How to set up a company in Cyprus

The private limited liability company is the most appropriate vehicle for setting up a sole shareholder subsidiary company in Cyprus. Legal entities of this type offer the benefits of:

• separate legal personality and
• limited liability.

Due to the applicable statutory requirements, no other corporate form is actually an option where there will be a sole shareholder (public limited liability companies must have at least seven members).

In general, there are no capital requirements by reason of a foreign company being shareholder in a Cyprus company. Nor are there any requirements as to capital and or ownership of quotas or shares registered in the name of foreign companies. Capital requirements may apply in the cases of regulated entities e.g. credit institutions, investment firms, alternative investment funds, insurance undertakings etc but these requirements would apply regardless the origin of the shareholder. Note that minimum capital requirements apply with regard to public limited liability companies, independently of the origin of the shareholders.

A company is governed by two bodies: the general meeting and the board of directors. There should be at least one director and one secretary (exceptions apply with regard to regulated entities e.g. credit institutions, investment firms, alternative investment funds, insurance undertakings etc). By way of exception, in the case of a company with a sole shareholder, the director and the secretary may be the same person. Alternate directors and a deputy secretary may also be appointed if the shareholder so wishes. Except as specified in the law, the competences and respective powers of the governing bodies of the company may be determined in the articles of association in the way that best serves the needs of the shareholder. In default of such provisions most decisions will fall within the competence of the directors, with the exception of decisions which under the law should be decided by the general meeting e.g. the increase and decrease of capital, the winding up, the amendment of the name and the articles of association of the company.

The registered office of the subsidiary must be located in Cyprus.

No legal requirements apply as a matter of corporate law when a foreign company incorporates a subsidiary in Cyprus. Any legal requirements that may apply in the case of regulated entities and sectors are specified in the relevant statutes and commonly apply regardless the origin of the shareholder (see the comment on capital requirements above).

Anti-money laundering requirements would need to be complied with. This would include explanations on the origin of the initial capital, the source of funds and the contemplated business and transactions.

Instructions need to be given to an advocate for the setting up of the company. Subject to mandatory provisions of the law, the memorandum of association and the articles of association may be drafted to serve any specific needs in terms of objects and or special arrangements that may be required. Alternatively, they may be drafted in a broad way and adopt standardized provisions and procedures. The sole shareholder needs to execute these documents which will then be submitted in original form to the competent authority i.e. the Registrar of Companies for registration. An officer of the company will need to execute two additional forms indicating the registered office of the subsidiary and disclosing certain details of the persons appointed as officers i.e. the director(s) and the secretary.

Foreign companies must satisfy the anti-money laundering and know-your-client requirements of the service provider which can become a very bureaucratic and time-consuming procedure but which is nevertheless necessary and obligatory. Opening of a bank account in Cyprus for a local subsidiary would also pose similar challenges as the credit institutions are obliged to apply anti-money laundering and know-your-client policies.