What is the main source of law authorising this entity form?

Companies Law (Cap. 113).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

A private limited liability company maintains a separate and distinct personality from that of its shareholders or related parties;

(Maximum) period of existence

Limited Liability Companies have perpetual duration;

Governing document(s)

A Limited Liability Company is Governed by its Articles of Association and Companies Law (Cap. 113);

Liability of incorporators / shareholders

Incorporators/shareholders are liable to the extent of their contribution to the capital of the company and are not personally liable for the liabilities and/or acts and/or omissions of the company. The Corporate veil may be lifted in extremely rare instances

(Governing) bodies

A company is managed by its Board of Directors, the powers of which may be altered (restricted or extended) by the Shareholders by amending the Articles of Association of the company.

Other particularities

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

The company has the ability to enter into international restructurings. Under Cyprus Law, the company may enter into a cross border merger and demerger, asset acquisition, equity acquisition, or exchange of shares.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

The permissible maximum number of shareholders for a private company is 50 persons, exclusive of employees. A private company may change its corporate status and be "floated" as a public company, should it be large enough and its circumstances be such as to warrant the raising of capital from the general public.

Can this type of entity be used for a non-profit or charitable organization?

A Limited Liability Company by Shares cannot be used as a non-profit purpose due to the fact that it is allowed to distribute dividends. An alternative type of company that is used primarily for non-profit purposes is a company limited by guarantee, in which the liability of its members is limited to the particular amount which each member undertakes to contribute to the company's assets. Currently, there are four (4) main types of non-profit organisations:

• Non-profit companies (entities established for non-profit purposes, such as companies limited by guarantee);
• Charitable Trusts;
• Foundations (entities all the assets of which are dedicated to a specific cause); and
• Societies (unions of at least 20 members established for the achievement of a specific non-profit objective).

Clubs (unions of at least 20 members established for entertainment purposes).

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

The first step of the process is the official approval of the company's name by the Registrar of Companies of Cyprus.

Main Documents:

• Memorandum of the company, which contains the activities and scope of business of the company, executed by the company's shareholder(s);
• Articles of Association, which contain the rules as to the company's internal procedures, management, and functions, executed by the company's shareholder(s); and
• Forms of the Registrar of Companies: H.E.1 (Sworn Affidavit by a qualified lawyer before the District Court), H.E.2 (information regarding the registered office of the company) and H.E.3 (information regarding the Director(s) and Secretary of the company).

Involvement of notary, company register, governmental authorities

The aforementioned documents must be submitted electronically to the Registrar of Companies through the e-filing system. The original documents must be held by the company's Secretary.

Timing (estimate)

The timeframe for the incorporation of the company is four (4) to five (5) working days for the name approval and six (6) to seven (7) working days for the incorporation of the company.

Main costs, including registration and similar fees (excluding legal fees)

The cost for the company's incorporation is as follows, which includes express services:

• a capital duty of 0.6% of the authorised share capital; plus
• €485.00 payable to the Registrar of Companies for the registration of the company and the issuance of duly certified corporate documents (certificate of registered office, certificate of director(s) and secretary, certificate of shareholders, certificate of incorporation, memorandum, and Articles of Association.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The company's activities are restricted by its Memorandum, which must contain the objects of the company.

Minimum number of incorporators / shareholders and residency requirements

The minimum number of incorporators/shareholders is one (1) and the number is limited to 50 by the Articles of Association, although there is no statutory limitation on the number of beneficial owners. There are no nationality or residency restrictions.

Minimum number of directors (or other applicable officers) and residency requirements

A Private Limited Liability Company must have at least one (1) Director and one (1) Secretary.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Although the law does not impose minimum share capital, a minimum of one (1) share must be issued. It is common for companies to have an initial share capital of € 1,000.00 divided into 1000 shares of € 1.00 each. Various classes of shares may be issued with different rights attached to each class. Such variations in the company's capital must be stipulated in the Articles of Association.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

As from 2023, a Cyprus incorporated Company is by default considered a tax resident of Cyprus provided it is not tax resident in any other jurisdiction. Therefore, there is no requirement for the majority of the Board of Directors to be Cypriot residents in order for the Cyprus Company to be considered as tax resident of Cyprus. However, the Company is required to demonstrate sufficient substance in Cyprus (i.e. hire at least one employee in Cyprus, have a physical office in Cyprus, Company’s economic activity is taking place in Cyprus etc).

The registered office, register of members, company seal etc., should be located in the company's registered office in Cyprus, and statutory functions related to its corporate status should be carried out in Cyprus.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

All the companies incorporated in Cyprus must be registered with the Cyprus tax authorities, once they are incorporated.

