Company Liquidation

Closing a Cyprus Company

When a company’s members decide to close a company, either because it is no longer needed or it has served the purposes for which it was established, the Cyprus Companies Law (Cap. 113) provides for two main methods to formally close a corporate entity: voluntary strike-off and voluntary liquidation (‘winding-up’).

Deciding whether to opt for liquidation or strike-off will depend on the circumstances surrounding the closure and the regulatory requirements.

A Cyprus company can also be subject to involuntary strike off by the Registrar of Companies for non-compliance with its statutory obligations, such as submission of annual returns, or to a compulsory winding-up by Court order upon a relevant request submitted by the company, by a creditor or contributor of the company, by an administrator of another EU Member State or by an official receiver.

Voluntary Strike Off Process

A company that has ceased to carry out business or has never carried out business activities can submit an application for strike off to the Registrar of Companies. This is the simplest method and typically takes around six months to complete.

In order to proceed with a voluntary strike off, it is essential that the company must first:

Close all its bank accounts.
Have a clean balance sheet with no liabilities, receivables or other outstanding obligations.
Have up to date audited financial statements.
Have complied with all its statutory tax, legal and regulatory obligations.

The company’s directors must then pass a resolution declaring that the company has no business activities, which must be filed with the Cypriot Registrar of Companies together with an application for voluntary strike off (form HE60).

Provided that the Registrar is satisfied that all relevant legal requirements have been met, it will register the application and publish a notice in the Official Gazette of the Republic of Cyprus that, three months after the date of publication, the company will be struck off the Register.

At the end of the three-month period and providing that no objection to the company’s strike off has been filed by the company, or any member or creditor of the company, the company will be struck off the Companies Register, the action will be published in the government gazette and the status of the company on the Register will be updated.

In the event that the company requires the issue of a Certificate of Strike off, it can request this from the Registrar of Companies.

It is important to note that while the company is struck off the Registry by having its name removed, the responsibilities of the company’s directors, officers and members remain and may be executed as if the company was never dissolved.

Any interested party (company or any member of the company or creditor) that is dissatisfied with the strike off of a company, or has sustained loss or damage, can apply to the Court for its restoration for a period of up to 20 years after the date of the company’s strike-off.

Voluntary Company Liquidation

Liquidation, also known as winding-up, is the legal process through which a company’s assets are realised and distributed to its creditors and shareholders. Under the Cyprus Companies Law, which governs the processes of liquidation and insolvency in Cyprus, a company may proceed with its voluntary liquidation in the following circumstances:

When the period of the company’s duration, if any is set out in its articles of association, has expired.
When a particular event occurs, the occurrence of which was set in the articles of association to mean the dissolution of the company.
When a company has voted by special resolution for its voluntary liquidation.
When a company has voted by extraordinary resolution that, due to its obligations, it may not continue its operations and that liquidation is therefore advisable.

The Cyprus Companies Law provides for two types of voluntary winding up: members’ voluntary liquidation (MVL) and creditors’ voluntary liquidation (CVL). The procedure is determined by whether the directors can make a statutory declaration of solvency.

The main differences between the two are that MVL is about efficiently distributing assets and closing solvent businesses, while a CVL focuses on debt repayment and protecting creditors’ rights.

Members' Voluntary Liquidation

A Members’ Voluntary Liquidation (MVL) is where the company’s members decide to close the company, either because it is no longer needed by the members or it has served the purposes for which it was established. An MVL is an administrative procedure only available to solvent companies that can pay all debts in full within a specified timeframe.

An MVL is often used in situations where a company’s owners wish to cease to trade and cannot sell the company. As long as the company remains solvent after meeting any cessation costs, it enables the company owners to extract the profit from the company while remaining in control of the process of winding up the business.

To initiate an MVL, the company’s directors must swear a Declaration of Solvency confirming that the company can settle all its liabilities within 12 months. The directors must then convene a general board meeting to propose an MVL, followed by a shareholders’ resolution approving the liquidation. A majority of shareholders must consent.

If the resolution is approved, a licensed insolvency practitioner is appointed to oversee the liquidation process. The appointment of liquidator must be published in the Official Gazette and local newspapers. Within 14 days of the resolution, a notice of the liquidation must also be submitted to the Registrar of Companies.

