Business restructuring and M&A in Cyprus

1) In what forms can the reorganization of a legal entity be carried out?

In Cyprus, the reorganization of a legal entity can be carried out in several forms, as governed by the Cyprus Companies Law, Cap. 113, and other relevant regulations. These reorganizations are commonly used in restructuring businesses for various strategic or financial reasons. 

The key forms of reorganization include:

• merger;
• division (demerger);
• transfer of assets or liabilities;
• exchange of shares;
• conversion;
• reduction of capital;
• cross-border mergers;
• schemes of arrangement;
• voluntary liquidation and reconstitution.

2) What are the procedures for the division or merger of a company?

In Cyprus, the division or merger of a company is governed by the Companies Law, Cap. 113, and specific regulations. The processes involve legal, financial, and regulatory steps to ensure compliance and protection of stakeholders' rights. 

A merger involves combining two or more companies, either by absorption or consolidation, to form a single entity.

3) How to separate a specific type of activity into an independent company?

In Cyprus, separating a specific business activity into a new, separate legal entity is a common restructuring process known as business spin-off or division. This is typically done by transferring part of the assets, liabilities, and operations related to the specific activity to a newly incorporated company or an existing one.

4) Is it possible to reorganize a company in case of bankruptcy?

In Cyprus, it is possible to reorganize a company in the case of bankruptcy or insolvency. The primary mechanism for this is the Examinership procedure, which is a formal corporate rescue process aimed at restructuring a company’s finances and avoiding liquidation. This procedure allows the company to continue operating while negotiating a compromise or arrangement with its creditors

5) Which government agencies' approvals should be obtained for mergers and acquisitions?

In Cyprus, mergers and acquisitions (M&A) require approvals from various government agencies and regulatory bodies, depending on the nature of the businesses involved and the structure of the transaction. 

Below is a list of key authorities whose approvals might be necessary in M&A transactions:

• Registrar of Companies;
• Cyprus Securities and Exchange Commission (CySEC);
• Commission for the Protection of Competition (CPC);
• Central Bank of Cyprus;
• Ministry of Finance.

Author: Nasos Kyriakides