Also, at least one of the directors of the company needs to have a Cypriot Tax identification number, at his capacity as director of the Cypriot company. Tax identification numbers are obtained through “tax for all” online platform

(https://www.mof.gov.cy/mof/tax/tfa.nsf/home/home?openform)

What is the title of the applicable company registry?

Department of the Registrar of Companies and Official Receiver.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

The information and documents listed below must be filed with the Registrar of Companies as a prerequisite for the incorporation and continued good standing of the company:

• Memorandum and Articles of Association;
• Registered Shareholders;
• Share Capital;
• Directors;
• Secretary;
• Registered Office;
• Audited Financial Statements;
• Mortgages and charges on the company's shares:
• Good Standing, insolvency, strike off and voluntary liquidation; and
• History of changes in the company's structure (names, Board of Directors, shareholders, share capital, secretary, registered office).

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The Board of Directors' responsibility is to ensure the well-being of the company by collectively directing and managing the affairs of the company in the company's best interest, also taking into consideration the interest of the shareholders and the stakeholders in general. Furthermore, attendance at board meetings is an integral part of their directorial role during which the board members exercise their voting rights. It may be possible to allow certain veto rights to the members of the company, through the Articles of Association, but that should not restrain the ability of the Board of Directors to manage the company.

How are the members of the executive body appointed, dismissed and replaced?

The procedure for the appointment/dismissal or replacement of the members of the board of directors is generally governed by the company's Articles of Association in conjunction with the law. The first director(s) is (are) generally appointed by the shareholder(s)/incorporator(s) of the company. Thereafter the Articles of the company provide when the existing directors will retire and be eligible for re-election.

The company may by ordinary resolution of the shareholder(s) of which special notice should be given in accordance with the Companies Law, remove any director before the expiration of his period of office, notwithstanding any provisions in the company's Articles of Association or any agreement between the company and such director. Such removal, however, shall be without prejudice to any claim such director may have for damages for breach of any contract of service between him and the company.

Any changes in the company's board of directors must be registered with the Registrar of Companies, including changes in the directors' details, such as passport number, residential address etc.

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes, a legal entity may be appointed as a director.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

Generally, no. However, the Articles of Association may contain provisions about the appointment of non-executive and/or executive directors and/or a managing director. Specific requirements may apply in case the company is under the supervision of a regulated body (i.e. Cyprus Securities Exchange Commission or the Central Bank of Cyprus). In accordance with the provisions of the Companies Law, all of the appointed members of the Board of Directors bear the same responsibilities and risks, and they owe the same fiduciary duties to the company.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The following matters comprise a non-exhaustive list of issues for which the shareholders or their proxies vote in a General Meeting –

• alteration of the company's Memorandum and Articles of Association;
• alteration of the company's capital;
• change of the company's name;
• approval of the company's annual accounts;
• final approval of final dividends;
• issues pertaining to mergers and re-organisations;
• decisions to wind-up the company; and
• any issue or approval of a director’s decision expressly provided to be so approved by the Articles.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

The first Annual General Meeting (AGM) of the shareholders of the company must take place, by law, within 18-months from the date of incorporation of the company. Following the first AGM, all other AGMs should not take place more than 15-months from the previous one. Any General Meeting of the shareholders of a company, other than Annual, is called an Extraordinary General Meeting. The Articles of the company usually set the quorum necessary for convening a general meeting. In general, an absolute majority (50+) of the shares which are carrying voting rights is required for decisions for which an ordinary resolution is needed. The vote of more than 75% of the shares carrying voting rights is required for decisions for which the Articles of Association need a special resolution.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Generally, no. Public limited companies and to a greater extent, companies listed on the stock exchange are subject to a "stricter" legislative and regulatory regime, which aims to protect the investment and the general public, such as the Corporate Governance Code (CGC). The CGC aims to strengthen the monitoring role of the Board of Directors in listed companies, protect minority shareholders, improve transparency, provide timely information, and safeguard the independence of the Board of Directors in its decision-making.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

It is a legal requirement that every Cyprus company must keep books of account to record its transactions which reflect the true and correct position of the company's affairs.

Annual financial statements must be prepared and filed with the Registrar of Companies showing the true and fair picture of the affairs of the company and explaining its transactions. The financial statements must be prepared according to International Financial Reporting Standards. In addition, in accordance with Cyprus tax laws, every company should submit to the tax authorities a tax return on an annual basis, together with its financial statements.

The first financial statements/annual returns must be submitted to the Registrar of Companies no later than 18-months from the registration of the company and thereafter once a year and not later than 15 months following the end of the financial year.

Is the entity permitted to determine its own financial year?

