This article was originally published in the PLC Cross-border Restructuring and Insolvency Handbook 2008/09, Practical Law Company.
SECURITY AND PRIORITIES
1. What Are The Most Common Forms Of Security Taken In Relation To Immovable And Movable Property? Are Any Specific Formalities Required For The Creation Of Security By Companies?
Immovable Property
The security most commonly granted over immovable property is the mortgage. A mortgage can be legal or equitable:
- Legal Mortgage. This transfers a legal
interest in the mortgaged property to the lender until full
repayment of the loan or the performance of some other
obligation.
- Equitable Mortgage. This transfers an
equitable interest in the property (as opposed to a legal
interest) to the lender until full payment of the debt or the
performance of some other obligation.
Another form of security is the charge, which is generally regarded as a species of mortgage although there is a difference between the two: a mortgage is a conveyance of property subject to a right of redemption, whereas a charge conveys nothing and simply gives certain rights to the chargee over the property in question as a security.
Movable Property
The security devices for movables are the common law lien, the pledge and the floating charge.
A lien may be legal under common law or equitable. The type of lien which is relevant in the current context is the common law lien, which is the right to retain possession of property belonging to another person until a debt has been paid. This type of lien merely gives the holder the right to retain the debtor's property until payment, not a right to sell or otherwise deal with the property, and it is extinguished if the creditor gives possession to the debtor or his agent. A common example is the carrier's lien, a carrier's right to retain possession of goods against payment of transport costs.
A pledge is the loan of money in return for the delivery of possession to the lender. The lender has the power to sell in the event of default by the borrower but the general ownership of the goods remains with the borrower.
A floating charge is a security interest, generally over all of the assets of a company, which "floats" until an event of default occurs or until the company goes into insolvent liquidation, at which time the floating charge crystallises and attaches to all the relevant assets. It gives the secured creditor two key remedies in the event of default:
- Firstly, the creditor may crystallise the charge, and
then realise any assets subject to the charge as if it was a
fixed charge.
- Alternatively, if the floating charge encompasses
substantially all of the assets and undertaking of the
company, the charge holder may appoint a receiver to take
control of the business with a view to discharging the debt
out of income or selling off the entire business as a going
concern.
Formalities
To have legal effect, mortgages, charges and other rights over immovable property should be registered with the Department of Lands and Surveys (Immovable Property (Transfer and Mortgage) Law, No. 9 of 1965). However, registration is not compulsory.
A company creating a charge over any of its property is required to send particulars of the charge accompanied by the charge itself to the Registrar of Companies within 21 days after creation of the charge (Article 91, Companies Law). If a company acquires property subject to a charge, it must send the same particulars together with a certified copy of the charge within 21 days of acquiring the property (Article 92, Companies Law). The charges must be properly stamped in order to be accepted for registration. Failure to comply with Articles 91 and 92 makes the company and every officer liable to a default fine of EUR425 (about US$625).
Any other person interested in the charge may submit the particulars to the Registrar of Companies for registration and recover the cost from the company (Article 91, Companies Law).
Article 96 of the Companies Law gives the court power to extend the time for registration or to register a charge out of time if it considers it appropriate to do so.
A charge that is not registered in the prescribed manner will be void against the liquidator and any creditor of the company (Article 90, Companies Law).
2. Where Do Creditors And Shareholders Rank On The Insolvency Of A Company?
The order of distribution of assets in a winding up is as follows:
- First, the costs of the winding up.
-
Second, the preferential debts. Preferential claims are
defined in Article 300 of the Companies Law and
comprise:
- all government and local taxes and duties due at the
date of liquidation and having become due and payable
within 12 months before that date and, in the case of
assessed taxes, not exceeding one year's
assessment;
- all sums due to employees including wages, up to one
year's accrued holiday pay, deductions from wages
(such as provident fund contributions) and compensation
for injury.
Claims of employees who are shareholders or directors may not rank as preferential depending on the nature of the shareholding or directorship (Article 300(1), Companies Law).
