Since 2 April 2026 a foreign investment of EUR 2m taking 25 per cent of a strategic Cyprus business needs the Ministry of Finance's written approval first.
Cyprus has had a foreign investment screening regime since 2 April 2026 and it is the kind of law that is discovered at the wrong moment. The Law establishing a framework for the screening of foreign direct investments, Law 194(I)/2025, was published in Official Gazette No. 5061 on 14 November 2025, and section 20 brought it into force on 2 April 2026, giving the market a deliberate five-month gap it largely did not use.
It applies Articles 3, 4, 6, 7, 9, 10, 11 and 14 of Regulation (EU) 2019/452. The competent authority, under section 2, is the Ministry of Finance.
Three tests, and all three have to be met
Section 3(2) is the whole of the scope question. The notification obligation applies where the following are satisfied cumulatively:
- the investment results in the acquisition of a qualifying holding as defined in section 3(3);
- its value, alone or combined with other transactions between the same parties within twelve months of the date on which the investment is planned to take place, equals or exceeds EUR 2,000,000; and
- it concerns an undertaking of strategic importance.
Miss one and the obligation does not arise. Meet all three and, under section 3(1)(d), the prior approval of the competent authority is required before the investment can be made.
The aggregation limb in the second test is the one that catches structured deals. Two tranches of EUR 1.2m between the same parties eleven months apart are one investment for this purpose.
Twenty five per cent, and what counts as reaching it
Section 3(3) defines a qualifying holding as the acquisition, directly or indirectly, alone or in concert with other persons, of a percentage corresponding to at least twenty five per cent of the share capital and/or the voting rights, or an equivalent ability to exercise decisive influence over the undertaking's activities.
Section 3(4) catches the creeping acquisition. A further increase in a qualifying holding counts where the proportion of share capital and/or voting rights held by the foreign investor moves from below 25 per cent to 25 per cent or more, or from below 50 per cent to 50 per cent or more.
Section 2 then defines control more widely than a shareholding. It is the ability to exercise decisive influence, in particular through ownership or right of use, directly or indirectly, of all or at least 25 per cent of the voting rights or the assets; or through rights, contracts or other means which, alone or in combination and taking account of the relevant factual or legal circumstances, confer decisive influence over the composition, the votes or the decisions of the management bodies.
And a proviso closes the gap that structuring usually aims at: persons who do not hold those rights are treated as having acquired control if they have de facto power to exercise them.
Which businesses are strategic
Section 2 defines an undertaking of strategic importance as one carrying on activities within the particularly sensitive sectors set out in the Annex.
Paragraph A(a) of the Annex names critical infrastructure, physical or virtual, including infrastructure in energy, transport, water, health, education, tourism, communications, media, data processing or storage, aerospace, defence, electoral and financial services including systemic credit institutions, sensitive facilities, and land and real estate critical to the use of such infrastructure.
Tourism and education on that list are worth pausing over. So is the land and real estate limb, which reaches a property transaction that would not otherwise look like a national security matter.
Paragraph A continues with the consequences for access to sensitive information including personal data; media freedom and pluralism; critical and dual-use technologies as defined in Article 2(1) of Regulation (EC) 428/2009, naming artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies; and the supply of critical inputs including energy, raw materials and food security.
Paragraph B turns the lens on the investor: whether they are directly or indirectly controlled by the government of a third country, including state bodies or armed forces, through ownership structure or the provision of significant funding, and whether they have already been involved in activities affecting the security or public order of a Member State.
What the notification contains
Section 3(1)(a) requires the foreign investor to notify by written request before the investment is made, and section 3(1)(b) requires it to describe the intended investment and give the information in section 4.
Section 4(1) lists it: the details of the parties, including name, trade name, registered address, seat, NACE classification code and registration number; the ownership structure of both the foreign investor and the target, including the ultimate investor and the beneficial owner and the capital participation; the approximate value; the products, services and business activities of both; the nature of the economic activities carried on in the Republic by the parties; the funding of the investment and its source; the date the investment is planned for; and the states under whose law the parties were incorporated or registered.
Two of those routinely take longer than the deal timetable allows: the beneficial ownership chain up to the ultimate investor, and the source of funding.
The two clocks, and how they stop
Section 5(1)(a) gives the authority twenty working days from receipt of the fully completed request to decide whether the notified investment is to be screened at all. Section 5(1)(b) requires it to consult the Advisory Committee before deciding that.
If it decides not to screen, section 5(3) requires it to inform the investor within five working days of that decision.
If it decides to screen, section 5(4)(a) requires notification within five working days and then a decision, within sixty five working days of the decision to screen, on whether the investment may affect the security or public order of the Republic, against the factors in the Annex.
Sections 5(2) and 5(4) suspend both periods while a request for additional information, explanation or clarification is outstanding. So the twenty and the sixty five are not elapsed calendar time; they are time in which the ball is not in the investor's court.
The proviso that matters most appears twice, in section 5(1)(a) and again in section 5(4)(a): approval is not considered to have been given unless the investor has received the authority's written approval. Silence is not consent, and neither is the expiry of a period.
