New Guidelines by the Central Bank of Cyprus for Shell Companies
The Central Bank of Cyprus, on 14 June 2018, has issued guidelines in opening new bank account or maintaining existing bank accounts consider “Cyprus shell companies” or “Cyprus letter box companies”
On November 2018, the Central Bank of Cyprus has issued further guidelines which entered into force, giving a new definition for “Cyprus shell companies” or “Cyprus letter box companies”
The term “shell company” refers to a limited liability company or any other legal/business entity that follows the below characteristics:
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The company has no physical presence (having a place of business – rent or own premises – or even an absence of meaningful and management) or operations on in its country of incorporation / registration
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It has no established economic activity in its country of incorporation / registration, lack of economic value and no documentary proof to the contrary
The following indicate economic activity:
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The company/entity is established for the purpose of holding stock or shares or other equity instruments of another business entity or entities engaged in legitimate business with identifiable ultimate beneficial owner(s)
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ii) the company/entity is established for the purpose of holding intangible or other assets including real estate, ship, aircraft, portfolio of investments, debt and financial instruments
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iii) the company/entity is established to facilitate currency trades and asset transfers, corporate mergers as well as carrying out asset management activities and trading of shares
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iv) the company/entity acts as a treasurer for companies recognized as a group or manages the activities of the group
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v) Any other case where convincing evidence can be provided that the company/entity is engaged in legitimate business, with identifiable UBO(s) (Ultimate Beneficial Owner)
Cyprus banks and Cyprus credit institutions would be required to avoid entering into and renewing business relations with entities meeting the criteria of Cyprus shell companies. It is expected that Cyprus banks will continue reviewing their customer base to identify Cyprus shell companies based on the above circular.