Cyprus Corporate Insolvency & Recovery

The International Comparative Legal Guide to:
A practical cross-border insight into corporate recovery and insolvency work
Published by Global Legal Group, with contributions from:
9th Edition
Corporate Recovery & Insolvency 2015
ICLG
Ali Budiardjo, Nugroho, Reksodiputro
Anastasios Antoniou LLC
Atlantik Legal Services
Baker & Partners
Bonelli Erede Pappalardo
Bredin Prat
Campbells
Clifford Chance LLC
Debarliev, Dameski & Kelesoska Attorneys at Law
Dhir & Dhir Associates
El-Borai & Partners
Fellner Wratzfeld & Partners Rechtsanwälte GmbH
Ferraiuoli LLC
Gall
Gilbert + Tobin
Gorrissen Federspiel
Hengeler Mueller
INFRALEX
Kvale Advokatfirma DA
Lenz & Staehelin
Nishimura & Asahi
Odvetniška družba Špec o.p. d.o.o.
Olswang LLP
Osler, Hoskin & Harcourt LLP
Pachiu & Associates
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Pinheiro Neto Advogados
RESOR N.V.
Rivera Gaxiola y Carrasco
Sedgwick Chudleigh Ltd.
Slaughter and May
Tonucci & Partners
Uría Menéndez
Uría Menéndez – Proença de Carvalho
White & Case
Yonev Valkov Nenov

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General Chapters:
Country Question and Answer Chapters:
3 Albania Tonucci & Partners: Artur Asllani & Ervin Bano 11
4 Australia Gilbert + Tobin: Dominic Emmett & Nicholas Edwards 17
5 Austria Fellner Wratzfeld & Partners Rechtsanwälte GmbH: Markus Fellner &
Florian Kranebitter 24
6 Bermuda Sedgwick Chudleigh Ltd.: Alex Potts & Nick Miles 30
7 Brazil Pinheiro Neto Advogados: Luiz Fernando Valente de Paiva &
André Moraes Marques 40
8 Bulgaria Yonev Valkov Nenov: Todor Nenov & Pavel Tsanov 46
9 Canada Osler, Hoskin & Harcourt LLP: Tracy C. Sandler & Andrea Lockhart 52
10 Cayman Islands Campbells: Ross McDonough & Guy Cowan 60
11 Cyprus Anastasios Antoniou LLC: Anastasios A. Antoniou & Michalis Michaelides 66
12 Denmark Gorrissen Federspiel: John Sommer Schmidt & Morten Nybom Bethe 74
13 Egypt El-Borai & Partners: Dr. Ahmed El Borai & Dr. Ramy El Borai 80
14 England & Wales Slaughter and May: Tom Vickers & Lynda Elms 86
15 France Bredin Prat: Nicolas Laurent & Olivier Puech 98
16 Germany Hengeler Mueller: Dr. Ulrich Blech 104
17 Hong Kong Gall: Nick Gall & Anjelica Tang 112
18 Iceland Atlantik Legal Services: Eiríkur Elís Þorláksson & Benedetto Valur Nardini 119
19 India Dhir & Dhir Associates: Nilesh Sharma & Sandeep Kumar Gupta 124
20 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Theodoor Bakker &
Herry Kurniawan 130
21 Italy Bonelli Erede Pappalardo: Vittorio Lupoli & Lucio Guttilla 135
22 Japan Nishimura & Asahi: Yoshinori Ono & Hiroshi Mori 145
23 Jersey Baker & Partners: William Redgrave & Ed Shorrock 152
24 Macedonia Debarliev, Dameski & Kelesoska Attorneys at Law: Dragan Dameski &
Jasmina Ilieva Jovanovikj 157
25 Mexico Rivera Gaxiola y Carrasco: Fabián Bartolini Esparza &
Carlos F. Chapela De Alvarado 163
26 Netherlands RESOR N.V.: Lucas Kortmann & Tom Booms 172
27 Norway Kvale Advokatfirma DA: Stine D. Snertingdalen & Ingrid E. S. Tronshaug 179
28 Portugal Uría Menéndez – Proença de Carvalho: Pedro Ferreira Malaquias &
David Sequeira Dinis 185
29 Puerto Rico Ferraiuoli LLC: Sonia Colón 191
30 Romania Pachiu & Associates: Ioana Iovanesc & Marius Nita 196
31 Russia INFRALEX: Artem Kukin & Stanislav Petrov 203
1 Recast EC Insolvency Regulation – Progress So Far and Remaining Steps to Adoption –
Tom Vickers & Lynda Elms, Slaughter and May 1
2 Restructuring Bonds: Legal Issues Under English Law – Alicia Videon & Julian Turner, Olswang LLP 5
Contributing Editors
Tom Vickers, Partner,
Slaughter and May, and Sarah
Paterson, Senior Consultant
to Slaughter and May and
Assistant Professor in Law, LSE
Head of Business
Development
Dror Levy
Sales Director
Florjan Osmani
Commercial Director
Antony Dine
Account Directors
Oliver Smith, Rory Smith
Senior Account Manager
Maria Lopez
Sales Support Manager
Toni Hayward
Sub Editor
Sam Friend
Senior Editor
Suzie Levy
Group Consulting Editor
Alan Falach
Group Publisher
Richard Firth
Published by
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ISBN 978-1-910083-50-5
ISSN 1754-0097
Strategic Partners
The International Comparative Legal Guide to: Corporate Recovery & Insolvency 2015
Continued Overleaf

The International Comparative Legal Guide to:
Country Question and Answer Chapters:
The International Comparative Legal Guide to: Corporate Recovery & Insolvency 2015
32 Slovenia Odvetniška družba Špec o.p. d.o.o.: Boštjan Špec 209
33 Spain Uría Menéndez: Alberto Núñez-Lagos Burguera & Ángel Alonso Hernández 215
34 Sweden White & Case: Carl Hugo Parment & Michael Gentili 224
35 Switzerland Lenz & Staehelin: David Ledermann & Tanja Luginbühl 230
36 Ukraine Clifford Chance LLC: Olexiy Soshenko & Andrii Grebonkin 238
