Offshore promoters are quick to sell and establish a company for you. However, when the time comes to close your operations, there is likely to be little advice on what comes next. Subsequently, I will attempt to demystify the process for closing down a Cyprus company.

Strike Off Versus Liquidation

Probably one of the first decisions you are going to have to make is whether you opt for a strike-off or a full liquidation process. Both processes are largely similar but liquidation goes further and discharges you completely.

In comparison, a strike-off might remove the company from the Cypriot register but a court order can re-instate the entity at any time. This is an important point because any future legal risks could see the company re-instated and action commenced.

Subsequently, we would always recommend a formal liquidation process unless your company is at zero risk of facing any future legal challenges.

The Strike-Off Process

The formal strike-off process is, relatively, straightforward with documentation and filing requirements. However, you will still require the assistance of your Cyprus registered agent to satisfy some of the following steps:

1. The audited corporate financial statements for the preceding year, up until strike-off, need to be prepared according to the standard Cypriot requirements.
2. All outstanding Tax returns then need to be filed, including all your employer returns and obligations, and all outstanding payments need to be satisfied.
3. You will need to ensure that the company annual returns have also been filed with the Registrar of Companies.
4. A tax clearance letter then has to be requested from the Income Tax Office. Your registered agent will normally write to them and request this clearance letter. Assuming all of the above has been completed correctly, a clearance letter will be issued in around 30 days.
5. At this point, a strike-off and company dissolution application can be made to the company registry, and you will cease operations.

Liquidation Procedures

Typically, a formal liquidation requires all of the above steps plus the involvement of the local court. The difference is that liquidation is designed to dispose of any residual assets or complex issues that may need to be solved before a corporate dissolution.

You should plan for a timeframe of approximately 3 months for liquidation as there are multiple court filings and auditors’ reports to be completed. The involvement of a liquidator slows the process and adds to the cost complexity but certainly protects you from any future legal risk.

Strike-Off Vs Liquidation: Costs

A typical strike-off process costs around 2,000 Euro and takes anywhere from 2-4 months depending on what needs to be done to bring the company into compliance.

In comparison, a formal liquidation costs upwards of 4,000 Euros and the price is dependent upon the complexity of the outstanding assets and obligations. The liquidator needs to deal with all of these issues before the company can be cleared and, finally, dissolved. It’s best with liquidation to get a ballpark quote before starting the process as costs can mount quickly.

Can I just let the Company Expire?

In the past, multiple offshore companies were left to, effectively, rot in Cyprus. Entrepreneurs would form these entities and then abandon them when their operations ceased. Subsequently, Cyprus introduced criminal penalties for officers not filing annual returns. There are large fines associated with late filing as well as the potential to be held personally and criminally liable for those costs.

In reality, unless you are planning on visiting Cyprus or forming another company, there is little they can do to enforce these measures. It’s unlikely that the Corporate Registrar is going to issue an Interpol Red Notice for your apprehension over unpaid annual fees.

However, you should try to, at a minimum, strike off the company correctly. This provides you with a modicum of legal protection and eliminates any future problems with the Cyprus authorities.

Final Words on Closing Down a Cyprus Company

In closing, the decision to choose either a strike-off process or a liquidation largely depends upon your risk profile. If your Cyprus entity has undertaken lots of work, signed numerous agreements, or could potentially face legal action then I would recommend you spend the money on a liquidation. Otherwise, you could face potential issues in the future.

In comparison, if the entity has solely been used as part of a holding structure, then you will likely just want to pursue a strike-off for the company.

Regardless of your choice, make sure you talk with your registered agent about your options. Failure to lodge annual reports brings with it risks that likely outweigh the benefit of just letting the company expire. Make sure you deal with your government obligations appropriately to ensure that you can return to Cyprus in the future.