icpac suggested practice guide for administration service ......companies”) relates to a cyprus...

ICPAC suggested

practice guide for

Administration

Service Providers

As revised on May 2019

Suggested practice guide for Administration Service Providers 2019 2

Table of Contents

1. Introduction ................................................................................................ 4

2. Client Acceptance ........................................................................................ 4

2.1 Due Diligence Requirements ..................................................................... 4

2.2 Contractual Requirements ........................................................................ 5

3. Proposed practices to be followed for effecting corporate structure

changes ................................................................................................................ 5

3.1 Change of Director or Secretary ................................................................ 5

3.2 Transfer of Shares /Change of Beneficial ownership ............................... 6

3.3 Increase of authorized share capital ......................................................... 6

3.4 Allotment of Shares ................................................................................... 7

3.5 Reduction of share capital ........................................................................ 8

3.6 Change of Company Name ....................................................................... 8

3.7 Amendment of Articles of Association...................................................... 9

3.8 Amendment of Memorandum .................................................................. 9

3.9 Registration of Pledges and Charges on assets owned by a Cyprus Company ....................................................................................................... 10

3.10 Pledge of the Shares of a Cyprus Company .......................................... 10

4. Duties .......................................................................................................... 11

4.1 Directors ................................................................................................... 11

4.2 Company Secretary .................................................................................. 11

4.3 Holding shares of a legal person .............................................................. 12

4.4 Registered Office ...................................................................................... 12

4.5 Bank Management Services ..................................................................... 12

4.6 Trustee ...................................................................................................... 12

5. Maintaining Clients’ Company/ies in Good Standing ............................... 12

5.1 Filing requirements .................................................................................. 13

5.2 TIC ............................................................................................................ 13

5.3 Statutory records and Registers ............................................................... 14

5.4 AGM ......................................................................................................... 14

6. Banking Administration ............................................................................. 14

6.1 Opening of Bank Accounts ....................................................................... 14

6.2 Maintaining Bank Accounts ..................................................................... 15

7. Execution of Documents – Matters to Consider........................................16

7.1 Tax and VAT considerations .....................................................................16


7.2 Legal considerations ................................................................................16

7.3 Powers of Attorney ................................................................................... 17

8. Board Meetings ......................................................................................... 18

8.1 Notices ..................................................................................................... 18

8.2 Quorum ................................................................................................... 18

8.3 Declaration of interest ............................................................................ 18

8.4 Minutes ....................................................................................................19

9. Shareholders’ Meetings ..............................................................................19

9.1 Annual General Meetings .........................................................................19

10. Trustee Services ......................................................................................... 20

11. Responding to queries ................................................................................ 21

12. Company closure ........................................................................................ 21

12.1 Voluntary Liquidation / Winding– Up under Section 203 (1) (b) and Section 261 of the Companies Law Cap 113 ................................................... 21

12.2 Procedure ............................................................................................... 22

12.3 Strike-off ................................................................................................ 26

12.4 General Comment ................................................................................. 26


1. Introduction This Guide aims to provide members of the Institute of Certified Public

Accountants of Cyprus (‘the Institute’) with an overview of best practice

procedures when providing administrative services in an effort to promote a

minimum service standard across the industry. The aim is to elevate the quality

of services offered by professionals in Cyprus which is an international

corporate and trust services centre. Application of this guide is highly

encouraged although not a regulatory requirement. In carrying out their

practice, members must at all times ensure compliance to the directives and

regulations issued by the Institute as well as applicable legislation.

Reference to company registered with the Department of the Registrar of

Companies and Official Receiver of the Republic of Cyprus (“the Registrar of

Companies”) relates to a Cyprus company with limited liability by shares.

Any Court related procedure mentioned below is undertaken by a registered

Advocate in the Republic of Cyprus.

2. Client Acceptance Prior to accepting any appointment for the provision of administrative services

as these are defined in the Laws Regulating Companies Providing

Administrative Services and Other Related Matters of 2012 until 2015 (Law no.

196(I)/2012 as amended) (the “Law”), the Administrative Services Provider

(the “ASP”) must consider the factors outlined below:

2.1 Due Diligence Requirements

The ASP needs to collect sufficient documentation to identify the beneficial

owner (the “BO”) as defined under the Prevention and Suppression of Money

Laundering Activities and Terrorist Financing Laws 2007-2018 ,of the entity to

be administered along with his economic profile and the intended activity of the

said entity. The documentation to be collected should be sufficient to enable the

ASP to discharge their regulatory obligations as per the AML legal framework

directives of the Institute in force.