37 USA Paul, Weiss, Rifkind, Wharton & Garrison LLP: Alan W. Kornberg &
Elizabeth R. McColm 245

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© Published and reproduced with kind permission by Global Legal Group Ltd, London
Chapter 11
Anastasios A. Antoniou
Michalis Michaelides
Cyprus
A pledge is the delivery of possession of an asset to the creditor
by way of security but with ownership of the asset remaining with
the pledgor. This contrasts with a mortgage where ownership of
the asset is usually passed to the mortgagee and possession remains
with the mortgagor. Pledges over shares in Cypriot companies need
not be registered with the Registrar, as long as all other requirements
for the perfection of the pledge are met. In addition, charges that
fall within the scope of the national legislation transposing Directive
2002/47/EC of the European Parliament and of the Council of 6
June 2002 on financial collateral arrangements, as amended, need
not be registered with the Registrar.
Under a contractual or equitable lien, the creditor can possess
the assets concerned until the debtor settles its debts, but without
affording any right to the creditor to sell such assets.
1.2 In what circumstances might transactions entered
into whilst the company is in financial difficulties be
vulnerable to attack and what remedies are available
from the court?
There are various provisions in Cap. 113, which may invalidate a
charge granted by the company or any other disposition it has made
or any debt which it has incurred.
Failure to register a charge as provided under Cap. 113 would
make the charge void against the liquidator and any creditor of
the company (section 90, Cap. 113), but without prejudice to any
contract or obligation for repayment of the debt, which would be
immediately payable.
According to section 301, 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 winding up will, in the event of the company
being wound up, be deemed a ‘fraudulent preference’of its creditors
and be invalidated accordingly.
On the question of 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 what the debtor
really intended and that the real intention was to prefer. The onus is
only discharged when the court, on review of all the circumstances,
is satisfied that the dominant intention to prefer was present. The
counterparty to such a transaction will not be protected merely by
reason of having acted in good faith and for value.
According to section 303, where a company is being wound up,
a floating charge on the undertaking or property of the company
created within 12 months of the commencement of the winding up
will, unless it is proved that immediately after the creation of the
1 Issues Arising When a Company is in
Financial Difficulties
1.1 How does a creditor take security over assets in
Cyprus?
The applicable legislation in Cyprus over corporate recovery and
insolvency is the Companies Law, Cap.113, as amended (Cap. 113).
Generally, a creditor is able to take security over assets through:
■ a mortgage (legal or equitable) over immovable property;
■ a charge (floating or fixed);
■ a pledge; or
■ a lien.
For charges over the assets of a company to be enforced, they must
be registered in the records of the Department of the Registrar of
Companies and Official Receiver (the Registrar). Such registration
must take place within 21 days from the date the charge arises
(section 91, Cap. 113).
Where a company fails to register a charge, any other person with
an interest in the charge may submit details to the Registrar of
Companies for its registration and to recover relevant registration
costs from the company. The court has the power to extend the time
for registration of a charge, prior to or after the lapse of the 21-day
period, where it so holds appropriate.
Charges and other rights over immovable property, including
mortgages, should be registered with the Department of Lands and
Surveys. A legal mortgage over immovable property would see the
mortgaged asset transferred to the creditor’s name with a right of
redemption.
A legal mortgage affords a creditor (lender) with 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.
On the other hand, an equitable mortgage transfers an equitable
interest in the property to the lender until full payment of the debt or
the performance of some other obligation.
A fixed charge attaches immediately to the charged asset provided
that the asset is, or is capable of being, ascertained and definite. It is
important for the effectiveness of the fixed charge that the charged
assets are identified as precisely as possible.
A floating charge is a security interest, generally over all the
company’s assets, floating until default occurs or until the company
goes into liquidation, at which time the charge is perfected.

