What do we mean with the term “Shell Companies” and how does SEPAGA E.M.I. approach the issue?

Shell Companies / Entities

On 2nd November 2018 the Central Bank of Cyprus (“CBC”) issued the revised Circular named “Shell companies / entities” into which there was a definition and clarification as to which legal entities are considered to fall under that category and under which circumstances a Cyprus Bank Institution, or Electronic Money Institution is permitted to engage in business relations with such entities.

As provided by CBC, the term “shell company/entity” refers to a limited liability company or other legal entity that:

• Has no physical presence or operations: “physical presence” includes employees, office space, etc. The presence of a third party providing merely “nominee” services, including secretary duties and virtual office space, does not constitute on its own physical presence for the legal entity,
• Has no established economic activity.

Exception From The Rule 

Through the latest circular of CBC, the following types of legal entities (with such economic activities) are excluded from the “Shell” criteria:

• Companies which hold stock or shares or other equity instruments of another business entity with identifiable ultimate beneficial owner(s);
• Companies which hold intangible or other assets including real estate, ships, aircrafts, portfolio of investments, debt and financial instruments;
• Companies established to facilitate currency trades and asset transfers, corporate mergers, as well as carrying out asset management activities and trading of shares;
• Companies that act as a treasurer for companies, recognized as a group or manages the activities of the group.

Offshore Companies

Adding to all the above, if the company/legal entity is incorporated / registered in a jurisdiction where companies/entities are not required to submit to the authorities Audited Financial Statements by independent qualified professional accountants, or companies/entities which have a tax residence in a jurisdiction included in the EU list of non-cooperative jurisdictions for tax purposes or the OECD’s list of non-cooperative jurisdictions for tax purposes, then CBC advises Bank Institutions or Electronic Money Institutions to avoid engaging in a business relationship with them.

In all other cases, the Bank Institution or Electronic Money Institution has the right to decide on whether to engage in or maintain a business relationship, by applying a risk – based approach, in accordance with the legal and regulatory framework of the respective jurisdiction, where the company/legal entity is incorporated.

Our Approach

SEPAGA as Electronic Money Institution licensed by Central Bank of Cyprus with license Number 115.1.3.18/2018 adopts and duly implements all Circulars and Guidelines of CBC, EBA and EU.

Sepaga has established policies, procedures and controls to endure the effective implementation and full compliance with the above-mentioned requirements of the Circular.

All new and/or existing clients will be (re)evaluated through the risk-based approach implemented and any assistance or additional guidance which needs to be provided to new and/or existing clients will be provided from the trained and knowledgeable team of Sepaga.

We hereby disclose that the content of this newsletter is solely for informative purposes and business decisions should not be taken based on it.

For any additional information or if you are interested in our services, please contact Business Development Team or Support Team at:

Tel: +357 22 283100

Email: sepagasupport@sepaga.com

Address: 29 Stasikratous Street, SAMICO HOUSE, 3rd Floor, 1065, Nicosia, Cyprus