The Cyprus Companies Law (Cap. 113) does not determine a minimum share capital for private companies limited by shares. Furthermore, provided certain conditions are met, the Cyprus Companies can proceed with changes to their share capital.
According to s. 60 of the Law, provided that its Articles of Association authorise such changes, a Cyprus company can: (a) Increase its share capital by new shares, or (b) Consolidate and divide all or any of its share capital into shares of a larger amount; or (c) Convert any paid‐up shares into stock and reconvert the stock into paid‐up shares of any denomination; or (d) Subdivide any of its shares into shares of a smaller amount; and (e) Cancel shares which have not been taken up. (Please note that according to s. 60 (3) cancellation in this case is not considered as reduction of share capital).
What is the procedure for increasing the share capital?
Provided that the Articles of Association authorise an increase of share capital, shareholders will be required to pass a resolution (according to the provisions of the Articles of Association. An increase can be resolved by an ordinary resolution, i.e. decision by the majority of members entitled to vote and vote either in person or by proxy).
The increase is effective from the date the said resolution is passed.
It is to be noted that according to the provisions of section 62 (1), within 15 days, a certified true extract of the shareholders’ resolution is to be filed with the Registrar of Companies along with the payment of the applicable capital duty, the amount of which depends on the increase.
The rate of capital duty is at 0,6% on the amount of the increase or €20, whichever amount is greater.
Please note that in case the Articles of Association do not authorise for a share capital increase, it will have to be amended by a special resolution in order to permit the said increase.
What is the procedure for reducing the share capital?
Provided that the Articles of Association authorise a reduction of share capital, the shareholders pass a special resolution in order to reduce the share capital.
It is to be noted that this resolution is subject to the Court’s approval. Therefore an application must be submitted to the Court in order to obtain the required order.
In case of success, a copy of the court order in addition to a copy of the special resolution should be submitted to the Registrar of Companies.
The reduction is effective from the date of registration of the court order with the supporting special resolution by the Registrar of Companies.
Why is the resolution for the reduction of share capital subject to a Court’s approval?
This measure aims to ensure that the proposed reduction of share capital is fair and equitable and does not aim to compromise the rights of any shareholders or of any other stakeholders dealing with the company.
According to s. 65(2) “ […] every creditor of the company […] would be admissible in proof against the company, and who can prove that there is a reasonable chance that the proposed reduction of the share capital will endanger the repayment of the debt […]”.
What must the court application include and what documents must be provided?
The application must point explicitly to the specific provisions in the Articles of Associations permitting the reduction. Moreover, it must include the shareholders’ special resolution and the reasons for the requested reduction.
Furthermore, the court application must be supported by an affidavit sworn by one of the company officers and the following documents are expected be attached as exhibits:
- Certificate of Incorporation of the Company;
- Memorandum and Articles of Association;
- Special Resolution approving the reduction of capital, including any relevant notices;
- Latest Financial Statements of the company and/or management accounts;
- Consents of the creditors to the proposed reduction of share capital or proof that the debt has been repaid and/or secured etc.
Please note that the above information is not exhaustive. It is provided as a general guideline only and cannot be treated as legal advice. For further information you can get in touch with the AGP Corporate Department.