Shipping and Ship Management
Cyprus is one of the main centres for shipping services and its importance in the shipping world is evidenced by the fact that Cyprus ranks 10th internationally as a Maritime Country and is a member of the International Maritime Organisation (IMO). The country’s accession to the European Union on 1st May 2004 has increased the registration of vessels under the Cyprus flag. Cyprus will effectively be the only “Open Registry” in the European Union.
Cyprus has many advantages to offer as a maritime centre. Besides being a member of the IMO, the council of Europe, the Commonwealth and many other international organizations, it has a well-established maritime infrastructure and offers substantial tax incentives for the shipping industry. It is a signatory to many international maritime conventions and has concluded bilateral agreements of co-operation in merchant shipping and double tax treaties with a large number of countries. Ship management companies which operate from fully manned offices in the country, manage a substantial number of Cyprus vessels as well as gross tonnage and have contributed to the expansion of the Cyprus Shipping Registry.
Maritime Administration and Legal Framework
Maritime matters are under the jurisdiction of the Ministry of Communications and Works. The Ministry’s authority is exercised through the Department of Merchant Shipping. The Department of Merchant Shipping handles the registration of ships, enforcement of merchant shipping legislation, administration, control of shipping and enforcement of international conventions, investigation of marine casualties, resolving labour disputes on board Cypriot ships and certification and training of seafarers.
Registration of Ships, Sales and Mortgages Laws 1963-2005.
The Register of Cyprus Ships is regulated by the Merchant Shipping. Shipping legislation in Cyprus is essentially based on the British model.
These correspond to the British Merchant Shipping Acts 1894-1954. The other principal merchant shipping laws are the Merchant Shipping (Masters and Seamen) Laws 1963-2002 and the Merchant Shipping (Fees and Taxing Provisions) Law of 2010. Cyprus shipping companies are regulated by Chapter 113 of the Statute Laws of Cyprus (as amended) which is, again, modelled on the UK Companies Act, 1948.
The Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (the “Tonnage Tax Law”) was enacted in 2010 and has retroactive effect from 1 January 2010. The regime introduces tax benefits for ‘qualifying’ ship owners, ship managers and charters, as these are defined in the relevant law. Cyprus is a signatory and has ratified the major international conventions on maritime safety, prevention of pollution of the sea, training certification and watch keeping of seafarers and limitation of ship owner’s civil liability in case of oil pollution damage and conventions on maritime labour. It has also determined double tax treaties and bilateral agreements with a large number of countries for the evasion of double taxation and enhancement of co-operation in the field of merchant shipping. These agreements provide additional financial advantages including tax incentives and advantages on the engagement of foreign seafarers on board Cypriot ships.
Banking and Finance
Again, commercial and banking arrangements and practices in Cyprus follow the British model. Cyprus also enjoys a well developed insurance industry and all types of risk are accepted, mainly through intermediaries and agents. There is a strong correspondence network with international banks.
THE CYPRUS SHIPPING COMPANY
A non-Cypriot/non-EU resident wanting to register a ship under the Cyprus flag must
form a Cyprus Shipping Company known as the “Company”). The Company will acquire the vessel in its name. Registration will be made as a private company (by shares) with limited liability.
- Company Formation
PROCEDURE FOR INCORPORATION
In order to carry out the formation of a Cyprus shipping company, the below information is necessary:
- the chosen name of the company
- amount of authorized share capital
- whether shares will be held in trust for Cypriot nominees;
- whether shareholders will subscribe to the memorandum and articles of association
through nominees or by themselves
- the name, nationality, address and occupation of the beneficial shareholders
- the name, nationality, address and occupation of the directors
- name and address of the secretary
- The Memorandum and Articles of Association
(B) COMPANY NAME
The name must be approved by the Registrar of Companies and must end with the word ‘limited’ or ‘Ltd.” Generally speaking, very general names or confusing names that are likely to be similar with existing ones will not be approved. It normally can take 2 days to obtain approval for the Company’s name.
