Eight factors to consider when choosing a corporate and fiduciary agent in Cyprus

Contributed by Fiducenter (Cyprus) Ltd [www.fiducenter.com.cy]

Introduction

Although Cyprus has a reputation of providing a good quality professional services by highly qualified and skillful persons, the absence of any direct regulation and regulatory body for the corporate and fiduciary sector, creates some issues, which must be seriously considered before choosing a service provider in Cyprus. And we make reference to direct regulation because, although the principals and many of the employees of the firms (and sometimes even the firms themselves) in the sector are qualified persons, having to abide by the various professional and ethical requirements of the international and local institutions in which they are members, there is no regulation governing the core activities of the firms of the sector. This creates some concerns for international investors and foreign professionals, some of them only at a theoretical level as they will probably never materialise, but as the saying goes, “Caesar’s wife must be above suspicion”.

Factors to consider

So what should someone take in to account when choosing a firm to be his corporate and fiduciary provider? We have summarised below, eight factors to consider when taking such a decision. The list is not exhaustive and for different investors each of these factors may have different importance, depending on their own needs and circumstances. Information to assess some of these factors might not be available at first hand, but any diligent professional would be more than happy to provide feedback upon request. Indeed, the willingness of a professional to engage in an open and transparent discussion with a prospective client without any commitments might form an evaluation factor on its own.

You will notice that price has been left out of the list and this is not without a reason. While our list focuses on factors evaluating the quality of a service provider, price could still be relevant as a sign of quality, since, as is commonly the case, the lowest price is not associated with good quality. Still, as the examples where a client is being overcharged while receiving a below average service are so common in this sector, not only in Cyprus, we believe that carrying out an assessment based on the factors below, would put a prospective client in a much better position to also assess the price quoted.
So, the factors on which a Cypriot corporate and fiduciary provider can be assessed are as follows:

1. Number and professional qualifications of directors/managers/principals – the persons responsible for the overall management of the business and the taking of important decisions.
2. Quality and quantity of resources – offices, employees, computer hardware and software, internet connection
3. Professional Indemnity and Directors’ Liability Insurance
4. Internal Procedures Manual, Internal Controls and Internal Audit
5. Level of share capital – related to the resources factor above, as well as the ability to meet unexpected requirements and claims against the firm
6. Know Your Client (KYC) procedures – although a burden all prudent clients should be happy to see their provider assessing issues such as origins of funds, the profile of the client, the purpose of the structure, etc.
7. Track record in meeting statutory obligations, such as submission deadlines, especially related to the accounts and tax returns
8. Existence of any promotional and/or informative publications, such as brochures, fact sheets, newspaper or magazine articles, etc.

Conclusion

For sure the absence of any regulation and any governing body to enforce it and monitor its application for the sector, transfers the burden of distinguishing between good, moderate and below average providers to the clients. It also allows certain people who have nothing to do with the sector, the so called “cowboys”, to engage in the provision of corporate and fiduciary services or at least a version of these services in the way they understand or want to understand it.

As Fiducenter we are one of the very few regulated firms of the sector, in the absolute and direct sense of the term regulation. We are regulated by the home regulator of our parent company in Luxembourg, the Commission de Surveillance du Secteur Financier, which is well-known for the demanding requirements it imposes to its members as well as their strict enforcement. Despite this fact, we believe that it is for the benefit of the sector and of the reputation of the country as an international financial centre, for Cyprus to have its own regulatory regime and body and we hope that the time this would happen is getting close.

George Savvides
Partner
Fiducenter (Cyprus) Ltd
george.savvides@fiducenter.com.cy
www.fiducenter.com.cy
Phone: + 357 25 50 40 00 Fax: + 357 25 50 41 00

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