A person who has advanced funds for the purpose of paying employees will have a subrogated preferential claim to the extent that the employees' direct preferential claims have been diminished by reason of the advances (Article 300(2), Companies Law).
- all government and local taxes and duties due at the
date of liquidation and having become due and payable
within 12 months before that date and, in the case of
assessed taxes, not exceeding one year's
assessment;
- Third, any amount secured by a floating charge.
- Fourth, the unsecured ordinary creditors.
- Fifth, any deferred debts such as sums due to members in
respect of dividends declared but not paid.
- Finally, any share capital of the company. Where there
are different classes of share capital, such as preference
shares, their respective rankings will be determined by the
terms on which they were issued.
Within each category of claim, creditors rank equally and abate in equal proportions should there be insufficient funds to pay them in full (Article 300(3), Companies Law).
3. Are There Any Mechanisms Used By Trade Creditors To Secure Unpaid Debts?
The commonest mechanism is the retention of title or "Romalpa" (after the English case of Aluminium Industrie Vaassen BV v Romalpa Aluminium Limited) clause. This is a provision in a contract for the sale of goods that the title to the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer. In the event of the purchaser's insolvency the buyer may be able to recover possession of goods that have not been paid for.
In Cyprus law, English law precedents after 1960 are highly persuasive and although retention of title clauses have not been tested in the Cyprus courts, it is likely that the courts would follow the English precedents, of which there are many.
4. Are There Any Procedures (Other Than The Formal Rescue Or Insolvency Procedures Described In Question 5) That Can Be Invoked By Creditors To Recover Their Debt?
In the case of an unsecured creditor, an action for recovery of the debt may be brought in the district court of the debtor's residence. Such actions can be protracted if the debtor files a defence.
A creditor who has obtained a judgment against a debtor may enforce it in various ways, including:
- A writ of execution for the sale of movables.
- Garnishee proceedings requiring a third party who owes
money to the debtor to pay the money directly to the creditor
instead.
- Registration of a charging order over the
debtor's immovable property or chattels.
- A writ of delivery of goods, ordering goods to be
delivered to the creditor.
- A writ of possession of land, ordering the land to be
delivered to the creditor.
- A writ of sequestration, ordering the seizure or
attachment of property.
If the debtor owns certain assets and there is a risk that the debtor will dispose of them, the creditor may obtain an injunction to freeze them. Apart from this, prejudgment attachments are not available.
No special procedures apply to foreign creditors.
RESCUE AND INSOLVENCY PROCEDURES
5. Please Briefly Describe Rescue And Insolvency Procedures That Are Available In Your Jurisdiction. In Each Case, Please State:
- The objective of the procedure and, where
relevant, prospects for recovery.
- Companies to which it can potentially
apply.
- How it is initiated, when and by whom.
- Substantive tests that apply (where
relevant).
- How long it takes.
- The consents and approvals that are
required.
- The effect on the company, shareholders and
creditors.
- How the procedure is formally concluded.
Company Arrangements And Reconstructions
- Objective. In addition to the financial
restructuring of a company which is viable but subject to
short-term liquidity problems, company arrangements are used
in Cyprus to effect a wide range of mergers and
reorganisations of companies, owing to the favourable tax
treatment of reorganisations.
- Companies. The procedure applies to all
Cyprus-registered companies apart from banks and insurance
companies, which are subject to special procedures.
- How, When And By Whom. Where a
compromise or arrangement is proposed between a company and
its creditors, or between the company and its members or any
class of them, the company or any creditor or member or, in
the case of a company being wound up, the liquidator may
apply to the court for an order for a meeting of the
creditors or the members of the company to be convened in
whatever way the court directs in order to consider the
proposals (Article 198, Companies Law).
- Substantive Tests. The notices of the
meetings sent to creditors and members must be accompanied by
a statement explaining the effects of the proposals. This
statement must identify any interests of the directors and
the effect of the proposals on those interests.