What happens if the answer is no
Section 5(6) allows the authority, where it finds the screened investment affects security or public order, to impose conditions, prohibit or reverse it. Section 6(1) carries the same powers, and section 6(2) provides that where an investor refuses or fails to comply within the period the authority sets, the authority prohibits, terminates or reverses the investment to the extent it concerns the undertaking of strategic importance.
Section 6(3) is what a purchaser should read before signing anything. Where a screened investment is prohibited, terminated or reversed, or until the investor complies with any conditions imposed, the investor and any persons controlled by or acting in concert with them are barred from exercising any rights arising from or relating to the investment, including without limitation any voting rights and any rights of management or control of the target.
That is a shareholding that cannot be voted and a board seat that cannot be used, for as long as the condition remains unmet.
Not notifying is not a strategy
Section 7 removes the judgement call. Where any person connected with an investment falling within the Law fails to notify under section 3, the investment is automatically deemed to be in breach of the Law, and the authority may take all or any of the measures available to it to prohibit, terminate or reverse it.
Section 8 then does something useful for the transaction lawyer and dangerous for the one who has not read it. Contracts, agreements and transactions concerning acts for which prior approval is required under the Law are deemed to be subject to the suspensive condition of obtaining that approval. The condition exists whether or not the document says so, which is a reason to draft it expressly rather than to discover it.
The fines
Section 12(1) sets four:
- failure to notify under section 3: not less than EUR 5,000 and not more than EUR 50,000;
- providing false or misleading information: up to EUR 100,000;
- failure to provide information required under the Law: up to EUR 50,000;
- failure to comply within the section 6(2) period with a measure ordered: up to EUR 100,000, plus up to EUR 8,000 for each day the breach continues.
Section 12(2) requires a duly reasoned decision, taking account of the gravity and duration of the breach, and after the affected party has been given the opportunity to be heard. Section 12(3) requires the decision to specify the breach and to be notified in writing.
Who decides, and how to challenge it
Section 9(1) establishes an Advisory Committee of seven members. Section 9(3) appoints as chair the Director General of the Ministry of Finance, or a representative at scale A13 or above authorised in writing. Section 9(4) appoints as members the Directors General, or similarly authorised representatives, of the Ministries of Defence, Energy, Commerce and Industry, Foreign Affairs, the Interior, Justice and Public Order, and Transport, Communications and Works.
Section 18 provides that decisions of the competent authority under the Law constitute administrative acts subject to a recourse before the Administrative Court under Article 146 of the Constitution. The deadline runs from the decision reaching you.
Section 5(7) preserves the European Commission's jurisdiction to issue an opinion and other Member States' right to submit comments under Regulation (EU) 2019/452, so a Cyprus clearance is not always the end of the process.
What to do
If you are buying into a Cyprus business and any part of it touches the Annex, work the three tests in section 3(2) before the term sheet rather than after it. Then work backwards from the timetable: twenty working days to know whether you are screened, sixty five more if you are, both suspended by every information request, and no approval at all until it arrives in writing.
If the deal is already signed, section 8 has put it under a suspensive condition, and section 6(3) means the shares cannot be voted until the position is regularised.
What to send us
What the target does, and which of the Annex sectors it touches. The shareholding you will hold before and after, and whether anyone is acting in concert with you. The value, and any other transaction with the same parties in the last twelve months. The ownership chain up to the ultimate investor and the beneficial owner. The source of the funding. And the date you need to complete by.
Questions we are asked
When did the Cyprus screening regime start?
Section 20 of Law 194(I)/2025 provides that the Law comes into force on 2 April 2026. It was published in Official Gazette No. 5061 on 14 November 2025, so there was a deliberate gap between publication and commencement. The regime has been live since 2 April 2026.
Which three tests have to be met together?
Section 3(2) makes the notification obligation apply only where all three are satisfied cumulatively. The investment results in the acquisition of a qualifying holding as defined in section 3(3); its value, alone or combined with other transactions between the same parties within twelve months of the planned date, equals or exceeds EUR 2,000,000; and it concerns an undertaking of strategic importance. Miss any one and the obligation does not bite; meet all three and prior approval is compulsory.
What is a qualifying holding?
Section 3(3) defines it as the acquisition, directly or indirectly, alone or in concert with other persons, of a percentage corresponding to at least twenty five per cent of the share capital and/or the voting rights, or an equivalent ability to exercise decisive influence over the activities of the undertaking. Section 3(4) adds that a further increase also counts where the proportion held moves from below 25 per cent to 25 per cent or more, or from below 50 per cent to 50 per cent or more.
How is control defined?
Section 2 defines control of an undertaking as the ability to exercise decisive influence over its activities, in particular through the ownership or right of use, directly or indirectly, of all or at least 25 per cent of the voting rights or the assets; or through rights, contracts or other means which, alone or combined, and taking account of the relevant factual or legal circumstances, confer decisive influence over the composition, the votes or the decisions of the management bodies. A proviso catches the arrangement that looks short of the threshold: persons not holding those rights are treated as having acquired control if they have de facto power to exercise them.
What makes a business one of strategic importance?