The appointed liquidator takes control of the company’s assets, ensures all creditors are paid and obtains a tax clearance certificate from the Cyprus Tax office. Any remaining assets are distributed to shareholders according to their rights.

A one-month notice for the final meeting of the company is published in the Official Gazette and a concluding meeting is conducted before the company is officially dissolved. Final minutes and the liquidator’s statement of account are filed with the Registrar of Companies and the company is deemed dissolved after the lapse of a three-month statutory period.

Unlike strike-off, voluntary liquidation is an irreversible process, ensuring complete transparency and legal compliance in winding up a company. Depending on the company’s circumstances and time taken to obtain clearance from the tax authorities, the MVL process generally takes over 12 months to complete.

While strike-off is effective for dormant companies with no outstanding debts, an MVL is suitable for businesses seeking an orderly and transparent dissolution process. Sovereign Cyprus can advise on the most suitable option and assist with all aspects of either procedure, including:

Updating accounting records.
Statutory filings with Registrar of Companies.
Corporate governance and administration.
Liaison with Cyprus Tax Department to obtain a tax clearance certificate.

Creditors' Voluntary Liquidation

A Creditors’ Voluntary Liquidation (CVL) is used for companies that are insolvent and unable to meet their debts. If a company starts an MVL but cannot pay its debts within the projected period, the liquidation must be converted to a CVL.

Unlike an MVL, the CVL process does not require a declaration of solvency. Instead, the creditors play a more active role in the liquidation process because they are directly affected by the company’s insolvency. A CVL prevents legal actions, allows for the appointment of a preferred insolvency practitioner, and helps avoid compulsory liquidation.

Under the CVL liquidation procedure, the directors are required to propose a CVL through a board resolution, which must then be followed by an extraordinary general meeting (EGM) for approval by members and creditors. If the resolution is approved, creditors and members appoint a licensed insolvency practitioner or practitioners to oversee the liquidation process.

The appointment of a liquidator(s) must be published in the Official Gazette and local newspapers. Within 14 days of the resolution, a notice of the liquidation must also be submitted to the Registrar of Companies. If the creditors deem it necessary and appropriate, an inspection committee can also be appointed to oversee the process.

The directors are obliged to deliver to the liquidator a Statement of Assets and Liabilities and the appointed liquidator takes control of the company’s assets. After settling all claims in part or full and distributing assets, the liquidator calls final meetings with creditors and members before applying for the company’s dissolution and arranging for the submission of the Final Liquidation Account to the Registrar of Companies.

The company will be deemed to be dissolved within three months from the registration of the accounts with the Cyprus registrar. While the company is formally placed into liquidation quickly, the full process – including asset realisation, creditor payments and clearance from the Cyprus tax authorities – can typically take from six to 24 months, depending on complexity.

Compulsory Company Liquidation

Compulsory liquidation – also known as court-ordered winding-up – is ordered by the Court on the basis of a petition filed by the company itself, a creditor or a contributory. Compulsory liquidation in Cyprus is a legal remedy designed to protect creditors and ensure an orderly dissolution of insolvent companies.

Under the Companies Law, the Court may order the winding-up of a company if it is satisfied that one of the following statutory grounds is met:

Special resolution – the company itself resolves, by special resolution, that it should be wound up by the Court.
Statutory reporting failures – failure to deliver the statutory report to the Registrar of Companies or to convene the statutory meetings.
Dormancy – the company does not commence its business within a year from its incorporation or suspends its business for a whole year.
Public company membership – where the number of members is reduced below seven and either the company declares inability to increase its number of members or is unable to increase within the time limit set by the Court.
Inability to pay debts – the company is insolvent and cannot meet its obligations.
Just and equitable ground – the Court is of the opinion that it is fair and in accordance with the law of leniency to dissolve the company.

A copy of the Court order for liquidation must be submitted to the Insolvency Service within three working days of the issuance date. The Court order generally provides for the appointment of a Liquidator. The Liquidator undertakes to conduct the liquidation procedure on the basis of a Statement of Affairs that must be prepared and submitted by the company’s directors.

Upon completion of the liquidation, the Registrar of Companies will proceed with the relevant publication of strike off in respect of the company in the government’s gazette.