Examinership is a process whereby the protection of the Court is obtained to assist the survival of a company. Basically, it allows a company to restructure with the approval of the Court.
The principal rationale underlying the concept of examinership is to allow a company that is experiencing financial difficulties a period of protection from creditor action during which a third party (the examiner) has an opportunity to examine the affairs of the company and, if there is a reasonable prospect of the survival of the company and all or part of its undertaking as a going concern, to formulate proposals for a scheme of arrangement to facilitate such a survival.
The appointment of an examiner to companies in financial difficulty was introduced in Cyprus with the Companies (Amending) (No.2) Law of 2015.
What you need to know:
- The Company.
- Any Creditor of the Company.
- Shareholders of the Company who hold 10% of the company’s capital.
- Any guarantor of the Company’s obligations.
- The Company is unable to pay its debts.
- There is no resolution or Order from the Court for the liquidation of the Company.
- There is a reasonable prospect of survival.
- The Company is placed under the protection of the Court for a period of 4 months.
- The Company cannot be liquidated.
- An Official Receiver cannot be appointed. Property secured by a secured creditor may not be disposed of without the consent of the Examiner.
- Creditors cannot take any action against guarantors.
- No action can be filed against the Company.
- The examiner is invited to examine the financial statements of the company and to make proposals for a compromise or settlement plan, which, as far as reasonably practicable, protect the company.
- The examiner has specific powers, including, following a court order, (i) the power to manage or dispose of the secured property and (ii) the power to exercise the duties and powers that belong to the management of the company.
- The examiner is required to submit to the court a report, which includes, inter alia, the compromise proposals or settlement plan, the results of the meetings of creditors and shareholders where such proposals were considered, and the examiner’s recommendations.
- In case new credit facilities are provided while the company is under protection, the examiner ensures that in case the restructuring plan does not succeed and the company proceeds to liquidation process, creditors who have granted the new credit facilities will be repaid before all other creditors (except for fixed charge holders).
- The Court may extend the protection period by a further two months to allow the Examiner to submit the report to the Court on the compromise or settlement proposals.
- The Court is also given the discretion to further extend the period, if necessary.
- Whether the proposals are fair and equitable.
- The continuation of business activity.
- Saving jobs.
- The fact that Creditors should not be in a worse position than they would be if the company was under liquidation.
- At least one class of creditors whose interests are harmed by the implementation of the plan has accepted the proposals.
- The court to be satisfied that:
(a) the proposals are fair and equitable to any class of creditors or shareholders which has not accepted the proposals and whose interests are harmed by the implementation of the plan and;
(b) the proposals do not adversely affect the interests of any of the parties concerned.
- The company.
- The examiner.
- Any creditor or Shareholder whose claim or interest is harmed if the proposals are implemented.
- Any guarantor.
- The proposals are legally binding on all parties involved and must enter into force at the latest within thirty days of their confirmation.
- When the compromise or settlement plan enters into force, the Company ceases to be under the protection of the Court and the appointment of the examiner is terminated.
DISCLAIMER: Information contained in this publication does not constitute any kind of advice on any particular matters and should not be considered as such. ATCA accepts no responsibility for clients’ decision