2.2 Contractual Requirements

The ASP needs to ensure that the business relationship with the Company and

the BO (if applicable) is documented through a services agreement which

includes as a minimum the following:

The administrative services to be offered

The personal details of the BO

Service Indemnities

Fees and Payment

Compliance with the General Data Protection Regulation (Regulation

(EU) 2016/679) known as the “GDPR”, including valid Consents for Data

Sharing and Processing, as well as the Law of 2018 on the protection of

natural persons with regard to the processing of personal data and on

the free movement of such data (Law no. 125(I)/2018)

BO undertakings and acknowledgments

FATCA and CRS provisions

Succession provisions

3. Proposed practices to be followed for effecting corporate structure changes

3.1 Change of Director or Secretary

Proposed documentation to be collated and steps to follow:

1. Resignation signed by the outgoing director/secretary

2. Indemnity by BO for actions during the period that the outgoing

director/secretary was in office and for which indemnity can be

provided

3. Consent of appointment signed by the incoming

director/secretary

4. Resolution signed by the shareholders (or by directors) as per

the Company’s Articles

5. KYC documents for the incoming director as per the ASP’s KYC

policies

6. Register of directors is updated and new certificate of directors

is ordered from the Registrar (HE 4 form submitted)

7. Banks where the Company maintains accounts are informed

and provided with the updated certificate and new director KYC


8. Scanned copy of new certificate is provided to the client with

original to follow (if needed by the client)

3.2 Transfer of Shares /Change of Beneficial ownership

Proposed documentation to be collated and steps to follow provided the ASP

will continue servicing the beneficial owner:

1. Request KYC for the new shareholder as per the ASP’s AML

requirements

2. Prepare instrument of transfer / instrument of cancellation and

the relevant authorization letters for the service providers from

the beneficial owners

3. Prepare waivers of pre-emption rights if applicable

4. Prepare resolution approving the transfer of shares

5. Original KYC, instrument of transfer/cancellation, consents,

waivers, share certificate and declaration of trust which will be

cancelled and original resolution must be received in order to

proceed with the update of the register of members and

submission of HE57 to Registrar of Companies

6. Call (telephone or skype) with the new BO if not already met in

person. Calls should be recorded with the prior consent for the

new BO for the ASP’s KYC related records.

7. AML Risk Assessment/ Categorisation/ Rating of the client by

Compliance and updating of ASP’s records.

8. Updating of the banks where the Company maintains accounts

with the fresh certificate and new shareholder/BO KYC.

9. Scanned copies of new certificate of shareholder and share

certificate (and declaration of trust if applicable) are provided

to the client with originals to follow (if needed by the client)

3.3 Increase of authorized share capital


1. Shareholders resolution for the increase of authorized share

capital (or minutes of extraordinary general meeting). Relevant

voting applies as per Articles of Association and Companies

Law (Cap. 113) as amended.

2. HE14 form submitted to the Registrar. Stamp duty applies.


Note: For other jurisdictions, the relevant Companies Law of the jurisdiction

and Articles of Association of the relevant Company should be considered.

Legal advice should be sought in such circumstances from lawyers registered

and practicing in such jurisdictions.

3.4 Allotment of Shares


1. Check if there is sufficient authorized capital to proceed with

the allotment.

2. Shares must be offered to all existing shareholders who have

the right of first refusal. The Articles of Association and the

Shareholders Agreement shall be considered to that effect.

3. KYC for the shareholder who will receive the shares must be

received in original. If shares are to be issued to the existing

shareholders, update KYC records if applicable.

4. Subscription Agreement must be signed by each shareholder

receiving shares and confirmation of the payment of the share

capital should be provided.

5. Directors’ resolution approving the allotment of the shares (or

minutes of directors meeting). Relevant voting applies as per

Articles of Association and Companies Law.

6. HE12 form submitted to the Registrar; 1 month limit applies.

7. If applicable, Engagement Letter between the ASP, the

directors and the new shareholder/BO must be prepared and

sent for signing.

8. New share certificates issued to the shareholders for the new

shares.

9. Call (telephone or Skype) with the new BO if not already met in

person. Calls should be recorded with the prior consent of the

new BO for the ASP’s KYC related records.

10. AML Risk Assessment/ Categorisation/ Rating of the client by

Compliance and updating of ASP records.

11. Updating of the banks where the company maintains accounts

with the fresh certificate and new shareholder/BO KYC.


