CYPRUS Law and Practice Contributed by: Kyriacos Scordis and Sofi Mylona, SCORDIS PAPAPETROU & Co LLC
4.11 Insolvency Laws Applied by Maritime Courts
before the Supreme Court. However, the Law provides that the following provisions will apply for as long as a company is under the protection of the Court: • no liquidation proceedings may be instituted against the company, nor may a resolution for liquidation be adopted in relation to that company – and any resolution thus adopted shall have no effect; • no seizure in the hands of a third party, suretyship, seizure or execution shall take place in respect of the property or objects of the company, except with the consent of the examiner; • in the event that any claim against the com - pany is secured by a mortgage, lien or pledge on or affecting all or any part of the com - pany’s property, objects or income, no action may be taken for the liquidation of all or any part of this security, except with the consent of the examiner; and • no measures may be taken to recover goods held by the company in accordance with any lease agreement, except with the consent of the examiner. 4.12 Damages in the Event of Wrongful Arrest of a Vessel Damages for “wrongful arrest” may be awarded in favour of the owner of the arrested vessel, if the arresting party has acted in bad faith or through gross negligence (the relevant English law principles are followed).
The Companies Law, Cap 113, as amended (the “Law”), contains proactive self-help provisions afforded to companies, similar to US Chapter 11 protection. It is a process whereby the protection of the court is obtained to assist the survival of the company, and essentially allows a company to restructure with the approval of the court. Upon a request being submitted to it, the court may appoint an examiner to assess the state of affairs of the company and to perform such duties in relation to the company as may be imposed by or in accordance with the provisions of the Law, if: • the court considers that a company is, or is likely to be, unable to pay its debts; • any resolution regarding the liquidation of the company has not been approved and pub - lished in the Official Gazette of the Republic; and • no decree has been issued for the liquidation of the company. The court shall issue an order only if it is satisfied that there is a reasonable prospect of the sur - vival of the company and of all or any part of that undertaking as an active entity (going concern). The court granting an order for the appoint - ment of an examiner places the company under court protection for a certain period of time. The examiner formulates a scheme of arrangement, which requires the approval of at least one class of creditors before it can be brought before the court for approval. The question of whether an order on the arrest and judicial sale of a vessel, owned by own - ers that are under the proceedings mentioned above, can be granted has not yet been decided
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