Cross-Border Mergers of Limited Liability Companies

The European Union 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.

The law sets that “cross border merger of limited liability companies”, shall mean the merger of limited liability companies incorporated in accordance with the legislation of a member state and having their registered office, central administration or main place of establishment within the community, on condition that at least two of these companies are regulated by the law of different member states.

 After 2007 and the adoption of the Directive 2005/56 EU, the Cypriot legislation was harmonised with the EU and thus allowed cross-border mergers between Cypriot and EU companies.

So, what exactly do we mean when talking about mergers and acquisitions?

When talking about mergers and acquisition we essentially refer to the act performed by several companies through which two or more limited liability companies by shares merge into one already existing or newly founded company. Furthermore, it is possible for one of them to acquire the all or part of the assets of the other company. For that, the Shareholders of the acquired company get a settlement amount as well as shares. The amount does not exceed the 10% of the nominal value of the company’s shares.

These type of mergers are allowed for companies limited by shares but not for companies limited by guarantee. They can either be private limited companies or public limited companies. In the last case, the objective is generally the formation of a European Company. Furthermore, for intra-group cross-border mergers the procedures in Cyprus are simplified thus attracting a lot of foreign investments.

For more detailed information, contact our team of specialists at Parparinos Milonas Corporate and Legal Consultants who will give the best advice and the correct course of action to take.

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