Although the majority of businesses in Cyprus aim to structure and carry on a business using a Cyprus private company limited by shares, in certain cases, examined below, it might be more appropriate to consider a the formation of a Cyprus Partnership.
What is a Cyprus Partnership?
A Cyprus partnership is a union of people who willingly come together for the pursuit of business with profit in mind. A Cyprus partnership formation is registered with the Registrar of Companies in accordance with the Partnership Law, Cap 116. In contrast to a Cyprus private company limited by shares, a Cyprus partnership does not have a separate legal personality and general partners are jointly and severally liable for the debts of the Cyprus Partnership. Limited partners, on the other hand, are only responsible for the amounts they have committed to giving to the capital of the Cyprus Partnership. A Cyprus Partnership can be either a general partnership or a limited partnership. We will consider these types further in the coming paragraphs.
Cyprus Partnership Formation
A partnership either limited or not at the time of its registration with the Registrar of Companies must satisfy certain conditions, and satisfy the following requirements:
Cyprus Partnership Name
The same principles as adopted to names of Cyprus Private Company Limited by Shares and those applicable to a Cyprus Trade Name are equally applicable to a Cyprus Partnership Name. To read more about this please consider this Publication “Cyprus Company Name – ROC Guidance” we wrote about this.
Place of Business
The Partnership must maintain its main place of business within the Republic of Cyprus and it must not be a P.O.BOX. At its main place of business, all the mail and notices are sent in accordance with the Partnership Law, Cap 116.
The Notice of the place of business and any change thereto is conducted with the submission of a prescribed form to the Registrar of Companies. Any change to the address of the main place of business must be notified within 7 days from the change.
Partners
A Cyprus Partnership can have at least two (2) members and no more than one hundred (100) members.
What is General Partner?
Every general partner must represent the firm and the other partners for the main purpose for which it was established. Every general partner is jointly and severally unlimitedly liable for the debts and obligation of the partnership during the time the person was a general partner.
What is a Limited Partner?
A limited partner contributes a specified amount or a specified asset to the Cyprus Partnership. The limited partner is not responsible for the debts and obligation of the partnership other than for the amounts which the limited partner has contributed.
A limited partner is also not involved with and does not have a right to vote in the operations and business of the Cyprus Partnership. The same holds true with a limited partner who has received shares in the partnership. Lastly, the limited partner is restricted from representing the firm in any way.
The limited partners are responsible thought for the notification of the partnership interest to the registrar of companies and any change thereto.
Share Capital and Shares of a Limited Partnership
We briefly touched upon this in the paragraph above however a Cyprus Limited Partnership can have a share capital with shares taken by the limited partners.
The share capital can be of any value and currency and may be divided into such numbers as the partners agree.
On the Formation of the Cyprus Partnership, the value, currency, and number of shares along with the person(s) who will be shareholders must be notified to the Registrar of Companies.
Nature of Business
The nature of the business of a Cyprus partnership indicates the activities which the partnership will conduct in Cyprus.
Certain types of businesses require a license and a few of them are mentioned below. Once the nature of business is decided by the partners it must be notified to the Registrar of Companies as well as any change which should be notified within 7 days.
Time Frames and Terms of Dissolution of a Cyprus Partnership
A Cyprus Partnership may be formed for an indefinite period of time. During the formation of the Cyprus Partnership if the partnership is to be formed for a specified period then this is noted within the necessary documents.
The terms of dissolution are also recorded and notified to the registrar of companies.
Financial Statements and Annual Return
Within 6 months from the year-end, a partnership needs to prepare and submit financial statements, if the general partners are private companies or other partnerships.
The general partners must procure that the entire set of financial statement are drawn up in accordance with International Financial Reporting Standards. The financial statements must provide a true and fair view of the partnerships dealings and preferably free of any audit qualifications. The financial statements are presented before the general meeting of the partnership, the latest within 18 months from its formation and thereafter once a year.
The general partners are responsible for the maintenance of books and records on the basis of which the financial statements will be prepared.
What types of Partnerships are available in Cyprus?
Cyprus Partnership Law allows for the formation of 2 partnerships types. The first is a general partnership whereas the second is a limited partnership.
What is a Cyprus General Partnership?
In a Cyprus general partnership, consists of two or more general partners
What is a Cyprus Limited Partnership?
A Cyprus limited partnership consists of one (1) or more persons classified as general partners and one (1) or more persons classified as limited partners.
Frequently Used Partnership Structures
As a general rule during the years, I have noticed that partnerships are great vehicles for certain cases whereas they are terrible vehicles for others.
The following stereotypes should not be considered as conclusive and each case should be assessed on its own merits.
Construction Joint Venture
When one party maintains the operational excellence of constructing a project whereas the other party or parties maintain the land and the financial resources required to complete the construction.
Business Joint Venture
When two parties work together for a common benefit, for example, one manufactures plastic bottles while the other has water reserves and together they would like to form a bottled water company. Then with the use of a partnership and a trade name they could quickly launch a business together.
GP/LP Fund Structures
Cayman, Channel Islands and other common law jurisdictions like the US are very familiar with the formation of a partnership. The asset manager would typically take the role of a general partner and be responsible for the investment strategy whereas the investors would take up a position of limited partnership so that they are entitled to a return.
Law Firms
Prior to the introduction of the Lawyers Limited Liability Company when 2 or more lawyers wanted to work together they had to form a general partnership. Nowadays lawyers in Cyprus prefer to use the LLC
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For many years he has worked and devoted his skills and efforts towards building a successful career as a leading executive. From humble beginnings, his aim has always been to yield results; with a keen focus to attention to detail and client satisfaction. His experience has always been varied and not specific, at times he preferred it. With that in mind, he has dealt with CySEC on licensing and ongoing regulation, international private equity and credit fund managers, NASDAQ and NYSE listed companies occasional millionaires as well as self-made millionaires. His passion though is difficult transaction work organizing and deploying people for a common goal. Harris enjoys reading and studying the Cyprus law and sharing that information on this website.
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