Guidance on Beneficial Ownership Upon Death: Registrar of Companies Notice
On 12th September 2024, the Department of Companies and Intellectual Property issued new guidelines regarding cases of beneficial ownership, where the owner has passed away.
The statement, based on legal advice from the Republic’s Legal Service (dated 13th June 2024), provides the following instructions:
1. Beneficial Ownership in Absence of a Will
When a beneficial owner dies intestate (without a will), and thus no executor has been appointed, the court steps in to authorise individuals to manage the deceased's estate. This is done through an application process, leading to the granting of letters of administration. These appointed individuals are then recognised as administrators of the estate.
2. Executor’s Role Where a Will Exists
In cases where the deceased has left a valid will, the named executor can be registered as the beneficial owner until the estate is fully settled. The executor is regarded as the person in charge, holding the highest administrative position in the company until the process is completed.
3. Interim Beneficial Ownership During Estate Administration
Where an estate administrator has been appointed but the management of the estate is still pending, the law allows for temporary registration of the following:
4. Letters of Administration and Executor’s Responsibilities
When a person dies intestate, the court can authorise individuals to act as administrators through the issuance of letters of administration. Similarly, in the presence of a will, the court grants the executor the necessary documents to administer the estate, following the deceased's wishes.
Once appointed, the administrator or executor is seen as the personal representative of the deceased. As such, they take on the role of trustee, managing the deceased's movable and immovable property. They are also recognised as the natural person who has "final control" over the company, thereby meeting the definition of a "beneficial owner" under the provisions of Law 188(I)/2007.
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However, it is important to note that the above does not apply if the inheritance is directly passed to heirs under Article 27 of Chapter 189. This exception typically comes into play when the estate’s value does not exceed 6,000 Cypriot pounds (LK).
5. No Beneficial Owner or Administrator
In cases where no administrator has been appointed, and there are no heirs, the deceased is considered to have died without heirs if no relative is alive within six degrees of consanguinity. In such circumstances, the undistributed inheritance reverts to the Republic.
Without the appointment of an administrator or a transfer of assets to the Republic, there can be no determination of a natural person holding the "final control" of the company. In this situation, the senior management of the company would assume the role of the beneficial owner, as per Law 188(I)/2007.
6. Heirs Not Yet Appointed: Spouse and Minor Children
When a deceased person leaves behind a spouse and minor children but no formal administrator has been appointed, the law designates the person in senior management as the temporary beneficial owner. This is valid until an administrator is appointed, unless the estate falls under the provisions of Article 27 of Chapter 189.
7. Deceased Sole Officer and Beneficial Owner
If a company’s sole officer and beneficial owner passes away, and there is neither a will nor an appointed administrator, there is no recognised beneficial owner under the terms of Law 188(I)/2007. Consequently, the company is considered to be non-operational.
Final Notes
The guidance concludes by advising that in all cases, the specific provisions in the company’s founding or statutory documents, as well as any other applicable legislation, must be considered to determine the appropriate course of action.
Source: Cyprus Legal News: