Cyprus: Company Framework

Cyprus was a British colony until 1960, when the island became an independent republic. Until independence the legal system was based on the English legal system. The laws enacted for the colony applied to Cyprus the principles of common law and equity. Many of those laws are still in force today

The details presented below derive from the companies law 'Companies Cap.113' which is the main law for Cypriot companies

Members (physical person or legal entity) rights and liabilities

Member's rights are protected by legal system which is based on UK common law and it was adopted by the public back 19th century Member's liability is limited to subscribed share capital (other structures available) Members may be residents or non-residents of Cyprus Republic A single member may own 100% of share capital Up to 50 members are allowed for private companies

Management

Directors / Secretary may be either legal entities or physical person Residents and non-residents can be appointed (the majority of directors need to be residents in the Republic to eligible the company to be a tax resident. Also email server and physical existence of computer hardware are considered (guidance from OECD) Board meetings may be held worldwide and electronically (video conference) Changes to board members need to be filed to Registrar

Reporting requirements and annual returns

Financial statements need to be prepared in accordance with IFRS Annual return to Registrar each year need to be filled Registered address (of office) need to be within the republic for mails Pledge registration – a pledge on assets of a company must be registered to the registrar in order for the lender to secure the asset, % fee apply from the registrar Annual tax return

Director's Report

Directors report requirement compared to other jurisdiction are relative relaxed and have minimal requirements Example of standard wording (principal activities, comment on performance, dividends, major events, corporate details, significant events occurred after year end)

Contracts sign / Power of Attorney

Use of contracts in foreign country can be done by issue a specific or general Power of Attorney A specific power of attorney will be used for a single transaction i.e.entered into loan agreement, opening bank account A general power of attorney can be used by the beneficial owners / or other representatives to bind the company for any economic activity (buy / sell assets or open bank account) and effectively is treated as being a directors of the company abroad but is not registered to the Registrar

Permanent Establishment

Branch (overseas company establishment). Branches can be used on initial expansion in a foreign country as usually losses arise from the operations of a branch established in another jurisdiction can be offset against taxable income in home country. As losses can be offset, so any income will be taxable again in home country. The branch may be converted into a company when is expected to be profitable thus taking advantage separate legal entity status of a company (Due to low rate of income tax, only Nil tax rate jurisdiction will not apply tax) Generally land and building are deemed by default to have permanent establishment in same jurisdiction of its location

Company Migration

Non-Cypriot companies which are allowed by their jurisdiction of incorporation to deregister in that jurisdiction and register elsewhere are able to become domiciled in Cyprus. Cypriot companies are also permitted to deregister from the Cypriot Register of Companies (Registrar) and become domiciled in another jurisdiction No tax applies to company's assets either on entry or exit from Cyprus

Merge and Acquisitions

Domestic and all cross-border reorganisations between member and non-member countries are allowed Types of reorganisation covered are mergers, divisions, transfers of assets and exchanges of shares All these reorganisations does not lead to recognition of income at company and shareholder level and therefore any profits or gains made as a result of reorganisation fall outside the ambit of the Cypriot tax net Book values have to be carried forward and losses are transferred to the absorbing company Reorganisations are exempt from VAT, capital gains tax and stamp duty

Cyprus public companies

Public companies registered in Cyprus have more requirements compare to private companies in terms of:

Shareholder: At least 7 members Share capital: EUR26.629 Annual audit requirement: Yes

European Company

The European Company or "Societas Europae" (SE)) is a European public limited company which can be formed in any Member State of the European Economic Area. The main benefit of a European Company is that it can take advantage of all corporate framework within Europe. The SE can easily transfer its registered office within the Community without – as is the case at present – dissolving the company in one Member State in order to form a new one in another Member State.

Formation

There is provision for four ways of forming a European Company: Through merger of two public limited companies from different Member States. As a holding company – SE holding company is available to public and private limited companies with their registered offices in different Member States or having subsidiaries or branches in Member States other than that of their registered office. As a joint subsidiary – A joint subsidiary is available under the same circumstances to any legal entities governed by public or private law. Through conversion of a public limited company previously formed under national law.

Minimum capital

The SE must have a minimum capital of EUR 120 000. Where a Member State requires a larger capital for companies exercising certain types of activity, the same requirement will also apply to an SE with its registered office in that Member State.

Registered office

The registered office of the SE designated in the statutes must be the place where it has its central administration, that is to say its true centre of operations.

Cypriot and European company winding up options

Every SE must be registered in the State where it has its registered office, in a register designated by the law of that State.

The registration and completion of the liquidation of an SE must be disclosed for information purposes in the Official Journal of the European Communities.

Management

The SE must have a minimum capital of EUR 120 000. Where a Member State requires a larger capital for companies exercising certain types of activity, the same requirement will also apply to an SE with its registered office in that Member State. The SE must have a minimum capital of EUR 120 000. Where a Member State requires a larger capital for companies exercising certain types of activity, the same requirement will also apply to an SE with its registered office in that Member State.

European or Overseas Company wish to establish a Cyprus Branch

A Cyprus Branch may be established either by a European or an Overseas company in Cyprus The Branch is an extension of a company into another jurisdiction Cypriot Branch are taxed in the same way as a Genshape Management The Branch may carry any activities such as

Trading of product and service abroad or within EU Support services to 'parent' company Trading activities in Cyprus

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.