Section 2 defines it as an undertaking carrying on activities falling within particularly sensitive sectors as set out in the Annex. Paragraph A(a) of the Annex names critical infrastructure, physical or virtual, in energy, transport, water, health, education, tourism, communications, media, data processing or storage, aerospace, defence, electoral and financial services including systemic credit institutions, sensitive facilities, and land and real estate critical to the use of such infrastructure.
What else does the Annex weigh?
Paragraph A also names the consequences for access to sensitive information including personal data or the ability to control it; media freedom and pluralism; critical and dual-use technologies as defined in Article 2(1) of Regulation (EC) 428/2009, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies; and the supply of critical inputs including energy, raw materials and food security. Paragraph B turns to the investor: whether they are directly or indirectly controlled by a third-country government, including state bodies or armed forces, through ownership structure or significant funding, and whether they have already been involved in activities affecting the security or public order of a Member State.
What has to go in the notification?
Section 4(1) sets it out: the details of the parties including name, trade name, registered address, seat, NACE code and registration number; the ownership structure of the foreign investor and of the target, including information on the ultimate investor and the beneficial owner and the capital participation; the approximate value of the investment; the products, services and business activities of both; the nature of the economic activities carried on in the Republic by the parties; the funding of the investment and its source; the date on which it is planned to take place; and the states under whose law the parties were incorporated or registered.
How long does the authority have?
Two clocks. Section 5(1)(a) gives the Ministry of Finance twenty working days from receipt of the fully completed request to decide whether the investment is to be screened at all. If it is, section 5(4)(a) requires notification within five working days of that decision and then a decision within sixty five working days of the decision to screen. Both periods are suspended under sections 5(2) and 5(4) while a request for further information or clarification is outstanding, so the calendar is not the same as the timetable.
When is the investment actually approved?
Only on written approval. The proviso to section 5(1)(a), repeated in section 5(4)(a), states that approval is not considered to have been given by the competent authority unless the investor has received its written approval. Silence is not consent, and the expiry of a period is not consent either.
What can the authority do if it objects?
Section 5(6) allows it, depending on the case, to impose conditions, prohibit or reverse the screened investment. Section 6(1) repeats the powers, and section 6(2) provides that where the investor refuses or fails within the period the authority sets to comply with conditions notified to them, the authority prohibits, terminates or reverses the investment to the extent it concerns the undertaking of strategic importance.
What happens between prohibition and compliance?
Section 6(3) is the provision that stops a deal dead. Where a screened investment is prohibited, terminated or reversed, or until the investor complies with any conditions imposed, the investor and any persons controlled by or acting in concert with them are barred from exercising any rights arising from or relating to the investment, including without limitation any voting rights and any rights of management or control of the undertaking of strategic importance.
What if we simply do not notify?
Section 7 removes the question of judgement. Where a person connected with an investment within the Law fails to notify under section 3, the investment is automatically deemed to be in breach of the Law, and the authority may take all or any of the measures available to it to prohibit, terminate or reverse it. Section 12(1)(a) adds an administrative fine of not less than EUR 5,000 and not more than EUR 50,000 for the failure itself.
What are the fines?
Section 12(1) sets four. Failure to notify under section 3: not less than EUR 5,000 and not more than EUR 50,000. Providing false or misleading information: up to EUR 100,000. Failure to provide information required under the Law: up to EUR 50,000. Failure to comply within the period in section 6(2) with a measure ordered: up to EUR 100,000, plus up to EUR 8,000 for each day the breach continues. Section 12(2) requires a duly reasoned decision, taking account of the gravity and duration of the breach, after the affected party has been given the opportunity to be heard.
Does the transaction document need anything?
Section 8 answers it as a matter of law rather than drafting: contracts, agreements and transactions concerning acts for which the prior approval of the competent authority is required under the Law are deemed to be subject to the suspensive condition of obtaining that approval. The condition is there whether or not anyone wrote it in, which is a reason to write it in properly rather than to rely on it.
Who actually decides?
The competent authority is the Ministry of Finance, under section 2. Section 5(1)(b) requires it to consult the Advisory Committee before deciding whether an investment is to be screened, and section 5(4)(b) before deciding whether it affects security or public order. Section 9(1) establishes that Committee with seven members, chaired under section 9(3) by the Director General of the Ministry of Finance or an authorised representative at scale A13 or above, with the Directors General of Defence, Energy Commerce and Industry, Foreign Affairs, the Interior, Justice and Public Order, and Transport Communications and Works as members under section 9(4).
Can a decision be challenged?
Section 18 provides that decisions of the competent authority under the Law constitute administrative acts and are subject to a recourse before the Administrative Court under Article 146 of the Constitution. The deadline runs from the decision reaching you, so the date it arrived is the first thing to record. Section 5(7) also preserves the European Commission's jurisdiction to issue an opinion and other Member States' right to submit comments under Regulation (EU) 2019/452.
Sources
- Law establishing a framework for the screening of foreign direct investments of 2025, 194(I)/2025, Official Gazette No. 5061, 14 November 2025
- Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union
This article is provided for general information purposes only and does not constitute legal advice.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 24 August 2026
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