The Cyprus Stock Exchange (CSE) was established by virtue of The Cyprus Stock Exchange Laws and Regulations of 1993 and 1995. The legislation provides the basis for the formation and operation of the CSE and for the development of the Securities Market in Cyprus. The Cyprus Securities and Exchange Commission (CySec) is the competent authority for the supervision of the CSE’s actions.
The CSE currently provides a range of services, including the provision of Investor Services in relation to the Cyprus Depository, the settlement of transactions through specialized systems and the Listing and Trading of Securities. A common platform between the CSE and the Athens Exchange is used from 2006 onwards, and is available for individuals who want to follow a fast track procedure to gain access to securities listed on both the CSE and the Athens Exchange for trading. The CSE provides for trading on both the Regulated Market and the Emerging Companies Market (ECM) which was established in 2009.
Comparison of the two markets
For the listing of Securities on the Regulated Market, CySec must firstly approve the Prospectus and at the same time, an application must be submitted to the CSE through which the issuer must satisfy the General and Special Listing Requirements of the CSE. Once the securities are listed, the company is able to commence trading. The Regulated Market is currently in the process of reducing its segments and by the end of 2014 will have a new structure consisted of the Main Market, the Alternative Market, the FUNDs Market and the Bond Market.
The ECM is a new market not regulated by the strict listing rules of the CSE. It imposes no regulations in regard to maximum ownership or minimum market capitalization, and therefore provides scope for a more flexible and innovative business practice. There are no segments in the ECM and only Bonds and Securities can be traded on it. The issuers of ECM must submit an application through a Nominated Advisor (NOMAD) and its operations are regulated by the CSE. For the listing of securities on the ECM, there is no need for CySec’s approval if the issue is less than 5 million euros or if the investors are less than 150. An application to the CSE must be submitted through which the issuer must satisfy some of the General Listing Requirements and Basic Listing Requirements. The listing of the Securities will commence in 2-3 weeks’ time following the application, as long as the documents that are submitted are filled in accordingly and everything that is included is correct.
Requirements for ECM Listing
For a company to be listed in the ECM it must be legally incorporated and operate as a public company, having the authority to issue securities to the public according to its Memorandum and Articles of Association. It must have a minimum share capital of 26 thousand euros, 10 – 12 shareholders (persons or legal entities of any nationality) and minimum 3 Directors. It is obligatory for a company that wishes to be listed on the ECM to submit its Shareholders’ Register to the Cyprus Securities Depository (CSD).
In addition, the company must have two years of audited accounts and only newly incorporated companies can be exempted from this requirement, if they can satisfy the Council that sufficient information will be provided to the investors in order to assess the value of the company’s securities. Last but not least, a NOMAD is required, who should be appointed by the issuer and his duties commence on the date of listing and last until the end of the life of the issuer.
The notion of NOMADs
The notion of NOMADs was recently introduced by the ECM. Only legal entities are allowed to be approved as NOMADs via the submission of an application to the CSE, provided they satisfy certain criteria of professionalism, expertise and knowledge, since the NOMADs perform highly specialized functions. For instance, the NOMAD is responsible for assisting the issuer in compliance issues related to the rules and regulations of the ECM, whilst in the process of the issuer’s admission to the ECM. Also, the NOMAD evaluates whether the listing requirements of the ECM are fulfilled by the issuer, and then introduces the issuer to the CSE. The NOMAD represents the issuer throughout the whole listing procedure and, as an ongoing duty; the NOMAD also assures that all the obligations of the issuer are met. The NOMAD therefore advises the issuer on compliance issues and provides guidance as to what should be done in order for the obligations of the issuer to be met. In the event where the issuer fails to comply with their obligations, the role of the NOMAD is twofold; the NOMAD will firstly take the necessary actions to remedy the failure and will also inform the CSE about the lack of compliance and what measures were adopted in this respect.
The NOMAD is also the responsible party for the submission of the online applications for the listing of issuers on the ECM. In the event where more information is required by the CSE, an online reply will be sent to the NOMAD. As part of the general characteristic of the ECM as a market with quicker and easier procedures, all correspondence takes place between the NOMAD and the CSE.
Apart from the wide range of services provided by the CSE, Cyprus in general is a favorable jurisdiction for company incorporation. The geo-strategic and financial position of the island and its European Union and Eurozone membership along with the fact that its tax regime is one of the most beneficial in the corporate world (corporate tax of 12,5%) render it as one of the top corporate destinations. In addition, Capital Gains Tax is not applicable under Cyprus legislation and no Sales Tax is imposed on securities’ transactions. Also, a wide variety of Double Tax Treaties exist between Cyprus and over 40 other jurisdictions.
As a closing point, the high level of expertise provided by the professionals in Cyprus in the Legal, Auditing, Accounting and Taxation Sector, along with the low cost, simple and quick procedures of the CSE are considered one of the main advantages for listing securities in CSE.
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