Nominal value and s.56 in Cyprus: no shares below par, founders' shares and option strikes

Section 56 of the Companies Law, Cap. 113, is the reason a Cyprus cap table has a nominal value column. It touches two decisions that founders make early and revisit late: what to pay for their own shares, and what strike price to put on employee options.

What the Law says

Every share in a Cyprus company has a nominal value. The memorandum states the share capital divided into shares of a fixed nominal amount, and shares of no par value do not exist under Cap. 113 (s.4(4)).

Section 56 then forbids issuing shares below that amount:

• A public company may not issue shares at a discount to nominal value in any circumstances (s.56(1)).
• A private company may do it only if all of these hold at once (s.56(2)-(3)): a resolution of the general meeting and the sanction of the court; the resolution states the maximum rate of discount; at least one year has passed since the company became entitled to commence business; the shares are issued within one month after the court's sanction, or a period the court extends. The discount is allowed only for a class of shares that has already been issued.

Where shares have been issued at a discount, the annual return discloses the discount to the extent that it has not been written off at the date of the return (Sixth Schedule, Part I, para 3(g)).

The price is a minimum per share, not a total. A company that wants to raise very little in total can set a low nominal value, such as a few cents, which gives room below any later issue price.

Founders' shares

On incorporation, founders subscribe for shares at the nominal value or more. The risk is a founder who is allotted shares for "free" or for a token amount on a company whose nominal value is €1.

The register records the amount paid or agreed to be considered as paid on each member's shares (s.105(1)); that is a separate fact from the price at which the shares were issued, and Ekvi's ledger does not know whether the money was received. An allotment is also a filing event: HE12 within one month of the allotment (s.51).

Ekvi refuses to record an allotment whose price per share is below the nominal value of its class.

Option strike prices

Cap. 113 contains no provisions on employee options at all: no requirement that the strike be at least market value, and nothing on vesting, expiry or forfeiture, so they are left to the plan's own terms. But the shares issued when an option is exercised are an allotment, and s.56 applies to it. A strike below nominal value is therefore, in practice, not permissible.

Ekvi applies that at the grant, not at the exercise, so that an exercise years later does not run into a refusal nobody expected: a grant whose strike is below the nominal value of the class the plan issues is refused.

A market-value test is different. Because the Law sets no minimum by reference to the fair value of the share, Ekvi records a grant with no valuation on its date, and shows the missing valuation as a gap (IFRS 2 measures at grant-date fair value) instead of putting a value in its place.

Worked example

A company has ordinary shares of €0.01 nominal. It allots 100,000 shares to its founder at €0.01 on 15 January 2026: the HE12 is due on 15 February 2026. In March 2026 it adopts an option plan on the same class. A grant with a strike of €0.005 is refused. A grant at €0.01 is accepted, with no valuation recorded and a visible gap. On exercise, the new shares are allotted at the strike, which is not below nominal, and the HE12 clock for that allotment starts again.

Summary

Nominal value is a floor. A private company can go below it only through the court route. For founders, pay at least nominal; for options, set the strike at least at nominal.

For the one-month clock on an allotment, use the deadline calendar.

Ekvi is a record-keeping tool and does not provide legal or tax advice.