12. Scanned copies of new certificate of shareholder and share

certificate (and declaration of trust if applicable) are provided

to the client with originals to follow (if needed by the client)

Note: For other jurisdictions, consider the relevant applicable Companies Law

of the relevant jurisdictions and the Articles of Association of the specific

Company. Legal advice should be sought in such circumstances from lawyers

registered and practicing in such jurisdictions.

3.5 Reduction of share capital

The reduction requires the approvals of the Cyprus courts. Below are the steps

in more detail:

1. Special Resolution of Shareholders is passed (75% plus one

share majority is needed)

2. The Petition and Summons is drafted and filed by the Directors

to the Court.

3. Consent Letters are obtained from creditors if applicable.

4. Director appears before the Registrar of the competent District

Court in order to file the Petition and Summons, swearing and

signing the affidavit.

5. The Petition is then served to the Registrar of Companies

6. Hearing takes place before the Court. If the Court is satisfied it

approves the reduction of capital and issues a relevant Order.

7. If there are numerous creditors or if the Court so orders, the

hearing of the Petition may be adjourned and publications of

the reduction in the Official Gazette of the Republic of Cyprus

may be ordered. The Court may also order the formation of lists

of creditors.

8. The Court Order, the minutes approved by the Court and

Special Resolution is filed with the Registrar of Companies.

9. The Registrar of Companies issues a relevant Certificate.

3.6 Change of Company Name

Such matter is handled by a Special Resolution which requires 21 calendar days’

Notice, unless 95% of the shareholders consent to waive it. Name approval is

obtained first by the Registrar of Companies after filing a relevant Application

to that effect and the relevant Special Resolution is filed with the Registrar of


Companies within 15 calendar days of the Special Resolution’s approval. The

Registrar of Companies issues a Certificate of Change of Name.

Banks where the Company maintains accounts are informed and provided with

the Certificate of Incorporation and the Certificate of Change of Name. Scanned

copies of the new certificates are provided to the client with originals to follow

(if needed by the client).

3.7 Amendment of Articles of Association

The Articles of Association of a Company can be changed at any time by way of

a Special Resolution.

The Special Resolution for the amendment of Articles must be detailed and

specific and encompassing every change that is sought or brought about by the

changes. A true copy of the said Special Resolution is submitted to the Registrar

of Companies together with the amended Articles within 15 calendar days of the

Special Resolution’s approval (for review by the Registrar).

3.8 Amendment of Memorandum

A company’s Memorandum contains its objects and the kind of business to be

undertaken. Any actions or activities not contained in the Memorandum cannot

be undertaken. Activities that require a special license from a competent

Regulator, such as the provision of financial services, should not be included in

the Memorandum if no approval or license has been obtained in advance. The

amendment of the Memorandum needs to be approved by the shareholders and

then sanctioned by the competent District Court of the Republic of Cyprus of

the District where the registered office of the company is situated.

The Special Resolution for the amendment of a Memorandum must be detailed

and specific and encompassing every change that is sought or brought about by

the changes. A true copy of such resolution accompanies the Petition that is

made to the Court for the approval of the amendments sought along with the

Summons for directions and is also submitted to the Registrar of Companies

following the approval of the Court and the issuance of the relevant Court Order

which must take place within 15 calendar days or as otherwise directed by the

Court.


3.9 Registration of Pledges and Charges on assets owned by a Cyprus Company

Section 90 of the Republic of Cyprus Companies Law (Cap. 113) applies. All

charges created by a Cyprus registered company on assets owned by it, as well

as any subsequent amendment or assignment or change of information of such

charge, must be submitted to the Registrar of Companies using HE24E Form

(if they are not duly registered they are void against the liquidator and any

creditor of the company). If the charge is executed in Cyprus, the period of

registration is 21 days from the date of the charge’s creation, amendment or

assignment or change of information. In the case of a charge created out of

Cyprus concerning property situated outside of Cyprus, the period of

registration is 42 days from the date of the charge’s creation, amendment or

assignment or change of information. Generally, pledge agreements which

involve the pledge by a Cyprus company, or the pledge of shares of a Cyprus

company require prior payment of stamp duty.

The register of charges of the Company must also be updated accordingly.

Further, released pledges/charges must also be submitted to the Registrar of

Companies using HE28 Form. The register of charges must also be updated

accordingly.

