Circumstances in which a company may be wound up voluntarily.

According to article 261, Part III of the Companies Law (Cap.113) (hereinafter referred to as the “Law”), a company may be wound up voluntarily in the following cases:

1. when the period for the duration of the company (if any), which is fixed by the Company’s Articles of Association, expires, or the event (if any), on the occurrence of which the company’s Articles of Association provide that the company is to be dissolved occurs, and the company has passed a resolution in a general meeting requiring the company to be wound up voluntarily;
2. where the company resolves, by special resolution, that it shall be wound up voluntarily;
3. where the company resolves, by extraordinary resolution, that it cannot by reason of its liabilities, continue the operation of its business, and that it is advisable to be wound up.

The voluntary winding up of a company shall be deemed to commence at the time of the passing of the resolution for the voluntary winding up thereof (article 263 of the Law). It is noted that in cases where a company has passed a resolution for voluntary winding up, it shall, within fifteen (15) days as of the date of the  approval of the aforesaid resolution, proceed with the filing of a copy thereof with the Department of the Registrar of Companies (hereinafter referred to as the “Registrar”), in order for the Registrar to proceed with the relevant publication thereof in the Official Gazette of the Republic of Cyprus (article 262(1) of the Law).

Consequences of Voluntary Winding Up

In case of a voluntary winding up, the company shall, as of the date of commencement of the winding up, cease to carry on its business activities, except where this may be required for the beneficial winding up thereof.  Notwithstanding anything to the contrary contained in the company’s Articles of Association, the corporate state and corporate powers of the company shall continue until the company is dissolved (article 264 of the Law).

Furthermore, any transfer of shares, not being a transfer made to the liquidator or with the approval of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the company’s voluntary winding up, shall be void (article 265 of the Law).

In addition to the aforementioned, it shall be noted that as of the date of the appointment of a liquidator all the powers of the directors shall cease, except where the liquidator or the company in general meeting approves the continuation thereof (article 268(2) of the Law).

Powers of the Liquidator

The liquidator’s powers include, inter alia, the following:

• taking into his custody or control all the assets, property, effects and actionable claims of the company;
• verifying claims of all the creditors and consolidate them;
• evaluating the assets and property of the company and prepare a relevant report;
• taking such measures to protect and preserve the assets and property of the company;
•  selling the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or corporate body, or to sell the same in parcels;
• drawing, accepting, making and endorsing any negotiable instruments on behalf of the company, with the same effect as if such instruments were drawn, accepted, made or endorsed by or on behalf of the company in the ordinary course of its business;
• the investigation of the financial affairs of the company in order to determine undervalued or preferential transactions;
• the signing, execution and verification of any paper, deed, receipt document, application, petition, affidavit, bond or instrument, and for such purpose to use the common seal of the company, if any, as may be necessary for the purposes of liquidation and distribution of the assets of the company;
• to initiate or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the company;
• to apply to the Court for such orders or directions as may be necessary, regarding the liquidation process;
• to obtain any professional assistance, in the discharge of his/her duties, obligations and responsibilities;
• to invite and settle claims of creditors and claimants and distribute the proceeds in accordance with the provisions of the Law.

Completion of Voluntary Winding Up

As soon as the affairs of the company are fully wound up, the liquidator shall prepare an account in relation to the company’s winding up, indicating how the winding up has been conducted as well the manner in which the property of the company has been distributed, and thereupon, the liquidator shall convene a general meeting of the company for the purpose of presenting before the same the aforesaid account, and provide explanations in relation to it.

The meeting shall be convened by publication in the Official Gazette of the Republic of Cyprus, specifying the time, place and object thereof. The notice of the said meeting shall be published in the Official gazette of the Republic at least one (1) month prior to the date of the meeting.

Within one week as of the date of the meeting, the liquidator shall deliver to the Registrar a copy of the account, and files with the Registrar a report regarding the convocation of the meeting and the date thereof. In the event that the copy of the account is not delivered to the Registrar, or the report is not filed with the Registrar, the liquidator is subject to a fine. It is noted that in the event that a quorum is not present at the meeting, the liquidator shall, in lieu of the return mentioned hereinbefore, prepare a return stating that the meeting was duly summoned, and that no quorum was present thereat.

As soon as the Registrar receives the account as well as the relevant report, shall proceed with the registration thereof, and upon the expiration of three (3) months as of the date of their registration, the company shall be deemed to be dissolved.

It shall be stressed at this point that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested, make an order deferring the date at which the dissolution of the company is to take effect for such time as the Court thinks proper (article 273 of the Law).

