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Athos Demetriou Associates LLC adds yet another practice area in the coveted Legal 500 EMEA top tier practice areas
Introduction
On 2 November 2018 the Central Bank of Cyprus issued a revised circular to money laundering compliance officers of all regulated credit, payment and e-money institutions on the issue of so-called shell companies. It replaces an earlier circular issued in June 2018 and aims to provide additional clarification to reinforce the effectiveness of anti-money laundering measures and the credibility of Cyprus as a destination for foreign investors and businesses. As per Circular, Cypriot credit institutions would be required to avoid entering into and renewing business relations with entities meeting the criteria of “shell” companies.
The new circular defines a shell company as a limited liability company or any other legal or business entity that has no physical presence or operations in the country in which it is incorporated or registered, and that has no economic substance in that jurisdiction.
The Circular requires banks to review their customer base to identify shell companies and inform the Central Bank on the results of the review.
Definition of Shell Companies:
The term “shell company/entity” refers to a limited liability company or any other legal/business entity that bears the following characteristics:
“physical presence of a company/entity is construed as having a place of business or operations (own or rented premises) in the country of registration/incorporation. Also, absence of meaningful mind and management could be construed as lack of physical presence. The presence of a third person providing merely nominee services including company secretary duties does not constitute on its own physical presence”;
and
Notably, if a company falls within the aforementioned criteria business relationships (i.e. banking) shall be avoided.
Exceptions:
Further to the above some exceptions may apply, in relation to the presence of economic activity. The following circumstances could indicate such behaviour:
How we can help
The above is intended to provide a summary of the changes on the subject. Our team of expert lawyers are closely monitoring current developments, and are able to assist you with all possible options for your business strategy.
Contact us
Our Corporate/Tax Lawyers will be happy to talk to you and answer to your queries. We treat all our information with due care and confidentiality.
Athos Demetriou Associates LLC adds yet another practice area in the coveted Legal 500 EMEA top tier practice areas
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