Partnership is the relation which subsides between persons carrying the business with the view of profit provided that it is not Limited liability Company and it is not formed or incorporated by any other Law other than the partnership Law Cap 116.
LIMITED LIABILITY PARTNERSHIP
A limited partnership must consist of one or more persons called general partners, who shall be liable for all the debts and obligations of the firm, and one or more persons to be called limited partners, who shall at the time of entering such partnership contribute thereto a sum or sums as capital or property valued at a stated amount, and who shall not be liable for the debts or obligations of the firm beyond the amount so contributed.
A Cyprus Partnership has become very important recently in relation to the form of a Limited Liability Company which may form part of the Tax Planning structure involving International Tax Planning.
FORMATION OF THE PARTNERSHIP
An application to the Registrar of Cyprus Companies has to be made for approval of the name of the Partnership before any application for registration of the Partnership is made to the Registrar of Cyprus Companies.
Limited Partner – his interest in the Partnership is determined by the contribution, thereby limiting his responsibilities and liabilities/ obligations towards Partnership and its creditors in case of dissolution.
General Partner in Cyprus Partnership: is the natural person or Corporate Body who undertakes unlimited liability towards all the debts and obligations of the Partnership.
The management of the Partnership: is by Law the responsibility of General Partner if a physical person, and if the General Partner is Limited Liability Company, then the Directors of the Limited Liability Company will manage the Partnership.
The registered office of Partnership must be in Cyprus.
The Partnership application must state the activities of the Partnership in greatest detail and in case a Partnership Agreement is in place signed between the Partners, the same details must appear in the Partnership Agreement.
For every Partnership it is advisable to put in place a Partnership Agreement stating inter alia the activities of the Partnership in greatest detail, the contribution of each partner, the management and operation of the Partnership and the Partnership to be managed according to the provisions of the Partnership Agreement as agreed between the Partners.
STRUCTURING BY USING CYPRUS LIMITED LIABILITY PARTNERSHIP
A Limited Liability Partnership when is used in International Planning the General Partner must be a Cyprus Company limited by shares, in which case the liability of a member to contribute to the company’s assets is limited to the amount, if any, unpaid on his shares.
This is an alternative way of limiting the unlimited liability of the General Partner to the unpaid share capital of the Cyprus Company who is acting as a General Partner.
In the application to the Registrar of Cyprus Companies and in the Partnership Agreement it must be stated that the Partnership is dissolved within a specified period or on such notice been given between the partners.
The Law provides under which circumstances a Partnership may be dissolved by the Court and other circumstances e.g. by death or bankruptcy of the Partner.
Dissolution of the partnership may be done in the following ways, according to the Cyprus Partnership Law Sections:
Subject to any agreement between the partners, a partnership is dissolved:
(a) if entered into for a fixed term, by the expiration of that term; or,
(b) if entered into for a single adventure or undertaking, by the termination of that adventure or undertaking; or,
(c) if entered into for undefined time, by any partner giving notice to the other or others of his intention to dissolve the partnership.
In the last mentioned case the partnership is dissolved as from the date mentioned in the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the notice.
Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner.
A partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the partnership property to be charged under this Law for his separate debt.
A partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry on a partnership.
On application by a partner, the Court may decree a dissolution of the partnership in any of the following cases:
a) when a partner is shown, to the satisfaction of the Court, to be permanently unsound mind, in which case the application may be made as well on behalf of that partner by his next friend, or person having to intervene as by any other partner;
b) when a partner, other than the partner suing, becomes in any other way permanently incapable of performing his part of the partnership contract;
c) when a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of the Court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on of the business;
d) when a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable for the other partner or partners to carry on the business in partnership with him;
e) when the business of the partnership can only be carried on at a loss; and
f) whenever in any case circumstances have arisen which, in the opinion of the Court, render it just and equitable that the partnership be dissolved.
Costs of dissolution will depend on the procedure of dissolution to be followed, and will depend whether it is through the Court or out of the Court procedures.
TAXATION ON LIMITED LIABILITY PARTNERSHIP
A Cyprus Limited Liability Partnership is not considered as a legal entity from a Cyprus Tax perspective. Thus, it is the partners who will be subject to taxation in accordance with the transactions that will be concluded by the partnership.