tax (CGT), which is levied on profits from the disposal of immovable property located in Cyprus. This tax also applies to the sale of shares in a company whose property consists of immovable property in Cyprus or profits from the disposal of shares in companies that directly or indirectly participate in a company or companies which own immovable properties in Cyprus, where at least 50% of the market value of such shares is derived from the relevant property. However, CGT does not apply to the sale of shares in companies that do not hold Cypriot real estate, making share transactions (in the absence of real estate) a more tax-efficient structure in many M&A deals. The responsibility for CGT usually falls on the seller, although certain exemptions may be available – particularly if the transaction qualifies as part of a corporate restructuring. Any profit from the sale of shares, bonds and debentures (including forwards, swaps, indexes and options connected to them) is also exempt from corporate taxation.

Regarding value added tax (VAT), share sales are exempt under Cypriot VAT law. However, asset sales may be subject to VAT at the standard rate of 19%. When VAT is applicable, the buyer typically bears the burden but can claim it back if the buyer is also VAT registered. Business-to-business sales usually have a neutral VAT effect.

If an M&A transaction involves the transfer of immovable property, land transfer fees and the contribution to the Central Agency for the Equal Distribution of Burdens must also be considered. These fees, which are payable to the Department of Lands and Surveys, are calculated based on the value of the property and are generally borne by the buyer. However, exemptions or reductions may apply, particularly in cases of corporate reorganisations or intra-group transfers.

Corporate income tax does not apply to capital gains from share sales, provided that the company does not hold immovable property in Cyprus. Cyprus also offers various corporate restructuring reliefs which can eliminate or reduce stamp duty, capital gains tax and other levies, provided that the transaction qualifies under the relevant tax laws.

5 Treatment of seller liability

5.1 What are customary representations and warranties? What are the consequences of breaching them?

Representations and warranties are fundamental in the contractual framework governing an M&A transaction.

They serve to protect the buyer by requiring the seller to confirm specific facts and disclose material information about:

• itself; and
• the target, or the assets/liabilities being transferred.

If a representation or warranty is later found to be untrue, the buyer may be entitled to legal remedies against the party that provided it, including:

• claims for damages or indemnification; and
• in some cases, the right to terminate the contract.

Customary representations and warranties can cover both the seller and the target. With respect to the seller, they typically include assurances regarding its:

• legal capacity and authority to enter into the transaction;
• corporate status;
• solvency; and
• ownership of the shares or assets being transferred.

As for the target or the assets being transferred, representations and warranties generally address:

• corporate status (confirming that the target is duly incorporated and in good standing);
• financial matters (eg, the accuracy of disclosed financial statements);
• tax compliance;
• the absence of undisclosed liabilities or litigation; and
• compliance with applicable laws and regulations.

Depending on the nature of the business or assets involved, representations and warranties may be tailored to address sector-specific risks and regulatory considerations.

5.2 Limitations to liabilities under transaction documents (including for representations, warranties and specific indemnities) which typically apply to M&A transactions in your jurisdiction?

In Cyprus M&A transactions, liability limitations are structured to balance the interests of both buyers and sellers. These limitations generally arise from two sources:

• time restrictions on claims; and
• financial caps on liability.

Buyers generally have a defined period within which they can bring claims for breaches of warranties. A common approach distinguishes between:

• general warranties, which have a shorter claims period; and
• fundamental warranties – such as those related to title, capacity and ownership – which are subject to longer periods.

Tax warranties may also carry more extended timeframes.

Financial limitations are also central to M&A agreements. Sellers often negotiate a cap on liability, limiting their exposure to a certain amount or a percentage of the purchase price. Additionally, a de minimis threshold may be used, ensuring that minor claims below a certain value are disregarded.

Another key limitation on the seller's liability comes from the disclosure process. Warranties typically do not apply to matters disclosed in the so-called 'disclosure letter'. The seller prepares a disclosure letter or data room, detailing exceptions to the warranties. Once a matter has been so disclosed, the buyer is considered to have knowledge of it and cannot claim a breach later.

