Cross-Border Mergers of Limited Liability Companies
Law N.186(I)/2007 has inserted new provisions in the Cyprus Companies Law, Cap113, bringing the same in line with the provisions of Directive 2005/56/EC on cross border mergers of limited liability companies, thus allowing cross-border mergers between Cypriot and EU companies. EC Directive 2005/56/EC has introduced a uniform and simplified procedure in order to pursue cross-border mergers between limited liability companies incorporated under the laws of a Member State and having their registered office, central administration or principal place of business within the Community, provided that at least two of them are governed by the laws of different Member States.
Procedure for a cross-border merger
Provided that the members of the Company approve the cross border merger plan, the Company must make an application to court with a supporting affidavit, in order to obtain the issue 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 merging non-Cypriot company in its own jurisdiction.
Within 6 months of the issue of the Pre-Merger Certificate a second application must be made to Court together with a supporting affidavit for further examination where the Court should examine whether the merging companies approved the common cross border merger plan under the same conditions, and if the methods of participation of the employees in relation to each merging Cyprus Company have been followed.
If the court is satisfied as to the legality of the procedures followed for the completion of the cross-border merger, the Court shall issue a Court Order approving completion of the merger and setting a date on which the cross border merger shall be deemed to take effect.
So, what exactly do we mean when talking about mergers and acquisitions?
When talking about mergers we essentially refer to the act performed by several companies through which two or more limited liability companies by shares (the acquired companies) merge into one already existing company (the acquiring company) and such a process requires the approval of the court.
For intra-group cross-border mergers the procedures in Cyprus are simplified thus attracting a great deal of foreign investments.
On the other hand, a share acquisition as such, refers to the procedure whereby the acquiring shareholder acquires all or part of the shares of the target company, a process which involves drafting and negotiating joint venture agreements, subscription agreements and shareholders agreements governing the management and operation of the acquired company.