Striking Off (Voluntary) vs Voluntary Winding-Up by Members in Cyprus
Introduction
A company may reach a stage where it has fulfilled its purpose or ceased trading, prompting its directors and shareholders to consider the most appropriate method of bringing the business to an end.
Two common mechanisms are voluntary strike off and voluntary winding up, each serving different legal and commercial objectives. While voluntary strike off offers a relatively simple and cost-effective route for dissolving dormant or solvent companies (with no assets and liabilities), winding up is a more formal procedure that involves settling liabilities, distributing assets and complying with statutory obligations. Understanding the distinction between these processes is essential for business owners and directors as the choice of procedure can have different consequences.
Strike-Off (Voluntary)
A company can be deleted from the Register of Companies under the strike-off procedure provided that it has either never commenced business (i.e. is dormant) or has terminated its activities and operations and no longer holds any assets or liabilities.
When opting for this procedure, the directors of the company must ensure that all required obligations have been complied with, following which they may submit an application for the company's strike off.
Requirements for Voluntary Strike-Off
• Social Insurances
• Tax Department
• Creditors of the Company
• There is not an injunction in force against the Company
• All its statutory filing obligations with the Registrar of Companies are submitted
Procedure Following the Application
Once the Registrar is satisfied that the company has fulfilled its relevant obligations, it will publish notice of the intention to strike off the company in the Official Gazette of the Republic of Cyprus. In the absence of any objections from third parties, the company will thereafter be recorded as deleted in the register.
Timeframe
The process usually takes 9 (nine) months provided that no objections from third parties are filed.
When is Voluntary Strike-Off Appropriate?
Generally, the strike-off procedure is recommended where the company has no exposure to third-party claims, there is a possibility of reinstatement if necessary and cost considerations are a relevant factor.
Reinstatement of a Struck-Off Company
A company that has been struck off may be reinstated administratively (without a court application) within two years from the date of its striking off. Thereafter, reinstatement is only possible by court order and may be sought for up to 20 years from the date of the striking off.
Voluntary Winding-Up by Members
The voluntary winding-up procedure commences with a resolution of the members of the company and presupposes that the company is capable of paying its liabilities within 12 months from the commencement of the winding-up process.
Declaration of Solvency
A declaration of solvency is made by the directors of the company, accompanied by evidence of the company's assets and liabilities.
Appointment of a Liquidator
A liquidator must further be appointed to advance the liquidation process, which involves the repayment and settlement of the company's financial obligations, tax liabilities and the payment of any dividends.
The appointment of a liquidator signifies that control over the company's affairs is transferred from the directors to the liquidator, who is responsible for carrying out the procedure.
Final General Meeting and Dissolution
At the final general meeting, the liquidator presents a statement of the actions carried out throughout the process, notice of which is published in the Official Gazette at least one month before the date of the meeting.
Within one week following the final meeting, the liquidator files a copy of the report and accounts with the Registrar of Companies. The company is deemed dissolved at the end of a three-month period following such filing.
Restoration of a Company Following Dissolution
Under certain conditions, the company may be restored within two years from the date of its dissolution with court order.
Choosing the Appropriate Company Closure Procedure
Depending on the company's status and the desired outcome, the legislation provides options for selecting the most appropriate route for closing the company.
How We Can Assist
Papantoniou & Papantoniou LLC advises directors, shareholders and businesses on company strike-offs, voluntary liquidations, corporate restructuring and all aspects of Cyprus company law. We assist clients throughout the entire process, ensuring compliance with statutory requirements and minimising legal and commercial risks.
Author
Contributed by Amaryllis A. Papantoniou, Partner
Disclaimer
This document is provided for informational purposes only. No action should be taken or refrained from based on the information contained herein without obtaining specific legal advice tailored to the relevant circumstances.