Considerations when creating a company in Cyprus
Cyprus undoubtedly offers a considerably advantageous base for any business. Offering a highly beneficial taxation system (which boasts one of the lowest rates of tax on corporate profits in Europe at 10%; the exemption from corporate tax of interest income, dividend income and profits from disposal of securities and a host of double taxation treaties upon which to rely) and located at a geographically favorable position, it is little wonder that Cyprus enjoys a reputation as an international business centre of excellence.
However, before a company can be created, certain fundamental decisions need to be made about the kind of legal entity required and the manner in which it will operate.
The Type of Legal Entity
The first consideration is whether a company is the appropriate vehicle for a particular client’s operations. Sole traders, partnerships, and charities can all enjoy their own respective benefits under appropriate circumstances. Different types of corporate structure should also be considered; public limited companies, private companies and limited liability companies are all available options and legal advice needs to be taken in order to ensure correct choices are made.
When incorporating a private limited company, the first consideration is always the name of the company. This will need to be submitted to the Registrar of Companies by your lawyer for approval. The Registrar will not permit names which are too similar to another company name, misleading, deceptive or offensive.
The Share Capital
The share capital of the company needs to be decided. The authorised share capital of the company is the amount that the company is permitted to issue to shareholders and this quantity is divided into individual shares of fixed sums. The most common share capital division on creation of a company will be 1000 shares of 1 Euro each. It should be noted that the share capital can be increased by issuing new shares at any time.
You will also need to decide the allocation of the issued capital (ie that portion of the shares which will be allocated to shareholders). There must be at least one registered shareholder and another company (including overseas company) may be shareholder.
A company must appoint at least one director. A director can be Cypriot or a foreigner although it should be noted that nationality of the directors will be one factor in determining whether the company is “managed and controlled” in Cyprus (and therefore eligible to take advantage of Cypriot taxation laws). The role of the directors is to exercise the powers of the company imbued upon them by the founding constitutional documents of the company (the Memorandum and Articles of Association) and directors owe a fiduciary duty of care to manage the company in accordance with these fundamental documents and Cypriot law.
The company secretary is appointed by the Board of Directors and the company secretary is the administrator of the company. He/she is instructed by the Board of Directors and is unable to bind the company without the authority of the directors or shareholders (where appropriate).
This is the address to which all notices and orders made upon the company will be sent and Cypriot companies must have a registered office in Cyprus.
The Memorandum of the company will outline which main business the company wishes to undertake. Although the Memorandum is often drafted along more general terms, it is one of the most crucial company documents as it defines the scope of business activities that the company is authorized to undertake.
Articles of Association
The Articles of Association are the rules governing the manner in which the company is managed and outline the necessary procedures for company activity.
Creation of the Company
A company can be tailor made to suit a client’s individual requirements. Alternatively (as a speedier process) we hold a number of ready-made (so-called “off the shelf”) companies which are already incorporated and merely need to be amended to reflect a client’s requirements (eg change of name, registration of appropriate directors, shareholders etc etc).
For more information and guidance please email Michalaki, Pitsillidou & Co LLC – iMPK Global Business Law Firm – Cyprus Lawyers, at email@example.com or visit our website at www.impklawyers.com.Tel. +357 25660092 – Fax +357 25 660097.