Amendments to the Companies’ Law – Variable Capital Investment Companies and Guarantees


On the 5th of November, the laws 150(I)/2021 and 151(I)/2021 introduced, among others, two significant amendments to the Companies Law, Cap. 113 (hereinafter the “Law), regarding the legal framework of Variable Capital Investment Companies (hereinafter “VCIC”) and the issuance of guarantees. In this legal update, we briefly outline the amendments introduced.

Amendments to the legal framework for VCICs

a. Amendment to Section 46(A)  

The amendment limits the applicability of sections 28-46 of the Law in relation to offers made to the public for subscription. In particular, it is stated that the said sections of the Law do not apply to a subscription of shares or debentures subject to the following laws:

      • The Prospectus and Public Offer Law; and/or
      • the Open-Ended Undertakings for Collective Investments Funds Law; and/or
      • the Alternative Investment Funds Law.


b. New section 61 (1A) (a) – enables the conversion of the share capital of a limited liability company to a VCIC without a par value, through a notification to the Registrar.

More specifically, it is clarified that, in case of conversion of a limited liability company, other than a variable capital investment company, in a VCIC, the company may convert its share capital into a specified number of shares without any par value. The notification and court order required must be submitted for registration to the Registrar of Companies. Relevant details as to the procedure and technicalities are set out under the provisions of article 370ID.


c. New provision under section 118 (1)(c) – Annual Return and VCIC – What needs to be disclosed?

The said amendment distinguishes and exempts VCICs from disclosing certain information that is required to be included for non-VCICs in the Annual Returns.


d. New subsection 2A(c) of section 327 – Compliance of existing VCICs with the Law


According to section 370IE of the Law, any existing VCIC must submit a special resolution, within a period of 12 months starting from the date the amendment came into force (5th of November 2021), amending its memorandum and articles of association to indicate that is now a VCIC in accordance with the new provisions of the Law.
The new subsection 2A(c) of section 327 indicates that non-compliance with the above-mentioned obligation will result to the strike-off of the non-compliant VCIC from the records of the Registrar of Companies.
It is important to mention that the obligation applies to all of the existing VCICs, which operate in the form of alternative investment funds.  


e. Amendment of Section 361A – Excludes and renders articles 355 to 361 of the Law inapplicable to the Open-Ended Undertakings for Collective Investment Law and/or the Alternative Investments Funds Law.


f. Amendment of Part XA of the Law (Sections 370A – 370IZ) - VARIABLE CAPITAL INVESTMENT COMPANIES

The newly introduced provisions serve guidance through elaborated definitions and enhanced regulations as to the establishment of VCICs.

More specifically:

  1. The recently incorporated Section 370A provides a clear interpretation of the term VCICs which is used in sections 370A to 370IZ. A "variable capital investment company" is defined as a limited liability company by shares. It is worth mentioning that VCICs are the most common form of entities used to set up alternative investment funds.
  2. The new Section 370B operates as a reference to the content of the Memorandum and Articles of Association for VCICs which should include that:

1. the share capital of the company is equal to the respective value of the issued share capital of the company;

2. the share capital is divided into a fixed number of shares without assigning any nominal value to them; and

3. the Memorandum specifies the minimum number of shares to be issued, preventing the VCIC to issue any less than the number specified. In the circumstance where the share capital is divided into different classes of shares, the class or classes of shares constituting the minimum number of shares corresponds to the minimum initial capital, as provided by the Open-Ended Undertakings for Collective Investment Law or the Alternative Investments Funds Law.


iii. It is further specified that both the Memorandum and the Articles of Association of a VCIC shall be drafted in accordance with the model incorporated in Part I, Model E of the Law or as close to it as circumstances permit.


iv. In accordance with Section 370C (1), newly incorporated VCICs shall correspond and comply with the provisions of the Open-Ended Undertakings for Collective Investments Funds Law and/or the Alternative Investments Funds Law, as may be applicable, as set out in Section 370C (2). Any registration of a VCIC or any amendments to the documents of the VCIC are subject to the prior approval of the Cyprus Securities and Exchange Commission, before the relevant registration or amendments are submitted to the Registrar of Companies.

v. The newly incorporated Section 370D specifies that the Memorandum or the Articles of Association of the VCIC should indicate the manner in which the fair value of a VCIC is calculated. In particular the above-mentioned documents should mention that:

a. the fair value of the issued share capital equals with the value of the company's assets minus its liabilities; and

b. the shares of the company may be redeemed by the company, at the request of any of the shareholders, directly or indirectly from the assets of c. the company, provided that the number of the issued shares remains above the minimum number indicated in the Memorandum of the Company.


