Individuals or companies who are considering using Cyprus for international business activities are advised to obtain expert professional advice before taking positive action.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

The legislation and procedure relating to winding up of legal entities is set out in the Companies Law, Cap.113 (the “Law”).

Under section 203 of the Law the two main types of winding up procedure are voluntary liquidation and liquidation by the court.

A.      Voluntary Liquidation

A Cyprus company may enter into a members’ or creditors’ voluntary liquidation. In order to enter into a members’ (shareholders) voluntary liquidation, the company must be able to pay all its debts, with interest, within a year.

a)      Procedure for voluntary liquidation

The liquidation procedure begins with the passing of a resolution of the company. If the articles of association provide for a fixed period for the duration of the company or specify that a certain event should occur for the liquidation, only an ordinary resolution in a general meeting is needed.  If not, a special or an extraordinary resolution is required, resolving that the company should be voluntarily wound up.

The directors, or a majority of them, are required to swear a statutory declaration to the effect that they have made a full inquiry into the company’s affairs and that having done so, they have formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate, within such period not exceeding 12 months from the commencement of the winding up, as may be specified in the declaration. The declaration must contain a statement of the company’s assets and liabilities as at the date before the making of the declaration.

In order for the declaration to have effect, it must be made within 5 weeks immediately preceding the date of the passing of the resolution for winding up and must be delivered, within 14 days, to the Registrar of Companies for registration.

Additionally the company must, within 14 days of the passing of the resolution, give notice of the resolution by advertisement in the Official Gazette. Failure to adhere to comply with this requirement renders the company and every officer of it who is in default liable to a fine.

It should also be noted that before company passes a resolution for a voluntary liquidation it must give written notice of the resolution to the holder of any qualifying floating charge.

b)         The liquidator

The company in a general meeting must appoint a liquidator for the purpose of winding up the company’s affairs and distributing assets. The creditors have no say in this appointment.

On the appointment of a liquidator all the powers of the directors cease, except so far as the company in general meeting or the liquidator sanctions their continuance.

If the liquidator, once appointed, forms the opinion that the company will not be able to meet its obligations and pay all its debts within the specified period, he or she must call a meeting of creditors and supply them with full information regarding the company’s financial position and affairs. From the date of that meeting, the winding-up is converted from a members’ voluntary winding-up to a creditors’ voluntary liquidation.

If the company is insolvent, the members’ appointment of a liquidator is considered by a meeting of creditors held on the same or the following day. The creditors may accept the liquidator appointed by the members or appoint someone else, either to act in place of the liquidator appointed by the members or to act jointly with him or her.

c)       Liquidation procedure

The liquidation procedure is deemed to have begun on the passing of the resolution. After the commencement of the liquidation, the company may not carry on any business except that required for its winding up.

The company shall, from the commencement of the winding up, cease to carry on its business, except so far as may be required for its beneficial winding up. However, the corporate state and the corporate powers of the company continue until the company is dissolved.

Any transfer of shares, not being a transfer made to or with the sanction of the liquidator and any alteration in the status of the company’s members, made after the commencement of the voluntary winding up, will be void.

By definition, creditors in a members’ voluntary liquidation must be paid in full within a year from the commencement of the liquidation. However, in certain case, realisation and distribution of residual assets to members and formal conclusion of the winding up may take longer. If the liquidation continues for more than one year the liquidator must convene annual meetings of members and present accounts before them. No consents and approvals are required.

As soon as the company’s affairs are fully wound up, the liquidator is required to make up an account of the winding up, showing how it has been conducted and how the company’s property has been disposed of.

The liquidator is required to call final meetings for approval of his or her accounts. Within a week the liquidator will file his or her accounts and a return of the meetings with the Registrar of Companies.

Within one week after the meeting, the liquidator must send to the Registrar of Companies a copy of the account.

The company is deemed to be dissolved three months after the registration of the return.

In the case where a company has been dissolved, with members voluntary liquidation, the Court may at any time within two years of the date of dissolution on an application being made for the purpose by the liquidator of the company or by any other person who appears to the Court to be interested, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void.
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d)      Voluntary Liquidation under the supervision of the Court

When a resolution has been passed by the Company to wind up voluntarily, the court may make an order directing that the voluntary winding up shall continue, but subject to the supervision of the Court, and on such terms as the court thinks just.

