It is often the case that the merger control regime of Cyprus requires the notification of transactions which are not directly related to Cyprus or do not prima facie raise any doubts as to their compatibility with the market in Cyprus.
A foreign-to-foreign transaction meets the jurisdictional thresholds if:
- the aggregate turnover achieved by at least two of the undertakings concerned exceeds, in relation to each one of them, the amount of €3.5 million;
- at least two of the undertakings concerned achieve a turnover in Cyprus; and
- at least €3.5 million of the aggregate turnover of all undertakings concerned is achieved in Cyprus.
The types of transactions concerned would be:
- a merger of two or more previously independent undertakings or parts of undertakings; or
- an acquisition, by the purchase of securities or assets, by contract or otherwise, of control of the entire or part of one or more undertakings, on behalf of one or more persons already controlling at least one other undertaking, or on behalf of one or more other undertakings;
- the establishment of a joint venture which permanently fulfils all the functions of an autonomous economic entity.
Foreign-to-foreign transactions are caught under the Law where the jurisdictional thresholds are met. The test as to whether a foreign-to-foreign merger is caught is essentially satisfied where the thresholds are met, with the local effects dimension being the achievement of turnover by at least two undertakings concerned in Cyprus and the Cyprus-achieved turnover of all undertakings concerned is at least €3.5 million.
Foreign-to-foreign transactions that meet the thresholds must be notified to the Cypriot Commission for the Protection of Competition (CPC) prior to their implementation.
Where a Foreign-to-foreign merger, acquisition or joint venture is implemented prior to clearance by the CPC, sanctions may be imposed by the CPC:
- an administrative fine of up to ten per cent (10%) of the aggregate turnover achieved by the notifying undertaking during the immediately preceding financial year may be imposed to the notifying undertaking for the discussed infringement
- additional administrative fines of €8.000 for each day the infringement persists.
- an order for the dissolution / reversal of the transaction
As evident, largely due to the relatively low jurisdictional thresholds, a plethora of foreign-to-foreign mergers and acquisitions, as well as joint ventures, may be caught by the Cypriot merger control regime. Parties would want to assess whether they indeed meet the thresholds under Cyprus law to avoid exposure to potential sanctions.
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.