3.10 Pledge of the Shares of a Cyprus Company

Where the pledgor is not a Cyprus company there is no need for the registration

of a charge with the Registrar in Cyprus. The formalities in the jurisdiction of

the pledgor must be followed (e.g. if the pledgor is a company registered in

Belgium , the provisions of the Laws of Belgium need to be consulted and

followed in respect of the formalities with the assistance of lawyers registered

and practicing in Belgium). Furthermore, upon receipt of a relevant notice from

the Pledgor or the Pledgee, the Secretary of the Cyprus Company must update

the register of members to reflect the fact that a shareholder has pledged the

shares. No transfer of shares can take place while the pledge remains in force

and this must properly be shown in the company’s register and followed.


4. Duties

4.1 Directors

Directors owe a duty to the company to manage it in accordance with the

provisions of the Companies Law, Cap. 113, the company’s Memorandum and

Articles of Association and their fiduciary duties. It is necessary to ensure that

the person accepting appointment must have sufficient competence to properly

carry out his/her respective duties. Such person should be appropriately

qualified in relation to the company’s activities and in a position to devote the

necessary time required to perform his/her duties.

The duties of a director can be subdivided into three categories:

4.1.1 Statutory duties imposed by the Companies Law, Cap. 113:

- keeping of proper books, records and accounts

- laying the accounts before the general meeting

- convening of annual general meeting and extraordinary general

meetings

- delivering approved and signed accounts to the Registrar of

Companies

- maintaining certain statutory registers

4.1.2 Duties of good faith, derived from their fiduciary nature, i.e. a

director is under a fiduciary duty to act in good faith and in the

interests of the company.

4.1.3 Duties of skill and care derived once again from their fiduciary

nature, i.e. the director must exhibit the same level of skill and care

in the performance of his/her duties as he/she would be expected

to exhibit in the conduct of his/her own affairs.

4.2 Company Secretary

Every Cyprus registered company must have a secretary who is either an

individual who ordinarily resides in Cyprus or a body corporate with its

registered office or place of business in Cyprus. The secretary must keep the

company’s statutory books such as the register of members and the register

of directors, etc. together with the minute books at its registered office. Each

year, a company must record minutes of its annual general meeting (“AGM”)


at which the audited accounts are presented, the directors re-elected and the

auditors re-appointed, etc. It must also file a return with the Registrar of

Companies of the company’s structure at the anniversary date of its

incorporation or any other date chosen by the Company subject to approval

by the Registrar.

4.3 Holding shares of a legal person

Holding shares of a legal person may be needed for commercial or other

personal reasons. Under the specific Law, an ASP may provide services of

holding shares which establishes a principal/agent relationship as opposed

to a full discretionary trust arrangement. The duties/rights of the person

holding shares in a company or other legal person in relation to dividends,

voting, etc. are defined in the declaration of trust and the overall

engagement letter between the two parties.

4.4 Registered Office

The registered office is the official address of the company and forms part of

its public record. As such the registered office should be a physical location,

not a post office box, and there should be someone present during working

hours to accept correspondence on behalf of the company.

All correspondence in relation to the company should be sent to its

registered office. Further, a company’s records and corporate stamp (seal)

should be maintained at the registered office.

4.5 Bank Management Services

Bank signatories are under a duty to ensure that the respective assets are

maintained and used for the benefit of the company.

4.6 Trustee

A trustee must administer the trust solely for the benefit of the beneficiaries

and must follow the terms and purposes of the trust in good faith.

5. Maintaining Clients’ Company/ies in Good Standing

One of the ASP’s main functions is to take the necessary measures to

maintain client companies in good standing with all their filing obligations.

To maintain a Company in Good Standing the following are required:


5.1 Filing requirements

For Cyprus companies the filing requirements include:

i. Preparation and submission of Annual Return

ii. Preparation and submission of Financial Statements to the

Registrar (accompanying the Annual Return)

iii. Preparation and submission of Tax Return to the Tax

Commissioner’s Department

iv. Preparation and submission of Vat Return Forms (Vat

registration depending on activities of the Company)

v. Preparation and submission of Vies Forms (Vies registration

depending on activities of the Company)

vi. Payment of annual levy (administrative fee) to the Registrar of

Companies regarding the maintenance of the company on the

Register of the Registrar of Companies

5.2 TIC

Obtaining a Tax Identification Code as soon as the company is registered.

To obtain a TIC number the following documents are needed:

i. Form TD 2001 must be completed, signed and submitted to the

Tax Department, together with copies of certificate of

incorporation / registration, certificate of Directors and

Secretary from the appropriate authority for legal persons not

registered in the Republic (must be submitted within 60 days

from incorporation or in the case the Company was

incorporated in another jurisdiction, as soon as the Company is

registered in accordance with the Cyprus Companies Law or as

soon as the company becomes Cyprus Tax resident).

ii. Form TD 1101 must be completed, signed and submitted to the

Tax Department for VAT registration

iii. Form TD 2003 must be completed, signed and submitted to the

Tax Department for change in details

The forms can be signed by the director, secretary, trustee, administrator or any

authorised person. Note that the authorised persons need to be disclosed to the

Tax Department via the submission of form TD 2003.


5.3 Statutory records and Registers

Maintenance and safekeeping of the statutory records and registers of the

Company as prescribed by the Cyprus legislation or any other applicable

legislation.

5.4 AGM

As per Section 125 (1) of the Companies Law (Cap. 113) as amended every

company shall in each year hold a general meeting as its annual general

meeting in addition to any other meetings in that year and shall specify the

meeting as such in the notices calling it.

Provided that, so long as a company holds its first annual general meeting

within 18 months of its incorporation, it need not hold it in the year of its

incorporation or in the following year.

The annual general meeting of a Company shall take place each year and no

more than 15 months shall pass between two AGMs.

It is common for an AGM to deal with, among other matters, the

appointment of directors in place of those retiring (if any, or the approval of

the continuation in office of the existing directors), the acceptance/approval

of dividends declared by the directors, the appointment of auditors and the

determination of their remuneration, the approval of the financial

statements of the previous year, etc.

Notices as specified in the Companies Law shall apply.

6. Banking Administration

6.1 Opening of Bank Accounts

When called upon to open a bank account, the service provider should take

into consideration the following:

- reputation and current developments of the jurisdiction in

which the bank maintains its head offices and in which it

operates

- credit rating of the jurisdiction in which the bank operates

- jurisdiction’s membership to organisations such as Financial


Action Task Force (FATF), Committee of Experts on the

Evaluation of Anti-Money Laundering Measures and the

Financing of Terrorism (MONEYVAL), Caribbean Financial

Action Task Force (CFATF) and the level of compliance of the

country with the International AML guidelines

- reputation of the financial institution including credit rating

- recent news on the financial institution

6.2 Maintaining Bank Accounts

It is important to ensure the following:

- if the ASP is acting as bank introducer and/or provides

Director services then the ASP should have the signatory

powers (or as a minimum co-signatory powers) for

operating the bank account in order to perform due

diligence on the transactions and minimise money

laundering risks.

- access to bank accounts is restricted to the bank signatories i.e.

electronic devices, online usernames and passwords as well as

details on the bank signatories are safeguarded.

- it is recommended that the process of executing a payment is

segregated so that individuals with access to input payments

are not the same individuals authorising and releasing the

payments.

- supporting documentation is available and has been reviewed

prior to the execution of a payment.

- all documentation, including communication with the banks, is

maintained at the company’s registered office.

- bank accounts should be monitored at frequent intervals to

ensure that the activities and turnover of the accounts are

within the initial client declarations.

- transactions outside the normal scope of the client’s business

should be investigated.

- very frequent payments or cash withdrawals of small amounts

should be investigated.


- Special attention is given to the following checklists that should

be maintained: a. Incoming transfers checklist

b. Outgoing transfers checklist

c. Payments register

7. Execution of Documents – Matters to Consider When requested to sign an agreement on behalf of a Company, the Directors

should have regard to the Client’s recommendations as well as to the

following:

7.1 Tax and VAT considerations

All Agreements signed on behalf of a Company generally have tax

implications thus all agreements need to be reviewed with the tax position

of the Company always in mind. The impact on the accounting records of a

Company of Loan Agreements, Forgiveness Letters, Share Purchase

Agreements, etc. has to be looked at prior to execution and discussed, if

necessary, with tax specialists.

Similarly, depending on the activities of a Company, VAT and/or VIES

registration may be necessary. Compliance with VAT rules is extremely

important since it’s a criminal offence if one fails to comply (in contrast with

the treatment of income tax which generally provides for administrative

penalties).

