THE CENTRAL BANK OF CYPRUS INTENDS TO PUT "SHELL COMPANIES" UNDER SCRUTINY
Asters, Kyiv, Ukraine,
Wed, June 20, 2018
On 14 June 2018, the Central Bank of Cyprus notified credit institutions of its intention to introduce certain measures targeting the so-called "shell companies".
Reportedly, such measures are expected to require Cypriot credit institutions to avoid engaging into or renewing business relations with entities that (i) are non-publicly traded, are in the form of a limited liability company, or any other business entities and(ii) fulfill any of the following criteria ("shell companies"):
- have no physical presence in its country of domicile (other than a mailing address);
- have no established economic activity, little to no independent economic value and no documentary proof to the contrary;
- are registered in jurisdictions where companies are not required to submit to the authorities independently audited financial statements;
- are tax residents in jurisdictions recognised as "tax haven" or have no tax residence anywhere.
Certain types of business entities that do not seem to need too much substance (like holding companies or asset holding companies) or the companies that facilitate currency trades, assets transfers, corporate mergers, or act as group treasurers may avoid being a target of the above measures.
Though such changes do not seem to be yet officially adopted and the final definition of the "shell companies" may still differ, the Central Bank of Cyprus has reportedly required the Cypriot credit institutions to review their client base in order to identify "shell companies" and inform about the outcome of such review.