Cyprus: The Regulation Of Fiduciaries, Administration Businesses And Company Directors Law Of 2012: Finally Enacted

Last Updated: 26 September 2013
Article by Elias Neocleous and Philippos Aristotelous


In December 2012, following a protracted public consultation process, the Cyprus legislature finally enacted the Regulation of Fiduciaries, Administration Businesses and Company Directors Law of 2012 (the 'Law'). The Law requires all individuals or companies offering trustee, administration or related services to be authorized as 'fit and proper' and licensed by the Cyprus Securities and Exchange Commission. The Law sets out accounting and reporting requirements and ensures that the authorities have accurate and up-to-date information on settlors, trustees, and beneficiaries of trusts. Regulated service providers will be required to put in place adequate internal controls, policies, and procedures.


Directive 2005/60/EC of the European Parliament, commonly referred to as the Third Anti-Money Laundering Directive, extends Member States' obligations to combat money laundering and terrorist financing to cover life insurance intermediaries and trust and company service providers. Following a protracted public consultation process of more than six years Cyprus has put in place a new regulatory regime for professional trustees and providers of company management services under the Regulation of Fiduciaries, Administration Businesses and Company Directors Law of 2012 (the 'Law').

The original draft law was published in January 2006 by the Central Bank of Cyprus ('CBC'), which was the proposed regulator. However, in view of the greatly increased role taken by the Cyprus Securities and Exchange Commission ('CySEC') in the Cyprus legal and regulatory environment over recent years, the CBC was replaced by CySEC as the sole regulator under the Law. This is a welcome change, since CySEC is generally regarded as better equipped to perform the role efficiently and effectively in the context of the rapidly changing and highly challenging economic environment.

Principal objectives of the Law

Since the emergence of Cyprus as an international business centre and particularly following its accession to the European Union in 2004, it became increasingly clear that regulation in the fiduciary and administrative services sector needed strengthening. This regulatory shortfall has become more apparent of late and has caused serious concern among well-run professional service providers, as it has frequently provided fertile ground for unfounded allegations regarding the quality of professional services in Cyprus.

In particular, registered lawyers and accountants in Cyprus who have provided fiduciary and corporate services via their respective firms and associated companies have been regulated throughout by their respective professional bodies (the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus, respectively). However, taking advantage of the lack of general regulation dozens of other service providers have set up business in Cyprus offering services to the public on an unregulated basis, exposing the financial system to potential abuse and exposing Cyprus to serious reputational risk.

Following the enactment of the Law, all individuals or companies offering trustee, administration or related services ('fiduciary services') will now have to be authorized as 'fit and proper' and be licensed by CySEC; otherwise they are required to cease business no later than six months after the date of entry into force of the Law.

Regulated service providers will be required to put in place adequate internal controls, policies, and procedures. The Law sets out accounting and reporting requirements and ensures that the authorities have accurate and up-to-date information on settlors, trustees, and beneficiaries of trusts.

The Law includes a 'four-eyes' rule, requiring service providers to 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. It also sets standards for capital adequacy, adequate accounting, and internal control systems, including adequate arrangements to segregate clients' funds from other assets. The offer or provision of fiduciary services without a licence is made a criminal offence.

The Law grants extensive powers to CySEC in the granting, refusal, revocation, and application of conditions to fiduciary licences. CySEC also has authority to exert control over the names of, and advertising by, fiduciary businesses, the right to obtain information and documents, and powers to conduct investigations and request interviews with applicants.

Registered lawyers and accountants who are regulated by their professional bodies are exempt from the requirement to obtain a licence from CySEC. However, they are subject to the other provisions of the Law.

In summary, the principal objectives of the Law are to regulate the provision of relevant services and to establish and impose licensing procedures for and supervision of such services, offering security to clients, and strengthening confidence in the sector.

Brief analysis of the main provisions of the Law

The following paragraphs give a brief description of the Law's most relevant provisions.

