Cyprus Investment Company CIF And FOREX companies

It is useful for you to be familiar with some of the aspects of the relevant legislative framework in relation to CIFs. It is CIFs are special corporate entities that operate under an authorisation granted by the competent authority which is the CySEC in order to provide one or more investment services to third parties or/and performs one or more investment activities on a professional basis.

The important aspect about the CIF is the passporting. Passporting – the license granted by CySEC to operate as a CIF, provides the opportunity to the company to offer directly cross-border investment services or establish a branch in another EU or EEA jurisdiction without the need to obtain any additional licenses.

Moreover, Cyprus has an attractive tax regime for companies providing investment services and a number of double tax treaties with other jurisdictions. Additionally, there are relatively low set-up and operational costs – the company’s set-up costs and the cost of providing services in Cyprus can be generally lower than some other EU countries (e.g. office space, staffing, professional services providers and so forth) as well as the benefit of the 12.5% corporation tax which is the lowest in Europe.

Depending on the range of the investment services that the CIF wishes to offer relevant organizational units should be operated. Possible core Investment Services that a Financial Services Company may offer are:

I. Investment Services (Part Ι of the Third Appendix of the Law 144(Ι)/2007)

I(1) Reception and transmission of orders in relation to one or more financial instruments

I(2) Execution of orders on behalf of clients

I(3) Dealing on own account

I(4) Portfolio management

I(5) Investment advice

I(6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis

I(7) Placing of financial instruments without a firm commitment basis

I(8) Operation of Multilateral Trading Facility

ΙΙ. Ancillary Services (Part IΙ of the Third Appendix of the Law 144(Ι)/2007)

ΙΙ(1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management

ΙΙ(2) Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction

ΙΙ(3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings

ΙΙ(4) Foreign exchange services where these are connected to the provision of investment services

ΙΙ(5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments

ΙΙ(6) Services related to underwriting

ΙΙ(7) Investment services and activities as well as ancillary services of the type included under points I and II above related to the underlying of the derivatives included under point  III (5), (6), (7) and (10) where these are connected to the provision of investment or ancillary services

ΙΙΙ. Financial instruments (Part III of the Third Appendix of the Law 144(Ι)/2007)

ΙΙΙ(1) Transferable securities

ΙΙΙ(2) Money-market instruments

ΙΙΙ(3) Units in collective investment undertakings

ΙΙΙ(4) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash

ΙΙΙ(5) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event).

ΙΙΙ(6) Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market or/and an MTF

ΙΙΙ(7) Options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in point 6 of Part III and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls

ΙΙΙ(8) Derivative instruments for the transfer of credit risk

ΙΙΙ(9) Financial contracts for differences

ΙΙΙ(10) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contract relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Part, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls.

It is observed that the more the number of services that you apply for the granting of the license, the longer it takes for the CySEC to examine the application and grant the permission. Therefore, for a fully-fledged CIF it may take longer to obtain the license and the relevant duty payable to the CySEC would be determined by the main and ancillary services to be offered. Perhaps it would be advisable to initiate the application on the basis of the basic Investment services and ancillary services for which you wish to apply, and then add up and apply for more services after the license is granted. Please provide us with instructions and directions as to the scope of service which you will be offering depending on the business plan that you have in mind so as to be able to provide relevant advice.

Further to your inquiry regarding the actual out of pocket expenses involved for the application for the CIF license please note below:

1. License fees payable to the CySEC

€3.000 initial fee

€1.000 for investment service as per paragraph I. (1), (5) and (7) of page 1 above

€1.500 for investment service as per paragraph I. (2) and (4) of page 1 above

€2.000 for investment service as per paragraph I. (3) and (6) of page 1 above

€3.500 (7 x 500) for each ancillary service

€16.500

Plus €10.000 Additional in order to provide services for a Multilateral Trading Facility

Please note that financial instruments would be included in the service, though for any additional application other than what is stated there is a fee of €300 per application.

It is observed that the more the number of services that you apply for the granting of the license, the longer it takes for the CySEC to examine the application and grant the permission. Therefore, for a fully-fledged CIF it may take longer to obtain the license and the relevant duty payable to the CySEC would be approx. €16.500 (plus €10.000 for the provision of MTF services).

2. Company Registrar Duties for the incorporation of a local CIF

The approximate actual out of pocket expenses payable to the company’s registrar is approximately Euro €850 PLUS the incorporation duty for the share capital requirement, which is calculated in the manner indicated below.

Share capital requirements

The minimum issued share capital depends on the investment services provided by the company as follows:

The share capital has to be blocked in a bank account in the name of the CIF and this is a requirement until the finalisation and granting of the permit. This is to secure and protect the investors of the CIF. The shareholders of the CIF will be reviewed by the CySEC and only if approved can continue to be shareholders.

Increase of share capital through Company’s Registrar – Actual expenses only

Usually, the share capital of the Company incorporated for the purposes of a CIF is merely nominal (this is to reduce the initial costs in terms of stamp duty to the company’s registrar) at the time of the incorporation, and can be increased by special resolution depending on the service that you will be offering. The amount of the stamp duty payable to the company’s registrar depends on the services to be provided and the share capital requirement:

– The share capital is going to be €1.000.000 then additional duty is 1.000.000 x 0.6% = €6.200 + stamp €150

– Additionally to the above, there is an application duty for the submission of the special resolution for the increase of the share capital and the issuance of the certificates with acceleration.

