Cyprus, New Law Regulating Fiduciary Services

For the purposes of regulating the professional activities provided in the framework of administrating private companies by other companies the law on the Regulation of Fiduciaries, Administration Businesses and Company Directors, which transposes the provisions of Directive 2005/60/EC into national law, has been enacted by the Cyprus Parliament on 21st December 2012.

Scope of the Law

The law applies to persons and companies providing relevant fiduciary and other corporate services relating to the administration or management of trusts and companies in or from Cyprus, including:

 directorship and secretarial services provided by a legal person, including acting as an alternate director or secretary;

 services such as holding of shares of legal persons in a nominee or trustee capacity;  provision of a registered office;

 opening or managing bank accounts; and

 safe keeping of financial instruments on behalf of clients;

The Law purports to regulate the provision of management and administration services to corporate entities and trusts, the provision of nominee and protector services for corporate entities and trusts. The provision of registered office in Cyprus, the opening and administration of bank accounts shall also be deemed as regulated activity.

Authorization/Licensing By virtue of the new Law, existing fiduciary firms need to:

1. Send a notification letter to CySEC informing them of their presence, as well as of their intention to submit or not an application for licensing. This letter should be sent to CySEC within two (2) months from the date of the Law enforcement, i.e. by the 20th of February 2013. According to the Law, the letter should include the following information:

 The name of the company

 The company’s shareholders

 The company’s directors

 Short description of the company’s activities.

2. Submit an application for licensing along with all relevant documentation as required by the Law, within four (4) months from the date of the notification letter. Please note that relevant application forms have not yet been prepared by CySEC.

3. Comply immediately with the provisions of the Law.

The most important criteria for a successful application are the following:

i. The Head Offices of the licensee must be based in Cyprus.

ii. The licensee must have at least two (2) qualified “Principals”, who are fit and proper with adequate experience in the field, academic background and professional skills which will enable them to ensure the correct and prudent management of the licensee.

iii. The licensee must employ an in-house lawyer or alternatively work with an outside lawyer on an annual basis. iv. The licensee must employ a compliance officer which has to be firstly approved by CySEC.

The law excludes registered legal firms, auditors and banks from its scope unless they opt to be regulated under it. Both the Cyprus Bar Association and the Institute of Certified Public Accountants of Cyprus will be regulating their members since they have their own rigorous regulatory arrangements.

Those who do not comply with the provisions of the Law may be held liable for a criminal offence and/or civil liability for an administrative fine of up to €1 million and or 5 years imprisonment.

For further information on this topic please contact Dr. Marina Himoni at P. N. KOURTELLOS & ASSOCIATES LLC, by telephone: +357 25 745575 or by fax: +357 25 755525 or by e-mail: mh@kourtelaw.com

Disclaimer

This publication has been prepared only as a general guide and for information purposes. It does not constitute or should not be read as a legal advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.