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Cyprus
2 Formal Procedures
2.1 What are the main types of formal procedures
available for companies in financial difficulties in
Cyprus and can any of these procedures be used in a
restructuring?
Cap. 113 has undergone substantial amendments in 2015 with
respect to corporate recovery and insolvency. Specifically, the
formal procedures provided under Cap. 113 in relation to companies
in financial difficulties are:
■ Examinership.
■ Arrangements and reorganisations.
■ Receivership.
■ Voluntary Winding-Up.
■ Compulsory Winding-Up.
The main amendment brought about in 2015 has resulted in the
following major changes introduced to the liquidation of companies:
(i) for a company to be deemed unable to pay its debts the
competent Court must be satisfied that the asset value of
the company amounts to less than its liabilities, taking into
account potential and future liabilities;
(ii) a liquidator can be appointed by both a competent court as
well as a duly convened meeting of creditors and contributors;
(iii) upon the issuing of an order winding up a company, the
Official Receiver can be appointed as the permanent
liquidator and not the temporary one, as had previously been
the case;
(iv) an insolvency advisor can be appointed as liquidator;
(v) a court order can be issued affording the liquidator the
authority to dispose of the company’s secured assets, where
the Court is satisfied that such disposal is advantageous to
liquidation compared to the disposal of other assets; and
(vi) net proceeds from the sale of secured assets are used to first
repay the security concerned, with the balance used to satisfy
unsecured creditors.
2.2 What are the tests for insolvency in Cyprus?
A company is insolvent when one of the following applies:
■ a creditor to whom the company is indebted in a sum
exceeding EUR 5,000 has served on the company a demand
in writing for the payment of the outstanding amount and
within three weeks the company fails to pay the sum due;
■ a judgment creditor has tried to enforce his judgment by
execution on the company’s property and the execution has
failed to meet the debt; or
■ the court is satisfied that the company is unable to pay its
debts.
The 2015 amendments over Cap. 113 have extended the definition
of a company’s inability to pay its debts vis-à-vis the satisfaction of
the court over such inability.
A company shall be deemed to be unable to pay its debts:
(a) if a creditor, by assignment or otherwise, to whom the
company is indebted in a sum exceeding five thousand euros
(EUR 5,000) then due on the company, by leaving at the
registered office of the company, a demand requiring the
company to pay the sum so due, and the company has for
three weeks thereafter neglected to pay the sum or to secure
or compound for it to the reasonable satisfaction of the
creditor;
charge the company was solvent, be invalid, except to the extent of
any cash paid to the company at the time of or subsequently to the
creation of and in consideration for the charge.
The onus of proving the company’s solvency is on the debenture
holder who seeks to support his floating charge. If the liquidator
can prove fraudulent trading against a director or other officer of the
company, the court may order that person to be personally liable for
the debt. The liquidator has the right to disclaim onerous property
(e.g., unprofitable contracts and property which cannot be sold).
During the four-month examinership period over which a company
facing financial difficulties comes under the protection of the court,
following a relevant application and approval by the court of same,
the following are prevented from taking place:
■ the appointment of a receiver over the assets of the company;
■ the winding up of the company;
■ the disposal of charged assets without consent from the
examiner; and
■ any action against the company.
1.3 What are the liabilities of directors (in particular civil,
criminal or disqualification) for continuing to trade
whilst a company is in financial difficulties in Cyprus?
Where a director of a company makes a declaration of insolvency
pursuant to section 266 of Cap. 113 without having reasonable
grounds for the opinion that the company will be able to pay its
debts in full within the period specified in the declaration, such
director shall be criminally liable for conviction to imprisonment
for a period not exceeding two years or to a fine not exceeding EUR
2,562, or to both such penalties. Where the company is eventually
wound up in pursuance of a resolution passed within the period
of five weeks after the making of the aforementioned declaration,
but its debts are not paid or provided for in full within the period
stated in the declaration, it shall be presumed until the contrary is
established that the director did not have reasonable grounds for his
opinion.
In accordance with section 311 of Cap. 113, if in the course of
the winding-up of a company it appears that any business of the
company has been carried on with an intent to defraud creditors of
the company or creditors of any other person or for any fraudulent
purpose, the Court, on the application of the official receiver, or the
liquidator or any creditor or contributory of the company may, if
it thinks it proper, declare that any persons who were knowingly
parties to the carrying on of the business in the manner aforesaid
shall be personally responsible, without any limitation of liability.
If during the winding-up of a company it appears to the court,
following a relevant petition by the official receiver, liquidator
or any creditor or contributory, that a director (past or present)
abused or withheld or is accountable for any funds or property of
the company, or that such director has breached his duties of trust
towards the company, the court may order for the return of such
funds or property, with interest, or pay damages to the company.
According to section 301, Cap. 113, 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 winding up will, in the event of the
company being wound up, be deemed a ‘fraudulent preference’ of
its creditors and be invalidated accordingly. If the liquidator can
prove fraudulent trading against a director or other officer of the
company, the court may order that person to be personally liable
for the debt.
