We undertake the establishment and licensing of Investment Companies in Cyprus.
Cyprus Investment Firms (CIFs) are governed by the Investment Services and Activities and Regulated Markets Law 144(I)-2007, consolidated with L141(I)/2012, L154(I)/2012 and L193(I)/2014. Under this Law, the competent authority to grant authorisation for the establishment of an investment company in Cyprus is the Securities and Exchange Commission. Once granted, the authorisation is valid in all EU member states and allows the investment firm to provide its services in all the member states, either through the establishment of a branch or through the free performance of activities. The Securities and Exchange Commission is obliged by the Law to register and publish information such as the Investment Firm’s name, its number and date of authorisation, as well as the investment activities and ancillary services which the firm is authorised to provide.
Minimum capital requirements
According to Article 10 of the Law a CIF must fulfil a certain initial capital requirement according to the services it provides. The general rule is that the initial capital must be €730.000 unless the CIF falls into the following categories:
A CIF that offers (a) the reception and transmission of investors' orders for financial instruments, and/or (b) the execution of investors' orders for financial instruments, and/or (c) the management of individual portfolios of investments in financial instruments, and does not deal in any financial instruments for its own account or underwrite issues of financial instruments on a firm commitment basis, but which holds client money or securities, must have an initial capital of €125.000.
A CIF which offers the services above but it is not authorised to hold client money or securities, to deal for its own account, or to underwrite issues or on a firm commitment basis, shall have initial capital of €50.000.
A CIF which falls into the category of EU Regulation No 575/2013, Article 4(1)(2)(c),
(i.e. not authorised to provide the ancillary service of safekeeping and administrating financial instruments for the account of clients, including custodianship and related services such as cash/collateral management, and offers (a) reception and transmission of orders in relation to one or more financial instruments, and/or (b) execution of orders on behalf of clients, and/or (c) portfolio management, and/or (d) investment advice, and which is not permitted to hold money or securities belonging to its clients and which for that reason may not at any time place itself in debt with those clients), shall have an initial capital of €50.000 or professional indemnity insurance covering the whole territory of the EU or some other comparable guarantee against liability arising from professional negligence, representing at least €1.000.000 for each claim, and in aggregate €1.500.000 per annum for all claims.
A CIF which falls into the above category and is also registered under the Insurance Services and other Related Issues Law 35(I)/2002), Article 171(1), shall have an initial capital of €25.000 or professional indemnity insurance covering the whole territory of the EU or some other comparable guarantee against liability arising from professional negligence, representing at least €500.000 applying to each claim, and in aggregate €750.000 per annum for all claims.
For the Securities and Exchange Commission to grant authorisation to a Cyprus investment company, a formal application procedure needs to be followed, and certain requirements must be fulfilled. First of all, the head office of the investment firm must be situated in Cyprus and the minimum initial capital requirements must be met. A Business Plan and an Internal Procedures Manual covering internal procedures and other organizational requirements, including the Anti-Money Laundering Procedures must be submitted. Additionally, certificates of clean criminal record and non-bankruptcy certificates for the shareholders and management of the company must be provided. Finally, questionnaires must be prepared with information about the beneficial shareholders and management of the company.
A decision is normally reached within 6 months upon filing the application. An application will be rejected if the competent authority is not satisfied that the persons who will effectively direct the business of the applicant are sufficiently experienced or are of sufficiently good repute, or if there are objective and demonstrable grounds for believing that their presence in the management of the firm poses a threat to its sound and prudent management. It is important to note that all authorised investment firms must become members of the Investment Compensation Fund for Clients of Investment Firms.
Investment companies can benefit from the tax advantages available for Cyprus companies, providing an additional incentive for their establishment on the island. Such tax benefits include a low 12.5% corporate tax on the profits of the Company, tax exemption on dividend income, non-taxable profits from the disposal of securities, and no withholding tax on payment of dividend or interest to non-residents.