Inside

Introduction to Company Law in Cyprus

Information on starting and running a foreign company in Cyprus: details on the obligations of the management of an IBC (or offshore company), the legal set-up for directors and shareholders, registration with the Cyprus Registrar of Companies and more.

The relevant legislation is Cyprus Companies Law, Cap. 113, which is virtually a copy of the English 1948 Companies Act. A private company is one which by its articles:

restricts the right to transfer its shares
limits the number of its members to 50
prohibits any public subscription to shares or debentures

The Companies (Amendment) Law of 2000 (Law 2(I)/2000) introduced single-member companies. The Companies (Amendment) (No 3) Law of 2000 (151(I)/2000) introduced new provisions as to the validity of transactions of companies and as to the information which must be included in the official documents of companies.

The Companies (Amendment) Law of 2001, Law 76(I) of 2001 provided for a new system for the certification of companies' auditors and for the recognition of Bodies of Auditors and the grant of approval to auditors with foreign qualifications and also the recognition of accountants' companies by the Council of Ministers.

Foreign Companies in Cyprus

When 100 percent foreign-owned, a private company is referred to as an offshore company, although recently the expression International Business Company has come into favour. However, as from 1st January, 2003, an offshore company (IBC) no longer has a separate taxation status, and is taxed according to the same principles as a regular company. IBCs are now allowed to trade inside Cyprus. However, a pre-existing IBC which made an irrevocable commitment not to trade inside Cyprus until 2006 was able to claim the existing low tax rate for the three years 2003, 2004 and 2005.

Creating a IBC in Cyprus

An IBC can either be resident in Cyprus (provided its management and control is in Cyprus) or can be non-resident (if its management and control is outside Cyprus.

In order to form a foreign-owned company, a bank reference and copy of the owner's passport is required for the registration. The bank reference must be issued by a bank included on the list of qualifying banks of the Central Bank of Cyprus.

The following information is required for the formation of a standard Cyprus offshore company:

Name of the company with two alternatives
Objects of the company (description of principal activities of a Cypriot off-shore company)
Capital: a minimum of €1,708.60 (CYP 1,000) for a company with no offices in Cyprus, or €17,086.01 (CYP 10,000) for a company with offices in Cyprus. Payment of the capital can be extended in time.
Full personal details of shareholders
Full personal details of directors (minimum two)

Registration of a standard Cyprus offshore company typically takes three weeks.

In Cyprus, a company's formation documents and its annual return must be filed in Greek; the same applies to accounts when these need to be filed.

Amendments made in 2003 to the Companies Law as part of the EU accession process included the following changes:

Every company must prepare a full set of financial statements in accordance with International Financial Reporting
Standards, and every parent company that has one or more subsidiaries, other than a company which is itself a wholly owned subsidiary, should present consolidated financial statements.
Under article 120, every company must complete an annual return within a period of 42 days from the date of
its Annual General Meeting and must file immediately with the Registrar of Companies, a copy of the annual
return, signed by a director and the company secretary. Under article 121, the annual return filed with the Registrar of Companies must be accompanied by the full set of financial statements.

Registration of an IBC in Cyprus

A certain procedure is followed for the registration of the company:

Choice of the name of the company. An application is filed to the Registrar of Companies for the requested name (in urgent cases, a law firm may be able to provide a list of names already approved from the Registrar of Companies)
The share capital can be expressed in any currency. There is no minimum share capital but for practical reasons the amount of €1,708.60 (CYP 1,000) is usually used
The name must include the word "Limited" or its abbreviation "LTD" to signing status. The period for the approval of the name is 10 working days
Once approval for the company name is obtained, the memorandum and the articles of association are prepared and submitted for registration to the Registrar of Companies with the information and the relevant application forms regarding the officers and shareholders of the company
The Registrar of the Companies usually gives a registration number and then the corporate certificates are issued either in English or Greek.

Directors and shareholders

The minimum number of directors is one who can be either an individual or corporate and the same requirement is provided for the shareholders. Nationality of Directors is important for management status.

Company Secretary: The existence of the company secretary is required by the Law. The secretary can be appointed by the directors. Although, the nationality of the secretary is immaterial, it is recommended the secretary of the company to be a resident in Cyprus.

Nominees: A nominee acts on behalf of the beneficial owner (to secure that the shares will go to the beneficiary, that is, make a trust). The following documents are provided by the nominee to protect the security of the beneficial owner.

The trust deed
Undated instrument of transfer
Director's resolution approving the transfer of shares to the actual beneficiary
Undated letters of resignation of the nominee directors.

Registered Office: The Cyprus Company Law (CAP 113) requires the presence of a registered office which is preferable to be in the territory of Cyprus.

Step-by-Step: Formalities for Companies in Cyprus

1) Company name: The name of a company must be approved by the Registrar of Companies before the whole registration procedure commences. Names of companies similar to existing company names are not approved.

2) Main Objects/Purpose of the company: The main objects/purpose of the company must be stated in the first paragraphs of the proposed company's Memorandum and Articles of Association.

3) Bank Reference: Bank references obtained from the banks based in Cyprus are not acceptable. Bank references should ideally originate from the country in which the beneficial shareholder resides or carries out his business.

4) Shareholders: The minimum number of registered shareholders should be one. The minimum beneficial shareholders could also be one. Shareholders can either be individuals or legal corporate entities. Trusts may also be shareholders in a Cyprus company.

Shares maybe held by trustee companies for the benefit of beneficial shareholders to preserve their anonymity. Trust Deeds are signed by the trustee in order to completely safeguard the interests of the beneficial shareholders. The identity of the beneficial shareholder is kept absolutely confidential if a nominee trustee is used.

5) Directors: At least one director is necessary. The directors may be local Cypriot individuals or foreigners. It is generally advisable to appoint local directors if one wishes to have effective management and control in Cyprus rendering the company resident in Cyprus for tax purposes. A corporate entity may act as a director.

6) Secretary: An individual or a secretarial company must be appointed.

7) Registered Office: The registered office of the company must be in Cyprus. The registered office address is the official address of the company where the statutory books, registers, and the seal of the company should be kept. Summons and writs are also served at the registered office address.

8) Confidentiality: With the use of Trustee shareholders together with the appointment of a nominee director one can ensure complete confidentiality and anonymity of the beneficial shareholders.

9) Timing: The time needed to register a company in Cyprus is minimum thirty days. However, an accelerated service is available at the Registrar of Companies office whereby a company may be registered very quickly, provided of course the name of the proposed company has already been approved.

Prepared by the Law Office of Louise Zambartas UK Solicitor/Cyprus Lawyer
Manoli Kalomiri 7, Vashiotis Loukas Court, Office 303, Limassol, 3030, Cyprus
Tel: 00357 25373734 / Fax: 00357 25725502, e-mail / Website
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