International business limited companies are by far the most popular legal entities.
The legal requirements for the registration of a limited company in Cyprus are based on the Companies Law Chapter 113, which is almost identical to the British Companies Act of 1948.
5.1 The registration procedure for such a company is similar to that applicable to a local limited company except that the prior approval of the Central Bank is required. As in the case of any other international business entity, there are certain requirements which must be satisfied before such approval is granted, namely:-
5.1.1 Confidential bank or other references for the shareholders must be sent to the Central Bank;
5.1.2 All the shares in the company must belong, directly or indirectly, to foreigners. However, residents can act as nominees for foreigners where anonymity is desired;
5.1.3 If the company establishes an operational office in Cyprus, its minimum issued and paid-up share capital must be CY£10,000; and
5.1.4 All other companies must have a minimum paid up share capital of CY£1,000.
5.2 The approval of the Central Bank is readily granted but the following conditions are usually imposed:
5.2.1 The objects of the company must be confined solely to business outside Cyprus.
5.2.2 All local expenses of the company must be covered from funds imported from external sources.
5.2.3 The company may not obtain any finance from local sources.
5.2.4
The company must undertake to submit to the Central Bank its annual accounts as at the end of its financial year, duly certified by accountants practising in the Republic and authorised by the Minister of Finance. The accounts should also bear a confirmation from the auditors that the company did not carry out any transactions with residents other than local payments for administrative purposes.
5.3 Before initiating the incorporation procedure it is advisable to ascertain that the proposed name of the company is acceptable to the Registrar of Companies. This will avoid complications if the proposed name is either not suitable or is already being used by another company. On applying to the Registrar for approval of a name it is recommended that two or three possible names be submitted as this may avoid unnecessary delays. Applicants should however bear in mind that a name is not likely to be authorised if:
5.3.1 it is similar to the name of an existing company;
5.3.2 it is considered misleading or confusing;
5.3.4 it implies links with royalty; or
5.3.5it includes the word "Imperial", "National", "Corporation", "Commonwealth" or "Co-operative".
5.4 Where a subsidiary company proposes to adopt the name of its parent company, the latter must furnish its written consent for the use of its name. Once the approval of the Central Bank has been obtained, the next step is the registration of the company. For a company to be registered, the following documents and information must be filed with the Registrar of Companies:
5.4.1 The Memorandum and Articles of Association. The Memorandum must state, among other things, the company's name and objects, and the number and the value of the shares authorised to be issued. The Articles of Association generally govern the company's internal procedures and functions.
5.4.2 A list of the directors and the secretary's name. A minimum of one director is required but there is no maximum. Although there is no necessity to have local directors, this is advisable especially where the provisions of a double tax treaty are to be utilised and it is important to show that the company is effectively managed and controlled from Cyprus and that all company decisions are taken in Cyprus. Also, for practical reasons, it is recommended that the secretary is a Cyprus resident.
5.4.3 The address of the company's registered office, which will be the place at which all official notices are served.
To avoid delays the company is usually registered through nominees pending receipt of the bank references for the beneficial shareholders and the permission of the Central Bank. Certain procedures are available to protect the anonymity of shareholders where this is desired. However, the Central Bank will require full disclosure of the true identity of shareholders although this information will be treated as strictly confidential.
Once all the required documents have been lodged with the Registrar of Companies and he has satisfied himself that they are in order, he will issue a Certificate of Incorporation. The formation and registration procedures, including printing of all official stationery and opening the necessary bank accounts, can usually be completed within a period of fourteen days whereupon the company can start operating immediately. In the event that a company is urgently required, there exists a special accelerated incorporation procedure at an extra cost whereby all relevant procedures are completed within a maximum time of two days.
Incorporation costs are reasonable and this assists in keeping corporate overheads as low as possible. Total formation costs, for a company with an authorised share capital of CY£5,000, including lawyers' and accountants' fees, stamp duty, printing and stationery costs and other miscellaneous expenses, are likely to be as little as CY£1,250. Stamp duty is paid on a sliding scale and is calculated on the amount of authorised share capital.
Fixed annual running expenses in respect of directors' and secretarial fees, registered office fees, trustee company fees and other miscellaneous expenses are extremely competitive and range between CY£500 and CY£2,000 depending on the type of services required and the nature of operations.
The purpose of this publication is to assist clients and associates in clarifying and appreciating the range of opportunities which are available in or through Cyprus. Although every effort has been made to provide the reader with a clear and comprehensive picture of the island's beneficial regime, it should be appreciated that is not possible to cover all aspects comprehensively in a publication of this size.
Individuals or companies who are seriously considering using Cyprus for any of their international business activities are advised to obtain expert professional advice before taking positive action.