Partnership

The law governing partnerships in Cyprus was enacted as the Partnership Law Cap. 116 and further to an amendment in 1977 it is now titled as the General and Limited Partnership and Business Names Law (the “Law”).  The Law provides for general partnerships, limited partnerships and after October 9th 2015 pursuant to the amending law 114 (I)/2015, partnerships limited by shares, introducing for the first time in Cyprus a limited liability partnership with a share capital, widely used in other jurisdictions for investment purposes.

Types of Partnerships

In a General Partnership every partner is liable jointly and severally with all the other partners for an unlimited amount of the debts and obligations of the partnership.

A person who is admitted as a partner into an existing firm does not thereby become liable to its creditors for anything done before he became a partner.

A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations incurred before his retirement.

In a Limited Partnership at least one of the partners must have unlimited liability for the debts and obligations of the partnership while the remaining partners may have limited liability.  Only general partners may participate in the management and operation of the partnership and be authorized to bind the partnership while a limited partner may not.  If such limited partner takes part in the management and operation of the LLP or purport to bind the LLP then he is liable for all debts and obligations of the LLP which arise for as long as he takes part in the management, as if he were a general partner. 

In a Limited Liability Partnership (“LLP”), the partnership has a share capital, an LLP partner contributes to the share capital and shares are allotted to him depending on the amount contributed.  It is comprised of one or more general partners who are liable for all debts and obligations of the partnership and are authorized to manage, operate and bind the LLP and one or more limited liability partners who merely contribute capital towards shares in the partnership. Limited liability partners may not participate in the management and operation of the partnership, and may not be authorized to bind the partnership.  Liability of the limited partners is limited up to the amount that remains unpaid, if any, for the shares held by each partner, who enjoys limited liability in the same manner as shareholders enjoy limited liability in a limited company. 

Conditions for the Existence of a Partnership

-the partnership must carry out a business

-the minimum number of partners (may be corporate entities or natural persons) is two and the maximum number is 100 (if the partnership is conducting banking activities then the maximum number of partners is 10)

-the partnership must have the purpose of obtaining profit

Partnerships of any type are not legal entities and do not have separate legal personality from the partners who compose it.

A partnership agreement is prepared to regulate the relations between the partners such as the interests of the partners in the partnership property, entitlement to capital and profits, contributions towards losses, participation in the management of the partnership and duration of the partnership etc.

Registration Procedure

An application is made to the Cyprus Registrar of Companies for approval of the name (before any applications for its registration)

Within a month of its establishment a written statement in a prescribed form is submitted to the Registrar signed by all the partners containing the following information:

i) the name of the partnership

ii) the general nature of its business activities

iii)the names, nationality, usual residence address, any other business activity of every natural person who is a general or limited partner, and if a legal person then its name and registered office or address of the main office  (general partners and limited liability partners may be companies)

iv) the duration of the partnership and its commencement date

v) a declaration, if applicable, that the partnership is a limited partnership

vi) the shares and capital which have been granted or which will be granted to every limited partner and /or the amount that will be contributed or the amount which has been contributed by every limited partner, reference to the amount which has been contributed in cash or any other manner and the manner by which it was contributed

vii) the names of the general partners who are authorized to deal with the affairs of the partnership, to direct and to sign on behalf of the partnership

viii) payment of registration fee

The Registrar if satisfied as to the information provided issues a certificate of registration.

If there are any changes in any of the information submitted, within 7 days of the date of the change, a statement must be sent to the Registrar in a prescribed form which is signed by the partnership, either by a natural or legal person, which outlines the change.

If the partnership ceases to conduct business activities, within one month after the cessation a declaration in the prescribed form shall be submitted to the Registrar.

Taxation 

Partnerships are considered as look through vehicles and are not subject to taxation.

Financial Accounts

Partnerships must keep books of accounts and for this purpose partners (except for LLP partners) must keep proper accounts in a manner necessary to present or explain their transactions and the financial statements in trade, activities or profession including statements which contain day to day entries with sufficient details.

If a sole general partner or all general partners of a partnership are entities listed in article 64A of the Law, which includes limited liability companies established in accordance with the Cyprus Companies Act Cap. 113 and partnerships which are established in accordance with the Law among others, annual reports and financial statements must be prepared in accordance with articles 118-122  and articles 141-169 of the Cyprus Companies Act Cap. 113 at the end of the financial year and must comply with the requirements specified therein.



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