The issuance of a charging order comprises an alternative means of enforcement which is accompanied by an order for sale of the charged asset under the Law on Charging Orders of 1992 (31 (I)/1992) (the Charging Order Law).
In accordance with the Charging Order Law, the judgment creditor (the Creditor) is entitled, for the purpose of enforcing the judgment and securing payment of the judgment debt, to make an ex parte application to the Court for issuance of a Charging Order over the interest of the judgment debtor (the Debtor) in assets which are covered by the relevant law (the Charging Order). Furthermore, in order for Creditor to advance the sale of the charged asset, he must secure in advance an order which will permit its redemption after all the interested parties are heard.
A Charging Order may be issued on the following of the Debtor's financial assets:
- government bonds;
- bonds of any legal person established in the Republic of Cyprus;
- bonds of a legal person established outside the Republic of Cyprus and which appear in a register held within the Republic of Cyprus;
- a share in unit trust, for which a register of the holders is kept anywhere in the Republic of Cyprus;
- funds in Court; and
- any dividend or income payable regarding the charged asset.
During the issuance of the Charging Order, the competent court may impose any conditions it considers necessary to inform the Debtor or/ and for any other matter. The Charging Order which was issued ex parte can be annulled or amended following an application by the Debtor or a person having a legitimate interest in the charged asset.
The issuance of the charging order shall result in:
- A charge on Debtor's interest over the asset with priority over all other debts which were not the object of previous charging orders or other charges created lawfully prior to the Charging Order.
- A ban on disposal of the charged asset.
- The prohibition of payment of any dividend to Debtor that derives from the charged asset, which is kept in a separate account.
- In case of a unit trust, a prohibition on the acquisition of units or of transactions involving them by any physical or legal person exercising responsibilities in accordance with the trust.
Furthermore, the ability of the competent court to proceed with appointing a receiver, if requested, in parallel with the issuance of an order for sale of the charged asset, is paramount. The receiver is appointed in order to carry out all necessary steps for the disposal of the charged asset and the judgment debt collection. It is noted that the receiver on appointment has all rights and obligations of the Debtor over the charged asset in his possession and under his protection, until the annulment of his appointment by the Court.
The recent judgment of the Supreme Court, under one Judge, that was published in the context of Civil Application No 205/2020, dealt with the issue of receiver's appointment in relation to Debtor's assets. According with what has been said in that decision, an order of receiver's appointment can also be issued under the Law on Courts of 1960 (No. 14/1960) even where the issuance of an order of redemption of the asset is not sought, ultimately aiming to preserve the assets where and when it is determined necessary under the circumstances.
Regarding the procedure to be followed for sale of shares, which are the most frequently charged asset, this is carried under public auction.
In conclusion, it is worth noting that a temporary Charging Order may be issued while legal proceedings are pending which regard debt or compensation and until the legal proceedings conclude, provided that:
- The Claimant has a legitimate claim against the Defendant; and
- The alienation of the financial asset would likely prevent satisfaction of a court judgment.
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.