THE EXAMINERSHIP - Amendments to the Cyprus Legislation

THE EXAMINERSHIP - Amendments to the Cyprus Legislation

 

 

The Companies Law, Cap.113 as amended by the 89(I)/2015, 63(I)/2015 and 62(I) 2015introducedthe examinership procedure, a process attempting to rescue companies facing insolvency from its creditors by providing a period of time where the company is placed under the court’s protection while its business is assessed bythe Examiner. During this certain period the Examiner ascertains whether the company may be rescued and prepare a rescue plan.

 

WHO CAN REQUEST PROTECTION

 

The court petition may be filed by:

 

·                 the company;

·                 a creditor of the company;

·                 a member of the company holding not less than ten per cent of the paid up voting share capital;

·                 a guarantor of the company’s obligations /liabilities .

 

WHAT ARE THE REQUIREMENTS

 

There is a number of requirements to be satisfied by the company for an Examiner to be appointed by the Court.

 

·            The company must be unable or likely to be unable to pay its debts. In deciding whether to take decision under s. 202 A CAP 113 the court may also take into consideration whether the company has requested significant extensions on the payment of its debts, or whether the value of the company’s assets are less than its liabilities, or having creditor demanding in writing amount exceeding Euro 5.000 and the company has neglected to satisfy the creditor, or whether a Court order in favour of a creditor which remains unsatisfied.

·            No resolution to be passed for voluntary winding-up of the company;

·            No order to be made for the winding-up of the company by the Court;

·            No receiver to be appointed for more than 30 days.

 

WHAT IS THEPROTECTION PERIOD”

 

The Company may be placed under the protection of the Court for four calendar months from the date of the presentation of the petition, the Examiner thoughmay request the extension of the protection period for another 60 days. Therefore the maximum period shall be six calendar months. During this period, if granted, the Examiner shall prepare and present to the court proposals for a scheme of arrangement. Upon presentation of the report of the examiner, the Court may extend the protection period further until their decision whether to approve a scheme of arrangement or not.

 

 

THE APPOINTMENT OF THE EXAMINER

 

Such position may be held by an individual qualified as an “insolvency practitioner”. The Examiner may be appointed by the Court only where there is a reasonable prospect of survival of both the company and the whole or part of the company’s undertakings as a going concern. The whole or part of the company’s undertakings shall remain with the company, therefore disposing its assets or business is not accepted. The interests of employees may also be relevant to the Court’s decision to appoint the Examiner, though the Court will practice its discretionary power considering whether any creditor will be prejudiced as a result.

The Court may fill the Examiner’s vacancy upon his resignation or removal by the Court.

 

THE RELATED COMPANIES

 

The Court may appoint an Examiner to any subsidiary or holding or associate company (as defined in the Cyprus Companies Law, Cap.113 as “related company”), therefore connected to Cyprus. Such appointment, may prevent attack against any related company. For the appointment of an examiner to related companies the Court will require the satisfaction of the same preconditions aforesaid separately. Examiner who is appointed in at least two related companies shall exercise his powers separately in relation to each other unless the Court ordersotherwise.

 

THE INDEPENDENT EXPERT’S REPORT

 

An independent expert’s report must be accompanying the petition. Such expert may be the auditor of the company or an “Insolvent Practitioner”. The report shall provide the information for the Court to be able to decide whether the company has a viable future as well as any possible arrangements (steps) to achieve this.

 

WHAT IS THE EFFECT OF THE PROTECTION AGAINST CREDITORS

 

During the protection period the creditors are unable to aim at remedies such as petition to wind-up or the appointment of receiver.

In case there is outstanding petition for winding-up, both petitions will be heard together and the Court will decide either to appoint an Examiner or put the company under winding-up.

 

WHAT IS THE EFFECT OF THE PROTECTION AGAINST GUARANTORS

 

During the protection period no proceeding may be introduced against any guarantor to pay any company debt. In case a creditor serves a demand, such guarantee cannot be enforced during the protection period.

 

WHAT ABOUT THE PRE-PETITION LIABILITIES

 

Liabilities established prior the protection period may be paid to employees (salaries in arrears) or to essential suppliers (electricity authority, water board, telephone companies)

 

THE POWERS VESTED IN THE EXAMINER

 

The Examiner with his appointment is vested with the rights of the auditor of the company, giving him the authority to conceive proposals to rescue the company.

The Examiner has certain powers including upon the Court permission the power to administrate, manage the company and dispose charged property or other security that  ease the rescue of the company.

 

FORMULATING PROPOSALS FOR SCHEME OF ARRANGEMENT

 

Proposals for scheme of arrangement shall specify each class and should be presented as soon as possible and report to the Court within 60 days of the appointment of the Examiner, unless another timeframe is given by the Court.