B.      Liquidation by the Court

A court petition requesting the winding up of a Company may be filed by the Company itself, by any shareholder, by the Official Receiver or by any creditor.

As set out by s.211 of the Law, a Company may be compulsorily wounded up by the Court in any of the following situations:

(a)     the Company has resolved by means of a special resolution that it should be wound up by the Court;
(b)     default is made in delivering the statutory report to the Registrar of Companies or in holding the statutory meeting;
(c)      the company does not commence its business within a year from its incorporation or suspends its business for a whole year;
(d)     the number of members, in the case of a private Company, is reduced below one, or, in the case of any other Company, below seven;
(e)     the Company is unable to pay its debts;

A Company is considered as unable to pay its debts when

(i)     the Company is indebted with a sum total exceeding €854, the concerned creditor has served the Company with a written notice demanding payment of the incurred debt due and the Company failed to pay the sum due within three (3) weeks from the date the written notice was served;
(ii)    when a judgment was executed against the Company’s property but the execution failed to settle the debt; or
(iii)   when the Court is satisfied that the Company is unable to pay its debts.
(f)      the Court is of the opinion that it is just and equitable that the Company should be wound up.

If a winding up order is made, a liquidator will be appointed by the Court to whom the administration and control of the Company as well as its property will pass. In turn, the liquidator, subject to the powers granted to him by virtue of s.233 of the Law, will have to secure that the assets of the Company are distributed to all its creditors and to ensure that any remaining surplus is distributed to any person entitled to it. When the liquidation of the Company’s assets is fulfilled and every matter is settled, a petition for the final wind up of the Company is filed by the liquidator to the Court which, at its absolute discretion, will issue an order for its final dissolution.

a)      Procedure for liquidation by the court

A petition for the winding-up of a company may be presented by any creditor, including a contingent or prospective creditor. On hearing the petition, the court may dismiss it, adjourn it, or make any order that it deems fit.

If a winding-up order is made, the liquidation will be deemed to have commenced at the time of presentation of the petition, unless a resolution has been previously passed for a voluntary winding-up, in which case liquidation will be deemed to have begun with the passing of the resolution.

Any disposition of the company’s property that takes place after the commencement of winding-up and any transfer of shares or alteration in the status of the members of the company after the commencement of winding-up will be void unless the court otherwise orders.

Notices of the first meeting of creditors should be posted to the creditors not less than seven days before the date of the meeting and the meeting must be advertised once in the Official Gazette and once in two daily newspapers circulating in the district where the registered office of the company or its principal place of business is situated.

b)         The liquidator

At the first meeting the creditors may accept or change the liquidator appointed by the members. The creditors may also establish a committee of inspection.

c)         Liquidation procedure

Once the liquidation order is made, no action or proceedings can proceed with or commence against the company except by leave of the court and subject to such terms as the court may impose.

The general rule is that secured creditors may enforce their security. The extent to which secured creditors can enforce their security is dependent upon the value of their security. If the value of the security covers the debt which is owed to the creditor they will be fully satisfied and any remaining balance will be credited to the assets of the company and will be used by the liquidator to satisfy other liabilities of the company. If however the security does not cover the full amount of the debt then they will join the ranks of the unsecured creditors.

Once the liquidator has distributed the funds in his hands and summoned a final meeting of the company’s creditors, he or she may vacate office and obtain his or her release.

Under section 260 of the Law the company is dissolved from the date of the issue of the court order for its dissolution. The liquidator is required to forward a copy of the order to the Registrar of Companies within 14 days of its being made. On receipt of the notice, the Registrar records the dissolution of the company in his or her books.

C.      Ranking of Creditors’ claims

The claims of the creditors are satisfied in accordance with a priority ranking determined by the Law. The order of distribution of assets in a winding-up, whether through a court judgment or voluntarily is as follows:

1.    The costs of the winding-up.
2.    Preferential debts. Preferential debts, ranking equally, comprise of:

• all government and local taxes and duties due at the date of liquidation and having become due and payable within 12 months before that date and, in the case of assessed taxes, not exceeding one year’s assessment;
• all sums due to employees including wages, up to one year’s accrued holiday pay, deductions from wages (such as provident fund contributions) and compensation for injury;
• claims of employees who are shareholders or directors may not rank as preferential depending on the nature of the shareholding or directorship

3.    Secured creditors.
4.    Unsecured creditors.
5.    Sums due to members in respect of dividends declared but not paid.
6.    Any share capital of the company.

