Preparations Underway for Euro switch

Efforts are being made by the government to streamline the means by which companies make the currency switch from the Cyprus pound to the euro regarding their share capital, with a new law allowing companies to sidestep the court proceedings normally required for such currency changes.

Under normal circumstances, a company wishing to convert the currency of its shares would under Cyprus law have to go through the court system, as well as call an extraordinary general meeting between all of its shareholders. The new law, approved by the House of Representatives, means that companies will only be required to perform the latter.
This modification serves to simplify the process so as to avoid extra headache during the inevitable confusion that will accompany the changeover.

Ministry of Finance director Andreas Charalmbous, who is in charge of the euro changeover, stated: “If companies go through the changeover process in 2008, they will not have to go through the normal court process; they will need only the decision of their general assemblies before notifying the Department of Registrar of Companies and Official Receiver. This will be a simple and relatively automatic process.”

The process of converting individual shares will not go swiftly, as companies will be required to come up with the same totals that they started with.
Charalambous stated: “Companies will have to convert all their capital shares to the new euro currency, which will cause some confusion because of the tendency there will be to round things up or down.”

Companies, he said, would likely be prone to rounding the worth of shares up or down for purposes of management and organisation. In such instances, efforts would have to be made to accommodate the changes fairly.

Charalambous said there were numerous actions companies would have to take if the rounding of individual shares resulted in there being a surplus over the original total.
“If there is a surplus, the legislation allows companies to capitalize from their reserves in order to equalise the amounts. They could also distribute profits to owners,” said Charalambous.
“If the exercise were to lead to a capital reduction, the company would need the concurrence of its general assembly to do so.”

As the euro is not a legally permitted Cyprus currency until January 1, companies wishing to make the changeover beforehand would have to pay a commission for switching currencies. After the euro is formally introduced in 2008, companies will have a full year to complete the switch for their share capital.

Once the currency switch for company capital shares is made, shareholders would be sent updated certificates showing the worth of their shares in euros.
As all the island’s enterprises begin the rush to make the share capital currency switch, authorities are said to be taking the necessary precautions to prevent staff at the Ministry of Commerce, Industry and Tourism facing overload due to demand. Reserve staff are being made available to deal with the high numbers of expected requests.

“In my point of view,” said Charalambous, “we have tried to simplify the process and make the transition as easy and unproblematic as possible by working to eliminate any bureaucratic hurdles we might have faced.”