legal Tag

by Andria Papageorgiou

Navigating the Legal Landscape of Acquiring a Licensed Entity: A Comprehensive Guide

A. Introduction:

Acquiring a licensed entity is a complex and highly regulated process that requires careful navigation of legal intricacies. Such acquisitions involve not only the transfer of ownership but also compliance with specific licensing requirements and regulatory approvals. In this article, we will outline the essential steps involved in acquiring a licensed entity, ensuring a seamless and legally sound transaction.

B. The Process:

Step 1: Letter of Intent (LOI)

The acquisition process often begins with the potential buyer submitting a non-binding Letter of Intent to the target company. The LOI outlines the buyer’s preliminary offer and key terms of the proposed acquisition, such as purchase price, conditions, and timeline. 

Step 2: Due Diligence (DD)

After accepting the LOI, the target company allows the buyer access to its financial, legal, operational, and other relevant information. This phase is called due diligence, during which the buyer investigates the target’s assets, liabilities, contracts, intellectual property, and other crucial aspects to assess the risks and opportunities of the acquisition. Engaging legal counsel and financial advisors during this phase is highly recommended to identify potential risks and evaluate the entity’s overall health.

Step 3: Negotiating the Purchase Agreement

Following successful due diligence, the parties proceed to negotiate a Definitive Agreement, often in the form of a Share Purchase Agreement (SPA). The Purchase Agreement is the cornerstone of any acquisition. This legally binding contract delineates the specific terms and conditions governing the transaction. It covers aspects such as the purchase price, payment terms, representations and warranties, indemnification provisions, and conditions precedent to closing. Both parties negotiate and finalize this agreement, often with the assistance of their respective legal counsel.

Step 4: Escrow Agreement

To add an extra layer of security, an Escrow Agreement may be established. In this agreement, a neutral third party (the escrow agent) holds the purchase price or a portion of it until all the closing conditions are met, ensuring that both parties fulfill their obligations before finalizing the transaction.

Step 5: Deposit or Earnest Money:

Upon reaching an agreement on the key terms in the SPA, the buyer typically pays a deposit or earnest money to the seller to demonstrate their seriousness about the acquisition and secure the deal. The deposit is usually held in escrow until the transaction is completed.

Step 6: Regulatory Compliance

The SPA includes conditions that must be met before the transaction can be completed. These closing conditions may involve obtaining necessary regulatory approvals, third-party consents, or fulfilling other specific requirements. For acquisitions involving licensed entities, regulatory compliance is of paramount importance. Depending on the industry and jurisdiction, the buyer may need to obtain approvals from relevant regulatory bodies. This process may include submitting applications/notifications, providing supporting documents, and demonstrating compliance with applicable laws and regulations.

Step 7: Transfer of Licenses and Permits

Acquiring a licensed entity entails the transfer of relevant licenses and permits from the seller to the buyer. This process may vary significantly based on the industry and location. Generally, the buyer needs to apply for the transfer of licenses, demonstrating that they meet all necessary qualifications and comply with regulatory requirements.

Step 8: Employee Considerations

The acquisition may impact the employees of the target entity. Ensuring a smooth transition involves understanding labor laws, employee contracts, severance arrangements, and potential union issues. Compliance with labor regulations is crucial to avoid any legal liabilities arising from the acquisition.

Step 9: Closing the Transaction

With all regulatory approvals secured, licenses transferred, and other contractual obligations met, the parties proceed to the closing of the transaction. At this stage, the purchase price is paid, and the legal ownership of the licensed entity is transferred from the seller to the buyer.

C. Conclusion:

Acquiring a licensed entity involves navigating a complex legal procedure to ensure compliance and mitigate risks. By conducting thorough due diligence, negotiating a comprehensive Purchase Agreement, and obtaining the necessary regulatory approvals, potential buyers can increase the chances of a successful and legally sound acquisition. Engaging experienced legal counsel throughout the process is crucial for a seamless acquisition experience and to protect the interests of all parties involved.

Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

Updates surrounding Markets in Crypto-Assets Regulation (MiCA)

Following the recent approval of the Markets in Crypto Assets Regulation (the “MiCA”) in June 2023 and the corresponding implementing measures that needs to be prepared, we would like to draw your attention on the following news and press releases published by the European Banking Authority (the “EBA”) and the European Securities and Markets Authority (the “ESMA”) on the 12^th of July 2023:

A. EBA’s publications:

1. Consultation Paper on Complaints handling procedures for issuers of asset-referenced tokens (EBA/CP/2023/13);
2. Consultation Paper on information for the assessment of a proposed acquisition of qualifying holdings in issuers of asset-referenced tokens under MiCA (EBA/CP/2023/14);
3. Consultation Paper on EU market access of issuers of asset-referenced tokens (EBA/CP/2023/15); and
4. Statement on timely preparatory steps towards the application of MiCA to asset-referenced and e-money tokens.

