Starting a business in Cyprus implies completing several steps among which the first one refers to establishing the structure of the company and who the founding members and managers are. The founding members or owners of a Cypriot company are also known as the shareholders or stockholders.
The duties, rights and obligations of shareholders in Cyprus are determined by the Company Law which covers various aspects related to opening a company in this country.
Below, our lawyers in Cyprus explain how to become a shareholder in a local company. We can also help foreign investors who want to start companies here.
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Who can become a shareholder in a Cyprus company?
According to the Cyprus Company Law, a company can have one or more shareholders who can be natural persons or other companies. There are no restrictions in relation to the nationality of company shareholders in Cyprus. The same law provides for the minimum number of shareholders a company can have. This number is established in accordance with the structure of the company.
It is important to know that only private and public limited liability companies have founding members who can be referred to as shareholders because these types of companies have a share capital which is based on the distribution of shares.
The minimum number of shareholders a private company in Cyprus can have is one, while public companies must have at least 7 shareholders. Also, private companies can have a maximum number of 50 shareholders, while there is no limit to the maximum number of stockholders in public companies.
Our Cypriot lawyers can explain to local and foreign investors the requirements of the Company Law in respect to the shareholding structure of various companies in this country.
How to become a shareholder in a Cypriot company
There are several ways in which a person or a company can become a shareholder in a Cyprus company. These are:
- the simplest way is by registering a new company (private or public) with the Cypriot Trade Register;
- it is also possible to purchase a shelf company, case in which its Articles of Association must be amended;
- it is also possible to become a shareholder by purchasing shares in a private company through an agreement;
- one can become a shareholder in a public company by purchasing the shares issued as public offering by the company;
- foreign companies can become shareholders in Cyprus by setting up subsidiary companies;
- mergers and acquisitions are also two possibilities when seeking to become a shareholder in a company in Cyprus.
Out of all the ways exposed above, the simplest way of becoming a shareholder in Cyprus is by starting a new business, however, the purchase of ready-made companies is also quite common in this country, as it has several advantages.
If you have any questions on how to become a shareholder in a Cypriot company, our lawyers are at your disposal for complete information.
Shareholders according to the Cyprus Company Law
According to Chapter 113 in the Cyprus Company Law, a company may have at least one shareholder. The legislation also allows both natural persons and legal entities to be shareholders in a Cypriot company. The shareholder of a Cypriot company must provide the following information when registering a company with Trade Register:
- the full name,
- the address,
- the nationality,
- the occupation,
- the number of shares held in the company,
- a copy after the passport,
- a bank reference letter,
- a recent utility bill as proof of residency.
If the shareholder wishes to remain anonymous, a nominee shareholder may be appointed. Our law firm in Cyprus offers nominee shareholder services for those interested.
What are the rights and responsibilities of Cypriot shareholders?
Shareholders of Cypriot companies are usually the owners of the company and will decide and control the composition of the board of directors. However, they will not control the company directly, but will delegate through the company’s Articles of Association who will manage the Cypriot company.
According to the Code of Corporate Governance, all shareholders no matter their class and participation are entitled to equal treatment. The Code of Cypriot Corporate Governance differentiates majority, minority and foreign shareholders.
Cypriot shareholders have certain rights, but also obligations which are set out in the company’s Memorandum and Articles of Association. The main right of shareholders is the voting right which allows them to participate and vote at general meetings. However, they may not force the company’s directors to take certain actions. The decisions made by shareholders of Cypriot companies are done by passing resolutions. The Commercial Law establishes the following types of resolutions:
- ordinary resolutions,
- extraordinary resolutions,
- special resolutions.
For details about each type of resolution to be passed by shareholders you may ask our Cypriot attorneys.
The Annual General Meeting of shareholders in Cyprus
One of the main obligations of shareholders in Cyprus is to establish and participate to the Annual General Meeting which is a requirement to be fulfilled no matter the type of company registered.
The first Annual General Meeting must be held no later than 18 months after the incorporation of the company. Also, the maximum period of time elapsed between the first and the next meeting is 15 months.
The following aspects of the business are usually discussed during this meeting:
- how the dividends and other profits in the company are distributed among the shareholders;
- the verification and approval of the managers’ and auditors’ reports and financial statements;
- the appointment of company managers and auditors, where such decisions are imposed;
- amendments to the company’s details can also be discussed and agreed upon during this meeting;
- the decision for voluntarily dissolving a company can also be made by the shareholders during this meeting.
Certain decisions can also be made during extraordinary meetings called by the shareholders.
Shareholders in Cyprus can also pass special resolutions and even enter into shareholders agreements which can help them settle various disputes.
Nominee shareholders in Cyprus
The nominee shareholder is a trustee in charge of holding the shares of the company in the name of a beneficiary which is the real owner of the shares. The nominee shareholders of companies will be registered with the Cypriot Trade Register. In order to appoint a nominee shareholder, a declaration of trust will be signed by the beneficiary and the trustee. Nominee shareholders, however, will not be able access the company’s accounts, make any payments or handle the company’s assets.
Why start a business in Cyprus?
Cyprus is described as a high-income economy by the World Bank and the most recent European Commission report indicates that:
- by the end of 2019, Cyprus’ Gross Domestic Product will grow by 3.1%;
- in 2020, the Commission reports a GDP increase of 2.7% for Cyprus;
- the unemployment rate is expected to go down by 6.7% by the end of this year;
- by the end of 2020, the unemployment rate is projected to decrease by 5.9%.
For nominee shareholder services you may also contact our lawyers in Cyprus.