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STRIKE OFF VS. VOLUNTARY LIQUIDATION OF A CYPRUS COMPANY

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STRIKE OFF VS. VOLUNTARY LIQUIDATION OF A CYPRUS COMPANY

The Cyprus Companies Law, Cap. 113 provides three methods for winding-upa Cyprus company:

  • voluntary winding-up (either by the members or by the creditors);
  • involuntary winding-up by its creditors; and
  • voluntary winding-up by the Court or winding-up subject to the supervision of the Court.

An alternative way for a company to cease to exist, is by way of striking-off of the Register of Companies, in accordance with section 327 of the Companies Law (Cap. 113).

The most common methods of dissolving a Cyprus private company limited by shares whose main activities is to act as a holding company is a members’ voluntary winding-up and the striking-off of the register.

1) Strike-off

This is a very straight-forward procedure and is generally used for companies that have terminated all activities and do not intend to carry on any business in the future. These companies are usually considered as dormant companies, however, the financial statements of the company must be prepared until the date that the company ceased activities.

Also, it is essential to submit the relevant income tax return to the Cyprus Tax Authorities which will be examined by the tax office. All the tax liabilities should be settled and a tax clearance certificate issued. A declaration of solvency must then be signed by all the directors of the company.

The declaration is a confirmation by the directors of the company that the management accounts have been prepared up to date, confirming that the company ceased its operations, has no trading activities, no obligations, no debtors/creditors and no assets and is for all intents and purposes inactive. The statement of assets and liabilities of the company must validate that the company has adequate funds to settle all its debts, and/or outstanding liabilities including the fees charged for the strike-off.

The Registrar of Companies will then publish in the Official Gazette of the Republic of Cyprus, the intention of the company to be struck-off, and sends a notice to the company that within three months, the company will be removed from the records of the Registrar of Companies.

The Registrar can also proceed with the striking off of a company where he has reasonable cause to believe that the company has ceased to carry on its business (i.e. if a company does not comply with its obligation for filing of the Annual Returns to the Registrar of Companies) and/or when the company omits to pay the annual levy, as provided by the Companies Law, Cap. 113.

It is noteworthy that in case where any member or creditor feels aggrieved by the striking-off of the company,they can apply to the Court for the reinstatement of the company provided that the application will be done before the 20 years’ expiration period, from the publication in the Gazette of the notice.

2) Members’ Voluntary Liquidation

A company may be wound up voluntarily when the period, if any, fixed for the duration of the company by the articles expires, or the event, if any, occurs, on the occurrence of which the articles provide that the company is to be dissolved.

Furthermore, a company may be wound up voluntarily if the general meeting resolved the voluntary liquidation of the company either by the passing of a special resolution resolving that the company be wound up voluntarily, or by passing an extraordinary resolution to the effect that it cannot by reason of its liabilities continue its business, and that it is advisable to wind up.

As the first step the auditors of the company should prepare the statement of assets and liabilities of the company, as at the latest practical date before the declaration of solvency.  The majority of the Company’s directors swear an affidavit before the registrar in the District Court, making a Declaration of Solvency. The Declaration of Solvency must be dated on a date not preceding 5 weeks from the date of the passing of the extraordinary general meeting. The sworn Declaration of Solvency will attach the Statement of Assets and Liabilities as an exhibit.

Moreover, a decision of the meeting of the board of directors of the Company (or alternatively a unanimous written resolution of the Board of Directors in lieu of such meeting) needs to be passed, where the directors of the Company will report that a Declaration of Solvency has been made and will resolve to convene an extraordinary general meeting of the Company to approve the liquidation of the Company and to appoint a liquidator.

The Extraordinary General Meeting of the Company will mainly resolve and approve the winding up of the Company and the appointment of the liquidator.

Once the liquidation commences, the auditors should proceed with the filling of the audited financial statements up to the date of the appointment of the liquidator and it is essential to obtain the Tax Clearance Certificate by the Tax Authorities.

Upon receipt the Tax Clearance Certificate, the liquidator should sent to the Registrar of Companies the one month notice of the Final General Meeting for publication in the Official Gazette of the Republic of Cyprus, fixing such meeting.

The Final General Meeting is held whereby the liquidator presents the final accounts of the Company for approval and then within a week the Liquidator should file with the Registrar of Companies a copy of the final accounts of the Company and a report of the Final General Meeting.

The Company is deemed to be dissolved on the expiration of 3 months from the registration of the said report with the Registrar of Companies and the Registrar of Companies will issue a Certificate of Dissolution.

