Ioanna Georgiou
A Cyprus company may be dissolved or cease to have legal substance in different ways. The most common methods to voluntarily dissolve a company whose business life cycle has ended and has no activities, are mainly two. The Strike-off Method and the Members’ Voluntary Liquidation.
Strike-off procedure
This procedure is a relatively simple and is mainly used for dormant companies that have either ceased their activities or never had any activity. In order to Strike-off a company, it should no longer have any assets or liabilities and therefore any remaining assets should be distributed to the shareholder company or individual. Likewise, any liability must be settled or waived before Strike-off may proceed.
Preparing the company for Strike-off/ Steps and Conditions:
- Ensure that the company has ceased its activities;
- Ensure that the company has no Assets or Liabilities;
- The financial statements of the company are prepared and audited until the date the company ceased its activities and are filed with the Tax Authorities;
- A tax clearance certificate is issued by the Tax Authorities confirming that the company has no further tax liabilities;
- The company is deregistered from the VAT (if applicable);
- The Bank accounts of the company are closed.
To initiate the Strike-off procedure, the directors of the company sign a declaration stating that the company:
- is no longer carrying on business;
- has no assets or liabilities; and
- does not intend to carry out business in the future.
The declaration is then filed with the Registrar of Companies together with a letter signed by a Director requesting that the company is removed from the Registry.
The Registrar of Companies will then publish in the Official Gazette of the Republic of Cyprus a notice for striking off the company from the Companies’ Register. The company is stricken off the register after 3-4 months.
Why Strike-off
Compared to the Member’s Voluntary Liquidation procedure, the Strike-off is easier, faster and cost effective.
What to have in mind with Strike-off
The company may be restored by an interested party within twenty years of its strike-off.
Members’ Voluntary Liquidation
This is the procedure whereby the Members or Members of a solvent company that ceased its activities, decide to dissolve the company. It is required that the directors of the company make a declaration of solvency, stating that that the company will be able to pay its debts in full within 12 months from the commencement of the dissolution procedure. A statement of assets and liabilities need to be attached to the declaration of solvency. The appointment of a liquidator1
is also required for this procedure.
Preparing the company for Members’ Voluntary Liquidation/ Steps and Conditions.
- Ensure that the company has ceased its activities;
- Ensure that the company’s Assets exceeds its Liabilities (the company is in Net Assets position);
- The financial statements of the company are prepared and audited until the date the company ceased its activities and are filed with the Tax Authorities;
- There is no company Levy pending for payment to the Registrar of Companies;
- The company is deregistered from the VAT (if applicable).
The steps towards the member’s voluntary liquidation are:
- Preparation of the Statement of Assets and Liabilities by the accountants of the company;
- The directors pass the following resolutions (either by holding a meeting or by a written resolution in case this is permitted under the company’s articles):
- a) Agree that a member’s voluntary winding-up is recommended and call an extraordinary general meeting whereat the members will pass a special resolution to wind up the company voluntarily and to appoint a liquidator; and
- b) Approve the Declaration of Solvency;
- The Declaration of Solvency with the statement of assets and liabilities attached is signed by the majority of the directors before the Court;
- Within five weeks from the date of Declaration, the members of the company need to pass a special resolution (either by holding a meeting where at least 75% of the members must be present or by signing a written resolution in case this is permitted under the company’s articles) to approve the voluntary winding-up and the appointment of the liquidator;
- The Declaration of Solvency and the true copy of the special resolution passed by the members, together with all necessary forms are filled with the Registrar of Companies;
- The special resolution passed by the members is announced in the Official Gazette of the Republic of Cyprus within fourteen days after the passing of the special resolution;
- The Liquidator disposes the company’s assets (and closes all bank accounts);
- The Liquidator settles all liabilities and obtains a tax clearance certificate from the Tax Authorities confirming that the company has no further tax liabilities;
- The Liquidator prepares the final accounts of the company and calls the Final General Meeting, whereat the final accounts will be approved by the members, by advertisement in the Official Gazette at least one month before the date of the meeting;
- Within one week after the Final General Meeting, the liquidator shall send to the Registrar of Companies a true copy of the minutes of the Final General Meeting and the final accounts attached;
- On expiration of three months from the filling of a true copy of the minutes of the Final General Meeting and the final accounts with the Registrar of Companies, the company shall be deemed to be dissolved and the Registrar will issue a certificate of dissolution.
Why Members’ Voluntary Liquidation
The company is permanently dissolved two years after the issue of the certificate of dissolution.
What to have in mind with Members’ Voluntary Liquidation
It takes approximately one year for the liquidation procedure to be completed.
* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render legal advice.
The author of the article is Ioanna Georgiou.
- 1Licensed Insolvency Practitioner as per Cyprus legislation
