A chapter published in a new edited book on cross-border mergers reviews the implementation of the Cross-border Mergers Directive[1] (hereinafter, “CBMD”) in Cyprus law. The CBMD was implemented in Cyprus by Law 186(I)/2007.[2] This Law amended the Cyprus Companies Law (Chapter 113) and added a new section to it (Arts. 201I–201X).  The Cyprus legislature did not adopt autonomous provisions for the decision-making process, creditor protection and protection of minority shareholders in cross-border mergers. The relevant provisions on domestic mergers and on schemes of arrangement apply by analogy to cross-border mergers.

Art. 201 dedicated to the protection of minority shareholders in schemes of arrangement applies by analogy to cross-border mergers. The rights deriving from Art. 201 are extended through Art. 201K(3) to cross-border mergers.[3] A cross-border mergers provision (Art. 201K (3)) refers directly to a provision on schemes of arrangement (Art. 201). Moreover, Art. 201 of Cyprus Companies Law (Chapter 113) is based on Art. 209 of UK Companies Act of 1948.[4] Art. 201 provides the possibility of squeeze-out rights and sell-out rights/appraisal rights in schemes of arrangement and, as a matter of fact, in cross-border mergers. These are exit rights. Dissenting shareholders[5] of merging companies could exit voluntarily or involuntarily from the company on fair and equal terms with the rest of the shareholders, who agreed to the cross-border merger.

With regard to the squeeze-out right, the company resulting from the cross-border merger (either a new company or one of the merging companies) could demand the acquisition of the shares of dissenting minority shareholders. The acquisition of shares through a squeeze-out right does not require the consent of the dissenting minority shareholder; the dissenting minority shareholder is obliged to sell his shares to the resulting company. The shares are acquired at a fair price, which is equivalent to the price provided for the transfer of shares. The relevant process is described by Art. 201(1).

Art. 201(2) introduces a sell-out right for dissenting minority shareholders, who could ask the company to acquire their shares. This appraisal remedy assists minority shareholders to exit the company after the cross-border merger by selling their shares at a “fair price”, which is equivalent to the price provided for the transfer of shares. Art. 201(2) states:

Where, in pursuance of any such scheme or contract as aforesaid, shares in a company are transferred to another company or its nominee, and those shares together with any other shares in the first-mentioned company held by, or by a nominee for, the transferee company or its subsidiary at the date of the transfer comprise or include nine-tenths in value of the shares in the first-mentioned company or of any class of those shares, then-

(a) the transferee company shall within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement) give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and

(b) any such holder may within three months from the giving of the notice to him require the transferee company to acquire the shares in question; and where a shareholder gives notice under paragraph (b) of this subsection with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed or as the Court on the application of either the transferee company or the shareholder thinks fit to order.

    The Cyprus Companies Law (Chapter 113) also provides an additional way of protecting minority shareholders. Art. 202 is a general company law mechanism aiming at the protection of minority shareholders. This provision might also be invoked in cross-border mergers. It is based on Art. 210 of UK Companies Act of 1948.[6] Art. 202 offers an alternative remedy to winding up in cases of oppression of minority shareholders.

There are also some other provisions aiming at the protection of minority shareholders. These provisions are found in Art 201C, which is a domestic mergers provision, but they apply also to cross-border mergers (the right to inspect certain documents, simplification and exceptions in the merger process, an exception to certain requirements of the merger process, as long as minority shareholders are granted an appraisal right and the case of disagreement about the value of the shares, where the Court could determine this value).

*Lowenstein Sandler thanks Thomas Papadopoulos, DPhil (Oxford), Assistant Professor of Business Law, Department of Law, University of Cyprus, Nicosia, Cyprus for his contributions to this blog.


[1] Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies. [2005] OJ L 310/1–9 (Cross-border Mergers Directive). This Directive was repealed and codified by EU Directive 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law. [2017] OJ L 169/46–127. This codification took place in the interests of clarity and rationality, because Directives 82/891/EEC and 89/666/EEC and Directives 2005/56/EC, 2009/101/EC, 2011/35/EU and 2012/30/EU have been substantially amended several times (Recital 1 of the Preamble). However, this blog post would refer exclusively to the Cross-border Mergers Directive (hereinafter, “CBMD”), which was the EU legal instrument implemented in Cyprus company law.

[2] Law 186(I)/2007 amending Cyprus Companies Law (Chapter 113), Paragraph. Ι(I), No. 4154, 31-12-2007, Official Gazette of the Republic of Cyprus.

[3] Art 201K (3) states that: “For the purpose of protecting minority members who have opposed the cross-border merger, section 201 of this Law shall apply mutatis mutandis.”

[4] Tsadiras A (2010) Cyprus. In: Van Gerven D (ed) Cross-Border Mergers in Europe, vol. I, CUP, Cambridge, p 133-146, 142.

[5] Art. 201(5) defines “dissenting shareholders”: “In this section the expression “dissenting shareholder” includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract.

[6] Tsadiras A (2010) Cyprus. In: Van Gerven D (ed) Cross-Border Mergers in Europe, vol. I, CUP, Cambridge, p 133-146, 142.

The post Guest Post: The Cyprus Legal Framework for the Protection of Minority Shareholders in Cross-Border Mergers, Including Certain Appraisal Rights appeared first on Appraisal Rights Litigation.