There has been a noticeable rise in foreign investments in Cyprus, with an upswing in mergers, acquisitions and joint ventures. This has been the result of various reforms and legislative amendments that have added legal certainty and contributed to the creation of a coherent statutory framework. International investors might well consider these factors when assessing Cyprus as an investment hub for future transactions in the M&A market post-Brexit.
Cyprus boasts an attractive merger and reorganisation regime not only locally (ie, between Cyprus entities), but also at an EU level. Besides the well-known advantages of merging two companies (eg, the transfer of assets and liabilities without the need for the novation of contracts or other cumbersome procedures), mergers and reorganisations in Cyprus are also attractive from a tax perspective, as those which fall within the scope of the law may result in a total tax exemption in Cyprus.
Cyprus recently introduced a law which aims to modernise its investment fund legislative regime and allows for the establishment of a new type of investment vehicle: the registered alternative investment fund (RAIF). The RAIF is a hybrid legal creature that combines the elements of authorised and regulated funds without extensive bureaucracy or, more importantly, the need for an operating authorisation from the Cyprus Securities and Exchange Commission.
The disclosure, transfer and processing of data raises concerns at several stages of the due diligence process during a transaction and undoubtedly makes things more complicated. Unless companies can navigate their way around the rules set out by the General Data Protection Regulation, it is highly likely that they will encounter significant difficulties and potential data protection breaches in the context of due diligence work undertaken for M&A transactions.
No banking and finance transaction is the same. However, there are a number of considerations that financial institutions should keep in mind when negotiating the provision of loans and the entry into other financial arrangements. The proper structuring of a finance transaction ensures the due performance of its terms – especially in situations of default and, more specifically, the borrower's insolvency.
Cyprus is a popular jurisdiction for establishing special purpose vehicles with an increased involvement in shadow banking, which takes the form of, among other things, securities lending, repurchase and derivatives transactions. This has resulted in a call for strengthened regulations to mitigate risks and support financial stability. Newly introduced regulations now bring non-financial counterparties, such as limited liability companies, into the ambit of transparency reporting.