vi. Section 370Εoutlines that the actions that must be taken by the VCIC, to ensure that its trading value does not deviate from the net value of its assets at a rate higher than the percentage specified in its articles of association, are considered as equal with the redemption of its shares. It is therefore established that the percentage of the said deviation shall not surpass five percent (5%) of the net value of the VCIC’s assets.

vii. Further definitions have been incorporated within Section 370Z, aiming to clarify, amongst others that:

    1. The notion of a “company limited by shares” is interpreted to include a VCIC;
    2. The reference to the “nominal value of shares” of the VCIC refers to the asset value of the company, after its liabilities have been deducted, divided by the number of issued shares; and
    3. “The share capital of a limited liability company by shares” is to be understood as the asset value of a VCIC, after deducting all its liabilities.


viii. The recently amended Section 370H clarifies that the redemption of shares should take place in accordance with the provisions of the Articles of Association of the company. Specifically, it is provided that not only the shares must be fully paid but also, that the redemption will not result in the creation of a reserve account, differentiating the requirements from those applicable to the redemption of redeemable preference shares.

Accordingly, and as set out in Section 370I, the redeemable shares of a VCIC are canceled, reducing in this manner the amount of the issued share capital against the consideration price paid for their redemption. Further, the VCIC is enabled to issue an equal number of shares as the amount acquired.


ix. Section 370Θ enables the VCIC to amend the provisions of its memorandum regarding the number of its shares, the minimum number of issued shares and any class of shares through an ordinary resolution. In such case and in order for the changes to be effected, the VCIC must file to the Registrar within one month, the copy of the resolution, the relevant notification, as well as a copy of the amended memorandum of the company.


x. Section 370IB indicates the articles of the Law which are not applicable to VCICs. It is important to mention that prior to this amendment, the Law was silent regarding the application of its articles to such companies. On the contrary, the Alternative Investment Funds Law mentions explicitly which articles of the Companies’ Law are exempted. Therefore, the addition of section 370IB is important since it empowers and completes the existing legal framework for alternative investment funds.


xi. Section 370IC provides that a VCIC may be established by any individual undersigning the memorandum of the company provided that all legal provisions of the Law are complied with accordingly.


xii. Section 370ID points towards sections 198 – 200 of the Law as guidance in relation to the conversion of a limited liability company to VCIC.


xiii. Section 370IE, aims to provide clarifications as to which companies are regarded as existing VCICs prior to the enactment of the new law. It is therefore outlined that an "existing variable capital investment company" is a company that has been registered under of the provisions of the Law and operates as a VCIC under the provisions of the Open-Ended Undertakings for Collective Investment Law or the Alternative Investments Funds Law.


xiv. Section 370ΣΤ clarifies that a register of members of a VCIC is maintained as per the Open-Ended Undertakings for Collective Investment Law and/or the Alternative Investments Funds Law regarding the Registers of Unitholders.


xv. Section 370IZ differentiates and clarifies the inapplicability of Paragraph 7 of Article 327 as to the reinstatement of a company following a strike off. More specifically, it provides that a VCIC may be reinstated within two years of strike off, unlike the 20-year period window that applies for limited liability companies.


Amendment introduced via Law 151(I)/2021 - Guarantees

Amendment 4 covers the provisions in relation to the issuance of guarantees. Specifically, Section 299 has been amended as follows:

  1. The reservation included in subsection 8(a)(ii), suggesting that the said subsection shall only be applicable to those guarantees which existed prior to the date that the Amendment 3 via Law 63(I)/2015 came into force, shall no longer be applicable and has therefore been struck off.
  2. Subsection 9 is entirely repealed, and it has been replaced with a new subsection which aims to clarify that the debts referred to in the preceding subsection 8 refer to agreements of guarantee executed by the date of the Amendment 2 of 2018 and apply throughout the period beginning on or after the date that Amendment 3 of 2015 was effected.
  3. It is also important to note that Amended 4 has retroactive effect as of 13 July 2018 and therefore any agreements of guarantee executed subsequent the said date, are affected.
  4. 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.


With Cyprus being a well-established jurisdiction for Alternative Investment Funds, the amendments in regard to VCICs pave the way for a more comprehensive and clearer legal framework.  More specifically, the newly introduced provisions loosen the applicability of the law regarding both the incorporation and the operation of VCIC and are considered to be the key that will solve procedural as well as operational issues faced by the industry stakeholders.




This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.

December 2021



Mariza Apostolou

Associate Lawyer – Corporate Department


Savvina Miltiadous

Associate Lawyer – Financial Services & Funds Department



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