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CYPRUS: TYPES OF COMPANY

BACK TO CYPRUS INFORMATION: BUSINESS, TAXATION AND OFFSHORE

Cyprus Private Company Limited by Shares

The relevant legislation is Cyprus Companies Law, Cap. 113, which is virtually a copy of the English 1948 Companies Act. A private company is one which by its articles:

Restricts the right to transfer its shares
Limits the number of its members to 50
Prohibits any public subscription to shares or debentures

The Companies (Amendment) Law of 2000 (Law 2(I)/2000) introduced single-member companies. The Companies (Amendment) (No. 3) Law of 2000 (151(I)/2000) introduced new provisions as to the validity of transactions of companies and as to the information which must be included in the official documents of companies. The Companies (Amendment) Law of 2001, Law 76(I) of 2001 provided for a new system for the certification of companies’ auditors and for the recognition of Bodies of Auditors and the grant of approval to auditors with foreign qualifications and also the recognition of accountants' companies by the Council of Ministers.

When 100% foreign-owned, a private company used to be referred to as an 'offshore company', although recently the expression International Business Company has come into favour. However, as from 1st January, 2003, an offshore company (IBC) no longer has a separate taxation status, and is taxed according to the same principles as a regular company. IBCs are now allowed to trade inside Cyprus. A pre-existing IBC which made an irrevocable commitment not to trade inside Cyprus until 2006 was able to claim the existing low tax rate for the three years 2003, 2004 and 2005.

In order to form a foreign-owned company, a bank reference and copy of the owner's passport is required for the registration. The bank reference must be issued by a bank included on the Central Bank of Cyprus's list of qualifying banks.

The following information will be required for the formation of a standard Cyprus offshore company:

Name of the company with two alternatives;
Objects of the company (description of principal activities of a Cypriot off-shore company);
Capital: a minimum of CYP 1,000 for a company with no offices in Cyprus, or CYP 10,000 for a company with offices in Cyprus. Payment of the capital can be extended in time.
Full personal details of shareholders will be necessary.
Full personal details of directors (minimum two) will be necessary.

Registration of a standard Cyprus offshore company takes three weeks typically.

In Cyprus, a company's formation documents and its annual return must be filed in Greek; the same applies to accounts when these need to be filed.

Amendments made in 2003 to the Companies Law as part of the EU accession process included the following changes:

Every company must prepare a full set of financial statements in accordance with International Financial Reporting Standards, and every parent company that has one or more subsidiaries, other than a company which is itself a wholly owned subsidiary, should present consolidated financial statements.
Under article 120, every company must complete an annual return within a period of 42 days from the date of its Annual General Meeting and must file immediately with the Registrar of Companies a copy of the annual return, signed by a director and the company secretary. Under article 121, the annual return filed with the Registrar of Companies must be accompanied by the full set of financial statements.

Cyprus Exempt Private Company

A private company limited by shares is exempt if:

No body corporate other than another exempt company holds any of its shares or debentures
The number of debenture holders is not more than 50
no body corporate is a director of the company.

The main advantages of an exempt private company are:

It need not file accounts with its Annual Return
It is not subject to the statutory restrictions on loans to directors

Cyprus Public Company Limited by Shares

Any company registered under the Act whose Articles do not contain the restrictions applicable to private companies is a public company. A public company may obtain a listing on the Cyprus Stock Exchange.

Cyprus Company Limited by Guarantee

As in England, companies limited by guarantee are normally used only for charitable or non-profit-making purposes. Apart from their share structure, they are similar to other types of private company and also fall under the Cyprus Companies Law.

Cyprus Branch of Overseas Company

Any overseas company may operate in Cyprus as a branch. Within one month of establishment of such a branch, the following documents must be filed (in Greek) with the Registrar:

A certified copy of the Memorandum and Articles of Association
A list of the directors and secretary
The names and addresses of persons residing in Cyprus authorized to accept all notices on behalf of the Company.

Companies with branches in Cyprus must also file their accounts annually, together with certified Greek translations.

Company law changes implemented in 2003 as part of the EU accession process include the following rules covering branches:

Every foreign corporation that maintains a branch in the Republic must submit, for every financial year, copies of its financial statements as presented in its last AGM and published in accordance with the laws of the country of incorporation, except that EU corporations that publish audited financial statements in their countries of registration and submit these financial statements to the Registrar of Companies are exempted from preparing and submitting separate branch financial statements.

Cyprus General Partnership

Partnerships fall under the Partnerships and Business Names Law Cap 116, basically similar to the equivalent English legislation. They must be registered with the Registrar of Partnerships within one month of formation, giving name, purposes, place of business, full particulars of the partners etc. Foreigners may belong, but need exchange control consent.

A general partnership may have between 2 and 20 individual members (up to 10 only, if it intends to conduct banking business).

Partnerships do not need to file accounts or to be audited.

Cyprus Limited Partnership

These are similar to general partnerships except that they have one or more general partners with unlimited liability and one or more limited partners (whose liability is limited to the amount declared in the partnership return filed with the Registrar).

Limited partnerships, used in conjunction with offshore companies offer good tax planning possibilities.

Cyprus Sole Proprietorship

A Sole Proprietorship falls under the Partnership and Business Names Law Cap 116, being essentially similar to the English sole partnership. It is subject to broadly the same rules as a General Partnership.

A sole proprietor has unlimited liability for his debts, and any business name (other than his own) must be registered with the Registrar of Partnerships.

Cyprus Trusts

Local Trusts
A 'local trust' is governed by the Cyprus Trustees Law Cap 193, which closely follows the English Trustee Act 1925. The settlor and beneficiaries are normally residents of Cyprus, and the trust and its property are subject to exchange controls, although these are vestigial since Cyprus joined the EU.

Offshore Trusts
Offshore Trusts are the same as local trusts, but their beneficiaries must be non-resident, and all the trust's activities must be outside Cyprus. As with 'offshore' companies, the special tax status of offshore companies has ceased with Cyprus's accession to the EU.

International Trusts
The International Trusts Law of 1992 brought Cyprus trust law into line with that of other major international trust jurisdictions. Both settlor and beneficiaries must be non-resident, although one Trustee must be Cypriot. International trusts may have many tax and legal advantages.