The setting up of a Forex company is more complex than the setting up of an ordinary company as it is then classed as a Cypriot Investment Firm (CIF) and must comply with the laws regulating such activities as well as the Cyprus Companies Law.
The first step must be the incorporation of a normal company and after this, an application must be made for obtaining a Forex Trading Company Licence, which is governed by the Cyprus Securities and Exchange Commission (CYSEC).
The first step would be to apply for approval for the name of a normal company and after this, an application must be made in order to obtain a CIF (Cyprus Investment Firm) Licence, which is governed by the Cyprus Securities and Exchange Commission (CYSEC).
Our fees for the registration of the company and the actual application to the CYSEC for a licence for the Forex Company would be in the region of €25,000, plus disbursements, which could be in the region of €5-10,000.
It is difficult to provide you with a completely accurate time frame for the incorporation of your company and for obtaining the required licence but we estimate that it will take approximately 2-4 months from commencing the procedure until the issuing of the licence which will allow you to operate. It is worth noting that under the laws here in Cyprus, the relevant authorities are obliged to decide whether to accept the application within a period of 6 months.
Cyprus has numerous tax advantages, it has a low set up and operational cost for forex companies and is also in a favourable position because of its regulatory body which makes the forex companies more reliable and it is a more prestigious and trusted location due to the fact that it is in Europe and more strictly regulated than many other offshore jurisdictions.
The share capital requirement depends on the type of company which you want to establish. You will need to provide us with further details as to the type of activities that the proposed company will be carrying out so that we can advise you as to the minimum share capital requirements. Please see as follows for the initial capital requirement:
Minimum Capital Requirements (CIF in general)
In February 2014, Law 193(I)/2014 Article 10 (Law of the Investment Services and Activities and Regulated Markets) was amended, whereby the initial capital requirements of CIFs have been reduced significantly in order to attract further investment in Cyprus.
The initial capital requirements are now as below:
- A CIF that provides one or more of the following investment services and holds clients' money or/and client’s financial instruments, must have an initial capital of at least one hundred and twenty-five thousand euro (€125.000):
(a) The reception and transmission of orders in relation to
(b) the execution of orders on behalf of clients;
(c) portfolio management;
(d) provision of investment advice;
- A CIF that provides the investment services stated in subsection (a) or/and (d) above, and does not hold clients' money or/and clients’ financial instruments, and which, for that reason, may not at any time place themselves in debt with their clients, may have an initial capital of:
(a) At least fifty thousand euro (€50.000); or
(b) at least forty thousand euro (€40.000) and professional indemnity insurance covering all member states or some other comparable guarantee against liability arising from professional negligence, provided that it takes out insurance cover for an amount of at least one million euro (€1.000.000), per claim, and on aggregate, at least one million five hundred thousand euro (€1.500.000) per year for all claims.
- A CIF that provides one or more of the following investment services or/and performs the following investment activities shall have an initial capital of at least seven hundred and thirty thousand euro (€730.000):
(a) Dealing on own account;
(b) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
(c) Placing of financial instruments without a firm commitment basis;
(d) Operation of Multilateral Trading Facility.
Once we have incorporated the Cyprus company, we will have to set up a bank account for you with a bank here in Cyprus and pay in the amount which you require for the share capital of the company.
General conditions for a licence to be granted
Any Cyprus company wishing to conduct the business of Forex trading has to apply for a licence from the Cyprus Securities and Exchange Commission (Cysec).
The main requirements are:
- The Memorandum of the Company must have specific clauses regarding the nature of this business.
- The applicant company must fulfill the minimum capital requirements, as set out above.
- At least one director who is resident in Cyprus should act as an Executive Director and who passes the fit and ‘proper test’.
- The company should have a physical office space in Cyprus.
- The company must set up an internal control mechanism, ie. Cysec will want to see that the company has in place internal rules and procedures to oversee potential problem areas, contingency plans, server protection, client protection, etc.
- The suitability of the shareholders - as with the directors, the shareholders need to pass a fit and proper test, especially a background check, whereby Cysec is satisfied that they have a clean criminal record as well as experience in the business.
- Cysec must be satisfied that the company has internal procedures that will avoid any potential conflict of interest with its clients.