In order to attract foreign investors and businesses in Cyprus, the Cyprus Securities and Exchange Commission established its Emerging Companies Market (ECM), along with other measures, for example new regulated entities like the Alternative Investment Funds. The ECM may aid in raising capital for small and medium-size enterprises and enables fast and affordable admission to public trading.
A plethora of advantages are evident for listing in the ECM, such as no minimum share capital requirement, more relaxed regulations than other listed companies, enhanced corporate profile, greater marketability as a public market promotes share transactions, and credibility. Listing a company on the ECM can effectively be achieved in two ways either through a public offering seeking for more than €2.5mn and addressed to more than 100 persons, or the offering can be done through a private placement, addressed to qualified investors only or to fewer than 100 persons and for less than €2.5mn.
The Russian Ministry of Finance has recently published a draft law on de-offshorization measures which introduces, amongst others, the concept of controlled foreign companies’ rules (CFC rules). The proposed rules prescribe, that a controlled foreign company is a legal entity whose shares are not listed on a stock exchange approved by the Russian Central Bank. Therefore, if a Company is listed on a reputable and recognized market, then such a company will simply not fall under the proposed CFC rules.
In conclusion, Russian tax residents who own companies listed on the Cyprus ECM will be safeguarded by the application of the forthcoming Russian CFC rules. Coupled together with the benefits of ECM listings such as no minimum share capital requirement, more relaxed regulations than other listed companies, enhanced corporate profile, greater marketability as a public market promotes share transactions and credibility, listing on the ECM may be a structure to avoid the new CFC rules and increased taxation.
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