Striking Off Your Company Does Not Move Its Debts to You

In short

A judgment of 42,200 euro against a shareholder and a director personally was cut to 18,300, because the older sums were owed by the company, a different person.

A woman was employed from 2007 as the manager of a Cyprus company's office. The sole shareholder of that company and its director were both foreign individuals who came and went. In December 2010 the company terminated her employment. She went on working through the first eight months of 2011 all the same, on the same terms, for the same two people.

Then she sued for 42,200 euro: the outstanding balance of agreed bonuses for 2009 and for 2010, and the agreed remuneration for her services during 2011. She sued the company and the two individuals. Shortly before the hearing, counsel announced that the company had in the meantime been struck off the register of the Registrar of Companies, so the claim against it was dismissed by consent and the trial went ahead against the two people alone.

The Nicosia District Court gave judgment against them for the whole 42,200 euro. On 9 September 2026 the Court of Appeal reduced it to 18,300 euro.

Who this matters to

Every Cyprus company owner and director who has ever let a company go quiet, and everyone who keeps supplying a business after the entity they contracted with stops trading:

Shareholders and directors of companies that are being struck off rather than wound up.
Business owners who run several vehicles and move activity between them.
Consultants, office managers and service providers who carry on working when the company that engaged them closes.
Anyone about to apply to the Registrar for a strike off while claims are outstanding.

The line the court drew

The 18,300 euro survived because of what the individuals themselves did in 2011. The claimant pleaded that after her services with the company were terminated in December 2010, the two individuals continued on the same contractual basis and on the same terms to work with her, that she continued to manage their business in Cyprus, and that on that arrangement they undertook to pay her as before until August 2011. The trial judge believed her, and the appeal court found no reason to interfere with that finding. Those eight months were a contract with them.

The other 24,230 euro did not survive, and the reasoning is the part worth keeping. Those sums were the balance of the 2009 bonus, 9,480 euro, and the balance of the 2010 bonus and increase, 14,750 euro. They related to the last two years of her employment with the company. The company, said the court, is of course a legal person distinct from the natural persons behind it.

Two things were missing. There was no pleaded allegation that in 2011 the individuals had agreed to pay those earlier bonuses retrospectively, so no such allegation could be advanced. And there was no evidence of any such agreement either. Under cross examination the claimant was clear that the bonus for 2009 had been agreed at the end of 2009 and the bonus for 2010 at the end of 2010, which is to say while her employment contract with the company was still in force. Even if those discussions had been held with the individuals, that did not justify a finding that they had later assumed personal responsibility for paying them.

The judgment was therefore reduced by 24,230 euro.

The arguments that failed

The appellants ran three further points and lost all of them.

They said the District Court had no jurisdiction, because everything claimed flowed from the contract of employment and therefore belonged to the Industrial Disputes Court under article 12(1)(e) of the Annual Holidays with Pay Law 8/1967, which gives that court exclusive jurisdiction over independent claims arising from a contract of employment. The court observed that the argument might have had prospects as to the 2009 and 2010 sums, which really could be characterised that way, but those sums had already fallen away on the first ground. It did not need to go further.

They attacked the trial judge's assessment of the claimant's credibility. The appeal court repeated the settled principle that assessment of evidence is primarily for the court that tried the case, and that an appeal court interferes only where the conclusions are objectively untenable, not reasonably permissible, arbitrary, or contradicted in a material way.

They said the claim was tainted by illegality, because the claimant had not been registered for VAT and had charged none. The court held they had not established that she was obliged to register, since an unquantified part of the 2011 sum was a bonus and article 8(2) of the Value Added Tax Law 95(I)/2000 excluded from the meaning of a transaction anything carried out without consideration. It went on to say that in any event, following Agathokleous and another v. Lappa (1998) 1(D) A.A.D. 2202, where a statute contains no provision barring access to the courts and the suggestion is that the bar is implied, the answer depends on construing the statute, and where the sole purpose of the statute is the raising of revenue the contract is not to be treated as illegal. No fraud on the revenue had been admitted or proved. The court added, in passing, that had such an intention been shown it would have implicated the appellants too, since they received the services knowing no VAT was being charged, and raised the point only in the action, with the ultimate object of avoiding payment for services they had received.

