Chaos at Cyprus Company House

Accounting and consultancy firms, as well as lawyers and professional organizations are up in arms over the vacuum created at Company House, after the Supreme Court overturned a previous Civil Service Commission (EDY) appointment of Spyros Kokkinos as the Registrar of Companies and Official Receiver.

The appointment had been challenged on grounds of merit as two applicants had vied for the same job back in 2002 with nearly identical qualifications and experience after Maria Kyriacou resigned when she was elected to the House of Representatives.

The government has yet to appoint a new Registrar since the court decision last month and this delay could result in irreparable damage to Cyprus’ reputation as a reliable international business and services centre.

The absence of leadership and lack of any policy decisions has caused frustration and created a back-log of new registrations, while some lawyers are even resorting to registering new companies overseas, such as in Malta or the Baltic states.

Accountants and lawyers contacted the Financial Mirror to express their dismay at the long delays to register a company, presently surpassing 40 days, while some even claim there is preferential treatment of a few firms, causing a longer queue for others to register companies.

Many firms have sought registrations abroad, depriving Cyprus of the lucrative revenue that reached CYP 15.86 mln (EUR 27.3 mln) last year from CYP 11,02 mln (EUR 18.9 mln) in 2005. This has surpassed the previous record year in 2000 when it had CYP 13,52 mln (EUR 23.3 mln) in revenue from company registrations, changes to shareholding (due to new public companies), receivership and liquidations, copyright, trademarks and patents.

There are over 155,000 companies registered to date, with 20,000 new companies registered in 2006 alone and 78,000 inspections of company name applications.

The Department employs 81 administrative and technical staff, 38 part-timers, 13 in support services, as well as 60 full-time and part-time inspectors.

 

— Situation unacceptable

 

The business associations, such as the Cyprus Chamber of Commerce and Industry (KEVE) and the Employers and Industrialists Federation (OEV) claim that the competent minister’s inability to effectively deal with the situation and appoint a new Registrar is costing the island’s services economy millions in lost daily revenue and could harm Cyprus’ reputation further.

KEVE President Manthos Mavrommatis told the Financial Mirror that “we had warned of the problem last November when we met with President Papadopoulos and later with the Commerce and Industry Minister. It should not take over a month-and-a-half to register a company. This is pushing Cypriot lawyers to go overseas to register new companies.”

“We expect the Minister to appoint a new Registrar of Companies in order for the Department to have a head. We’ve been told that this is still in the process of receiving the official notification of the court decision,” Mavrommatis said.

“We are concerned with this delay and this situation cannot continue. We are losing significant business,” the KEVE president added.

OEV General Director Michalis Pilikos had harsher words to say.

“The time needed to register a company is unacceptable,” he said, adding that “for some time now this problem has been an obstacle in all efforts to promote Cyprus as a services or international business centre in order to attract foreign investments.”

“The endless promises we have heard from government leaders have not produced results,” Pilikos said.

“This is an unacceptable, futile situation that has dragged on for too many years,” he added.

Pilikos said that as the main attraction for new international-business companies is to have a foothold within the European Union, Cypriot lawyers are now resorting to registering new companies in Malta “where it only takes a week to register a company.”

“We have made many suggestions to the president and the minister in charge, but we have seen no results. It is unacceptable for the government not to be able to fill 20 jobs. If it is a high budget burden, then the state can outsource some of these services,” he said.

 

— Outsourcing a solution

 

Former Registrar Maria Kyriacou told the Financial Mirror that present and past administrations have never appreciated the Department’s valuable contribution to the island’s economy, adding that outsourcing is one of the solutions to the many problems.

She said that major reforms are needed at the Department, such as automation, restructuring of staff hierarchy to make it more efficient and working with authorized agents.

“I started work to introduce a new system software back in 1990-1992, but I never got approval,” said the deputy for DISY who was at the House Committee on Commerce Tuesday, desperately trying to explain to fellow MPs the intricacies involved at the Department.

“The process whereby it takes 2-3 weeks to get a name approval for a company soul easily be solved by simplifying the system,” she said. “Each lawyer could get online onto the system and check or approve a company name, but subject to certain conditions, which would make things much easier and more efficient.”

Kyriacou added that another problem is the lack of a pyramid of hierarchy. “At present there are only two Deputy Registrars and there is a need for five promotions or appointments to the level of department heads in order to give the staff greater authority to proceed with their work.”

“There is also, of course, a need for more staff, but not much can be achieved if the infrastructure does not improve,” Kyriacou said.

 

— Staff shortage

 

Members of parliament heard unconvincing arguments Tuesday by a senior official during a session of the House Committee on Commerce that confirmed the doubts in many peoples’ minds of the tragic situation at Company House.

Spyros Kokkinos, whose appointment as Registrar and Official Receiver was overturned by the Supreme Court decision on January 31, admitted to shortcomings in the department that falls under the jurisdiction of Commerce and Industry Minister Antonis Michaelides.

Kokkinos could not tell the parliamentary committee what needed to be done in order to rectify the problems at Company House, while he failed to inform the committee chairman Lefteris Christoforou (DISY) that he was no longer acting as Registrar and that company registration documents have not been signed for the past two weeks, causing chaos at the department.

Officials from the Ministry of Finance told the same committee that suggestions to hire more temporary staff or part-timers has been rejected on several occasions.

Kokkinos acknowledged that 20 places remained vacant, but committee member Nicholas Papadopoulos (DIKO) hinted that perhaps the vacancies were not filled in order to favour the promotion of others from within the department.

Kokkinos told the committee that despite the fact that staff had been working overtime since January 13, the large volume of work makes it impossible to register a company in les than a month.

The committee members concluded that more staff hiring and the introduction of computerised systems and automation was a must, according to a report on Stockwatch.com.cy.

“We must follow the example of Lithuania where someone can register a company online in less than six hours,” Stavros Evagorou (AKEL) was quoted as saying.