7.2 Legal considerations

All agreements entered into by the Company and its directors render them

liable towards the counterparty therefore an internal control review process is

recommended to mitigate such risks. Prior to the execution of an agreement,

the following matters should be considered:

a. Nature of Transaction

Whether the nature of the transaction is in line with the company’s

normal course of business and whether such transaction would be

subject to any applicable sanctions.


b. Value of Transaction

Whether the value of the transaction does not significantly deviate

from the company’s normal operations

c. Business Rationale of Transaction

Whether the transaction makes solid business sense

d. Territory

Whether the geographical territory in which the transaction is being

carried out is of good repute and whether any sanctions are applicable.

e. Specialised Advice

Whether specific legal, tax or other advice is required

f. Payment of stamp duty

g. Authorisation of signatory

Whether the director signing the agreement on behalf of the company

has been properly authorised to do so at a duly convened meeting of

the Board of Directors

h. Filings

Whether the specific transaction requires reporting and/or filing

7.3 Powers of Attorney

A power of attorney is an authorisation given to a third party to represent

and act on the company’s behalf. The following should be ensured by the

Directors prior to issuing a power of attorney in order to mitigate any tax,

litigation or money laundering risks:

- powers of attorneys should only be issued for the execution of

specific decisions taken by the Board of Directors

- the authorities of the attorney must be clearly and accurately

defined on the power of attorney

- the power of attorney should be for a limited duration and

should not exceed one year

- due diligence documentation should be obtained on the

attorney

- a background check should be carried out on the attorney

confirming that he/she is of good character and with a clean

criminal record


- all documentation executed under the power of attorney should

be provided to the Board of Directors and should be maintained

at the company’s registered office

General powers of attorney should NOT be provided.

8. Board Meetings The business of a company is managed by the board of directors. The

directors should be appropriately qualified in relation to the company’s

activities and in a position to devote the necessary time to perform their

duties. The board of directors should meet as and when dictated by the

business of the company.

8.1 Notices

It is good practice for notice of board meetings to be circulated to all

directors outlining the time, place and date of the meeting and the nature of

the business to be transacted. Such notice shall be accompanied with any

supporting documentation allowing the directors sufficient time to review

the information in advance of the meeting. Although there is no specific

statutory requirement under the Companies Law (Cap. 113) as amended for

the period of notice to be given, a reasonable time should be provided. The

subject matter of the notice is being dealt with by the Articles of Association

of the company.

8.2 Quorum

No business may be transacted if a quorum is not present. The subject

matter of quorum is being dealt with by the Articles of Association of the

company.

8.3 Declaration of interest

A director who is in any way interested in a proposed transaction, whether

directly or indirectly, must declare the nature of his interest at the meeting.


8.4 Minutes

The directors have an obligation to ensure that minutes of all meetings are

kept. Any minutes signed by the chairman of the meeting or of the next

succeeding meeting shall be evidence of the proceedings.

Minutes of a directors’ meeting should record:

- date, time and place of the meeting

- any declaration of interest

- directors present

- directors absent

- other persons in attendance

- the name of chairperson

- detailed debate concerning any point as well as any reservations

expressed

- recommendations rejected by the board

- decisions taken

- voting and abstaining from voting directors

- duration of the meeting

9. Shareholders’ Meetings

9.1 Annual General Meetings

Every company registered in Cyprus must hold a general meeting in each

calendar year. There are two kinds of business to be transacted - ordinary

and special.

Ordinary business is:

a. Consideration of the accounts and the reports of the directors and

auditors

- Copies of the accounts must be circulated

- The directors are obliged to lay the accounts before the company

in general meeting

- The general meeting "receives and adopts” the accounts

b. Consideration of the declaration of a dividend

- the general meeting will declare the dividends recommended by

the board of directors


c. The election of directors in the place of those retiring. If the retiring

director offers himself for re-election, he is re-elected unless:

- another person is elected

- a resolution not to fill the vacancy is passed

- a resolution for his election is lost All other directors continue in

office.

d. The appointment of, and the fixing of the remuneration, of the auditors

At each annual general meeting the company must appoint an auditor

to hold office from the conclusion of that, until the conclusion of the

next, annual general meeting.

The retiring auditor is re-appointed unless the retiring auditor is not

qualified for reappointment or a resolution has been passed at that

meeting appointing another auditor instead of the retiring auditor or

providing expressly that the retiring auditor shall not be reappointed

(with a special notice of 28 calendar days being provided) or the retiring

auditor has given the company notice in writing regarding the

unwillingness of the retiring auditor to be reappointed.

The remuneration of the auditors for the following year is fixed but

usually a resolution is passed authorising the directors to fix the

remuneration of the auditors.

Special business - Extraordinary General Meeting

All other business is considered to be special business and detailed

information must be given in the notice calling the meeting.