Payments’ priority

In a winding up the following debts shall be paid in priority to all other debts-

1) the below rates and taxes:-

1. all local rates owed by the company on the date of passing of the resolution for the company’s winding up, which become due and payable within twelve (12) months prior to the aforesaid date;
2. all Government taxes and duties owed by the company on the date of passing of the resolution for the company’s winding up, that become due and payable within twelve (12) months prior to the aforesaid date. In the case of assessed taxes, these shall not exceed the whole one year’s assessment.

2) i. any salary owed to an employee and any sum withheld by the employer from the employee’s salary for the payment of any obligations of the employee or otherwise, which has not been paid by the employer; and

1. any other sum or benefit of the employee that arises as a result of an agreement or employment relationship, including any sum owed to a recognized union that arises from the employment relationship between the employer and the employee or otherwise, that the employer has not paid. It is noted that this shall not apply in cases where an employee of a private company is a shareholder or member of the company’s board of directors, unless he/she holds shares or participates in the board of directors as a representative in an evidently procedural and non-substantive manner, and provided that there is no first or second degree relationship between himself/herself and the person being represented.
2. every amount of compensation which the company is obliged to pay to an employee, on account of bodily harm suffered by the employee as a result of an accident caused by his/her employment and during his/her employment with the company. An employee of a private company who is a shareholder thereof is exempted, unless the company is voluntarily wound-up or wound-up for reconstruction or merger purposes.
3. every amount due to the employee, excluding an employee of a private company who is a shareholder thereof, concerning the leave which he/she is entitled to from his/her employment in the company for an employment period of only one year.
4. In cases where any payment has been made: (a) to any clerk, servant, workman or labourer in the employment of a company, on account of wages or salary; or (b) to any such clerk, servant, workman or labourer or, in case of his/her death, to any other person in his/her right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in case of the company’s winding up, have a right of priority in respect of the money so advanced and paid up to the amount by which the sum in respect of which the clerk, servant, workman or labourer, or other person in his right, would have been entitled to in the event of the company’s winding up, to the extent this amount has been diminished by reason of the payment(s) having been made.

The foregoing debts shall rank equally among themselves and be paid in full, unless the company’s assets are insufficient to meet these debts, in which case they shall abate in equal proportions. If the assets of the company available for payment of the general creditors are insufficient for the full payment of the general creditors, they shall have priority over the claims of holders of debentures under any floating charge created by the company and be paid accordingly out of any property comprised in or subject to that charge.

Subject to the retention of such sums as may be necessary for covering the costs and expenses of the company’s winding up, the foregoing debts shall be discharged to the extent to which the assets of the company are sufficient to meet aforesaid debts (article 300 of the Law).

Definition of Institutions and Acquisition of Legal Personality

The term institution is defined by The Societies and Institutions and other related Matters Law of 2017 (104(I)/2017), as amended (the “Law”), as the aggregate of property that is intended to serve a certain non-profit object and for its establishment, the worth of the dedicated property cannot be less than One Thousand Euro (€1,000) (section 2 of the Law).

Institutions acquire legal personality as of the date of their registration in the Register of Institutions (the “Register”) by the competent District Officer of the relevant district who is responsible in relation to any matters in connection with the registration and operation of Societies, Clubs and Institutions, and the issuance of the relevant registration certificate (the “Registrar”) (sections 2, 5 and 26(1) of the Law).

Registration of Institutions

For the purposes of establishment and registration of an Institution, a written application by the founders or the trustees of a trust or the executors of a will, must be filed with the Registrar in the prescribed form and shall be accompanied by the constituent deed, as well as by the articles of association of the Institution.

The constituent deed and articles of association must stipulate and/or include at least the following:

• The Institution’s name, object(s) and registered office;
• The emblem of the Institution (if any);
• Detailed reference to the mode of operation and/or administration of the Institution;
• The aggregate of the Institution’s property;
• The names and addresses of the members of the Institution;
• The names and addresses of the members of the Board of Directors of the Institution;
• The manner of succession of the members of the Board of Directors of the Institution;
• A provision according to which no remuneration of any kind whatsoever shall be paid to any founding member or officer or member of the Board of Directors of the Institution with regards to any services provided by them (sections 26(2) and 27(2) of the Law).

The Registrar shall proceed with the examination of the relevant application for the institution’s registration, without any delay, and in any event within three (3) months as of the date of submission of the relevant application and all the necessary, duly filled in forms and documentation (section 26(2) and 26(4) of the Law).

Provided that the requirements under the applicable Law are met, the Registrar will proceed with the registration of the institution in the Register of Institutions and the issuance of the relevant registration certificate in the prescribed form. The registration certificate shall be published in the Official Gazette of the Republic and will constitute conclusive evidence of the date of registration of the institution and of compliance with all legal requirements (section 26(5) of the Law).

