Franchise in Cyprus
When it comes to a ‘Franchise Agreement’ with a franchisor, it should be decided what form the agreement will take. For instance, being an agreement for a limited company, a partnership or a sole trader.
General or Limited partnerships:
First, the companies are regulated to a significant extent by the Cyprus Companies Law, Cap 113 and the Partnerships and Business Names Law Cap 116, of the Laws of Cyprus. Also, the companies have obligations under European Laws, which will take precedent in case there is a clash between the national law and the European Law.
In addition, there is a body of the government, the Companies Registrar, which checks the activities and approves the applications of the companies. They also want to make sure that the relevant laws are followed during incorporation and formation process and in any changes made to the company structure.
Moreover, for the incorporation of a company, under Cap Law 113, it should have a registered office in Cyprus and at least some directors and a company secretary. Also, the name of the shareholders of the company should be available in the corporate documents, but in case they want to avoid disclosure of the names, they can use nominee shareholders which based on declaration of trust maintains their anonymity.
Taxation for foreign business in Cyprus:
In order to encourage foreign business and foreign investment in Cyprus, there are no specific tenable restrictions for foreign investment. For example, the same regulations apply for national and foreign business regarding the need of the company to have the registered office in Cyprus.
Additionally, corporate tax is charged for ‘taxable trading profit’ which refers to the accounting profit based on the company’s income statement. Limited companies are charged with a corporate tax of 10% for their profits, whereas, public corporate bodies have to pay 25% for corporate tax.
Moreover, Cyprus incorporated IBC’s (International Business Companies), that are completely owned by non-residents and are charged with a 10% tax on their taxable profits, thus being charged the same with a regular company. Furthermore, an individual is subject to up to 30% taxation which depend on their taxable income level under the Cyprus Income Tax Law.
Labour and Employment law for Franchisors in Cyprus:
Moreover, the same Labour and Employment laws that apply for corporations involved in business activities, apply for business that have commercial activities as
franchisors too. The Cypriot Labour Law is both based on Common and Statute Law. For instance, regarding employment relationship, they use contract law principles, but they also refer to statutory rights when necessary.
In addition, the existence of a franchise agreement is necessary, and in the agreement, they should specifically refer to any employee, thus to avoid any misrepresentation in case there is a dispute or discrepancy. Additionally, the European laws take precedent in case there is a clash between them and the Cypriot National Laws.
The protection of Intellectual Property Rights:
Additionally, there are statutory terms that protect Intellectual Property Rights(IPR) related to franchising. These rights are also protected by the contractual terms included in the franchise agreement. These terms might for instance, do not allow the franchisee to use the franchisors rights when the agreement expires, or to stop the franchisee to use the rights in a way they are not allowed to do so.
Moreover, the Trade Marks Law, Cap 268 regulates trademarks, which protects the franchisor’s and franchisee’s rights. The same law regulates the trademarks of both domestic and foreign franchisors. The most essential rights given in a franchising agreement are the ones that refer to the franchisor’s business and the running of it. For example, how the business is done, how marketing, advertisement and the staff training is made and how the quality and stability of the franchisor’s business is maintained.
Additionally, the most successful way to protect the know-how of a business is based on the contractual law and by putting the provisions related to it in the franchise agreement. Indeed, contractual law is used, as copy right law and trade mark law do not cover know-how if it is not related to an original, distinctive representation of the franchise business. This might be a slogan that will be under the provision of copyright law and there might be a separate protection for good will by the law of passing off.
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.