Exempted persons

As noted earlier, registered lawyers and accountants and companies controlled by them are exempt from the requirement to obtain a licence under the Law. In addition, firms authorized to provide investment services under the Investment Services and Activities and Regulated Markets Laws of 2007 to 2012 ('Cyprus Investment Firms') and credit institutions that exercise administrative services in the context of the performance of their business are also exempt from the ambit of the Law.

Like registered lawyers or accountants, Cyprus Investment Firms and credit institutions may opt to submit an application in order to obtain authorization by CySEC but in any case their relevant activities will be subject to supervision by CySEC and they will be required to confirm to all the provisions of the Law notwithstanding that they may also be regulated by another body.

The 'fiduciary services' covered by the Law

Article 4 of the Law defines the services subject to its provisions. These may be divided into two main categories, namely trust services and corporate services. Article 4(a) of the Law defines the former as the administration of trusts including, without limitation, the assumption of duties or provision of services such as trustee or protector of any trusts wherever such trusts may have been established or settled and irrespective of the locus of administration or investment or disposition of the property of a trust;. Article 4(b) defines relevant corporate services as:

  • directorship and secretarial services provided to a legal person, including acting as an alternate director or secretary;
  • services such as the 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;
  • services related to the holding of financial assets on behalf of third parties as defined in the Third Schedule, Part II, Para 1 of the Investment Services and Regulated Markets Law; and
  • services ancillary to the services specifically referred to above.

Exempt services

Article 4(4) of the Law provides that certain activities are deemed to fall outside the scope of fiduciary services and therefore do not require a licence, provided that they are not advertised or offered to the public at large. These activities include:

  1. acting as a director of a company which is publicly listed in a regulated market, or a company that is subject to regulation by another regulatory authority and is obliged to have non-executive directors under its regulatory framework or a company in which the Republic of Cyprus or any other public authority or organization holds the majority of shares;
  2. acting as director or secretary of a company that is beneficially owned to the extent of at least 25% by the person concerned and persons connected with him or her (his or her spouse and close family members), or by a company that is wholly owned by the person concerned and persons connected with him or her or owned by a trust of which he or she or persons connected with him or are the only beneficiaries;
  3. acting as director or secretary of a company that is the sole employer of the person concerned or which belongs to the same group of companies as the sole employer of the person concerned;
  4. acting as director or secretary of a subsidiary of a company referred to in (b) or (c) above;
  5. acting as trustee of a trust of which the person concerned is the settlor where the only beneficiaries of the trust are the person concerned or members of his or her family;
  6. acting as trustee of a trust arising from a will of a natural person; and
  7. acting as a director of fewer than 10 companies excluding companies referred to under (b), (c), and (d) above provided that the person concerned does not control the board of directors of the company in question.

Finally, it should be noted that the incorporation of companies remains within the exclusive competence of lawyers.

Register of licence holders maintained by CySEC

CySEC will maintain a register of licence holders (Article 25 of the Law) and licences may be issued on such terms and conditions as CySEC considers appropriate (Article 12). In order to obtain a licence, applicants must meet specified requirements in terms of professional and academic qualifications and experience of the people concerned in the business and the internal procedures of the business (Article 7).

Infrastructural requirements for obtaining a licence

In order to obtain a licence a service provider must satisfy the following requirements:

  1. Its head office must be located in Cyprus (Article 6);
  2. 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 (Article 7).
  3. It must employ an in-house lawyer or maintain a regular professional relationship with an external lawyer (Article 9).
  4. It must employ a compliance officer or externally engage these services (Article 9).

CySEC may require the members of the board of directors of an applicant or the natural persons who control the company or the board to complete and submit individual questionnaires.

Obligation to maintain and appropriate records and power of CySEC to confiscate data

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.

