CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
as may any court proceedings initiated by other credi- tors.
due and payable within 12 months before that date and, in the case of assessed taxes, not exceeding one year’s assessment; and (b) all sums due to employees including wages, up to one year’s accrued holiday pay, deductions from wages (such as provident fund contribu- tions) 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); • secured creditors; • unsecured creditors; • sums due to members in respect of dividends declared but not paid; and • any share capital of the company. Before payments may be made to creditors with a lower priority ranking, claims in that ranking must be fully fulfilled. If the assets of the firm are inadequate to satisfy all creditors of a particular ranking, payments to such creditors are made on a pro rata basis. 7.3 Length of Insolvency Process and Recoveries The duration of typical insolvency processes in Cyprus can vary depending on the complexity of the case, the size of the company, and other relevant factors. Generally, insolvency proceedings in Cyprus could take anywhere from several months to a few years to complete. Secured creditors and preferential creditors usually have a higher likelihood of recoveries closer to the value of their claims due to their priority in the repay- ment order. On the other hand, unsecured creditors might receive lesser amounts or nothing if the com- pany’s assets are insufficient to cover all its debts. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency Corporate reorganisations can take place according to the Companies Law, by way of compromises or arrangements, usually suggested between the com- pany and either its creditors and/or its shareholders. A court application is therefore made either by the company, or any creditor or a shareholder, seeking a court order for a creditors’ or shareholders’ meet- ing subject to the voting requirements being met. The
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
The degree to which a lender’s rights of enforcement are affected upon the commencement of insolvency proceedings depends on the kind of security the lend- er has over the assets of the insolvent entity. Where relevant, a contract can set out insolvency as an event of default whereby termination and enforcement pro- cedures can be triggered as set out in the contract. If a winding-up order is made or a provisional liqui- dator has been selected, the (provisional) liquidator takes over all assets and things in action to which the company is or seems to be eligible. A secured creditor ought to file with the official receiv- er, liquidator or guarantor, a preparatory valuation of the secured asset and reach agreement about the valuation. An independent valuer may be appointed if no agreement is reached regarding the value. The court may also impose a deadline by which all lenders must verify any debts or claims they may have. If the creditors’ debts are not evidenced, then they will be omitted from any distribution since the proof will set out whether the creditor is a secured or unsecured creditor. Any distribution of the company’s property, which occurs after the beginning of winding-up by the court, is void, unless the court orders otherwise. Once a winding-up order is issued by the court and a provi- sional liquidator is selected, no further action or pro- ceeding can be continued or commenced against the company, unless by leave of the court. 7.2 Waterfall of Payments The priority ranking of creditors’ claims is determined by law and is as follows: • the costs of the winding-up; • preferential debts, ranking equally, which comprise: (a) all government and local taxes and duties due at the date of liquidation and having become
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