Thousands of companies face hefty fines

MPs heard on Tuesday that out of some 230,000 registered companies, so far only 140,000 have updated their records regarding their ultimate beneficial owners (UBOs), the rest facing hefty fines if they fail to do so by the March 31 cutoff date.

Under a directive issued by the Registrar of Companies, all corporate entities should have filed their updated UBO data by December 31, 2023. Companies not complying would be fined €200 on January 1, 2024, and €100 per every continuing day of non-compliance. Following a host of complaints by companies, that deadline was later extended to the end of March.

Parliamentarians said many entities are for various reasons unable to contact their respective UBOs. For example, in many cases the UBOs are in either Ukraine or Russia – making it hard to reach them.

Non-compliant companies could face fines of up to €20,000.

MPs said the clock is ticking, and that a solution must be found so that Cyprus as a whole does not end up getting more bad publicity over the existence of shell companies – as happened with the release of the Panama Papers.

Kyriacos Hadjiyianni, chair of the House commerce committee, called for reducing unnecessary red tape for companies. He suggested scrapping the requirement for filing the HE-32 form.

The HE-32 form is a statutory document that companies must submit to the Registrar each year. The annual return shows the details of the shareholders, directors, company secretary, registered office and share capital, and must be filed together with the audited financial statements of the previous year.

Hadjiyianni said this form is not necessary, as the audited financial statements themselves contain the UBO information.

Edek MP Elias Myrianthous said there are approximately 230,000 registered companies, of which just 140,000 have updated their UBO records as required.

An additional complication has meanwhile come up, in that among the 90,000 entities that have not updated their UBO records, 70,000 have filed for deletion from the registry. However both tax authorities and banks are not consenting to many of these deletions.

The deputy said the sheer volume of paperwork is clogging up the Registrar.

Myrianthous also complained that whereas parliament has passed a law allowing for electronic signatures, nevertheless to date the Registrar of Companies has not implemented it – meaning a great deal of paperwork and sluggish processes.

Greens MP Stavros Papadouris said that because of the armed conflict between Ukraine and Russia, many nationals of these countries who are the UBOs cannot be tracked down.

He cited the example of an individual listed as a company director, shareholder or secretary. This individual needs to declare the UBOs for some 800 companies, but is unable to do so.

As a result the person could face a fine of up to €16 million – the 800 companies multiplied by the €20,000 fine in each case.

Papadouris said that with time running out till the end of March, the hefty fines could “crush” many family businesses. He called on the finance ministry to quickly come up with ideas.