LEGAL STATUS

The first step to be taken by all non-Cypriot shipowners who wish to register a vessel under the Cyprus flag is to form a Cyprus Shipping Company (hereinafter referred to as 'the company') which will acquire the vessel in its name.

The company is registered as a private company with limited liability (limited by shres) under the provisions of the Cyprus Companies Law.

For the incorporation of the company, the filing of the memorandum and articles of association in Greek with the Registar of Companies is required. The incorporation of the company is evidenced by the issue of a certificate of incorporation by the Registrar of Companies.

The time required for incorporation is about 3 days from the filing of the incorporation documents. The present legislation contains provisions which facilitate the acceleration of the various procedures in urgent cases.

NON-RESIDENT STATUS

The company will be designated by the Central Bank of Cyprus as non-resident for exchange control purposes provided that its entire share capital is held beneficially and at all times by non-resident shareholders.

As a non-resident, the company may buy vessels from or sell vessels to non-residents, borrow from non-residents, mortagage its vessels in favour of non-residents, etc without any exchange control approval. Furthermore, the company may, as a non-resident, open with a commercial bank in Cyprus an external account (in Cyprus pounds or in foreign currency). The deposits in such an acount are freely transferable and fully convertible into other currencies.

However, it should be noted that it is not necessary to keep a bank account in the island.

MEMORANDUM AND ARTICLES OF ASSOCIATION

The memorandum must contain the objects of the company, set out as widely as possible. These are the usual ones of a shipping company e.g. to own and operate vessels, borrow money, mortgage its vessel, etc.

The articles usually adopt Table A of the Companies Law with a number of changes of additions as deemed necessary. The most usual departures from Table A are: pre-emption of the rights in case of transfer of shares; full borrowing powers for directors; lower quorum for mettings; simplified sealing provisions; appointment of alternate directos, etc.

NAME OF THE COMPANY

The name of the company must end with the word 'limited'. Prior approval of the name by the Registrar of Companies is recommended. Very general of deceptive names are not accepted nor are names likely to lead to confusion with existing ones. It usually takes 4 days to obtain a name approval but the procedure may be expedited upon request.

REGISTERED ADDRESS

This, by law, must be in Cyprus. It is usually situated at the foocies of either the lawyers who have incorporated the company in Cyprus or the accountants who act for the company in the island, unless the company has a more substantial presence in the island by operating its own offices or having a sister management company or affiliate here. The registers and minute-books are normally kept there but there is no legal restriction on their being kept abroad.

SHARE CAPITAL

The share capital of the company may either be nominal (e.g. CY 1.000) of the actual amount to be deposited by the promoters for the pursuit of the venture. It may be paid up in full or by calls, in cash or for consideration other than cash and the shres may be allotted a par value. Any class of shares e.g. ordinary of preference, and with different voting and dividend rights, are acceptable. All shares must be nominative; bearer shares are unacceptable.

SHAREHOLDERS

GENERAL

A minimum of 2 shareholders is required for the incorporation and continued existence of a Cyprus private company. The nationality of the shareholders is immaterial. Under Cypriot law all shareholders of a shipping company may be foreigners residing outside the island.

Foreign individuals of corporations require exchange control permission in order to subsribe to or hold shares in a Cyprus registered company. For shipping companies such permission is usually given as a matter of course in all bona fide cases. The transfer of shares to or from foreigners also requires authorisation. The transfer of shares from one foreigner to another is allowed as a matter of course in the case of shipping companies.

ANONYMITY

Although shares are nominative anonymity may nevertheless be achieved in one of two ways:

In the later case, however, the name of the beneficial owners may have to be disclosed to the Central Bank of Cyprus when applying for non-resident status. The employees of the Central Bank are bound by oath to secrecy under the Central Bank Law.

SECURITY OF BENEFICIAL SHAREHOLDERS

The trust relationship is recognised under Cypriot law both by statue and in equity. The priceiples of equity which apply under English law were preserved in Cyprus after Independence by the provisions of the courts of Justice Law, 1960. The security documentation of the beneficial owner (according to the practice followed by law firms) comprise the following:

MEETINGS

General meeings may be held abroad and, as a rule, written resolutions signed by all shareholders will suffice in lieu of a meeting. Annual general meetings must be held every year, the first to be held within 18 months from incorporation.

DIRECTORS

One or more directors may be appointed. The nationality of directors is totally immaterial and does not affect the status of the company in any way. Thus, there is no obligation to have local directors, unless it is considered advisable to establish local management for tax or other reasons. Share qualifications are not required.

The appointment and removal of directos are in the hands of the shareholders, unless special rights are given for this purpose to any class of shares.

Board meetings may be held in amy county of the world. Directors resolutions may be taken in one of two ways:

The names of the directors should be disclosed to the Registrar of Companies by separate returns which are open to inspection. Their names and nationalities (for foreigners) must by law appear on the leterhead but, in practice, this in not observed for shipping companies.

SECRETARY

A company secretary must be appointed by the directors and is removalbe by them. The nationality of the secretary is totally immaterial and does not affect the status of the company in any way. However, it is advisabel that the secretary be a person who is resident at the place where the director resides and that an assistant secretary be appointed in Cyprus to attend to company formalities in the island. This will ensure that all company returns are promptly signed by him and recorded, both initially as well as later on, especially if a change needs to be made urgently. A director (but not a sole director) may also act as the company's secretary.

RETURNS

Annual returns must also be filed. The names of the shareholders must appear in the annual returns filed with the Registrar of Companies. Any charges against the company must be filed and registered. Once filed the returns are open to public inspection.

PROCEDURE FOR INCORPORATION

A limited liability company can be incorporated in one of the following ways:

In both cases exchange control permission has to be obtained from the Central Bank but this is readily granted.

REQUIRED PARTICULARS

In order to proceed with the formation of a Cypriot shipping company, law firms in Cyprus require the following particulars:

AUDITORS AND ACCOUNTS

Auditors are appointed by the annual general meeting (or by the directors until such a meeting) and ae thereby removable. Any auditor who is entitled to audit English companies is acceptable in law. Powers and duties of auditors are similar to those under English law prior to 1967.

If the company is exempted (i.e. does not have another company as a shareholder) if neednot file its annual accounts with the Registrar of Companies. Otherwise, the accounts must be filed and be open to inspection. If, therefore, a company wishes to avoid such inspection it must not have another company as a shareholder and may use, instead, a nominee. The necessity for filing accounts has been relexed in respect of foreign owned shipping companies.

The books may be kept abroad and denominated in any currecny.

COSTS

The Companies (Fees and Dues Payable) Regulations provide that the fees payable on incorporation are:

There are no annual official fees payable in order to keep the company in good standing and operative, but there is stamp duty of CY 7 for filing the annual returns.

Charges are levied for the registration of mortgages as are charges against the vessel and the shipowning company with the Registrar of Companies. There are also other stamp duties, payable for filing other returns, documents of charges. On winding up, the official fees are CY 75.

COMMENCEMENT OF TRADING

Upon the issue of the certificate of incorporation by the Registrar of Companies and following the filing with him of the memorandum and articles of association and the othe statutory documents (as well as payment of the presribed fees), the company may commence its activities forthwith and register a vessel in its name.

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Researcher: Popie Damaskinos HTML AuthorV.Haskas . Last modified on 18/05/96.

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