MEMORANDUM AND ARTICLES OF ASSOCIATIONS - BASIC RULES FOR CYPRUS
The existence of every company begins with its Memorandum & Articles of Association, being it’s A-Z guide of all its norms and rules that regulate a company.
The Memorandum & Articles of Association (the “M&A”) is prepared for the formation and registration of a company, by specifying the objectives for which the company is being formed, as well as defining its relationship with its shareholders.
The founding documents of a company are its statutory documents, together with form HE1, HE2 and HE3, which can now be submitted electronically through the Registrar of Companies online system.
The documents that must be submitted to the Registrar of Companies for the registration of a company are the following:
- Memorandum of Association
- Articles of Association
- Solvent Declaration signed by a Lawyer and stamped in accordance with the share capital of the company (form HE1),
- Filing of form HE2, details of the registered office of the Company,
- Filing of form HE3, details of the officials of the Company (director and secretary),
- Declaration of the witness, and that witness must be the same witness as the one on the last page of the M&A
MEMORANDUM OF ASSOCIATION
According to Article 4 of Chapter 113, the founding document must meet certain conditions. In particular, the following must be stated in the founding document:
a) the name of the company
b) the purpose of the incorporation of the company
c) limited liability clause (where applicable),
d) the terms regarding its share capital (if it is a company with shares); and
e) signatures of the first subscribers of the Memorandum and Articles of the Company indicating the share capital, the signature of the witness and the name of the lawyer
Since the company is an artificial entity, it must be given a name. The name of the company must be stated in the founding document, and this applies to both private and public companies For the incorporation of the Company it is mandatory to secure a name that is pre-approved by the Registrar of Companies and Official Receiver.
1.APPROVAL OF A COMPANY NAME – REGISTRAR OF COMPANIES AND OFFICIAL RECEIVER, THE REPUBLIC OF CYPRUS
The name of the company must be accompanied by the following words or initials as the case may be: (Article 4 of Cap.113)
- Private company – ltd/ limited /Limited / Ltd
- Public company – public limited/ public company limited/ plc
- European Public Limited Liability Company
- Law firm with limited liability – Δ.Ε.Π.Ε./ LLC
- Architectures or other companies licensed under ETEK, - L.L.C
- According to Article 18 of Cap.113, prior to receipt of approval by the Registrar of Companies for the proposed name of the company is necessary before any other action to establish a company. The registrar cannot accept a name which:
- Is similar to a name of an existing company,
- Considered misleading,
- Famous country locations etc, and/or
- Names implying connection with any Ministry or Government Department or Municipal or other Local Authority or with any organization or body established by Law or with the Government of any foreign country cannot be accepted unless it corresponds to the fact.
The decision of the Registrar regarding the refusal to register a name due to undecidedness is subject to an appeal based on Article 146 of the Constitution of the Republic of Cyprus. The judge of the refused registration is the Registrar of Companies, and the court does not replace the Administration in the judgment of the matter but is limited to the control of the exercise of the power in order to establish whether it was exercised within the limits set by the law. Protection of the company name is also provided by the provisions on unfair competition provided there is a likelihood of confusion.
When changing a company name (based on Article 19 of Cap. 113), the same principles apply to the registration of a first name as regards the issue of infringement of the already registered company name. That is, a company cannot change its name so that the new name is too similar to another company's name. Also, if the company is forced to change its name because it is too similar to the name of an existing company, the new name cannot be too similar to the first name to be changed.
2.THE ARTICLES OF ASSOCIATION OF A COMPANY
The articles of association of every company must state the purpose of the company in accordance with Article 4(1)(b) of Cap 113. The purpose of the company cannot be unlawful under Article 3(1) of Cap 113.
The statement of purpose serves two main purposes: 1) it defines the company's powers: the company can take actions that reasonably serve these purposes and 2) it serves the protection of investors and the public, the company's potential creditors AND/OR any third party having a direct right against the said company.
3.MEMORANDUM OF A COMPANY
Any changes to the Memorandum require a Court Application for approval of such change, since the scope of any company is considered as fundamental, the Court for such a change must issue a Court Order approving the relevant special resolution of the Company, in compliance with Article 7 of Cap. 113.
In accordance with Article 7 (1) of Cap. 113, the main pillars, why a company may change its scope of the Memorandum, are:
(a) conduct its business more economically or more efficiently or
(b) achieve its primary purpose by new or improved methods or
(c) develop or change its local area of operations or
(d) to carry out work which under the existing circumstances may be more suitably and advantageously combined with the business of the company or
(e) limit or abandon any of the purposes specified in the articles of association or
(f) to sell or dispose of the whole or any part of the company's business or
(g) to merge with any other company or body of persons.
4.ARTICLES OF ASSOCIATION
Articles of Associations is the document that defines the rules of how a company operates. The drawing up of the articles of association is mandatory only with regards to companies limited by guarantee in accordance with Article 8 of Cap.113. Companies limited by shares are not required to register articles of association. Where no articles of association are registered, section 10(2) of Cap. 113 provides that the regulations contained in Table A of the First Schedule of Cap. 113 constitute the company's regulations in the same manner as if they were contained in a duly registered article of association. The statute regulates matters such as: General Assemblies of the company, voting rights of members, transfer of shares, powers of members of the Board of Directors etc.
The registered articles of association must comply with the following conditions:
(a) be printed;
(b) be divided into consecutively numbered paragraphs and
(c) be signed by each person who subscribed to the instrument of incorporation in the presence of at least one witness who must attest to the signature.
It is suggested in cases where many shareholders are involved in a company’s structure, the parties may proceed with the drafting of a SHAREHOLDERS’ AGREEMENT a private agreement containing the rights and obligations of the shareholders of a company
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