There are two ways to close a Cyprus Company. The question that often arises is how a company can be dissolved or be “killed”. We have the “strike-off” and the “liquidation” process.
Procedure for Strike off Process:
This is a very straight-forward procedure.
a) The company's audited financial statements must be
prepared up to the year preceding the strike off
b) The company must file all its tax returns
c) The company must file its annual returns to the Cyprus registrar
of companies
d) All annual levies must be paid
Once all the above are achieved, the agent or auditor will submit a letter to the registrar of companies to strike off the company. The registrar of companies will then publish in the Official Gazette of the Republic of Cyprus, the intention of the company to be struck-off and sends a notice to the company that within three months, the company will be removed from the records of the Registrar of Companies.
Procedure for Liquidation:
There are 2 types of liquidations a) Voluntary liquidation and b) Involuntary Liquidation by court. In this article we will only mention the voluntary liquidation by members.
Voluntary liquidation is where the company's members decide to close the company, either because it is no longer needed by the members, or it has served the purposes for which it was established.
The condition for this method is that the company must be solvent. Solvency means that the company must be able to pay all its creditors and have no liabilities.
Procedure:
- Resolution by shareholders after directors' resolution to propose liquidation;
- Audited financial statements up to date of appointment of liquidator. Assets should exceed liabilities
- Sworn declaration of solvency in form of an affidavit by directors
- Publication of appointment of liquidator in the government gazette and two local newspapers
- Obtainment of tax clearance certificate from the Department of Taxation
- Once the above have been done, then a one month notice for the final meeting of the company is published in the government gazette
- On the lapse of this one-month notice, final minutes and liquidator's statement of account is filed with the Registrar of Companies.
- Company is deemed dissolved after the lapse of a three-month statutory period.
Any creditor or interested party may apply to have the company reinstated within a period of two years by applying to the court in the district where the company's registered office is situated, thus reinstatement under this method is by court order.
This method usually takes 12– 18 months to complete, depending on the company's circumstances and obtainment of tax clearance.
When to choose the Strike Off Option:
If your company was small and never had any issues with third party creditors, the VAT or the Income Tax Office and has never entered into any agreements that could at some point backfire and result to a lawsuit, then the Strike Off Option is more suitable as it will be cheaper and easier.
When to choose the Liquidation Option:
If your company was a fully-developed company with several agreements and sufficient vat exposure as well as substantial 3rd party creditors then the liquidation option will offer you a piece of mind as once the company has been liquidated everything surrounding it ceases to exist.
What is the difference between strike off and liquidation?
As indicated in strike-off the company is not dissolved but it is just struck-off from the register. At any time, it can be reinstated following a court order.
On the other hand, with the liquidation, once the company is dissolved there is no way to revive it.
Also, in the case of the liquidation the final order is issued by the court, whereas with strike-off there is not court involved.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
