At CX Financia, #YourTrustedFinancialAdvisor, one of the most common requests and inquiries we receive relates to financial licenses for sale in Cyprus. Such inquiries often entail the purchase of an empty shell (CIF) – an investment company for which a license in Cyprus has already been issued but with minimal activities. All these questions from customers had us thinking that market participants or new start-ups are often confused or misinformed when it comes to buying/selling an existing and duly authorized entity. In this overview, CX Financia wishes to provide you with relevant guidance in relation to IF sale/purchase, ready-made entities (also known as the CIF license), alternative investment funds (RAIF), investment firms (IF), investment funds, Electronic Money Institutions (EMI), Crypto-Exchanges for sale.  

Steps of obtaining an authorized CIF:

Ready-made licenses for sale in Cyprus (CIFs): Debunking the myths

Time is of the essence! The greatest driving force to buy an existing CIF is time considerations. It is often (falsely) believed that the purchase of an already licensed institution will allow operations to begin faster when compared to applying for authorization from scratch.

What do I need to know about financial licenses for sale in Cyprus (CIF)?

If you are interested in buying a CIF – a financial license for sale in Cyprus – you are required to take into accountability the following basic regulatory principles concerning ownership transactions. These are the following principles to have in mind:

1. Management of the CIF can only take place once the change of ownership permission is granted. This is subject to change, in the case that the buyers’ representatives (directors and senior management) are approved by the regulators as related to the target.
2. Upon the change of ownership, a new business model, program of operations, and a financial model are to be introduced and submitted to the regulators. This is to be accompanied by the ownership application.
3. The change in products and services is a part of the change of ownership. This requires the development of a new framework that is to be updated and developed.
4. Regulators consider the change of ownership the equivalency of new authorization.

Due Diligence-what do I need to have in mind?

The planning of acquisition only presupposes the accountability of several stakeholders. Having the right experts and the right expertise is exactly what you are are required to have, in order to conduct great depth of due diligence of the acquisition target. This is why the CX Financia team is all you need during this transition! #YourTrustedFinancialAdvisor

How can I follow up on current issues raised by the Regulators or competent Authorities?

CX Financia can help you thoroughly check all communication between the company and the regulators, as well as competent authorities. Open-ended investigations/complaints can damage the company and the new shareholders.

How can I ensure the regulatory reporting process followed by the company is accurate, timely, and reliable?

Our team at CX Financia will conduct searches for all regulatory reports submitted by the company, to verify the credibility of information. This is to inspect working files of such reports and verify customer funds balances and balances on safeguarding bank accounts and the company’s own accounts. At CX Financia we carry out thorough checks relating to the correctness of the safeguarding reports (internal and external). As part of this process, we verify several samples of the daily reconciliations and check with the bank for the remaining balances on the bank accounts. All such verifications are important as the failure of doing so may come back to haunt the buyer.

What are the current agreements of the CIF I should be aware of?

Check any exit clauses or:

• Look over current agreements and how this future acquisition might affect your business operations in the future.
• Investigate if there are any pending financial or non-financial compensations
• Analyze employee, directors, and management employment/service agreements. This is to verify there are no prospects for additional bonuses and compensations in case of termination.
• Make sure there are no golden parachutes or outstanding non-financial compensations (for instance stock, for the top management).

Buy Ready-made vs New set up, timeframe and costs?

It is important to note that obtaining financial licenses for sale in Cyprus compared to obtaining a new CIF license, would essentially require the same amount of time. Moreover, setting up a new CIF can be achieved at a fraction of the cost compared to purchasing an expensive license for sale. What is more, an empty shell CIF license may have developed very little and does not have valuable technology, products/services, third-party contracts, and customer portfolio. All these do not add any further value, as any other premiums asked on the market are often not justified by any underlying value apart from the license itself. Having these variables in mind, our expert team at CX Financia Ltd feels that it is not worth purchasing an empty shell CIF license. Below is a short comparison of the Financial licenses for sale in Cyprus (CIF license) vs the new CIF license:

Timeframe Comparison	Purchase of an existing CIF	New CIF application
Minimum timeframe for conducting due diligence and preparing purchase/sale agreement	1 month	N/A
Preparation of all necessary application forms and collection of required documentation for the set-up or change of control	At least 1 month	At least 1 month
Regulatory Approval timeframe	3-5 months	6-8 months
Total time from start to approval	5-7	6-8
Cost comparison	Purchase of an existing CIF	New CIF application
Seller’s Premium Min	€200,000	N/A
Due diligence costs and preparation of relevant agreements for the Share Purchase agreement and escrow account	€10,000	N/A
Service Fees for application	€5,000	€20,000
CySEC Fees Application	€3,500	€8,000
CySEC  Fees Change of Director	€2000 for each Director
One Off costs	€220,500	€28,000
Capital Requirements	Purchase of an existing CIF	New CIF application
Minimum Capital	€150,000	€150,000
ICF	€43,000	€43,000
Total Investment	€413,500	€221,000

 Please note that the above figures are indicative

When is the purchase of a ready-made license the best option for my business?

Buying financial licenses for sale in Cyprus (CIF) would be the best option in the case that you are acquiring an existing profitable business (either in the Forex industry on in any other industry), proprietary technology, and/or customer base that directly identifies with your company’s products/services. Key takeaways

• The change of ownership process starting from the due diligence and ending with the receipt of permission typically takes around 3 to 5 months.
• It would be better for the newly acquired CIF to commence operations following the approval by the Regulator and not before relevant permissions are granted.
• Entering into the purchase-sale transaction and closing it without proper due diligence could lead to a negative outcome.
• Carefully consider the risks related to the agreements concluded and any potential skeletons in the closet.
• Make sure you are represented by a professional with relevant M&A experience
• Moreover, setting up a new CIF can be achieved at a fraction of the cost compared to purchasing an expensive license for sale.

CX Financia will provide you with protections and you will not have to worry about contingent liabilities, hidden obligations, legacy issues, customer complaints, and many other important issues that may hamper your business development and wealth management. It is worth noting that the real challenge is not finding a ready-made CIF, on the contrary, the real challenge stems from completing a successful transaction with financial licenses for sale in Cyprus.

Is your business looking to buy or sell a licensed entity in Cyprus (CIF)?

If you still prefer to seek a CIF license for sale and need any assistance with the due diligence, change of control applications, or new CIF authorization, CX Financia can assist you with any task, no matter how easy or complex it is. We participate in the acquisition or sale of Investment Firms, Investment Funds, legal entities, domains, and other licensed business segments. Whether you or an affiliated party is looking to buy or sell an entity in a licensed jurisdiction, we can assist you with the following:

• Identify an Entity for Acquisition or Sale based on business needs;
• Guide you through the Compliance and financial due diligence required;
• Expedite negotiation based on previous deals experience between all parties;
• Compliance and financial due diligence;
• Transaction supervision

  Do not hesitate to contact us at [email protected]