Cyprus: Law of Offshore
Investment Company Law
Cyprus Private Investment Funds, known as private International Collective Investment Schemes (ICIS), are private funds that can be formed under the laws of Cyprus. The Central Bank of Cyprus is the regulatory and supervisory authority for ICIS under the International Collective Schemes Law 47 (I) 1999 (the ICIS Law).
A private ICIS fund can have up to 100 investors, also known as unit-holders. The purpose of a private ICIS fund is the collective investment of funds injected in such schemes by the unit-holders. It provides an arrangement that enables a number of investors to add collectively their assets, have these professionally managed and invested by independent managers and extract their profits in a tax efficient manner.
Under the legislation, therefore, a Scheme may take one of the following forms:
- International Fixed Capital Company (IFCC): Incorporated under the Companies Law and recognised to operate as an international fixed capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital cannot vary, it remains fixed. The initial minimum capital required to set up an IFCC is US$100,000. If the IFCC is a private ICIS then it is exempted from this capital requirement. A private ICIS is one that has 100 or less investors.
- International Variable Capital Company (IVCC): Incorporated under the Companies Law and operates as an international variable capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital varies according to the participating investors at any given time. The share capital of the company is equal to the net asset value (NAV) of the shares of the company at any time.
- International Unit Trust Scheme (IUTS): An international trust created under the International Trust Law and recognised to operate as an International Unit Trust Scheme under the ICIS Law. (See Cyprus International Trusts). The assets are owned by the Schemes Trust in fiduciary for the trust beneficiaries
- International Investment Limited Partnership (IILP): A limited partnership registered under the Partnerships Law and recognised to operate as an international investment limited partnership under the ICIS Law. As with all limited partnerships (see Partnerships), there must be a general partner appointed who manages the fund and is responsible for the assets and liabilities of the fund. The limited partner will also be a member of the scheme. A general partnership can also have companies as partners.
All four legal types of Schemes, can either be of limited or unlimited duration.
A Scheme, once recognised, may be designated by the Bank as:
- A Scheme to be marketed to the general public; or
- A Scheme to be marketed solely to experienced investors; or
- A private international collective investment scheme.
A manager of a Scheme must be approved by the Bank. In this respect, a manager must on an ongoing basis, satisfy, the Central Bank that, having regard to the investment policy and the particular investment objectives of the Scheme for which it acts as manager that it has sufficient financial and operational resources at its disposal to meet its liabilities, as well as sufficient investment expertise to conduct its business effectively.
Trustees of Schemes must also be approved by the Central Bank. Under the Law, only the following can act as trustees of Schemes:
- A Cyprus local or international bank or an overseas bank established in a jurisdiction which in the opinion of the Bank exercises adequate banking supervision and which has such minimum paid-up share capital as the Bank may from time to time prescribe; or
- A local or international or an overseas professional trustee company which is adequately supervised and which has such minimum paid up share capital as the Bank may from time to time prescribe; or
- A company incorporated in the Republic, which is a subsidiary of a person referred to at (1) and (2) above, provided that its liabilities are fully guaranteed by that person.
Every Scheme, its manager and trustee are subject to on-site inspections by the Central Bank of Cyprus. In addition, the Bank may, under certain circumstances, apply to the Court in order to appoint an inspector to investigate the affairs of the Scheme, its manager or trustee, or any associated undertaking of any of the aforementioned.
Every Scheme, its manager and trustee will also be subject to off-site monitoring and will, therefore, be required to furnish the Bank with such information and returns concerning the business of the Scheme, its manager or trustee as the Bank may specify from time to time.