New Insolvency framework
On 18 April 2015, the Parliament voted in favour of the five bills that constitute the new Insolvency framework. The Insolvency framework comes is in addition to other legislative initiatives and reforms in the process of the implementation of the Cyprus economic adjustment programme agreed in 2013 with Troika. The passing of the insolvency framework clears the way for the troika to return to Cyprus and resume its review of Cyprus’s economic adjustment programme. The delay in passing the insolvency bills resulted in the IMF withholding around €85 million of bailout monies and also disqualified Cyprus from participating in the ECB’s quantitative easing programme.
The new Insolvency Framework comprises of a package of six legislative texts which entered into force on the 07/05/2015, the date of their publication in the Official Journal of the Republic (five laws and a set of regulations). More specifically the following came into force:
1. Insolvency of Natural Persons (Personal Repayment Schemes and Debt Relief Order) Law of 2015.
2. Bankruptcy (Amending) Law of 2015
3. Companies (Amending) Law (No.3) Law of 2015, regarding liquidation
4. Companies (Amending) Law (No.2) Law of 2015, regarding a mechanism for restructuring corporate debt (Examinership)
5. Insolvency Practitioners Law of 2015
6. Insolvency Practitioners Regulations of 2015
The first two laws are for natural persons whereas the third and forth law are for legal entities. The fifth law and regulations regulate the profession of Insolvency Practitioners, which is pivotal for the successful application of the Insolvency Framework. The fix pieces of legislation have been put into force since the date of their publication in the Official Journal of the Republic, apart from Part I of the Insolvency of Natural Persons Law, regarding the Debt Relief Order. This part will come into force three months after the publication of the law, i.e. on the 7th August 2015. Aims – targets of the Insolvency Framework The main aims of the Insolvency Framework are the following:
The creation of appropriate incentives for repayment of debt, thus contributing to a substantial decrease of non-performing loans The protection, where feasible, of the primary residence and under strict eligibility criteria
The provision of a second chance for a fresh start of a bankrupt person so that he/she can be reintegrated in the economy and society
The introduction of a new mechanism to afford full and speedy relief to debtors, with little unsecured debt with no assets and no income, who cannot file for bankruptcy according to the current laws (due to the low amount of their debt).
The provision of incentives for the rescue and rehabilitation of companies to afford viable companies the opportunity to reduce indebtedness and preserve jobs, while maximizing the value as a going concern for the benefit of creditors.
The modernization of laws regarding the liquidation of companies and bankruptcy for natural persons, so that the liquidation procedure becomes speedier and more efficient.
Implementation of the Insolvency Framework – Informing the public Further information on the Insolvency Framework can be found on the webpage of the Department of Registrar of Companies and Official Receiver, of the Ministry of Energy, Commerce, Industry and Tourism (www.mcit.gov.cy/drcor ).
Disclaimer This publication has been prepared only as a general guide and for information purposes. It does not constitute or should not be read as a legal advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.