All claims in a particular ranking must be satisfied in full before payments can be made to creditors of a lower priority ranking. If the company’s assets are insufficient to satisfy all creditors of ranking, payments to such creditors shall be made on a pro-rata basis.

D.      Personal Liability

Personal liability may only be imposed on directors in the event of fraudulent trading, namely carrying on business with intent to defraud creditors. However due to the high standard of proof required, successful claims for fraudulent trading are extremely rare. However, directors involved with a company that could potentially be unable to pay its debts should abstain from engaging in any transactions that could be considered having any element of an intention to defraud creditors.

Cyprus law does not contain any wrongful trading provisions requiring directors to commence insolvency proceedings as soon as they know or ought to know that their company will be unable to pay its debts.

However, any director of a company making a declaration of solvency for the purposes of a members’ voluntary liquidation without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the specified period will be liable to up to two years’ imprisonment or a fine of up to €2,560.

The Law describes a range of offences by officers of companies in the course of winding up including failure to cooperate with the liquidator, concealment of the company’s assets and falsification of accounts. Furthermore, if in the course of winding up it appears that any person who has taken part in the formation or promotion of the company, or any past or present director, manager or liquidator, or any officer of the company has misapplied or retained any money or property of the company or being guilty of any misfeasance or breach of trust in relation to the company, the court may compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation.

E.       Other information

Following either type of liquidation, the court can restore a Company to the register within two years if, for example, further assets are discovered which should be distributed to creditors.

It should also be noted that a Cyprus company may apply to the Registrar to be struck off the register if the company is not trading, has no assets or liabilities and no creditors (or the creditors have been notified and do not object to the strike-off), and an affidavit to this effect is sworn before the Cyprus courts by the directors. However, any shareholder, creditor or liquidator can apply to restore the company to the register for up to 20 years after its date of strike-off.

The timeframe for the liquidation process depends on a variety of factors including how well organised and up to date the records of the individual Company are, the existence of creditors or litigation procedures etc.

For further details contact:

Nicholas Theodorou
Pekris & Theodorou LLC
T: +357 22446866
F: +357 22454878
E:  n.theodorou@cyadvocates.com

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Company Law related information is available here.

As a result of the benefits offered, an ever increasing proportion of investment into India has been channelled through Cyprus.

The full text of the Republic of Cyprus – Republic of India Tax Treaty is available here. If you require further information on the benefits of investment via Cyprus into India please contact us.

Individuals or companies who are seriously considering using Cyprus for any of their international business activities are advised to obtain expert professional advice before taking positive action.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Cyprus limited liability company is a practical vehicle for tapping the international tax planning advantages offered by this jurisdiction which has the lowest corporate tax in the European Union. There are currently a great number of Cyprus limited liability companies registered and operating out of Cyprus.

The growth of the use of Cyprus in international tax planning indicates the existence of clear advantages that attract both business entities and foreign private individuals.

Tax advantages

The use of a Cyprus limited liability company in international tax planning can mitigate or eliminate completely the overall tax liability arising from an international activity. Specifically, proper structuring of a Cyprus limited liability company in an international tax plan can:

• Reduce the tax burden in the country where the income is earned
• Reduce the withholding tax on getting the money earned out of the country where the income is earned
• Reduce or defer the tax burden of the ultimate shareholder of the tax planning structure
• Reduce the overall tax burden of an international activity increasing in this way the overall return on investment of the project.

The Cyprus fiscal legislation offers a number of incentives that give rise to these advantages.  The incentives include:

• Introduction of the concept of tax Resident and Non-Resident companies
• Taxation of worldwide income for tax Residents and Cyprus sourced income for non-Residents
• Lowest corporate tax rate in the Europe union of 10%
• Tax-exempt business profits of Non-Resident companies
• Tax-exempt gains on the trading and disposal of securities
• Tax-exempt gains on the disposal of subsidiaries
• Tax-exempt dividend income (subject to applicable criteria)
• Tax-neutral group reorganisations
• Tax-relief for group losses
• Full adoption of the EU Parent-Subsidiary Directive
• Full adoption of the EU Mergers Directive
• Full adoption of the EU Directive on Mutual Assistance and Cooperation
• Full adoption of the EU Royalty and Interest Directive

The wide network of double tax treaties of Cyprus offers numerous opportunities for sophisticated tax planning structures.