- How Long. The reorganisation procedure
is flexible and fast, and with proper planning
reorganisations can be completed within weeks.
- Consents And Approvals. The approval of
the court is required for the convening of any meetings and
to sanction the resolutions passed at those meetings.
-
Effect. Subject to the sanction of the
court, any compromise or arrangement passed by a majority
in number representing three-quarters in value of the
creditors or members present and voting at the meeting of
creditors or members will be binding on:
- all the creditors or members;
- the company; and
- in the case of a company being wound up, on the
liquidator and contributories (those persons liable to
contribute to the assets) of the company.
- all the creditors or members;
- Conclusion. The order sanctioning the
compromise or reconstruction must be delivered to the
Registrar of Companies for registration and a copy must be
annexed to every copy of the memorandum or other document
comprising or defining the constitution of the company issued
after the order has been made.
Receivership
- Objective. A creditor holding a charge over assets may
appoint a receiver to realise the assets subject to the
charge and discharge the debt out of the proceeds. If the
charge is a floating charge covering substantially all the
assets of the company, the creditor may appoint a receiver
and manager. The purpose of receivership is recovery of the
secured creditor's debt. It does not bring the
existence of the corporate debtor to an end, as liquidation
does, and therefore offers the best chance of the debtor
continuing as a going concern. The secured creditor's
recovery prospects are entirely determined by the value of
the security in relation to the debt.
- Companies. The procedure applies to all
Cyprus-registered companies apart from banks and insurance
companies, which are subject to special procedures.
- How, When And By Whom. An application
may be made to the court by debenture holders or other
creditors of a company and the court will order a receiver
(who may be the Official Receiver) to be appointed
(Article 336, Companies Law). Alternatively, a
creditor may appoint a receiver under a specific power
contained in the charge.
- Substantive Tests. The court will make
an appointment if it considers that the interests of the
creditors concerned require protection by the appointment of
a receiver, depending on the circumstances of the case (for
example, whether the assets are in jeopardy). An appointment
under a charge merely requires compliance with the provisions
of the charge.
- How Long. If the receiver can quickly
realise charged assets and account to his appointer and the
company, the process may be completed in months. More
usually, receiverships take years to conclude.
- Consents And Approvals. No consents and
approvals are required.
- Effect. The effect of receivership is to
suspend the directors' powers of management over the
assets encompassed by the receivership. Within seven days of
appointing a receiver, the appointer must notify the
Registrar of Companies (Article 97, Companies Law).
If the appointment is under a floating charge covering
substantially all the assets of the company, the receiver
must immediately notify the company, which must within 14
days provide the receiver with a statement of affairs
including a statement of all assets and liabilities
(Article 340, Companies Law). Based on this the
receiver will decide whether to realise assets piecemeal or
as a whole.
-
Conclusion. Once the receiver has repaid
the sum due to the appointer (or has concluded that it is
uneconomic to continue the receivership), he will account
to the appointer and the company, and notify the Registrar
of Companies under Article 97 of the Companies Law that he
has ceased to act. He must send an account of his receipts
and payments to the appointer, to the company and to the
Registrar of Companies within two months of ceasing to
act.
If the appointment lasts for more than one year, he must submit annual accounts to the same people at each anniversary.
Winding Up By The Court (Compulsory Liquidation)
-
Objective. Compulsory liquidation is the creditor's
ultimate sanction. The company immediately ceases to trade,
the assets are realised and distributed, and the
company's existence comes to an end. The threat of
compulsory liquidation may be used as a debt collection
tool. However, if a company actually goes into compulsory
liquidation recovery prospects are slim.
Compulsory liquidation also involves investigation into the conduct of persons involved in the company to ascertain the reasons for its demise and their part in it.
- Companies. The procedure applies to all
Cyprus-registered companies apart from banks and insurance
companies, which are subject to special procedures. A company
incorporated outside Cyprus which is carrying on business in
Cyprus or which having carried on business in Cyprus ceases
to do so, may be wound up by the court, even if it has been
dissolved or otherwise ceased to exist as a company by virtue
of the laws of the country in which it was incorporated
(Article 362, Companies Law).