Disputes often arise over whether the buyer should be barred from claiming for matters discovered during due diligence. Some agreements explicitly state that the buyer's due diligence does not reduce the seller's liability under warranties, allowing the buyer to rely on warranties regardless of the buyer's findings during the due diligence. The buyer can ask for specific indemnities to address certain risks that were identified during due diligence, thus offering it protection against significant issues that may fall outside the scope of standard warranties. These indemnities typically provide more substantial financial protection or extended survival periods.

5.3 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

In Cyprus, warranty and indemnity insurance is not widely used in M&A transactions.

5.4 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

First, in terms of contractual protections, a sale and purchase agreement will typically include warranties and representations from the seller concerning key aspects of the seller and the target.

To further secure the buyer's position, escrow arrangements – particularly in non-simultaneous signing and closing scenarios – may also be used. For example, in such cases, the buyer may deposit the purchase price into an escrow account, where the funds are held by a third party (the escrow agent) until the closing conditions are met. Once all conditions have been satisfied and the transfer of ownership occurs, the funds are released to the seller.

Also, it is not uncommon for the share purchase agreement to include provisions for post-closing purchase price adjustments. If issues arise after the closing – such as the discovery of additional liabilities – the parties may agree that the purchase price will be adjusted to reflect these changes. In such cases, the share purchase agreement will likely specify a process for determining the final adjustment, with:

• the buyer paying the seller an additional amount; or
• conversely, the seller being required to reimburse the buyer, depending on the circumstances.

5.5 Do sellers in your jurisdiction often give restrictive covenants in sale and purchase agreements? What timeframes are generally thought to be enforceable?

In Cyprus, it is quite common for sellers to agree to restrictive covenants in sale and purchase agreements. These covenants are typically designed to prevent the seller from taking actions that could harm the sold business post-transaction. The most common types of restrictive covenants include:

• non-compete clauses;
• non-solicitation clauses; and
• non-disclosure clauses.

Non-compete clauses prevent the seller from engaging in business activities that directly compete with the sold business:

• for a specified period; and
• within a defined geographical area.

Non-solicitation clauses restrict the seller from soliciting the business's clients or employees for a certain duration after the sale.

Non-disclosure clauses ensure that the seller does not share confidential information gained during their ownership of the business.

Regarding enforceability, Cyprus law generally upholds restrictive covenants if they are reasonable in:

• scope;
• duration; and
• geographic reach.

Specifically, non-compete clauses:

• must be proportionate; and
• should not:
• • unduly restrict the seller's ability to earn a living; or
  • violate their constitutionally recognised right to work and freedom to pursue a profession.

In terms of timeframes, restrictive covenants are typically enforceable for one to three years. The timeframe must strike a balance, protecting the buyer's interests while not unnecessarily limiting the seller's rights.

5.6 Where there is a gap between signing and closing, is it common to have conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

It is common to include conditions such as a MAC clause and bring-down of warranties to protect the buyer.

A MAC clause is commonly included to protect the buyer from significant negative changes to the target between signing and closing. This clause often restricts the seller from taking actions during such interim period that could harm the value of the target.

A bring-down of warranties requires the seller to confirm that the warranties made at signing remain true and accurate as of the closing date, ensuring that no material changes or breaches have occurred that could impact the buyer's decision to proceed with the deal.

6 Deal process in a public M&A transaction

6.1 What is the typical timetable for an offer? What are the key milestones in this timetable?

The primary source of legislation governing public M&A transactions in Cyprus is the Takeover Bids Law. The competent authority responsible for the supervision and enforcement of this law is the Cyprus Securities and Exchange Commission (CySEC).

The takeover bid process of a takeover bid begins with the announcement of the intention to make a bid. Within three working days of such announcement, the bidder must:

• submit the necessary applications to obtain any relevant administrative permits from the competent authorities;
• commence the due diligence exercise on the target; and
• take all necessary steps to ensure that the process moves forward.

The bidder has 12 days from the announcement of the public offer to submit the offer document to CySEC. Upon submission, CySEC will review the offer document. If the bid is to be satisfied in cash, CySEC has eight working days to approve the offer document. If the offer involves securities, the review period extends to 12 working days. If CySEC requires further information, the bidder must submit the requested information within five working days, and CySEC will issue its decision within three working days of receiving the additional information. Once CySEC approves the offer document, the bidder must promptly announce its approval in accordance with the Takeover Bids Law. The acceptance period for the bid is specified in the offer document and must not be less than 30 days and not more than 55 days from the date on which the offer document is:

• sent to the shareholders; or
• made available on the bidder's website.

