As of the 1st of August 2022 it is possible to file an application with the Registrar of Companies in the Republic of Cyprus and request the issuance of a Beneficial Ownership Report. This report shall outline taking into consideration any trust deeds in place the holding structure of a company and its beneficial owners.

Interested parties may submit the relevant application via the Registrar of Companies platform or may contact us for assistance.

Please note that all Beneficial Ownership Report applications are currently only submitted manually at the cashier’s office for the time being.

Fundamental amendments brought by European and domestic legislation have transformed the corporate industry dramatically over the last years as it has strengthened the maintenance and account opening procedures for individuals and corporate accounts as a means to significantly minimising money laundering and terrorist financing activities.

Banking institutions in Cyprus are reluctant to take on any significant risk when it comes to new clients and as a general rule of thumb avoid dealings with high risk companies. To that extent account opening applications forms are becoming increasingly demanding and require a level of expertise when navigating and preparing them correctly.

We undertake to review the individual or corporate entity and all associated counterparties leading down to the Ultimate Beneficial Owner (UBO) running our own assessment formula where we initially advice on the success rate of such an application. We request from the clients all the necessary supporting documents and information which shall be identified below to prepare and file the form on behalf of the client reducing thus the hustle and stress associated in such tasks.

As a result of our long lasting relationship with financial institutions in Cyprus we are able to overcome certain issues that may arise provided that the company or individual does not fail our risk assessment policies.

For any individual that wishes to set up a bank account in Cyprus the following documents must be submitted:

• Recent bill of utility of the last 3 (three) months (electricity bill, water bill etc.).
• Reference letter from their former or existing Bank or Financial Institution not older than 3 months.
• An updated and comprehensive CV.
• Scanned coloured copy of Passport.
• Supporting Documentation in relation to their annual income (such as tax declaration, income, any profits or dividends, any company relationships, etc.).
• Title deeds, dividends, relationship with companies and any other source of income that to establish the value and source wealth.

For any company who wishes to set up a bank account in Cyprus the following documents must be submitted:

• A business profile of the company
• Certificates of Directors, Secretary and Shareholders
• Certificate of Good standing for companies is older than 2 (two) year
• Certificates of Incumbency
• Certificate of Incorporation
• Certificate of Registered office Address
• Memorandum and Articles of Association,
• Corporate structure that clearly shows the Ultimate Beneficial Owner/s (UBOs) interests/benefits.
• Audited Accounts of the company where applicable.

Members’ Certificates

Any physical person who is related to the company such as UBOs, shareholders, Directors, Secretary, signatories, cardholders shall need to provide the same documents as above for an individual account opening. A meeting must also take place with the company’s UBOs.

(IMPORTANT NOTE: all documents regarding the Corporate and Personal account opening & Account maintenance in Cyprus must be in Greek or English, if not they must be officially translated.)

According to guidelines set out by the European Council’s Directives EU 2015/849 and EU 2018/843, companies incorporated or registered in the Republic of Cyprus must obtain and hold adequate, accurate and up-to-date information on their beneficial ownership, including details of the beneficial interests held which must be submitted and kept updated in the relevant portal of the Registrar of Companies.

WHO IS  CONSIDERED A BENEFICIAL OWNER (BO)?

Beneficial Owner means any natural person(s) who ultimately owns or controls the company and/or the natural person(s) on whose behalf a transaction or activity is being conducted.

WHO CAN ACCESS THE BO INFORMATION?

 The information on the beneficial ownership is accessible to:

1. The Competent Authorities and Financial Intelligence Units, without any restriction such as:

• The Cyprus Securities and Exchange Commission (CYSEC)
• Unit for Combating Money Laundering (MOKAS)
• The Department of Customs and Excise
• The Tax Department,
• The Police;

2. obliged entities, within the framework of customer due diligence in accordance with EU Directive 2015/849, Chapter II;
3. any person or organisation that can demonstrate a legitimate interest.

During the interim solution, the obliged entities and members of the general public will not have any access to the information held in the Register.

The particular provisions of the operation of the registry as well as the procedures for verifying legitimate interest will be determined by relevant Regulations. It is noted that access to the information on beneficial ownership shall be in accordance with provisions of the data protection rules. Exemptions rules for the access to the register are found in article 61Α (9). The specific provisions for the creation and operation of the register will be determined by relevant Regulations.

WHICH ENTITIES MUST REGISTER?