Objects of Institutions

An institution may be established and registered by the Registrar, provided that the main objective thereof is to achieve one or more of the following objects (section 26(3) of the Law):

• The combat and/or alleviation of poverty;
• The promotion of education;
• The promotion of health and/or saving lives;
• The promotion of the community’s and citizens’ development;
• The promotion and/or flourishing of arts, culture, cultural heritage or science;
• The promotion of amateur sports;
• The safeguard and protection of human rights, the promotion of dispute resolution or reconciliation, as well as the promotion of religious and/or ethnic harmony, equality and diversity;
• The protection and/or safeguard of the environment;
• The relief of needs arising out of young or advanced age, health problems, disability, financial hardship or other disadvantage;
• The promotion of animal welfare and protection;
• For the achievement of any other object that benefits the public in general, or for the achievement of any purpose which is considered to be relevant to any of the aforementioned objectives.

Administration of Institutions

Institutions must be administered by a board of directors consisting of at least three (3) members. Unless otherwise provided in the articles of association of the Institution, their decisions are taken by a simple majority of the members of the board of directors present at the meeting and, in the event of tied vote, the president of board of directors’ meeting shall have a casting vote (section 32(1) of the Law).

In case an institution is administered by three (3) persons, the presence of all three (3) persons is required for quorum purposes (section 32(1) of the Law).

Obligations of Institutions

The members of the board of directors of any institution are bound to keep accurate and detailed books of account where all accounts of money received and paid on behalf of such institution shall be recorded and shall also, at the end of each financial year, prepare the following accounts:

• an account of the gross income of the institution during the financial year;
• an account of any surplus in hand at the commencement of the financial year and of all moneys received during the same year on behalf of the institution;
•  an account of all money owing to or from the institution and an account regarding all payments made during the same financial year (section 49(1) of the Law).

The members of the of the board of directors of an institution are obliged to submit to the Registrar, at the latest within seven (7) months from the end of each financial year, the accounts and relevant report prepared by a certified auditor.

Definition of Societies and Acquisition of Legal Personality

Society is defined by The Societies and Institutions and other related Matters Law of 2017 (104(I)/2017), as amended (the “Law”), as an organised association of at least twenty (20) persons that is established for the accomplishment of a common objective (section 2 of the Law).

Societies acquire legal personality as of the date of their registration in the Register of Societies, Clubs and Institutions (the “Register”) by the competent District Officer of the relevant district who is responsible in relation to any matters in connection with the registration and operation of Societies, Clubs and Institutions, and the issuance of the relevant registration certificate (the “Registrar”) (sections 2 and 5 of the Law).

Registration of Societies

For the purposes of registration of a Society, a written application must be filed with the Registrar by the board of directors of the society or the founding members thereof. The aforesaid application shall be accompanied by the Articles of Association of the society which must be executed by its founding members and bear an execution date, and the relevant forms including information as the names, addresses and contact details of the founding members and the members of the society’s board of directors, copy of the emblem of the society (if any) and a description of the immovable and movable property belonging and/or possessed by the society at the time of registration thereof and/or any immovable and movable property that is to be transferred to the Society after its registration in the Register (section 7(2) of the Law).

The Registrar shall proceed with the examination of the relevant application for the society’s registration, without any delay, and in any event within three (3) months as of the date of submission of the relevant application and all the necessary, duly filled in forms and documentation (section 7(4) of the Law). Provided that the requirements under the applicable Law and regulations are met, the Registrar will proceed with the registration of the society in the Register and the issuance of the relevant registration certificate upon payment of the prescribed fee (section 7(4) of the Law). The registration certificate shall be published in the Official Gazette of the Republic and will constitute conclusive evidence of the date of registration of the society and of compliance with all legal requirements.

Articles of Association of Societies

The Articles of Association of a society shall be deemed as acceptable for registration purposes, provided that this includes and/or addresses the following matters:

• The Society’s name, object(s) and registered office, which shall be located in the areas controlled by the Republic of Cyprus;
• The society’s resources;
• The terms of admission, resignation, expulsion of members, and the rights and duties of the society’s members; 
• The manner and the body of representation of the society in Court and out-of-Court cases;
• The terms of alteration and/or modification of the Articles of Association of the society;
• The manner of auditing of the society’s accounts, in accordance with the principle of transparency;
• The terms relating to the convocation and holding of the meetings of the society’s members, the manner the decisions are taken, as well as the term that a members’ meeting is held at least once, on an annual basis;
• The administrative body of the society, the process of election of its board members, the term for which the members of the board will remain in office, the terms of formation and operation of the administrative body, the dismissal of its members and the frequency of their meetings;
• The terms relating to the society’s dissolution and/or merger with another society, as well as terms in relation to the utilisation and/or exploitation of the society’s property in case of dissolution thereof, as such property cannot be distributed to the society’s members.

