On 8 July the Cyprus parliament approved a package of legislative measures aimed at creating market security, stability and growth, and strengthening the legal framework to deal with non-performing loans.
The principal changes are as follows:
- The Transfer and Mortgage Law of 1965 has been amended to make it possible, in the case of the sale of one or more of multiple loans secured by the same mortgage, to allocate the mortgage between the loans so that loans are not left unsecured after the sale.
- The Sale of Credit Facilities and Related Matters Law of 2015 has been amended to provide that no fees on the transfer of property or of a charge are payable by the buyer. In addition, clearer rules have been introduced regarding the outcome of the sale of credit facilities, the transfer rights and obligations, priorities, the continuation of lawsuits and retention of documents.
- The Insolvency of Natural Persons (Personal Repayment Plans and Debt Relief Orders) Law of 2015 has been amended to simplify procedures and facilitate rehabilitation of debtors who have not committed offences.
- Amendments to the Companies Law have been made to further facilitate debt restructuring and promote corporate rescue. The moratorium during the tenure of an Examiner ceases if the company does not pay its obligations, and creditors may take measures to enforce their debts.
- Fees payable to isolvency practioners for successful implementation of a personal restructuring plan have been increased.
- A new law has been passed creating a framework for debt securitisation under the supervision of the Central Bank of Cyprus. The debtor's obligations and rights do not change with the securitisation of the loan and any security is unaffected. The sale and transfer of the loan to the SPV is final and binding on the transferor, and in the event of the subsequent insolvency of the transferor, there will be no recourse against the transferee.
To further facilitate the reduction of non-performing debt, a debt relief programme known as ESTIA regarding principal private residences will come into force at the beginning of 2019. Loans secured on principal private residences with a value of €350,000 or less will be reduced to the market value of the property and extended up to 25 years at a below-market interest rate, with a government subsidy. The scheme is estimated to benefit approximately 15,000 debtors, with total debts of in the order of €3.4 billion. The scheme will be administered by the Cyprus Land Development Corporation and funded by the government over 25 years.
The current exemptions from income tax, capital gains tax, SDC tax, stamp duty and transfer fees for transfers of immovable property from a borrower to the lender in the course of loan have been extended to borrowers who dispose of the property themselves in the open market. Both sets of exemptions will be available until the end of 2019.
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