Alternative forms of business organisation

Alternative forms of business organisation

Limited Liability Company

The Law in Cyprus governing limited liability companies is the Companies Act – CAP 113, which is based on the companies ACT 1948 of the United Kingdom.

The majority of companies incorporated in Cyprus are limited liability, where the liability of the shareholders is limited to the amount paid for their shares. Companies must have at least one director and a company secretary. Directors are considered employees of the company and are paid salaried remuneration. In some cases directors may be shareholders as well and thus can choose to some extent to be remunerated by salary or by a way of dividend. The constitution of a registered limited company consists of two documents; the Memorandum of Association and the Articles of Association.

The following is a list of documents and / or items of information that need to be filed with the application to the Registrar of Companies in order to establish a company / branch in Cyprus. International Business Companies must also apply to the Central Bank of Cyprus, accompanied by bank references for the proposed shareholders.

  • Company name (3 choices)
  • Full names of shareholders, addresses, professions and photocopy of the first 3 pages of the passport of all shareholders
  • Bank references
  • Share Capital
  • Nominee shareholders (See note 1 below)
  • Names of Directors
  • Nominee directors (See note 1 below)
  • Secretary (See note 1 below)
  • Registered office (See note 1 below)
  • Objects of new company
  • Bank signatories (See note 1 below)
  • Letter heading


Note 1

Our firm is associated with nominee companies that can hold the shares in trust on the behalf of the beneficiary. In addition, our firm can provide nominee directors, secretary and bank signatories that will only act after instructions from the beneficial owners. Registered office facilities can also be provided.

All of the above will facilitate the speedy registration of the company.

After both applications described above are accepted, the following documents must be filed with the Registrar of Companies:

  • Copies of the memorandum and articles of association (in Greek),
  • Statutory declaration of compliance with the Companies Law signed by a registered practicing advocate.
  • The names of the first directors and secretary
  • The intended address of the registered office of the company (which must be in Cyprus).

Once the registration is completed and the relevant statutory fees are paid the Registrar will issue, in English if preferred, certificates of incorporation of directors, secretary and the registered office. Registration renders the company a separate legal entity distinct from its members. The whole procedure may be completed in a matter of days after all the necessary documents and information is received.

Limited Liability Companies, which are public or which prepare consolidated financial statements, must file their accounts with the Registrar of Companies within 12 months of their year end. Also, all Limited Liability Companies have to file the special form “I.R.4”, which includes information on the financials and tax computations to the Inland Revenue Department within 12 months from their year end.

Limited Liability Companies will prepare accounts usually for 12 months with a year end at 31 December. Limited Liability Companies which are public also have to conform to Stock Exchange regulations.

General Partnership

The definition of a partnership is the relationship between two or more persons carrying on a business in common with a view to profit. The members of the partnership are jointly and severally liable for all debts and obligations, without limitation. Partnership profits are shared by the partners as income, and taxation is paid on this income in exactly the same way as a sole proprietor.

Limited Liability Partnership

A limited partnership consists of one or more partners, called general partners, who shall be liable for all debts and obligations of the partnership and one or more persons called limited partners, who are not liable for the debts or obligations of the partnership beyond their fixed contribution.

Branch/Representative Office

The registration formalities of registering a branch are the same as the registration of a company. Overseas companies may also establish a branch in Cyprus, provided that they file with the Registrar of Companies similar documents to those listed for limited liability companies.

Sole Proprietorship

The owner has unlimited liability for all debts. Cypriots are allowed to carry on business in their name or under a trade name which must be registered as a business name. All business profits are treated as income of the sole proprietor who then pays income tax according to the applicable rates in force.  Foreign investors are also allowed to carry on the same business if they comply with the relevant exchange control regulations and the immigration law and regulations.

Offshore legal entities

The Offshore legal entities in Cyprus ceased to exist on 1st January 2003. International Business Companies (IBCs) in Cyprus are essentially Cyprus registered entities owned by non-Cypriots and operating outside of Cyprus. They are taxed at the same rates as local companies, at 12.5% corporation tax. Establishment of an IBC is made in the same way as a local limited liability company.

Joint Venture

Joint ventures can be set up in Cyprus and registered with the Registrar of Companies. Their operation and treatment is similar to partnerships.

Public Limited Company

Public Limited Companies are limited companies, which are listed in the Cyprus Stock Exchange. In addition to the legislation applicable to limited liability companies, they have to conform to the provisions of the Cyprus Stock Exchange and Cyprus Securities and Exchange Commission regulations.

Trust / Foundation

The Trust is one of the most important and flexible institutions of English law and finds no parallel in any legal system not influenced by English law. The Cyprus legal system is modelled on the English legal system and the concept of Trust in Cyprus is routed in the English law.

The legal framework in Cyprus also allows the establishment and operation of International Trusts which are created by non-residents for the benefit of non-residents.

A Trust (or a Settlement as it is often called) is established by an individual “the Settlor” and is a means whereby property “the Trust Property” is held by one or more persons “the Trustees” for the benefit of another or others “the Beneficiaries” or for specific purposes.

The Settlor can be a Trustee and the Settlor and the Trustees, or either of them, can be Beneficiaries. A Settlor cannot be a Trustee and a Beneficiary at the same time. In law the Trustees are the owners of the Trust Property, although they may not deal with it as absolute owners, but rather in accordance with the provisions of the law relating to Trusts and the rights of the Beneficiaries, as set out in the Trust document. In other words, the Trustees are under a binding obligation to deal with the Trust document.  The beneficial owners of the Trust Property are the Beneficiaries. The Trust Property can include all kinds of assets situated anywhere in the world provided the Trustees have legal control and ownership of the assets according to the law governing the particular Trust.

Trusts can be established:

  • by lifetime gift
  • on a death pursuant to Will
  • by operation of law
  • by accident

A Trust may be created by the owner of property during his lifetime by Deed or upon his death by Will.  No one should enter into a Trust arrangement without first having obtained expert professional advice and ensuring that he understands what he is doing. He should also see that the Trust instrument provides exactly the degree of flexibility or otherwise what he requires.

There are many reasons for which the Settlor may wish to create a Trust but some of the principal reasons are:

  • to avoid or mitigate taxation liabilities – Trusts have traditionally been a very important tax planning device and even today a very high proportion of tax saving schemes involve Trusts.
  • to preserve property in the family – by ensuring that an individual is well provided for, without giving that individual the opportunity of exhausting the family assets because of mismanagement or unsuitable marriage.
  • to benefit disabled or mentally handicapped persons by making them Beneficiaries without passing control of the property to them.
  • to keep control as Trustee over the enjoyment and ultimate destination, despite giving the assets away.
  • to provide flexibility over the identity of the donees and the extent of the interest taken by them in order to take account of future developments.
  • to make gifts for charitable and religious purposes to be held by Trustees for such purposes.