In Cyprus, mergers between Cyprus companies and cross-border mergers are regulated by the Cyprus Companies Law, Cap 113.
Mergers between Cyprus Companies may take several forms, including the following:
- One company absorbs one or more other companies, with the latter ceasing to exist as a separate legal entity/ies.
- Two or more companies unite to form a new entity, with the original companies dissolving.
With the merger, the absorbing company absorbs all assets and liabilities of the absorbed company, which is dissolved without being liquidated.
Procedure
The merger procedure starts with the preparation of a common merger plan by the Board of Directors of the merging companies, which is subject to the approval of the shareholders of the merging companies.
The merging companies must then submit an application to the District Court with a view to obtain the Court’s approval for the merger.
For the merger to take effect, the merging companies must submit the Court’s order and any other relevant documents to the Registrar of Companies, which will proceed with the necessary changes to the Company’s records and issue a Certificate of Dissolution of the absorbed company.
Key Considerations for Merging Companies
- They must be up to date with their filings with the Registrar of Companies.
- They must be up to date with their tax obligations.
- The consent of their creditors must be obtained prior to the approval of the merger by the Court (this is often obtained during a meeting of creditors conveyed for this purpose).
Advantages of a Merger
- The merging companies combine their resources, expertise and clientele, leading to a stronger entity with a larger market share.
- It reduces the operational cost of the companies.
- The merger will need to be examined and approved by the Tax Department. Reorganisations of companies are exempt from taxation.
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This article is provided for general information purposes only and does not constitute legal, tax, or other professional advice. It should not be relied upon as a substitute for specific advice on any individual matter or transaction. Professional advice should be obtained before acting or refraining from acting on the basis of any information contained herein.
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