16.09.2022
This week, a bill was submitted to the Cabinet of Ministers to enshrine in national legislation the European Union directive on the verification of foreign direct investment (FDI).
The initial framework was adopted in March 2019 and entered into force for the first time in October 2020, with most countries in the European Union either implementing the framework themselves or currently in the final stages of implementation.
According to the Cyprus News Agency (CNA), the draft law describes the conditions under which an obligation to notify prospective foreign direct investment and obtain approval is created, as well as the criteria and factors that may be taken into account in the control of foreign direct investment.
It also defines the FDI control process, the type of information required in investment control, and the executive powers of the competent authority, which in this case is the Ministry of Finance.
In effect, the bill would allow the relevant finance minister to have a say in approving foreign direct investment from third countries in Cypriot companies. After Cabinet approves the bill, it will be submitted to the House of Representatives for further discussion and approval.
Finance Minister Konstantinos Petrides recently said that “Cyprus must ensure the stability of its banking sector”, calling it in the public interest.
“If we see that there are dangerous and aggressive takeovers from abroad, then we should have the right to decide whether they should take place or not,” Petrides added.
The bill is directly related to the recent takeover attempts by the American private equity firm Lone Star to take over the Bank of Cyprus.
The Board of Directors of the Bank of Cyprus has already unanimously and unequivocally rejected three unsolicited, conditional, non-binding offers from a US private equity firm, with the latest offer offering the bank €1.51 per share.
On September 6, Lone Star, in a statement published on the London Stock Exchange, said it was considering its options in terms of submitting a revised offer to acquire the Cypriot bank.
Lone Star also stated that it has not reached a final decision regarding the submission of a revised and final proposal to the Board of Bank of Cyprus, however clarified that any revised proposal submitted will be for the acquisition of Bank of Cyprus. Cyprus under an arrangement scheme based on Irish law and not based on a takeover bid as set out in the relevant 2007 Cypriot law.
The firm, which has until Sept. 30 to submit a revised offer, has reportedly held remote preliminary talks about a potential takeover, seeking to determine if it remains a possibility.
