Establishment of a Medical Company in Cyprus

Establishment of a Medical Company in Cyprus

With a publication in the Official Gazette of the Republic of Cyprus, on 19.07.2013, the Law on Registration of Doctors (Amended) of 2013 (Law 73 (I) / 2013) (hereinafter “the Law”) was issued. The Law provides for the establishment of Medical Companies and establishes the legal framework for the establishment, administration, operation and dissolution of Medical Companies, in addition to the Companies Law and the Law on Good and Limited Liability Companies and Commercial Brands Law , depending on the type of company that will be registered on a case by case basis.  In other words, if we choose to register a Medical Company with Limited Liability, the legal framework of the commendation comprises of the Law and the Companies Law. When we choose the registration of a General or Limited Liability Company, respectively, the legal framework consists of the Law and the Law on General and Limited Liability Companies and Commercial Brands.

Legal Provisions

• Establishment of Medical Companies

According to the Law, the prior approval of a relevant application by the Medical Council of Cyprus is a necessary condition for the registration of a Medical Company. Only when there is such approval, an individual can contact the Registrar of Companies for the registration of the intended Medical Company. Formal conditions for approval by the Medical Council are, respectively:

1. For registration under the Law on General and Limited Liability Companies: all the intended partners must be doctors, registered in accordance with the provisions of the Law on Medical Registration.
2. For registration under the Companies Law: all shareholders and members of the board of directors must be doctors, registered in accordance with the provisions of the Law on Medical Registration. In the second instance, it is permitted to be shareholders of the Company, except natural persons, and general or limited liability companies, such as those of the first category.

It is noted that, for this category, i.e. Limited Liability Companies, the obligation to secure an approval of the Medical Council extends to the case of acquisition of shares by third parties, after its establishment. After all, the same conditions will be met once more to the person of the new shareholders.

3. Finally, it is possible to set up a company of either the first or the second above category, if its proposed name consists exclusively of the name or names of one or more doctors who now practice or who have practiced the medical profession in the past.

• Following the Establishment

After the establishment of a Medical Company, meaning after its registration in the Registrar of Companies, it is registered in a special register kept by the Medical Council. The Medical Council also informs the Medical Council, which is established under the Law on Physicians (Associations, Discipline and Pension Funds).

If a Medical Company has been registered as a limited liability company, then it is registered with the acronym “M.C.L.L”, meaning Medical Company of Limited Liability a Limited, instead of the word “Limited”, as is the case with the usual limited liability companies which are written under of the Companies Law. In case the company is registered with an English – Latin name, the “M.C.L.L.” is replaced by “DLC”, meaning Doctors ’Limited Company. The Law clarifies that such a company may use its name in either Latin or Greek characters, regardless of the manner in which it is registered.

• Delete, Termination of Registration, Suspend Registration

In addition to the relevant provisions of the Companies Law and the Law on General and Limited Liability Companies, the Medical Council may delete a Medical Company if it does not meet the conditions that must be met upon its establishment. However, it may not delete a Medical Company if:

1. The shares of an M.C.L.L. to a person who is not a doctor, due to inheritance from a person who was a doctor

Or if

2. a member of a company or a member of its board of directors or a partner, has lost his / her status as a doctor.

Meaning that, within twelve months from the day the above -mentioned occurred, the Medical Company ensures that the conditions for its establishment are met again.

In case of a conviction for misconduct by the Medical Council, the Council may suspend or cancel the registration of the Medical Company and delete it from the Register of Medical Companies.

• Advantages of M.C.L.L. Registration

The provision of medical services by a Cypriot Medical Company and, in particular, an M.C.L.L., ensures legal and tax benefits to doctors operating in the private sector. The main tax advantage is the submission of the income of M.C.L.L. to its low corporate tax rate of 12,5% compared to the tax rates applicable to the incomes of self-employed individuals, which amount to up to 35%. The legal advantage is the limited liability of the members of an M.C.L.L., with the reservations that we develop below.

Liability of the members of M.C.L.L.

The main legal advantage for the incorporation of an M.C.L.L., as in any case of a limited liability company, is of course the limitation of the liability of its members, to the amount of the contribution of each member to the share capital of the company. The M.C.L.L. and its member or members are considered by law as separate legal entities, regardless of the absolute control exercised by one or more members in the M.C.L.L. As a result, the members of M.C.L.L. will not be personally responsible for the civil debts or for the debts to the public of M.C.L.L. (with the exception of specific debts to the State, such as VAT debts for which the company officials are responsible) and cannot be sued in person by the creditors of M.C.L.L., with a  result of the liability to be limited exclusively to the amount of their contribution to the share capital of M.C.L.L. Thus, there is a limitation of the civil responsibility of the members of the M.C.L.L., towards, for example, suppliers of the doctor’s office or clinic managed by an M.C.L.L. to the employees of M.C.L.L. or liability for civil offenses unrelated to the practice of the medical profession, such as a liability for damages for a nuisance of a medical center to its neighbors or even liability for damages due to negligence unrelated to the practice of the medical profession, e.g. from negligent driving of an employee of M.C.L.L.

But because the M.C.L.L. governed by specific legislation, it is very important to emphasize:

the existence of personal responsibility of the members of an M.C.L.L. against third parties, in cases of medical negligence or the commission of any offense during:

• the performance of a medical duty. In this case, of course, M.C.L.L. will be liable, ex officio, for the acts or omissions of the medical shareholders or employees of the M.C.L.L., but there will be no limitation of the responsibility of its members (See Article 7 of the Law/ Art. 19(2) of the Basic Law).
• the non-exemption from any personal disciplinary responsibility and the non-influence of any disciplinary procedure exercised against a doctor, according to the Law on Doctors (Associations, Discipline and Pension Fund), due to the participation of a doctor in M.C.L.L., in any capacity or due to the cooperation of the doctor with M.C.L.L. in any way or due to his employment by M.C.L.L. or due to the capacity of the doctor as a representative or added of M.C.L.L. (See Article 4 (4) of the Law of Doctors (Associations, Discipline and Pension Fund), as amended by the 72 (Ι)/2013) Law. Each doctor will be subject to personal disciplinary control for any disciplinary misconduct.

The above is a brief description of the new legal framework for the provision of medical services in Cyprus. We believe that, with the new framework, an attempt is made to adapt the medical services sector to the new perceptions of the free market, in order to secure the professional-business interests of the medical world, without losing or weakening the traditional perception of doctors’ social responsibility, which is intertwined with the fundamental social responsibility of doctors – responsibility towards their patients and with the very nature of the doctor-patient relationship, since the legislator does not limit any personal responsibility of doctors from their negligent acts and omissions or from their offenses during the exercise of their medical duties, as well as does not limit their disciplinary responsibility.

For any further guidance regarding this procedure or if you require an initial consultation, please do not hesitate to contact our Law Firm at [email protected], , +357 22 251 777 or +357 25 261 777 or please visit our office in Nicosia or Limassol.