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Setting-up a Cyprus Investment Firm (“CIF”)

Setting-up a Cyprus Investment Firm (“CIF”)

The company formation procedure in Cyprus is basically the same for all business entities; having a simple and straightforward structure. However, to set-up a CIF you have to apply to Cyprus Securities and Exchange Commission (“CySEC”) to acquire investment services license and authorisation as explained further below.

Let’s have a look at the basic steps needed to establish a company in Cyprus and then to set-up a CIF:

Step 1 – Register the Firm’s Name

Think of your company name and then apply to the Registrar of Companies to reserve it and receive approval; alternatively, in case of urgency, you may request our list of ready-made (shelf) Cyprus companies, which are available upon request.

Kindly note that when applying for a name you should have in mind CySEC’s Circular C108, which specifically states that “The name of the Regulated Entities, or the use of words within their name, should reflect the work/activities they are engaged in, for purposes of not misleading the investors.” This Circular is important to be followed to avoid further delays in the approval of the CIF’s authorisation.

Step 2 – Register the Firm

A certified corporate lawyer shall prepare the Memorandum and Articles of Association (“MAoA”), which must be signed by him. The MAoA is thereafter submitted to the Companies Section of the Department of the Registrar of Companies and Official Receiver along with a sworn statement from the lawyer and details of the registered office, all the directors and secretary and the shareholder making the relevant fee payment (accelerated processing for an extra fee is available via One Stop Shop).

Step 3 – Post-registration obligations

Then, you should wait several working days to receive the Certificate of Incorporation. Furthermore, you should apply to the Tax Department to receive a Tax Identification Number (“TIN”) and register with the Ministry of Labor, Welfare and Social Insurance as an employer to be allowed to employ staff in Cyprus.

Step 4 – Getting a CIF license

Investment firms are regulated by the CySEC under the Investment Services Law and the relevant European Regulation. CySEC provides licenses and supervises the Firms depending on the Investment Services they will provide which are:

  1. Reception and transmission of orders in relation to financial instruments
  2. Execution of orders on behalf of clients
  3. Portfolio management
  4. Provision of investment advice
  5. Dealing on own account
  6. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
  7. Placing of financial instruments without a firm commitment basis
  8. Operating a Multilateral Trading Facility
  9. Operation of an Organized Trading Facility

Types of CIFs

  • Full Scope CIFs: Firms which shall hold client’s funds and/or financial instruments and will be licensed for any of the above services, the minimum initial capital requirement is €730,000.
  • Limited Activity CIFs: Firms that shall not hold client’s funds and/or financial instruments and will be licensed for service 5 (as above), the minimum initial capital requirement is €730,000.
  • Limited License CIFs: Firms which may or may not hold client’s funds and/or financial instruments and will be licensed for any services except the services 5 – 6 (as above), the minimum initial capital requirement is €125,000.
  • Out of Scope CIFs: Firms that shall not hold client’s funds and/or financial instruments and will be licensed for the services 1 – 4 (as above), the minimum initial capital requirement is €50,000.
  • Despite minimum levels of initial capital as set out by European Regulations from time to time, the CySEC’s consideration of an applicant’s business plan submitted will more accurately determine the funds/capital to be initially made available for each specific case. Founders of CIFs should be prepared early on with available liquid investment of at least the minimum initial capital prescribed by applicable regulation, plus the minimum of first year’s budget for the set-up and operating of the CIF.

The application package for CySEC submission

In order to obtain a license from CySEC and to operate as a CIF, an application package has to be submitted for approval. The documents that are included in the application package are, but not limited to, the following:

  1. Completed application form as provided by the CySEC;
  2. Information about the directors, managerial staff and shareholders with special participation (for example CVs, completed questionnaires as provided by CySEC, etc.);
  3. Company legal documents and Registrar Certificates (certificate of incorporation, Memorandum, and Articles of Association, etc.);
  4. Group structure;
  5. Organisational structure;
  6. Clean criminal records and Certificates of Good Standing of the shareholders with special participation, the Board of Directors and employees of the company;
  7. Company’s Internal Operations Manual for all activities and operations;
  8. Together with the above document bundle, a three-year business plan and anti-money-laundering and know-your-client procedures must be filed with the application.

Other Requirements

  • The Board of Directors of the CIF shall consist of at least two executive members and two independent non-executive members. The majority of the members shall be Cyprus residents.
  • The Memorandum of Association of a CIF must state that the firm operates as an investment firm following the provisions of Law 87(I)/2017. Furthermore, it must state that the company offers or performs investment and ancillary services within the scope of its license.

Step 5 – Activation of License

To activate the license CySEC has in place additional conditions to make sure the firm is fully capable of operating and will allow for a timeframe up-to six months for the firm to set-up. CySEC then will perform inspections and interviews to activate your license. The activation requirements are:

  • Establish fully operational offices in Cyprus;
  • Have in place policies and procedures to be in compliance with the applicable laws and regulations (i.e., follow the Internal Operations Manual and the AML Manual);
  • Have key personnel in place and provide evidence of their knowledge and expertise as well as to hold the CySEC’s required certificate to perform their duties for the departments required under the law.
  • Pay the amount required to the Investor’s Compensation Fund (“ICF”) of CySEC, which is a non-redeemable amount.

 

Even though the process is easy to follow and implement, it is highly recommended to seek the help of professional advisers when establishing a CIF, as regulatory requirements can be exhaustive and create time-delays or unexpected costs.

CX Financia’s expert advisers can act as your guide and offer consultation to all of the steps of your choosing. Our network of experts can help you navigate the bureaucracy with ease, allowing you to focus on your core business activities. Find out more here.

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