The procedure by which companies are merged is governed by the Companies Law, Cap.113, sections 198-202. The law governs the restructuring procedure of a company, a procedure which includes mergers. In summary, the law provides that, for a merger of a company to take place it is a prerequisite to hold a general meeting of the shareholders, which determines the extent to which there is a necessity to compromise or arrange the liabilities between the shareholders and the creditors, as the company being acquired shall be wound up without going into liquidation and its assets shall be transferred to the acquiring company.
Further, prior to the general meeting, it is required to inform the shareholders of the acquired company by giving a notice which states the reason for which the meeting shall be held. The notice shall include a special report specifying the effects of the merger. The creditors of the company being acquired shall also receive a notice as they shall provide their consent as well for the merger to proceed. At the general meeting the members examine the restructuring plan of the company, which shall be then approved in order to proceed with the relevant procedures.
The restructuring plan shall also be approved by the general meeting of the acquiring company. The legitimacy of the restructuring process is examined by the court which issues the restructuring order, which also determines the responsibilities of the restructured companies. In particular, the court may order:
a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;
b) the allotting or appropriation by the transferee company of any shares, debentures, policies or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;
c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
d) the dissolution, without winding up, of any transferor company; (e) the provision to be made for any persons, who within such time and in such manner as the Court directs, dissent from the compromise or arrangement;
e) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.
For the Cyprus Courts to allow the restructuring, both the acquiring and the acquired companies shall have fulfilled in full their obligations to the tax authorities of the Republic of Cyprus and the Department of Registrar of Companies and Official Receiver, including the filing of the annual company reports.
The Department of Registrar of Companies and Official Receiver is notified of the said order and this marks the completion of the merger process.
In summary, in order to complete the merger process the following is required:
- Drafting the restructuring plan.
- Acquiring the consent of the creditors.
- Drafting the notice for the general meeting of the acquiring company and the minutes of the said.
- Preparation and filing of the accounts and annual reports of the acquiring and the acquired company up to the date of the filing of the restructuring application with the court.
- Drafting the restructuring application and appear before the court for the approval of the restructuring.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought on your specific circumstances.
For further information, please contact Chrystalla Philippou at chrystalla@kyprianou.gr.
Michael Kyprianou & Co LLC