-
How, When And By Whom. A petition for the
winding up of a company may be presented by (Article
213, Companies Law):
- the company;
- any creditor (including a contingent or prospective
creditor);
- a contributory; or
- a member.
The Official Receiver may present a petition against a company that is being wound up voluntarily.
On hearing the petition, the court may dismiss it, adjourn it, or make any order that it deems fit. If a winding-up order is made, the liquidation will be deemed to have commenced at the time of presentation of the petition unless a resolution has previously been passed for a voluntary winding up (see below), in which case liquidation will be deemed to have begun with the passing of the resolution.
- the company;
-
Substantive Tests. A company may be wound
up by the court if (Article 211, Companies
Law):
- it has resolved by special resolution to be wound up
by the court;
- default is made in delivering the statutory report to
the Registrar of Companies or in holding the statutory
meeting;
- the company does not commence its business within a
year from its incorporation or suspends its business for
a whole year;
- the number of members is reduced below one in the
case of a private company or below seven in the case of
any other company;
- the company is unable to pay its debts;
- the court is of the opinion that it is just and
equitable that the company should be wound up.
- it has resolved by special resolution to be wound up
by the court;
- How Long. Compulsory liquidation is the
most formal insolvency process and proceedings generally take
several years to complete.
- Consents And Approvals. No consents and
approvals are required.
-
Effect. On the making of a winding-up
order the company may no longer trade, except with the
sanction of the court (or if there is one, the committee of
creditors) for the beneficial realisation of assets. No
action may be proceeded with, or commenced against, the
company except by leave of the court and subject to such
terms as the court may impose (Article 97, Companies
Law). Any disposition of the company's
property that takes place after the commencement of winding
up and any transfer of shares or alteration in the status
of the members of the company after the commencement of
winding up will be void unless the court orders
otherwise.
All the company's assets vest in the Official Receiver, who is responsible for realising them and distributing the proceeds among the creditors. The directors are required to provide the Official Receiver with a statement of affairs detailing all the company's assets and liabilities, including prospective and contingent assets and liabilities. The Official Receiver (or liquidator appointed to act in his place (see below)) will realise the assets, determine the amount of individual claims and distribute any funds in accordance with the priorities set out in Question 2 above.
Article 233 of the Companies Law gives the liquidator extensive powers to realise the assets and determine claims, including the right to:
- bring and defend actions on the company's
behalf;
- continue to trade for the beneficial realisation of
assets;
- borrow on the security of the company's
assets; and
- do anything else that may be necessary for the
purposes of the winding up.
Certain of these powers require the sanction of the court (or the committee of creditors if one has been appointed) and all powers are subject to the control of the court, and any creditor or contributory may apply to the court in respect of the exercise of the liquidator's powers (Article 233(3), Companies Law).
The Official Receiver is a government official and in Cyprus the post has always been combined with that of Registrar of Companies. The Official Receiver may apply to the court for another person to conduct the liquidation under his direction. He will convene meetings of creditors and contributories (shareholders) in order to ascertain their wishes on this issue (Article 227, Companies Law).
Liquidators in compulsory liquidations have extensive powers to investigate the conduct of persons involved with the company, including power to apply to the court for the public examination of any officer of the company or anyone involved in its promotion. The court may order the arrest of any person it considers liable to abscond and the seizure of any relevant records (Article 257, Companies Law).
- bring and defend actions on the company's
behalf;
- Conclusion. Once the assets have been
realised and the funds have been distributed the liquidator
may apply to the court for the dissolution of the company.
The company is dissolved with effect from the date of the
order (Article 260, Companies Law). The liquidator
is required to send a copy of the order to the Registrar of
Companies.
Members' Voluntary Liquidation
- Objective. Members' voluntary liquidation is the
means of bringing to an end the existence of a solvent
company which is no longer required and distributing the
assets among the members. It is generally undertaken as a
housekeeping measure in the context of group
reorganisation.