B. ESMA’s Consultation Paper:

1. Consultation Paper on Technical Standards specifying certain requirements of MiCA (ESMA74-449133380-425)

In brief, allow us to summarise the following:

A. EBA’s News and Press: 

1. Consultation Paper on Complaints handling procedures for issuers of asset-referenced tokens (EBA/CP/2023/13):

• Scope: To ensure prompt, fair and consistent handling of complaints by holders of asset-referenced tokens (the “ARTs”) and other interested parties.
• Main Provisions: It sets out definitions of complaints and complainants, requirements related to the complaints management policy and function, provision of information to holders of ARTs and on templates and recording. They then proceed with requirements about the procedure to investigate complaints and to communicate the outcome of the investigations to complainants and specific provisions for complaints handling involving third-party entities.
• Next Steps: Comments to the Consultation Paper EBA/CP/2023/13 can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is on the 12^th of October 2023.

2. Consultation Paper on information for the assessment of a proposed acquisition of qualifying holdings in issuers of asset-referenced tokens under MiCA (EBA/CP/2023/14):

• Scope: To regulate access to the EU market of ARTs by applicant issuers and persons intending to exercise significant influence on these undertakings via the acquisition of qualifying holdings.

• Main Provisions:

• • Under MiCAR, the offer to the public or the admission to the trading of an ART is reserved for legal persons or other undertakings established in the EU subject to the authorisation and approval of the publication of a white paper. The draft RTS on information for authorisation lay down the information requirements to be included when applying for such an authorisation. The information requirements cover the business model, and internal governance, including ICT risk management, liquidity, the reserve of assets, sufficiently good repute of the members of the management body, and of shareholders with qualifying holdings.
  • The draft ITS set out the standard application letter, and the application template and clarify the process relating to the assessment of completeness of the application by the competent authority. As credit institutions are only required to receive approval to publish a white paper, the draft RTS and ITS do not apply to credit institutions.
  • Consistent with the general regime applicable in the financial sector, MiCAR envisages a prudential assessment by competent authorities for the acquisition of qualifying holdings in issuers of ARTs that are not credit institutions. The draft RTS on the detailed content of the information to be included in the notification for the proposed acquisition clarifies the information requirements that are necessary for such an assessment.
  • This information covers five criteria relating to (a) the reputation of the proposed acquirer, (b) the suitability of any person who will direct the target undertaking, (c) the financial soundness of the proposed acquirer, (d) the sound and prudent management of the target undertaking following the acquisition and (e) suspicion that money laundering or terrorist financing is committed or attempted or that it may increase following the acquisition.

• Next Steps: Comments to the consultation paper can be sent by clicking on the “send your comments” button on the EBA’s consultation page. The deadline for the submission of comments is 12 October 2023.

3. Statement on timely preparatory steps towards the application of MICA to ART and e-money tokens (the “EMT”):

• Scope: To encourage timely preparatory actions to MiCA application, with the objectives to reduce the risks of potentially disruptive and sharp business model adjustments at a later stage, to foster supervisory convergence, and to facilitate the protection of consumers.
• Content:
  • The Statement includes ‘guiding principles’ to which financial institutions (and other undertakings) carrying out ART/EMT activities are encouraged to have regard until the application date (disclosures to, and fair treatment of, potential acquirers and holders of ARTs and EMTs, the business model, sound governance, including effective risk management, reserve, recovery and redemption arrangements, and communications with the relevant competent authority).
  • The Statement is accompanied by a template that financial institutions (and other undertakings) intending to carry out, or carrying out, ART/EMT activities, are encouraged to communicate, on a timely basis, to the relevant competent authority.

B. ESMA’s Consultation Papers:

Same-day press release publication by ESMA,  in relation to the lunch of the first of three consultation packages (the “ESMA’s Consultation Paper”), on the technical standards specifying certain requirements.

• Scope: Through the aforesaid consultation paper, ESMA is seeking input on proposed rules for CASPs related with their authorization, identification and management of conflicts of interest as well as the procedures on how CASPs should address complaints. The ESMA’s Consultation Paper‘s aim is to collect views, comments and opinions from stakeholders and market participants in regard to the appropriate implementation of MiCA.

