Please fill out the form below to get a consultation on a company reorganization in Cyprus
Scan the QR code
for quick communication in telegram
IQ Decision QR code

The Cypriot regime of mergers and reorganizations of companies is actively taking place not only at the local level (that is, between local structures), but also at the cross-border level.

If there is a merger of equal firms, where both parties have the same priorities, then such a union is a merger. Acquisition is characterized by a different principle: one company buys another company.

Thus, the absorbed organization ceases to exist. However, a merger confers administrative powers to both parties.

The advantages of such processes are obvious: strengthening the company, avoiding its liquidation. The Cyprus merger procedure is also attractive from a tax point of view. Moreover, such processes may well lead to complete tax exemptions in Cyprus.

Merger of Сypriot companies 

Companies mergers occur by agreement of two equal firms planning to merge to achieve common goals, which provokes the re-creation of the formation of a new stronger company, the merger of which predicts the successful completion of the agreement. However, the actual companies merger in Cyprus happens much less often than takeovers. Generally, for companies today, mergers are rare.

Mergers in Cyprus, like acquisitions, are also subdivided into types. The main division occurs into two groups: by the relationship between enterprises and by the methods of financing.

So, the first type of merger is when firms unite into a single entity:

  • Horizontal merger, i.e. the unification of competing entities, which carry out identical activities. The main advantage is strong competitiveness;
  • Vertical merger is a merger of LLC in Cyprus and other firms operating in related industries, such as a garment factory and a fabric manufacturer, a finished metal-plastic product plant and raw materials manufacturers. Advantage of these companies is the minimization of procurement and supply costs, reduction in the cost of the product, growth in popularity;
  • Parallel / generic merger of similar firms that provide their services in diverse markets;
  • circular merger is a merger of entities that do not have anything in common with each other in the production or sales framework, but operate in the same market;
  • reorganization resulting in merger of Cypriot companies completely different  in the field of activity.

The second type of mergers includes:

  • a transaction with a buyout, that is, one party buys out the other. The ransom can look like cash or an asset purchase;
  • the buyout applies to both companies, which provokes the formation of a completely new structure.

Companies reorganization in Cyprus 

Local mergers of Cypriot companies are only carried out after court approval. The formalities of this procedure include a decision by the board of directors of the acquiring company to approve the merger and a proposed agreement, which is then passed on to shareholders for approval. 

All transaction documents together with the incorporation documents of the acquiring company, are attached as material evidence to 2 petitions that are filed with the relevant district court. One petition confirms that the meeting of shareholders has already taken place and letters of consent have been received from creditors. Another petition aims to approve the proposed merger. 

Merger risks

When different companies merge, a range of integration difficulties may arise. Also, as a result of the merger transaction, disagreements with employees are likely. Companies formed by cross-border mergers may face internal conflicts due to different mentality and culture.

Final word

If you plan companies merger in Cyprus please be aware of the fact that some merger transactions do not exclude high costs, the reason for which, most often, is the unfair attitude of company representatives who misuse their official position and use the funds invested by the management for other purposes. Accordingly, in any business, especially at the first stage of development, strict control is required from the founding staff. Otherwise, the risks of a decline in the asset price policy are high.

The IQ Decision UK team will provide legal assistance in the process of merger and reorganization of a company in Cyprus. Reach out to us for professional consultation using a feedback form below.