10. Trustee Services

In carrying out the services of a trustee, it is important to ensure the

following:

- A complete understanding of the nature and purpose of the trust

- Full knowledge of the beneficiaries, class of beneficiaries or potential

beneficiaries as the case may be.

- Registration of the trust with the Institute’s Trust Registry where


applicable under the Law.

- Notification of any changes in the trust to the Institute.

11. Responding to queries

When receiving queries from various bodies such as those outlined below,

prompt, efficient responses should be given providing requested documents

where applicable:

- The Institute

- Unit for Combating Money Laundering (MOKAS)

- Central Bank

- Cyprus Securities and Exchange Commission

- Tax Authorities

- Customs Authorities

- Other competent Governmental Departments of the Republic of Cyprus

12. Company closure

A solvent Cypriot company that has ceased to conduct business or operations can be dissolved via one of the following two methods:

1. Under Section 327 of the Companies Law Cap. 113 the Registrar of Companies of the Republic of Cyprus has the power to strike off a company from the Registry of registered companies provided that the circumstances set forth in the same are met.

2. Also Sections 203 (1) (b) 261 of the Companies Law Cap 113 , a company can be liquidated voluntary subject to the terms and conditions of the legislation.

12.1 Voluntary Liquidation / Winding– Up under Section 203 (1) (b) and Section 261 of the Companies Law Cap 113

Winding up or liquidation is the process by which the management of the

company’s affairs is transferred under the absolute power of the liquidator with

the ultimate objective of achieving its dissolution by realisation of its assets in

order to discharge any of its debts or liabilities. Any surplus of assets remaining

is returned to its shareholders.


There are two types of voluntary liquidations under the Cypriot Law and legal

framework namely (a) members’ voluntary liquidations and (b) creditors’

voluntary liquidation. The present analysis will deal only with the terms of

voluntary winding-up by members’.

According to Section 261 of Companies Law Cap 113, a company may be put into

voluntary liquidation by its members in general meeting passing one of the three

statutory resolutions for a voluntary winding up. These resolutions are:-

a. In general meeting passes an ordinary resolution for voluntary

winding-up where the period specified by the Articles of Association,

if so exists , for the existence of the company expires , or a fact takes

place by virtue of which , according to the Articles of Association , the

company may be liquidated and in a general meeting, the company

passes a resolution by which the voluntary liquidation of the

company is requested;

b. The company resolves by special resolution that the company be

wound up voluntarily ;

c. The company passes an extraordinary resolution that it cannot

continue with its operation due to its obligations, and that it is

advisable that is liquidated.

12.2 Procedure i. Declaration of Solvency ( Section 266)

Within five (5) weeks before the date of the passing of the shareholder’s

resolution for voluntary liquidation of the company¨-

a. The Directors of the company or the majority of the Directors of the

company , must make an institutional statement ( “Declaration of

Solvency”) in a Board of Directors meeting that:

(i) they have performed a full research in the company’s matters’

and


(ii) the company is in a position to fully settle its debts within a

period that does not exceed 12 months from the beginning

of the voluntary liquidation.

b. Provide the Registrar of Companies with the above Declaration

of Solvency in the prescribed way before the passing of the

resolution for voluntary liquidation.

The Declaration of Solvency must include a statement of the assets and

liabilities of the company as they are at the date of making the Declaration of

Solvency and this must be made and verified before the Court Registrar. In the event that the Declaration of Solvency is not made within the period of 5 weeks, then it shall not be effective.

ii. Initiation and process of the liquidation procedure

The Directors of the company call an Extraordinary General Meeting (EGM)

of the shareholders. Respective Notices of the said meeting must be

circulated to all interested parties ( i.e. shareholders ).

At the said Meeting of the company:

(a) the company appoints one or more liquidators for the purposes of liquidating of its business and distributing its assets ;

(b) the company may specify the remuneration fees of the liquidator(s)

(c) Also at the EGM, the Directors authority ceases to exist. The minutes of the EGM and the relevant forms are submitted to the Registrar of Companies and a relevant announcement is made in the Official Gazette of the Cyprus Government that the liquidator has been appointed.