Main Differences between Strike-off Method and Members’ Voluntary Liquidation

Strike-off is the simplest and cheapest method, no liquidator is required and it is usually applicable to dormant companies.On the contrary the members’ voluntary liquidation is a more complex and costly procedure and a liquidator is required to be appointed.

Moreover, in the case of strike-off,any person with a locus standi against the company may submit an application to the court  requesting that the company is reinstated on the register before the 20 years’ from the date of the publication in the Gazette of the notice lapses, while in the case where a company has been dissolved by a members voluntary liquidation, any such  Court application can be made at any time within two years of the date of dissolution by the liquidator of the company, or by any other individual who appears to the Court,showing interest, and upon such terms as the Court thinks appropriate, declaring the dissolution to be void.

Our team of professionals at Savva & Associates, have extensive experience in international and Cyprus company incorporation, international tax planning and international offshore company corporate services can provide you with expert advice on winding up of a Cyprus company and all company incorporation services.

Business

Euro zone business activity shrank in January as lockdowns hit services

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Euro zone business activity shrank in January as lockdowns hit services 1

By Jonathan Cable

LONDON (Reuters) – Economic activity in the euro zone shrank markedly in January as lockdown restrictions to contain the coronavirus pandemic hit the bloc’s dominant service industry hard, a survey showed.

With hospitality and entertainment venues forced to remain closed across much of the continent the survey highlighted a sharp contraction in the services industry but also showed manufacturing remained strong as factories largely remained open.

IHS Markit’s flash composite PMI, seen as a good guide to economic health, fell further below the 50 mark separating growth from contraction to 47.5 in January from December’s 49.1. A Reuters poll had predicted a fall to 47.6.

“A double-dip recession for the euro zone economy is looking increasingly inevitable as tighter COVID-19 restrictions took a further toll on businesses in January,” said Chris Williamson, chief business economist at IHS Markit.

“Some encouragement comes from the downturn being less severe than in the spring of last year, reflecting the ongoing relative resilience of manufacturing, rising demand for exported goods and the lockdown measures having been less stringent on average than last year.”

The bloc’s economy was expected to grow 0.6% this quarter, a Reuters poll showed earlier this week, and will return to its pre-COVID-19 level within two years on hopes the rollout of vaccines will allow a return to some form of normality. [ECILT/EU]

A PMI covering the bloc’s dominant service industry dropped to 45.0 from 46.4, exceeding expectations in a Reuters poll that had predicted a steeper fall to 44.5 and still a long way from historic lows at the start of the pandemic.

With activity still in decline and restrictions likely to be in place for some time yet, services firms were forced to chop their charges. The output price index fell to 46.9 from 48.4, its lowest reading since June.

That will be disappointing for policymakers at the European Central Bank – who on Thursday left policy unchanged – as uncomfortably low inflation has been a thorn in the ECB’s side for years.

Factory activity remained strong and the manufacturing PMI held well above breakeven at 54.7, albeit weaker than December’s 55.2. The Reuters poll had predicted a drop to 54.5.

An index measuring output which feeds into the composite PMI fell to 54.5 from 56.3.

But despite strong demand factories again cut headcount, as they have every month since May 2019. The employment index fell to 48.9 from 49.2.

As immunisation programmes are being ramped up after a slow start in Europe optimism about the coming year remained strong. The composite future output index dipped to 63.6 from December’s near three-year high of 64.5.

“The roll out of vaccines has meanwhile helped sustain a strong degree of confidence about prospects for the year ahead, though the recent rise in virus case numbers has caused some pull-back in optimism,” Williamson said.

(Reporting by Jonathan Cable; Editing by Toby Chopra)

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Volkswagen’s profit halves, but deliveries recovering

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Volkswagen's profit halves, but deliveries recovering 2

BERLIN (Reuters) – Volkswagen reported a nearly 50% drop in its 2020 adjusted operating profit on Friday but said car deliveries had recovered strongly in the fourth quarter, lifting its shares.

The world’s largest carmaker said full-year operating profit, excluding costs related to its diesel emissions scandal, came in at 10 billion euros ($12.2 billion), compared with 19.3 billion in 2019.

Net cash flow at its automotive division was around 6 billion euros and car deliveries picked up towards the end of the year, the German group said in a statement.

“The deliveries to customers of the Volkswagen Group continued to recover strongly in the fourth quarter and even exceeded the deliveries of the third quarter 2020,” it said.

