by Andria PapageorgiouUnderstanding Non-Governmental Organizations (NGOs)
Non-governmental organizations (NGOs), also known as civil society organizations, are groups or entities of volunteers that operate independently from any government. These organizations are established to contribute at community, national, or international levels, aiming to fulfill humanitarian purposes or environmental protection goals.
The Legal Framework for Establishing and Maintaining NGOs in Cyprus
In Cyprus, there are three primary options for establishing an NGO: Clubs, Foundations, and non-profit companies limited by guarantee. Clubs and Foundations are governed by the Clubs and Foundations Law (Law 104(I)/2017, as amended), with the latest amendment in 2020. Non-profit companies are regulated under the Cyprus Companies Law, Cap. 113.
If any of these entities are approved by the Council of Ministers of the Republic of Cyprus as a ‘charitable organization,’ their income is exempt from taxation. Donations to such approved organizations may also be tax-deductible under the Law on Income Tax (Law 118(I)/2002), though the tax treatment of donations depends on the laws of the donor’s jurisdiction.
Characteristics and Obligations of Different NGO Structures
Clubs:
- Require at least 20 members to form and must serve public purposes without commercial aims.
- Governed by their constitutional documents and the law, clubs must register with the Ministry of Interior’s Registrar of Clubs.
- Clubs must submit audited accounts annually and report changes in membership and board composition.
Foundations:
- Managed by a minimum of three persons, Foundations must register their incorporation act, detailing their purpose and assets.
- Must hold property valued at no less than €1,000, dedicated to non-profit purposes such as education, health, or environmental protection.
- Foundations are overseen by Commissioners or a Board of Directors and must file annual audited accounts.
Non-Profit Companies Limited by Guarantee:
- Established under the Companies Law, Cap. 113, these companies limit members’ liability to their guaranteed amount.
- Must state non-profit purposes in their memorandum of association and prohibit profit distribution to members.
- Managed by a Board of Directors, these companies must file annual audited accounts with the Registrar of Companies.
Conclusion
Establishing an NGO in Cyprus requires careful consideration of the legal form and compliance with specific regulatory requirements. Each type of entity—Club, Foundation, or non-profit company—offers distinct advantages and obligations. Proper registration and adherence to governance and reporting standards are crucial for maintaining the status and benefits of an NGO in Cyprus.
Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.
Disclaimer: Please note that the information provided above is intended as an overview of the four types of non-profit organizations and should not be regarded as legal advice. To ensure proper understanding and compliance with the specific requirements for registering a non-profit company, society, foundation, or club, it is strongly recommended to seek professional legal advice. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouAbolishment of Annual Levy for Cyprus Companies
On February 21, 2024, the government issued an official statement regarding the abolition of the €350 annual company levy, effective immediately for the fiscal year 2024.
This strategic decision is aligned with broader economic initiatives aimed at fortifying businesses within our evolving global landscape and elevating Cyprus’s allure as a preferred destination for business activities.
Further information regarding the logistical aspects of this policy change will be communicated as it becomes accessible.
In case you need our legal support, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouNew Membership Announcement
We are thrilled to announce a momentous achievement for our esteemed Founding Lawyer, Ms. Andria Papageorgiou, who has been elected by the Board of the Cyprus Bar Association (CBA) to serve on the prestigious Committee of Finance of the CBA. This appointment stands as a testament to Ms. Papageorgiou dedication, expertise, and unwavering commitment to excellence in the finance industry.
This Committee will be responsible, among others, for the below:
This appointment not only reflects Ms. Papageorgiou’s individual accomplishments but also highlights the caliber of talent and expertise within our Firm. It reinforces our commitment to fostering a culture of excellence and innovation that extends beyond our Firm’s boundaries.
The role of Ms. Papageorgiou in the Committee of Finance at the CBA will undoubtedly pave the way for groundbreaking initiatives and strategic decisions that will shape the future of the finance industry in Cyprus. We are immensely proud of her achievement and are confident that her invaluable insights and expertise will continue to drive positive change and growth within our Firm and the industry at large.
We look forward to witnessing the continued success and impactful contributions that Ms. Papageorgiou will bring to both the CBA and our Firm.
In case you need our legal support, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouImportant update on the Cyprus UBO Register
The Department of Registrar of Companies and Intellectual Property has announced that the final electronic system solution of the Register of Beneficial Owners of Companies and other legal entities (UBO Register) is now implemented. The final system solution replaces the existing system, which was implemented with effect as of 12 March 2021 as an interim measure for the collection of information on beneficial owners. Access to the final system solution begins on 14/11/2023. You may access the official announcement of the Registrar (which is in Greek) by clicking here.
PERIOD A: 14/11/2023 – 31/12/2023
All companies established or registered under the Companies Law, Cap. 113, all European Public Limited Liability Companies (SE) and all Cooperatives (hereinafter Organizations) or their officers/partners are invited to enter the final system and proceed with the “Initial Registration”. That is, to update/ re-register their UBOs, even if they have already done so in the interim solution system. During this period there will be no fines imposition.
