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).Cypriot Private Investment Funds, known as private International Collective Investment Schemes (ICIS), are private funds that can be formed under Cypriot law. The Central Bank of Cyprus is the regulatory and supervisory authority for ICIS under the International Collective Schemes Law 47 (I) 1999 (ICIS Law).
A private ICIS fund can have up to 100 investors, also known as unit holders. A private ICIS fund allows the multiple unit holders to pool their resources. It is an arrangement whereby a number of investors may combine 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 remains fixed. The minimum capital required to set up an IFCC is US$100,000, though this capital requirement does not apply if it is a private ICISs; i.e. it has 100 or fewer 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 trust scheme on behalf of 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. Any limited partners will also be a member of the scheme. A general partnership can also have companies as partners.
All four legal types of scheme can be of limited or unlimited duration.
Once recognised, a scheme may be designated by the Bank as one of the following:
- to be marketed to the general public
- to be marketed solely to experienced investors
- a private international collective investment scheme.
A manager of a scheme must be approved by the Bank. In this respect, a manager must continue to satisfy the Central Bank (bearing in mind the investment policy and particular investment objectives of the scheme being managed) 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 one of the following can act as trustees of schemes:
- A local Cypriot bank, international bank or overseas bank established in a jurisdiction which Bank deems to exercise adequate banking supervision and which has such minimum paid-up share capital as the Bank may from time to time prescribe.
- A local, international or overseas professional trustee company which is adequately supervised and has such minimum paid up share capital as the Bank may from time to time prescribe.
- A company incorporated in the Republic of Cyprus which is a subsidiary of a person referred to in the two points 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 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.