The relevant legislation is Cyprus Companies Law, Cap. 113 which is virtually a copy of the English 1948 Companies Act. Most of the issues that will be discussed today are covered BY this Law and all Articles cited herein are Articles of the abovementioned Law except if otherwise is specified.
According to Article 64(1), subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital, may, if so authorized by its articles, by special resolution notified to the registrar of companies and official receiver and published in accordance with the provisions of article 365A, reduce its share capital in any way and in particular, without prejudice to the generality of the foregoing power may:
- extinguish or reduce the liability on any of its shares in respect in respect of share capital not paid-up;
- either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets;
- either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company;
and may, in so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares accordingly.
According to Article 64(2), a special resolution under this Article is in the Companies Law referred to as a "resolution for reducing share capital."
According to Article 65(1) where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.
Article 65(2) states that, where the proposed reduction of share capital involves either diminution of liability in respect of unpaid share capital or the payment to a shareholder of any paid-up share capital, and in any other case if the court so directs, any creditor or creditors who fulfill the conditions set in this section, shall have the right to object to the reduction subject to Article 65(3) which provides for the court's right to deny certain class or classes of creditors to object.
The Court, if satisfied may make an order confirming the reduction on such terms and conditions as it thinks fit, following the procedure set in Article 66.
The registrar of companies, on production to him of an order of the court confirming the reduction of the share capital of a company, and the delivery to him of a copy of the order and of a minute approved by the court showing the relevant details, amount, number etc, shall register the order and minute which shall immediately after, take effect.
Originally published 3 September 2018
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.