Non-Tax advantages

The non-tax advantages of Cyprus offer the infrastructure for doing business internationally, of the highest professional standards, with significantly lower operating costs. The time zone of Cyprus allows an investor to operate via Cyprus their subsidiary in the East in the morning and report back to head-offices in the West in the afternoon.

The non-tax advantages include:

• Advantageous geographical location and time zone
• English as a business language
• Pleasant climate
• European standard of living
• Comparatively lower set-up and maintenance costs
• Highly developed and efficient accounting, legal and banking sectors
• Strict confidentiality with the local authorities and the banks
• Excellent transport and telecommunication facilities
• Exemption from foreign exchange control
• Possibility for acquisition of immovable property

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Companies’ redomicile for a variety of reasons including to take advantage of more favourable tax laws or less stringent regulatory provisions; to align their place of registration with their shareholder base; or to access specialist capital markets.

Up until the 28/07/2006 the Cyprus Companies Act (Cap.113) did not provide for companies to redomicile to Cyprus or from Cyprus to another jurisdiction. The enactment of Law 124(I)/2006 on the 28/07/2006, amended Companies Law Cap. 113, and theoretically the redomiciliation of companies to and from Cyprus was made possible from this date. However, in practice only recently have regulations been issued by the Council of Ministers which provided details of the procedure to be followed, the forms to be filed and the fees payable.

This enactment, in conjunction with the existing attractive taxation system and the excellent infrastructure facilities and services offered by Cyprus, further ads to the islands` competitiveness as an international financial Centre.

A brief summary of the provisions of the law and regulations concerning foreign companies to be redomiciled in Cyprus is covered here.

Application for redomiciliation

A foreign company registered in a country which allows redomiciliation and whose Memorandum and Articles of Association provide for the possibility of redomiciliation, may apply to the Registrar of Companies in Cyprus to be registered in Cyprus as a continuing company pursuant to the provisions of the Companies Law Cap 113.

The application must be submitted together with the following documents:

(a)        a resolution or a similar document authorising the foreign company to obtain registration in Cyprus as a continued legal body;

(b)        a copy of the revised constitutional documents of the foreign company (Certificate of Incorporation and/or Memorandum and Articles of Association or as the case may be) satisfying the provisions of Cap. 113 and which accords to the laws of the Country of first incorporation;

(c)        a certificate of good standing (or equivalent) from the Country of first incorporation;

(d)       an affidavit from the director of the foreign company duly authorized by its Board of Directors – management board (or equivalent) stating the following:

(i)         the current company name of the foreign company and the name under which it will continue to continue to use once the process of re-domiciliation is completed;

(ii)        the country of jurisdiction where the foreign company is registered;

(iii)       date of registration of the foreign company;

(iv)       the resolution with which the Company has decided to re-domicile to Cyprus;

(v)        that the foreign company has formerly declared its decision to re-domicile to Cyprus to the authority of the Country of the first incorporation (a copy of which must be provided);

(vi)       that there are no criminal or administrative procedures pending or which have been commenced against the company, whether in the past or present;

(vii)      an affidavit by a duly authorised director of the foreign company confirming the financial good standing and solvency of the foreign company;

(viii)     a list of the shareholders/members of the foreign company;

(ix)       a list of directors of the foreign company and/or the secretary and/or the managers of the foreign company and

(x)        such other documents as the Registrar of Companies in Cyprus may deem appropriate to prove that:

• such application is allowed under the laws of the Country first incorporation; and
• that the parties needing to consent to such action under the law of the Country of first incorporation have so consented.

Registration in Cyprus

Once the documents mentioned above been filed, and the registrar of Companies is satisfied that they satisfy all the legal requirements, a temporary certificate of redomiciliation is issued.

This temporary certificate will give the redomiciled Company the status of a legal person established under the Cyprus Companies Law and will extend to it all rights and obligations arising therefrom. The amended constitutional documents will be deemed to be the Company’s Articles of Association.

Within six months from the date of issue of the temporary certificate, the foreign Company must provide the Registrar of Companies with evidence that it is no longer registered in the Country of Registration in Cyprus
Once the documents mentioned above been filed, and the registrar of Companies is satisfied that they satisfy all the legal requirements, a temporary certificate of redomiciliation is issued.

