By way of the Companies Law (Amending Law) (No. 3) of 2024 (Law 26(I)/2024) (the “Amendment”), which was passed in March 2024 by the Cyprus Parliament, the Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (the “Mobility Directive”) – which facilitates and regulates cross-border company reorganisations across member states of the European Union – was transposed into Cyprus law and thus incorporated into the Cyprus Companies Law (Cap.113).
The Amendment introduced a comprehensive set of rules and procedures for cross-border conversions and divisions of companies within the European Union, while also revising the existing rules on cross-border mergers. These changes aim to harmonise the processes for cross-border company reorganisations, enhancing legal certainty and protection for the shareholders, creditors and employees of the companies in such transactions.
According to the new rules:
• Cross-border conversions between EU member states now require approval by the Cyprus courts.
• Enhanced protections are provided for shareholders, creditors and employees, ensuring that stakeholders are informed with respect to such cross-border operations, thereby safeguarding their interests.
• Shareholders who do not agree with the cross-border operation have a right to cash compensation if they wish to exit the company.
• Creditors who are dissatisfied with the safeguards offered by the company may apply to the Cyprus courts for adequate safeguards, provided that such creditors can credibly demonstrate that, due to the cross-border operation, the satisfaction of their claims is at stake and that they have not obtained adequate safeguards from the company.
For any clarifications of the above, please do not hesitate to contact our firm’s Corporate Department.