Cyprus Company Formation, Holding Cyprus, Cyprus Investment Firm, Offshore Company Formation
Company Formation Cyprus: Types of Company
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Company Formation Cyprus:
Company Formation Cyprus: Types of Company
Private Company Limited by Shares
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.
When 100% foreign-owned, a private company used to be referred to as an ‘offshore company’, although the expression International Business Company subsequently came into favour to describe such entities. 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. 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.
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 Central Bank of Cyprus’s list of qualifying banks.
The following information will be 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 (the Euro equivalent of) CYP 1,000 for a company with no offices in Cyprus, or (the Euro equivalent of) CYP 10,000 for a company with offices in Cyprus. Payment of the capital can be extended in time.
- Full personal details of shareholders will be necessary.
- Full personal details of directors (minimum two) will be necessary.
Registration of a standard Cyprus offshore company takes three weeks typically.
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.
An online company search system was launched by the Ministry of Trade, Commerce and Tourism in February 2011. The system, which is being co-funded by the European Regional Development Fund and the European Union, allows users to access information about companies already registered with the Registrar of Companies and Official Receiver. Users can view data regarding company directors, shareholders, partners and owners, registered addresses, and the charges and mortgages registered on company assets.
Company Formation Cyprus: Cyprus Exempt Private Company
A private company limited by shares is exempt if:
- No body corporate other than another exempt company holds any of its shares or debentures
- The number of debenture holders is not more than 50
- no body corporate is a director of the company.
The main advantages of an exempt private company are:
- It need not file accounts with its Annual Return
- It is not subject to the statutory restrictions on loans to directors
Any company registered under the Act whose Articles do not contain the restrictions applicable to private companies is a public company. A public company may obtain a listing on the Cyprus Stock Exchange.
Cyprus Company Limited by Guarantee
As in England, companies limited by guarantee are normally used only for charitable or non-profit-making purposes. Apart from their share structure, they are similar to other types of private company and also fall under the Cyprus Companies Law.
Company Formation Cyprus: Cyprus Branch of Overseas Company
Any overseas company may operate in Cyprus as a branch. Within one month of establishment of such a branch, the following documents must be filed (in Greek) with the Registrar:
- A certified copy of the Memorandum and Articles of Association
- A list of the directors and secretary
- The names and addresses of persons residing in Cyprus authorized to accept all notices on behalf of the Company.
Companies with branches in Cyprus must also file their accounts annually, together with certified Greek translations.
Company law changes implemented in 2003 as part of the EU accession process include the following rules covering branches:
- Every foreign corporation that maintains a branch in the Republic must submit, for every financial year, copies of its financial statements as presented in its last AGM and published in accordance with the laws of the country of incorporation, except that EU corporations that publish audited financial statements in their countries of registration and submit these financial statements to the Registrar of Companies are exempted from preparing and submitting separate branch financial statements.
Cyprus General Partnership
Partnerships fall under the Partnerships and Business Names Law Cap 116, basically similar to the equivalent English legislation. They must be registered with the Registrar of Partnerships within one month of formation, giving name, purposes, place of business, full particulars of the partners etc. Foreigners may belong.
A general partnership may have between 2 and 20 individual members (up to 10 only, if it intends to conduct banking business).
Partnerships do not need to file accounts or to be audited.
Cyprus Limited Partnership
These are similar to general partnerships except that they have one or more general partners with unlimited liability and one or more limited partners (whose liability is limited to the amount declared in the partnership return filed with the Registrar).
Limited partnerships, used in conjunction with offshore companies offer good tax planning possibilities.
Cyprus Sole Proprietorship
A Sole Proprietorship falls under the Partnership and Business Names Law Cap 116, being essentially similar to the English sole partnership. It is subject to broadly the same rules as a General Partnership.
A sole proprietor has unlimited liability for his debts, and any business name (other than his own) must be registered with the Registrar of Partnerships.
Company Formation Cyprus: Cyprus Trusts
A ‘local trust’ is governed by the Cyprus Trustees Law Cap 193, which closely follows the English Trustee Act 1925. The settlor and beneficiaries are normally residents of Cyprus, and the trust and its property are subject to exchange controls, although these are vestigial since Cyprus joined the EU.
Offshore Trusts are the same as local trusts, but their beneficiaries must be non-resident, and all the trust’s activities must be outside Cyprus. As with ‘offshore’ companies, the special tax status of offshore companies has ceased with Cyprus’s accession to the EU.
The International Trusts Law of 1992 brought Cyprus trust law into line with that of other major international trust jurisdictions. Both settlor and beneficiaries must be non-resident, although one Trustee must be Cypriot. International trusts may have many tax and legal advantages.
Company Formation Cyprus: Law of Offshore
Cyprus Trust Law
Cyprus trust law began with the Cyprus Trustee Law Chapter 193, based on the English Trustee Act 1925, but the island’s trust regime was brought into line with normal international practice with the International Trusts Law 69(I) of 1992. The result is that there are three types of trust available, of which only the last will normally be of interest to the international settlor:
Local Trusts are governed by English common law and the original Trustee Law. The settlor and beneficiaries are normally residents of Cyprus, and the trust and its property are subject to exchange controls.
Offshore Trusts are equally outside the International Trusts legislation, and are the same as Local Trusts except that their beneficiaries must be non-resident and all the trust’s activities must be outside Cyprus.
International Trusts are the normal form of Cyprus Trust used by foreign settlors. International Trusts have the following key characteristics:
- the settlor must be non-resident
- the beneficiaries must also be non-resident (except for local charities)
- one of the Trustees must be Cypriot (individual or corporate)
- the trust period may be up to 100 years (longer for charitable trusts)
- confidentiality is protected in the law, and foreign judgements are specifically non-recognized
- there is no registration requirement
- trust documents are in English
- trust assets may not include immovable property in Cyprus
- creditors have to prove intent and must claim within two years
- there is Stamp Duty of CYP250
- broadly speaking, the income and assets of International Trusts are not taxable in Cyprus
It is often possible to combine Cyprus International Trusts with the island’s network of double-tax treaties to create very advantageous results.