 LC LAW Stylianou & Drakou LLC named Boutique Service Law Firm of the Year in Cyprus
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LC LAW STYLIANOU & DRAKOU was originally incorporated as a partnership in 2006. In 2009 LC LAW STYLIANOU & DRAKOU formed a private Lawyers’ Limited Company under the name LC LAW STYLIANOU & DRAKOU LLC which as of 01/01/2009 has taken over the business, clientele, assets and liabilities of LC LAW STYLIANOU & DRAKOU.
The Markets in Financial Instruments Directive (“MIFID”)
On November 15, 2007, a new law was enacted to implement Directive 2004/39/EC of the European Parliament and of the Council on Markets in Financial Instruments and Directive 2000/12/EC of the European Parliament. Together these establish a comprehensive regulatory framework for the execution of transactions of behalf of investors by stock markets, alternative trading systems and investment firms, with the objective of protecting investors, facilitating the integration of Europe’s financial market.
As part of the process, a “single passport” for investment firms, banks and stock markets has been created which enables such institutions to offer their services on a cross-border basis throughout Europe on the basis of home-country authorizations, granted on the basis of uniform prerequisites in all Member States.
The new “MIFID” Law 144(I)/2007 (the “Law”), which also incorporates other relevant EC Directives replaces the existing Investment Firms Law of 2002 (Law 148(I)/2002).
According to the Law, all enterprises that are involved with the provision and performance of investment services, activities and the operation of regulated markets must be licensed by the Cyprus Securities and Exchange Commission (“CySEC”). Terms such as “investment services”, “investment activities”, “regulated market”, “stock exchange”, “financial services”, “stock broking services”, “broker” or any other similar word in any language may not be used by anyone unless he/she is licensed according to the provisions of the Law.
The licence to operate such investment companies is valid in all Member States, either through a branch or by simply providing services or activities in any of the Member States.
Enterprises which are interested in applying for a permit must file an application using the prescribed forms of CySEC accompanied by the documentation prescribed in the Law. CySEC has the discretion to decide upon the context of the said forms and the kind of information to be supplied by the interested parties. The application will not be examined unless there is written confirmation that the company seeking a permit has sufficient funds for the requested share capital (as prescribed by the Law) and that it is willing to freeze them at CySEC’s request.
CySEC must decide whether the application is approved or rejected within a period of six (6) months. The period starts from the moment a complete application is filed with CySEC containing all information requested by the latter. In the event that CySEC does not meet the above deadline, the applicant has a recourse to the Supreme Court of Cyprus against CySEC under article 146 of the Constitution.
Cyprus joins the Euro Zone
Cyprus will join the Euro Zone on 1st January 2008 and will adopt the Euro as its official currency, thus replacing the Cyprus Pound.
The rules for the adoption of the Euro are governed by law, which provides, inter alia, that the share capital of companies currently expressed in Cyprus Pounds will be converted to Euro as from the date of adoption of the Euro, using the irrevocable fixed conversion rate of EUR1 = CYP0.585274 and rounded up to two decimal places.
The conversion and rounding up of the nominal value of shares will be done in accordance with the prescribed rules and as a result a company’s share capital may be increased or decreased accordingly. Such increase or decrease of the share capital must be approved by a resolution of the company in general meeting and then filed with the Registrar of Companies. Certain provisions of the Cyprus Companies Law, CAP.113 concerning the increase or decrease of share capital are being suspended for a year following the adoption of the Euro, so as to facilitate the necessary changes in the share capital of companies.
Any increase of the share capital can be achieved through the capitalization of reserves or the payment of cash and any decrease can be recorded in a special reserve to be used for any future capital increase or be distributed by way of dividend without any tax repercussions.
It should be noted that the aforesaid provisions only apply to the conversion of a company’s share capital from Cyprus Pounds to Euro.
Cyprus tax reductions
The Cyprus House of Representatives has approved new measures including an increase in the threshold above which personal income tax becomes payable in Cyprus.
The tax allowance for individuals for the year 2007 has been increased from CYP10.000 to CYP10.750. The allowance will be further increased in 2008 to EUR19390 (equivalent to CYP11,350).
Reduction of Cyprus stamp duty
A new legislation has been passed resulting in a significant reduction in the amount of stamp duty payable on large transactions involving or having to do with Cyprus, by introducing a cap on the amount payable, making Cyprus even more attractive for large financial transactions such as bond issues.
Accordingly, payment of stamp duty fees on instruments which are subject to stamp duty based on their value is calculated as follows:
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on the first €170,860, the stamp duty payable is €0.02 per €17.09 or part thereof;
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above €170,860, the stamp duty payable is €0.03 per €17.09 or part thereof;
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stamp duty is capped at €17,086 per document;
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where no amount is specified in the contract, the stamp duty us €34.
A number of categories of documents are exempt from stamp duty, including documents relating to corporate reorganizations (which are exempt from all forms of taxation) and ship mortgage deeds or other security documents.
Migration of companies in Cyprus
A recent amendment to the Cyprus Companies Law, CAP.113 has introduced the necessary regulations to enable company redomiciliation to and form Cyprus under certain terms and conditions. This places limited companies on a similar footing to SE’s, which are free to move their registered office between European Member States.
Thus a company incorporated in Cyprus may now transfer its central management and control to another country, provided that the country concerned has legislation in place allowing the migration of companies. Conversely, companies incorporated in another country may migrate to Cyprus as long as the legislation of their current domicile permits it. In either case the company remains registered in the country of origin whilst operating in a different jurisdiction.
The amendment to the Cyprus Companies Law, CAP.113 and the related regulations issued, set out the procedures to be followed. Companies such as banks, insurance companies and investment firms that require a license to carry on a specific type of business from an appropriate authority must also obtain the consent of that authority to continue their operations in the other jurisdiction.
One Stop Shop for Foreign Investors
The Ministry of Commerce, Industry and Tourism has introduced a new government service to encourage investment and new business ventures by facilitating the completion of registration formalities for new companies.
The new service operates as a “One Stop Shop”, hosting services from all government departments involved in setting up a new business in Cyprus.
Officials from the Department of the Registrar of Companies are available to facilitate the speedy registration of the company.
Representatives of the VAT Department register the new company for VAT purposes and provide registration and any other necessary information on VAT.
The Labour Department provides assistance with the employment of both local and foreign staff, and to effect registration in the Social Insurance Scheme.
The Immigration Department issues residence permits and work permits for directors, managers and staff from third countries, as well as any permits required by EU citizens.
The Inland Revenue Department provides Tax Identification Numbers and advice on Cyprus tax.
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