Liquidation of a Cyprus Company
A Cyprus company can be voluntarily dissolved either by its liquidation otherwise known as a members’ voluntary winding-up or through the procedure of striking off from the Register of Companies, in accordance with section 327 of the Companies Law (Cap. 113).
This is a simplified method and is normally used for international business companies that have ceased all activities and do not intend to carry on business in the future. The financial statements of the company must be prepared until the date the company ceased activities. The relevant income tax return to the Cyprus tax office must be prepared and filed along with these accounts and after the tax office examines and agrees these and any tax liability settled a tax clearance certificate will be issued. A declaration of solvency known as an affidavit must then be signed by all the directors of the company. This statement must be sworn before a notary public.
The affidavit is a confirmation that the company has no assets or liabilities whatsoever, is no longer active or carrying on business, and does not intend to carry on business in the future. The statement of affairs to be prepared must show that the company has adequate funds to discharge its debts including the fees charged for the strike-off.
Once the Registrar has published in the Official Gazette notice that the company has been struck off the register, such company is considered as having been dissolved. The Court has power on the basis of an application to this direction (Section 327(5)(b) of the Companies’ Law is silent as to who may so apply) to order the winding up of such company. It is imperative that a company under liquidation should appoint a liquidator. The liquidator’s role is to then take possession of the company’s assets and use them to settle the liquidation costs as well as any creditor’s claims. In the case that there is any surplus, of course it will be returned to the members of the Company.
A company which has been struck off the register can be restored provided that an application is made to this direction before the 20 years’ expiration period from the publication in the Gazette of the notice. Such application can be made either by any of its member or by the company itself.
Members’ Voluntary Liquidation
According to the Law, a company may be wound up voluntarily (a) when the period fixed for its duration by the Articles expires; (b) if the company so resolves by special resolution; or if the company resolves by an extraordinary resolution because it cannot, by reason of its liabilities, continue its business.
This is a more formal method and is used only if there is a need for a liquidator to be formally appointed in order to distribute certain assets, chiefly for tax reasons. The liquidator must confirm that the company is solvent in order to be able to proceed with the voluntary liquidation. A statutory declaration declaring that the company is able to pay its debts needs to be made by the directors. The declaration of solvency must be sent to the Registrar of Companies and should be made within five weeks immediately preceding the date of passing the resolution of wounding up the Company, and needs to embody a statement of the Company’s assets and liabilities as at the latest practical date before the declaration. This must be settled within 12 months from the commencement of the winding up of the company.
A tax clearance certificate will also be obtained. The liquidator will call a general meeting of the shareholders and the full account of his receipts and payments are then presented at the meeting. Such meeting must be published in the official Gazette at least one month in advance. Within a week after the meeting, the liquidator is required to submit to the Registrar of Companies a report of the meeting together with a copy of his account and 3 months after registration of these documents the dissolution of the Company is published in the Official Gazette of the Republic.
The Registrar of Companies will issue a Certificate of Dissolution within 3 months from this date of filing and the company is deemed to be dissolved.
Differences – Strike-off Method Vs Members’ Voluntary Liquidation
The main differences between the two methods have been covered above i.e. timing and necessary procedure. However, the most important difference that needs to be addressed with regards to the strike off method is that if a company or any member or creditor of the company suffers by the company having been struck off the register, the Court on an application made before the expiration period of twenty years from the publication in the Gazette of the notice for the strike-off, if satisfied that the company was at the time of the striking off carrying on business, or in operation, may order that the company is restored to the register and the company shall be deemed to have continued in existence as if its name had not been struck off.
In the case where a company has been dissolved with members voluntary liquidation, the Court may at any time within two years of the date of dissolution on an application being made for the purpose by the liquidator of the company or by any other individual who appears to the Court to be interested, make an order, upon such terms as the Court thinks appropriate, declaring the dissolution to have been void.