The Emerging Companies Market (ECM) is the unregulated market of the Cyprus Stock Exchange (CSE). The ECM’s concept is like the Alternative Investments Market (AIM) of the London Stock Exchange (LSE).
Companies which are wishing to list their securities on the ECM are not required to comply with the mandatory provisions of regulated markets with respect to both listing requirements, such as size, number of shareholders/ spread and continuous obligations.
The ECM’s simplified regulated environment has been designed to address the needs of:
• Unlisted companies which are seeking finance and easy access to a secondary market, thereby improving the liquidity of their shares, and providing an exit route to existing or future investors;
• Unlisted Companies that are aiming to enhance their permanent establishment status and benefit from DTT provisions. For example, the DTT with Russia provisions that a Company that is listed in a Recognised exchange is exempted from withholding tax on dividends.
• Listed companies that are not able or willing to undertake the higher costs of remaining in a regulated market (subject to first delisting from the regulated market following an acquisition);
• Companies which are seeking to float their securities to a recognised secondary market of an EU member state.
• Investors who are seeking new ways of investment, with awareness of the high risk of the market;
Methods of listing
Floatation in the ECM can be achieved in one of the following methods:
• By public offer which requires a Prospectus, pursuant to the European Prospectus Directive, and an approval by CySEC (unless offering is less than €5 million and is addressed to less than 150 persons) or
• By private placement, which requires only an Admission Document to be submitted to the CSE or
• A combination of the abovementioned methods or
• By listing of existing shares, which requires an Admission Document to be submitted to the CSE.
It should be noted, that whenever the size of a new issue and the number of persons to which the issue applies, falls within the limits of the Prospectus Law/ Directive, the Admission document should be a full Prospectus, that has to be prepared and approved according to the legal provisions (i.e. approved by the CySEC, if in Cyprus). Once the Prospectus is approved, an issuer listed in the ECM will only have the obligations of that market.
Advantages of ECM listing
There are many advantages through ECM listing including:
• Lower cost of listing compared to the regulated markets;
• Easiness of raising capital;
• Shares and bonds are more attractive to investors as listing provides an exit strategy;
• Lower cost of continuous obligations compared to regulated markets;
• The status of a listed company may assist in attracting investors;
• Serves as preparation for listing in the regulated markets of the CSE;
• Offers an alternative for companies delisted from the regulated markets of the CSE.
The tax benefits
The Cyprus tax legislation is fully compliant with the EU Acquis Communautaire and EU Directives. It is in full compliance with the code of Conduct for Business Taxation and against harmful tax competition. Cyprus has a double tax treaty network with over 60 countries. In addition to these advantages, there are significant tax benefits offered by the Cyprus tax legislation such as:
• One of the lowest corporate tax rates in EU at 12,5%
• Group relief availability
• Exemption from tax on foreign dividends (subject to meeting one of two exemption conditions)
• Exemption from tax on profit from sale and/or revaluation of qualified securities
• No capital gains tax on disposal of shares/units
• No withholding taxes on dividend, interest and royalty payments (under certain conditions) to nonresident shareholders or non-domicile resident shareholders
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