The company’s officers are required to reasonable assist the Examiner to his duties. If at any time during the protection period the examinership the Examiner realizes that the company cannot be rescued he should immediately inform the Court accordingly.

 

MEMBERS’ AND CREDITORS’ MEETINGS DURING THE PROTECTION PERIOD

 

Meetings of Members or Creditors may be convened during the protection period by the Examiner.

Such meetings may lead to approval, rejection or modification of any proposal of the Examiner. Acceptance of the majority in number and in value of claim/creditor represented by the meeting of the creditors shall be considered in favour. On the other hand where there is no approval of the proposal by the members of the company, the Court will determine whether these proposals shall be approved or not.

 

WHAT ABOUT THE EXPENSES OF EXAMINERSHIP

 

Certain liabilities may be certified by the Examiner during the protection period as “reasonable expenses property incurred”. Such certified expenses shall be paid in full before any other claim, including a claim secured by a floating charge, but after any claim secured by a mortgage, charge, lien or other encumbrance of a fixed nature or a pledge, under any compromise or scheme of arrangement or in any receivership or winding-up of the company to which he has been appointed.

 

THE CONTENT OF THE EXAMINER’S REPORT

 

The Examiner's report shall include the proposals, any modification and outcome of the required meetings, the recommendation of the committee of creditors, if any, a statement of the assets and liabilities, a list of the creditors of the company, the amount owing to each and the nature and value of any security held, a list of the officers of the company, his recommendations, evidence of notifications made to the registrar, such other matters as the Examiner deems appropriate or the court directs.

 

THE COURT’S DECISION

 

In case the Court confirms the proposal, all parties affected will be bound. On the other side where the Court will reject the proposal, the latter will order the winding-up of the company, or any other order as it deems fit.

 

CONCUSION

 

The introduction of the Examinership to the Cyprus Companies Law, Cap.113 as an insolvency mechanism aims to the restructuring of debts, the restoration of business activity and subsequently may contribute to financial growth and the keeping of the employment promoting the Cyprus economy. However only companies with prospect of survival may be placed under Examinership and this mechanism should not be considered as a path to avoid creditors and liabilities. 

 

 

 

 

For further information on this topic please contact Mrs. Pauline Alexopoulou (palexopoulou@pittaslegal.com) and

Mrs. Lisa Bokova (lbokova@pittaslegal.com) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.

PUBLICATIONS 2015

Cyprus: Guidance for Cyprus Courts on the duties o...
28 Dec 2015 08:22

Cyprus: Guidance for Cyprus Courts on the duties owned by directors of a company to the sharehold [ ... ]

read more
Cyprus: Taxation – Amendments on the Double Tax Tr...
22 Dec 2015 15:29

Cyprus: Taxation – Amendments on the Double Tax Treaty between the Republic of Cyprus and U [ ... ]

read more
CYPRUS: Guidance by the Supreme Court of Cyprus on...
14 Dec 2015 12:53

CYPRUS: Guidance by the Supreme Court of Cyprus on “mens rea” for bounced cheques In October 2 [ ... ]

read more
CYPRUS: Double Tax Treaty between Cyprus and Swiss...
09 Dec 2015 07:53

CYPRUS: Double Tax Treaty between Cyprus and Swiss Confederation On 15th October 2015, the Double T [ ... ]

read more
Cyprus: New Procedure for Issuing a Tax Residency ...
07 Dec 2015 14:40

Cyprus: New Procedure for Issuing a Tax Residency Certificates   Tax Department, has recently iss [ ... ]

read more
CYPRUS: NO CAPITAL GAINS TAX FOR IMMOVABLE PROPERT...
27 Nov 2015 06:47

CYPRUS: NO CAPITAL GAINS TAX FOR IMMOVABLE PROPERTIES PURCHASED UNTIL THE END OF THE YEAR 2016    [ ... ]

read more
Tied Agents
23 Nov 2015 08:53

Tied Agents   A tied agent means a person established in a Member State, who, actin [ ... ]

read more
Cyprus: Possible guidance from the English Courts ...
20 Nov 2015 08:04

Cyprus: Possible guidance from the English Courts on the Interpretation of jurisdiction clauses a [ ... ]

read more
CYPRUS: WINDING OF COMPANIES – WINDING UP BY THE C...
18 Nov 2015 11:09

CYPRUS: WINDING OF COMPANIES – WINDING UP BY THE COURT (COMPULSORY WINDING UP)-INABILITY OF [ ... ]

read more
Cyprus: A possible amendment in the Law of Social ...
30 Oct 2015 10:54

Cyprus: A possible amendment in the Law of Social Insurance Debtors   In Cyprus over [ ... ]

read more
Cyprus: Will the proposed amendment in relation to...
29 Oct 2015 08:28