If there are reasonable grounds to suspect that a licensed fiduciary is in breach of the Law CySEC may enter its premises for the purpose of obtaining information and documentation in any form in order to determine whether the licensed fiduciary has complied with its obligations. The obligation of a licensed fiduciary to have adequate internal control systems has also been extended to control systems and procedures to assure compliance with the Prevention and Suppression of the Legalisation of Income from Illegal Activities Law.

For this reason, Article 3(7) of the Law requires all providers of trustee services to obtain the following information regarding trusts they administer and keep it available at all times for disclosure to CySEC:

  1. identity of all trustees;
  2. identity of the settlor;
  3. identity of the beneficiaries or information on the class of beneficiaries;
  4. identity of any protector;
  5. identity of the investment manager, accountant, and tax consultant (as may be applicable); and
  6. the business of the trust.

Article 30 (6) empowers CySEC to 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, to seize and retain for up to 45 days any registers, accounts, books, documentation, or electronic devices used for the transmission of data.

Administrative fines and sanctions

Articles 26–31 of the Law set out the various sanctions, liability, and penalties for contravention of the Law and provide that this constitutes a criminal offence punishable on conviction by imprisonment of up to five years, a fine of up to E350,000 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 E500,000 (or up to E1 million for repeat offences), depending on the seriousness of the offence.

CySEC is vested with the power to revoke a fiduciary licence if it is established that the service provider is in breach of the provisions of the Prevention and Suppression of the Legalisation of Income from Illegal Activities Law.

Lawyers, accountants, and other regulated individuals and organizations will be regulated by their supervisory body rather than by CySEC.

Amendments to the Cyprus Securities and Exchange Commission Lawof 2009

Following the enactment of the Law a draft law has been placed before the House of Representatives to amend the Cyprus Securities and Exchange Commission Law of 2009 (the 'CySEC Law'). The proposed amendments are directly related to and connected with the Law and CySEC's new powers.

The proposed amendments give CySEC the additional statutory powers required to effectively oversee all persons providing fiduciary and trust-related services in Cyprus, including the power to request any information from any legal person in Cyprus including persons acting as trustees in relation to beneficiaries, ultimate beneficial owners of structures, accounts, and copies of various corporate documents.

In particular, the new subsections (3), (5), and (7) being introduced in Section 32 of the CySEC Law as well as the new Section 34(1)(b) have been included so as to empower CySEC to properly discharge and enforce its various duties and responsibilities. In the event of refusal by any undertaking to cooperate and provide information, CySEC may seize and retain any relevant information, archives, books, accounts, and other documents and evidence and of the electronic means of storing and transfer of data, in line with Articles 3(7) and 30(6) of the Law.

Private trustee companies

As noted above, the Law provides an exemption for persons acting as trustee of a trust of which the person concerned is the settlor where the only beneficiaries of the trust are the person concerned or members of his or her family. It is apparent from this that the exemption granted is quite limited and narrow. It should be noted that the original versions of the bill contained extensive exceptions for Private Trustee Companies ('PTC').

Bearing in mind the very important role that PTCs have in the context of trust administration and succession planning, it would be prudent for CySEC to issue a circular or directive on the matter or to promote an amendment to the Law to the extent necessary so that PTCs would be exempt from the need to be regulated provided that certain conditions are met.

In this respect, we could take certain examples from other countries such as Malta and Singapore. In line with Section 43 of the Malta Trust Act, Cap 331 and Section 4 of the Singapore Trust Companies Act (2005) PTCs are generally not subject to the same form of regulation and are in fact exempted from licensing regulations otherwise applicable to trustees soliciting clients and offering services to the public at large.

Relevantly, a typical family trust structure not involving a professional trustee company would involve a PTC, the shares of which are owned by the settlor and his family or, if off-shore, by a trust or other entity such as a foundation established for the purpose. The PTC is formed for the purpose of acting as trustee of one or more specific trusts. The directors of the PTC will be usually be or include members of the settlor's family who may also be beneficiaries of the trust or advisers to the family. The power to appoint directors is likely to be put under the control of the settlor or the protector.


