• Flexi Group

Dissolution of a Cyprus Company

Updated: Jan 18

Companies are predominately created to serve a purpose and usually that purpose is profit making, so what do you do when the purpose of the company becomes obsolete? How do you deal with a no longer purposeful entity? What steps should you take now?

1. Introduction

A company is a distinct legally entity that has the power to own assets, has liabilities and obligations and generally can be viewed as a legal person.

Companies are predominately created to serve a purpose and usually that purpose is profit making, so what do you do when the purpose of the company becomes obsolete? How do you deal with a no longer purposeful entity? What steps should you take now?

As per Companies Law, Cap. 113, there are two different methods by which you can wind up a Cyprus company: the Strike-Off method and the Voluntary Liquidation method (a further method of compulsory liquidation by court order is not analysed in this publication).

Below we are explaining the procedure and differences of the two methods.

2. Methods of dissolution

a. Strike-Off method – Section 327, Cap.113 of the Companies Law

If a company has ceased its operations or has never had any operations, it can apply to the Registrar of Companies to be struck-off the register.

In order for a company to be able to proceed with the Strike-Off procedure, all financial statements of the company must be prepared and submitted up to and including the official date the company had ceased operations.

Furthermore, all companies wishing to proceed with a Strike-Off procedure must also submit all income tax returns to the Tax authorities for examination and settle all tax liabilities, to be eligible to receive a tax clearance certificate. Upon receipt of the tax clearance certificate, the directors of the company can submit the Strike-Off form to the Registrar of Companies.

The form serves as a confirmation issued by the directors of the company that the corporation has ceased operations, is no longer trading and has no obligations whatsoever. With this form the officers of the company that all assets still owned by the company are considered “Bona Vacantia” (vacant goods – ownerless property) and belong to the Cyprus Republic.

As a next step, the company’s intention to be struck-off will be published in the Official Gazette of the Republic of Cyprus and a notice will be sent to the company stating that it will be removed from the records of the Registrar of Companies 3 months after the publication date. If no objection for the strike-off is filed in this period, the act is published in the Official Gazette and the company is officially struck-off. Generally, the strike-off procedure takes approximately between 18 to 24 months, provided that the company does not have any liabilities.

It is important to note that a struck-off company can be reinstated at any time and within a period of 20 years since the publication date in the Official Gazette. Reinstation is effected through a Court decision after an application of any member or creditor that feels aggrieved by strike-off of the company. In this case, the company shall be deemed to have continued operations during the struck-off period.

b. Voluntary Liquidation method – Section 268-274, Cap. 113 of the Companies Law

A company can be voluntarily liquidated in four cases:

  • if its fixed period duration, as set out in the Articles of the Association expires

  • if the event on the occurrence of which shall be dissolved has occurred, as set out in the Articles of Association,

  • if the company resolves such by special resolution

  • if the company resolves that, due to its obligations, it shall cease operations and therefore the liquidation is advisable.

The commencement date of the voluntary liquidation is considered to be the date of approval of the relevant resolution.

Voluntary liquidation can either be made by the members of the company or its creditors. Generally, the liquidation procedure takes approximately between 6 to 9 months, provided that the company does not have any liabilities.

The Court can declare the dissolution to be void, in a period of two years from the date of dissolution, shall the liquidator or any other person who has legit interest applies to the Court and the Law court deems fits.

i. Voluntary Liquidation by the Members

As mentioned above to commence a voluntary liquidation by members there needs to be a resolution declaring the intention to proceed with the winding up of the company. Even prior to the Extraordinary General Meeting, a statement of Assets and Liabilities must be prepared along with a Declaration of Solvency stating that the company is in a position to pay of its debts in a period of 12 months from the commencement date of the liquidation. The Declaration of Solvency must be sworn by the majority of the directors before the Registrar of District Court.

At the Meeting, the final approval for the closure of the company is given and a liquidator is appointed so as to distribute any company assets and settle any outstanding business. In order to do so, the liquidator shall confirm that the company is solvent. As soon as the liquidator is appointed, the directors cease to have any powers.

As soon as the winding up and the affairs of the Company are completed, the Liquidator sends a Notice of the Members’ Final Meeting. The Notice is published at least a month before the meeting in the Official Gazette of the Republic. The Liquidator then, presents the final accounts to the members.

Upon completion of the meeting and in a period of 1 week, the Liquidator shall submit the final accounts and the report of the final meeting to the Registrar of Companies. 3 months after the final filing, the company is considered to be dissolved and a Certificate of Dissolution is issued.

ii. Voluntary Liquidation by the Creditors

The process for the Voluntary Liquidation by the Creditors is pretty much the same as the Voluntary Liquidation by the Members. In this case, the directors must call a meeting of both Creditors and Shareholders to agree to commence the Liquidation process. In case the proposal of the Creditors and Shareholders differ, the Creditors’ proposal prevails.

3. Differences of the two methods

4. Appointment of Liquidators

As mentioned above, in the case of Voluntary Liquidation, a Liquidator must be appointed. The person acting as a Liquidator shall be a licensed insolvency practitioner, listed in the register of the Registrar of Companies.

5. How we can assist you

Flexi can assist you with the strike-off or liquidation procedure of your company. With over 25 years of experience in the field, we are in position to provide expert advice and guidance in respect to the dissolution of your company, appointment of Licensed Insolvency Practitioners and provision of legal and tax advice. Let our team take care of all your needs and avoid the stress and hassle of bureaucracy.

*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.

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