With the appointment of the liquidator, all the powers of the directors cease to exist, unless the liquidator approves the continuation of all/some of the powers in a general meeting. It is noted that the execution of voluntary liquidations falls within the scope of the Insolvency Practitioners Law and the liquidator has to be an appropriately licensed, for the said purpose, person.


iii. Notifying the Registrar of Companies and Official Receiver:

After the passing of a resolution about the voluntary liquidation of the

company, a copy of the said resolution must be provided to the Registrar of

Companies and Official Receiver of the Republic of Cyprus within 15 days

of its passing. (It is then up to the Registrar to register it and to publish it

in the Official Gazette of the Republic of Cyprus.) iv. Cessation of all activities

From the beginning of a voluntary liquidation, the company must cease all

actions and/or activities, save for actions which are in helpful for the

liquidation.

Additionally, any transfer of shares, which is not a transfer to the liquidator

of the company or which takes place without the liquidator’s approval, and

any amendment made in the members of the company after the beginning

of the voluntary liquidation of the company, is invalid.

The liquidator will take over the company. The liquidator is charged with

the duties of collecting and realising the company’s assets and discharging

its debts and liabilities. The liquidator must ensure, prior the final

distribution of any surplus available in the process of the liquidation

procedure , that all outstanding liabilities and debts towards the creditors of

the Company are settled and also that the necessary tax clearance is

obtained.

v. Meetings of shareholders: Duty of LIQUIDATOR to convene meeting (Sections 272 and 273):

In the event that the liquidation procedure lasts for over one year:

the liquidator shall convene a meeting of the shareholders at the end

of the first year since the beginning of the liquidation, and at the end

of each year (or other dates specified by the law) and shall present

the activities and transactions performed by him and the process of

the liquidation during the preceding year.


After the distribution of all assets of the company (whether this falls

within the period of 12 months of the commencement of the

liquidation procedure or later in accordance with the provisions of

the law) and the end of the liquidation process: the liquidator shall

convene a meeting of the shareholders and shall present to them an

account with all the activities and the way the liquidation have been

performed, and the way the assets have been distributed and give

explanations. The meeting is convened via a publication in the

Official Gazette of the Republic of Cyprus (specifying the place, time

and purpose of the meeting) at least one month (30 days) before

the said meeting.

Within one week after a meeting of the shareholders or the last

meeting of the shareholders: the liquidator shall provide the

Registrar of Companies and Official Receiver a copy of the account

provided above and a statement regarding the convention of the

meetings and their dates. If the liquidator does not conform to the

above, then each day passing after the deadline shall cost to the

liquidator £25 (€42). If there is no quorum during the meeting, the

liquidator must inform the Registrar of Companies about it and must

reassure the Registrar that the meeting was convened appropriately

vi. Date upon which the company is regarded as having been liquidated:

When the Registrar is provided with the statement for all the meetings

that have taken place, it registers them immediately. After 3 months

from the registration of all those meetings, the Registrar issues a

Certificate of Liquidation, by virtue of which, company is deemed to be

dissolved under “ Voluntary Winding Up “ .

For monitoring purposes a search can be made in the Cyprus Gazette

webpage at the following address: http://www.cygazette.com and/or

via the website of Insolvency Service Department at

http://www.mcit.gov.cy/mcit/insolvency.nsf/page15_gr/page15_gr?O

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12.3 Strike-off

According to Section 327 of Companies Law, Cap. 113, the Registrar of

Companies, of the Republic of Cyprus has the power to strike off a company

from the index of registered companies if, among other, the directors, after

ensuring that there are no assets or liabilities in the company, issue such

statement and apply to the Registrar of Companies for the struck off of the

company from the register. The Registrar of Companies after checking with

the Income Tax authorities that there are no liabilities in relation to taxation,

proceeds with the struck off of the company.

Once the company is struck off, it can be re-instated within a period of 20

years, by relevant court order after the person who wants to re-instate the

company applies to the court. If the Court considers just and equitable, it

may order ( among others) that the company ( and its officers) be fully

reinstated to the state ( or position in the case of officers of the company )

that it was immediately before its dissolution through the process of

Striking off.

In order to apply for strike-off, a company needs to file audited financial

statements for the period the company has been in existence and obtain tax

clearance confirmation from the Tax Commissioner’s Department and VAT

Authority if applicable. The below should be in place before proceeding

with the strike off application to the Registrar of Companies:

i. Closure of the company’s bank accounts;

ii. Audited financial statements up to the date of application;

iii. Tax clearance certificate;

iv. Confirmation by beneficial owner regarding assets and liabilities;

12.4 General Comment

The cost of voluntary liquidation is usually higher than the cost of strike-off

because of the fees to be paid to the liquidator and the Registrar of

Companies.