Starting a business in Cyprus represents an attractive opportunity for international entrepreneurs due to its favorable tax climate and strategically convenient location.

1. Mistakes in defining the company’s field of activity

The articles of association of the company must clearly state the activities to be carried on by the company. According to the Cyprus Companies Law (Cap. 113), a company’s activities must be consistent with its statutory purpose. If the articles of association do not specify specific activities or are too broadly worded, this may lead to legal complications. For example, a company engaged in retail trade cannot engage in wholesale trade without a corresponding change in the articles of association.

Recommendation: When drafting the articles of association, it is recommended that the company’s activities be spelled out in detail, avoiding general wording. This will ensure legal certainty and prevent possible disputes with regulators.

2. Mistakes in determining the capital structure

Although the minimum authorized capital for a private company in Cyprus is €1, it is important to correctly reflect the distribution of capital between shareholders. Failure to correctly reflect the shares may lead to disputes between shareholders and difficulties in managing the company..​

Recommendation: Carefully document the allocation of capital and shareholder interests in the articles of association to avoid future conflicts.

3. Mistakes in the definition of management authorities

The articles of association should clearly describe the governance structure of the company, including the powers and duties of directors and other bodies. Uncertainty in these matters can lead to internal conflicts and difficulties in decision-making.

Recommendation: Clearly define in the statutes the powers and duties of each governing body, as well as decision-making procedures.

4. Mistakes in the wording of the conditions for liquidation of a company

Liquidation procedures should be described in detail in the articles of association, including how assets will be distributed and debts settled. The absence of such provisions may lead to legal disputes and financial losses..​

Recommendation: Include detailed liquidation provisions in the articles of association that comply with the requirements of the Cyprus Companies Law.

5. Mistakes in determining the rights and obligations of shareholders

The articles of association should set out the rights and obligations of shareholders, including their participation in the management of the company, profit distribution and other key aspects. The absence of such provisions can lead to shareholder dissatisfaction and even legal disputes.

Recommendation: Develop clear provisions in the articles of association governing relations between shareholders, their rights and obligations to ensure harmonious cooperation and prevent conflicts.

Thus, mistakes in the charter documents when registering a business in Cyprus can have serious consequences. Careful drafting of the articles of association, taking into account all legal requirements and the interests of shareholders, will help to avoid many problems and ensure the successful functioning of the company. It is recommended to contact professional lawyers specializing in Cyprus corporate law to draft and review the articles of association.

It is important to provide clear liquidation procedures in the articles of association, including procedures for the settlement of debts and distribution of assets. The absence of such provisions may lead to lengthy litigation and financial loss.