Cyprus
the conduct of persons involved in the company to ascertain the reasons for its demise and their part in it.
The first step in a creditors’ voluntary liq-
uidation is the convening of separate meet- ings of members and creditors. The creditors’ meeting must be convened for the same day as the members’ meeting, or the following day, and notice of the meeting must be post- ed to creditors simultaneously with the notice to members, and advertised in the official Gazette and two local newspapers. The purpose of the members’ meeting is to
pass a resolution to wind up the company and appoint a liquidator. While a special res- olution or an ordinary resolution may be used in certain circumstances, most creditors’ vol- untary liquidations are initiated by means of an extraordinary resolution that the company cannot, by reason of its liabilities, continue its business, and that it is advisable to wind up. This requires a 75% majority of votes cast at a general meeting, of which notice has been given specifying the intention to propose the resolution as an extraordinary resolution. The appointment of a liquidator may be by ordi- nary resolution. The purpose of the meeting of creditors is
to present creditors with a statement of the company’s financial position and a list of creditors’ claims and, if the creditors wish, to nominate a liquidator to act in place of the person appointed by the members and appoint a committee of inspection of up to five persons to assist and oversee the liquida- tor and fix his remuneration. If the creditors and members nominate different people to act as liquidator, the creditors’ wishes will prevail, subject to a right to apply to the
court. The effect of liquidation is to vest the
assets in the liquidator as trustee. The compa- ny may no longer trade except to the extent required for beneficial realisation of the assets. A creditor who has issued execution against a company’s property or has attached any debt due to the company after com- mencement of the winding up cannot retain the benefit of the execution or attachment against the liquidator in the winding up. The liquidator has extensive powers,
including the right to bring and defend actions on the company’s behalf, to continue to trade for the beneficial realisation of assets, to borrow on the security of the company’s assets and to do anything else that may be necessary for the purposes of the winding up. He can exercise most of those powers without reference to anyone, although he will need the approval of the committee of inspection if there is one, or of the court for certain mat- ters. The liquidator can also apply to the court to determine any issue or to exercise any of the powers available to the court in a compulsory liquidation. The liquidator realises the company’s
assets and distributes the proceeds according to the following statutory order of priority. Within each category of claim, creditors rank equally and abate in equal proportions if there are insufficient funds to pay them in full. • First, the costs of the winding up. • Second, the preferential debts, which comprise: (i) all government and local taxes and duties due at the date of liquida- tion and having become due and payable within 12 months before that date and, in
the case of assessed taxes, not exceeding one year’s assessment; (ii) all sums due to employees, including wages, up to one year’s accrued holiday pay, deductions from wages (such as provident fund con- tributions) and compensation for injury. Claims of employees who are shareholders
or directors may not rank as preferential depending on the nature of the shareholding or directorship. A person who has advanced funds for the purpose of paying employees will have a subrogated preferential claim to the extent that the employees’ direct preferen- tial claims have been diminished because of the advances. • Third, any amount secured by a floating charge.
• Fourth, the unsecured ordinary creditors. • Fifth, any deferred debts such as sums due to members in respect of dividends declared but not paid.
• Finally, any share capital of the company. Where there are different classes of share capital, such as preference shares, their respective rankings will be determined by the terms on which they were issued. Secured creditors are paid out of the pro-
ceeds of sale of the assets subject to the charge. If the charge is a floating charge the charge holder ranks behind the preferential creditors. If there is a surplus from the sale of the assets subject to the charge it becomes part of the general pool of assets: if there is a shortfall the creditor concerned will have an unsecured claim for the shortfall. Liquidations may take several years to
complete and separate annual meetings of members and creditors must be held within three months of each anniversary to consider
About the author Maria Kyriacou is a partner in Andreas Neocleous & Co, and head of the firm’s Nicosia office. She is a barrister of the Middle Temple and was admitted to the Cyprus Bar in 1974. Maria served as registrar of companies and official receiver, and
registrar of patents, trademarks and copyright between 1989 and 2001. She oversaw the successful harmonisation of Cypriot company and IP law with the acquis communautaire. As official receiver, she conducted and supervised major liquidations, including investigation, identification, tracing and recovery of alienated assets.
Maria is a member of Insol, and has written numerous articles and papers and lectured in Contact information
Maria Kyriacou Andreas Neocleous & Co
Cyprus and abroad on legal, social and political matters, particularly topics relating to the economy, companies, insolvency and intellectual property. Her main areas of practice are banking and finance, company matters, restructuring and insolvency, international trade, intellectual property, and trusts and estate planning.
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
www.iflr.com
IFLR|RESTRUCTURING & INSOLVENCY 021
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52