In effect, this means that all previously inserted UBO-related details into the interim system must be processed again into the final system with the most up-to-date status as of 14/11/2023 and also record any updates thereafter. In order to avoid fines this must be done by 31/12/2023.
Period B: 01/01/2024 – 29/02/2024
Those who have not complied with the updating/ re-registration of their UBOs into the final system during Period A, will be subject to a fine. The fine will be calculated daily from 01/01/2024 until the date of submission (* see fines note below). After the resulting fine is paid, they will then be able to proceed with registration and/or suspension and/or change without any further financial burden.
*Fines: By failing to comply, the legal entity and potentially each of its officers shall be subject to a fine of €200 and a further daily fine of €100 until the date of compliance, with a maximum charge of €20,000. Further, there could be a criminal liability or prosecution of any person failing to comply.
Period C: 01/03/2024 onwards
During this period, all actions based on the relevant Directive (K.D.P. 112/2021, as amended) will be available as below:
• Updating the Register of Beneficial Beneficiaries
• Confirmation of Beneficial Beneficiaries
• Mismatch
• Electronic Research in the Register of Beneficial Beneficiaries
• Request for exemption from disclosure of information
• Request for access to the details of a minor
• Calculations of monetary charges where applicable
In case you have any questions, please do not hesitate to contact us for further professional assistance.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouRegistration of a Non-Profit Organisation in Cyprus
In Cyprus, there are currently four primary types of non-profit organizations:
- Non-profit Companies: These entities are established with the purpose of serving non-profit objectives. They operate with the intention of benefiting the public or a specific group without pursuing commercial gains.
- Foundations: Foundations are established with the unique characteristic that all their assets are dedicated to a specific cause or purpose. They are typically created to support charitable, educational, scientific, or cultural activities.
- Societies: Societies are formed as unions comprising a minimum of 20 members. Their primary objective is to achieve a specific non-profit goal or purpose. These organizations work towards common interests or causes, fostering collaboration and collective efforts.
- Clubs: Clubs are associations formed by a minimum of 20 members, primarily for entertainment or recreational purposes. These organizations provide a platform for individuals with shared interests to come together, engage in activities, and promote social interactions.
These distinct types of non-profit organizations in Cyprus play crucial roles in various sectors, contributing to the betterment of society, the promotion of social causes, and the cultivation of shared interests.
It is important to note that each type of organization may have specific legal requirements and regulations governing its establishment, operation, and governance.
1. Non-Profit Companies:
Non-profit companies in Cyprus, governed by the Companies Law (Cap. 113), differ from for-profit companies in terms of their main characteristics:
- Dividend Distribution: Non-profit companies are prohibited from distributing dividends to their members or shareholders. Instead, any surplus generated is to be reinvested into furthering the organization’s non-profit objectives.
- Objectives: These companies can be registered to promote specific causes such as art, science, charity, or any other similar non-profit objective. The primary focus is on advancing public welfare or specific societal needs rather than generating profits for the shareholders.
- Regulatory Requirements: Non-profit companies are subject to the same legal requirements as for-profit companies, including the maintenance of audited accounts, adherence to annual levy obligations, and compliance with dissolution procedures such as strike-off or liquidation.
- Registration Authority: The Registrar of Companies is the competent authority responsible for the registration and oversight of non-profit companies in Cyprus.
2. Foundations:
Foundations in Cyprus are governed by the Societies and Foundations Laws of 1972 and 1997.
The main characteristics and requirements of foundations can be summarized as follows:
- Legal Definition and Purpose: Foundations are established with the principle that the entirety of their assets must be dedicated to a specific purpose or cause. This ensures that the resources are utilized for the intended objectives, such as charitable, educational, scientific, or cultural endeavors.
- Membership and Funding: Foundations can be established by a single individual (one member) and there is no specific minimum amount of funds required for their formation.
- Registration Authority: The Ministry of Interior is the competent authority responsible for the registration and oversight of foundations in Cyprus. To initiate the registration process, certain documents must be submitted, including the founding act, details of administration members, foundation name and address, foundation emblem (if applicable), and a lawyer’s letter.
- Dissolution or Liquidation: Foundations may undergo dissolution or liquidation under certain circumstances. In such cases, the remaining funds of the foundation are transferred to the authorities of the Republic of Cyprus, who are responsible for utilizing these funds for the cause originally supported by the dissolved or liquidated foundation.
3. Societies (or Associations):
Societies also referred to as associations, are governed by the Societies and Foundations Laws of 1972 and 1997 in Cyprus. Here are the key points and requirements related to societies:
- Definition and Purpose: According to the law, a society is defined as an organized union of at least twenty (20) individuals who come together to achieve a specific non-profit objective. These objectives can range from charitable, educational, cultural, or other similar non-profit endeavors.
- Registration Authority: The Ministry of Interior is the competent authority responsible for the registration and oversight of societies in Cyprus. It is through this authority that the registration process should be initiated.
- Registration Requirements: To register a society, the following documents and information are typically required: a memorandum of association, names and addresses of the administration members, articles of association signed by the members, the society’s emblem (if applicable), and a description of any movable and/or immovable property held by the society at the time of application.
- Publication: The certificate of registration, in the prescribed form, is published in the official Gazette of the Republic of Cyprus to formalize the society’s legal status.