(C) REGISTERED ADDRESS
The registered address must be in Cyprus. In the case that the Company does not have offices on the island, it is common practice for the registered address to be the address of the lawyers who act for the company in the country. The secretary keeps the registers and minute books.
(D) SHARE CAPITAL.
The share capital may be insignificant, for example 100 EUR or the actual amount to be deposited by the promoters for the quest of the venture. The shares may be allotted at par value. Any class of share is acceptable ordinary, preference and with different voting and dividend rights. All shares must be nominative. Bearer shares are unacceptable. The capital may be paid up in full or by calls and this can be done in cash or for other consideration.
In a private company, the company must have a minimum of one shareholder. The shareholder/s may all be foreigners residing outside the island. Nationality is of no importance. It is possible for General Meetings of the company to be held abroad and, as a rule written resolutions signed by all the shareholders will suffice in lieu of a meeting. An AGM (Annual General Meeting) must be held every year, with the first to be held within 18 months from the date of incorporation.
One or more directors may be appointed. Their nationality is of no importance. The names of the directors are submitted to the Registrar of Companies and are kept on a public record. There is no obligation to have local directors. Board meetings can be held in any country. Directors’ resolutions may be taken either at a duly convened meeting or without a meeting provided that the resolutions are signed by all the directors.
The directors are those who appoint the secretary and who has the right to resign them. A director may also act as secretary provided he is not the sole director unless the company has one shareholder. There are no restrictions on who may be appointed as a secretary, however, it is practical for the directors and secretary to reside in the same country so as to enable the holding of board meetings. It would also be practical for an assistant secretary to be appointed in Cyprus to attend to the Company’s annual formalities on the island.
Annual returns showing the names of the shareholders must be filed with the Registrar of Companies. The Registry is a public record open to inspection. Any charges against the company must also be filed and registered.
REGISTRATION OF SHIPS
Types of Registration and conditions of ownership
A vessel may be registered under the Cyprus flag if more than 50% of the shares in the ship are owned by:
- Cypriot citizens or by citizens of other Member States who in the instance of not being permanent residents of the Republic will have appointed an authorised representative in the Republic of Cyprus, or 100% of the shares of the ship is owned by one or more corporations, which have been established and operate under and in accordance with the laws of the Republic of Cyprus and having its registered office in the
- in accordance with the laws of any other Member State and have their registered office, central administration or principal place of business within the EEA and which have either appointed an authorised representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus, or
- outside Cyprus or outside any other Member State but controlled by Cypriot citizens or citizens of Member States and have either appointed an authorised representative in Cyprus or the management of the ship is entrusted in full to a Cypriot or a Community ship management company having its place of business in Cyprus. The corporate is deemed to be controlled by Cypriots or citizens of any other Member States when more than 50% of its shares are owned by Cypriots or citizens of any other Member States or when the majority of the Directors of the corporation are Cypriot citizens or citizens of any other Member State.
An authorised representative may be a Cypriot citizen or a citizen of any other Member State, who is resident in Cyprus, or a partnership, corporation, or branch established in accordance with the laws of Cyprus, which has its place of business in the Republic and which employs permanent staff in the Republic of Cyprus.
Therefore, this is the reason why all non-European owners who wish to register their ships under the Cyprus flag must incorporate a company in Cyprus. This Company will either acquire the ship in its name, or bareboat charter the ship.
There are three main types of vessel registration in Cyprus, provisional, permanent and parallel registration. All documents which refer to Cypriot ships must be drawn up in a language understandable to the competent officers under the law. In practice, most of the documents are admissible in English. This provision makes the registration of vessels much faster and saves on translation expenses as the documents do not have to be in the Greek language.
The age of a vessel is calculated by deducting the year when its keel was laid from the year when the application for registration of the vessel was filed with the Registrar of Cyprus Ships. The year of conversion or modification or major reconstruction and the year of completion or delivery of a vessel, will be ignored as they are considered irrelevant.
For more detailed information with regards to ship management and the types of vessel registration in Cyprus along with registration fees, tonnage taxes and corporation tax, contact our specialized team of consultants who will help and guide you each step of the way.