CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
compromise or arrangement becomes binding to all persons involved, when the court approves the order requested. The examinership concept is aimed at a company when facing possible insolvency, as an attempt to pre- vent liquidation. With this, the intention is to appoint an examiner, whose duty will be to assess the rescue plan, while the company is placed under the court’s protection, and if the rescue plan accompanying the petition is considered viable, then the court will permit the commencement of “rescuing” the company. In order for the court to appoint an examiner, three conditions must be met: • the company is, or most likely will be unable to pay its debts; • no liquidation resolution for the company has been published in the Official Gazette of the Republic of Cyprus; and • no court order has been issued for the liquidation of the company. Furthermore, if the court is convinced that there is a plausible chance of the company enduring, with its entire or part of its business as a going concern, then it will issue an order for examinership. During that time, the company is “protected” and no court action can be taken against the company without specific court sanction. 7.5 Risk Areas for Lenders Once a company goes into liquidation, any activity relating to property such as mortgage, charge, pay- ments and so forth made up to six months prior to the commencement of the winding-up, could be con- sidered as “fraudulent preference” and ultimately be set aside. This occurs when a creditor is given undue advantage over others and ends up having a better position than they would have, at a time when the company is not able to pay its debts. If found guilty, such creditors ought to pay back any benefit they obtained. Where a transaction falls within the definition of a “financial collateral arrangement” under the Financial Collateral Arrangements Law (43 (I)/2004), as amend-
ed (the “FCA Law”), such an arrangement is not auto- matically void based on the fact that a financial col- lateral agreement has been entered into or has been provided, within the timeframe of six months prior to the commencement of winding-up. If, however, such a transaction is considered to be a fraudulent prefer- ence of its creditors then it can still be set aside and in such a case the FCA Law should be interpreted on the basis of a bona fide person with no prior knowledge of any fraudulent dealings to defraud any creditors. Furthermore, a floating charge created within 12 months of a company commencing wind-up proce- dures and which is currently in liquidation, will be void unless it is proved that the company was solvent after the creation of the charge. If a charge is not regis- tered as per the requirements, the charge will be void against the liquidator and any creditor, but its validity will not have any interference with the chargor and the chargee. Project finance is popular amongst local investors/ Cypriot-owned businesses. However, in view of the increasing amount of FDI into Cyprus, overall there is lower project finance activity than one might have expected. The vast majority of lenders in Cyprus are the local credit and finance institutions. The main recipients of project financing are infra- structure development, energy (particularly renewable energy projects), real estate and transportation. 8.2 Public-Private Partnership Transactions Public-private partnership (PPP) transactions in Cyprus are constant. There is no finance-specific PPP-enabling legislation currently in force, but gen- eral public procurement laws and regulations, as well as specific legislation, apply depending on the field of operations. 8. Project Finance 8.1 Recent Project Finance Activity Both international airports of the Republic of Cyprus are managed by an operator with a BOT concession. The operator is an international consortium, contain- ing various local and international partners such as
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