Yes, however, it is recommended that the financial year ends on 31 December in order to comply with the year-end used by the tax authorities.

Is the entity subject to any statutory (external) auditor obligations?

Cyprus companies are obliged by law to have their accounts audited once per year by a certified local auditor, regardless of turnover or the number of transactions. The director shall cause to be made, for every company, a complete set of financial statements as prescribed by the International Accounting Standards.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

There is no legal requirement for the company secretary to be physically located in Cyprus. However, for practical and compliance purposes, it is common to appoint a Cyprus based secretary, particularly if the company is managed and controlled from Cyprus for tax residency purposes.

Auditors of a Cyprus company must be licensed and registered in Cyprus under the regulations of the Institute of Certified Public Accountants of Cyprus (ICPAC). This ensures that statutory audits are conducted in accordance with local laws and International Standards on Auditing.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Ownership of shares either directly as registered owner/shareholder or indirectly via nominee structure, in which case the trust deed evidences the ownership of the beneficiary of the shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Members of a company may, subject to the Articles of Association, choose to issue different classes of shares, and any such class may carry particular rights or have particular limitations. The classes of shares which are commonly used are the following:

• Ordinary shares, redeemable preference shares, non–voting shares carrying only rights for dividends, shares carrying only voting rights that relate only to the distribution of dividends, return of capital on winding up, and/or the right to appoint directors.
• In general, the law does not stipulate what specific rights are to be conferred on holders of a particular class of shares. This aspect is essentially regulated by the company's Articles of Association.

What documentation is required for the transfer of ownership interests?

For every transfer of a share, an instrument of transfer must be executed by the transferor and the transferee, and the secretary must record such transfer in the minute book of the company.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

There are no formal requirements in relation to notarisation or stamping. Each change of ownership, regardless of the number of shares, must be filed with the registrar of companies and the following documents in original form must be held by company's secretary at the company's registered office –

• a waiver in writing by other shareholders of their pre-emption rights if any;
• executed Instrument of Transfer signed by the transferor and the transfer;
• a resolution of the directors approving the transfer of shares;
• existing share certificate(s) must be cancelled;
• the secretary of the company makes the necessary amendments in the corporate register;
• the company issues a new share certificate under the name of the new shareholder;
• the company notifies the Registrar of Companies with a HE57 Form, which includes the new and the existing shareholders; and
• a new certificate of shareholders is issued by the Registrar of Companies.

In case of purchase of shares due to an increase of capital, the issuer is generally liable to pay a fee equal to 0.6% of the newly issued shares.

Are there any applicable stamp duties imposed when transferring ownership interests?

Other than the fees payable to the registrar of companies for the processing of the change in the official register, there are not any applicable stamp duties.

How are shares issued? (including information on payment obligations, registration requirements)

The incorporators named in the memorandum, on registration of a company, will be entered as members in its register of members. Subject to any restrictions contained in the Articles of Association, the shareholder(s) of the company may authorise the company to increase its authorised capital and allot part or all of the authorised capital to the existing or new shareholders.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Shares may be allotted to persons after the incorporation of the company for cash or non-cash consideration (or a combination of both) and may be issued as fully or partly paid.

The company is at liberty to issue shares at a premium, in which case the allotee is required to purchase the shares at a price in excess of the share's nominal value. When a capital contribution is made without the issuance of shares, there may be tax implications.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

A company limited by shares acting in a general meeting may alter the conditions of its memorandum and cancel the shares which have not been issued/taken up or agreed to be taken, if so authorised by its Articles. The cancellation of unissued share capital is not regarded as a reduction of capital because it does not reduce the amount of issued capital available to the company. The cancellation of issued share capital may be done through a reduction of share capital.

Provided that the Articles of Association authorise a reduction of share capital, the shareholders may pass a special resolution in order to reduce the share capital. However, no reduction of share capital may be carried out unless it is approved by the Court, safeguards the creditors' (if any) interest, and is fair to all existing members.

Any requirements with respect to distributions to shareholders?

Matters pertaining to the declaration of dividends are normally governed by the company's Articles of Association. Directors have a right and not the obligation to declare dividends. In a general meeting, the shareholders declare dividends, however, the declared amount must not exceed the amount recommended by the directors who have determined the amount payable after review of the company's financial statements, taking also into consideration the company's liabilities and reserves.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

The shareholders of a company may enter into a shareholders' agreement, which is a contractual arrangement:

• Between all the shareholders;
• Between certain shareholders;
• Between the company and all the shareholders; or
• Between the company and some of the shareholders.