What this means in practice

Do not treat a strike off as a way of ending the company's debts. It ends the company, which is a different thing. Creditors who are quick enough simply sue whoever dealt with them, and the argument then becomes what you personally agreed to, which is a far less comfortable place to be than the corporate veil you gave up.
Close the file before you close the company. Here the strike off happened while the action was pending, the claim against the company was withdrawn, and the individuals then litigated for nine years over sums the company had owed. Settle or document outstanding claims first.
The dangerous period is the handover. Liability attached to the eight months when the company had stopped employing her and nothing new had been signed. If activity continues after an entity stops trading, say in writing who is now the counterparty and on what terms.
What is not pleaded cannot be proved. Two thirds of this judgment fell away because the statement of claim never alleged the agreement that was needed to support it. The appeal court expressly noted that the statement of claim had not been drafted in the best way, particularly as to clarity and the separation of the financial claims.
Non registration for VAT is a weak defence to payment. It did not work here, and the court pointed out that the party raising it had accepted the services knowing the position.

The individuals recovered 1,700 euro in appeal costs, and the judgment against them stands at 18,300 euro rather than 42,200 euro. Whether a debt belongs to a company or to the people behind it is decided by what was agreed and what was recorded, which is where corporate and commercial advice and litigation and arbitration work meet.

Questions we are asked

If my company is struck off, do I become liable for its debts?

No. Striking off does not transfer the company's obligations to its shareholders or its directors. The company is a separate legal person from the individuals behind it, and that separation survives the removal of the company from the register. In this appeal the sums that were owed by the company under an employment contract could not be recovered from the shareholder and the director personally, and the judgment was reduced accordingly.

So how did the individuals end up liable for anything?

Because of what happened after the company stopped operating. The trial court accepted that during 2011, once the company's employee had been dismissed, the shareholder and the director continued to receive her services personally on the same basis as before. That arrangement was a contract with them, not with the company, and 18,300 euro for those eight months of services stood on appeal.

Can a claim be proved if it was not pleaded?

No, and this is what lost two of the three sums. There was no pleaded allegation that in 2011 the individuals had agreed to pay, retrospectively, bonuses that related to 2009 and 2010. The appeal court held that such an allegation could not be advanced in the absence of pleading, and added that in any event no evidence of such an agreement had been given. The claimant's own cross examination showed those bonuses had been agreed at the end of each of those years, while the employment contract with the company was still running.

Which court hears a claim arising from an employment contract?

Article 12(1) of the Annual Holidays with Pay Law 8/1967, and in particular paragraph (e), places independent claims arising from a contract of employment within the exclusive jurisdiction of the Industrial Disputes Court. The appellants argued that the whole claim belonged there. The point might have had prospects as to the 2009 and 2010 sums, which did arise from the employment contract with the company, but it did not touch the claim for services rendered to the individuals personally in 2011.

Is a contract unenforceable because the supplier charged no VAT?

Not on these facts. The appellants argued the claim was tainted by illegality because the claimant was not registered for VAT and issued no invoice. The court held they had not shown she was obliged to register, since part of the sum was a bonus and article 8(2) of the Value Added Tax Law 95(I)/2000 excluded anything done without consideration. It added that under Agathokleous v. Lappa (1998) 1(D) A.A.D. 2202, where a statute contains no prohibition on access to the courts and its only purpose is raising revenue, a contract is not thereby illegal.

What should I do before closing a Cyprus company I owe money through?

Settle or formally document what the company owes before it leaves the register, because once it is struck off there is no longer a defendant to sue or to be sued. Here the company was struck off while the action was pending, the claim against it was withdrawn by consent, and the litigation continued for another nine years against the individuals over sums the company had owed.

How do I avoid contracting personally by accident?

Say who is contracting, in writing, every time the arrangement changes. The exposure in this case arose in the gap after the company ceased to employ the claimant and before anything new was documented. Services carried on, payments carried on, and nobody recorded that a different legal person was now receiving them. Eight months of undocumented continuation produced an 18,300 euro judgment against two individuals.

Sources

This article is provided for general information purposes only and does not constitute legal advice.

Klitos Platis

Advocate, Partner

Kleanthous & Platis LLC, Nicosia · Published 17 September 2026

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