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Creditors Voluntary Liquidation

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Creditors Voluntary Liquidation

FOREWORD

Below we set the procedure for the creditors’ voluntary liquidation for a Cyprus company with references to the Cyprus Companies Law Cap. 113 (the “Cyprus Companies Law”) followed by a practical step by step procedure of the actions necessary to complete such a liquidation.

LSTS members are licensed liquidators under the Cyprus Insolvency Practitioners Law, 64(I) of 2015 and can be appointed as liquidators in relation to Cyprus company liquidations.

 

PROCEDURE FOR THE CREDITORS’ VOLUNTARY LIQUIDATION

In accordance to the Cyprus Companies Law a company can be wound up voluntarily provided that the company resolves under a special resolution that the company be wound up voluntarily (Article 261 (b)).

The above resolution is passed at an Extraordinary General meeting (“EGM”) convened by the directors at the request of the members holding not less than 10% of paid up share capital having the right to vote at such meeting. Such request must be signed and sent by the members to the registered office address of the company.  The directors must within 21 days of such request proceed and convene the EGM (Article 126).

At the same time, the Company seeks, also, to convene a meeting of the creditors of the Company (“Meeting of the Creditors”) on the same or the day following the day of the convention of the EGM while the notices relating to the Meeting of the Creditors must be sent to the Creditors, by post, simultaneously with the dispatch of the notices relating to the EGM.

In addition, the Company needs to publish the notice for the convention of the Meeting of the Creditors in the Official Gazette of Cyprus as well as in two local newspapers circulated in the district within which the registered office of the Company is situated.

In this regards, the Directors of the Company shall:

  1. Prepare a statement showing the assets and liabilities of the Company along with any outstanding affairs accompanied with a list of creditors of the Company showing also the estimated amount of the claim which will be presented in the Meeting of the Creditors and
  2. Appoint one of the directors to be the chairman of the Meeting of the Creditors.

(Article 276)

As regards to the appointment of the liquidator, it should be underlined that both the Creditors and the Company (through its Members) may, during the Meeting of the Creditors and the EGM respectively, indicate one or more person(s) to be appointed and act as the liquidator(s) of the Company.

However, it is worth noting that in the case that the proposal of the Creditors and that of the Company differs, the proposal made by the Creditors prevails. In that case, any director, member or creditor of the Company may within seven days from the day of such proposal, file an application to the Court requiring the latter to issue a Court Order approving the appointment of the liquidator that has been proposed by the Company to be appointed and act as the liquidator of the Company instead of or in conjunction with the liquidator proposed and appointed by the Creditors.

(Article 277)

Furthermore, in case the Creditors deem so appropriate, they may opt to appoint an Inspection Committee which may consist of up to five persons, in which case the Company has the right to also appoint up to another five persons to be part of the Inspection Committee subject however to the approval of the Creditors and/or the Court, as the case may be (Article 278).

Upon appointment of the liquidator the powers of the directors cease unless the Inspection Committee or, if no such committee exists, the creditors approve the continuation of those powers (Article 279).

In case the liquidation lasts for more than one calendar year, the liquidator is obliged to convene Meetings of the Members / Creditors at the end of every year or within three months from the end of every year or in any extended but reasonable time permitted by the Registrar of Companies for the purpose of submitting to such Meetings a report relating to the actions and/or transactions that have taken place in the course of the liquidation of the Company within the (respective) previous year (Article 282).

At last, as soon as the liquidation procedure has been completed, the liquidator shall send notices convening the final Meetings of the Members / Creditors of the Company and submits the final accounts accompanied by a report stating the way in which the affairs of the Company have been liquidated while he/she may be required to provide explanations and/or justifications for his/her actions.

The notices for both Meetings must be published in the Official Gazette of the Republic of Cyprus at least one month before the date of the respective Meeting.

Following the convention of both Meetings, the liquidator is obliged to file with the Registrar of Companies a copy of the account and the report concerning the Meetings within one week from the date of the last of the two Meetings (if these are not held on the same day).

