20
[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN CYPRUS]
the Official Receiver himself or the creditors and contributories in their respective meetings, petition to the court for the appointment of a private insolvency practitioner. 3.4 Protection Following the filing to the court of a winding up application, any court proceedings against the company are stayed and with the issuance of a winding up order, no proceeding may commence or continue against a company without leave of the court. Any attachment in the hands of a third party, bailment, seizure or execution which commences against the property of the company after the commencement of the winding up is void. During the winding up, any disposal of property of the company and any transfer of shares or change of status of the members of the company is void, unless the court orders otherwise. 3.5 Priority of Payments A secured creditor may rely on execution of his security in order to satisfy his claim and is not obliged to submit a “proof of debt”. Unsecured creditors must submit proof of their debts to the liquidator, in order to participate in the distribution of the liquidated assets of the company. The order of priority of payments may be summarised as follows: (i) costs of the winding up; (ii) preferential debts such as government and local taxes, (iii) sums due to employees; (iv) amounts secured by securities; (v) unsecured ordinary creditors; and
(vi) deferred debts such as dividends declared but unpaid. 3.6 Transactions subject to challenge The liquidator has the right to challenge any questionable transactions entered into by the company or its directors which may have been made at an undervalue, that may be a fraudulent preference, or made to defraud creditors. 4. Receivership Receivership is the process whereby a creditor, by the appointment of a receiver, enforces its security over the company’s assets. The appointment of the receiver may be made out-of-court under the powers contained in any document (e.g., a debenture), or by order of the court after application by a creditor. The powers of the receiver are determined by the court order by which he is appointed, or by the document under which he is appointed. With the appointment of the receiver, the powers of the company’s directors in connection with the secured assets cease and are shifted to the receiver. Once the receiver disposes of the company’s assets covered by the security he was appointed to realise, his powers cease. The Companies Law does not provide for an automatic moratorium or stay of proceedings against the company in receivership proceedings. 5. Schemes of Arrangement A scheme of arrangement is a procedure provided by the Companies Law, under which a company may enter into a compromise or arrangement with its members and/or creditors. A scheme of arrangement may be pursued by the company, any member, a creditor or the liquidator of the company.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
Made with FlippingBook Online newsletter maker