Administration of Societies

Societies must be administered by a board of directors consisting of at least five (5) members, who, unless otherwise provided in the Articles of Association of the society, shall also be members of the society. Decisions are taken by absolute majority of the members that are present in the meetings, unless otherwise provided in the society’s Articles of Association (section 16(1) of the Law).

Provision of services without the payment of remuneration

No remuneration shall be payable to the members and/or administration members of the society in relation to any services they may provide to the society, unless otherwise provided in the society’s Articles of Association (section 18A of the Law).

Membership is non-assignable

Membership in societies is not eligible of representation, and cannot be assigned and/or inherited (section 15 of the Law).

On April 24, 2013, the Council of Ministers approved the policy for the issue and renewal of Temporary Residence and Employment Permits for third country nationals employed by International Business Companies / Companies of Foreign Interests operating in the Republic of Cyprus (the “Policy”). The said Policy was introduced as an incentive to attract investors for transferring and/or establishing their businesses in the Republic of Cyprus and, to this end, it afforded -those eligible to take advantage of its provisions- with a series of benefits, including the employment of a relatively large number of high-skilled third-country nationals in particular professions and/or businesses through an expedited admission procedure, which may not require the receipt of any consent(s) and/or approval(s) of any other services and/or authorities.

In view of the demanding framework with regards to investment programs of any kind and in the course of applying stricter criteria for the admission of third country nationals in the Republic of Cyprus on that basis, the Policy has been amended on October 7, 2020 following a proposal to this end submitted to and approved by the Council of Ministers (the “Revised Policy”). Retrieving from the Revised Policy, a Third Country National may apply for a Temporary Residence and Employment Permit in the event that he will be employed by an International Business Company / Company of Foreign Interests having physical presence and operating in the Republic of Cyprus provided that the employer meets certain qualification criteria:-

1. The majority (51%)* of the employer – company’s shareholders are foreign shareholders. The following cases are excluded:

–          Public companies registered in any recognized stock exchange

–          Former offshore companies that were operating in Cyprus by approval of the Cyprus Central Bank, before the change of their offshore status.

–          Cypriot shipping companies.

–          Cypriot companies of high technology / innovation, that will be certified by the Deputy Ministry of Research, Innovation and Digital Policy based on the applicable framework.

–          Cypriot pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.

–          Persons who have acquired Cypriot citizenship by naturalization based on economic criteria, given that they will prove that the conditions under which they were naturalized are still met.

2. The percentage of foreign shareholding stake in the employer – company must represent an amount equal to or greater than the amount of the required direct foreign capital investment.

3. The direct foreign capital investment must amount to at least €200.000,00 (for the prescribed purposes) and must be legally brought in Cyprus form abroad (through the prescribed means).
4. The employer – company should operate from its self-contained offices in Cyprus; to be more precise, the employer – company must have physical presence in Cyprus.

Nonetheless, an approved International Business Company (of foreign interests) has the right to employ a certain number of foreign nationals in official or key positions, such as directors, managers, middle management executives and other key personnel; such employees may be employed in any of the following key-positions:

(a)   Directors (Directors or Partners registered in the Registrar of Companies and Official Receiver; General Managers of branches and of mother companies of alien companies; Departmental Managers; Project Managers) with minimum gross monthly salary at €4.000,00 (subject to periodical adjustments depending on fluctuations in the wage index).

(b) Middle management executives and other key personnel (upper / middle management personnel and other administrative, secretarial or technical staff) with minimum gross monthly salary in between €2.000,00 (subject to periodical adjustments depending on fluctuations in the wage index).

(c) Specialists in specific fields (Software and System Engineers, Application and Data Architects, Information and Communication Technology and Enterprise Solution Architects, Technical Assurance Professionals, Telecom and Space Engineers, Data scientists, Machine Learning Engineers, Web Developers and designers, UX User Experience Professionals, Quantitative Analysts, Quality Assurance Analysts, Mobile Application Developers, Augmented Reality/ Virtual Reality Programmers, Digital Marketing Specialists, Video Production Multimedia Specialists for Mobile Apps and Software, Analysts for Mobile Apps and Software, Designers of Prototype for Mobile Devices, DevOps Engineers, Cyber Security Specialists, Artificial Intelligence, Robotics and Big Data Specialists, Pharmaceutical Formulation Technologists, Pharmaceutical Engineer Validation Specialists, Pharmaceutical Patents Specialists, Pharmaceutical Regulatory and Quality Assurance Professionals, Marine Engineers, Naval Architects) with minimum gross monthly salary in between €2.000,00 (subject to periodical adjustments depending on fluctuations in the wage index).

(d)   Support staff; if it is proved that there are no qualified Cypriots or European citizens available, the employer – company may employ, through the standard procedure established for General Employment, third country nationals in posts in this category.