6.2 Can a buyer build up a stake in the target before and/or during the transaction process? What disclosure obligations apply in this regard?

The offeror, as well as anyone holding 5% or more of the voting rights in the target, must immediately report any purchase of shares in the target. This applies to purchases made by:

• the offeror;
• others acting on its behalf; or
• any of its controlled companies.

If a person acquires 0.5% or more of the voting rights in the target, this must also be disclosed immediately; and every subsequent acquisition above this threshold must be disclosed as well.

6.3 Are there provisions for the squeeze-out of any remaining minority shareholders (and the ability for minority shareholders to 'sell out')? What kind of minority shareholders rights are typical in your jurisdiction?

The squeeze-out right is referred to in Article 36 of the Takeover Bids Law. Article 36 provides that if an offeror makes a bid to all holders of securities in the offeree company for the total of their holdings, it can require all holders of the remaining securities to sell those securities to it in the following situations:

• The offeror holds securities in the offeree company representing at least:
• • 90% of the capital carrying voting rights; and
  • 90% of the voting rights in the offeree company; or
• The offeror holds or has irrevocably agreed to acquire, following the acceptance of a takeover bid, securities in the offeree company representing at least:
• • 90% of the capital carrying voting rights; and
  • 90% of the voting rights included in the takeover bid.

To initiate the squeeze-out procedure, the offeror must apply to CySEC. If CySEC determines that the necessary conditions are met, it will authorise the offeror to proceed with the squeeze-out and acquire the remaining securities from the minority shareholders.

In any of the situations described above, a minority shareholder that still holds securities in the target (after the offeror has acquired the majority stake) has the right to demand that the offeror buy its shares. This sell-out right is provided under Article 37 of the Takeover Bids Law.

6.4 How does a bidder demonstrate that it has committed financing for the transaction?

In every bid offering cash consideration, the offeror must support the offer with a confirmation from a credit institution (or other organisation with the necessary solvency). This confirmation must state that the cash the offeror will be required to pay to the recipients upon the expiration of the bid is available and will remain available to the credit institution until the payment date. CySEC will reject the takeover bid documents unless they are accompanied by:

• this confirmation from the credit institution; and
• a relevant confirmation from the offeror's board of directors stating that the amount the offeror is required to pay to the recipients upon the expiration of the bid has been secured with a credit institution and will remain secured until the payment date.

6.5 What threshold/level of acceptances is required to delist a company?

To delist a company following a takeover bid, the offeror must have acquired at least 90% of the total voting rights in the target.

6.6 Is 'bumpitrage' a common feature in public takeovers in your jurisdiction?

'Bumpitrage' is not a typical feature of public takeovers in Cyprus.

6.7 Is there any minimum level of consideration that a buyer must pay on a takeover bid (eg, by reference to shares acquired in the market or to a volume-weighted average over a period of time)?

According to the Takeover Bids Law, the consideration offered by the offeror must be at least equal to the highest price paid or agreed to be paid for the same securities by the offeror (or by persons acting in concert with it) during the 12 months prior to the announcement of the bid. However, in the case of a voluntary bid, CySEC has the discretion to approve a lower price if it deems appropriate.

6.8 In public takeovers, to what extent are bidders permitted to invoke MAC conditions (whether target or market-related)?

Under the Takeover Bids Law, bidders are generally restricted from invoking MAC conditions – whether related to the target or to market conditions – unless such conditions are clearly and explicitly stated in the bid documents, including specific criteria or events that would trigger the condition. If a bidder wishes to invoke a condition, it is generally allowed to do so only:

• with the relevant approval of CySEC; and
• if the circumstances are of material significance to the bidder in the context of the offer, which in practice is a very high standard.

6.9 Are shareholder irrevocable undertakings (to accept the takeover offer) customary in your jurisdiction?

Yes, shareholder irrevocable undertakings to accept a takeover offer are common in Cyprus.

7 Hostile bids

7.1 Are hostile bids permitted in your jurisdiction in public M&A transactions? If so, how are they typically implemented?

