Under Cyprus law, and specifically the Companies Act, Cap 113, a creditor, whose claim has matured and remains unsettled can apply to the District Court for an Order that the company be liquidated. The relevant provisions can be found in articles 203 – 344.
The key provision of the law is that a company is unable to pay its debt when:
- If a creditor for an amount over 500 Cyprus Pounds (855 Euro) has served the company, by delivering it to its registered office (or more commonly through a process server), with a notice of claim, signed by the creditor (or his advocates), which demands the payment of the amount owed, and for the following three weeks the company does not settle, pay or reach an arrangement with the creditor in relation to the debt or
- if an execution or other proceedings undertaken by virtue of an order of the Court is returned partly or completely unsatisfied or,
- if it is proven to the satisfaction of the Court, that the company is unable to settle its debts, and to determine this the Court will take into consideration the future and potential obligations of the company.
Practically, the proceedings start with the payment of a small fee to the office of the Official Receiver (and Companies Registrar) of approximately 190 Euros. This is a necessary condition for the submission of an application to the Court and non compliance with this requirement will lead to the non acceptance of the application by the Court Registrar.
The second step would be to file the application to the Court, which is accompanied by an affidavit from a person having positive knowledge of the facts of the case, and which includes those necessary details describing to the Court why it should entertain the application. The Court will have jurisdiction provided that the registered office of the company is located within the district area of that Court.
At that stage the application is set for a hearing in approximately 30 days time. For applications filed in late May, June, July and August a hearing date in September is usually scheduled, or even if one is scheduled for July, the proof hearing will be scheduled in September due to the judicial holiday period of the Cyprus Courts.
Provided that the company has not registered an appearance or filed an objection, which is the most common attitude in practice, the Court will reschedule the application for proof in approximately 15 to 30 days time, in order for a publication to be made in the Government Gazzette and a local newspaper mentioning that a liquidation hearing is scheduled at a specific date and that any interested party, creditor or otherwise affected can appear in Court and make representations in relation to the application, provided they have given a 24 hour notice to the attorneys of the applicant.
If the respondent company does file an appearance and an objection to the application then a substantive hearing will take place at a time which will be scheduled by the Court. In such a case, the Court may request that the parties file written submissions in relation to their arguments.
Again assuming that no interested party makes representations the proof hearing is conducted through the filing of an additional affidavit with evidence towards proving the merits of the case.
Provided that there are no complications, the decision from the Court is expected to be issued on the same or the next working day and the Order to be issued within 2-3 days.
The Order is then served to the respondent company and to the Companies Registrar who will appoint an examiner for the insolvency and liquidation and will publish the liquidation of the company to the Government Gazzette.
The examiner will receive the company, administer its assets and distribute it amongst eligible creditors.
The liquidation Order is effective from the day that the liquidation application was filed and any alienation of assets of the company during the liquidation is void, unless the Court issues a further Order to the contrary.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
