approved, the arrangement is binding on all the creditors or members, as the case may be, on the company and, in the case of a company being wound up, on the liquidator and contributories. The procedure is initiated by an application to
the court for an order for a meeting of the creditors or members of the company to be convened, in whatever way the court directs, to consider the proposals (section 198, Companies Law). The application may be made by the company, a mem- ber or a creditor. The notices of the meetings sent to creditors
and members must be accompanied by a statement explaining the effects of the proposals. This state- ment must identify any interests of the directors and the effect of the proposals on those interests. If the arrangement is approved by a majority in
number representing 75% in value of the creditors or members present and voting at their respective meetings, and is subsequently sanctioned by the court, it is binding on all creditors or members, as the case may be. The reorganisation procedure is flexible and
fast, and with proper planning, reorganisations can be completed within weeks. It is important to note that the procedure provides no protection from action by creditors and it is important to keep creditors informed and acquiescent.
Receivership A creditor holding a charge over assets may appoint a receiver to realise the assets subject to the charge, and dis- charge the debt out of the proceeds. A creditor holding a floating charge over substantially all the assets of the com- pany may appoint a receiver and manager with power to carry on the business. The purpose of receivership is the recovery of the secured creditor’s debt. It does not bring the existence of the corporate debtor to an end, as liqui- dation does, and therefore offers the best chance of the debtor continuing as a going concern. The secured cred- itor’s recovery prospects are entirely determined by the
Compulsory liquidation is the nuclear option for creditors
“ ”
value of the security in relation to the debt. Debenture holders or other creditors of a com-
pany can make an application to the court for the appointment of a receiver. Alternatively, a secured creditor may appoint a receiver under a specific power contained in the charge. The appointment ends the directors’ powers of management over the assets subject to the receivership and places them in the hands of the receiver. If the appointment is under a floating charge over substantially all the assets of the company, the receiver must immedi- ately notify the company, which must provide the receiver with a statement of affairs within 14 days, including a statement of all assets and liabilities. The receiver may decide to realise assets piecemeal (for example, if there are sufficient readily realis- able assets to discharge the amount payable to the secured creditor) or as a whole. The receiver’s powers and the degree of supervi-
sion over him are set out in the document appoint- ing him, which may be a court order or an appointment under a charge. While the appoint- ment of a receiver does not give any protection against recovery actions by creditors, if it is under a crystallised floating charge, the creditor will be unable to enforce any judgment he may obtain. Once the receiver has repaid the sum due to the
appointer (or has concluded that it is uneconomic to continue the receivership), he will account to the appointer and the company, and notify the reg- istrar of companies that he has ceased to act. He is required to submit an account of his aggregate receipts and payments to the appointer, to the company, and to the registrar of companies within two months of ceasing to act.
Creditors’ voluntary liquidation Creditors’ voluntary liquidation is the process by which the available assets of an insolvent company are distrib- uted among the creditors and the company’s existence is brought to an end. It may also involve investigation into
About the author Elias Neocleous graduated in law from Oxford University in 1991 and is a barrister of the Inner Temple. He was admitted to the Cyprus Bar in 1993, and since 1995 has been a partner in Andreas Neocleous & Co, Cyprus’s largest law firm and the recognised market leader in the south-eastern Mediterranean region. Elias currently heads the firm’s corporate and commercial department as well as the specialist banking and finance, tax and company management groups. He is fluent in English and Spanish, in addition to his native Greek. His main areas of practice are banking and finance, company matters,
international trade, intellectual property, trusts and estate planning and tax. Elias is a founder member of the Cyprus Society of Trust and Estate Practitioners and serves on its committee. He is the honorary secretary of the Limassol Chamber of Commerce and Industry.
Contact information
Elias Neocleous Andreas Neocleous & Co
Neocleous House 195 Makarios III Avenue CY-3030 Limassol T: +357 25 110000 F: +357 25 110001 E:
info@neocleous.com Website:
www.neocleous.com
020
IFLR|RESTRUCTURING & INSOLVENCY
www.iflr.com
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