CROSS-BORDER CONVERSIONS AND REDOMICILIATIONS UNDER THE CYPRIOT LEGAL FRAMEWORK

The process of transferring the registered seat of a company to and from Cyprus is regulated by Sections 201HA – 201HK and Sections 354A – 354IH of the Companies Act, Cap. 113.

Following the adoption of the Directive (EU) 2019/2121 (the “Directive”) which amended the Directive 2017/1132 concerning cross-border conversions, the procedures for transferring a company’s registered seat within the European Union (“EU”) and from the outside the EU have been distinguished. This differentiation was introduced to establish a harmonised process regulating cross-border conversions within the EU.

The provisions of cross-border conversions apply to limited liability companies seeking to transfer their registered office from one Member State (“departure MS”) to another Member State (“target MS”) while maintaining their legal personality.

This article outlines the process for transferring a company’s registered seat to Cyprus within the EU and outside the EU

What are the steps to proceed with a cross-border conversion within the European Union?

1) Cross-Border Conversion Plan

The draft terms of a Cross-Border Conversion (“CBC”) plan are drawn up by the directors of the company, to explain the process by which the CBC will be effected and provide information about any safeguards offered to creditors, the likely repercussions of the CBC on employment and any other information which is deemed to be important for the completion of the CBC as provided for in the law. The CBC plan also includes the new memorandum and articles of association of the company which are drafted pursuant to the law of the target MS.

2) Directors’ Report

A report by the directors must be submitted to the members and employees of the company, explaining the legal aspects of the CBC and the implications of the CBC for the employees. An independent expert’s report may also be prepared and submitted to the shareholders; however, it is often waived by shareholder resolution.

3) Disclosure

The company is under an obligation to make publicly available the draft terms of the CBC plan alongside a notice to the creditors, representatives of employees and members at least one month from the date of the general meeting, allowing them to submit comments and/or objections ahead of the meeting.

4) General Meeting of Shareholders

The shareholders’ general meeting must be convened one month after the publication of the CBC documents.

5) Application to the Court

Following shareholder approval, an application is filed with the competent court of the departure MS. The court examines whether the company has complied with all of its legal obligations. If satisfied, the court issues a pre-conversion certificate, confirming completion of the procedures in the departure MS.

6) Filing to the competent authority of the target MS

The pre-conversion certificate is submitted to the competent authority of the target MS.  Upon registration of the CBC with the target MS, then the competent authority of the departure MS proceeds with striking off the company from its register and the CBC is deemed to be completed with the registration of the company in the target MS.

What are the steps to transfer a company’s registered seat to Cyprus outside the EU framework?

1) Articles of Association

The company’s articles must explicitly permit the transfer of its registered seat to Cyprus or to any other jurisdiction. This is a fundamental requirement to ensure that the company has the legal authority to initiate the transfer process.

2) Application to the Registrar of Companies in Cyprus

An application is filed with the Registrar of Companies in Cyprus requesting the approval of the transfer of the registered seat to Cyprus. The application for the transfer of the seat shall be accompanied by, inter alia, the following documents:

(i)     A shareholders or directors’ resolution authorising registration in Cyprus;

(ii)    Revised memorandum and articles of association meeting Cyprus incorporation requirements;

(iii)  Director’s affidavit confirming, among other things, the solvency of the Company and that the Company has notified the relevant authority of its decision to redomicile to Cyprus;

(iv)  Official notification to the authorities of such decision, and

(v)    Directors’ declaration confirming details of the company and transfer decision.

3) Temporary Certificate of Continuation

Upon review of the application which will be filed with the Registrar of Companies in Cyprus, the Registrar of Companies, if satisfied that all of the requirements for the transfer of the registered seat of the company in Cyprus were completed, will proceed with issuing a temporary certificate of continuation of the company in Cyprus.

This certificate is then filed with the competent authority of the country in which the company is currently registered and the relevant authority must remove the company from its register within six (6) months from the date of issuance of the temporary certificate of continuation. If the relevant authority fails to remove the company from its register within the six (6) month period, then the Registrar of Companies may reject the application for the transfer of the registered seat of the company to Cyprus.

4) Final Certificate of Continuation

Once the company provides proof of removal from the foreign registry, the Cyprus Registrar issues the Final Certificate of Continuation. This certificate confirms that the company is now registered and legally recognised as a continuing company in Cyprus.

How can we help?

Our highly experienced lawyers will support clients in finding the most effective way to complete a transfer of a registered seat and provide targeted legal advice and support to complete a redomiciliation to and from Cyprus.

Authors:

Andreas Thoma

Partner, Corporate Law

Hadjianastassiou, Ioannides LLC (Deloitte Legal)

Email: athoma@deloitte.com

Sofia Panayi

Managing Associate, Corporate Law

Hadjianastassiou, Ioannides LLC (Deloitte Legal)

Email: spanayi@deloitte.com

Charalambos Charalambous

Associate, Corporate Law

Hadjianastassiou, Ioannides LLC (Deloitte Legal)

Email: ccharalambous@deloitte.com

Nicholas Sofocleous

Director | Business Process Solutions

Deloitte Cyprus

Email: nsofocleous@deloitte.com