This article provides a brief summary of the framework governing the intro-EU cross-border conversions under Cypriot law.
General
The addition of articles 201HA-201HK to the Companies Law (Cap. 113) of Cyprus substantially incorporates in the Companies Law (Cap. 113) the provisions of European Directive 2017/1132/EU as amended.
The aforementioned articles apply to cross-border conversions of capital companies, which are incorporated under the law of a Member State of the European Union and have their registered office, central administration or principal place of business within the European Union, into capital companies governed by the law of another Member State.
When used herein the term "cross-border conversion" will refer to the operation whereby a company, without being dissolved or wound up, converts its legal form under which it is registered by one Member State "the departure Member State" into a legal form in another Member State "the destination Member State", whereas importantly the Company will retain its legal personality throughout the process.
The European framework governing this process is established under Directive (EU) 2017/1132, as subsequently amended. This directive introduced uniform rules across the European Union to facilitate cross-border conversions, mergers, and divisions of capital companies. In Cyprus, the directive has been implemented through the incorporation of Articles 201HA to 201HK into the Companies Law, Cap. 113.
In line with the European Union's legal framework departure Member State governs the parts of the procedures and formalities to be followed in relation to the cross-border conversion process for obtaining the pre-conversion certificate. Subsequently, the law of the destination Member State shall govern the procedures to be followed after the said pre-conversion certificate has been obtained.
Cyprus- Departure Member State
If the departure Member State is Cyprus, the competent authority for issuing the pre-conversion certificate is the District Court of the province where the company's registered office is located.
The company must submit an application for the issuance of the pre-conversion certificate, accompanied by the necessary documentation, including:(a) the proposed cross-border conversion scheme;(b) the directors' report and any accompanying opinion of the directors in relation to the cross-border conversion scheme, along with the report of an independent expert, if available;(c) evidence of approval of the conversion by the general meeting; and(d) an affidavit confirming the accuracy of the information provided and the truthfulness of the statements made in the application. All documentation must be prepared and submitted in accordance with the requirements set out in the relevant provisions of the Companies Law.
Upon the submission of the application to the relevant Court for the issuance of the pre-conversion certificate, the Court will examine all documents and information submitted as well as the company's compliance with the obligations concerning the employee participation arrangements and safeguarding of employees', shareholders' and creditors' rights.
If it is established that the cross-border conversion meets all applicable conditions and that the required procedures and formalities have been properly completed, the Court will issue the pre-conversion certificate. Once issued, this certificate allows the company to move forward with the procedures required in the destination Member State, ultimately leading to the registration of the converted entity under its new legal form.
Cyprus Member State of destination
In the case where Cyprus is the destination Member State, the pre-conversion certificate is issued by the competent authority as designated by the departure Member State.
The competent authority for the control of the legality of the cross-border conversion in respect of the part of the procedure governed by Cypriot law is the District Court of the district where the registered office of the Cypriot company to be created by the conversion is located.
The application submitted to the Court for this purpose shall be accompanied, inter alia, by the pre-conversion certificate and the proposed cross-border conversion scheme as approved by the general meeting in departure Member State, which shall constitute proof that the pre-conversion procedures and formalities in the departure Member State have been completed.
If the Court is satisfied that all legal requirements have been fulfilled, it will issue its approval. The company must then file the Court's decision with the Cyprus Registrar of Companies, who will record the completion of the cross-border conversion in the public register and ensure its publicly available.
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.