• Companies incorporated or registered in the Republic of Cyprus under the Companies Law Cap.113.
• European Public limited liability Companies.

Note: The requirement for Registration requirement does not apply for the following companies:

1. Companies listed on a regulated market who are subject to disclosure requirements consistent with Union law.
2. Companies whose directors submitted an application for strike off pursuant to Article 327 (2A)(a) of the Companies Law, Cap. 113, prior to the commencement of the Directive.
3. Companies whose liquidation has been enacted before the commencement of the Directive.

PROCEDURE OF THE BO REGISTRATION / HOW DO I REGISTER?

A company must first subscribe and obtain access through the government gateway portal “ARIADNI” before proceeding to register for the BO register. To that extent the e-filing codes given by the ROC to access the ARIADNI Portal shall not apply to the system of beneficial owners.

DEADLINES

A period of 6 months, starting from the 16^th of March 2021, will be given to all existing entities to upload their BO’s data on ARIADNI portal.

In case of a change in the information of a BO, the company and its officers have an obligation to submit any changes on the portal within fourteen (14) days.

Entities incorporated from the 12^th of March 2021, must upload electronically onto the BO Registry, all the required information of their beneficial owner or owners within thirty (30) days.

Within December of each calendar year, a company must electronically confirm through the Portal its Beneficial Owners and any possible changes to them thereof.

PENALTIES

For companies incorporated after the 12^th of March 2021, that have not submitted the BO details within the abovementioned 30-day deadline, no penalties shall be issued for the year 2021.

As of 12^th of March 2022 any failure to comply with the abovementioned provisions will result to a financial charge of €200 (Two Hundred Euros) with an additional financial charge of €100 (One Hundred Euros) for each day of continuation of the infringement, with a maximum charge of no more than €20,000 (Twenty Thousand Euros).

Every company registered in the Republic of Cyprus must submit an annual Returns Report commonly known as HE32 together with the Audited financial accounts of the company for the previous year. Where a company is submitting for the first time, there is an eighteen (18) months period for preparation and submission as of the date of incorporation. For consequent years the Annual Returns must be submitted within 28 days from the previous reference date of the initial submission as per CAP.113, 120 (1A).

PENALTIES

For companies that do not comply with the above mentioned requirements the Registrar of Companies imposes the below penalties as per Cap 113 Art. 120(4):

• For Annual Returns HE32 until the year 2020, the companies shall be subject to a one-off financial charge of Forty Euros (€40) per year.
• As of 1/04/2021 any company who fails to submit their Annual Returns HE32 accompanied by its Financial Statements before the end of the year 2020 shall be subject to a one-off financial charge of Fifty Euros (€50) and a further financial charge of One Euro (€1) for each day of continuation of the infringement during the first six (6) months, and two euros (€2) for each day of continuation of this infringement up to a maximum total amount of five hundred euros (€500).

To this extend Demetris Ch. Demetriades LLC is by your side to assist and coordinate with your auditors for the submission of all pending Annual Returns HE32.

Annual Fee for the year 2021 is extended until 31 December 2021 without the imposition of the additional charges.

The above amendment shall be deemed to have entered into force on 30 June 2021.

All companies registered in the Republic of Cyprus must pay at the Registrar of Companies an annual levy of €350. For companies that fall within a group the total amount is capped at €20.000.

ISSUE 1 – BRANDING

Branding is the key to any successful business, finding the right name to distinguish yourself from the market is difficult and requires some due diligence.

Once you have an idea of the name you wish to use, it is important to check that no other identical or similar names exist in the market. We recommend doing a preliminary google search of the name, checking the well-known social media platforms and going even further to check the Registrar of Companies (hereinafter referred to as “ROC”).

The first step required in incorporating a company in Cyprus is to obtain an approval by the ROC for the proposed company name. It is our recommendation to have at least 2 alternative names, as a name may not be approved for one of the below reasons. The name approval may be submitted electronically and requires approximately 5-7 working days to be evaluated.

A company name may not be approved for one of the below reasons:

• Resembles to any organizations registered in Cyprus and Overseas.
• Resembles to any registered trademarks in Cyprus and Overseas.
• Is considered misleading as to its size, type and status.
• When it indicates a relationship with the Republic of Cyprus, the President, the Minister, the Ministry, the Government Department, the Local Authority unless it corresponds to reality.
• When the name only includes a general description of the activity or quality or location provided.
• Registered under a name that in the opinion of the Council of Ministers is undesirable.
• includes any of the following words “National”, “International”, “Democracy”, “European Union”, “Europe”, “Euro”, “bank” or “casino” except in special cases.
• Includes the word “cooperative”, “municipal”, “privileged”, or “recognized”.
• Should not include the name and/or surname of a person other than the director, shareholder or owner unless there are reasons for their acceptance.