Anastasios Antoniou LLC Cyprus

Cyprus
(f) an examiner; or
(g) the official receiver according to subsection (1) of section
222 of Cap. 113,
or all or any one of these persons, together or separately.
Where it is proposed to wind up a company voluntarily, the directors
of the company may make a statutory declaration to the effect that
they have made a full inquiry into the affairs of the company, and
that, having so done, they have formed the opinion that the company
will be able to pay its debts in full within such period not exceeding
12 months from the commencement of the winding up as may be
specified in the declaration.
The members of a company in a general meeting shall appoint one
or more liquidators for the purpose of winding up the affairs and
distributing the assets of the company, and may fix the remuneration
to be paid to him or them. On the appointment of a liquidator all the
powers of the directors shall cease, except so far as the company in
general meeting or the liquidator sanctions the continuance thereof.
2.4 Please describe briefly how the company is placed
into each procedure.
(a) Examinership
Under the examinership framework introduced in 2015, a company
facing financial difficulties, upon the application of the company
itself, its shareholders (holding over 10%) or a guarantor over its
liabilities can apply to the court with a view to appoint an examiner.
(b) Arrangements and reorganisations
Arrangements and reorganisations are instituted by an application
to the court for an order for a meeting of the creditors or members
of the company to be convened, in whatever way the court directs,
to consider proposals for a compromise or reconstruction. The
application may be made by the company, a creditor, a member or,
in the case of a company being wound up, the liquidator.
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.
If a majority in value of the creditors or class of creditors or in
number of votes of the members or class of members, as the
case may be, present and vote either in person or by proxy at the
meeting, agree to any compromise or arrangement, the compromise
or arrangement shall, if sanctioned by the Court, be binding on all
the creditors or the class of creditors, or on the members or class of
members, as the case may be, and also on the company or, in the
case of a company in the course of being wound up, on the liquidator
and contributories of the company.
(c) Receivership
Receivership can be initiated in accordance with the terms of the
charge under which a receiver is to be appointed, usually by a
written notice of appointment on behalf of a secured creditor.
(d) Winding up
Where the Court has made a winding-up order or appointed a
provisional liquidator, unless the Court thinks fit to order otherwise
and orders in such manner, a statement in the prescribed form is
prepared and submitted to the official receiver, in relation to
the affairs of the company, verified by affidavit and includes the
following:
(a) details of the assets, debts and liabilities of the company;
(b) the names, residence and occupations of its creditors;
(c) the securities held by them, respectively;
(d) the dates when the securities were respectively given; and
(b) if execution or other process issued on a judgment, decree or
order of any Court in favour of a creditor of the company is
returned unsatisfied in whole or in part;
(c) if it is proved to the satisfaction of the Court that the company
is unable to pay its debts as they fall due, and, in determining
whether a company is unable to pay its debts as they fall
due, the Court shall take into account the contingent and
prospective liabilities of the company; or
(d) if it is proved to the satisfaction of the Court that the value
of the assets of the company is less than the amount of its
liabilities, taking into account the contingent and prospective
liabilities of the company.
2.3 On what grounds can the company be placed into
each procedure?
(a) Examinership
Where it appears to the Court that:
(a) a company is, or is likely to be, unable to pay its debts;
(b) no resolution for the winding up of the company has been
passed and published in the Gazette; and
(c) no order has been made for the winding up of the company,
it may, on application by a petition, appoint an examiner to
the company for the purpose of examining the state of the
company’s affairs and performing such duties in relation
to the company as may be imposed under the applicable
legislation.
In the cases of arrangements and reorganisations, the company must
be facing short-term financial difficulties but, subject to resolution
of those difficulties, is considered to be viable. The procedure is
also used in Cyprus due to the favourable tax treatment of corporate
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.
(c) Receivership
In the case where a defined event of default has taken place, a
secured creditor can appoint a receiver under the terms of a relevant
charge against the company.
The appointment of a receiver does not give any protection against
recovery actions by creditors. However, if the appointment is under
a crystallised floating charge, the creditor is unable to enforce any
judgment it may obtain. The terms of individual agreements will
determine whether counterparties can terminate their contracts with
the debtor or rescind any licences.
(d) Winding up
An application to the Court for the winding up of the company is
made by petition submitted by any one of the following persons:
(a) the company;
(b) a creditor or creditors, including any contingent or prospective
creditors;
(c) a contributor or contributors;
(d) a liquidator of another Member State, as determined by
paragraph (b) of section 2 of Council Regulation (EC) No
1346/2000 of 29 May on insolvency proceedings, who is
appointed within the framework of judicial proceedings by
virtue of section 3 of this Regulation, as it may be amended
or replaced from time to time;
(e) a temporary liquidator appointed by the court of another
Member State according to section 38 of Council Regulation
(EC) No 1346/2000 of 29 May on insolvency proceedings;

Cyprus
Following the 2015 legislative amendment, creditors’ or
contributories’ meetings can appoint a liquidator.
