Restructuring and insolvency in Cyprus: Forms of security 1. What are the most common forms of security granted over immovable and movable property? What formalities must the security documents, the secured creditor or the debtor comply with?
What is Liquidating a company in cyprus property effect of non-compliance with these formalities? Immovable property Common forms of security and formalities.
The security most commonly granted over immovable property is the mortgage. A mortgage can be legal or equitable:. This gives the lender a legal interest in the mortgaged property until full repayment of the loan or the performance of some other obligation. A mortgage does not constitute an estate in land but rather a contractual right for the benefit of the mortgagee and a charge on the immovable property.
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.
A charge is generally regarded as a type of mortgage, although there a difference between the two: 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.
However, registration is not compulsory. A company creating a charge over any of its property must send particulars of the charge accompanied by the charge itself to the Registrar of Companies within 21 days after creation of the charge section 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 section 92, Companies Law.
The charges must be properly stamped to be accepted for registration. Failure to comply with sections 91 and 92 of the Companies Law makes the company and every officer liable "Liquidating a company in cyprus property" a default fine of EUR Liquidating a company in cyprus property other person interested in the charge can submit the particulars to the Registrar of Companies for registration and recover the cost of doing so from the company section 91, Companies Law.
The court has the power to extend the time for registration or to register a charge out of time if it considers it appropriate to do so section 96, Companies Law. A charge that is not registered in the prescribed manner will be void against the liquidator and any creditor of the company section 90, Companies Law.
Movable property Common forms of security and formalities. The security devices for movables are the:. A lien may be legal under common law or equitable. The common law lien is relevant in the current context.
This 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 Liquidating a company in cyprus property extinguished if the creditor gives possession to the debtor or his agent.
A common example is the carrier's lien, which is 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 company's assets, 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:. Any other person interested in the charge can submit the particulars to the Registrar of Companies for registration and recover the cost from the company section 91, Companies Law.
Section 96 of the Companies Law gives the court power to extend Liquidating a company in cyprus property time for registration or to register a charge out of time if it considers it appropriate to do so. Creditor and contributory ranking 2. Where do creditors and contributories rank on a debtor's insolvency?
The order of distribution of assets in all forms of winding-up and in receivership is as follows:. First, the costs of the winding-up.
Second, the preferential debts. Preferential claims are defined in section of the Companies Law and "Liquidating a company in cyprus property." Claims of employees who are shareholders or directors may not rank as preferential depending on the nature of the shareholding or directorship section 1Companies 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 because of the advances section 2Companies Law.
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 if there are insufficient funds to pay them in full section 3Companies Law.
Secured creditors are payable out of the proceeds of sale of the assets subject to the charge. If the charge is a floating charge the charge holder ranks behind the preferential creditors. If there is a surplus from the sale of the assets subject to the charge it becomes part of the general pool of assets.
If there is a shortfall the creditor concerned will have an unsecured claim for the shortfall. Unpaid debts and recovery 3. Can trade creditors use any mechanisms to secure unpaid debts? Are there any legal or practical limits on the operation of these mechanisms? This is a provision in a contract for the sale of goods that the title to the goods remains vested in the seller until the buyer fulfils certain obligations usually payment of the purchase price. In the event of the purchaser's insolvency, the seller may be able to recover possession of goods that have not been paid for.
In Cyprus law, English law precedents after are highly persuasive and although retention of Liquidating a company in cyprus property 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.
Can creditors invoke any procedures other than the formal rescue or insolvency procedures described in Questions Question 6 and Question 7 to recover their debt?
Is there a mandatory set-off of mutual debts on insolvency? Unsecured creditors can bring an action for recovery of debt in the district court of the debtor's place of business or residence. Recovery actions can be protracted if the debtor files a defence. A creditor who has obtained a judgment against a debtor can enforce it in various ways, including:.
A writ of execution for the sale of Liquidating a company in cyprus property. 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, pre-judgment attachments are not available. Section of the Companies Law incorporates into Cyprus law the right of set-off in corporate insolvencies.
This applies the relevant provisions of the Bankruptcy Law Cap. In the event of mutual credits, mutual debts or mutual dealings between a debtor and any of his creditors, the sums due in respect of these mutual dealings are netted off to arrive at a balance section 35, Bankruptcy Law. If the outcome is a balance owed by the insolvent company, the creditor claims in the insolvency proceedings for the net balance and does not have to pay anything to the company.
If the outcome is a balance owed to the insolvent company, only the net amount is payable. The right of set-off is automatic.
Cyprus is an EU member and all EU cross-border debt recovery mechanisms, including those for enforcement of judgments, are available in Cyprus. Otherwise there are no specific local rules relating to debt recovery by foreign creditors. Liquidating a company in cyprus property state support for distressed businesses available?
There is no specific state support scheme. Rescue and insolvency procedures 6. Company arrangements and reconstructions Objective. Company reorganisations are used:.
For the financial restructuring of a company which is viable but subject to short-term liquidity problems. To effect a wide range of mergers and reorganisations of companies, owing to the favourable tax treatment of reorganisations.
The procedure can be used to achieve a compromise or arrangement between a company and its creditors, or between a company and its members or any class of them.