Overall, the Revised Policy introduced some ‘minor’ amendments for enhancing its application by persisting and emphasising on the employers’ business and physical presence. The amendment of the previous Policy was imperative in view of the need to ensure its proper implementation by filling in any gaps that could operate in a way that would facilitate the misuse of the procedure.

The position under Cyprus law with regards to the registration of an encumbrance over shares in a Cyprus company has recently been clarified following an opinion provided by the Attorney-General of the Republic of Cyprus; more explicitly, in accordance with the contents of the announcements dated 08/01/2019 and 15/03/2019, (which are available online under the ‘News’ section on the official webpage of the Department of the Registrar of Companies and Official Receiver of the Republic of Cyprus) it has been clarified that the procedure with regards to the registration of an encumbrance pursuant to s.90 of the Companies law, Cap. 113 (hereinafter “Cap. 113”) does not apply to encumbrances concerning the pledge of share certificates of companies registered in Cyprus, or any other encumbrances emanating therefrom. In other words, any such encumbrance concerning shares of companies registered in Cyprus is not capable of registration in the Register of Encumbrances kept at the Department of the Registrar of Companies and Official Receiver of the Republic of Cyprus. On the contrary, an encumbrance over shares of a foreign company is capable of registration in the said register pursuant to the provisions of s.90 of Cap. 113.

Subject to the abovementioned clarification with regards to an encumbrance over shares in a company registered in Cyprus, pursuant to s.90 of Cap. 113, in order for any encumbrance to be valid as against any liquidator and/or any creditor of the company in question, such encumbrance has to registered following the procedure envisaged pursuant to the provisions of s.90(1A) of Cap. 113, in the relevant Register of Encumbrances kept at the Department of the Registrar of Companies and Official Receiver of the Republic of Cyprus. In the context of a pledge over shares, having regard to the abovementioned clarification, the procedure envisaged under s.90 of Cap. 113 only applies to a pledge over shares of a foreign company.

In such a case, it is worth noting that Cap. 113, and in particular s.91 thereof imposes upon the company a duty to deliver to the Registrar of Companies for the purpose of registration, the details of any encumbrance performed by the company and which requires registration on the basis of the procedure envisaged under s.90 outlined hereinabove. In the event of a pledge on shares of a foreign company, within twenty one days from the date such encumbrance came into existence, the company must provide the Registrar of Companies for the purposes of registration, details of the encumbrance, the duly certified instrument evidencing such encumbrance, the date the encumbrance came into effect, the amount secured by the encumbrance, details of the encumbered property and details of the persons for whose benefit the encumbrance shall be registered. Upon such registration, the Registrar of Companies shall proceed to issue a certificate of registration of encumbrance stating the amount secured by such encumbrance in accordance with s.93(2), and the said certificate shall constitute conclusive proof that the registration of the encumbrance was made in compliance with the provisions of Cap. 113.

A copy of any instrument evidencing the existence of such an encumbrance requiring registration must be kept at the registered office of the Company in accordance with the provisions of s.98 of Cap. 113. In addition the Company must keep at its registered office a register of encumbrances on which all encumbrances specifically affecting the assets of the company and all floating charges on the business or any property of the company shall be recorded providing a brief description of the property that is subject to the encumbrance, the encumbrance amount and the names of the persons for the benefit of whom the encumbrance was registered (s.99(1) of Cap. 113). The register of encumbrances kept by the company should be open for inspection during normal business hours by any creditor or member of the company free of charge, as well as by any person upon payment of a nominal fee determined by the Company pursuant to the stipulations of s.100(1) of Cap. 113.

On the other hand, if the encumbrance in question concerns a pledge over shares in a company registered in Cyprus, recourse must be had to s.138 of the Contracts Law, Cap. 149, pursuant to which any pledge in respect of share certificates as security for the payment of a debt or fulfilment of an obligation is only valid and enforceable provided that the pledge agreement is made in writing and signed by the pledgor in the presence of two witnesses signing the same. Going further, the validity of such a share pledge shall rest on the fulfilment of the following conditions, namely that (a) the pledgee sends to the company a notice for the creation of the pledge along with a certified copy of the pledge agreement, (b) the Company registers such pledge to the Register of Shareholders as against the shares in which such notice relates and (c) the Company delivers to the pledgee a certificate evidencing the registration of the pledge in accordance with the foregoing.

Taking advantage of the flexibility provided by EU Directive 2011/61/EU which provides that Members States may apply a lighter regime for sub-threshold AIFMs, a new legislation titled the “Law which provides for the Incorporation and Operation of Small Alternative Investment Fund Managers” came into force on the 3rd of July 2020 (the “Law”).

