Answer ... Perfection of legal mortgage over real estate: An instrument in writing signed by the mortgagor and mortgagee creates a valid mortgage on immovable property. The mortgagee and mortgagor must both appear in person at the district lands office where the immovable property is located and show the signed instrument to a qualified officer to proclaim the mortgage.
The mortgage will be void against the mortgagor, the mortgagee, the liquidator and any other creditors of the firm or third party if it is not registered.
Perfection of pledge over shares: A pledge of shares in a Cyprus company held by a corporate shareholder/pledgor (whether or not a Cyprus company) is not registrable (with some exemptions under Section 90(2)(θ) of the Companies Law). If the pledge is taken over a foreign company’s shares and the pledgor is a Cyprus registered company, the pledge must be registered as a charge with the registrar. A charge that is not duly registered is invalid as against a future liquidator of the legal entity chargor to be perfected and valid against a liquidator of the pledgor.
For a pledge over shares of a Cyprus company to be valid and enforceable, the following formalities set out in the Contract Law (Cap 149) must be met:
- The pledge must be made in writing, signed by the pledgor and the pledgee, and witnessed by at least two witnesses;
- Notice of the pledge must be given by the pledgee to the company whose shares are being pledged;
- A memorandum of the pledge must be entered in the register of members of the company whose shares are being pledged; and
- The company must issue and deliver to the pledgee a certificate executed by the appropriate official of the company confirming the fact of the registration of the pledge in favour of the pledgee.
Perfection of security over intellectual property: According to the Companies Law, any security issued by a company registered in Cyprus, as well as any alterations made in the future, over intellectual property, including a patent or copyright licence, may be registered with the registrar of companies.
Perfection of security over claims, receivables and cash deposits: Security over claims, receivables and cash deposits is perfected through security agreements in writing, and is valid and enforceable if it complies with common law and the statutory rules of contract law.
An equitable charge, assignment, lien or charge can be granted over future property; but a pledge cannot be granted over future property. The pledgor must be the owner, the possessor or a person with an interest in the movable property.
It is possible to create a pledge over any kind of movable property, provided that the provisions of the Contract Law are properly applied.
The perfection requirements in relation to securities or any subsequent amendments created over claims and receivables of a legal entity are set out in the Companies Law. A security over receivables is registrable when it is granted over:
- book debts of a company;
- an undertaking or property of the company, by a way of a floating charge; or
- any other movable property, if created or evidenced by a document where the company retains possession of such property.
Registration does not affect the validity of the security agreement between the contracting parties, but perfects the security and renders it enforceable against any liquidator or creditor of the company.
For equitable securities such as assignments and charges, there is an additional common law perfection requirement.
Perfection of fixed or floating charges over tangible movable property: If the chargor is a Cyprus legal entity, it must register the charge with the registrar of companies. A charge that is not duly registered is invalid as against a future liquidator of the legal entity chargor.
Perfection of liens over tangible movable property: Usually, liens are taken over goods that are being transported. The lien gives the holder the right only to retain the debtor’s property until payment and does not include a right of sale. The carrier’s lien (the right to retain possession of the goods) is then extinguished on it receiving payment for the transport costs. Liens can arise under common law or equitable principles with no formalities being observed, although a contract may explicitly provide for a lien.
Perfection of ship mortgages: A registered ship or a share therein may be made a security for a loan or other valuable consideration, and the instrument creating the security. On the production of such instrument, the General Director of the Shipping Deputy Ministry will record it in the Register of Ships.
There will be attached to any such instrument of mortgage a deed of covenants agreed between the parties and dealing with any matter relating to the mortgage, including the following:
- the mode of payment of interest and the repayment of principal;
- insurances and renewals thereof and the application of policy money;
- limitations on employment of the ship;
- a definition of ‘default’ upon which statutory or other powers may be exercised;
- the powers exercisable by the mortgagee, including the power to take possession of the ship, assume its management and sell the ship by private deal; and
- any other matter ancillary or incidental thereto.
Mortgages will be recorded by the General Director of the Shipping Deputy Ministry in the order in which they are presented to him for this purpose. The General Director of the Shipping Deputy Ministry will issue a memorandum confirming that each mortgage has been recorded by him, stating the time and date on which this occurred.
Stamp duty: Stamp duty is imposed on agreements and ancillary documents pertaining to property or proprietary rights located in Cyprus or matters to be performed in Cyprus, regardless of where the document is signed (with some exceptions). Although the payment of stamp duty is not a requirement for perfection, it is necessary, among other things, in order for the document to be enforced in Cyprus courts.