Where a company is wound up by the creditors and separate
meetings of the creditors and the contributories of the company are
summoned for the purpose of choosing a person to be the liquidator
of the company, a liquidator can be nominated in such meetings, as
the case may be. Where more than one person is nominated, any
contributor or creditor may, within seven (7) days from the date on
which a person was nominated, apply to the Court for an order:
(a) appointing the person nominated by the contributories as
liquidator, in place or together with the person nominated by
the creditors; or
(b) appointing another person as liquidator, except the person
nominated by the creditors.
A resolution is passed in a meeting of the creditors or contributories
when the majority in value, of the present and voting persons,
personally or by proxy, have voted in favour of the resolution.
2.6 Are “pre-packaged” sales possible?
Where the court is satisfied that disposing any of the company’s
secured assets could lead to more favourable liquidation of its
assets. In such disposal, the secured creditor maintains the same
priority over the net proceeds accruing from such disposal.
3 Creditors
3.1 Are unsecured creditors free to enforce their rights in
each procedure?
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.
Unsecured creditors cannot bring an action while a company is in
examinership.
Where the company is being wound up by the court, a person
claiming to be a creditor of the company and wishing to retrieve
his debt in total or partially, must serve written proof of debt to the
liquidator within thirty-five (35) days from the date of publication
of the winding up order in the Gazette. Following a duly justified
application of a creditor, the time period of thirty-five (35) days may
be extended by the official receiver or the liquidator. The proof
of debt sets out whether the creditor is or is not a secured creditor.
Proof of debt includes or refers to a statement of account evidencing
the details of the debt and specifies the proof of debt of payments,
if any, by which the debt may be supported and, where applicable,
the names of all the guarantors having a liability in relation to the
debt of the company and the extent of the liability deriving from the
guarantee according to the agreement of guarantee, at the date of
serving the proof of debt. The official receiver or liquidator may at
any time require the presentation of expenditure documents.
3.2 Can secured creditors enforce their security in each
procedure?
Generally speaking, a creditor having obtained a judgment can
enforce such judgment through the following execution measures:
■ 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.
(e) such further or other information as may be prescribed or as
the official receiver may require.
In relation to a directors’ declaration in voluntary winding up, such
declaration shall have no effect for the purposes of this Law unless:
(a) it is made within the five weeks immediately preceding the date
of the passing of the resolution for winding up the company and is
delivered to the registrar of companies for registration before that
date; and (b) it incorporates a statement of the company's assets and
liabilities as at the latest practicable date before the making of the
declaration.
2.5 What notifications, meetings and publications are
required after the company has been placed into each
procedure?
(a) Examinership
During the examinership, the company comes under the protection
of the court, for a period of four months, while the examiner
assesses proposals relating to the company’s debts. The court, upon
assessing such proposals, can ratify them into being legally binding
over all parties concerned.
Notices of the meeting or meetings to consider the proposals
must be sent to members, creditors or both, as the court directs,
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. At such meetings,
creditors decide by simple majority of value or votes.
To be binding, the compromise or arrangement must be passed by
a majority in number representing 75% in value of the creditors or
members present and voting at the meeting of creditors or members.
The approval of the court is required for the convening of any
meetings and to sanction the resolutions passed at those meetings.
(c) Receivership
Within seven days of appointing a receiver, the appointor must
notify the Registrar of Companies (Cap. 113, section 97). 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
(Cap. 113, section 340).
(d) Winding up
If a winding up order is made by the Court, the Official Receiver
will be appointed as liquidator (permanently and not temporarily
as had previously been the case). The Official Receiver may apply
to the court for another person to conduct the liquidation under his
direction. The liquidator will convene meetings of creditors and
contributories to ascertain their wishes on this issue.
Where a petition for the winding up has been presented by the
company, the company submits alongside the petition a statement of
its affairs as they stood at the time of the presentation of the petition.
The official receiver shall by virtue of his office become the
liquidator and shall continue to act as such unless, following an
application to the Court by the official receiver, another person is
appointed liquidator or another person becomes liquidator pursuant
to the provisions of Cap. 113 and is capable of acting as such.
At any time during which the official receiver is the liquidator of the
company he may, within 60 days from the service of the order of the
Court appointing him liquidator, summon and preside over separate
meetings of the creditors and contributories of the company for the
purpose of choosing a person who shall be liquidator in the place of
the official receiver.

Cyprus
taken into account for the purpose of the final adjustment of the rights
of the contributories among themselves.
4 Continuing the Business
4.1 Who controls the company in each procedure? In
particular, please describe briefly the effect of the
procedures on directors and shareholders.
(a) Examinership
The examiner controls the procedure, while the company comes
under the protection of the court for the period during which the
examinership is in place (four months).
(b) Arrangements and reconstructions
The directors continue to control the company, subject to the
oversight of the court.
(c) Receivership
The receiver controls the assets over which he has been appointed,
for as long as his appointment lasts. The extent of his powers and
the degree of supervision over him are set out in the document
appointing him. If the appointment is under a floating charge over
substantially the whole of the assets and undertaking, the directors’
powers of management of the business are suspended. However,
they remain responsible for the company.