According to the Law, small AIFMs, also known as “Mini Managers”, can be set up in the form of a limited liability company pursuant to the provisions of the Law and of the Companies Law Cap. 113. The sole activities of a Mini Manager shall be the management of Alternative Investment Funds (“AIFs”) as defined in article 6(5) of the AIFM Law and its registered office and central management shall be based in the Republic of Cyprus.

The Law applies to:

(A)    Mini Managers of the Republic of Cyprus (also known as “Cypriot Mini Managers”);

(B)    Mini Managers of a Member State;

(C)    Cypriot Investment Services (CIFs) that received CySEC’s permission for managing AIFs.

Cypriot Mini Managers and CIFs can be appointed as external managers for the following AIFs:

(a)    AIFs that are incorporated and operate in the Republic;

(b)    AIFs that are incorporated and operate in a Member State, other than the Republic, or in a third country, provided that this is permitted by the law governing such AIFs;

(c)     AIFs with a Limited Number of Persons (“AIFLNPs”);

(d)    Registered Alternative Investment Fund (“RAIFs”) – as per article 135 of Law which provides for the Alternative Investment Funds and other Related Matters.

As external manager for (a), (c) and (d) above can also be appointed a Mini Manager of other Member State.

The main characteristics of Mini Managers include the following:

(a)    Initial Capital:

Cypriot Mini Managers that apply to CySEC for a license, shall have a minimum initial paid up capital /own funds of EUR50.000 (Fifty Thousand Euros).

Where the value of the portfolios of AIFs managed by the Cypriot Mini Manager exceeds EUR125.000.000 (One Hundred Twenty Five Million Euro), the latter shall provide an additional amount of own funds which shall be equal to 0,02% of the amount by which the value of the portfolios of the Cypriot Mini Manager exceeds EUR125.000.000 (One Hundred Twenty Five Million Euro).

(b)    Board of Directors and Senior Management:

The Board of Directors of a Cypriot Mini Manager consists of at least 4 (four) individuals out of which 2 (two) shall perform executive duties.

(c)     Shareholders:

The shareholders or members of the Mini Manager that have qualifying holdings, are suitable taking into account the need to ensure the sound and prudent management of the Cypriot Mini Manager.

(d)    Offices:

The head office and the registered office of the Mini Manager are located in the Republic of Cyprus.

(e)    Permitted Activities:

        i.           Portfolio management and risk management;

       ii.            Management of the AIF which includes:

• legal and fund management accounting services;
• customer inquiries;
• portfolio valuation and pricing, including tax returns;
• regulatory compliance monitoring;
• maintenance of unit/shareholder register;
• distribution of income;
• unit/shares issues and redemptions;
• contract settlements, including certificate dispatch;
• record keeping;

     iii.            marketing;

     iv.            activities related to the assets of the AIF, namely services necessary to meet the fiduciary duties of the Mini Manager, facilities management, real estate administration activities, advice to undertakings on capital structure, industrial strategy and related matters advice and services relating to mergers and the purchase of undertakings and other services connected to the management of the AIF and the companies and other assets in which it has invested.

(f)     Delegation of functions:

Subject to the following conditions, a Cypriot Mini Manager may delegate to a third person one or more of its managing functions:

         i.            the Cypriot Mini Managers has notified CySEC in writing about the subject delegation, before such delegation comes into force;

       ii.            such delegation does not prevent the effective supervision of the Cypriot Mini Manager and more importantly it does not hinder the operations of the AIF;

     iii.            the Cypriot Mini Manager does not delegate its functions to an extent that would result for it not to be considered as the manager of the AIF.

     iv.            In case where the delegation concerns the management of portfolio or the risk management, such delegation shall be allowed to be made only to entities that received license for asset management pursuant to article 78 of the EU Regulation 231/2013 or to entities received the prior approval of CySEC.

(g)    Licensing:

A Cypriot Mini Manager is allowed to manage AIFs only upon receiving CySEC’s relevant authorisation.

In order to be duly authorised, a Cypriot Mini Manager, shall submit an application for authorisation to CySEC accompanied by the following:

1. Information on the persons effectively conducting the business of the Mini Manager;
2. Information on the identities of the Mini Manager’s shareholders or members;
3. Business Plan and internal regulations setting out the organisational structure of the Mini Manager including information on how the latter intends to comply with its obligations;
4. Information on arrangements made for the delegation of functions to third persons pursuant to the provisions of articles 23 and 25 of the Law;
5. Information about the investment strategies, the risk profiles, the use of leverage and other characteristics of the AIFs it manages or intends to manage, including information about the member states or the third countries in which such AIFs are established or are expected to be established.
6. Information on where the master AIF is established if the AIF is a feeder AIF;
7. Information on the arrangements made for the appointment of the depositary – in case this is required by the applicable law governing the said AIF.

