As another calendar year is coming to an end, most companies will look to prepare and file promptly with the Registrar of Companies their annual reports for the year 2024, accompanied with their financial statements of the previous year, that is 2023. For purposes of compliance with the statutory obligations of Cypriot companies, as per the provisions of the Companies Law (Ch. 113), this is enough.

However, for an operating company, to be reviewing its overall, annual financial performance some months, or even a year late can be disastrous. This is why, financially sophisticated corporations will look to prepare and finalise the financial statements of all of their companies within the first couple of months of each calendar year.

This enables the management of corporate groups to identify at an early stage any financial vulnerabilities, shortcomings or threats in any particular company, service line or jurisdiction, that they are operating in, and act proactively, in order to mitigate their likely impact to the group. Depending on the issue at hand, such actions may take the form of:

• immediate relief measures, such as temporary costs’ cuts, bridge financing, sale of assets;
• dissolution of certain branches, service lines or companies within the group. This can be efficient with local constraints, such as the impact of new regulatory measures or new taxes;
• group reorganisation, which is commonly used for mergers and acquisitions and includes merging or de-merging companies or service lines within the group and taking over some other business;
• Examinership, which can serve as a last chance for a company to formally restructure all of its debts with all creditors (banks, suppliers, affiliated companies), before resorting to, an otherwise inevitable, liquidation.

When it comes to the dissolution of a Cypriot company, it is permitted its last financial statements to cover a period of up to 15 months, rather than the usual 12 months. Hence, in deciding to dissolve a company, either via members’ or creditors’ voluntary liquidation or within a corporate reorganisation, in the first 3 months of the year, one can avoid the requirement of preparing additional financial statements for the company up to the date of commencement of the liquidation or reorganisation process.

On this we would like to alert companies of the importance of preparing and reviewing their financial statements of 2024 within the first 3 months of 2025.

For consultation on the preventive restructuring measures mentioned above, please refer to our restructuring experts at EK Insolvency https://ekinsolvency.eu/ [ tel: +357 22 848325; email: info@ekinsolvency.eu ].