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CYPRUS LEGAL ENTITIES
The Cyprus legal system is largely based on the English model as Cyprus was a British colony until 1960, when the island became an independent republic. After independence in 1960 the English legal system was largely preserved and following the accession of the Republic of Cyprus to the European Union in 2004, the Constitution was amended so that European law has supremacy over the Constitution and national legislation.
Cyprus companies are governed by Company’s Law, Chapter 113. Over the years Cyprus introduced changes in its Company Law, Cap. 113 rendering the island an attractive jurisdiction whereby international businesses may conduct their activities via a Cyprus legal entity.
Types of Cyprus Legal Entities:
- Limited liability company by shares (can be public or private)
- Limited liability company by guarantee
- Branch of a foreign company
- Societa Europea
This is the most popular vehicle for carrying on business. The main characteristics of the Cyprus Company are:
- The company has its own legal personality which is distinct from its shareholders
- The minimum number of shareholders is one and the maximum number is fifty
- The liability of its members is limited to the amount of their subscribed shares
- Bearer shares cannot be issued
- Special classes of shares with preferential rights may be issued
- There is no minimum issued and paid up share capital. It is common to have a share capital of at least €1.000
- Nominee shareholders can be used
- General Meetings of the Shareholders may be held in Cyprus or abroad
- The minimum number of Directors is one and there is no maximum number. Alternate directors may be appointed
- Directors may be Cypriots or foreigners, physical or legal persons. It is common practice for the majority of Directors to be Cypriot residents for tax residency issues (management and control in Cyprus)
- Meetings of the Board of Directors and General Meetings may be held in Cyprus or abroad
- The Company must have a registered office in Cyprus
- Company secretary must be appointed who may be Cypriot or foreign, physical or legal person
- The Company Secretary maintains the register of members, the minute book (recording all board meetings and resolutions) the register of charges, the register of directors/secretary and the company seal
- The Company’s Memorandum and Articles of Association are prepared by a Cyprus licensed lawyer, signed by the subscribers and filed with the Cyprus Registrar of Companies
- The Company may open bank accounts (in any currency) either in Cyprus or abroad with any banking or financial institution
- The Company’s file that is maintained by the Cyprus Registrar of Companies is available to anyone for public inspection
- Companies must file with the Registrar of Companies on an annual basis, their Annual Return (containing information as to the details of its directors, secretary, shareholders, registered office address, issued and paid up share capital) and their annual financial statements
According to Company’s Law, Cap.113, every company registered in Cyprus is a public company unless its articles of association contain the following provisions that will constitute it as a private company:
- Restrict the right to transfer its shares
- Limit the number of its members to fifty (exclusive of employees)
- Prohibit any invitation to the public to subscribe for its shares or debentures
The characteristics are mainly similar to the Limited Liability Company by shares, apart from the liability of each member being limited to the amount agreed on the Memorandum of Association to be contributed in the event the company goes into liquidation.
In the majority of cases these companies are incorporated as non-profit making organisations as per section 20 of the Companies Law, Cap.113.
A company incorporated outside Cyprus may establish a branch or representative office in Cyprus provided that within one month from the date of establishing a place of business in Cyprus, it registers itself as an overseas company with the Cyprus Registrar of Companies.
The branch does not amount to the creation of a new legal entity in Cyprus, as the entity is incorporated abroad and simply has a branch in Cyprus through which it may carry its international activities.
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 its 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.
An SE is a European Public Limited Liability Company. An SE may be created on registration in any one of the Member States of the European Economic Area (EEA). European Regulation requires Member States to treat an SE as if it is a public limited company formed in accordance with the law of the Member State in which it has its registered office.
There are several ways of forming an SE: by merger, as a holding company, or as a subsidiary. An SE can also be formed by a PLC transforming into an SE.
Once registered, an SE has legal personality. It must have a registered office and its head office must be in the same Member State.