Foreign Investor’s Guide- setting up a company in North Cyprus

THE OBJECTS OF THE COMPANY

One of the most important decisions you will need to make when setting up a private limited company in The Turkish Republic of Northern Cyprus is determining whether the company will be taking title of any immovable property. Not only will this decision have an impact on planning the corporate structure but it could also mean that in the absence of the appropriate corporate structure the company may encounter certain restrictions and requirements when acquiring property.

If the company is being formed with the object of acquiring and holding immovable property, the majority of the shareholders and the board of directors should not consist of foreign real or legal persons. Otherwise, the company shall be deemed a “foreign legal person” and/or a “foreign controlled company” and the rules and restrictions relating to the purchase of property by foreigners i.e. the requirement to obtain permission to purchase from the Council of Ministers with a quota of 1 property (house or flat not exceeding 5 donums or a land not exceeding 1 donum) will apply. In order to ensure that the company can invest in a larger scale and bypass the requirement for permission to purchase, at least 51% of the company shares must be registered in the name of a TRNC real or legal person and the majority of the board of directors must also consist of TRNC citizens. You may appoint nominee shareholders and nominee directors to act on your behalf as trustee by executing a deed of trust. Please contact us for legal advice regarding trusts and trust deeds.

If you do not intend to acquire any immovable property in the name of the company at any stage, all its shareholders as well as directors could be of foreign nationality.

MINIMUM REQUIREMENTS
 

Under the Laws of The Turkish Republic of Northern Cyprus the minimum requirements for the registration of a TRNC company with foreign capital participation are;

At least two shareholders, one director and one secretary:

A registered office in the TRNC:

A minimum paid up share capital of 25,000.-EUR or its equivalent. This amount must be deposited in a TRNC bank where it will be blocked until the company is formed. Once the funds are deposited, a block letter is obtained from the bank as proof that this requirement has been satisfied and presented to the Registrar of Companies. The funds will be relesead after the incorporation process is completed.

If there are any foreign directors, each must provide a bank guarantee letter from a TRNC bank in the amount of 100,000.-TL for a period of 18 months as security for any tax liabilities that may be incurred. This bank guarantee letter will be lodged at the TRNC Inland Revenue and a “Tax Security Certificate” will be obtained in return, which will then be presented to the Registrar of Companies.

THE COMPANY INCORPORATION PROCESS

The incorporation process begins with selecting a company name along with a few alternatives and submitting them for approval to the Registrar of Companies. The Registrar shall approve any name as long as it is not deemed “undesirable” or it does not conflict with an existing name. We will then draw up the Memorandum and Articles of Association stating the objects of the company and its rules and regulations. The Memorandum and Articles must be signed by each shareholder of the company in the presence of at least one witness. Expert legal advice must be sought for the drawing up of the Memorandum and Articles of Association since any mistake and/or omission could obstruct the operations and dealings of the company. Rectifying such mistake or omission can be quite onerous since both a special resolution and a court order is required for any alteration and/or addition to the Memorandum of Association.

Once the company name has been approved and all necessary documents have been drafted, we will submit our application for the incorporation of the company. The required documents to complete the process of incorporation are as follows:

1. Company incorporation forms

        a. MŞ 1 –A lawyer’s declaration of compliance with the requirements of the Law

        b. MŞ 2 - Registered office of the company

        c. MŞ 3 - Name, address and description of directors and secretary

2. Memorandum and Articles of Association

3. For each foreign shareholder

         a. A passport copy provided that the original is seen by the Registrar of Companies or a passport copy certified by the TRNC Consulate or the Turkish Embassy or an Apostille stamp

        b. A Criminal record certificate your country of origin. If the document is not in Turkish or English language, it must be translated to either Turkish or English and certified as a true translation by an Apostille stamp

        c. A Certificate of residence or utility bill as proof of address

4. For each foreign director

        a. A Tax Security Certificate from the TRNC Inland Revenue as explained above

        b. A passport copy provided that the original is seen by the Registrar of Companies or a passport copy certified by the TRNC Consulate or the Turkish Embassy or an Apostille stamp

        c. A Criminal record certificate your country of origin. If the document is not in Turkish or English language, it must be translated to either Turkish or English and certified as a true translation by an Apostille stamp

        d. A Certificate of residence or utility bill as proof of address

5. A block letter from a TRNC bank stating that the sum of 25,000.-EUR as the minimum share capital has been deposited and will remain blocked until the company formation process is complete as explained above.