• Main Provisions:

• • Provision of crypto-asset services by certain financial entities – Article 60

Specifies the notification requirements, that certain financial entities intended to provide crypto-asset service and for which they shall take into account when submitting the notification to the NCA of their home Member State (e.g. program of operations, description of the internal control mechanisms relating to AML/CFT obligations, description of the procedure for the segregation of clients’ crypto-assets and funds, etc.)

• • Content of templates for the application for authorisation – Article 62

Sets out the requirements related to the application for the authorisation as a CASP as well as the information to be provided with the application that shall be submitted to the NCA of their home Member State. (i.e. program of operations, description of CASP’s governance arrangements, description of the procedure for the segregation of clients’ crypto-assets and funds, etc.).

• • Complaints-handling procedures of CASPs – Article 71

Provides the requirements that CASPs shall follow when establishing and maintaining effective and transparent procedures for the prompt, fair, and consistent handling of complaints received from clients (i.e. filing a free-of-charge complaint by the client).

• • Identification, prevention, management, and disclosure of conflicts of interest by CASPs – Article 72

Clarifies the policies and procedures that CASPs shall implement and maintain so as to be able to identify, prevent, manage and disclose any conflict of interest and disclose to their clients the general nature and sources of conflicts of interest as well as the steps that shall be taken to mitigate them.

• • Assessment of intended acquisition of a qualifying holding in a CASP under Article 83(4)

Natural/Legal person who intends to acquire or increase a qualifying holding in a CASP shall notify the respective NCA through an assessment with the specific information in order for the relevant NCA to assess the proposed acquisition or increase the existing qualifying holding.

• Next Steps: Comments to the ESMA’s Consultation Paper can be sent by clicking the heading ‘Your input – Consultations’. The deadline of the submission of the responses/comments is on the 20^th of September 2023.

Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

A Step-by-Step Guide to Setting Up a Partnership in Cyprus

A. Introduction:

Setting up a partnership in Cyprus can be an excellent way to establish a business and benefit from shared responsibilities and resources. Whether you’re looking to start a general partnership (GP) or a limited partnership (LP), this step-by-step guide will help you navigate the process and ensure compliance with Cyprus laws.

B. Process:

1. Choose the Partnership Type: Before proceeding, it’s crucial to decide on the type of partnership that best suits your business goals. In a GP, all partners have unlimited liability and share equal management responsibilities. An LP, on the other hand, involves general partners with unlimited liability and limited partners with liability limited to their investment.
2. Select a Name for Your Partnership: Choose a unique and distinguishable name for your partnership. It should not be similar to any existing businesses in Cyprus to avoid confusion. Ensure that your chosen name complies with the requirements set by the Department of Registrar of Companies and Official Receiver.
3. Draft a Partnership Agreement: While not legally required, drafting a partnership agreement is highly recommended to establish clear guidelines and avoid potential disputes. The agreement should include key details such as the partnership’s purpose, capital contributions, profit-sharing arrangements, decision-making processes, and mechanisms for resolving conflicts.
4. Register Your Partnership: To register your partnership, you’ll need to submit the necessary documents to the Department of Registrar of Companies and Official Receiver.
5. Obtain Necessary Permits and Licenses: Depending on the nature of your business activities, you may need to obtain specific permits or licenses from relevant authorities in Cyprus.
6. Register with the Tax Department: Once your partnership is registered, you must register with the Cyprus Tax Department for tax purposes. You will receive a Tax Identification Number (TIN) for your partnership. Comply with all tax obligations, including filing tax returns, maintaining proper accounting records, and paying taxes in a timely manner.

C. Conclusion:

Setting up a partnership in Cyprus involves a systematic approach to ensure legal compliance and a solid foundation for your business. By carefully following the steps outlined in this guide, you can establish a partnership structure that aligns with your goals and positions your business for success.

Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

Strengthening Compliance: Safeguarding against Money Laundering Risks

A. Introduction:

In an increasingly interconnected and digital world, the fight against financial crimes, including money laundering, has taken center stage. As illicit activities continue to evolve and become more sophisticated, it is crucial for businesses to prioritize Anti-Money Laundering (AML) compliance. This article sheds light on the importance of AML measures, the risks associated with non-compliance, and how our law firm is dedicated to upholding AML standards while offering consulting services to organizations seeking to strengthen their AML frameworks.

B. The Significance of AML Compliance:

Anti-Money Laundering compliance refers to the comprehensive set of regulations, policies, and procedures designed to prevent the facilitation of money laundering and terrorist financing activities. Money laundering not only undermines the integrity of the global financial system but also aids criminal enterprises in disguising their illicit gains as legitimate funds. By complying with AML regulations, businesses not only protect their reputation but also contribute to maintaining the integrity of the financial system.