Volkswagen’s shares, which had been down as much as 2%, turned positive and were up 1.5% at 164.32 euros by 1158 GMT.

Sales at the automaker rose 1.7% in December, at a time when new car registrations in Europe dropped nearly 4%, data from the European Automobile Manufacturers’ Association showed.

Like its rivals, Volkswagen is facing several challenges due to the coronavirus pandemic as well as a global shortage of chips needed for production.

It also sees tough competition in developing electrified and self-driving cars. The merger of Fiat Chrysler and Peugeot-owner PSA to create the world’s fourth-biggest automaker Stellantis adds to the pressure.

Volkswagen said on Thursday it missed EU targets on carbon dioxide (CO2) emissions from its passenger car fleet last year and faces a fine of more than 100 million euros.

The group is expected to release detailed 2020 figures on March 16.

($1 = 0.8215 euros)

(Reporting by Kirsti Knolle; Editing by Maria Sheahan and Mark Potter)

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Global chip shortage hits China’s bitcoin mining sector

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Global chip shortage hits China's bitcoin mining sector 3

By Samuel Shen and Alun John

SHANGHAI/HONG KONG (Reuters) – A global chip shortage is choking the production of machines used to “mine” bitcoin, a sector dominated by China, sending prices of the computer equipment soaring as a surge in the cryptocurrency drives demand.

The scramble is pricing out smaller miners and accelerating an industry consolidation that could see deep-pocketed players, many outside China, profit from the bitcoin bull run.

Bitcoin mining is closely watched by traders and users of the world’s largest cryptocurrency, as the amount of bitcoin they make and sell into the market affects its supply and price.

Trading around $32,000 on Friday, bitcoin is down 20% from the record highs it struck two weeks ago but still up some 700% from its March low of $3,850.

“There are not enough chips to support the production of mining rigs,” said Alex Ao, vice president of Innosilicon, a chip designer and major provider of mining equipment.

Bitcoin miners use increasingly powerful, specially-designed computer equipment, or rigs, to verify bitcoin transactions in a process which produces newly minted bitcoins.

Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co, the main producers of specially designed chips used in mining rigs, would also prioritise supplies to sectors such as consumer electronics, whose chip demand is seen as more stable, Ao said.

The global chip shortage is disrupting production across a global array of products, including automobiles, laptops and mobile phones. [L1N2JP2MY]

Mining’s profitability depends on bitcoin’s price, the cost of the electricity used to power the rig, the rig’s efficiency, and how much computing power is needed to mine a bitcoin.

Demand for rigs has boomed as bitcoin prices soared, said Gordon Chen, co-founder of cryptocurrency asset manager and miner GMR.

“When gold prices jump, you need more shovels. When milk prices rise, you want more cows.”

CONSOLIDATION

Lei Tong, managing director of financial services at Babel Finance, which lends to miners, said that “almost all major miners are scouring the market for rigs, and they are willing to pay high prices for second-hand machines.”

“Purchase volumes from North America have been huge, squeezing supply in China,” he said, adding that many miners are placing orders for products that can only be delivered in August and September.

Most of the products of Bitmain, one of the biggest rig makers in China, are sold out, according the company’s website.

A sales manager at Jiangsu Haifanxin Technology, a rig merchant, said prices on the second-hand market have jumped 50% to 60% over the past year, while prices of new equipment more than doubled. High-end, second-hand mining machines were quoted around $5,000.

“It’s natural if you look at how much bitcoin has risen,” said the manager, who identified himself on by his surname Li.

The cryptocurrency surge is affecting who is able to mine.

The increasing cost of investment is eliminating smaller players, said Raymond Yuan, founder of Atlas Mining, which owns one of China’s biggest mining business.

“Institutional investors benefit from both large scale and proficiency in management whereas retail investors who couldn’t keep up will be weeded out,” said Yuan, whose company has invested over $500 million in cryptocurrency mining and plans to keep investing heavily.

Many of the larger players growing their mining operations are based outside of China, often in North America and the Middle East, said Wayne Zhao, chief operating officer of crypto research company TokenInsight.

“China used to have low electricity costs as one core advantage, but as the bitcoin price rises now, that has gone,” he said.

Zhao said that while previously bitcoin mining in China used to account for as much as 80% of the world’s total, it now accounted for around 50%.

(Reporting by Samuel Shen and Alun John; Editing by Vidya Ranganathan and William Mallard)

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