- Companies. The procedure applies to all
Cyprus-registered companies apart from banks and insurance
companies, which are subject to special procedures.
-
How, When And By Whom. A members'
voluntary winding up starts with a statutory declaration by
the directors (or a majority of them if there are more than
two) that, having enquired fully into the affairs of the
company, they consider that the company will be able to pay
its debts in full within a maximum of 12 months
(Article 266(1), Companies Law). The statutory
declaration must be made within five weeks before the date
of the proposed resolution to wind up and delivered to the
Registrar of Companies before the date of the proposed
resolution to wind up (Article 266(2), Companies
Law).
Once the statutory declaration has been delivered to the Registrar of Companies, the liquidation is initiated by the passing of a resolution of members to wind up the company. A special resolution is necessary unless the articles of association of the company provide for a fixed period for the duration of the company or specify that a certain event should occur for the winding up, in which case an ordinary resolution is sufficient.
- Substantive Tests. The critical factor
is the ability to pay debts in full within a year of
liquidation. If the directors are unable to make the
statutory declaration of solvency or if, having been
appointed, the liquidator forms the opinion that the company
will be unable to pay its debts, the liquidation must be
undertaken as a creditors' voluntary winding up
(see below, Creditors' voluntary
liquidation).
- How Long. By definition, creditors in a
members' voluntary liquidation must be paid in full
within a year of commencement of the liquidation. Realisation
and distribution of residual assets to members and formal
conclusion of the winding up may take longer. If the
liquidation continues for more than one year the liquidator
must convene annual meetings of members and lay accounts
before them.
- Consents And Approvals. No consents and
approvals are required.
- Effect. The effect of liquidation is to
vest the assets in the liquidator as trustee. The company may
no longer trade except to the extent required for beneficial
realisation of the assets. The liquidator has the same
extensive powers as a liquidator in a compulsory liquidation
to do whatever is necessary to achieve a beneficial winding
up. Apart from needing the sanction of the court or the
committee to settle any category of claims in full, or to
make compromises of claims, he may exercise those powers
without reference to anyone (Article 286, Companies
Law). The liquidator may also apply to the court to
determine any issue or to exercise any of the powers
available to the court in a compulsory liquidation
(Article 290, Companies Law).
-
Conclusion. The provisions concerning the
conclusion of members' voluntary liquidations are
set out in Articles 273 and 274 of the Companies Law and
may be summarised as follows:
- once the liquidator has realised all the
company's assets, discharged its liabilities and
distributed remaining assets among the members he is
required to call a final meeting of members (which must
be advertised by one month's notice in the
official Gazette) and lay before it an account of his
receipts and payments;
- the liquidator must notify the Registrar of Companies
of the meeting within a week of its having taken
place;
- the company is deemed to be dissolved three months
after the registration of the return of the meeting,
subject to the right of the liquidator or any other
interested person to apply to the court for the
three-month period to be extended.
- once the liquidator has realised all the
company's assets, discharged its liabilities and
distributed remaining assets among the members he is
required to call a final meeting of members (which must
be advertised by one month's notice in the
official Gazette) and lay before it an account of his
receipts and payments;
Creditors' Voluntary Liquidation
- Objective. Creditors' voluntary liquidation is
used to distribute the available assets of an insolvent
company among the creditors and bring the company's
existence to an end. Like compulsory liquidation, it may
involve investigation into the conduct of persons involved in
the company to ascertain the reasons for its demise and their
part in it.
- Companies. The procedure applies to all
Cyprus-registered companies apart from banks and insurance
companies, which are subject to special procedures.
