Bankruptcy Procedures in CyprusUpdated on Tuesday 22nd September 2015
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The Bankruptcy Act in Cyprus
Insolvency in Cyprus falls under the regulations of the Bankruptcy Law or Chapter 5 last amended in 2008 and Bankruptcy Rules in the Subsidiary Law. Cypriot companies are considered bankrupt if they fail to liquidate their debt within a specific timespan. In this situation a liquidator will be appointed to use the assets of the company to pay its debts. The liquidation of a company can be voluntary or compulsory.
Initial proceedings in Cypriot bankruptcy
As mentioned above, bankruptcy procedures in Cyprus can be initiated by a creditor –compulsory liquidation- or by the company itself- voluntary liquidation. A creditor may ask a Cypriot court to initiate bankruptcy proceedings under one of the following circumstances:
- - the debtor must have transferred or pledged a property in favor of the creditors,
- - the debtor disposed of properties in a fraudulent way in an attempt to delay or avoid paying the debt,
- - or failure of complying with the bankruptcy notice.
In order to initiate compulsory bankruptcy proceedings in Cyprus the debt must exceed the amount of 854 euros. For voluntary bankruptcy proceedings to begin, the amount of money must exceed 8,600 euros.
Compulsory bankruptcy procedure in Cyprus
Once the evidence has been evaluated, the court can issue a receiving order or an interim order. Through the receiving order a trustee, also called an Official Receiver, will be appointed. The Official Receiver will assess and then distribute the assets among creditors. The receiving order will be published in two newspapers and in the Official Gazette. The debtor will give the trustee details about its debts and creditors. These details must be provided within seven days to the creditor, or three days if the debtor filed the petition himself. The Official Receiver establishes a general meeting of the creditors in maximum 14 days and appoints a trustee to coordinate the bankruptcy procedure but will also allow the debtor to reach an agreement with his creditor.
Voluntary bankruptcy proceedings in Cyprus
Voluntary termination can be decided by the general meeting of the shareholders or creditors of a company. The decision will be published in the Official Gazette within 14 days after it’s been made. Once the decision was approved, the liquidator will draft a plan and a report on the company’s dissolution and distribution of assets in order to pay its debts. The documents will be presented to the company’s shareholders and within one week, the liquidator will submit the report and balance accounts with the Cypriot Trade Register.
Our law firm in Cyprus can offer you details about bankruptcy proceedings. You can also contact our Cypriot lawyers for information about company registration or any other legal matter that could be of help.