(d) Winding up
On the making of a winding-up order the company can no longer
trade, except with the approval of the court (or the committee of
creditors, if there is one) for the beneficial realisation of assets.
No action can be proceeded with, or commenced against, the
company except by leave of the court and subject to such terms as
the court may impose (section 220, Cap. 113). 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) will realise the assets, determine the amount of
individual claims and distribute any funds in accordance with the
priorities set out in section 2. The liquidator has 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.
■ Do anything else that may be necessary for the purposes of
the winding-up.
The Official Receiver is a State official and in Cyprus the post
has always been held by the Registrar of Companies. Private
individuals can also be appointed liquidators, provided they are
licensed insolvency practitioners.
4.2 How does the company finance these procedures?
Arrangements and reconstructions costs are financed from the
company’s normal cash flows.
In the context of receivership, costs are paid out of the assets subject
to the charge. Temporary funding to carry on the business will
■ 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.
The appointment of a receiver does not give any protection against
recovery actions by creditors. However, if the appointment is under
a crystallised floating charge, the creditor is unable to enforce any
judgment it may obtain. The terms of individual agreements will
determine whether counterparties can terminate their contracts with
the debtor or rescind any licences.
No legal action or proceeding can be continued or commenced
against a company in respect of which a winding-up order has been
made, or a provisional liquidator has been appointed, except with the
leave of the court and subject to such terms as the court may impose.
In voluntary liquidation, a creditor who has issued execution against
a company’s property or has attached any debt due to the company
after commencement of the winding-up cannot retain the benefit of
the execution or attachment against the liquidator in the winding-up.
Also in winding-up, a secured creditor shall, within ten (10) days
from the date of publication of the winding up order in the Official
Gazette of the Republic, submit to the official receiver or the
liquidator and – where applicable – to a guarantor, a preliminary
evaluation of the value of the property subject to security. At
the latest within ten (10) days from the day of submission of the
said preliminary evaluation by the creditor the official receiver or
liquidator, and, where applicable, the guarantor:
(a) agrees between themselves and the creditor in relation to the
value of the property subject to security and in such case the
said evaluation is binding upon all;
(b) appoints an independent evaluator; or
(c) applies to the competent authority (the Insolvency Service)
for the appointment of an independent evaluator.
The statutory changes brought about in 2015 provide for the
administration of secured assets of the company, by leave of the
court, where the court is satisfied that the disposal of any secured
assets may lead to a preferable liquidation of its assets compared to
alternative liquidation. In this manner, unsecured creditors could
receive proceeds from any outstanding balance remaining following
the disposal of the secured assets. The secured creditor maintains
the same priority it had prior to the disposal of such secured assets,
over the net proceeds resulting from the disposal of such assets.
3.3 Can creditors set off sums owed by them to the
company against amounts owed by the company to
them in each procedure?
Subject to certain restrictions discussed below, set-off could be
made available to creditors. The court may, at any time after issuing
a winding-up order, order any contributory to pay any money due
from him to the company. In making such an order the court may
make, to any director or manager whose liability is unlimited, an
allowance by way of set off of any monies due from the company
on any independent dealing or contract with the company, but not
any money due to him or her as a member of the company in respect
of any dividend or profit. Moreover, pursuant to the provisions of
section 204(g) of Cap. 113, a sum due to any member of a company
in his or her capacity as a member by way of dividends, profits or
otherwise is not deemed to be a debt of the company, but it may be

Cyprus
Those forms of proof will be examined by the liquidator, who must
decide if he accepts, rejects or requires more information and details
about certain claims. In case he rejects a claim he must give in
writing the reasons why he rejected the claim.
Only proved claims may be paid by the liquidator. An unsatisfied
creditor may apply to the Court if the liquidator did not accept the
proof of his debt.
5.2 What is the ranking of claims in each procedure?
In particular, do any specific types of claim have
preferential status?
During a voluntary arrangement or a reorganisation plan, the
creditors are paid according to the terms and conditions they have
agreed and approved. It must be noted though that the rights of the
secured and preferential creditors remain intact.
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 section 300 of Cap. 113 and comprise:
(a) 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; and
(b) 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. 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.
■ 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.
■ Lastly, 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.
5.3 Are tax liabilities incurred during each procedure?
No taxation liabilities arise for companies under any of the
procedures, unless where profits are deemed to arise. Regarding
reorganisations in particular, the Income Tax Law 118(I)/2002, as
amended, provides (sections 26 to 30) that reorganisations are tax
exempt. This one of the main reasons Cyprus is extensively used as
a jurisdiction for corporate reorganisations and restructuring.
6 Ending the Formal Procedure
6.1 What happens at the end of each procedure?
Where there is a successful implementation of the voluntary
arrangement or the reorganisation plan, the board of directors and
shareholders continue to enjoy their rights under the new status of
generally be available from the appointor. The terms of the financing
are a matter for agreement between the receiver and the appointor.
