There are two ways of closing down a Cyprus company; strike off and the liquidation process. In this short guide, we compare the two!
A. Strike Off Process
The strike-off process is a fast and cost-effective method to make
a company inactive. This method allows for the possibility of
reinstating the company either through the tax office or by a court
decision.
Steps Involved:
1. Notification:
o Auditors or accountants will send letters to the Cyprus
Registrar of Companies, the income tax office, and the VAT office,
informing them of the intent to close the company. The reasons for
the strike-off must be clearly stated.
o Auditors must also request a tax clearance certificate by the Cyprus Income Tax Office. This process requires that all tax returns of the company are submitted and that there are not taxes due the date the filing is made. In addition managemnt accounts must escort the application with no liabilities or assets held by the company dated as recent as possible.
2. Examination by Authorities:
o The Cyprus Income Tax Office will check for any outstanding tax
obligations.
o Financial statements must show no liabilities or pending tax
issues.
o The company should not have any significant assets or
liabilities before the strike off.
3. Approval:
o The income tax office and VAT office must confirm there are no
objections to the strike-off; primarily no taxes or vat due.
o The Land Registry will check if the company owns any property,
which can complicate the process.
4. Completion:
o The process can take between 6 - to 12 months. During this
period, all financial statements, tax returns, and VAT returns must
be up-to-date and submitted.
Conditions:
o The company must have a nil balance sheet (no assets or
liabilities).
o The company should not owe money to third parties or have any
VAT obligations.
o Bank accounts should be closed.
o Any remaining balances owed to directors or shareholders should
be settled.
B. Liquidation Process
The liquidation process is more complex and expensive, involving
hiring lawyers and going to court. Once liquidated, the company
cannot be reinstated, and all inquiries about the company
cease.
Steps Involved:
1. Work by auditors:
o Auditors must also request a tax clearance certificate by the Cyprus Income Tax Office. This process requires that all tax returns of the company are submitted and that there are not taxes due the date the filing is made. In addition, management accounts must be provided to the lawyers who will file the application with no liabilities or assets held by the company dated as recent as possible.
o The Cyprus Income Tax Office will check for any outstanding
tax obligations.
o Financial statements must show no liabilities or pending tax
issues.
o The company should not have any significant assets or
liabilities.
2. Legal Proceedings:
o Lawyers file for liquidation in court.
o They must prove that the company has no debts or pending issues
with authorities.
3. Notification:
o Creditors and relevant authorities are notified to ensure there
are no outstanding claims against the company.
4. Court Approval:
o The court reviews the case and, if satisfied, grants the
liquidation. The court procedings take between 10 - 16 months.
Key Points:
o The liquidation process is irreversible.
o It ensures that the company has settled all its obligations
before closing.
Comparison and Considerations
Strike Off:
o Faster and cheaper.
o Reversible.
Liquidation:
o Lengthy and costly.
o Irreversible.
Final Notes
Companies must ensure all financial and legal obligations are met
before opting for either process. Regular consultation with
auditors and legal advisors is recommended to avoid
complications.
By following these guidelines, companies in Cyprus can effectively manage the closure process, whether through strike-off or liquidation, ensuring compliance with all regulatory requirements.
About Us
CYAUSE Audit Services has extensive experience in the insurance industry has helped tens of insurance brokers and agents register and get licensed by the local Cyprus regulator granting them passporting access to the rest of the European Union.
CYAUSE Audit Services is an Audit & Assurance firm with offices in Cyprus and the UAE. During 2015 we have been awarded by I.C.P.A.C and the A.C.C.A (local and international association of Chartered Certified Accountants) for the Quality of our Audit Services and our Office's Procedures.
Being a Truly International Audit & Assurance firm, we have associates from all over the world and we are constantly looking for new associates to expand our network further. At present, CYAUSE Audit Services operates internationally through its membership with BKR International amongst the largest American associations in the world, Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience. Our network covers almost 40 jurisdictions with over 2,000 professionals, it supports more than 10,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and processes at least 170,000 payslips globally.
CYAUSE Audit Services Ltd is also a member of BKR International one of the biggest US Accounting Associations of the word and the 3E Accounting Network, an international accounting network which originates from Hong Kong and has more than 80 members from all over the world.
Learn More about Cyprus Corporate Environment
Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website or our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.
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.