In the context of a takeover bid, a 'hostile bid' is an offer made by a bidder that is not supported by the target's board of directors at the time the bidder announces its intention to acquire the company. In contrast, a friendly takeover occurs when the target's board supports the bid.

Cyprus takeover law does not explicitly distinguish between hostile and friendly bids, as some other jurisdictions do. However, the law provides a comprehensive framework for both types of bids, focusing on the process, disclosure and protection of shareholders, regardless of whether the bid is hostile or friendly.

Under the Takeover Bids Law, hostile takeover attempts are not prohibited. However, once a bid has been announced, the target's board is legally required, among other things, to provide shareholders with timely and accurate information about the bid's terms and implications, as outlined in Article 33 of the Takeover Bids Law (41(I)/2007).

7.2 Must hostile bids be publicised?

Yes, every takeover bid (whether hostile or not) must be publicised.

7.3 What defences are available to a target board against a hostile bid?

Article 34 of the Takeover Bids Law (41(I)/2007) establishes the board neutrality rule, restricting the actions of a target's board during a takeover bid. From the moment the board becomes aware of a potential bid until the offer period expires, is withdrawn or is cancelled, the board cannot take any action that may obstruct or prevent the bid without prior approval from the general meeting of shareholders. The only exception to this restriction is that the board is allowed to seek alternative competing bids without the need for such shareholder approval. Thus, any board decision that falls outside the company's ordinary course of business that could hinder the takeover (eg, issuing new shares, entering into transactions that significantly alter the company's assets or liabilities, conducting share buybacks) will be considered void unless approved by the shareholders.

8 Trends and predictions

8.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

The M&A landscape in Cyprus remains dynamic and attractive to investors, thanks to the country's:

• strategic location;
• tax incentives;
• access to EU markets; and
• business-friendly environment.

In terms of prevailing trends, M&A activity has been notably strong in sectors such as:

• real estate;
• energy;
• tourism; and
• technology.

Real estate investments, especially in residential and commercial properties, continue to drive the market. Additionally, Cyprus's emerging energy sector, with opportunities in renewable resources, is gaining increasing attention.

8.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms? In particular, are you anticipating greater levels of foreign direct investment scrutiny?

Regarding foreign direct investment (FDI), Cyprus, as an EU member state, is subject to the EU Foreign Direct Investment Screening Regulation, which provides a framework for monitoring investments that may affect:

• national security;
• public order; or
• strategic sectors.

While Cyprus does not currently have a dedicated FDI screening mechanism, the regulation encourages EU member states to adopt measures for evaluating certain large investments in sensitive sectors. In this context, Cyprus is expected to take steps towards implementing an FDI screening mechanism in alignment with the EU regulation.

Also, a public consultation process for Cyprus's tax reform is currently underway, with the reforms anticipated to take effect in the upcoming months. The tax reform aims to:

• modernise Cyprus tax system; and
• enhance its competitiveness.

Key proposals include:

• increasing the corporate tax rate from 12.5% to 15%;
• introducing a €20,500 tax-free income threshold; and
• restructuring income tax brackets to reduce the tax burden on households.

9 Tips and traps

9.1 What are your top tips for smooth closing of M&A transactions and what potential sticking points would you highlight?

The key to smooth closing of an M&A transaction can be summarised in three words – prepare; protect; proceed:

• Preparation is the foundation of any successful transaction. The initial phase involves strategic planning to outline timelines and structure the deal. It is advisable to consult in advance with legal and financial advisers to ensure that the transaction is optimally structured. Preparation also includes conducting thorough due diligence on the target to gain deeper insights into its operations, structure and potential risks.
• Protection is about securing the best possible terms and safeguarding the client's interests, while ensuring full compliance with applicable laws and legal requirements. Honest and transparent communication between clients and advisers is essential for addressing potential risks and aligning on key objectives. Equally important is effective negotiation between counterparties, which helps to avoid unnecessary delays and unproductive discussions, ensuring that the transaction moves forward efficiently.
• Once the transaction documents have been prepared, it is time to proceed. If the previous stages have been carried out diligently, the execution and closing of the transaction should unfold smoothly. However, attention to detail remains critical. Practical considerations such as the acceptance of electronic copies and signatures, the number of document copies and the logistics of exchanging deliverables must be carefully planned and efficiently coordinated.

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.