The below enactments represent the concerted efforts in recent years of the Republic of Cyprus to make Cyprus a more attractive jurisdiction for international business, by modernizing, streamlining and updating many aspects of the Cyprus Companies Law, Cap.113 (the “Cap.113”):
(1) Law 99(I)/2009 introduced various amendments to Cap.113 the most important of which are summarized below:-
(A) Affixing Of The Common Seal
As regards the need of affixing the common seal, there are the following changes:-
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.
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.
As regards prospectus the following amendments have been introduced:-
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.
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.
(C) Unlawful Financial Assistance
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:
such private company is not a subsidiary of any public company, and
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.
(D) Redeemable Preference Shares (“RPS”)
RPS 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.
(E) Conversion Of Articles Of Association
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.
(F) Amendment to Charges
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.
(G) Abolition Of Registration Requirements For Certain Charges
The need to register with the Registrar of Companies of certain charges has been abolished. More specifically:-
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 (a) this does not dispense with the other perfection requirements for a pledge over shares in a Cypriot company and (b) 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.
There is no need to register with the Registrar of Companies charges which come within the Cyprus legislation adopting the EU Financial Collateral Directive.
(H) Public Companies Listed On A Market Outside Cyprus
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:-
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.
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.
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
(A) No Requirement to Circulate Annual Reports In Hard Copy
Law 42(I)/2010 amended section 152 of Cap.113. The crucial change is that section 152 of Cap. 113, as amended, relieves a Cyprus public company from the obligation to circulate in hard form before a general meeting the set of financial statements, the directors’ report and the auditors’ report (the “Documents”). Therefore subject to the length of notice required for the calling of a general meeting, the Documents required to be presented to the company in general meeting now need only to be made available on the company’s website or at a place and with a method of distribution that the company so determines.
Law 60(I)/2010 amended Cap.113 to implement Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (the “2007 Directive”). The main change is summarized below:-
(A) Notification and voting rights of shareholders in listed Companies
The transposition of the 2007 Directive aims to ensure in particular that shareholders of companies whose shares are admitted on a regulated market have timely access to the complete information relevant to general meetings and facilitates the exercise of voting rights by proxy and by electronic means. Furthermore, the 2007 Directive provides for the replacement of share blocking and related practices through a record date system.
Law 88(I)/2010 amended Cap. 113 to implement Directive 2006/46/EC of the European Parliament and of the Council of 14 June 2006 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance undertakings. The principal changes introduced by Law 88(I)/2010 are the following:-
(A) Raise of Financial Thresholds For Small Size Groups
Law 88(I)/2010, amongst other, has raised the financial thresholds defining small size groups under Cap.113 in the manner described herein below, noting in this respect, that small size groups are exempt from the obligation to prepare consolidated financial statements:-
The total of the assets appearing in the balance sheet (and without deducting the liabilities) has been increased from EURO €14.600.000 million to EURO €17.500.000 million;
The net level of the turnover has been increased from EURO €29.200.000 million to EURO €35.000.000 million.
(B) Collective Civil Liability On Board Members
Law 88(I)/2010 has also imposed a collective duty and corresponding civil liability on board members towards the company for the preparation of annual accounts and reports. However, it is noted that, board members shall be exempt from such liability if evidence exists to demonstrate that such board member had reasonable cause to believe and believed that an able and responsible person, who was assigned with the duty to ensure compliance with the provisions of the duty described in this paragraph (B), was in a position to exercise that duty.