Company liquidation in Cyprus
Company liquidation in Cyprus
Business is an unpredictable mechanism, and if in the past the company made a profit, then there is no guarantee that in the future it will not become unprofitable. In this case, it is better to cancel the firm. Liquidation, like registration, requires certain financial expenses. Therefore, quite often you can find companies that actually operate, but in fact have long ceased their activities. Each organization legally registered in Cyprus must be legally annulled in the event of termination of operation (this condition is prescribed in the legislative base of the republic). Naturally, leaving the company on its own is simpler, but untimely liquidation can cost much more. Therefore, we strongly recommend you to take a responsible approach to this issue and do everything according to the rules. In addition, you can choose the most optimal tactics for you.
Ways of liquidation
On the island of Cyprus, several options for legitimate cancellation of the company are possible:
• Voluntary Liquidation / Winding Up;
• Strike off (withdrawal of the company from the Register);
• at the initiative of the Registrar.
Let us examine each of these methods in more detail.
Sometimes during the registration it is supposed that it is necessary to cancel the organization, then the Charter specifies:
• the conditions under which the company must be liquidated;
• the body taking the appropriate decision;
• the procedure for repayment of debts.
If nothing is written about this procedure in the company’s Articles, then liquidation on a voluntary basis is carried out on the basis of a decision of a majority of votes (from 75%) of the Board of Directors on the closure of the company.
After the adoption of this resolution, it is necessary to prepare a financial report containing information about the debts and assets of the organization. On the basis of this report, under the oath of office, the director of the company signs a statement on the possibility of paying off all types of arrears for one year. Then, at the general meeting of shareholders, a liquidator is appointed, who is obliged to inform the Registrar of the beginning of the liquidation of the company and of its appointment. Having received the specified information, the Registrar places an announcement about the desire to cancel the company in a specialized publication of the mass media of Cyprus. This alert is addressed to possible creditors. At this point, the closing procedure begins. The liquidator is engaged in the payment of debts of the firm, distributes balances and sells assets, as well as receives a certificate of compliance with all tax obligations provided by the tax service. Having carried out these procedures, the government newspaper of the island of Cyprus gives notice of the holding of the final shareholders meeting, which will take place in a month. During the last month, the liquidator prepares a final report for the meeting, which shareholders will need to approve. Having received approval, the liquidator prepares a notification to the Registrar, indicating the suspension of functioning. Official confirmation of the cancellation of the organization in the form of a certificate is provided after approximately three months of waiting.
The company is removed from the Register using a different algorithm. In this case, the decision on liquidation is taken by the shareholders and put the signature in the letter to the Board of Directors, which informs about this decision. Having considered the received letter, the Board of Directors is also obliged to confirm this conclusion, after which it signs an application for the removal of the company for the Registrar and notification to the tax authorities. This document should contain evidence of non-functioning of the organization. Submission of the document to the Registrar is preceded by:
• repayment of debts;
• sale of assets;
• payment of all taxes and duties (including VAT and the duty to withdraw the company from the registry);
• Submission of the final financial report.
Having received the application, the Registrar sends a notice to the company (1st notice) and publishes an announcement about the company’s withdrawal from the register in three months in the official newspaper of the Republic of Cyprus. After the expiration of this period, if no objections are received from the shareholders, tax or creditors, the final notice is sent, and an announcement on the final removal of the company from the state register is published in the government newspaper of the island.
The registrar makes an independent decision to close the firm when it does not pass annual accounts for several years. Given the absence of reports, it is assumed that the company does not carry out activities, so the Registrar sends a request to the legal address for confirmation or protest within one month of the decision. If confirmation comes in due time, then in the official print media of the Republic of Cyprus, a notice on the cancellation of the organization is published. If no response has been received, a second request is sent. If the second request is also ignored, the Registrar publishes a similar notification, and the property, subject to no debts, becomes the property of Cyprus.
The options considered, of course, require costs. The cheapest option is liquidation on the initiative of the Registrar. But even this cancellation requires the absence of debts and assets, payment of duties and taxes and the preparation of financial reporting, so there will still be costs. If you choose such a method of closing the organization and you will wait for the first step from the Registrar, we strongly recommend that you pay close attention to the tax system and apply to the tax authorities to confirm payment of all types of state fees. Since the government of the Republic of Cyprus has passed a law, according to which now non-payment of taxes is a criminal offense.
The other two options, naturally, will cost more, because the procedure is more complicated and takes more time. So, it takes about three months to delete from the registry. Despite this, the process of cancellation takes much longer. According to the legislation of Cyprus, the time allotted for the study and analysis of applications for removal is three years. That’s basically what you have to wait. In addition, a few more months are spent on publication in a republican newspaper, which would confirm the fact of liquidation. Thus, the removal of the company from the registry takes up to three and a half years. In its turn, voluntary liquidation takes place from six to nine months. If there are special circumstances, the case can last up to a year.
An important point is also the irreversibility of the processes. But here there is a nuance. If someone does not agree with this procedure, they can sue the court to recognize the process as invalid for twenty years. In parallel, it is necessary to provide documents confirming the illegality of the closure of the organization. If the court decides to satisfy the claim, then the restoration of the company will take about two years.
Tips for closing a company in Cyprus
As we see, the liquidation of the company on the island of Cyprus is a complex and lengthy procedure, which has its own characteristics. That there were no problems at cancellation of firm, we recommend to listen to following advice:
• Careful and correct choice the service provider (he must timely and regularly provide information about the company, as well as communicating);
• carefully maintain documentation in accordance with the rules;
• in due time submit a financial declaration to the appointed bodies (social insurance department, tax services, Registrar).
To make a final decision on the liquidation of an organization, we should carefully weigh the pros and cons (the complexity of the event, the irreversibility of the process, the cost, the duration of the procedure), then choose the liquidation method and start the procedure as soon as possible. Since delaying it can lead to higher costs and longer time required for liquidation.
To do everything correctly and qualitatively, you can turn to us for help – qualified professionals with extensive experience.