After the protracted six-year public consultation process, the recent enactment of the Law is a very positive and highly welcome development. The Law generally reflects similar or comparable provisions appearing in the laws of reputable international financial centres such as Guernsey (the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc (Bailiwick of Guernsey) Law, 2000 as amended) and Malta (Chapter 331 Trusts and Trustees Act of 1989, as amended). It provides an effective regulatory framework and places the fiduciary services sector in Cyprus on a par with the best trust jurisdictions worldwide, both in terms of transparency and of compliance standards.

There are a number of factors that will determine how effective and successful the Law will prove to be in practice.

First of all, CySEC has been given the significant responsibility for supervising and enforcing the proper application of the Law, together with the necessary powers. A great deal will depend on how diligently and rigorously CySEC undertakes its responsibilities and exercises its powers, both at the stage of granting licences as well as subsequently monitoring undertakings to ensure compliance with the Law.

Secondly, CySEC will need to maintain the correct balance between diligently performing its regulatory role on the one hand and not stifling the development of the fiduciary sector and the attraction of new trust business to Cyprus on the other. These objectives need not be mutually exclusive, and it is important that legitimate and compliant trust and fiduciary service providers are not deterred from offering services by an unduly burdensome and inflexible regulatory regime. CySEC's role and approach will be crucial in ensuring that the correct balance is struck.

Thirdly, the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus, in their capacity as the regulatory bodies for registered lawyers and accountants, should take all necessary steps (including legislative initiatives and new disciplinary policies) to ensure that their members adopt higher compliance standards along the lines of those introduced in the Law so as to ensure that competition is on a level playing field without discrimination or market distortions due to double standards. At the same time, the size and resources of law firms and accountancy firms will become a critical factor to determine whether such firms should be licensed (or even continue as going concerns) taking into account the requirement for employing compliance officers and accommodating high compliance standards. An obvious example of a critical factor is the correlation between the number of clients v employees of a particular service provider firm, given that the higher number of clients, the higher amount of human and capital resources will be required to ensure that proper checks and balances and compliance standards are consistently met and applied at all times. Otherwise, the firm will be ipso facto unable to meet the requirements of the Law.

More generally, the rigorous new regulatory and compliance requirements introduced by the Law, if correctly applied and enforced, are likely to change the landscape of trust and fiduciary services in Cyprus as the additional substantially higher human and capital resources required for meeting the new standards will inevitably lead to a consolidation of the fiduciary services market and possibly mergers between existing organizations pooling resources in order to meet the new requirements.

At the same time, it is true that Law does not include all that it ought to have regulated. For example, professional indemnity insurance, while still opted for by a number of service providers, has not been included in the mandatory requirements of the Law, a shortfall that will sooner or later draw the attention of CySEC for resolution through a directive or in the context of a future legislative amendment.

Finally, despite the protracted consultation process there are still a number of areas in the Law requiring clarification. Article 31 of the Law empowers CySEC to issue any directives that it may consider necessary for the enforcement of the Law, and we hope that it will make this a priority so as to minimize any uncertainty or ambiguity.


The enactment of the Law is a long overdue and highly welcome development in the Cyprus financial services sector. Together with the recent modernization of the International Trusts Law it places Cyprus in the 'premier league' of reputable trust jurisdictions worldwide. Cyprus is now in a position to legitimately promote genuine trust business as well as to impose and closely supervise compliance and effectively enforce applicable anti-money laundering legislation at all levels. For these reasons it is now expected that Cyprus will attract the largest and most reputable trust service providers globally, which in turn will help Cyprus further consolidate its position as a global participant in the trusts sector. In turn, this should have a positive impact on Cyprus's position as a leading international financial centre.

Originally published by Trusts & Trustees, Vol. 19, No. 7, September 2013

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Elias Neocleous
Philippos Aristotelous
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.