MEMO ON REDOMICILIATION OF A CYPRUS COMPANY TO AN EU FOREIGN JURISDICTION

On 15 March 2024, Companies Law (Amendment) (No. 3) of 2024 (L. 26(I)/2024) (the “Amendment Law”) amended the Cyprus Companies Law, Cap.113 (the “Companies Law”), transposing into domestic law the provisions of Directive (EU) 2019/2121 (the “Mobility Directive”) which amended the Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.

A new set of provisions has been introduced into the Companies Law, namely sections 201HA to 201HK establishing a new legal framework for cross border conversion.

The new procedures on cross border conversion apply where the companies involved have been incorporated, have their registered office, their central management or principal place of business within the EU, ensuring an aligned set of safeguards across the EU for the affected stakeholders.

It is noted that the Companies Law already accommodated an analogous procedure to cross border “conversions” known as “redomiciliation”, which provided for the transfer of the registered office of a company both in and out of Cyprus, from and to other jurisdictions both within and beyond the EU, therefore having a broader scope of application than the cross-border conversion provisions. The redomiciliation provisions will remain in place alongside the cross-border conversion provisions, in scenarios where the cross-border conversion provisions would not apply, i.e. where a Cyprus Company wishes to redomicile to a jurisdiction outside of the EU and conversely where a company from a non-EU jurisdiction wishes to transfer its seat to Cyprus.

A. Conversion steps, documents and formalities to be included and completed:

1. The Board of Directors of the Cyprus Company draws up the conversion draft terms of conversion (the “Conversion Plan”), which must include at least the particulars noted in B below.
2. The Conversion Plan together with the Directors Report noted in 3 below (along with the declaration of solvency noted in B (13) below) must be filed with the Registrar of Companies and Intellectual Property (the “Registrar”) at least one month before the date of the general meeting of the shareholders, which is mandated to approve the same.
3. The Board of Directors of the Cyprus Company must draw up a report for the shareholders and employees of the company explaining and justifying the legal and economic aspects of the conversion and the implications of the conversion vis-à-vis its shareholders, creditors and employees.
4. The report must be made available to the shareholders and the employees (if any) at least six weeks before the general meeting of the shareholders.
5.  An independent’s expert report for the shareholders must be prepared and made available not less than one month before the date of the general meeting of the shareholders. Note: The shareholders of the companies involved may collectively waive the need for this expert report.
6. The general meeting of the company considers and approves the Conversion Plan.
7. The Companies Law (Article 201HI(a)) provides that the creditors have the right within three months form the date of publication of the Conversion Plan to abstain on the conversion and request further securities. Thus, there’s either the option to wait for the three months period to lapse and then proceed with the relevant court application or, if there are no creditors, the relevant court application is submitted immediately after the publication with evidence that there are no creditors. Upon petition, the District Court, as regards the part of the procedure which concerns the Cyprus Company, issues a certificate conclusively attesting to the proper completion of the pre-conversion acts and formalities. The pre-conversion certificate is submitted to the Registrar.
8. (a) The pre-conversion certificate shall be transmitted to the competent authority of the Member State of destination referred to in Article 86ie of Directive (EU) 2017/1132, through the system of interconnection of registers, and (b) the pre-conversion certificate shall be available through the system of interconnection of registers.

B. Draft terms of cross-border conversion

According to the Companies Law, the Conversion Plan has to include the following information (non-exhaustive though as the court has the discretion to request further information and/or documents):

1. The legal form and name of the Cyprus Company and the registered office of the Cyprus Company;
2. The legal form and name proposed for the converted limited liability company in the destination Member State and the proposed location of the registered office in the destination Member State;
3. The instrument of incorporation of the limited liability company in the destination Member State, where applicable, and the articles of association where these are included in a separate document;
4. The proposed indicative timetable for the cross-border conversion;
5. The rights granted by the converted limited liability company to shareholders who have specific rights or to the holders of securities other than shares representing the company capital or the proposed measures relating to such rights;
6. Any safeguards provided to creditors, such as guarantees or pledges;
7. Any special advantages provided to members of the board of directors or other administrative, management, supervisory or audit bodies of the Cyprus Company;
8. Whether the Cyprus Company has received incentives or subsidies in the Republic during the previous five (5) years;
9. The details of the offer of cash compensation to shareholders (if any);
10. The likely consequences of the cross-border conversion on employment;
11. Where applicable, information on the procedures by which arrangements are made for the participation of employees in the determination of their participation rights in the converted company;
12. The e-mail address of the Cyprus Company;
13. Declaration of solvency by the board of directors.

C. Requisite documents and information re the Cyprus District Court Application (non-exhaustive)

1. Special resolution of the shareholders of the Cyprus Company, authorizing the same to register as redomiciled in the foreign jurisdiction.
2. Intermediate accounts and latest financial statements approved by the shareholders of the Cyprus Company.
3. The court application should include amongst other the following information:

• the name of the Company and, if it wishes to redomicile with a different name, the new name it wishes to continue with once the process of redomiciliation is completed;
• information on the redomiciliation jurisdiction, including name and address of the relevant authority;
• declaration relating to the solvency of the Cyprus Company, stating clearly that the persons signing the same are not aware of any circumstances that would negatively and materially affect the solvency of the Cyprus Company
• Official documentation evidencing that the Cyprus Company has no outstanding tax/duty liabilities (VAT, Inland Revenue and Social Security).
• Number of employees, if any;
• List of the subsidiaries of the company and their country of registration.

4. A  statement signed by the directors of the company which accurately reflects the current financial status of the Cyprus Company, not earlier than one (1) month before the publication of such statement, according to which the board of directors of the Cyprus company, based on the information available to it at the date of the statement and after reasonable inquiries, is not aware of any reasons from which it can be concluded that the Cyprus    Company will not be able, after the conversion takes effect, to fulfill its obligations when they become due. The practice is that the relevant management accounts of the company are attached.