If you are in the process starting your own business and have little to no experience on setting a business, we highly recommend reading this article which may identify some legal issues to consider in order to save time and avoid problems down the line.
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.
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