(h)    Transitional provisions:

CIFs that, prior to the entry into force of this Law, received CySEC’s authorisation pursuant to the provisions of the “Law which provides for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and Other Related Matters of 2007 to 2016” or “the Law which provides for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and Other Related Matters of 2017 to 2020 for the management of AIFs, are considered to be Mini Managers and may continue to provide such activities provided that within 9 months from the entry into force of the Law, they shall take all necessary measures to comply with the provisions of the Law.

For this purpose, prior to the lapse of the 9 months, the mentioned CIFs shall inform CySEC about the compliance measures taken or to be taken by them and submit a written confirmation by their Board members in regard to their compliance with the provisions of the Law.

In case of non-compliance with the above within the set deadline of 9 months, the mentioned CIFs will not be allowed to provide management functions pursuant to the provisions of the Law.

As a general principle, it is not possible for a Cyprus company to buyback and, thus, own or to cancel its shares. Nevertheless, a public company is exceptionally permitted to own its own shares; according to sections 57A – 57D of Cap. 113, the ability of a public company to acquire its own shares is possible although such acquisition is still subject to a series of conditions set forth by the Law. However, this is not the case for a private company that is not allowed to buy and/or otherwise acquire and hold its own shares; this may only be effected, indirectly.

At first instance, a private company may be able to acquire and hold its own shares through the procedure of forfeiture of shares. Subject always to the provisions of the Articles of Association of each particular company, the mechanism of forfeiture may employed in cases the holder of one or more shares in a company fails to comply with a condition or meet an obligation under which the share or shares, as the case may be, in question, was / were issued to that person. That said, it should be stressed that the Companies Law, Cap. 113 makes no reference to the power of the company to forfeit any of its issued shares; instead, it is left open to each company to incorporate (or not) the mechanism of forfeiture as well as its particulars in its Articles of Association. In this regard, the Model Articles of Association included in Part I of Table A of the Companies Law, Cap. 113 provides for a specific mechanism, according to which the company’s Board of Directors may forfeit the share(s) of a member only in the case the said member “fails to pay any call or instalment of a call on the day appointed for payment thereof”. Given that, although, the Model Articles of Association included in Part I of Table A does not necessarily apply in all cases, the forfeiture mechanism can be interpreted in a more broad and liberal, but always reasonable, way and thus, the particulars thereof can be adjusted to the specific needs of each particular company.

In any event, however, following the exercise of forfeiture, the forfeited shares (free of any rights for the benefit of the holder for so long as these are held by the company) may be held by the company for an indefinite period of time while such forfeited shares are considered, in essence, as forming part of the unissued share capital of the company and, thus, may at any time be sold (issued), re-allotted, cancelled or otherwise disposed of at the discretion of the Company. That said, in view of the fact that forfeited shares will be treated as unissued shares, it becomes apparent that the forfeiture of shares could therefore be considered as equivalent to the cancellation of shares out of the company’s issued share capital.

That notwithstanding, depending on the circumstances of each particular case, the forfeiture of shares may not be the proper way to achieve the desired result. To be more precise, despite that the forfeiture of shares may serve the purpose of cancelling issued shares leading in their inflow to the company’s unissued capital (but not the transfer thereof in the ownership of the company), this may also be effected through their direct cancellation by way of reduction of the issued share capital of a company. However, the cancellation of issued shares in that way is a bit complicated in the sense that the legitimizing basis of the cancellation must be well-justified.

More specifically, in so far as the reduction of the share capital of a company is concerned, section 64 of the Companies Law, Cap. 113, provides an indicative list of reasons on which a company could rely for the reduction of its company’s share capital:

(a) Extinguish or reduce the liability on any of its shares in respect of share capital not paid up.

(b) Cancel any paid-up share capital which is lost or unrepresented by available assets;

(c) Pay off any paid-up share capital which is in excess of the wants of the company;

(d) Cancel paid up share capital for the purpose of writing off losses of the company;

(e) Cancel paid up share capital by the creation of a reserve, to be called “the capital reduction reserve fund” which will be subject to the same treatment as the share premium account.

In terms of the reduction of the share capital of a company, the fact that the list provided for in the Law is not exhaustive, is of particular importance, since it enables the company to make various adjustments in its share capital. Besides, both section 64 of the Companies Law, Cap. 113 (“[…] a company […] having a share capital may […] by special resolution reduce its share capital in any way […]”) and the regulation 46 of the Model Articles of Association included in Part I of Table A of the Companies Law, Cap. 113 (“the company may by way of a special resolution reduce its share capital […] in any way […]”) give the company the power to reduce its issued capital in any way. In this respect, it is worth to note that, relying on the relevant legislative provisions, the reduction of the share capital of a company is always subject to the confirmation by the Court. Therefore, in view of the fact that the competence of a Court to approve and confirm the reduction of the share capital of a company arises provided that the general meeting of the interested company has duly passed a special resolution for reducing its share capital, it follows that a company may well pass a special resolution to this end according to which its issued share capital is reduced otherwise than in accordance to the rights of the company’s members, including the ability to reduce its issued share capital by cancelling one or more shares out of its issued share capital, provided this is duly justified.