- Dissolution: A society can be dissolved either by a resolution passed by the assembly of its members or if the number of members falls below twenty. Alternatively, a court order can also initiate the dissolution process.
4. Clubs:
Clubs in Cyprus are regulated by the Club Registration Law of 1972 (Cap. 112). The key characteristics and requirements of clubs can be summarized as follows:
- Definition and Purpose: A club is defined as the association of at least twenty individuals who come together for social activities, mutual entertainment, or any other lawful non-profit purpose. The primary focus of clubs is to foster social interactions and provide a platform for shared interests and recreational pursuits.
- Minimum Number of Members: A club must have a minimum of twenty members to be considered valid.
- Registration Authority: The registration of clubs is overseen by the local district office where the club premises are located. Prior to commencing operations, the club must submit an application to the local district office.
- Application Requirements: The application must include essential information such as the name and purpose of the club, the club’s address, the names of the secretary and all members, the total number of members, and the club’s memorandum.
Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.
Disclaimer: Please note that the information provided above is intended as an overview of the four types of non-profit organizations and should not be regarded as legal advice. To ensure proper understanding and compliance with the specific requirements for registering a non-profit company, society, foundation, or club, it is strongly recommended to seek professional legal advice. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
by Andria PapageorgiouShareholders’ Agreements
A. Introduction:
Under the Cyprus Companies Law, Cap 113 (hereinafter the ”Law”), all private limited Companies are required to adopt articles of association (hereinafter the ”AoA”) and a memorandum of association upon their incorporation. The AoA specify the regulations for a Company’s operations and management, and they set out the administrative and Company law procedures for carrying out the business affairs of the Company. It goes without saying that they are being drafted in accordance with the Law so that the provisions of Law are reflected in the regulations of a Company. The AoA are public documents, and the public can review them through the Registrar of Companies and Official Receiver of Cyprus.
A Shareholders’ Agreement (hereinafter the ”SHA”) is a private contract between the members of a Company. A SHA regulates the relationship between the Shareholders as well as setting the grounds in the event of a deadlock. Whilst Companies are not legally required to have a SHA (the Law does not make any references to SHA), it is important for the Shareholders to enter a SHA upon the incorporation of the Company in order to be aware of their rights and obligations towards each other. It is not necessary that the Company is a Party to a SHA.
B. When should the Shareholders enter a SHA:
From our experience, we would recommend for a SHA to be signed at the stage when you form the Company and issue the first shares. In fact, it is a good practice to ensure there is a common understanding of Shareholders’ expectations of the business.
C. What a SHA usually covers:
At Andria Papageorgiou Law Firm, we offer tailor-made solutions for SHAs drafted specifically to avoid future conflicts between the members of a Company, covering, among others, the below issues:
- The Company structure, including the composition of the share capital of the Company;
- Shareholders’ rights and obligations;
- Regulate the issuance, transfer and sale of shares of the Company;
- Regulate the appointment and resignation/removal of Directors;
- Restrictions on the activities of the Company, including provisions, requiring consent of all Shareholders, or approval by specific majority to enter new areas of business or territories;
- Set out provisions to resolve deadlock situations;
- Non-Competition issue, including provisions preventing shareholders from setting up competing business, to the Company, within a prescribed time period, or territory;
- Regulate the amount and way of declaring dividends;
- Confidentiality issue, including provisions relating to the exposure to publicity of the Company’s documents (Under Cyprus Law there is no obligation for the registration or deposit of the SHA with the Registrar of Companies); and
- Set out provisions for dispute resolution procedures.
D. What if there is a breach of the SHA:
In the event of a violation of the SHA by any contracting Party, then the other Party can enforce same by an action for specific performance, and for damages, as well as to apply for an injunction to block the violation of same.
It should also be noted however that any term of the SHA which contravenes any statutory provision of the Law is considered invalid under Cyprus Law. In addition to this point a SHA and the AoA of a Company should be consistent with one another.
E. Conclusion:
A SHA is a valuable tool, for providing a procedural framework, to regulate and govern the internal management of a Company, or joint venture.
In addition, through the use of a SHA, the Parties can achieve greater protection, of the rights of minority Shareholders, quick resolution of deadlocks, sufficient regulation of the rights of entry, or exit, of shareholders in the Company, secure methods of valuation of the fair value of the shares of the Company etc. Because the SHA, has the additional advantage of not being available to public, unlike the Company’s constitutions, sensitive details, regarding the role of the Parties in the Company’s management, their rights, and obligations etc., may be set out in the SHA.
The SHA shall be signed by all registered Shareholders of the Company, as well as by the Company, and in case of conflict between the terms of the AoA, and the terms of the SHA, the terms of the latter, prevail and have superior effect.
F. AP Law Firm:
Andria Papageorgiou Law Firm can assist you with the below:
- Provision of a Legal Opinion and Advice on the SHA;
- Drafting of a new tailor-made SHA;
- Review and Comment on any existing SHA;
- Provision of a Legal Advice on any dispute arising out of a SHA
Should you have any further questions, please do not hesitate to contact us at info@apapageorgiou.com.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.