The most popular type of company formed is a Limited Liability Company. A Cyprus Limited Liability Company may be created in Cyprus as a legal entity by being registered under the provisions of the Companies Law, CAP 113. The Companies Law (as well as Cyprus Law generally and particularly in the field of commercial and private transactions) is based on English Law. It reproduces almost verbatim the Companies Act 1948 of the United Kingdom, but several amendments have been made due to Cyprus accession to the EU.
The following types of Companies are recognized by the Law:
• Company with limited liability by shares
• Company with limited liability by guarantee, with or without shares
The basic characteristic of a limited liability Company is that the members’ (shareholders’) liability is limited to the nominal value of the shares subscribed by them.
In the case of a Company by guarantee, members’ liability is limited, on winding up, to the extent agreed upon. This type of Company is usually adopted when its purpose is non-profit making.
Companies with limited liability by shares may be private or public.
A private company is one whose articles restrict the right of transfer of shares, limit the number of its members to 50 and prohibit any invitation to the public to subscribe for any shares or debentures of the Company, whereas in the case of a public company these restrictions/limitations do not apply.
The type of company that is adopted almost exclusively by foreign investors who are interested in creating a Cyprus registered company is the private Company limited by shares. The Company may be formed as holding, property or general trading company.
Annual reporting requirements
The basic reporting requirements, which should be adhered to by a Company of limited liability registered in Cyprus, are the following:
• Annual audited accounts should be prepared by accountants practising in Cyprus and copies should be filed with the Department of Inland Revenue. The first audited accounts may cover the first eighteen months of the Company’s life.
The audited accounts are also filed with the Registrar of Companies, in the case of public or non-exempt private companies. A private company is considered as exempt when (i) no corporate body is a director of it, (ii) the number of persons holding the company’s debentures does not exceed 50, (iii) no corporate body holds shares or debentures issued by it unless itself is an exempt company and (iv) no person other than the holder has any interest in its shares or debentures.
• An Annual Return in statutory form must be filed with the Registrar of Companies stating, basically, the share capital and the registered shareholders, the directors, secretary and registered office.
Allotment of new shares and changes to the other details mentioned above, as well as charges on the company’s assets, must also be filed and registered with the Registrar of Companies.
Registration of a Cyprus Limited Liability Company
The registration of a Company in Cyprus, particularly a private Company limited by shares, is completed within a period of about ten days, although this period may be expedited if necessary.
The following particulars are needed for the registration:
1. Name of the Company
The first step for the registration of any company in Cyprus is to obtain approval of the proposed name of the company from the Registrar of Companies. The Registrar is unlikely to accept a name if: it is too similar to that of an existing company, it is considered misleading, too general or pompous, it suggests a royal, national or international connection or it includes certain words such as “Co-operative”, “Insurance”, “Bank”, “Financial Services” unless justified by the company’s objects. It is recommended that more than one name be proposed so as to facilitate approval.
2. Share Capital
The Company’s share capital is expressed in Euro and is divided into shares of any value, again expressed in Euro. The Company’s share capital may also be expressed in another currency for example in USD.
Authorised or Nominal Capital is the total capital, which the Company is allowed to issue to shareholders.
Paid up Capital is that part of the Authorised Capital which has been issued to, and paid up by, the shareholders.
Both Authorised and Paid up Capital may be increased very easily at any time by a Resolution of the Shareholders and as provided in the Company’s Articles of Association.
There are no restrictions with regards to the denomination of the shares but normally the Capital is divided into shares of Euro 1 each.
The Company must have at least one registered shareholder. For every shareholder the following is required for the registration of the company: full name, nationality, address, profession and number of shares to be taken up.
A foreign corporation may be a shareholder of a Cyprus Company and in such a case its basic incorporation documents should be provided.
All shares are nominative and in the case of a private company issue of shares to bearer is not allowed; however owners of shares who do not wish to appear as registered shareholders may appoint nominees to act for them as registered shareholders, whilst the actual ownership shall always rest with the beneficial owners of the shares. Nominee shareholders may be Cypriots or foreigners. It is the practice to appoint the company which undertakes the incorporation of the company to arrange the nominee shareholding through its members or through companies fully controlled by it.
The company must have at least one Director but it is recommended that at least two Directors be appointed.
For every Director the following information is required: full name, nationality, address, profession and copy of passport.
Directors may be Cypriots or Foreigners. However it should be noted that the residency of the directors of a Cyprus Company is a key factor in determining whether the Company is resident in Cyprus or not for tax purposes. Facilities for appointing local (Cypriot) Directors are offered by our firm.
The Company must have a Secretary. The Secretary acts under the control and instructions of the Directors, keeps the Company’s statutory registers and performs ministerial functions of a non-executive character. For practical reasons, it is usual to appoint as Secretary a member of, or a company controlled by, the firm establishing the Company.
6. Registered office
Every company must have a registered office in Cyprus. The registered office is the address where writs, notices and other official documents can be served upon the Company. Companies established in Cyprus are free to operate from the offices of lawyers, accountants, other service providers or from their own offices should they decide to set up management offices in Cyprus. It is the practice (at least for companies which do not maintain their own offices in Cyprus) for the company that undertakes the incorporation of the Company to act as the Company’s registered office.
7. Main objects
Whilst the Company’s Memorandum of Association is usually drafted in a wide form empowering the Company to deal in almost everything, it is standard the practice to enumerate in the opening paragraphs of the objects clause of the Memorandum the main activities that the Company will be carrying on. A general description of the Company’s proposed main business is required in this connection.
8. Company’s Memorandum and Articles of Association
This is the constitutional charter of the Company and is drafted by a local advocate. It is divided into two parts:
(i) the Memorandum of Association, which primarily includes the objects and powers of the Company particularly as regards its dealings with the outside world, its limited liability character and its authorised capital, and
(ii) the Articles of Association, which comprises the Regulations under which the Company operates as a legal entity and regulates the rights of the shareholders amongst themselves.
The Memorandum and Articles of Association, along with other prescribed documents, which are settled by the firm which undertakes the formation of the Company, are submitted to the Registrar of Companies.
Full sets of registration documents (Certificate of Incorporation, Memorandum and Articles of Association, Certificate of Directors & Secretary, Certificate of Shareholders and Certificate of Registered Office), are provided as soon as the Company is registered.
9. Shelf companies
It is possible to buy ready-made “shelf” companies which may have been inactive since incorporation. This may save time and expense in relatively simple instances but may prove to be more costly if substantial alterations need to be made to the Memorandum and Articles of Association.
Other types of Cyprus entities
Apart from the limited Company commonly incorporated in Cyprus, the Partnerships, the Branch of an overseas Company, ICIS, UCITS, CIFs and now SEs are forms which are utilized by foreign investors.