COMPANY FORMATION IN CYPRUS
As you may probably know, Cyprus is now developed as an international business centre. Since 1975 non residents have established more than 1000 companies for the investment of capital locally, over 28.000 offshore companies for the management of their overseas affairs and more than 10.000 shipping companies for the registration of ships under the Cyprus flag. Cyprus offers to entrepreneurs, investors and shipowners a unique basket of advantages for the conduct of their affairs worldwide. Such offshore companies enjoy the best of the following:
1. Modern telecommunications that are considered as one of the best in Europe.
2. Excellent climatic conditions.
3. Very good postal and transport facilities.
4. Well organised and efficient professional services.
5. Adequate housing and office accommodation.
6. Skilled Labour.
7. Relatively low cost of living.
8. Efficient banking services.
9. Easy access to Government Departments.
10. Low taxation on the profits, i.e. 4.25%. The relevant law has recently been extended until 31st December, 2007.
11. Offshore branches which are managed and controlled from abroad and offshore partnerships are totally exempt from corporate and income tax.
12. The beneficial owners of offshore companies, branches and partnerships are not liable to additional tax on dividends or profits over and above the amount paid or payable by the respective legal entities.
13. Cyprus has concluded a number of treaties with other countries for the avoidance of double taxation.
14. Cyprus has a solid legal system which is founded on the English legal system.
15. The island has a strong code of confidentiality which may well be evidenced by the fact that the Central Bank of Cyprus keeps the names of the beneficial owners of shares in a company, strictly confidential and same are not recorded in the public register. Only the names of nominee shareholders appear in the Public Register who are usually members of the law offices that incorporate the company. Although the Central Bank knows the identity of the beneficial owners it is prevented by legislation from acting as a source of information either on individuals or corporations. The only case that information may be given is after a Court’s order and it is worth mentioning that since 1975 there was not even one such case.
Turning now to the procedure for the registration of such companies it is to be noted that Cyprus Companies Law Chapter 113 is similar to the 1948 British Act.
Firstly, under the Exchange Control Law, the Central Bank of Cyprus is the competent authority for the issue of the permission for the establishment of an offshore company in Cyprus. The Central Bank before granting its permission to set up an offshore company will ensure that desirable and reputable persons or concerns will be the shareholders of such company. For that purpose, the Central Bank requires bank or other references as to the trustworthiness of the proposed shareholders.
Secondly, upon obtaining the permission of the Central Bank a company must be registered with the Registrar of Companies. The procedure is the following:-
A) Approval of name
The proposed name of the company should be given to the Registrar of Companies for approval.
B) Filing of Memorandum and Articles of Association
The Memorandum and Articles of Association of the company must be submitted for filing with the Registrar of Companies, in Greek. If it is desirable, this may be translated into English.
C) Share Capital
Pursuant to Cyprus Company Law there is no restriction to the minimum or maximum authorised share capital. However, we would recommend an authorised share capital of at least C£5.000,00 if the company will not open offices in Cyprus. If there is a possibility that the company will open offices in Cyprus then the nominal and paid up capital should be C£10.000,00.
Cyprus Law requires at least two shareholders and at least two shares of C£1.- each must be issued and paid up. However, for reasons of respectability we would recommend a paid up capital of at least C£1,000.-
(D) Shareholders
Cyprus Law requires at least two shareholders for each of whom the following information is required:-
(a) Full name
(b) Residential address
(c) Occupation
(d) Nationality
(e) Percentage of shareholding
In cases where the company belongs really to one shareholder who is either a parent company or a private individual, then what is recommended to do is to give all but one share to the main shareholder and the remaining one to a resident or non-resident who will hold it in trust for the main shareholder.
Foreigners who do not wish to appear as registered shareholders may appoint nominees to act for them as registered shareholders, whilst the actual ownership shall always rest with the non-resident beneficial owners of the shares. It is the practice to appoint the firm which undertakes the formation of the Company to settle the nominee shareholding through its members or through companies fully controlled by it.
(E) Directors
Local management and control of the company is very important. Therefore it is advisable that at least two local directors are appointed. There is no limit as to the maximum number of directors unless there is a restriction in the articles. Local directors usually are provided by the law firm establishing the company, who are acting upon the written instructions of the beneficial shareholders.
It is advisable not to appoint more than one director resident in a particular country. This is of importance in order to preclude the possibility of the management and control of the company being deemed to be in a place outside Cyprus.
With regard to the proposed directors the following particulars are required:-
(a) Full name
(b) Residential address
(c) Occupation
(d) Nationality
(F) Secretary
Pursuant to Cyprus Law every Cyprus company must have a secretary. For practical purposes it is recommended that the secretary appointed is from Cyprus. Usually and for practical reasons the secretary appointed is from the law firm establishing the company.
(G) Registered Office
Pursuant to Cyprus Law a company must have a registered office in Cyprus and therefore an address in Cyprus must be used. Lawyers' offices are normally used for the address of the registered office of a company.
(H) Income Tax on offshore companies
Companies which are 100% controlled by foreigners and derived their income exclusively from sources outside Cyprus, irrespective of the place of their control and management, pay income tax at one tenth of the normal rate (i.e. they pay tax at 4.25 per cent). There is no additional tax on dividends paid by offshore companies.
For your better information attached hereto please find the following:
i) Questionnaire
ii) Specimen for the bank reference
iii) List of our fees
The cost for incorporating the company including all fees to be paid to the Registrar of Companies other disbursements and documentation for opening bank accounts shall be US$2.500,00.
If you will need any further clarifications please let me know.
Kindest regards
Yours very sincerely
COSTAS P. EROTOCRITOU