The Central Bank of Cyprus has been institutionally appointed as the watchdog regarding procedures and criteria to be met in order for applications to be evaluated in terms of providing funds to newly-fledged corporations, or merely when banking institutions are to decide whether a new bank account is to be opened with regards of one of those novel business entities.
Please bear in mind that our Law Firm is able to assist you with all the relevant paraphernalia regarding the opening of a bank account with the just introduced Electronic Money Institutions regardless of whether these institutions are introduced internally or abroad; such Institutions are licensed and regulated under both national and EU legislation, given of course that both such sets of legislation have to be in essence compatible, or at least complementary to each other. It goes without saying that the as always competent authority taking care of such Institutions is the Central Bank of Cyprus.
Having said all of the above, we can now proceed with the policies and arrangements Banking Institutions have themselves introduced internally in order to be able to establish whether a corporation is actively and properly operating, or if it is just a “shell company” -as they are so often coined in everyday transactions. It is for the Banking institutions to decide whether an entity resembles in essence the characteristics of a “shell company”, however in certain cases it is more than obvious that the entities at hand serve nothing more but a shell-like scope. For instance and before elaborating further please do take into consideration that if the entity at hand has been established in one of those countries known as tax-paradises where business formations are not obliged to follow any of the internationally accredited financial standards, then it is more than certain that such an entity does not bear any chance with the eligibility criteria provided for by the Central Bank of Cyprus.
To make a long story short and according to the internal regulation of the Central Bank of Cyprus as of November 02, 2018, the definition of the “shell company” practically entails the following features:
- The company as such has no tangible presence, or scope within its country of origin, but for a postal address , while
- The very same company has not been operating in any sort of ways not only within its country of origin but anywhere; and what is even more striking and needs to be utterly stressed out is the fact that there is no physical evidence of any sort that even suggests the opposite
Needless to say that despite appearances, in certain cases a company might seem to be a “shell” formation of a sort, but at the end of the day, it may have been established in order to:
- have in its possession stock or shares or any other sort of equity instruments referring to other business entities whose end-beneficiaries have been well identified
- have in its possession intangible or other sorts of property including among others real-estate, boats, airplanes, investment portfolios and other kinds of financial means
- facilitate the sell and purchase of currencies, or the sell and purchase of real-estate properties, mergers and acquisitions, an in general to have that sort of scope and activity
- finance same Group company formations that have already been operating and which have already well-established and clear-cut, unequivocal scope for quite some time;
in other words, it all boils down to whether the newly-established entity is able in a fairly undisputed way to display its scope, by also being able to introduce, if needed, its end-beneficiaries.
As soon as the first two aforementioned points seem to be appearing and even more so accumulatively, then it is more than certain that the company at hand is one which should be considered a “shell” one, thus no new bank accounts for these entities are to be expected to open within the Cypriot banking system; let alone any other bank-related chore to be taking place.
As far as the rest of the points are concerned, it rests with the Central Bank of Cyprus to evaluate each and every separate situation at hand and decide whether this is a proper entity, or one which has to be constrained and practically rejected from the banking system of Cyprus. For instance it should be taken into consideration the fact that as soon as it is established that the entity in question has been actually operating through a proper seat which has been leased and has been actively functional anywhere within the borders of Cyprus, that entity shall face no problem with other administrative arrangements with which most definitely it shall be faced up; whereas other entities whose presence shall be restricted merely to the presence of certain leased employees vested solely with the execution of administrative tasks shall be treated as non-eligible in terms of opening a bank account, let alone being funded within the framework of any investment plan
