New Definition For "Shell Companies"

The Central Bank of Cyprus ("CBC") issued a circular (Ref. BS 6020) on 02/11/2018, with the purpose of clarifying and further explaining the vague information and definitions about the so-called "shell companies" and entities in Cyprus and how licensed Financial Institutions should deal with them. This was highly needed as the original circular which was issued in June 2018 created uncertainties as to the treatment of various entities by the financial institutions.

1. Main Provisions

As provided by the CBC, the term "shell company/entity" refers to a limited liability company or any other legal entity that:

• Has no physical presence or operations; "physical presence" includes employees, office space (owned or rented), etc. The presence of a third person providing merely nominee services including company secretary duties does not constitute on its own physical presence. Also, absence of meaningful mind and management could be construed as lack of physical