Cyprus, known for its favorable geographical position as a crossroad between three continents, has become a significant shipping and trade center and grew to be one of the main maritime performers throughout the world, having the 3rd largest fleet in the European Union and the 11th largest worldwide.
As a result, the needs of the shipping industry have become obvious and on 6 October 2022, the House of Representatives has unanimously passed the Law on the Limited Liability Shipping Company (the “Law”) which was published in the Official Gazette of Cyprus on 27 October 2022. The adoption of this legislation constitutes the implementation of Action No. 14 of the Long-Term National Strategy for Cyprus Shipping "SEA Change 2030", which aims to improve the competitiveness of the Cyprus flag in international shipping, as well as to simplify the procedures and operating regime of Cypriot shipping companies that own Cypriot ships.
To that effect, the Law provides for the establishment of a one-stop-shop framework for shipping companies. It creates a new type of corporate entity, namely, the Limited Liability Shipping Company (the “LLSC”), with its only purpose the ownership and operation of Cypriot vessels.
The structure of the Law is inspired by the basic provisions of the Companies Law, Cap.113 ("Cap.113”). It includes provisions for the management and administration of the LLSCs and it regulates the procedures from their establishment to their liquidation. However, the Law includes provisions aimed at simplifying various procedures and aspects of Cap.113.
Here are some provisions of the Law, evidencing its flexibility:
· The creation of a new registrar and of a new registry - the LLSC Registry, which will be kept by the Deputy Ministry of Shipping (the “Ministry”) with the Director General of the Ministry being the registrar of the LLSCs (the “Registrar”).
he Ministry, in addition to the matters already handling with relation to maritime law, will, in respect of the LLSCs, be the competent authority for all matters currently falling within the scope of the Registrar of Companies;
· Provisions relating to the transfer of companies currently registered with Registrar of Companies to the LLSC Registry;
· The power of the Registrar to approve the use of electronic signatures in relation to documents submitted to or issued by the Registrar;
· Provisions for the reduction of share capital and amendment of the memorandum of association without the need of obtaining a court order as conventionally happens under the Cap.113.
· The memorandum of the LLSCs will be based on a template prescribed under a notification of the Registrar and its amendment will be permitted only in circumstances specified under the Law.
To conclude, we shall wait and see how this reform will be implemented in practice. What someone can say with certainty though, is that the Law, apart from the flexibility it offers, is creating a corporate legal framework that it is unique and tailored to shipping companies.
Article by CPM a Proud member of Delphi Alliance