Repayment of this finance has no special priority under the law.
In winding-up proceedings, here a person other than the official
receiver is appointed liquidator, that person shall receive such salary
or remuneration by way of percentage calculated on the basis of the
value of the assets secured or distributed or one way or the other or a
combination or otherwise as the Court may direct or as the creditors
may determine depending on the time spent by the liquidator in relation
to matters relating to the winding up, and, if more such persons than one
are appointed liquidators, their remuneration shall be distributed among
them in such proportions as the Court directs or the creditors decide.
4.3 What is the effect of each procedure on employees?
There is no direct impact on employees in case a reorganisation plan is
applied. It may be a term of the arrangement that their status will remain
unaffected or altered according to the terms of the agreed scheme.
A receiver will review and adjust resource requirements as
appropriate, but the receivership procedure itself has no automatic
effects on contracts.
In a winding-up, employees are no longer required, and the liquidator
will terminate their employment. Their entitlements to arrears of
pay, holiday pay, notice pay, compensation for redundancy and the
like will rank as claims in the liquidation and some of these will also
be underwritten by the government under employment legislation.
4.4 What effect does the commencement of any
procedure have on contracts with the company and
can the company terminate contracts during each
procedure?
In an arrangement or reorganisation there will be no impact on the
contracts already entered into, unless there is a different arrangement
according to the terms of the agreed scheme of arrangement.
The contracts entered into by a company in administration or
liquidation will not be terminated by entering into the procedure
itself. It is very common, however, for a contract to be terminated
by default upon the commencement of administration or liquidation.
The liquidator has the right (an administrator does not) to cancel
unilaterally an “onerous” contract in order to fulfil his duties and
proceed with the liquidation of the company. If from that action
losses of the other party occur, then the damaged party may claim
its losses during the winding up.
5 Claims
5.1 Broadly, how do creditors claim amounts owed to
them in each procedure?
In arrangements and reorganisations, a claims mechanism will be
made available under the relevant proposal made within the context
of the reorganisation.
In receivership, the receiver’s principal objective is repaying the
amount owed to the chargeholder and other claims (apart from
preferential claims if his appointment is under a floating charge)
will not be relevant. Preferential claims will be individually agreed.
Where a liquidator has been appointed, the creditors must send
to the company a formal claim in order to prove their debts. The
liquidator is obliged to send forms of proof to every known creditor
and it must be submitted back to him with all their proofs for any
kind of claim they have – present or future.

Cyprus
decisive role if they are being asked to accept anything less than
full, immediate settlement of their debts. Otherwise the members
will have the decisive role.
An approved compromise or arrangement is binding on all creditors
or members, the company itself and, where the company is wound-
up, on the liquidator and contributories.
7.2 If such a procedure is available, is a debt for equity
swap possible and how are existing shareholders
dealt with?
The procedure for arrangements and reconstructions sets out a
very flexible framework under which any type or reorganisation is
possible. It is possible to convert debt into equity on any terms that
are agreed between the various stakeholders.
7.3 Is a moratorium available as part of the restructuring
process?
During examinership, a moratorium is in place for the entire
four-month period during which the company is placed under the
protection of the court.
There is no moratorium in the context of reorganisations and
arrangements.
7.4 Can dissenting creditors be crammed down?
An arrangement or compromise approved by a majority representing
75% in value of the creditors or members present and voting at a
duly convened meeting of creditors or members is binding on all
creditors or members, as the case may be. Depending on the terms
of the proposal approved by the court, separate meetings of different
classes of creditor or member may be convened, in which case
the “cram-down” extends only to the class of member or creditor
concerned. The “cram-down” is finally binding when the outcome
of the meetings is reported to, and approved by, the court.
7.5 Is consent needed from other stakeholders for a
restructuring?
In arrangements and reorganisations, rights cannot be varied without
the consent of the affected parties (or, at least, without the consent of
the requisite majority of the group to which they belong).
8 International
8.1 What would be the approach in Cyprus to recognising
a procedure started in another jurisdiction?
If there are concurrent proceedings in Cyprus and abroad against a
foreign company, the Cyprus courts consider the local proceedings
as subsidiary to the foreign proceedings. Generally, Cyprus courts
recognise judgments and orders made by courts in other jurisdictions
if the Cyprus courts consider that those judgments or orders have
been properly made under the foreign law and that the foreign
courts had the necessary jurisdiction. Under Regulation (EC)
1346/2000 on insolvency proceedings (Insolvency Regulation) the
Cyprus court may not question whether the court hearing the main
proceedings had jurisdiction.
the company. There is a great possibility, however, that the voluntary
arrangement or the reorganisation plan may fail and the company
will have to enter into other procedures such as liquidation.
A receiver may end the receivership if it is of the opinion that his
task has been achieved and in such case he will return control to the
company directors. He may also wind-up the company in order to
distribute the company’s assets or to dissolve it if there are no assets
for distribution.
