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Legal Status

The first step to be taken by all non-European 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 shares) under the provisions of the Cyprus Companies Law, Chapter 113 of the Statute Laws of Cyprus, as amended.

For the incorporation of the company, the filing of the memorandum and articles of association in Greek with the Registrar 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 - 5 days from the filing of the incorporation documents. The present legislation contains provisions which facilitate the acceleration of the various procedures in urgent cases. 

Memorandum and Articles of Association

The company may buy vessels from or sell vessels to non-residents, borrow from non-residents, mortgage its vessels in favour of non-residents, etc without any exchange control approval. Furthermore, the company may, open with a commercial bank in Cyprus an external account (in Cyprus pounds or in foreign currency). The deposits in such an account 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.

 

Name of the Company

The name of the company must end with the word ‘limited’ or “Ltd”. Prior approval of the name by the Registrar of Companies is required. Very general or deceptive names are not accepted nor are names likely to lead to confusion with existing ones. It usually takes 2 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 offices 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 and operates from fully fledged offices or has a sister management company or affiliate here. The registers and minute-books are kept with the secretary of the company.
 

Share Capital

The share capital of the company may either be nominal (e.g. CY £100) or 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 shares may be allotted a par value. Any class of shares e.g. ordinary or preference, and with different voting and dividend rights, are acceptable. All shares must be nominative; bearer shares are unacceptable.

Shareholders

GENERAL
One shareholder 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.The transfer of shares from one foreigner to another is allowed.

SECURITY OF BENEFICIAL SHAREHOLDERS

The trust relationship is recognised under Cypriot law both by statute and in equity. The principles of equity which apply under English law are applicable in Cyprus as provided by the Courts of Justice Law, 1960. The security documentation of the beneficial owner (according to the practice followed by law firms) comprise the following:

bullet the trust deed;
bullet the original share certificates which are issued in the names of the nominee shareholders;
bullet instruments of transfer of shares executed in blank;
bullet directors’ resolutions approving the transfer of shares (where nominee directors are appointed);
bullet undated letters of resignation of the nominee directors;
bullet irrevocable dividend mandates for payment of dividends to the beneficial owners or to an account designated by them.

MEETINGS
General meetings 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 directors are in the hands of the shareholders, and special rights may be given for this purpose to a specific class of shares.

Board meetings may be held in any country of the world. Directors’ resolutions may be taken in one of two ways:

bullet at a board meeting duly convened and held or
bullet without a meeting provided that the resolution is signed by all the directors.

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

Secretary
A company secretary must be appointed by the directors and is removable 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 advisable that the secretary be a company or a person resident at the place where the directors reside and that an assistant secretary be appointed in Cyprus to attend to company annual formalities in the island. This will ensure that all company annual returns are promptly signed and filed with the Registrar of Companies by the secretary and recorded. A director (but not a sole director), unless the company has one shareholder, 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:

bullet by the actual shareholders appearing as subscribers to the memorandum and articles of association and signing the said documents;
bullet by Cypriot nominees (usually members of the law firm who are acting for the formation of the company) subscribing to the memorandum and articles of association and later transferring their subscription shares to the actual shareholders by instruments of transfer.

 

Required Particulars

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

bullet desired company name (more than one name should be given if time is of the essence);
bullet amount of authorised share capital;
bullet whether shareholders will subscribe to the memorandum and articles of association themselves or through Cypriot nominees;
bullet whether shares will be held in trust by Cypriot nominees;
bullet names, address, nationality and occupation of beneficial shareholders;
bullet name, address, nationality and occupation of directors;
bullet name and address of secretary. 

 

Auditors and Accounts

Auditors are appointed by the annual general meeting (or by the directors until the convening of such a meeting) and are 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.

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

Costs
The Companies (Fees and Dues Payable) Regulations provide that the fees payable on incorporation are the Registration Fees, which are a fixed amount of CYP 60,00 plus 0,6% on the nominal capital.

There are no annual official fees payable in order to keep the company in good standing and operative, but there is a stamp duty of CY£10 for filing the annual returns.

Charges are levied for the registration of charges against the shipowning company, with the Registrar of Companies.

Commencement of Trading

Upon the issue of the certificate of incorporation by the Registrar of Companies, the company may commence its activities forthwith and register a vessel in its name.

 

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