It was the 2013 economic crisis in Cyprus which led to the introduction of new amendments into Cyprus Companies Law, Cap. 113, for the provision of mechanisms for the protection of businesses which were facing difficulties due to the 2013 banking crisis. The aforesaid amendments introduced the examinership procedure into the legislation which essentially was designed to save potentially viable companies and at the same time ensure that their survival is not unfair to any interested party and most importantly to their creditors as a whole. 

If the examinership process is used correctly and timely it may assist businesses to tackle the difficulties presented to Cyprus companies by Covid19 pandemic and mitigate the impact of the anticipated new global financial crisis could have on them. 

In a nutshell, the examinership procedure gives a company facing insolvency a statutory period of four (4) calendar months from the date of the presentation of a relevant petition within which some form of compromise with its creditors can be reached. It should be noted that the aforesaid period may be extended for a further of 60 days following an application of the examiner to the Court, enabling the examiner to finish the report. 

An examiner is appointed by the Court when the latter is satisfied that there is a reasonable prospect of survival of both the company and the whole or any part of the company’s undertaking as a going concern. The appointment may be extended to any related company (subsidiary or holding or associated) of the company named in the petition and this obviously complements its protection as it prevents ‘attack’ against any related company.

During the protection period, which has been described as a “temporary breathing space”:

1. No petition to wind-up the company can be brought by a creditor.
2. No action can be taken to realise any security without the examiner’s consent.
3. No enforcement can be made in relation to company assets. 
4. No proceedings may be initiated against any guarantor or other third person to pay any company debt.
5. Creditors with retention of title rights over property in the company’s possession are prohibited from recovering their goods without the consent of the examiner.
6. No legal proceedings can be brought on grounds of oppression under Cap. 113 or any other proceedings in relation to the company without the prior leave of the Court.  

The examinership procedure might be proven as a useful tool for Cyprus businesses to survive the current economic difficulties created by the pandemic of Covid – 19. For any relevant assistance or information regarding the examinership procedure in Cyprus, please contact us at info@pirilides.com.