Before any other steps are taken with regard to the Cyprus company registration, the Registrar of Companies must be approached to ascertain whether the name by which the company is proposed to be incorporated is acceptable.
It is desirable to submit for approval to the Registrar two or three alternatives to the first choice of name, as experience has shown that this can save time. Where the proposed Cyprus company is intended to have a similar name to that of its parent company, the Registrar will require the consent of the parent company for the use of such name.
The Cyprus company formation and registration procedures, including various administrative needs and up to the time the certificate of incorporation is issued, can normally be completed within a period of two weeks.
Once the Registrar of Companies has been satisfied that the documents lodged in relation to a proposed company are in order, a certificate of incorporation will be issued, whereupon the Cyprus company becomes a corporate body, having an independent legal existence quite distinct from the shareholders composing it.
Every company must have a registered office from the day it commences business or from the fourteenth day after its incorporation, whichever is earlier. The registered office is the place where writs, summonses, notices, orders and other official documents can be served upon the company. The registered office is usually the place where the company's Register of Members is kept, unless the company informs the Registrar of Companies of another place.
The appointment of the secretary is made by the directors and the articles of association should normally contain an appropriate provision to this effect. The existence of a secretary is a requirement of the law. For practical purposes a body corporate (i.e. a company) may be appointed secretary. A number of secretarial companies which can act as secretaries to Cyprus companies are available and operate satisfactorily.
The company's objects and powers are defined in the company's Memorandum of Association. Any act beyond a company's legitimate powers as defined in its Memorandum is void. Consequently, the Memorandum of Association is normally drafted as widely as possible to enable the Cyprus company to engage in any type of business.
The Articles of Association set out the administrative regulations and procedures for running the company. They stipulate and define how meetings of shareholders and directors are held, the powers bestowed on directors, the method of appointing and removing directors, determine the minimum number of persons that must be present for a quorum, set out the procedures for issuing new shares, transferring shares, borrowing powers and so on.
The articles may be altered or added to by means of a special resolution, which requires a majority vote of over 75 percent of the members.
Specimen memorandum and articles of association which have been prepared after careful study by lawyers can be made available, but care should be taken that the first few main object clauses are tailored to the specific circumstances and main business objects of the company.
The powers in a company are distributed between the board of directors and the shareholders as stipulated in the Articles of Association. The power of the directors can therefore be as wide or narrow as the Articles provide except that the exercise of certain powers are specifically reserved for the shareholders. For example, the shareholders always have the right to remove directors.
Under Cyprus tax law, a company is considered to be a Cyprus tax resident if its management and control is carried out from Cyprus. In general, the Cypriot tax authorities take a lax attitude accepting that management and control is exercised from Cyprus unless residence is claimed by another country. It is therefore important, especially where a number of jurisdictions are involved, each with differing requirements regarding substance, to ensure that the Cypriot companies are properly managed and controlled from Cyprus. The following ensure that substance and management and control cannot be disputed by a foreign authority:
majority of the board are residents in Cyprus
regular meetings to be held in Cyprus (at least every 3-4 months and more regularly in necessary)
all major decisions and contracts should be approved by the board in Cyprus
major contracts should as far as possible be signed in Cyprus
in certain circumstances, it is advisable that a Cyprus company has office or virtual office facilities including dedicated fax and telephone lines, web pages and internet access.
There is no legal requirement as to the minimum or maximum share capital of the company. It is recommended that the authorised share capital should be at least or approximately €1.000 which may conveniently be divided into 1.000 shares of €1 each.
It is advisable to ensure that upon the Cyprus company incorporation its beneficial owners or other appropriate officials are provided with copies of all corporate documents, properly legalized and translated where appropriate, from Greek into English or any other language. Such corporate documents normally comprise:
certificate of incorporation
memorandum and articles of association
address of the company's registered office
the first of directors, secretary and shareholders
statutory and other necessary minutes of the meetings of the directors and shareholders
any other documents pertaining to the company's activities up to the date of its establishment
Every Cyprus company must maintain accounting records that enable the preparation and audit of financial statements that show a true and fair view of the company's financial position and performance in accordance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS).
The accounting records must be held either at the registered office or at another place in Cyprus and must always be available for inspection by the directors.
The financial statements must be accompanied by a report of the board of directors which includes:
details of any changes in the nature or volume of operations
any changes in the share capital
any significant change in the constitution of the board of directors or the duties assigned to its members
directors' proposals regarding the distribution or not of the retained profits
Failure to comply with these requirements leaves the directors open to prosecution with the possibility of a fine of up to €10.000 and imprisonment of up to 12 months. The financial statements must be audited by a registered auditor.