CYPRUS Trends and Developments Contributed by: Christina Ioannidou, Katerina Hadjichristofi, Zoe Christou and Nicolas Panayiotou, Ioannides Demetriou LLC
takeover bids having been announced and com - pleted. Given the particularities and intricacies in the provisions and application of the local frame - work on takeover bids, including indicatively the rules on deemed acquisitions, concerted practices, exemptions, temporary prohibitions and/or restrictions in decisions and/or actions, application of sell-out/squeeze-out provisions, specialised support and legal advice in the area is required. Digitalisation and Innovation Cyprus has witnessed notable M&A transac - tions in the technology and digitalisation sec - tors, reflecting its growing prominence as a hub for innovation. Deals in this sphere include the acquisition of fintech firms and e-platforms, which in essence involve a licence-acquiring element and hence merit regulatory precision and investments by venture capitalists in Cyp - riot software development start-ups focusing on artificial intelligence, aiming to scale operations and enter new markets. The digital transformation of the Cypriot econ - omy has been a key driver of M&A activity. The government’s push for digital innovation, cou - pled with increased investment in tech start-ups, has created a vibrant ecosystem for deal-mak - ing. Cybersecurity, fintech and e-commerce are particularly active sectors, with both local and international players seeking to expand their footprints. As digitalisation reshapes industries, there is a growing appetite for expansion, both locally and internationally. This trend is expect - ed to continue and create new opportunities for growth. Foreign Direct Investment Screening Cyprus has traditionally maintained minimal restrictions and a favourable tax regime in its approach to foreign direct investment (FDI), while
at the same time recent developments support the implementation of a formal FDI screening process. Cyprus, as an EU member state, is subject to the EU FDI Screening Regulation (Regulation (EU) 2019/452), which establishes a framework for screening foreign investments into the EU. This regulation allows member states to assess and, if necessary, restrict foreign investments that may affect security or public order. While the regulation provides a common framework, the implementation and enforcement of FDI screening mechanisms are the responsibility of individual member states. In response to evolving geopolitical dynamics and the EU’s emphasis on strengthening FDI screening, Cyprus has initiated steps to estab - lish its own FDI screening mechanism. A draft bill is currently under review by the Parliamen - tary Committee on Finance and Budget, and the relevant legislation is expected to be enacted in 2025. Once enacted, the new FDI screening process in Cyprus will likely introduce the following. • Notification requirements – foreign investors may need to notify the relevant authorities of certain investments in Cyprus, particularly in sensitive sectors. • Approval process – certain investments may require prior approval before proceeding, especially if they are deemed to pose risks to national security or public order. • Sector-specific scrutiny – investments in areas such as critical infrastructure (energy, transport, digital infrastructure, water sup - ply), defence and military, banking, shipping, media, and real estate may face more strin - gent scrutiny compared to other sectors.
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