RECENT AMENDMENT TO THE COMPANIES LAW, CAP.113

On 24th of July 2009, in its effort to make Cyprus a more attractive jurisdiction for international business, the House of Representatives has adopted important amendments to the Cyprus Companies Law, Cap.113 (the “Law”), the purpose of which is to modernize and update many aspects of the Law.

The most important amendments which have been introduced by Law 99(I) of 2009 are the following:

1. As regards the need of affixing the common seal, there are the following changes:

(a) The need of affixing the common seal on documents which under English law would require the common seal to be affixed (i.e. deeds) has been abolished.

(b) It is noted, however, that in case a company opts to affix its common seal on any document, the affixing of such seal should be done in accordance with the relevant procedure set out in its articles of association.

2. As regards prospectus the following amendments have been introduced:

(a) The filing of a prospectus with the Registrar of Companies by companies is no longer required in case of offerings of shares or debentures to which the Public Offer and Prospectus Law of 2005 implementing Directive 2003/71/EC and/or the Open-Ended Undertakings for Collective Investment in Transferable Securities and Related Issues Law of 2004 Law apply.

(b) In case a prospectus needs to be filed with the Registrar of Companies by a public company which is offering shares or other securities in a market abroad, the filing of such prospectus and accompanying documents can be accepted by the Registrar of Companies in any widely used language, such language would surely include the English language.

3. Whitewash provisions regarding unlawful financial assistance have been introduced in cases of private companies. Specifically, the provision of direct or indirect financial assistance by a private company for acquisition of its own shares or of the shares of its holding company is no longer unlawful in cases where (a) such private company is not a subsidiary of any public company, and (b) the relevant transaction is approved by the general meeting of the company by a resolution passed by a majority of 90% of all the issued shares of the company. It is important to highlight that the general prohibition for the provision of financial assistance by a public company for acquisition of its own shares still exists. Further, it is noted that the whitewash provisions do not affect the obligation to comply with any other legal obligations.

4. Redeemable preference shares may now be issued on terms that allow their redemption both at the option of the company and at the option of the holder thereof.

5. The articles of association of a company can provide for the automatic conversion of the rights attached to shares on the happening of a specific event without the need of taking any further corporate action at the time.

6. In case of an amendment, assignment or other change to a charge which has been filed with the Registrar of Companies, it is now possible to also register such change without the need to register such change as a new charge which applied, rather illogically, under the legislation prior to the amendment.

7. The need to register with the Registrar of Companies of certain charges has been abolished. More specifically:

(a) there is no need to register with the Registrar of Companies pledges over shares in Cypriot companies created by chargors which are Cypriot companies noting that (i) this does not dispense with the other perfection requirements for a pledge over shares in a Cypriot company and (ii) in any event, where the chargor is not a Cypriot company there is no need of registration of a charge with the Registrar of Companies.

(b) There is no need to register with the Registrar of Companies charges which come within the Cyprus legislation adopting the EU Financial Collateral Directive.

8. The amendments abolish practical issues which arose in cases of a public company the shares of which are listed on a market outside Cyprus and particularly the problem which existed resulting from the need to maintain a physical register of members in Cyprus. More specifically:

(a) The registration of a transfer of shares or other securities is legal even in the absence of an instrument of transfer provided, however, that such transfer has taken place in accordance with the rules regulating the relevant market.

(b) In cases of companies which carry on business outside Cyprus, or the shares of which are listed on a market outside of Cyprus or that have shareholders who reside outside Cyprus, one can keep a register of members outside Cyprus provided copies of all entries therein are sent to the registered office of the company. It is clarified that in such cases the register of members should be kept in the place where the business is carried out or where the market is situated or where the members reside.

(c) In cases of companies the shares of which are listed on a market outside Cyprus, the obligation to keep a register of members is satisfied if the companies maintain their registers of members in accordance with the rules regulating such market which, in effect, allows for electronic registers and dematerialized shares and the procedures for perfection of pledges over such shares will be those laid down by the rules of such market.