Liquidation is the process of dissolving a Company and distributing its assets to the Company’s creditors and shareholders.
In Cyprus, the liquidation procedure is regulated by the Companies Law, Cap. 113, which specifies the below two types of liquidation:
- Voluntary liquidation which is initiated either by the members or the creditors of the Company (this may be done under Court supervision).
- A compulsory liquidation which is ordered by the Court following an application of a creditor, contributor or interested party.
Members’ Voluntary Liquidation
The liquidation procedure commences with the passing of a resolution by the Company’s shareholders or creditors.
As part of the liquidation procedure, a liquidator licensed by the Cyprus Insolvency Department is appointed, who is responsible for winding up the affairs of the Company and paying the Company’s debts and creditors. Any remaining assets are distributed to the shareholders.
Upon settlement of all affairs of the Company, a concluding meeting of the shareholders is convened for the presentation and approval of the final accounts of the liquidation. The Company is then dissolved and removed from the Cyprus Companies Register.
The liquidation period depends on the circumstances of each case. It is usually completed within 6-12 months.
The competent authority in Cyprus for Company liquidations is the Department of Insolvency, which must be notified of the commencement of the liquidation, the appointment of the liquidator and the final accounts of the Company.
Key Considerations
- The Company must prepare audited financial statements up to the date of the liquidation.
- The Company must be up to date with its tax, VAT and social insurance obligations.
- The Company must also be up to date with its compliance obligations with the Registrar of Companies.
Liquidation vs Strike Off
- A strike-off procedure may be completed within 4 months whereas the liquidation procedure takes longer.
- The strike-off procedure does not require the appointment of a licensed liquidator.
- In both cases, any taxes, social insurance contributions or other fees or levies need to be settled.
The choice between strike off and members’ voluntary liquidation depends on various factors, including the financial standing of the Company and its legal obligations.
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This article is provided for general information purposes only and does not constitute legal, tax, or other professional advice. It should not be relied upon as a substitute for specific advice on any individual matter or transaction. Professional advice should be obtained before acting or refraining from acting on the basis of any information contained herein.
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