The main legislation regulating mergers and acquisitions in Cyprus is the Companies Act (Cap 113). In particular, articles 198 to 202 contain provisions on mergers, reconstruction and merger of companies and exchange of shares between two or more companies. Other important legislations are the Law of Control of Concentration between Companies (22 (I) / 1999) and the Safeguarding and Protection of the Rights of Employees in Case of Transfer of Companies, Businesses or Parts thereof (104 / (I) / 2000). The first promotes fair competition and the second protects the rights of workers in the event of business transfers.
Procedure:
First, the companies involved in the merger or acquisition must file an application with the Court and then schedule a general meeting of shareholders of both companies. During the meeting, it is determined if it is required to settle the responsibilities between shareholders and creditors. It should be noted that the merged company must be dissolved without going into liquidation and its assets must be transferred to the acquiring company.
In accordance with the provisions of Article 198, the merger or acquisition proceeds on the condition that three-quarters of the company’s management approve the transaction. An outline is then drawn up and presented to the auditors. Once the scheme is approved, companies can submit the last petition for approval to the Court. Please note that the request must be accompanied by an affidavit from a director of each company. Subsequently, a copy of the agreement must be sent to the Registrar of Companies. Finally, the board of directors of each company will draw up an agreement that will determine the reorganization plan and each company will be obliged to follow this particular plan.
It should be noted that in the case of listed companies, the merger procedure will be the same except for minor changes in the merger plan, which must contain:
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name;
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the form of the registered office of the companies;
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details about the transfer of shares and the amount of money;
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information on the allocation of shares;
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the exact date on which the new shareholders will be entitled to benefits;
Advantage:
From a tax point of view, the main benefit of mergers and acquisitions is that the earnings from dividends are exempt from corporation tax. Also, mergers and acquisitions are not subject to VAT in Cyprus. Another considerable advantage is that the profits generated by the transfer of real estate during the merger or acquisition are exempt from capital gains tax. Furthermore, with regard to the transfer of real estate, the payment of the transfer fee is not required.