Tips: Individuals are allowed to incorporate a company under their own name, unless a name already exists in the records of the ROC. In such a case we propose including your initials and/or a middle name or incorporating a relative’s name to surpass the misleading criteria.

Moreover, where a client has a name in mind which is not acceptable by the ROC, we suggest including a word (noun) in the begging or in between or at the end of the name, to distinguish it from the other companies. Another option to consider, is incorporating your initials in the name.

ISSUE 2 – STRUCTURE

For Business setups with a sole Director and Shareholder, we usually use our standard Memorandum & Articles of Association that allow the individual general freedom on the company, however such freedoms must be addressed and often restricted when setting up a business venture with multiple shareholders and directors.

Often new partnerships fall out even before commercialising their business as a result of failing to deal with fundamental management issues of the company. Focused to the end goal of bringing their ideas into fruition, partners fail to agree fundamental issues and procedures such as voting rights, deadlock clauses, falling out clauses, end goals, targets to be achieved, which often result in costly and lengthy court battles.

Tip: In order to avoid such issues, we recommend drafting a tailored Memorandum & Articles of Association for your business as well as a shareholder’s agreement which will address all aspects of the business, even those not covered in the Articles of Association.

ISSUE 3 – SUBSTANCE REQUIREMENTS

Substance requirements are an issue that we address with our overseas clients as they are usually not based in the Republic of Cyprus. Clients that wish to take advantage of the benefits afforded to companies incorporated in Cyprus need to comply with the below requirements:

• Management and decision making must be made in Cyprus;
• Have a local employee on payroll;
• Having an office in Cyprus;
• Having a local telephone line.

We offer substance solutions for you and your company where we can provide an all in one package saving you the trouble of arranging for all the above.

ISSUE 4 – TRUSTEES AND NOMINEE SERVICES

A nominee is an individual appointed by the owner of the company (Ultimate Beneficial Owner – UBO) as a director and/or secretary and/or shareholder where he holds the position for and on behalf of the UBO.

Where a client wishes to remain anonymous, it is suggested to appoint a nominee to act in the specific position in accordance with the UBO’s instructions. Such a nominee may be a legal entity or a natural person.

Tip: It is required by the law to disclose such nominee relationships to financial institutions for due diligence and AML (Anti Money Laundering) purposes nonetheless the general public will have no knowledge of the UBO’s relationship with the company.

Relevant articles that might interest you with regards to Cyprus companies are:

• Obligations of Cyprus Company
• Annual Levy on Cyprus Companies

We inform you that the Department of Registrar of Companies, in the context of measures taken by the Government to support companies/businesses affected by the restrictive measures imposed to limit the spread of Coronavirus, has announced the following measures:

1. The publication process is suspended in the Official Gazette of the Republic for three months notice for strike off of non-compliant companies, until January 2021.

2.Payment of Annual Levy € 350:

The option to pay the annual levy for 2020 is extended until December 31, 2020 without imposing an additional charge of 10% and 30%.

3. Imposition of a fee for late submission of forms to the Registrar of Companies:

In co-operation with the House of Representatives, the implementation of the financial charge for the late submission of statutory forms to the Registrar of Companies will be postponed to 2021.

4. Submission of Financial Accounts of 2020:

The Financial Accounts dated 01/01/2020 to 31/12/2020 may be submitted to the Department until 28/01/2021, without charge of € 20 for late registration.

As of 1^st February 2013, the levy is payable as follows:

• The annual levy on companies dormant or not is payable as of the year of incorporation. Exempt are only companies under liquidation or winding up.
• The annual levy must be paid no later than 30^thJune of each relevant year;
• Failure to pay the annual levyby 30^th June shall have the following penalties:

– For a delay of up to 2 months  – a 10% penalty;

– For a delay between 2 and 5 months – a 30% penalty.

• Non-payment of the levy shall be given notice of strike off by the Registrar of companies and in the event of non-compliance the registrar will proceed with deregistering the company.
• Reinstatement fees from its strike off has a penalty of €500 (in addition to the outstanding amount of the levy) is imposed and €750 where a company is re-instated after the two-year period.