3. Fees for the preparation, submission and follow up of the Application up to CySEC decision: €25.000

– Legal fees for the preparation and submission application through CySEC for the CIF licence and follow up of application.

– Fees for the preparation of the Company procedures manual for all activities and operations.

– Fees for the assistance to the client on the preparation of a two-year business plan.

Please be informed that in addition to the above amounts there will be the additional costs to be taken into consideration.

Further requirements:

The Directors must also be approved by the CYSEC. Usually the CYSEC prefers to have on the Board of Directors as Non-Executive Directors people who used to work at Banks or that they have been in Bank Boards. These individuals usually hold the position as nominees, and if it be necessary we can assist you with the appointment of such a person.

• The Board of Directors of a CIF shall consist of at least:

• two executive Directors and • two independent non- executive Directors.

• The majority of the Directors of the CIF shall be residents of Cyprus

• The management of a CIF must be undertaken by at least two persons meeting the following requirements:

• Shall be of sufficiently good repute and sufficiently experienced as to ensure the sound and prudent management of the CIF

• The CIF shall have a General Manager, who shall:

• have detailed knowledge of all of its activities,

• render his services in full and exclusive employment at the CIF

• be a resident of Cyprus.

• The General Manager of the CIF may be one of the executive Directors.

• Employees/ key persons of the CIF shall render their services in full and exclusive employment at the CIF so that the following objectives are achieved:

• the CIF shall operate independently from all other businesses of the group, to which it, possibly, belongs,

• the employees/ key persons of the CIF shall be specified and accessible at all times

• the CIF shall independently offer the necessary substance

• A CIF’s head office must be situated in Cyprus.

THE CYSEC PROCEDURE

In order to obtain a license from the CySEC to operate as a CIF an application package has to be submitted for approval to the CySEC. The documents that constitute the application package include, but are not limited to, the following:

•  Completed application form as provided by the CySEC
• Information by the directors, managerial staff and shareholders with special participation (for example CVs, completed questionnaires as provided by the CySEC, etc.)
• Company legal documents (certificate of incorporation, Memorandum and Articles of Association, etc.)
• Certificates of the registered office in Cyprus (confirming there is a registered company in the Republic of Cyprus)
• Certificates by the Republic of Cyprus confirming the Directors and Secretary of the company
• Group structure
• Organisational structure
• Clean criminal records and Certificates of Good Standing for the shareholders with special participation, the Board of Directors and employees of the company
• Company procedures manual for all activities and operations
• Two-year business plan
• Financial statements for the past three years
• Indemnity insurance, also insurance for the NEDs

How much time does it take?

It is estimated that it takes around 1-3 months for the preparation of the application package. Upon submission of the application package, CySEC has a period of maximum 6 months to review the application and come back to the company asking for additional information and clarifications. Based on our experience CySEC normally takes 2-3 moths to respond. Usually the company is then given 2-4 weeks to provide CySEC with the required information and given that no additional clarifications will be required by CySEC, the company will be given a conditional licence. This means that CySEC will give the applicant company a list of conditions that will have to fulfilled (such conditions may include the setting up of the company’s offices in Cyprus including employees for the key positions, etc). Overall it can be expected that a licence can be issued around 3-5 months after submission. This also depends on CySEC’s workload at the time and may change. At our end we shall strive to proceed with the application and press the authorities for an expedient and quick incorporation of the company and application with the CySEC for the granting of the relevant permits.

Conditions to be satisfied for the granting of a license

• Minimum issued share capital
• Incorporation of a local Cyprus company
• Organisation adequacy and administrative structure of the company
• Efficiency of the company’s internal control mechanism (to be described in the procedures manual)
• Company’s structure and organisation designed to minimise the risk of conflict of interest between the client and the company or between the clients
• Proper staffing of the company
• Suitability of the company’s shareholders and directors
• Company’s technical and financial resources

STEPS TO BE FOLLOWED:

1. Preparatory Stage

a. The first step is to arrange to have in place the documents in the attached list of the Application for granting of a CIF authorization (Form 144-03-01). The certificate of Incorporation, the certificate of the registered office of the applicant and the certified copy of the memorandum and articles of association of the applicant (Greek) will be drafted by us for the registration of the company. An English translation of the original Greek Memorandum and Articles of Association shall be provided.

b. We will prepare the internal operations manual, policy manual and antimoney laundering procedures, client-categorization policy, best-execution policy, Conflict of Interest policy and can further provide assistance in compiling the business plan in order for these to comply with the requirements of the Cyprus Securities and Exchange Commission.

2. Filing an application

a. Once we have the documents ready we will be in a position to file the application.  

3. Executive Director / General Manager

a. Both the Executive director and the General Manager must be approved by CYSEC as persons having the reputation and knowledge to hold their respective positions. In this respect certain criteria apply of which we shall inform you in process.

4. CySEC review

a. Once filed, the application will be reviewed by CYSEC. Normally CYSEC takes around three months to reply.

We can assist the company with the application process, as described below:

(a) Assist the company in preparing and submitting an application package to CySEC to obtain a license, including advice on the best way to set up this company as regards staffing, organisational structure, costs, etc.

(b) Prepare or assist with the preparation of the Procedures Manual for all activities and departments of the company to be included in the application package.

(c) Prepare or assist with the preparation of the two-year Business Plan to be included in the application package, as required by CySEC.

(d) Support the company and assist with any additional work in connection with the follow up of the processing of the application with CySEC until the license is granted or the application is rejected.

Should you require any additional information, clarification or have any comments, please do not hesitate to contact this office and we shall be more than happy to be of assistance.