During a recent meeting of the Cyprus Bar Association's Committee for Company Law, committee members recognised the urgent need for the comprehensive review and modernisation of company law and governance. The issue has also been raised in Parliament and hopefully marks the start of a new way forward for company law and governance to meet the needs of today's businesses.
A new law on the regulation of fiduciaries, administration businesses and company directors is expected to be tabled before the House of Representatives before the end of 2012. Among other things, it aims to regulate the provision of administration services to companies and establish licensing procedures and rules on the provision of corporate services, offering security to clients and strengthening confidence in the sector.
The Companies Law provides that each company with subsidiaries must consolidate its financial accounts with those of its subsidiary companies as prescribed by international accounting standards. The basic provisions of the law on consolidated accounts were recently amended to illustrate the circumstances in which companies may be exempt from these obligations.
In July 2010 Cyprus took action to implement the EU Shareholder Rights Directive by transposing it into the Company Law by virtue of Amendment Law 60(I)/2010. The amendment law introduced new rights for shareholders of publicly listed companies to attend and vote at general meetings remotely, gain access to relevant information and raise questions, among other things.
The Company Law recently underwent significant changes. One such change was the deletion and replacement of Sections 114 to 117, which contained anachronistic provisions regarding the maintenance of corporate share registers. The new sections have removed references to Cyprus's old colonial status and modernized the relevant provisions to bring them into line with today's commercial requirements.
It is a long-established rule that a Cypriot company must have a corporate seal, which must be kept at the company's registered office under the custody of the company secretary as directed by the board of directors. Recent amendments to the Company Law have clarified the position on corporate seals.
After some delay, Cyprus has implemented the EU Statutory Audit Directive through its enactment of the Law on the Obligatory Audit of Annual and Consolidated Accounts by Legally Registered Accountants and Audit Firms. The new law introduces statutory requirements for the audit profession and a public oversight system for regulating auditors and audit firms and clarifying their duties in line with the EU directive.
A company incorporated outside Cyprus may establish a branch or representative office in Cyprus, provided that within one month of the establishment date it registers itself as an overseas company with the registrar of companies. Overseas companies intending to establish a branch in Cyprus are subject to certain regulatory filing requirements.
Under Cypriot law, any act considered to be beyond the company’s legitimate powers (as provided in its memorandum of association and articles of association) is ultra vires and void ab initio. However, directors, as the company's agents, are personally liable for any loss caused to the company through their own illegal or ultra vires acts.
Under Cypriot law, every company limited by shares must have at least one shareholder. Even though legislation does not permit the issuance of bearer shares, it is possible to obtain absolute secrecy of the shareholders’ identity through nominee or fiduciary arrangements.
The Regulation of Fiduciaries, Administration Businesses and Company Directors Bill is soon expected to become law. The new law will establish and impose strict regulations on trust and company service providers. It is of particular interest to lawyers and accountants who manage and control incorporated companies in order to satisfy tax requirements for resident companies.
In recent years Cyprus has introduced considerable changes to the Companies Law and the relevant regulations, rendering the island an attractive jurisdiction for international businesses to conduct activities using various types of Cypriot legal entity.
The fees levied for the registration of charges, limited liability companies and partnerships and business names have been revised. Although almost all the fees have been increased, the fee for the registration of charges has been reduced to a maximum of C£300, replacing the previous fee of 0.3% of the amount for which the charge was created.
Until recently, Cyprus - unlike many other countries - had no legal provision allowing a company to transfer its seat of incorporation into or out of the jurisdiction. However, foreign companies wishing to redomicile in Cyprus will soon be able to make the transfer without the need for a winding-up process; the change in law will help them to benefit from Cyprus's advantageous tax regime.
The Cyprus Companies Law 1951 (Cap 113) is based on UK company legislation. After it came into force, no major amendments were made to the law for several decades. However, in recent years changes have been made in order to harmonize its provisions with the EU Company Directive in light of Cyprus's accession to the European Union in 2004.
Since October 1 2004 a complete liberalization of foreign direct investments has applied for investments in Cyprus originating from outside the European Union. Non-EU nationals registering Cypriot companies or acquiring shares in existing companies no longer need the approval of the Central Bank of Cyprus or any other Cypriot authority.