C. Risks of Non-Compliance:

The consequences of non-compliance with AML regulations are severe, ranging from reputational damage to financial penalties and legal consequences. Financial institutions and businesses failing to implement adequate AML controls can face substantial fines, regulatory sanctions, and potential loss of licenses (if applicable). Additionally, non-compliance may lead to damaged customer trust and adverse publicity, which can have long-lasting impacts on an organization’s bottom line.

D. Our Commitment to AML Compliance:

At Andria Papageorgiou Law Firm, we recognize the critical importance of AML compliance and the challenges businesses face in meeting regulatory obligations. With a team of experienced legal professionals specializing in AML, we are dedicated to assisting organizations in navigating the complex AML landscape, tailoring our services to their unique needs.

Our law firm offers comprehensive AML consulting services, helping clients establish robust AML frameworks and compliance programs. We collaborate closely with businesses across various sectors, providing guidance on risk assessment, policies and procedures development, staff training, and ongoing monitoring. By leveraging our expertise, organizations can ensure compliance with AML regulations, minimize risks, and safeguard their operations and reputation.

Recognizing that each business has unique AML requirements, our consulting services are tailored to meet specific needs. We work closely with clients to understand their operations, risk profile, and regulatory environment. We then develop customized solutions that address their specific challenges, ensuring an effective and efficient AML compliance program.

We understand that AML regulations are constantly evolving to keep pace with emerging risks. We remain up-to-date with the latest regulatory developments and industry best practices, ensuring our clients stay ahead of the curve. We proactively monitor changes in AML laws, guidelines, and enforcement actions, incorporating relevant updates into our consulting services to help clients maintain their AML compliance posture.

Further to all the above, we are also proud to announce that our esteemed Founder and Lawyer, Mrs. Andria Papageorgiou, has achieved an exceptional milestone in her professional career. Mrs. Papageorgiou has recently completed the prestigious International Compliance Association (ICA) Certification in Anti-Money Laundering (AML) for Institute of Certified Public Accountants of Cyprus and Cyprus Bar Association (CBA) Members, successfully passing the exam with Distinction. This accomplishment highlights her expertise and dedication to upholding the highest standards in AML compliance. The ICA Certification in AML is an internationally recognized qualification offered by the International Compliance Association (ICA). This certification equips professionals with the in-depth knowledge and skills necessary to combat the ever-evolving challenges posed by money laundering and terrorist financing activities.

E. Conclusion:

The fight against money laundering requires a proactive and comprehensive approach to ensure the integrity of the global financial system. By prioritizing AML compliance, businesses can mitigate risks, Andria Papageorgiou Law Firm, we are committed to helping organizations navigate the complex world of AML regulations through our tailored consulting services. 

Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as financial or investment or legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information. 

by Andria Papageorgiou

EU List of third country non-cooperative jurisdictions for tax purposes and possible implications

In last February the ECOFIN Council updated the EU list of third country non-cooperative jurisdictions for tax purposes (the so-called EU ‘blacklist’) and the list became official upon publication in the Official Journal on 26 February 2021.

The EU list of non-cooperative jurisdictions for tax purposes is a tool to tackle:

• tax fraud or evasion: illegal non-payment or under payment of tax
• tax avoidance: use of legal means to minimise tax liability
• money laundering: concealment of origins of illegally obtained money

The updated EU ‘blacklist’ includes the following jurisdictions:

• American Samoa
• Anguilla
• Dominica
• Fiji
• Guam
• Palau
• Panama
• Samoa
• Seychelles
• Trinidad and Tobago
• US Virgin Islands
• Vanuatu

The EU has previously decided that, as from 2020, the list will be updated twice a year.

Various defensive measures are currently being enacted by EU Member States which should negatively affect entities resident in jurisdictions on the EU ‘blacklist‘. These defensive measures include increased withholding taxes (WHT), stricter CFC rules, denial of deductibility of expenses, denial of participation exemption, increased monitoring and audits, special documentation requirements etc.

From a Cyprus tax angle, it is noted that the Cypriot Ministry of Finance recently submitted to Parliament a draft bill (currently having an effective date as from 1 July 2021) which introduces WHT for certain payments to companies in the EU ‘blacklist’ jurisdictions, as follows:

• For payments of dividends, WHT at the rate of 17%;
• For payments of passive interest, WHT at the rate of 30%; and
• For payments of royalties, WHT at the rate of 10%.

Finally, increased DAC6 reporting obligations may apply to certain related party transactions between companies in the EU and the EU ‘blacklisted’ jurisdictions, as the relevant Hallmark can be met irrespective if the Main Benefit Test is also satisfied.

Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.