Amendment 3
Amendment 4


While the overhaul of Chapter 113 of the Companies Law awaits the appointment of a designated law firm to undertake the task by a public tender that expires on 29 November 2021, the government has proceeded with two important amendments to the Companies Law.

The two amendments – namely, Amendment 3, which was introduced via Law 150(I)/2021, and Amendment 4, which was introduced via Law 151(I)/2021 – were passed on 5 November 2021, and they aim to clarify:

  • the establishment and operation of a variable capital investment company (VCIC), which is the most common form of entity used to set up alternative investment funds; and
  • provisions regarding the issuing of guarantees.

Amendment 3

Amendment 3 provides for the following improvements:

  • the offer to subscribe – the newly replaced section 46A clarifies that, regardless of whether publication of a prospectus is required, sections 28 to 45 do not apply for subscription to shares or debentures governed by the:
    • Prospectus and Public Offer Law;
    • Open-Ended Undertakings for Collective Investment Law; or
    • Alternative Investments Law;
  • the notification to the registrar regarding conversion of the share capital of a VCIC – it is now clear that with new section 61(1A)(a), a VCIC may convert its share capital into shares without a nominal par value. The relevant notification and court order required under section 370ID, reflecting the change is filed with the registrar of companies;
  • information on VCICs included in an annual return – a new provision under section 118(1)(c) clarifies that the information that is required to be included in the annual returns of non-VCICs are not required in those of VCICs;
  • strike offs for VCICs that fail to submit a special resolution with the registrar – the new subsection 2A(c) of section 327 provides that failure to submit the special resolution complying with section 370IE within 12 months from 5 November 2021 (the date that Amendment 3 came into force) will result in the registrar striking off the VCIC in question;
  • section 361A – amended by reference to the Open-Ended Undertakings for Collective Investment Law and/or Alternative Investments Law;
  • Part XA of the Companies Law – amended extensively by the introduction of elaborate provisions defining and regulating the establishment and operation of VCICs. In particular, the new section 370A clarifies that the term "VCIC" in sections 370A to 370IZ refers to a limited liability company by shares and, therefore, the word "company" is interpreted accordingly;
  • the content of the memorandum of association for VCICs – the new section 370B provides that a VCIC's:
  • share capital is equal to the current value of the issued share capital of the company;
  • share capital is divided to the fixed number of shares without any par value; and
  • current number of issued shares is not smaller than the lowest number fixed in the memorandum of association and, where the share capital is divided into different classes of shares, the class, or classes, of shares that represents the lowest number of issued shares corresponds with the lowest original share capital, as provided by the Open-Ended Undertakings for Collective Investment Law or Alterative Investments Law;
  • new VCIC memorandum and articles of association model – now incorporated in Part I, Model E of the Companies Law;
  • the Companies Law for VCICs – aligned with investment laws so that:
    • section 370G(1) expressly provides that any new VCIC must correspond and comply with the provisions of the Open-Ended Undertakings for Collective Investment Law and the Alternative Investments Law; and
    • section 370G(2) clarifies further that any amendments to the constitutional documents of a VCIC by the registrar of companies are subject to the prior approval of the Cyprus Securities and Exchange Commission;
  • the provisions on the real value of a VCIC by reference to its share capital and reserves – new section 370D defines the way in which the actual value of a VCIC is calculated:
    • the actual value of the issued share capital equals always with the value of its assets minus liabilities; and
    • the company may buy back shares at the request of any of the shareholders, either directly or indirectly, using the company's assets, provided that the number of issued shares is not reduced to below the lowest number indicated in the company's memorandum of association;
  • the steps equivalent to a buy-back – these are considered as any steps that a VCIC takes to ensure that its trading value does not materially deviate from the net asset value at a higher percentage than that defined in its memorandum of association. The difference between a VCIC's trading value and its net asset value cannot surpass 5% of its net asset value;
  • the new definitions in section 370Z:
    • "company limited by shares" is now interpreted to include a VCIC;
    • "nominal value of a share" is now interpreted to mean the asset value of a VCIC following deduction of its liabilities and divided by the number of issued shares; and
    • "share capital of a limited liability company by shares" is now interpreted to refer to the asset value of a VCIC following deduction of all its liabilities;
  • a VCIC's power to buy back its own shares – the new section 370H clarifies the manner in which buy-back can take place that includes a requirement that shares are first fully paid and that buy-out will not result in the creation of a reserve account (contrary to that which applies to the redemption of redeemable preference shares);
  • the amendment of a VCIC's memorandum:
  • section 370Θ provides that amendments to the number of shares, lowest number of issued shares and any class shares can take place by ordinary resolution; and
  • copy of the resolution and relevant notification attaching a copy of the amended memorandum to be filed with the registrar of companies within one month of the amendments;
  • a VCIC's buy-back shares are cancelled and the issued share capital is reduced against the price paid for the buy-back. The VCIC can then issue an equivalent number of shares in the place of those bought-back;
  • section 370IG clarifies the manner in which a VCIC can be established by any person undersigning the memorandum of association and once all legal provisions are complied with accordingly;
  • sections 198 to 200 of the Companies Law will be read accordingly when referred to the conversion of a limited liability company to a VCIC;
  • an existing VCIC is required to file a special resolution with the registrar of companies, converting to a VCIC within the meaning of Amendment 3 within 12 months from date that this amendment came into force 5 November 2021. Until such time as the filing of the said special resolution, the VCIC will be deemed as a VCIC governed by the Alternative Investments Law and the Open-Ended Undertakings for Collective Investment Law;
  • an important clarification that the register of members of a VCIC is maintained as per the Open-Ended Undertakings for Collective Investment Law and the Alternative Investments Law, on share participants registers; and
  • the reinstatement of a VCIC following strike off is possible within two years of strike off, and not the 20-year period that applies to limited liability companies.

Amendment 4

Amendment 4 concerns guarantees and provides that section 299 is amended as follows:

  • the reservation in subsection 8(a)(ii) must be struck off;
  • subsection 9 is to be replaced in its entirety with a new subsection that clarifies that the debts referred to in the above subsection 8 concern agreements of guarantee signed by the date Amendment 2 of 2018 and apply throughout the period started on or after the date that Amendment 3 of 2015 came into force;
  • Amendment 4 has a retroactive effect as of 13 July 2018; and
  • transitional provisions are made by reference to court orders issued in the context of liquidation following the 13 July 2018, but before the publication of the present law in the Official Gazette, so that civil procedure rules are applied.


These amendments to specific sections of the Companies Law were long overdue and necessary to smooth out and streamline the applicability of the law governing the incorporation of VCIC with the laws governing the operation of the vehicles using the VCIC for investment purposes (Open-Ended Undertakings for Collective Investment Law and Alternative Investments Law). The introduction of model articles, as well as the manner in which the value of a VCIC share capital can be determined, will solve many procedural and operational problems for providers and clients alike.

For further information on this topic please contact Stella Koukounis or Chara Paraskeva at Solsidus Law by telephone (+357 22 007700) or email ([email protected] or [email protected]). The Solsidus Law website can be accessed at