One of the principal question clients ask before deciding in which jurisdiction to set up their business is the cost of registration and running of a company.

This article focuses solemnly in the Jurisdiction of Cyprus.

The fees involved when setting up a Cyprus company:

1. The registration or set up fee
2. The annual fees for nominee services
3. The accounting & auditing fee
4. The annual expenses payable to the Registrar of Companies

1. The registration or set up fee

Our fees for incorporating a Cyprus company start at €1.500 plus 19% VAT if applicable. These fees include the incorporation costs and certified documents issued by the Registrar of Companies (ROC).

2. The annual fees for nominee services

Annual fees include the fees for the services of nominees, secretary and registered office. We advise all clients that are abroad to appoint our law firm as your secretary as we will be able to make any changes in the ROC on your behalf in a very timely and cost-effective manner. Fees available upon request.

3. The accounting & auditing fees

It is compulsory to have hire Accounting & auditing services for your company. The fees for such services vary substantially depending on the following factors:

1. the number of transactions the company executes each month/year
2. the size of the firm you decide to hire

A Cyprus company needs to register with the Inland Revenue Office and get a tax number. From then on it has to file audited accounts every year and pay tax, if appropriate.

Some companies are also registered with the VAT Department and get a VAT number. In such case, they have to file VAT return every three months.

Auditing & Income Tax (preparation of IR4) fees start at €1.500 plus VAT per year. Moreover, if the company wishes to outsource the accounting, payroll and VAT services fees start at €250 per month.

Please note that the above fees vary and increase depending on the requirements of each company.

4. The annual levy payable to the ROC

Annual Return

Each year a company has to file an annual return (annual report) with the ROC known as HE 32 which records the changes that took place in the company during the year. With this report the financial accounts of the company and all relevant minutes of the company need to be submitted at the ROC.

Our fees for the preparation and submission of annual report to the ROC is €180 plus VAT.

Special Government Levy

All companies registered in the Republic of Cyprus must pay at the ROC an annual levy of €350. For companies that fall within a group the total amount is capped at €20.000. Non-compliance may result in penalties and eventually striking off.

Other fees

If you want to open a corporate bank account or require other administrative or legal services these shall be agreed separately.

It is a fundamental principle of law that a company limited by shares should only in limited circumstances reduce its share capital. This principle derives from the need to protect third parties such as creditors against the risk that the company’s assets could be transferred and/or removed depriving them of their security over the debts. In order to safeguard such risks a reduction is only feasible subject to the approval by the appropriate District Court in the Republic if certain requirements are met.
A Company registered in the Republic of Cyprus can is if so authorised by its Articles, reduce its share capital by way of special resolution to:

• Either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; or
• Either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; or
• Cancel paid up share capital for the purpose of writing off losses of the company; or
• Cancel paid up share capital by the creation of a reserve, to be called “the capital reduction reserve fund”

Reasons & Benefits for a reduction of share capital

Once a company reduces its capital the reserves arising from a reduction are treated as realised profit and are distributable immediately. This is a relatively simple way for private companies to create a distributable reserve which can be used for the following reasons:

• To eliminate a deficit on the company’s profit and loss account and thereby enable the company to pay dividends
• To return excess capital to the shareholders
• A means of paying cash to shareholders where the company does not have sufficient distributable reserves to pay a dividend.
• The capital reduction proceeds can be used for conversion of non-distributable reserves to distributable reserves and reduce accumulated losses.
• It may lead to the return of any surplus capital to shareholders
• The procedure can also be used to simplify the capital structure of the company by eliminating certain classes of shares which have no valuable rights attached to them.

Procedure

A Share Capital reduction is effective subject to confirmation by the Court. The Court may require the company to show that no third parties are affected negatively by this reduction, and if so their consent shall be required. The Court may further request a publication to be made to give any third party the opportunity to file an objection to such a reduction.The procedure is mapped out as follows:

1. Passing a Shareholders special resolution approving the reduction of the share capital of the company with a right to vote majority of at least 75%.
2. If the company has creditors, such consents will have to be obtained and submitted with the court application as appendix.
3. Obtaining the courts consent and judgement.
4. Submitting relevant documents to the Registrar of Companies to finalise the reduction and obtaining relevant certificate.

Effective date of reduction of Share Capital

The reduction of the share capital will have no effect unless and until step (3) above takes place and the necessary filing is made to the Cyprus Registrar of Companies (s.67 (2) of the Law).