A client paying an annual fee for a Cyprus director may expect that fee to cover the director’s review of the company’s contracts. The provider may have quoted for the appointment alone, intending to charge separately for each transaction. Unless the terms explain this, the disagreement may only emerge when a contract is ready for signature.
Similar uncertainty can arise over work described as company administration or assistance with opening a bank account. The engagement letter is where the law firm or corporate service provider records the extent of its undertaking. It may be accompanied by standard terms and separate nominee documents, all of which form part of the proposed arrangement. Any discrepancy between those documents and the quotation is best resolved before instructions are confirmed.
The engagement and the parties
Before incorporation, instructions normally come from the proposed owner. Once the company exists, it may itself become the client for continuing services. The documents can distinguish between those engagements and record whether the founder remains personally responsible for any fees. A personal payment undertaking deserves particular attention: it may leave the owner liable even though the work concerns the company.
On the provider’s side, the firm issuing the quotation may arrange for another person or entity to act as director or hold shares as nominee. Dealing with one contact does not necessarily mean that there is only one contracting party. The appointment documents identify who will perform each role and the terms on which they will do so.
For legal advice, the identity of the client has a further consequence. A lawyer retained by the company is not automatically advising each shareholder in a personal capacity. Shareholders’ interests can diverge, and an instruction to act for more than one party remains subject to the applicable professional rules on conflicts.
The fee quotation
Name approval, preparation of the memorandum and articles, and the incorporation filings are the principal elements of registering the company. Beyond that, quotations can differ. Bespoke articles may carry an additional fee, as may translations or documents prepared for use abroad. A breakdown showing the professional fee, government charges and certificates to be supplied allows the client to assess the actual cost. VAT and disbursements also need to be accounted for.
An appointment fee does not necessarily cover every task performed during the year. The secretary’s fee, for example, may exclude certain filings. Work charged separately can be identified in the fee schedule, with arrangements for estimates and approval where the charge depends on time spent. Administration included in an incorporation package might run for twelve months, or only until the end of the calendar year. Renewal dates and notice of fee increases belong in the agreed terms.
An estimated incorporation date assumes that the firm receives the information required to carry out its due diligence. Questions about the ownership or proposed business may have to be resolved before the firm can proceed. Where money is paid in advance, the terms can address what happens if the engagement cannot be accepted or the client withdraws the instruction.
Opening a bank account is a separate process. The firm’s work may extend to preparing the application and answering enquiries, but acceptance rests with the bank. A refusal can lead to a second application elsewhere and further fees. The description of the service is therefore more useful than a general reference to “bank account assistance”, particularly as to how long that assistance continues and whether another application is included.
Nominee arrangements
Living outside Cyprus does not, in itself, require an owner to appoint a nominee shareholder. If one is used, the signed nominee or trust documentation records the shares held for the beneficial owner and the basis on which they are held. Voting and the payment of distributions are dealt with there, together with the arrangements for transferring the shares to the owner or a replacement nominee. The beneficial owner needs copies of those documents, rather than relying solely on the provider’s confirmation that the arrangement has been put in place. None of this removes the obligation to identify the beneficial owner for compliance purposes or to make the disclosures required by law. Confidentiality provisions remain subject to those obligations. They cannot promise anonymity from the bank or the relevant authorities.
With a director, the relationship is materially different. A nominee director holds the office of director and owes duties to the company. Those duties require the director to exercise judgment over proposed transactions, even where the beneficial owner has already agreed the commercial terms. An undertaking to act on instructions cannot displace the director’s responsibilities.
Suppose the owner sends a completed contract for signature on the day a transaction is due to close. The director may require the full supporting papers and information about the counterparty before deciding whether to approve it. The engagement can provide for response times and urgent requests, but it cannot sensibly commit the director to approve every document received. A company trading regularly will also generate a different workload from one holding a single investment. That difference ought to be reflected in the description of the work covered by the annual fee.
Appointing a Cyprus director does not, by itself, settle the company’s tax position in Cyprus or elsewhere. If tax advice is included in the engagement, its scope and the adviser responsible can be identified separately.
Running the company
Owners who intend to sign contracts themselves require authority to act for the company; ownership of the shares alone is not enough. Depending on the articles and the transaction, a board resolution or power of attorney may be appropriate. Where several owners are involved, the arrangements for giving instructions also require some care. The firm needs to know whose instructions it may accept and how to proceed if conflicting requests arrive.
Payments will depend on the bank’s mandate and approval procedures. These determine who can initiate a payment and whose authorisation is required. If the only authorised signatory is unavailable, the company’s ability to pay an urgent invoice may be affected. Cover for absences and the procedure for urgent instructions can be agreed when the account arrangements are made.
Day-to-day administration often involves both the corporate services provider and an accountant. Their respective retainers may allocate the annual return to the secretary and financial statements and tax filings to the accountant. Any required audit or review must also be covered by the appropriate appointment. Beneficial ownership filings, including changes and the applicable annual confirmation, require an express allocation of responsibility. A general promise to “administer the company” leaves too much room for disagreement about this work. Even with advisers appointed, the company and its officers retain the responsibilities imposed on them by law. The client must supply the records needed for filings and notify changes in the ownership or business. Agreement on who monitors deadlines is of little use if the necessary information arrives after the filing date.
Official correspondence delivered to the registered office may also call for a prompt response. The terms can provide for its forwarding to an identified contact. Court papers warrant particular care: receiving and forwarding them does not, by itself, mean that the provider has accepted instructions to defend the proceedings. The company will need to instruct lawyers to deal with the claim.
A bank requesting a signed resolution may assume that the company can produce it promptly. If the original is held by the provider, the company depends on the arrangements for access to its records. Those arrangements can cover the delivery of originals and copies to the company’s authorised representatives. Fresh certificates, certification and apostilles for overseas use may involve further charges and take time to obtain.
Liability and a change of provider
Among the standard terms, a liability cap or an exclusion of particular losses may affect the remedy available if the provider’s work is defective. Such provisions are subject to legal limits. An indemnity given to a director or nominee also warrants examination because it may expose the person giving it to a claim. Statutory restrictions apply to provisions purporting to exempt or indemnify company officers against liability for their own breaches.
A notice period can leave fees payable after the client has decided to move the work elsewhere. There may be separate charges for unfinished work and the handover of the file. The treatment of fees paid in advance depends on the terms and applicable law. Governing law and provisions for court proceedings or arbitration are also relevant, particularly for a client based abroad.
Once a change is agreed, terminating the retainer does not dispense with the necessary resignations, appointments and filings. A move of registered office requires its own notification. Replacing a nominee shareholder involves the appropriate share transfer formalities, while the bank’s records and mandate require separate attention. Appointing a new director does not automatically change the account signatories.
Timing can become difficult if a return falls due during the handover or a transaction remains unfinished. The outgoing and incoming providers will need to know who is dealing with that work and when the company documents are to be delivered. An outgoing firm may remain obliged to retain certain records for legal or compliance purposes. That obligation is separate from handing over the company’s documents to its authorised representatives.
How we can help
At A. Danos & Associates LLC, we assist with Cyprus company registration and continuing corporate administration, including nominee appointments where appropriate. We discuss the proposed business before agreeing the scope of our engagement and prepare the documentation for the services to be provided. Where the arrangement calls for accounting or specialist tax advice, we can coordinate with the relevant advisers.
Please contact us with details of the company and the corporate services you require.
