On 19 June 2015, the Cyprus parliament enacted amendments to the Cyprus Companies’ Law, CAP 113(the ‘Law’) in order to make the workings of the Law more streamlined and business friendly.
The amendments to the Law broadly fall into three categories: (i) modernization of certain areas of the Law to assist companies (ii) simplification of procedures facilitating the electronic submission of documents to the Registrar of Companies (the ‘Registrar’) and (iii) strengthening the enforcement powers of the Registrar in order to ensure correct and up to date information is registered at the Registrar’s office in Cyprus.
The most important provisions of the amendments to the Law are the following:
1. Objects of the Company (s4)
It is now sufficient to provide in the objects of a company a very general description that it can carry out any lawful activity. Previously, a detailed description of activities in the objects were required, a requirement which often raised questions and complications as to whether the specific activity was within the objects of the company.
2. Number of Shareholders in a Private Limited Company (s29)
The definition of a private company has now been amended so that not only are employees of the company excluded from the calculation of the maximum number of 50 shareholders of a private company but also employees of the company’s holding and/or a subsidiary company/ies, or of a subsidiary company of its holding company. This amendment importantly provides clients with greater flexibility in using a Cyprus private limited company as a holding company; ie shares in the Cyprus company can now be given by way of incentive to employees of the Cyprus company’s subsidiaries.
3. Need for a Cyprus Prospectus abolished in certain cases (s46A)
The Law has been amended so that whenever there is a listing of shares of a Cyprus company on any non Cyprus exchange no prospectus needs to be filed with the Registrar. It is noted that previously the exception only applied to the listing of shares of European regulated markets, a limitation which caused considerable complications in the event of listings on other markets.
4. Notification of Payment of any unpaid or partly paid share capital (s51A)
The Law now provides that one should notify the Registrar as and when payments are made on partly paid shares.
5. Financial assistance permitted for employees of group companies (s53)
The exemption of the prohibition for financial assistance by a company for the 2 acquisition of its own shares whereby the company could provide financial assistance for the acquisition of shares in the company by its employees has now been expanded to include employees of this group so that a Cyprus holding company can now, in effect, give free shares to and/or otherwise assist the acquisition of its shares by employees of operating subsidiaries.
6. Pre emption rights in public Companies (s60B)
The Law now clarifies that the disapplication of pre-emption rights in a public company need not be with reference to a specific proposed allotment but may be general. This provides more flexibility to a public company in raising equity.
7. Registration of a Charge (s90, s90(1A))
The Law now clarifies that:-
(i) the exemption from the obligation to register a charge against the assets of a company does not only apply to a pledge over shares which the company owns in another entity but is extended to cover charging of dividends and related rights which are connected to the pledged shares.
(ii) where security documents are amended to increase the amount secured, the amendment regarding the increase of the secured amount is registered without affecting the priority of the initial charge; and
(iii) sets a time limit of 42 days from the date of creation of the charge for registering a registrable charge created outside Cyprus which includes property situated outside Cyprus, in line with the existing practice of the Registrar.
Importantly, therefore, a Cyprus pledge over Cyprus assets no longer needs to be registered with the Registrar.
8. Annual Returns (s118,s125)
The Law now clarifies that the Annual returns of a company which are filed with the Registrar are filed once a year, effectively after the preparation of the related audited financial statements.
9. Board Meetings and General meetings (s191A,128D)
The Law provides that both general meetings and board meetings may be held by electronic means and they are deemed to be held where the secretary of the company is located, a provision which will facilitate the conduct of meetings where parties are located in different jurisdictions and simultaneously comply with the business need to hold the meeting in Cyprus for management and control purposes.
10. Articles of Association of a company may stipulate a higher majority for a shareholders’ resolution (s136A)
The Law provides that, other than resolutions for the dismissal of directors which, by Law, cannot require a majority higher than 50% + 1, the Articles of Association may impose higher threshold than those stipulated in the Law.
11. No need to register Shareholders agreement (s137)
There is no longer a need to register with the Registrar any shareholders’ agreement relating to the company, a requirement which was cumbersome and widely avoided and disliked by shareholders due to confidentiality reasons.
12. Strike off by Registrar (s327 and s391)
The Law now provides for the following:-
(i) The possibility for the Board of Directors of the Company to apply to the Registrar to strike a company off the register; and
(ii) Clarifies and restates the ability of the Registrar to strike off the company if it defaults in payment of its annual dues at the Registrar.
13. Common seal (Section 37A in combination with the amendment in section 363 (3))
The certification and/or validation of documents by electronic means e.g. electronic seal is introduced greatly simplifying the procedure and, therefore, reducing the time span for obtaining documents from the Registrar.
14. Compulsory Disclosure of certain documents (Section 365 (B))
Certain types of documents and returns submitted to the Registrar from 1 January 2007 onwards will be stored in electronic form by the Registrar and made available to the public in that form.