Cyprus was not party to the delays associated with the creation of the European Company (Societas Europeae (SE)) entity as the country acceded to the EU on May 1 2004, six months prior to the coming into force of the SE Regulation (EC/2157/2001) on October 8 2004.
Since this date the SE has been recognized in Cyprus as a corporate entity ipso jure. Furthermore, Cyprus has, thankfully, put in place the network of supporting EU measures required to give meaning and purpose to the SE entity. These measures are the Third Company Law Directive on Domestic plc Mergers (78/855/EEC), the SE Employee Participation Directive (2001/86/EC) and the Mergers Directive (1990/434/EEC), which were all transposed either shortly before or shortly after accession.
Despite this, the incorporation of an SE in Cyprus is not yet legally possible because Cypriot corporate law has yet to be updated to reflect the SE registration procedure. However, the final piece in the SE jigsaw is about to fall into place after the Cyprus Council of Ministers passes subsidiary legislation setting out an SE registration procedure. This is scheduled for early 2006.
Once the SE registration procedure is in place it will be possible, from a Cypriot perspective, for an existing Cypriot public company, for example, to become the surviving member of an SE cross-border merger by acquisition, or for a new Cypriot public company to become the SE into which two other EU-based public companies merge with.
This is good news for both Cyprus and large multinationals from an international and intra-EU tax planning perspective, because EU corporates will be able access the corporate-friendly Cypriot tax regime. Furthermore there appears to be an appetite for the use of Cypriot SEs. There is a large merger between a Cypriot entity and other accession state entities scheduled for spring 2006. The exit tax advantages of the outgoing aspect of this SE merger appear to be very favourable.
It seems the new Europe has embraced the SE concept more fully and reverently than old Europe.