Cyprus continues to enhance its appeal as a forward-looking jurisdiction for corporate structuring within the European Union. A significant development in this regard came with the introduction of Law 26(I)/2024, which implements the EU's Directive (EU) 2019/2121 on cross-border conversions, mergers and divisions. This legislative update, in force since 15 March 2024, opens the door for Cyprus-registered companies to convert their legal form and transfer their registered office to another EU Member State—while maintaining their legal identity and without undergoing liquidation.
What is a Cross-Border Conversion?
A cross-border conversion allows a Cyprus company to relocate its registered office and transform into an equivalent corporate entity in another EU country, while remaining the same legal person. The process involves converting the company's legal form under the laws of the destination jurisdiction, without dissolving the original Cyprus entity. In effect, the company migrates across borders with full continuity of its legal, financial, and contractual obligations.
This mechanism is not to be confused with cross-border mergers, where one or more companies cease to exist. In a conversion, the company simply transforms and relocates, offering a more efficient and less disruptive route for restructuring across the EU.
Legal Framework and Process
Under the new provisions, companies intending to undergo a cross-border conversion must prepare a Conversion Plan, which includes essential details such as the name and legal form of the company in the destination state, proposed amendments to the Articles of Association, anticipated legal consequences, and arrangements for employee participation and protection of creditors.
This plan must be approved by the shareholders and then submitted to the Registrar of Companies in Cyprus, who will issue a pre-conversion certificate confirming that the process has complied with the applicable legal requirements. The conversion becomes effective once the host Member State confirms that all formalities have been completed under its national law.
The process incorporates safeguards for minority shareholders, creditors, and employees, including the possibility to challenge the conversion before the District Court under specified conditions. Furthermore, a valuation and report by an independent expert may be required, depending on the circumstances of each case.
Practical Implications
This new regime provides an attractive legal tool for businesses operating within the EU to reorganise their structure and establish presence in other Member States. It facilitates flexibility and efficiency, while ensuring a high level of legal certainty and stakeholder protection.
From a strategic perspective, Cyprus companies can now explore jurisdictional advantages in tax, regulation, or operational efficiency by relocating, without bearing the burdens of dissolution and re-registration.
Points to Consider
While the legal framework is robust, companies considering a cross-border conversion should be mindful of the following:
- The process is formal and must be planned with precision.
- Legal and regulatory conditions in the destination jurisdiction should be thoroughly examined.
- Stakeholder notifications and court involvement may extend timelines in certain cases.
- Expert guidance is necessary to ensure compliance and avoid unintended legal consequences.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
