SOURCES OF COMPANY LAW IN CYPRUS
The law in Cyprus emerges out of a unique legal system, based on the Anglo-Saxon system, namely common law and equity, in a combination with the Continental system. Accordingly, various European law directives, regulations and international treaties, the constitution of the Republic of Cyprus (the supreme law of Cyprus), the legislation (statutory law) and the judicial precedent (case law), constitute the main sources of law in Cyprus.
In view of the above, a company is governed by the Companies’ Law Cap. 113. The Companies’ Law, being the core statutory law for corporate law in Cyprus, is comprised of several, detailed sections governing a Private Company from its incorporation until its dissolution. The law is mandatory and controls the contents of the Memorandum and Articles of Association.
Memorandum and Articles of Association of a Cyprus company:
A company is also governed by its own Memorandum and Articles of Association, provided that these have been set in accordance to the various provisions, rights or restrictions, mentioned in Cap. 113.
The main difference between the two is in the following:
The Memorandum of Association, declares the purposes for which a company has been incorporated, for example trading and / or holding assets, while the authorised share capital, the issued share capital and the name of the company, followed by the word “Ltd” or “Limited”, must also be clearly mentioned in the Memorandum.
The form of a Memorandum of Association of a Company Limited by Shares can found in Table B of the Companies’ Law Cap. 113. The Memorandum of Association can be amended, while the procedures followed for this alteration vary according to the nature of the amendment. For example, the name of a company can be amended through a special resolution signed by the shareholders of the company and upon the relevant approval by the Cyprus Registrar of Companies. The Memorandum may also be amended as to the purposes of a company, or for any changes to the company’s authorised capital.
On the other hand, the role of the Articles of Association is to specify various internal regulations controlling the day-to-day procedures of a company, e.g. the quorum needed for the shareholders’ meeting or the board of director’s meetings.
The Articles of Association of a company may adopt all or any of the regulations contained in Table A of the First Schedule of the Companies Law Cap. 113. The Articles of Association may be amended through a special resolution signed by the shareholders of the company as long as such an amendment is not in contradiction to the company law provisions; by restricting, for example, the interests of the minority of shareholders unless this would be analogous to the benefit of the Company.
Shareholders of a Cyprus company:
A Company is a legal persona separated from its members – shareholders, and the liability owed by them, towards the Company is limited to the amount of money not paid for their shares.
The first Annual General Meeting (AGM) of the shareholders of the Company must take place, by law, within eighteen (18) months, the maximum, from the date of incorporation of the Company. Following the first AGM, all other AGMs should not take place more than fifteen (15) months from the previous one. Any, General Meeting of the shareholders of a company, other than Annual, is called an Extraordinary General Meeting.
The minimum number of shareholders required for a company to be incorporated as a Private Company by the Department of the Registrar of Companies and Official Receiver is one (1) and the maximum is fifty (50).
Directors:
“The Directors are the mere trustees or agents of the company, trustees of the company’s money and property and agents in the transactions, which they enter into on behalf of the company. Such agents have duties to discharge of a fiduciary nature towards their principal; the company” (From the English case GT. Eastern Rly v Turner [1872])
The structure of the Board of Directors in Cyprus Companies is based on the one-tier system according to which there is no Executive and / or Supervisory Board of Directors but an Administrative Board of Directors.
The minimum number of directors for a company to be incorporated as a Private Company by the Department of the Registrar of Companies and Official Receiver is one (1). According to section 107 of the Companies’ Law Cap. 113, as this was amended by Law 70(1)/2003, a sole director shall not also be the Secretary of a company unless the company has one and only member.
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