Setting Up a Business in Cyprus
Are you contemplating starting a business in Cyprus? Below you will find more detailed information on setting up a business in the sunny paradise of Cyprus.
Business entities in Cyprus can operate under the following forms:
- Limited Liability Company;
- Sole proprietor;
- partnership; or
- Branch
The Cyprusfranchising.com team in Cyprus is ready to provide you with any guidance that you may require in identifying the most suitable vehicle for your business affairs and will be happy to assist you with your requirements, including any applicable company registration.
Setting up a Limited Liability Company in Cyprus– Incorporation Process
The limited liability company is the most common form of business structure in Cyprus and has two essential features:
- the creation of a separate legal person distinct from that of its members;
- the limitation of liability of its members to the value of the consideration paid by the shareholder for the shares.
To qualify as a limited liability company, the Articles of Association must restrict the right of a shareholder to transfer its shares, limit the number of shareholders to 50 and prohibit the sale of any securities of the company to the public.
Incorporation Process
The Cyprus Registrar of Companies is responsible for company registration in Cyprus. It also has a key role in providing information about Cyprus companies. The existence of any form of company commences when a certificate of incorporation is issued by the Cyprus Registrar of Companies.
Under the Cyprus Companies Law the Administrative procedures for registering a company, set out below, have been simplified, reflecting the importance placed on the country’s development as a centre of international business.
1. Approval of name
Before any other steps are taken with regard to the incorporation of a company in Cyprus, the Registrar of Companies must be approached to ascertain whether the proposed name is acceptable. An application for the approval of the legal entity’s name is examined within few days.
2. Filing of the Memorandum and Articles of Association
After securing the company’s name and to effect registration of a company, the Memorandum and Articles of Association must be submitted for filing with the Registrar of Companies. The Articles of Association govern the internal affairs of a company. A Standard Memorandum and Articles of Association is usually made available but care should be taken to ensure that the main object clauses are tailored to your specific circumstances and main business objects (aims or activities) of the company.
3. Share capital requirements
There are no legal requirements in Cyprus as to the minimum or maximum share capital of the company. In the case of foreign direct investment there are some indicative minimum levels of investment depending on the sector.
4. Shareholders
Under the relevant legislation there must be at least one shareholder for whom the following information is required to be disclosed to the Registrar of Companies:
- full name;
- nationality;
- address;
- occupation;
- number of shares held.
5. Directors
How directors are appointed is usually laid down by the Articles of Association as well as how many constitute a quorum. However, it is usual for there to be at least one director. The names of the directors are also required to be disclosed to the Registrar of Companies.
6. Company Secretary
The appointment of the secretary is made by the directors in accordance with the Articles of Association. For practical purposes a body corporate may be appointed secretary.
7. Registered Office
Every company must have a registered office in Cyprus, which is determined by the directors.
A recent development, as a result of Cyprus’ entry in the EU, is the introduction of legislation enabling the registration of European Public Limited Companies, otherwise known as Societas Europaea (“SE”).
In addition, recent legislation enables the re-domiciliation of foreign companies to Cyprus and vice versa. This means that companies may migrate from another jurisdiction to Cyprus (and vice versa) without the need for a takeover or a transfer of assets to another company already registered in the destination country.
Partnerships in Cyprus
A partnership can be formed based upon an agreement between two or more natural or legal persons to carry on business in common with a view to profit.
The two types of partnerships may be registered in Cyprus under the Partnerships and Business Names Law are as follows:
General Partnership
The essence of a general partnership is that every partner is jointly and severally liable, and without limitation with the rest of the partners in the partnership for all debts, obligations, and liabilities of the partnership.
Limited Partnership
The registration of a general partnership in Cyprus is that there is at least one general partner who is liable without limit for all debts, obligations, and liabilities of the partnership and one or more limited partners whose liability extends only to the amount to which they have contributed to the partnership. A limited partner may not take part in the management of a partnership and has no authority to bind the partnership.
In order for the registration of a partnership to be finalized, a duly signed and executed partnership agreement must be filed with the Cyprus Registrar of Companies together with the prescribed documentation which contains the particulars of the partners such as full name, postal address, nationality, and the names of the partners who are vested with authority to bind the partnership.
The minimum number of partners required for Partnerships in Cyprus(whether general or limited) is two and the maximum is twenty.
Neither partnership is a distinct legal entity but it can sue or be sued in its own name. The concepts of a limited liability partnership (LLP) and a limited liability limited partnership (LLLP) are not recognized under Cyprus partnership law.
Setting up as a sole trader in Cyprus
Setting up as a sole trader in Cyprus is a simple way to get started in business. Once you have informed the Cyprus agencies of your intentions to go this route, you can start trading right away (subject to any specific licenses you might require in your line of work).
As a sole trader, you can quickly adapt to changes in your business with minimal bureaucratic changes required and you have complete control over your business and accounting affairs. However, a sole trader is also ultimately responsible for any liabilities should anything go wrong. If you are subject to a lawsuit, potentially all of your assets, both personal assets as well as business assets, can be subject to a judicial sale to satisfy the claims of a judgment creditor. A further negative aspect about setting up as a sole trader in Cyprus is that can be very expensive to operate from a tax point of view bearing in mind that the Cyprus tax rates that apply to individuals can reach 30% whereas 10% apply for all corporations
It is thus worth spending time considering which set-up format is best for you.
