Since the articles of association can be adjusted to reflect the shareholders’ arrangement, it is possible to include in them provisions which provide to the minority further protection (for example veto rights, requirement for increased majorities, tag-along and drag-along provisions and other mechanisms to deal with possible deadlocks). In addition, protection to the minority is afforded by the Companies’ Law which permits oppressed or unfairly treated shareholders to apply to the Court for an order to remedy the situation. Foreign shareholders and directors The shareholders and directors of a Cyprus company may be non-Cypriots. The secretary of the company must be in Cyprus. Compliance obligations Cyprus companies must in each year hold annual general meetings, prepare audited financial statements, submit an annual return, and pay an annual levy of EUR 350. 3.B Partnership Partnerships operate by decisions of their partners passed in accordance with the partnership agreement. They must keep books of accounts and for this purpose partners (except for LLP partners) must keep proper accounts in a manner necessary to present or explain their transactions. When the taxable income of a partner exceeds €70.000 then audited accounts must be prepared. 3.C Fund Funds operate in accordance with the provisions in their articles of association, their investment policy and prospectus, and the law. The governing body of an AIF or its external manager must consist of a certain minimum number of natural persons who must have executive function (depending on the type of

AIF, this minimum number varies from two to four). The registered office and business offices of all types of AIFs must be in Cyprus. In certain cases, AIFs must appoint a local depositary and appoint a compliance officer. Filing and reporting obligations that an AIF must comply with on a monthly, quarterly or an annual basis, vary depending on its type. 3.D Trust The settlor of a Cyprus International Trust and the beneficiaries must not be tax residents in Cyprus during the year preceding the year of creating a CIT. At least one of the trustees must be Cyprus resident. Trusts are managed by their trustee in accordance with the mandatory provisions of the law and the provisions in the trust instrument which can regulate what powers the trustee has and to what restrictions his powers are subject. It is possible in the trust instrument for the settlor to reserve powers, or to otherwise restrict the ability of the trustee to take certain actions with the trust fund. Where a protector is appointed and the trust instrument requires his consent for certain type of decisions, the consent of the protector must be obtained. There is no statutory obligation to prepare or file audited accounts for the trust. The trustee in the exercise of its duties must keep proper books of accounts. 4. Foreign Investment, Thin Capitalisation, Residency and Material Visa Restrictions 4.A Foreign Investment & Thin Capitalisation There are generally no restrictions on investment in Cyprus by foreign investors. Foreign persons can be both shareholders or directors in Cyprus companies/entities without being needed to obtain approval or license.

ILN Corporate Group – Establishing a Business Entity Series

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