“The Company (Amendment) (No4) Law of 2011” amended the basic Company Law, Cap.113, by adding new section 142A. The new section provides that any parent undertaking, governed by the Cyprus Company Law, which only has subsidiary undertakings which are not material, both individually and as a whole, shall be exempted from the obligation to draw up consolidated financial statements. A subsidiary undertaking is considered immaterial, if it does not affect the true and fair view of the assets, liabilities, financial position and profit or loss included in the consolidated financial statement.
Also, the financial statements of a subsidiary undertaking need not be included in consolidated financial statements if (a) severe long-term restrictions substantially hinder the parent company in the exercise of its rights over the assets and the management of that subsidiary undertaking or (b) the information necessary for the preparation of consolidated accounts cannot be obtained without disproportionate expense or undue delay or (c) the shares of the subsidiary undertaking are held exclusively with a view to their subsequent resale.
This amendment was approved for purposes of harmonization with EU “Directive 2009/49 amending Council Directives 78/660/EEC an 83/349/EEC as regards certain disclosure requirements for medium-sized companies and the obligation to draw up consolidated accounts”. The purpose of the said Directive is to reduce the administrative burden on companies.