Cross-Border Conversions to and from Cyprus under the new Mobility Directive
Further to a recent amendment of Companies Law, Cap.113 by the adoption of the Directive (EU) 2019/2121 (‘The Mobility Directive’) which amended the Directive 2017/1132, a new era of redomiciliations has been introduced.
Definition of a Cross-Border Conversion:
According to the amended Companies Law, Cap. 113, a cross-border conversion is defined as an operation by which a capital company without being dissolved, wound up or going into liquidation, converts its legal form, under which was registered in departure Member State, to a legal form in accordance with the laws of the destination Member State, by transferring at least its registered office, while maintaining their legal personality.
Proceedings:
The amended Law requires both the involvement of the Department of Registrar of Companies and Intellectual Property and the Cyprus Court in order to ensure that employees’ and members’ interests are protected.
The First step of the cross-border conversion is the drafting by the Directors of the company of Cross-Border Conversion Plan, in which a detailed explanation of the procedure is stated along with provision of information about any safeguards offered to creditors and employees (if any) and the new memorandum and articles of association of the company, drafted in accordance with the laws and provisions of the destination Member State.
Further to that, a report by the Directors must be submitted to the members and employees (if any) of the company explaining the legal aspects and the implications of the conversion to the employees and the company to proceed with publication of the Cross-Border Conversion Plan, at least 1 month prior to the General Meeting of the company.
Upon approval by the shareholders of the Cross-Border Conversion Plan, an application must be filled with the competent court of the departure Member State for the issuance of the pre-conversion certificate.
The pre-conversion certificate is submitted to the competent authority of the destination Member State and the cross-border conversion is deemed to be completed with the official registration of the company to the registries of the destination Member State.
Result of the cross-border conversion:
- All assets and liabilities of the capital company, including all contracts, credits, rights and obligations, become assets of the converted capital company;
- The shareholders of the capital company continue to be shareholders of the converted capital company, except in the case where they have disposed of their shares in accordance with the provisions of the law;
- Τhe rights and obligations of the capital company arising from employment contracts or employment relationships and which exist on the date of entry into force of the cross-border conversion, become rights and obligations of the converted capital company.
The existing provisions for the transfer of a company’s legal seat, known as redomiciliation, remain available for transfer of a company’s seat to a jurisdiction outside the EU and vice versa.
Our Services:
- Legal Review and drafting of the terms of the Cross-Border Conversion Plan;
- Drafting of amended Memorandum & Articles of Association if the destination Member State is Cyprus;
- Liaison with foreign legal counsel on the procedures;
- Shareholder, creditor and employee protection guidance;
- Drafting and filling of relevant Court Application in Cyprus Courts;
- Communications and fillings with the Registrar of Companies;
- Legal, Tax and Corporate Governance support in accordance with the laws and regulations of Cyprus, upon completion of the conversion.
The information provided by AGPLAW | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. While every effort has been made to ensure the accuracy and reliability of the information contained herein, the author, publisher, or any related parties make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the information. In no event will the author, publisher, or any related parties be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this document/article. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.
