Liquidation and voluntary winding up of a Cyprus company
A Cyprus company might decide to wind up as a result of various reasons and such procedures may be a challenging and lengthy task. The difficulties faced and time to complete is dependent upon many factors, including how well the company has been managed and administered throughout its existence, the method chosen for closing down and who performs such a processes.
There are actually two main methods of dissolving a Cyprus Company:
(i) Strike off method under section 327 of the Companies Law, Cap.113; and
(ii) Member’s Voluntary Winding Up under sections 268 – 274 of the Companies Law, Cap. 113.
Strike off method
The strike off procedure is a relatively simple method of closing down a Cyprus company and is typically used for dormant companies that have ceased their activities and no longer have any assets or liabilities.
In order to strike off a Cyprus company, the following requirements must be met:
(i) The financial statements of the company must be prepared until the date the company ceased activities.
(ii) Obtain a Tax Clearance Certificate from the Inland Revenue Department.
(iii) Formal letter/application signed by a Director requesting for the company to be removed from the registry of companies including a statement that the company has no liabilities must be submitted to the Registrar. Upon filing of such a letter, the Registrar will examine the application and if satisfied that the company is not indeed carrying out any further business or operations, the Registrar publish a notice with a view to striking the name of the company off the register in the Official Gazette.
(iv) The statement of affairs must be prepared to show that the said company has sufficient funds to discharge its debts, including the fees for the strike off.
(v) The said company must close any open bank accounts to any bank held offshore, worldwide.
(vi) The said company must be de-registered from the V.A.T.
(vii) Payment of annual levy for any pending year.
This procedure takes approximately 4-9 months to be completed.
In addition to the above, the Registrar of Companies has the power to strike off a Cyprus company. In fact, whenever the Registrar of Companies has any reasonable grounds to believe that the company does not carry any activities or is not operative, is entitled to send a letter via post to the said company in order to verify such information.
If the Registrar does not receive any reply within one month from the date of the letter that was sent, the Registrar will, within 14 days from the aforesaid deadline, send another letter via registered mail to the company stating that, by reference to the first letter, the Registrar did not receive any reply and that if the recipient fails to reply to the 2nd letter within 1 month, the Registrar will publish the said company in the Official Gazette as notice for the company to be struck off.
If the Registrar does not receive any reply, he will proceed with the publishing and he will send a letter to the said company informing it that within 3 months from the receipt of the letter, the company will be struck off, unless there is a reason for the contrary.
It is worth noting that the Registrar of Companies and Official Receiver announced on the 27th day of May 2014, that failure to submit the Annual Return will result in the deregistration of the company from the Register in accordance with article 327 of the Companies Act. (Cap. 113).
Also recently the Registrar has announced that as from 29th day of September 2014 notices will send notifications to all Companies that have not filed their Annual Returns (HE32).
Member’s voluntary winding up
(a) If the period, if any, fixed by the Articles for the duration of the company expires, or the event, if any, occurs, on the occurrence of which the Articles provide that the company is wound up and the company at general meeting resolves for the voluntary winding up of the company.
(b) The company resolves by special resolution that the company should be wound up voluntarily.
(c) An extraordinary resolution is passed to the effect that the company cannot by reason of its liabilities, continue its business and that it is advisable to be wound up.
This method is usually used when there is a need for a liquidator to be formally appointed in order to distribute certain assets, primarily for tax reasons.
A member’s voluntary winding up is a type of voluntary winding up when a “declaration of solvency” has been made in accordance to the Company Law, Cap 113.
“Declaration of Solvency” is a statutory declaration made by the directors of the said company stating that they have made a full inquiry into the affairs of the company and having done so, they have formed the opinion that the company will be able to pay its debts in full within a period not exceeding 12 months from the commencement of the winding up.
Consequences of the declaration of solvency
- The winding up is considered to be a member’s voluntary winding up.
- Any Director making the declaration without having reasonable grounds for the opinion that the company is able to pay its debts in full within the time specified, is liable on conviction to an imprisonment sentence or to a fine or to both penalties. If the company is wound up, but its debts and liabilities are not paid or settled in full within the period specified, there is a rebuttable presumption that the Director had no reasonable grounds for his opinion.
- If in the event of members’ voluntary winding up, the liquidator is of the opinion that the company will not be able to pay its debts in full within that period, he must convene a meeting of creditors and lay before the meeting a statement of the assets and liabilities of the company. Thereafter, the winding up continues as a creditors’ voluntary winding up.
Procedure of the member’s voluntary winding up
- The commencement of a winding up begins from the date of the passing of the resolution.
- The company must cease to carry out its business activities, except so far as may be required for the beneficial winding up thereof.
- Any transfer of shares or other relevant changes must be made after the commencement of the winding up are void.
- The relevant resolution of the winding up must be advertised in the Official Gazette of the Republic within 14 days.
- The company in general meeting appoints the liquidator or liquidators and fixes their remuneration. On the appointment, all the powers of the Directors cease except so far as the company in general meeting or the liquidator sanctions their continuance.
- Within a week after the meeting, the liquidator must send to the Registrar of Companies a copy of the account and a return about the calling of the meeting and its date.
- The Registrar of Companies registers the account and return and at the end of 3 months from the date of registration, the company is considered to be dissolved.
|Strike off||Members voluntary wind up|
|Easiest and cheapest method||More complex and costly|
|Approximately 4-9 months in order to be completed||Approximately one year or more|
|If a company or any member or creditor of the company feels aggrieved by the company having been struck off the register, the court on an application made before the expiration of 20 years from the publication in the Gazette of the notice for the strike off, may restore the said company||Where a company has been dissolved, the Court may at any time within 2 years of the date of dissolution on an application being made for the purpose by the liquidator of the company or by any other interested person, make an order declaring the dissolution to be made void|
|No liquidator||Liquidator is appointed|
|Typically used for dormant companies||Not applicable to dormant companies|
Our experienced staff are more than happy to assist as to which method are applicable to any purpose and can help with the liquidation process for any business.
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