On the 2nd of November 2018 The Central Bank of Cyprus issued a circular addressed to banks and financial institutions, which deals with shell companies, also known as “shelf companies”. The provisions of the circular have already been put into effect and contain the following key points:
1. A shell company is defined as:
• A company, which does not have an actually presence in the country of its registration or incorporated. The company would not be considered to have an actual presence in the country of registration where third parties provide nominal services to such company, including secretarial services.
• A company which does not carry out any economic activity in the country of its registration or incorporated and a company which has small or no economic value.
2. Where the company meets any of the definitions above, and it is also:
• Registered in a jurisdiction where it is not obliged to file financial statements and not required to have audited financial statements;
• Registered in a jurisdiction, which is listed by OECD or EU countries as a jurisdiction which does not participate in the exchange of tax information or does not have tax residency.
In such cases it is not recommended to commence any business relationship with such companies. Such companies may not have bank accounts in Cyprus.
The Central Bank of Cyprus would also like to remind that financial institutions should immediately review their policies with respect to onboarding new clients. All financial institutions are required to carry out all the necessary processes for customer verification (due diligence) pursuant to the current norms and procedures in place, which include the identification of all beneficial owners, their source of income, and the nature of client’s activities.
Our Corporate Governance specialists will be delighted to provide additional information with respect to this matter. We can examine your corporate operations to determine whether they fall within the definition above and if they do, our specialists can work with you to find some alternative solutions.
Ekaterina Bankova,
Client Account Manager
