With an attractive location lying just a few miles from the Suez Canal and in the crossroad of the European – African and Asian markets, Cyprus grew to one of the main maritime players of the world with the 3rd largest fleet in the European Union and the 11th largest worldwide. The country’s business minded policy coupled with the evolving needs of the shipping industry led to the creation of the Shipping Deputy Ministry in 2018.
In 2021, the Ministerial Counsel approved the Strategic Vision for Cyprus Shipping dubbed “Sea Change 2030” which included the development of a regulatory and administrative framework for the incorporation of shipping entities. As a result of this strategy, the Cypriot parliament voted in favour of the Cypriot Shipping Limited Liability Company Law (the “SLLC Law”).
The SLLC Law was published in the Official Gazette of Cyprus, issue no. 4916 on 27 October 2022 and was shaped after the Cypriot Companies Law, Cap.113 (the “Companies Law”), thus offering shipping entities a familiar regulatory framework and corporate environment.
Shipping Limited Liability Company
The purpose of the SLLC Law is to simplify the procedures and operation of shipping companies for the ownership and exploitation of ships. To that effect, the SLLC Law introduces a new type of legal entity, the Shipping Limited Liability Company (“SLLC” or «ΝΕΠΕ – Ναυτιλιακή Εταιρεία Περιορισμένης Ευθύνης») which is the equivalent of a limited liability company.
The SLLC Law applies to newly incorporated SLLCs and to shipping companies incorporated under the Companies Law that wish to transfer on the SLLC register under the SLLC Law.
Administration and management of SLLCs
The objective of the SLLC Law is the creation of a “one-stop-shop” within the Shipping Deputy Ministry for the servicing of shipping companies and their shareholders, and the handling of matters which were previously under the responsibilities of the Registrar of Companies. In effect, SLLC Law maintains the advantages and flexibility offered under the Companies Law as it includes provisions for the administration and management of SLLCs and provisions regulating matters which concern SLLCs from their incorporation up to their liquidation.
Features of the SLLC Law
The SLLC Law mirrors a number of functions exercised by the Registrar of Companies. The following list outlines some of the matters regulated under the new law:
- The creation of the Registrar of SLLCs as the competent authority for the registration of SLLCs and any other corporate matters relating to SLLCs, for the promotion of a “one-stop-shop”;
- The creation of the SLLC register;
- Provisions on the incorporation of SLLCs, their share capital and other management arrangements;
- The appointment of a secretary of the SLLC who, as per the SLLC Law, must be a lawyer;
- Provisions for the transfer of companies registered in the register of the Registrar of Companies under the register of the Registrar of SLLCs;
- The power of the Registrar of SLLCs to approve the use of electronic signatures in relation to documents submitted to or issued by the Registrar of SLLCs;
- The power of the Registrar of SLLCs to impose administrative fines.
Why incorporate or convert into an SLLC?
Despite the seemingly identical legal frameworks between a limited liability company (incorporated under the Companies Law) and a SLLC (incorporated/transferred under the SLLC Law), the SLLC Law contains small but rather significant differences which are tailored to the operations of SLLCs:
Simplified procedures for the increase and reduction of share capital
The Companies Law requires a court approval for the reduction of a company’s share capital.
On the other hand, the reduction of share capital for SLLCs does not require a court order and is achieved under a simpler and time-effective manner.
Simplified procedures for amending the SLLC’s memorandum
Under the Companies Law, a change in the memorandum of association is not effective unless approved by the court following a related application.
In contrast, the memorandum of SLLCs is based on a template prescribed under a notification of the Registrar of SLLCs and its amendment is permitted only in circumstances specified under the LLC Law.
A law tailored to SLLCs
SLLCs have the opportunity to benefit from a legal framework distinct from other entities. The SLLC Law is tailored to their business activities and creates a sustainable environment for SLLCs by setting the ground for further targeted improvements in the shipping industry.
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The information provided in this article does not and is not intended to constitute legal advice; instead, all information contained in this article is for general informational purposes only. If you require assistance with any legal matter, including a matter referred to in this article, you should contact one of our attorneys to obtain advice tailored to your specific circumstances.
