Saturday 21 April 2018
Danos and Associates
Kaimakliotis and Co
Epias 22

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Establishment of a limited liability company in Cyprus

I propose the establishment of a limited liability company instead of the establishment of a cooperative for the following reasons:

• A company has legal personality and a cooperative does not.

Company = Legal Entity

• A company has independent legal personality in contrast to a cooperative that is not a legal entity and is made up of natural persons.

• Shareholders of a limited liability company are only personally liable for their shares, while the partners in a cooperative are usually personally responsible for the debts of the cooperative.

• If a company has debts, its debts can be repaid from the company's capital and the shareholders only pay for their share. For example, if a shareholder has 2 shares of a total value of 2 thousand euros, he is personally liable for only 2 thousand euros.

• Also, if a company owes a lot of money, as long as its debts have not been misplaced, it can declare a bankruptcy, thus relieving the shareholders. If they are solely responsible for their shares.

• In a cooperative in which there are 2 partners and each of which has 50% shares, if the cooperative fails, the cooperative is responsible for repaying 50% of the cooperative's debts.

• * Companies have the so-called 'corporate veil' that exempts shareholders from repaying the debts of the company to all others just for their shares. But if the shareholders of a company make fraudulent debts to the company, the company veil can be lifted and the shareholders personally be liable for all the debts of the company. This is not the case for all shareholders, but only for shareholders whose actions were "fraudulent".

• Another good reason to set up a company instead of a cooperative is because a company can be personally responsible because it is an independent legal personality and can file a lawsuit against another company while a cooperative can not file a lawsuit against him or he must the natural persons, ie the partners, are registered. That is, the company can be blamed and not the persons who run the company eg. shareholders and the partnership can only be accused of the partners.

Thus, in a decision, the company is liable as a legal person and not its shareholders personally, in practice means that the shareholders will not pay their debts personally except for the share of their share. Of course this does not preclude that if the shareholders or members of the company act fraudulently they can be prosecuted legally and personally.

Ultimately, an associate may need to sell his house, his car, his field, etc. all his assets in order to repay the debts of the cooperative while a partner will need to pay only the share of their share. So he knows from the forefront of how much he is responsible and is assured that he will not find a day without a home or without a car.

 Establishing a company is more difficult and more complex and it costs a lot because of some procedural, but in my opinion it really is worth it because it guarantees its shareholders the limit of their responsibility, since they are certainly in good faith.

 

 

Bibliography

  • General principles and documents of legal and commercial activities: theory, practice, documents, Andri Herakleous, 2004, Nicosia.
  • The Administrative Advisers to the Cypriot Envoy, Paul St. Painless, 2016 Athens.
  • Lecture Notes Law of Commercial Companies 1 +2, Lawyer Anna Papantoniou, Dr. Georgios Dimitriadis.

 

Maria Papi
Student of the Law School
University of Neapolis, Paphos

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