Cyprus: Will the proposed amendment in relation to the reduction of Judges in Family Courts solve [ ... ]

read more
CYPRUS: SERVICE OF COURT DOCUMENTS UNDER REGULATIO...
23 Oct 2015 09:24

CYPRUS: SERVICE OF COURT DOCUMENTS UNDER REGULATION (EC) 1393/2007    In a case [ ... ]

read more
CYPRUS: APPOINTMENT OF RECEIVER IN AID OF EQUITABL...
21 Oct 2015 13:59

CYPRUS: APPOINTMENT OF RECEIVER IN AID OF EQUITABLE EXECUTION OF CYPRUS JUDGMENT   I [ ... ]

read more
Cyprus : Supreme Court has ruled in favour of Spee...
20 Oct 2015 10:19

Cyprus : Supreme Court has ruled in favour of Speed and Efficacy in the spirit of judicial cooper [ ... ]

read more
CYPRUS: Strengthening protection on money launderi...
19 Oct 2015 13:43

CYPRUS: Strengthening protection on money laundering by the Introduction of the Fourth Anti-  [ ... ]

read more
The International Court of Arbitration of the Inte...
13 Oct 2015 05:54

The International Court of Arbitration of the International Chamber of Commerce to communicate re [ ... ]

read more
A fight against corruption by the proposed introdu...
05 Oct 2015 06:12

A fight against corruption by the proposed introduction of Criminal Record Certificates for Companie [ ... ]

read more
THE EXAMINERSHIP - Amendments to the Cyprus Legisl...
30 Sep 2015 07:36

THE EXAMINERSHIP - Amendments to the Cyprus Legislation     The Compan [ ... ]

read more
CYPRUS TAX. AMENDMENTS EXPECTED TO ARRIVE IN AUTUM...
23 Sep 2015 06:24

CYPRUS TAX. AMENDMENTS EXPECTED TO ARRIVE IN AUTUMN 2015.   A. Income Tax Treatment  [ ... ]

read more
Changes to the Inheritance process under European ...
10 Sep 2015 10:30

  Changes to the Inheritance process under European Succession Regulation 650/2012 & [ ... ]

read more
Renewal and Amendment of the Double Taxation Treat...
09 Sep 2015 12:35

Renewal and Amendment of the Double Taxation Treaty between Cyprus and Ukraine   ___ [ ... ]

read more
ACTIVATION OF A CIF AUTHORISATION
01 Sep 2015 09:25

ACTIVATION OF A CIF AUTHORISATION   According to Cyprus Securities and Exchange Comm [ ... ]

read more
RECENT DEVELOPMENTS IN CYPRUS DTT NETWORK
01 Sep 2015 09:23

RECENT DEVELOPMENTS IN CYPRUS DTT NETWORK   Cyprus- Bahrain (DTT signed in March 201 [ ... ]

read more
CYPRUS INVESTMENT FIRMS (CIFs)
01 Sep 2015 09:16

CYPRUS INVESTMENT FIRMS (CIFs)   The Cyprus Investment Firms Law 144(I)/2007 provide [ ... ]

read more
The establishment of a New Administrative Court in...
19 Aug 2015 05:55

The establishment of a New Administrative Court in Nicosia, Cyprus     &nbs [ ... ]

read more
The Approval of a Bill relating to the Sale of Loa...
06 Aug 2015 06:43

The Approval of a Bill relating to the Sale of Loans   A bill under the name &ldquo [ ... ]

read more
Recent Amendments to Cyprus Tax Regime
23 Jul 2015 06:41

Recent Amendments to Cyprus Tax Regime   On the 9th July 2015, Cyprus Parliament passed number of [ ... ]

read more
Cyprus – Immovable Property
20 Jul 2015 09:30

Cyprus –Immovable Property     ‘Parliament to submit law addres [ ... ]

read more
The Law amending the Companies Law CAP 113 N.4 [89...
16 Jul 2015 06:31

The Law amending the Companies Law CAP 113 N.4 [89(I) /2015] and collectively (the ‘Law’) came i [ ... ]

read more
Scheme for Naturalisation of Investors in Cyprus
30 Mar 2015 09:38

EU PASSPORT   Scheme for Naturalisation of Investors in Cyprus     The Council of Ministers  [ ... ]

read more
The new features under the Recast Regulation 1215/...
24 Mar 2015 07:02

The new features under the Recast Regulation 1215/2012     The significance of the EU Regulatio [ ... ]

read more
Lis Alibi Pendens under the Council Regulation (EC...
02 Feb 2015 10:50

Lis Alibi Pendens under the Council Regulation (EC) No 44/2001 on jurisdictionand the recognition an [ ... ]

read more
More Publications 2015

Subscribe to our Publications

Image
We are dedicated to providing our clients with outstanding, highly personalized, legal representation.
Chrysanthou Mylona 10 
3030 - Limassol, Cyprus
© Soteris Pittas & Co LLC. All Rights Reserved.
Image