The Company is considered as liquidated following the expiration of the three month period following the registration of the copy of the account and the report submitted by the liquidator. Such date may, however, be extended by a Court order issued following an application of the liquidator or any other interested party provided that the Court Order has been submitted to the Registrar of Companies within seven days from the date of its issue.

 

STEP BY STEP PROCEDURE ON THE MEMBERS VOLUNTARY LIQUIDATION

  1. Shareholders notify the company of their intention to proceed with the voluntary liquidation
  2. Shareholders send a letter to the registered office of the Company and addressed to the Directors of the company declaring their intention to proceed with the creditors voluntary liquidation.

  3. The Directors convene an EGM within 21 days of receiving the above notice. At the same time they call for a Meeting of the Creditors to be held on the same day or one day after the EGM.
    1. The Directors prepare the following to present in the Meeting of the Creditors:
      1. Statement of Assets and Liabilities
      2. List of creditors and estimated amount of their claim
    2. The Directors hold a Directors meeting whereby the statement of assets and liabilities and list of creditors and estimated amounts is presented and approved and resolve to:
      1. Convene an EGM and a Meeting of the Creditors with the following subjects:
        1. The voluntary winding up of the company and
        2. The appointment of the liquidator
        3. The appointment of the Inspection Committee (if required).
      2. and

      3. Appoint of one director to act as the chairman of the Meeting of the Creditors
    3. The Directors convene the EGM and the Meeting of the Creditors by giving at least 21 days’ notice and publishing such notice in the Cyprus Government Gazette and two local newspapers.
    4. The shareholders and creditors provide a proxy to a person to attend and vote on their behalf (optional)
    5. The creditors present a debt verification statement showing their debt as well as a declaration showing the security they hold over the assets of the Company (if any).
  4. Holding of an EGM

    The shareholders hold an EGM whereby they vote (personally or through the proxies) on:

    1. Proposal for the winding up of the company (Special Resolution)
    2. Recommendation of the liquidator (Ordinary Resolution)
  5. Holding of a Meeting of the Creditors

    The Creditors hold a meeting chaired by one of the directors of the company whereby they vote on the following:

    1. Proposal of the winding up of the company (Special Resolution)
    2. Recommendation of the liquidator (Ordinary Resolution)
    3. The appointment of the Inspection Committee (if required)

    A Greek translation of the EGM/Meeting of the Creditors, certified as true copy of the original by the Secretary, must be prepared and delivered to the Registrar within 15 days of such EGM and Meeting of the Creditors.

  6. Appointment of the Liquidator

    Within 14 days of the Liquidators appointment (date of the EGM/Meeting of the Creditors), the Liquidator must provide the following documents to the Registrar:

    1. Notification of appointment to be published in the Government Gazette (HE43)
    2. Notification of appointment to be kept by the Registrar (HE42)
  7. Preparation of the statement of distribution of assets. When the liquidation finishes and the liquidator distributes all the assets to the shareholders, the liquidator prepares a statement showing such distribution (if applicable).
  8. Notice to the Final EGM and Meeting of the Creditors

    The liquidator calls for a final general meeting to present such account prepared and provide explanations in relation to this.

    The notice of such meeting has to be published in the Government Gazette at least 1 month prior to such meeting.

  9. Final EGM and Meeting of the Creditors

    The shareholders hold the Final EGM and the Creditors hold the Final Meeting of the Creditors at the date set and whereby the liquidator presents the final accounts and the shareholders and Creditors approve such accounts.

  10. Delivery to the Registrar of the final documents

    Within 1 week after the final General Meeting and the Meeting of the Creditors (which ever comes last) the Liquidator has to deliver to the Registrar of Companies a copy of the accounts prepared along with a return for the holding of the meeting and the date of such meeting.

HOW CAN LSTS ASSIST YOU

LSTS may assist in:

i.)  Being appointed and act as the liquidator in the creditors’ voluntary liquidation of Cyprus companies.

ii.) Providing you with guidance on the process of the liquidation.


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