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Cyprus

Examinership aimed at rescuing ‘worthy’ companies

By Elias Hazou

ONLY troubled companies with good prospects of survival will be placed under examinership once the relevant law is amended, officials told lawmakers on Monday.

Details of the examinership process, which forms part of the so-called insolvency framework – a set of laws governing bankruptcy – were discussed at a joint session of the House finance and interior affairs committees.

Examinership is a process whereby the protection of the court is obtained to assist the survival of an insolvent company, allowing the corporation to restructure.

To obtain the appointment of an examiner it is necessary to petition the court and persuade it that there is a reasonable prospect of survival of the company and the whole or part of its undertaking if an examiner is appointed.

However, on being quizzed by MPs, trade ministry officials said no objective model is available for calculating a company’s prospects of survival.

Assessing a company’s prospects would be left to the discretion of insolvency practitioners and to the courts, deputies heard.

In order to avert abuse of examinership, appointments of examiners are to be published in the government Gazette and records kept with the Registrar of Companies. A list of certified insolvency practitioners will also be compiled.

Companies applying for restructuring may propose an examiner of their choice, although the bank reserves the right to object in court. The law will allow a company’s in-house financial auditor to be nominated for the job.

Minority shareholders will be entitled, if certain conditions are met, to petition a court for their company to be placed under examinership even if the majority disagrees.

During the discussion, Greens MP George Perdikis asked officials whether the government intends to establish a special fund for companies placed under protection, but did not receive a direct answer.

Speaking to reporters later, Perdikis said the absence of such a fund would lead to “half-baked” solutions.

So far, the government has submitted to parliament four of the five bills comprising the insolvency framework. The fifth and final bill, which deals with the thorny subject of the obligations of debt guarantors, is still being negotiated between the government and the troika of international lenders.

The opposition says that until a satisfactory insolvency framework is enacted, they will keep blocking the coming into force of foreclosures-related legislation.

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