A compulsory winding up is completed within a time period of
eighteen (18) months from its commencement. Where the official
receiver or the liquidator deems that it is not possible to complete
the compulsory winding up of a company within 18 months, he
applies to the Court for an extension of such period.
7 Restructuring
7.1 Is a formal statutory procedure available to achieve a
restructuring of the company’s debts in Cyprus and, if
so, to what extent is it supervised by the court?
(a) Examinership
The main aspects of the examinership process introduced in 2015
are as follows:
(i) examinership can span a total of four (4) months;
(ii) within the four-month period of examinership, an appointed
insolvency advisor shall be appointed as examiner upon
an application lodged by the company itself, any creditor
or shareholders holding more than 10% in the company’s
shares;
(iii) the examiner can propose debt settlement/restructuring plans
to creditors and shareholders of the company concerned,
which will require judicial ratification where the court is
satisfied that there is a reasonable viability prospect for the
company on the basis of an independent expert report;
(iv) during the four-month period of examinership, the insolvency
advisor acting as examiner shall have powers, subject to leave
of the court, to manage or dispose of secured assets of the
company and perform functions of the company’s directors;
and
(v) the court’s approval of any settlement plans/restructuring
proposals submitted by the examiner takes into account the
prospects of continuity of the business, employment positions
and assesses whether the creditors of the company would
be in a less favourable position if the company underwent
winding-up.
As mentioned above, company reorganisations are used for the
financial restructuring of a company which is viable but subject
to short-term liquidity problems. Sections 198 to 201 of Cap.
113 set out the provisions governing company arrangements and
reconstructions. The procedure is available to all Cyprus-registered
companies (including companies already in liquidation) apart from
banks and insurance companies, which have separate resolution
regimes.
They are also used 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. The creditors will have the

Cyprus
of judicial proceedings by virtue of section 3 of this Regulation,
as it may be amended or replaced from time to time. Moreover,
a winding up petition can be lodged by a temporary liquidator
appointed by the court of another Member State according to
section 38 of Council Regulation (EC) No 1346/2000 of 29 May on
insolvency proceedings.
The 2015 legislative amendment has incorporated the recognition
of liquidators from other EU Member States into the Cypriot legal
order. Specifically, an application to the Court for the winding up
of the company can be made by petition submitted by a liquidator
of another EU Member State, as determined by paragraph (b) of
section 2 of Council Regulation (EC) No 1346/2000 of 29 May on
insolvency proceedings, who is appointed within the framework
Anastasios A. Antoniou
3, Gr. Afxentiou 102
4003 Limassol
Cyprus
Tel: +357 257 500 03
Fax: +357 251 045 74
Email: anastasios@antoniou.com.cy
URL: www.antoniou.com.cy
Michalis Michaelides
3, Gr. Afxentiou, 102
4003 Limassol
Cyprus
Tel: +357 257 500 03
Fax: +357 251 045 74
Email: michaelides@antoniou.com.cy
URL: www.antoniou.com.cy
Anastasios A. Antoniou practises the law in Cyprus as an Advocate
of the Supreme Court and is the founder of Anastasios Antoniou LLC.
Anastasios is ranked as a leading Cyprus lawyer by The Legal 500,
Who’s Who Legal, Best Lawyers International and IFLR1000 in his
practice areas of expertise. He has also received the ILO/Lexology
Client Choice Award for competition law.
He is a member of the European Competition Lawyers Forum, the
British Institute of International and Comparative Law, the Cyprus Bar
Association, the International Bar Association and the Association of
International Petroleum Negotiators. He has authored a plethora of
articles in journals, books and professional guides on corporate and
commercial law and litigation.
Anastasios is fluent in English, Spanish and Greek.
Ranked as a top-tier Cyprus law firm by The Legal 500 and acclaimed by Best Lawyers, IFLR1000 and Who’s Who Legal, Anastasios Antoniou
LLC is a boutique practice advising on Merger Control, Competition law, Corporate law, Shipping & Maritime law and Intellectual Property, while our
Litigation & Dispute Resolution team acts in corporate, commercial, investment and maritime litigation and arbitration.
In corporate law, particularly recovery and insolvency, Anastasios Antoniou LLC provides the highest quality of legal services, covering all aspects
from drafting corporate legal documents and rendering legal advice on corporate law issues, to acting in judicial proceedings relating to the insolvency
framework and carrying out all required filings with the competent authorities in relation to examinerships, reorganisations and restructurings.
Michalis Michaelides heads the Corporate Law Practice Group.
Michalis is a UK-educated lawyer (University of Leicester) at
postgraduate level and is highly versed in all aspects of Cyprus
corporate law, insolvency and investment law.
Michalis has authored a number of articles and book chapters
on corporate insolvency and recovery under Cyprus law and has
extensive expertise in assisting with the establishment, reorganisation,
compliance and contractual affairs of Cyprus companies.
Michalis is fluent in Greek, English and French and practises the law
as a qualified Advocate from our Firm’s offices in Limassol.

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www.iclg.co.uk
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