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As the economic crisis deepens leading to layoffs in many countries and university graduates are faced with tremendous difficulties in finding the right job, more and more people around the globe, but mostly in developed countries, are choosing to become self-employed and open up their own businesses.
The majority aim to create a business that will give them employment, a steady income and perhaps as importantly, dignity.
To set up a new business, the first thing to do is coming up with the business idea or copying a successful model used in another country and try to bring the concept to your home country. Market research is very important to test whether the business idea is appealing among family, friends and preferably among a small percentage of the target group. The next important thing to do is write up a crisp and attractive business plan, after which the entrepreneur embarks on the task of raising money to implement the project.
With banks refusing to lend to startups because of tightening lending rules, the only other alternative is to approach other investors to put the seed funding so that the business can start, generate positive cash flow and perhaps then qualify for borrowing from the banks.
It is one thing to approach one or two investors to raise money to open a small shop or office, but for larger outfits, a better and far more professional approach would be to organize the business in such a way to enable it to raise a bigger amount of money from multiple investors and preferably in smaller lots to lower their risk.
The best way would be to either consider setting up a public company (PLC) with the objective to list it on a stock exchange or set up a private investment fund. In both cases, the entrepreneur would be in a position to raise money from other investors in a professional way and at the same time give additional assurances and safeguards, protecting the rights of interested investors.
Cyprus offers both capital raising methods for locals and non residents.
The first option is to form a public company with minimum 8-10 shareholders and then list the company on the Emerging Companies Market of the Cyprus Stock Exchange (ECM/CSE), which is ideal for startups of any nationality or location since the CSE has gone out of its way to make this specific market very business friendly.
One of the key advantages of the ECM/CSE is that the listing procedures are very easy – the whole listing process can be finalized in 2 weeks. The listing fees are very reasonable, below EUR 10.000 for the year. There is no daily volume requirement, hence no need to do fictitious trades or spend money on unnecessary brokerage fees. There is no maximum ownership rule, which means the beneficial owner can legally hold 100% of the share capital with related parties. There is no minimum market capitalization rule, which means even a EUR 50.000 worth company can list.
As for the Investment Funds, these are essentially variable capital companies, which issue units to investors when they step in and redeem the units when investors exit out of the fund. All the assets are placed with a Custodian Bank and an independent Administrator works out the NAV based on which investors buy into or exit out of the Fund. A regulated Fund Manager may also act as overall fund manager ensuring that the investment decisions are carried out according to the charter of the Fund and that all other EU rules on knowing clients and anti-money laundering measures are implemented.
The important thing is that in both cases (PLC or Inv Fund) the promoters or those raising money get to do so under a regulatory structure, hence they are not breaking any investment rules, while they also get to raise money from multiple investors and thus are more likely to meet their objectives faster. As for investors, there is more transparency, a level playing field since their interests are fully aligned with those of the entrepreneur and in both instances, the regulatory authorities are involved. Additional information on both setups is available on request.
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(Shavasb Bohdjalian is an approved Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10, licensed to trade in forex, offer portfolio management services and hold client funds. Eurivex is also an approved Nominated Adviser for listings on the Emerging Companies Market of the Cyprus Stock Exchange. The views expressed above are personal and do not bind the company and are subject to change without notice. Investing in markets and trading on leverage is highly risky and it may not be suitable to all investors since it carries a high degree of risk and you can lose more than your initial investment)
