The legislation on the Regulation of the Fiduciary Services passes in Cyprus

Cyprus/January 2012

In December 2012, the Cyprus legislation on the regulation of businesses offering management services and related subjects was finally published. The legislation was welcomed by the majority of the service providers, who see the regulations as a step forward in enhancing even more the level of quality in the provision of management services to private companies.

The legislation does not apply on CIF and credit institutions who exercise administrative services in the framework of their business which are regulated by their respective Competent Authorities and management companies and variable capital investment companies who provide administrative services during the course of their business under the Open Ended Undertakings in Collective Investments Law, and only the persons who are eligible will be able to provide management services.

The application of the legislation will cover, in general, the following services and activities:

Trustee Services
Provision of services, such as nominee services, opening of bank accounts etc., to private and public companies, partnerships or other organisations whether legal or physical persons, wherever they have been incorporated or established

The legislation will not apply to physical persons providing services as:

-a consultant in a company in which its securities are listed on a regulated market, which is under a supervisory authority and is obliged to have non-executive independent consultants, in governmental or semi-governmental majority owned by the Republic of Cyprus;
-a consultant or secretary in a company in which he owns physically or through company at least 25% by his/her spouse and/or members of his/her family up to forth degree of relation or in a trust in which relatives up to fourth degree are beneficiaries;
-a consultant or secretary in the company which is his exclusive employer or company belonging to a group that the employer is a member;
-a consultant or secretary of a subsidiary company as described on the above three paragraphs;
-a Trustee where the person is a settlor or where all the beneficiaries are himself or relatives up to fourth degree of relation;
-a Trustee in a trust created in the will of a physical person; and
-a consultant providing services for less than 10 companies, not including companies mentioned in the first three paragraphs and provided that the person is not controlling the Board of Directors of a company.

Persons, whether legal or physical, providing fiduciary services in Cyprus, other than the services provided above, shall be obliged to apply to be licensed by the relevant authority.

Requirements for acquiring the license:

Head offices of the licensee is situated in the Republic
Persons that are in fact directing the applicant or licensee must:

– have the characteristics of honesty, expertise or/and professional qualifications

– the licensee is directed by at least two persons that fulfil the above qualifications

– the Committee will have the power to oppose the appointment of a person or to ask further information or to request modifications.

3. The license will be provided only after the direct or indirect and real beneficial owners of the applicant are disclosed.

4. The licensee must ensure the employment of persons with ethos, honesty, ability, knowledge and expertise required for that position.

It is required to employ internal lawyer or to have regular professional contact with external lawyer on an annual basis.

It is required to appoint a compliance officer, after the said person is approved by the Committee.

Procedure for acquiring the license:

An application is completed and forwarded to the Commission (Cyprus Securities & Exchange Commission), which can be found on its website. The application is signed by the directors and is accompanied by:

-Special questionnaire signed by the directors or the persons that are in fact directing the company, if not the directors, the shareholders, the beneficial owners, if any and the compliance officer.
-Confirmation of the Directors that the details provided are correct and truthful.
-Criminal record certificate and certificate of non-bankruptcy for the directors, the persons that are in fact directing the company, the shareholders, the beneficial owners, if any and the compliance officer.
-The Memorandum and Articles of Association of the Company, as well as certificates showing the directors, shareholders, beneficial owners, registered office and good standing of the Company.
-Payment of the levy, as provided by the Commission.

The Commission may request additional documents.

Persons providing management services before the introduction of the legislation

Within two months from the introduction of the legislation the person notifies the Commission regarding its details and its intention to submit or not to submit an application.
Within four months from the notification, the application is submitted to the Commission, with the Financial Statements of the previous two years.
Comply completely with the provisions of the legislation.

Persons, who do not comply with the above, may continue to provide such services for six months after the date of entry into force of the legislation. After the six months they will not be allowed to provide such services.

In cases an application is rejected by the Commission, then the said person shall cease to provide such services within six months from the notification date of the rejection.

The Commission shall respond to each application of newly established service providers within four months.

The Commission shall respond to already existing service providers within twenty four months.

Intention of a person for an extension of its license to additional services or amendment of a license must be accompanied by a notification in advance to the Commission, which its approval is not required but can be opposed or asked for more information.

A license can be suspended or revoked by the Commission, while there are cases where the license is automatically terminated.

Licensed persons are held in a Register, which can be freely accessible by the public.

Persons, who do not comply with the provisions of the legislation, can face criminal and civil liability, administrative sanctions and regulatory competency of the Securities and Exchange Commission.

Eurofast Taxand, Cyprus
Tel. +357 22 699 222