The purpose of the agreement is to create a binding arrangement between the shareholders in relation to the corporate governance matters of the company. A shareholders' agreement should not contradict the provisions of the company's Articles of Association.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The company must follow the statutory requirements related to the submission of the financial statements to the Registrar of Companies and the tax authorities. In addition, the positions of the directors and secretary must remain filled at all times.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

A Cyprus tax resident company is taxed on its income accrued or derived from all chargeable sources in Cyprus and abroad.

A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus.

The standard corporate income tax rate in Cyprus is 12.5%. Dividends are generally exempt from corporate income tax and the "special contribution for defence" (unless certain anti-avoidance rules apply).

Any capital gain resulting from the sale of Equity Securities of a company is not taxable, unless the Equity Securities are issued by an issuer which owns, directly or indirectly, real estate located in Cyprus, in which case a 20% tax may be due.

No controlled foreign company (CFC) rules apply in Cyprus.

According to the Provisions of the Parent Subsidiary Directive, the distribution of dividends from one member state to another is free of withholding tax provided that the required conditions are satisfied.

Profits from the sale of shares, bonds, debentures, and other titles of companies established anywhere in the world are exempt from tax.

Summary of any specific matters, e.g. recent or prospective major legal developments

Major legal developments

From 2016 onwards, all companies in Cyprus, including small/dormant companies, are subject to statutory audit and the exception that existed previously in the Law has now been abolished. The Companies Laws was amended in September 2016 in order to transpose the EU Accounting Directive (2013/34/EU) into domestic law.

The main change in the law was the categorisation of Companies and Groups of Companies into Small, Medium Sized and Large. The category of each company and/or group depends on the Total Gross Assets, Net Turnover and Average Number of Employees during the financial year. The provisions of the Law, inter alia, exempting groups of companies from preparing consolidated financial statements if the ultimate parent or parent companies publish consolidated financial statements on the basis of Generally Recognised Accounting Principles, introduced the Management Report as a replacement of the Directors Report, which requires more comprehensive reporting, and introduced additional disclosure requirements to be included in the financial statements of medium and large sized companies.

Examples include specific disclosures for staff costs, audit fees, number of employees, and details about the registered office. Large Companies must disclose on their annual reports policies they implement regarding environmental protection, social responsibility, and treatment of employees. The Directive also imposes additional requirements on large companies to adopt anti-corruption and bribery policies and gender equality provisions.

In line with OECD guidelines, the Cyprus tax authorities on 30 June 2017 issued a Circular revising the transfer pricing framework for companies carrying out intra-group financing activities in Cyprus. Therefore, it is now required that all intra-group transactions are conducted in compliance with the arm's length principle – in other words, at market value or market interest rates. As from the date the circular was issued, all the companies that are involved in intra-group financing are required to prepare a comparability analysis testing the group transaction with a similar transaction between unrelated entities.

As from 1 July 2016, the provisions of the IP Box Regime have been aligned with the recommendations of the Organisation for Economic Co-operation and Development. New rules apply for corporate taxpayers wishing to obtain benefit under the so called "IP Box Regime", related to income derived from IP. The new regulations introduced by the OECD recommended "nexus approach". This approach links the tax benefits of the regime with the R&D expenses incurred by the taxpayer. In general, the new IP Box regime provides for a deduction of 80% from the qualifying profits (only 20% of the qualifying profits are taxed at the rate of 12.5%) earned from qualifying intangible assets.

In early 2021, the Cyprus government transposed the 5th Anti-Money Laundering EU Directive into Cyprus legislation. According to the legislation1, companies and other legal entities incorporated in the Republic of Cyprus have an obligation to register their beneficial owners in a national centralised register. According to the legislation, any individual holding directly or indirectly 25% plus one share (although there are other parameters to consider) should have his personal details in the national centralised register.

In case no natural person is identified as a beneficial owner or there is doubt, the details of the senior management should be disclosed with relevant information. New entities have 90 days from the day of their registration to file the information mentioned above electronically and in the case of change of the beneficial owner or their information, the national centralised register should be updated with the relevant information within a period of 45 days.

Additionally, during the period from 1st October to 31st December of each calendar year, a Company must confirm electronically, to the Registrar its beneficial owners.

Specific matters

Shipping: Since introducing an advantageous EU-approved tonnage tax system in 2010, Cyprus has continued to attract increasing numbers of shipping companies from across the world, which accounts for €1 billion in annual revenue and around 7% of the country's GDP.

Double tax treaties: Cyprus differs from other jurisdictions due to the existence of a large number of double tax treaties (over 60), for the avoidance of double taxation. In brief, most of the treaties provide reduced rates of withholding taxes on dividends, interest and royalties paid out of the contracting state, or the avoidance of double taxation.