This temporary certificate will give the redomiciled Company the status of a legal person established under the Cyprus Companies Law and will extend to it all rights and obligations arising therefrom. The amended constitutional documents will be deemed to be the Company’s Articles of Association.

Within six months from the date of issue of the temporary certificate, the foreign Company must provide the Registrar of Companies with evidence that it is no longer registered in the Country of first incorporation. If such a certificate is not provided the registrar may strike the Company off the Registry.

Once the certificate is delivered to the Registrar, the Registrar shall register the Company as redomiciled in the Republic of Cyprus.

Registration in Cyprus

Once the documents mentioned above been filed, and the registrar of Companies is satisfied that they satisfy all the legal requirements, a temporary certificate of redomiciliation is issued.

This temporary certificate will give the redomiciled Company the status of a legal person established under the Cyprus Companies Law and will extend to it all rights and obligations arising therefrom. The amended constitutional documents will be deemed to be the Company’s Articles of Association.

Within six months from the date of issue of the temporary certificate, the foreign Company must provide the Registrar of Companies with evidence that it is no longer registered in the Country of Registration in Cyprus
Once the documents mentioned above been filed, and the registrar of Companies is satisfied that they satisfy all the legal requirements, a temporary certificate of redomiciliation is issued.

This temporary certificate will give the redomiciled Company the status of a legal person established under the Cyprus Companies Law and will extend to it all rights and obligations arising therefrom. The amended constitutional documents will be deemed to be the Company’s Articles of Association.

Within six months from the date of issue of the temporary certificate, the foreign Company must provide the Registrar of Companies with evidence that it is no longer registered in the Country of first incorporation. If such a certificate is not provided the registrar may strike the Company off the Registry.

Once the certificate is delivered to the Registrar, the Registrar shall register the Company as redomiciled in the Republic of Cyprus.

Temporary registration

From the date of issuing the temporary registration the foreign company:

• is considered as a legal entity duly incorporated according to the laws of Cyprus and is temporarily registered in the Republic for the purpose of the Companies Law Cap 113;
• has the same liabilities and is eligible to exercise all powers that registered companies have according to the laws of Cyprus;
• the constituent document of amendment is considered as the Memorandum of the company and where applicable as its Articles of Association;
• the registration of the foreign company is not lawful and is void if it is done:

(i)         for the purpose of establishing a new legal entity;

(ii)        to damage or affect the continuance of the foreign company as a legal body;

(iii)       to affect the property of the foreign company and the way this company will maintain its assets, rights and obligations;
(iv)       to render ineffective any legal or other procedures filed or to be filed against the foreign company and

(v)        to acquit or prohibit from any conviction, judgment, opinion, debt, order or liability against the foreign company or its officials or shareholders.

Refusal of Application

Within six months from the issuing of the temporary registration certificate, the foreign company must present evidence to the Registrar of Companies that it has been disallowed from being a company registered in the country of initial incorporation.
Refusal of Application The application to re-domicile a Company to Cyprus will be denied in the following circumstances:-

(a)       procedures for dissolution or winding-up or any other insolvency proceedings, settlements or writs against the Company are in process or equivalent proceeding have been commenced against the Company;

(b)       a liquidator, receiver or equivalent administrator has been appointed in relation to the Company;

(c)        any order exists that limits or suspend the rights of the Company’s creditors;

(d)       any legal proceeding, criminal or civil have commenced against the Company in the jurisdiction of primary incorporation.

Licensed Activities

Companies which offer licensed activities under certain provisions of the law in their jurisdiction and for which similar licences are required in Cyprus, must produce relevant consent for their redomiciliation by the proper authorities of their country.

Any foreign company which will undertake any activity for which a licence is required in Cyprus, must obtain such a licence according to the requirements of Cypriot law (such companies include Financial Services Companies, Insurance Companies and Banking Institutions). Public companies If the company is a public company, then the following must be produced in addition to the above:

Public companies

If the company is a public company, then the following must be produced in addition to the above:

• the prospectus of the foreign company, once the shares have been offered to the public;
• if it is listed in a Stock Exchange, evidence of consent of the foreign Stock Exchange allowing redomiciliation in Cyprus must be provided and
• A duly certified list of it`s shareholders.

If you have are considereing redomilation of a company to or from Cyrpus or simply wish to receive further information, please contact us using company@cyadvocates.com.