Company Winding Up
A Cyprus company can be liquidated in three ways: voluntarily either by its members or creditors, involuntarily by its creditors or subject to the supervision of the Court. An alternative way for a company to cease to exist is also by way of striking off the company from the Register of companies in accordance to CAP 113 section 327. Nonetheless, in Cyprus, a private company limited by shares is usually liquidated by its members or the strike off method is used, as a more simplified method for companies that have ceased all activities and do not intent to carry on business in the future. There are however some advantages and disadvantages following either procedure from costs, time to restoration of the company to the Register.
The process is usually initiated by the shareholder(s) of the Company. The company director must provide confirmation that the Company has no assets or liabilities. In order for this confirmation to be given, Audited financial statements must be prepared up to the date of termination of business showing that the Company no longer carries on business and has no assets or liabilities. The Company must close all operative bank accounts and to settle all tax and other obligations (including payment of the annual levy for any pending year) with the relevant authorities. If registered with the V.A.T Department, it must apply to de-register from the V.A.T Registry as well. Thereafter, a relevant resolution is executed by the directors and/or shareholders (depending on the Articles of Association of the Company) for the termination of business and closing down of the company.Then an Application/formal letter by the directors of the Company is submitted to the Registrar of Companies requesting the Registrar to strike-off the Company from the Company Registry under Section 327 of the Companies Law Chapter 113. Such an application/formal letter is accompanied by the statement of the Directors that the Company has terminated any and all operations and has no liabilities. Upon the submission of such application/formal letter, the Registrar will examine the application and if satisfied that the company is not indeed carrying on business , the Registrar will publish a notice of its intention to strike-off the Company from the Registrar’s Registry within three months in the Official Government Gazette unless an interested party claims against the Company. If within this period of three months there is no claim by any other third party against the Company, the Registrar will publish a final notice at the Official Government Gazette and the Company is considered as being struck-off from the Registrar’s Company registry. The strike-off process is a straightforward and low-cost solution for closing down a company.
However there are two main disadvantages that must be taken into consideration before opting for the strike-off method:
If any creditor or any third party feels aggrieved by the company being struck-off the registry , the Court on an application made by the creditor or the third party before the expiration of twenty years from the publication in the Gazette of the notice aforesaid may, if satisfied that it is just to restore the company to the Register and upon an office copy of the order being delivered to the registrar for registration, the company shall be deemed to have continued in existence as if its name had not been struck-off.Therefore, the liability, if any, of every director, shall continue and may be enforced as if the company had not been dissolved for up to 20 years from strike- off.
Section 328 provides that when a company is dissolved all property and rights vested in the Company immediately before its dissolution shall upon dissolution belong to the Republic. The procedure is therefore inappropriate for a company which has significant assets that have not been distributed to members.
Members Voluntary Liquidation :
The Shareholders must notify their intention to proceed with the voluntary liquidation by sending a letter to the registered address of the Company, addressed to the Board thus declaring their intention to proceed with the MVL.
The Directors convene an Extraordinary General Meeting within 21 days of receiving the above notice.
The Directors prepare the following to sign before the Registrar of District Court (sworn affidavit): Statement of Assets and Liabilities & Statutory Declaration of Solvency.
The Directors hold a Directors meeting whereby the declaration of solvency and statements of assets and liabilities is presented and approved and resolve to convene an extraordinary general meeting with the following subjects:
a) The voluntary winding up of the company and
b) the appointment of the liquidator.
The Directors send the notice of the meeting giving at least 21 days’ notice (or less if such notice is waived by the shareholders).
The shareholders hold an EGM whereby they vote (personally or through the proxies) on the
a) Winding up of the company
b) Appointment of liquidator and
c) an authorisation to the liquidator to distribute the assets among the shareholders.
The Registrar will proceed and publish this EGM in the Government Gazette. Within 14 days of the Liquidators appointment (date of the EGM), the Liquidator must provide the following documents to the Registrar:
a) Notification of appointment to be published in the Government Gazette (HE43) and
b) Notification of appointment to be kept by the Registrar (HE41).
Preparation of the statement of distribution of assets when the liquidation finishes and the liquidator distributes all the assets to the shareholders, the liquidator prepares a statement showing such distribution (if applicable).
The liquidator calls for a final general meeting to present such account prepared and provide explanations in relation to this. The notice of such meeting has to be published in the Government Gazette at least 1 month prior to such meeting. The shareholders hold the Final EGM at the date set and whereby the liquidator presents the final accounts and the shareholders approve such accounts. Within 1 week after the final General Meeting the Liquidator has to deliver to the Registrar of Companies a copy of the accounts prepared along with a return for the holding of the meeting and the date of such meeting.
In terms of time as a first step is the preparation by the company auditors of the F.S of the company as at the latest practical date before the declaration of Solvency. Time is also relevant depending upon the assets to be liquidated (and overall obligations and liabilities of the Company-including contractual- )and in the event that the winding up lasts for more than 1 year, the liquidator has to produce a progress report and send it to the members. A MVL can take around 1 year to complete (or more) so as to obtain the certificate of dissolution by the Cyprus Registrar always depending on each specific case/company. Additional steps to a MVL: bank account closing/de-registration from VAT/ tax clearance certificate.
Foreign Company Dissolution:
We may further assist you in the Dissolution of your foreign subsidiary in case where the foreign venture was not successful thus closing such subsidiary abroad should be considered as one possible steps towards researching for a new marker location. We are here to ensure that our clients are supported throughout the process so that all requirements under the jurisdiction where the Dissolution is required are followed.