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Cyprus Forex Company Formation

Michalaki, Pitsillidou Law Firm > English Articles  > Cyprus Forex Company Formation

Cyprus Forex Company Formation

Cyprus Forex Company Formation

Foreign exchange trading is a new type of market where investors and investment firms conduct business. Forex is trading over the counter where buyers and sellers conduct forex transactions. Cyprus is an attractive destination for forex companies due to its tax regime and EU member status and also due to its regulations that have proved as one of the most reliable jurisdictions for FX companies.

Furthermore after the changes in EU law and regulations non EU regulated FX companies cannot operate in European Union therefore the is a trend of new FX companies forming in Cyprus.

Changes in the regime for Forex Companies in Cyprus

Forex trading was unregulated unit 2009 but since then in order to obtain a license to operate in Cyprus the company has to have a real presence in the island in terms of staff and premises and local director. It is a serious investment.

New Requirements for a Forex Trading Company License

All companies wishing to provide Forex trading services have to apply for licensing as a Cyprus Investment firms and to comply with the minimum capital requirements set out by the Provision of Investment Services law 144(I)/2007. So as soon as a company is licensed in Cyprus it can provide its services across the EU without having to apply again for a license . If there are countries that require registration of such companies it can easily be achieved with representative offices or branches.

Reporting and Compliance Requirements

CIF companies have to continuously report to Cysec and also to comply with the Anti Money Laundering requirements and KYC ( Know your client).

Minimum Capital Requirements

In February 2014 the Law N.193(I)/2014 Article 10 (Law of the Investment Services and Activities and Regulated Markets) was amended in order to reduce the initial capital requirements of CIF companies in order to attract further foreign investment in Cyprus,

The initial capital requirements were configured as below:

A CIF company that holds customers money or provides investment services (portfolio management, execution of orders on behalf of customers, transmission of orders in relation to financial instruments) must have an initial capital of €125.000

Directors

A Cyprus registered Forex company need to appoint at least one Executive Director who passes the requirements (investment / financial background, clear criminal record and a respected reputation) and is a resident of Cyprus. The Executive directors need to be a Cyprus resident in order for Cysec to correspond and liaise with him especially in as regards reporting as well as for clarifications and spot checks.

Also the company needs to have a General non executive manager that visits Cyprus in a regular basis to monitor the company operations. The role of the General Manager is mainly to oversee the Executive Director and the Board of Directors in general.

General Conditions to grant a license

  • The Memorandum of the Company must have specific clauses regarding the nature of this business.
  • The applicant company need to fulfill the minimum capital requirements stated above
  • At least one director who is resident in Cyprus to act as Executive director and who passes the requirements tests.
  • The company to have a physical office space in Cyprus.
  • Set up an internal control mechanism
  • As with the directors, the shareholders pass a requirements tests, especially a background check whereby Cysec is satisfied that they have a clean criminal record as well as experience in the business. Cysec would demand  that the company has the internal procedures  to avoid any potential conflict of interest with its clients.

Application Procedure

  • All corporate documents of the company (incorporation certificate, certificate of directors, shareholders, Memorandum, etc) together with the Cyprus investments firms application form (Form 144-03-01). This would take approximately 1 -2months.
  • Together with the above documents, a business plan that will cover around 3 years, internal procedures manual , anti money laundering and KYC procedures must be filed with the application.
  • The application and all supporting documents is filed with Cysec.
  • Cysec has up to 6 months from the date of submitting all the application documents, to reply favorably or not to the application. In the event of unreasonable delay, the applicant may bring administrative action against Cysec at the Supreme Court of Cyprus.

Cysec Application Fees

Three thousand (3,000) euros, plus an additional one thousand (1,000) euros per investment service or activity of Part I, Annex III of the Law, except for the operation of a Multilateral Trading Facility (MTF) the additional amount of which is ten thousand (10,000) euros, as well as five hundred (500) euros per ancillary service of Part II, Annex III of the Law

Conclusion

Any Cyprus company wishing to conduct the business of FX trading, has to apply to be licensed by Cysec.

The main requirements are:

  • The Memorandum of the Company must have specific clauses regarding the nature of this business.
  • The applicant company must fulfill the minimum capital requirements as set out above.
  • At least one director who is resident in Cyprus to act as Executive director and who passes the fit and ‘proper test’.
  • The company has physical office space in Cyprus.
  • Set up an internal control mechanism, namely Cysec will want to see that the company has in place internal rules and procedures to oversee potential problem areas, contingency plans, server protection, client protection etc.
  • The suitability of the shareholders. As with the directors, the shareholder pass a fit and proper test, especially a back round check whereby Cysec is satisfied that they have a clean criminal record as well as experience in the business.
  • Cysec must be satisfied that the company has such internal procedures so as to avoid any potential conflict of interest with its clients.

The setting up of an FX company in Cyprus provides many advantages such as:

  • Attractive, low tax regime.
  • Relatively simple application procedure as well as low application fees when compared to other EU jurisdictions.
  • The possibility for passporting the license to operate in other EU jurisdictions.

For more information and guidance get in touch with our lawyers or email iMPK Global Business Law Firm – Cyprus Lawyers – Michalaki, Pitsillidou & Co. LLC, at info@impklawyers.com .Tel. +357 99345000 – Fax +357 25 660097.

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