On the whole, although it seems that the mechanism of forfeiture of shares and that of cancellation of shares by way of reducing the issued share capital of a company may serve the same purposes, it is of utmost importance to underlying the key-elements underlying each of the said mechanisms, as explained above. In any event, however, it is clear that in order for a company to effect either forfeiture or reduction, its Articles of Association must specifically make a reference to the power of the company to effect the respective action. On that basis, the company through its managing body, the Board of Directors, must specifically examine the particulars of each case it appears before the same so as to assess its merits as well as the options available and powers granted pursuant to the respective company’s Articles of Association so as to be in a position to decide of the treatment of each such case.

The ability of a Cyprus company to issue redeemable shares is determined in its Articles of Association that constitutes the instrument that sets out the regulations with regards to the operation of the Company. More specifically, relying on template Articles of Association included in Table A of the First Schedule of the Companies Law (Cap 113), and in particular to regulation 3 thereof, “subject to the provisions of Section 57 of the Law, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are or at the option of the Company are liable, to be redeemed on such the terms, and in such manner [in terms of, among others, time, notice period, price and tranches] as may be determined by special resolution of the Company before the issue of such shares”. According to the said mechanism, a person may temporarily become a shareholder of a Cyprus company while his/her share shall be redeemable either at the option of the same or the company.

Retrieving from the aforesaid regulation included in Table A of the First Schedule of the Companies Law (Cap 113), the issue of redeemable shares is made by ordinary resolution while it is the Company -at a General Meeting- that determines through a special resolution (passed before the issue of such redeemable shares) the manner of redemption. In light of the provisions of the regulation in question, whether the holder of the shares or the Company can proceed with the redemption is determined by an ordinary resolution of the General Meeting while the particular manner of redemption (among others, whether, in the case the shares are redeemable at the option of the Company, the General Meeting or the Board of Directors will have the right to redeem the said shares), is determined by a special resolution of the General Meeting. However, in the event that the Company fails to determine the manner of redemption, the remaining provisions of the Company’s Articles of Association must be taken into consideration so as to find out whether the Board of Directors is authorized to exercise such power; if not, the Board of Directors may -in the circumstances- have to bring the matter to the attention of the General Meeting so as for the latter to resolve, by way of special resolution, the manner of redemption.

Moreover, in so far as the status of redeemable preference shares is concerned, it is worth noting that, as a general principle, preference shares usually carry some preferential rights in relation to other classes of shares, particularly, in relation to ordinary shares. Besides, neither the Law nor the common law attach a rigid, uniformly applicable meaning to ‘ordinary’, ‘preference’ or other description of shares. In other words, while preference shares are usually associated with certain preferential rights, in the absence of specifically determined rights in the terms of issue thereof, it follows that the redeemable preference shares are issued on the same terms as the existing shares. Besides, as noted by the Supreme Court of the Republic of Cyprus in Lavinia Investments Ltd ν. Republic (1998) 3 C.L.R. 827 ‘it is assumed that all shares, unless there is evidence to the contrary, grant the same rights and impose the same responsibilities’; this coincides with the presumption of equality of shares. On that basis, we may assume that in the absence of specifically determined rights in the terms of issue of the redeemable preference shares, these are differentiated on that these are issued on the term that they are subject to redemption. That said, it seems that in all other aspects the redeemable preference shares carry the same rights as the existing (at the time of the issue of the first redeemable shares) shares.

Lastly, as regards the substantial nature of redeemable preference shares in terms of their classification as either equity or liability for accounting purposes pursuant to the IFRS, it is stressed that, in general, preference shares redeemable only at the option of their holder can be categorized as equity while preference shares redeemable at the option of the Company are regarded as liabilities or loans, especially in the case that these seem that are or were used as a means for financing; however, such classification always depends on the particularities of each case which must be examined under the IFRS.

All in all, the specific procedure for the redemption of the respective preference shares to be followed in each particular case is largely determined by the manner of redemption as this is set forth in the relevant instrument passed in accordance to the relevant provisions of the Company’s Articles of Association, while of considerable importance is whether the shares in question are redeemable at the option of their holder and/or the Company. Therefore, it becomes apparent that both at the stage of the issuance of such shares as well as at the stage of the redemption thereof, it is of particular importance to respectfully follow the relevant provisions of the respective company’s Articles of Association, which must be properly interpreted in order for any misconceptions to be avoided.