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ARTICLE · 18 AUGUST 2014

Shareholder Dilution And Anti-Dilution Measures

The proposed €1bn capital raising by Bank of Cyprus through a placing and open offer of 4,166,666,667 new ordinary shares in the capital of the bank has again raised the much debated topic of capital dilution and how shareholders can prevent share dilution.

CyprusCorporate/Commercial Law

Introduction

The proposed €1bn capital raising by Bank of Cyprus through a placing and open offer of 4,166,666,667 new ordinary shares in the capital of the bank has again raised the much debated topic of capital dilution and how shareholders can prevent share dilution. The issue is to be effected as a placement and open offer since:

a) In phase 1 a private placement is made with selected qualified investors1, and

b) In phase 2 an open offer is made to existing shareholders allowing for up to 20% of a clawback on the shares placed in private placement.

The issues of dilution are common and frequently hard fought issues in public and private companies alike.

Nature of Dilution

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