The law on the Regulation of Fiduciaries, Administration Businesses and Company Directors, which transposes the provisions of Directive 2005/60/EC into national law, has been enacted by the Cyprus Parliament. The first draft law was published in 2006 and several changes have been made in the course of a long consultation process, including the shifting of the supervisory responsibility from the Central Bank of Cyprus to the Cyprus Securities and Exchange Commission (CySEC).
The law applies to persons and companies providing relevant fiduciary and other corporate services relating to the administration or management of trusts and companies in or from Cyprus. It covers services such as directorship and secretarial services provided by a legal person, including acting as an alternate director or secretary, holding of shares of legal persons in a nominee or trustee capacity, provision of a registered office, services related to the opening and operating bank accounts; and services for the ownership of financial assets on behalf of third parties.
The principal objectives of the new law are to regulate the provision of relevant services, to establish and impose licensing procedures for and supervision of such services, offering security to clients and strengthening confidence in the sector.
The new law provides that relevant services may be offered only by persons or legal entities that hold a licence from CySEC or who are specifically exempted from the licensing requirement. Lawyers and accountants who are regulated by their respective regulatory bodies are exempt from the need to obtain a licence.
CySEC will maintain a register of licence holders and licences may be issued on such terms and conditions as CySEC considers appropriate. In order to obtain a licence, providers of relevant services must comply with certain criteria regarding their professional and academic qualifications, experience and their internal procedures.
In order to obtain a licence a service provider must satisfy a number of requirements. Its head office must be located in Cyprus; it must be represented and administered by at least two persons, who must have the appropriate academic and professional qualifications, expertise and integrity to manage it competently and prudently and it must employ a compliance officer and an in-house lawyer or externally engage these services.
Regulated service providers must put in place appropriate internal control procedures in order to ensure that they have accurate, up to date information at all times, in compliance with the law.
All providers of trustee services are required to obtain the following information regarding trusts they administer and keep it available at all times for disclosure to CySEC:-
- identity of all trustees;
- identity of the settlor;
- identity of the beneficiaries or information on the class of beneficiaries;
- identify of any protector;
- identity of the investment manager, accountant and tax consultant (as may be applicable); and
- the business of the trust.
At any time, CySEC may request a licence holder to provide any information or documentation that is reasonably required for conducting its supervisory role and, in the event of non-cooperation on the part of the licence holder, may confiscate for up to 45 days any registers, accounts, books, documentation or electronic devices used for the transmission of data.
Contravention of the law is a criminal offence punishable on conviction by imprisonment of up to five years, a fine of up to €350,000 or both. If the offence was committed by a legal person, then any of its directors, managers or responsible auditors may be liable if it is proved that he or she agreed or assisted in the commission of the offence. CySEC may also impose an administrative fine of up to €500,000 (or up to €1 million for repeat offences), depending on the seriousness of the offence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
