Structuring A Joint Venture Through Cyprus

The Cyprus JV vehicle

A Cyprus incorporated company remains one of the most flexible vehicles for a cross-border joint venture. The Companies Law and Contract Law offer certainty while accommodating modern commercial needs. A Cyprus company has freedom to contract in any language and under any governing law — English law is a common choice on international transactions.

Contractual freedom

JV and shareholders’ agreements may be entered into under any governing law, including English law (on which the Cyprus Companies Law is modelled). Parties are free to submit to any court, or to resolve disputes by arbitration, including LCIA arbitration. Cyprus is a party to the New York Convention, so foreign arbitral awards are recognised through a straightforward process.

Shareholders’ agreements

A shareholders’ agreement regulates the relationship between the parties as a private contract and, unlike the articles of association, remains confidential. The articles can be drafted to mirror the JV/SHA — avoiding conflicts while preserving the confidentiality of the more sensitive commercial terms. It is usual to provide that, in the event of inconsistency, the shareholders’ agreement prevails.

Tailoring rights and control

• Classes of shares. Different classes may carry different rights as to voting, dividend, return of capital and participation on a winding up.
• Reserved matters. Subject to mandatory law, specified matters may be reserved to particular directors or shareholders.
• Pre-emption rights. An anti-dilution mechanism on allotment and transfer of shares, provided for in the articles or the SHA.
• Quorum. Special quorum requirements ensure that particular directors or shareholders participate in decision-making.
• Enhanced majorities. The articles may prescribe a higher majority (e.g. 75%) than the law requires, protecting minority shareholders on sensitive decisions.