Cyprus Private Company Limited by Guarantee

Cyprus Private Company Limited by guarantee is a class of private companies incorporated in accordance with the Cyprus Companies Law, Chapter 113 of the laws of the Republic of Cyprus. It is not frequently, used and many people in and outside of Cyprus have never heard of it. Reviewing the publicly available data at the registrar of companies you would not be able to distinguish whether a company is limited by guarantee or by shares.

Company Limited by Guarantee, what’s that?

A Cyprus Private Company Limited by Guarantee is almost the same as a Cyprus Private Company Limited by Shares only that it’s members (founders of the company) do not, typically, hold any shares, they declare that they would contribute a set amount towards the obligations of the Company in case of winding up – more on this in the following paragraphs. Furthermore, they are used for a charitable purpose and dispense with the use of the name Limited or Ltd in their name.

Comparison of a Private Company Limited by Shares and a Private Company Limited by Guarantee

Both company types enjoy the status of a separate legal personality, for further information on this please consider this post. In both cases the liability of the members is limited (either by shares or by guarantee).

Liability

The distinction between these types of companies is that the members are required to contribute only on the winding up and for no other reason whereas the shareholders of a private company limited by shares are required to contribute during the active lifecycle of the company as well as during the winding-up process.

Capital

In a private company limited by shares, the shareholders would obtain shares and in exchange, they would contribute assets to the Company. This means that the working capital requirements of the company are received by way of capital contribution.

A private company limited by guarantee does not have shareholders and accordingly cannot raise the required capital from its’ members, by extension the only suitable methodology to raise the required working capital is by way of endowments, contributions, subscriptions, charities and gifts and borrowing.

Purpose

A private company limited by guarantee is not, in the ordinary course, suitable as a vehicle to transact business since it cannot raise capital from its shareholders. Perhaps it would be better suited if it served a purpose or a common good. Several times I have seen private company limited by guarantee being set-up as a charity or an association since it allows for greater control, a well-defined structure and transparency. The same appears to be the case in England and Ireland.

Name

A Cyprus private company limited by guarantee must include the term ‘limited’ or ‘ltd’ in its name however as with companies limited by shares if the articles restrict the distribution of profits an application may be made to the registrar of companies to eliminate the use of the words limited.

Guarantee

Such companies may not have different classes of guarantors, meaning that one set amount of guarantee is applicable to all the members. Nevertheless, the rules of proportionality apply and as such a person undertaking to guarantee 20 Euro will receive twice the dividend of a member who has guaranteed 10 Euro and the same may be true for voting rights within the company.

Obligations

Similar to private companies limited by shares the guarantee companies are required to:

  1. Submit annual returns to the registrar of companies
  2. Prepare accounting, financial statements and have such financial statements audited. Once audited then they must accompany the annual return to the Registrar of Companies
  3. Pay the Annual Government Levy, currently at 350 Euro
  4. Prepare annual income tax returns to be submitted to the Inland Revenue Department.
Harris Sharpe

Harris Sharpe

Author - Photographer

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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