-
How, When And By Whom. The first step in a
creditors' voluntary winding up is the convening of
separate meetings of members and creditors:
- Members' Meeting. The
purpose of the members' meeting is to pass a
resolution to wind up the company and appoint a
liquidator;
-
Creditors' Meeting. The
purpose of the creditors' meeting is to
(Articles 276 to 278, Companies Law):
- present creditors with a statement of the
company's financial position and a list of
creditors' claims;
- nominate a liquidator to act in place of the
liquidator appointed by the members; and
- appoint a committee of inspection of up to five
persons to assist and oversee the liquidator and fix
his remuneration. If the creditors and members
nominate different people to act as liquidator, the
creditors' wishes will prevail, subject to a
right to apply to the court (Article 277,
Companies Law).
- present creditors with a statement of the
company's financial position and a list of
creditors' claims;
The creditors' meeting must be convened for the same day as the members' meeting or the following day and notice of the meeting must be posted to creditors simultaneously with the notice to members, and advertised in the official Gazette and two local newspapers.
- Members' Meeting. The
purpose of the members' meeting is to pass a
resolution to wind up the company and appoint a
liquidator;
- Substantive Tests. None.
- How long. Creditors' voluntary
liquidations are often protracted as realisation of assets,
agreement of claims and completion of investigations can take
years. If the liquidation lasts longer than a year, separate
annual meetings of members and creditors must be held within
three months of each anniversary to consider the conduct of
the liquidation and the liquidator's receipts and
payments account (Article 282, Companies Law).
- Consents And Approvals. No consents and
approvals are required.
- Effect. The effect of liquidation is to
vest the assets in the liquidator as trustee. The company may
no longer trade except to the extent required for beneficial
realisation of the assets. The liquidator has the same
extensive powers as a liquidator in a compulsory liquidation
to do whatever is necessary to achieve a beneficial winding
up. Apart from needing the sanction of the court or the
committee to settle any category of claims in full, or to
make compromises of claims, he may exercise those powers
without reference to anyone (Article 286, Companies
Law). The liquidator may also apply to the court to
determine any issue or to exercise any of the powers
available to the court in a compulsory liquidation
(Article 290, Companies Law).
- Conclusion. Once the liquidator has
realised and distributed all the company's assets and
completed his investigations, he is required to call separate
final meetings of members and creditors (which must be
advertised by one month's notice in the official
Gazette) and lay before each of them an account of his
receipts and payments. He must notify the Registrar of
Companies of the meetings within a week of their having taken
place. The company is deemed to be dissolved three months
after the registration of the return of the meeting, subject
to the right of the liquidator or any other interested person
to apply to the court for the three-month period to be
extended.
LIABILITY AND TRANSACTIONS
6. Are There Any Circumstances In Which A Director, Parent Company (Domestic Or Foreign) Or Other Party Can Be Held Liable For The Debts Of An Insolvent Company?
If a person is proved to be involved in fraudulent trading under Article 311 of the Companies Law or some other offence (such as misappropriation of assets under Article 312), the court may make an order for him to be personally liable for the company's debts or to pay compensation. However, in the absence of severe misconduct such as this there are no provisions for lifting the corporate veil.
There is no provision in Cyprus law for the combination of proceedings against the parent company and its subsidiaries for administrative purposes, or for the aggregation of assets and liabilities. Each company is a separate legal entity and is subject to separate procedures.
7. Can Transactions That Are Effected By A Company That Subsequently Becomes Insolvent Be Set Aside?
There are a number of provisions in the Companies Law which may invalidate a charge granted by a company or any other disposition it has made or any debt which it has incurred:
- A charge that has not been properly registered is void
against the liquidator and any creditor of the company
(Article 90(1), Companies Law) (see Question 1,
Formalities).
- Article 301 of the Companies Law extends the
"fraudulent preference" provisions of bankruptcy
law to companies. Any transaction (including any conveyance,
mortgage, delivery of goods, payment, execution or other act
relating to property made or done by or against a company)
within six months before the commencement of its liquidation
may be deemed a fraudulent preference against its creditors
and be invalid accordingly unless there is full consideration
for the company having entered into it. In determining
whether there was a fraudulent preference, the court looks at
the dominant or real intention and not at the result. The
onus is on those who claim to avoid the transaction to
establish that the dominant intention was to prefer.
- A floating charge on the undertaking or property of the
company created within 12 months of the commencement of
winding up is valid only to the extent of any cash paid to
the company at the time of, or subsequently to, the creation
of and in consideration of the charge, unless it is proved
that immediately after the creation of the charge the company
was solvent (Article 303, Companies Law). The onus
of proving the company's solvency is on the holder of
the floating charge. Solvency requires not only an excess of
assets over liabilities, but also the ability to pay debts as
they become due.
8. Please Set Out Any Conditions Under Which A Company Can Continue To Carry On Business During Insolvency Or Rescue Proceedings. In Particular:
- Who has the authority to supervise or carry on
the company's business?
- What restrictions apply?
Receivers
As long as the order appointing him (in the case of a court appointment) or the charge and the instrument of appointment (in the case of a receiver appointed under a charge) give him the power, a receiver or a receiver and manager may carry on the company's business.
A receiver is personally liable on any contract he enters into in the performance of his functions, except in so far as the contract excludes personal liability. As long as the contract has been entered into with proper authority he has a right of indemnity out of the assets (Article 337, Companies Law).
Once a receiver has been appointed, every invoice, purchase order or business letter issued by or on behalf of the company or the receiver or manager showing the name of the company must contain a statement that a receiver or manager has been appointed (Article 338, Companies Law).
Liquidators
In any form of liquidation, the liquidator may only carry on the business of the company so far as is necessary for the beneficial winding up of the company. In a compulsory liquidation, the liquidator requires the sanction either of the court or of the committee of inspection in order to carry on business (Article 233(1), Companies Law). Liquidators in voluntary liquidations are not required to obtain approval.
INTERNATIONAL CASES
9. Please State Whether:
- Courts In Your Jurisdiction Recognise Insolvency
And Rescue Procedures In Other Jurisdictions.
- Courts co-Operate Where There Are Concurrent
Proceedings In Other Jurisdictions.
- There Are Any International Treaties Relating To
Insolvency To Which Your Jurisdiction Is A Signatory.
- There Are Any Special Procedures That Apply To
Foreign Creditors.
- Recognition. To date the courts in
Cyprus have not been involved in cross-border insolvency
arrangements or co- operations with other jurisdictions, and
so there is no case law. There is no domestic legislation
that prevents recognition of insolvency proceedings in
another jurisdiction. The appointment of a foreign insolvency
officeholder will also be recognized and there will be no
need for the officeholder to apply for formal
recognition.
- Concurrent Proceedings. If there are
concurrent proceedings in Cyprus and abroad against a foreign
company, the Cypriot courts will consider the Cypriot
proceedings as subsidiary to the foreign proceedings.
Generally, Cypriot courts will recognize judgments and orders
made by courts in other jurisdictions where the Cypriots
courts consider that such judgments or orders have been
properly made under the foreign law and that the foreign
courts had the necessary jurisdiction. Under Regulation (EC)
No. 1346/2000 on insolvency proceedings (Insolvency
Regulation) the Cypriot court may not question whether the
court hearing the main proceedings actually had jurisdiction.
No doubt this will be clarified by case law in due
course.
- International Treaties. Cyprus has not
entered into any agreements in relation to insolvency. The
Insolvency Regulation has had direct effect in Cyprus since
the island's accession to the EU on 1 May 2004, but
there have not yet been any significant developments or
decisions involving it.
- Special Procedures For Foreign
Creditors. Foreign creditors may prove their claim
in a Cypriot liquidation under the normal procedure. In the
event of concurrent liquidation of the same company in the
foreign jurisdiction, a creditor who proved his claim in
Cyprus will only receive a share in any distribution after
any amount received in the foreign proceedings has been taken
into account.
PROPOSED REFORMS
10. Are There Any Proposals For Reform To Insolvency Law In Your Jurisdiction?
No reforms are imminent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.