Cyprus: Registration of Charges
Charges and mortgages are two instruments that ensure creditors’ protection. Precisely, all creditors need to ensure that they will receive payment for their sets or that their loan will be repaid. Charges give the right to creditors to resort to identified character, immovable character or personal character, in order to satisfy the debt or other liability in the case it has not been paid. It should be taken into account that neither possession nor ownership passes to the creditor. however, under a mortgage of immovable or personal character, the mortgagor possesses the mortgaged character. In the case that the debt has not been repaid then the creditor obtains title/ownership for the particular character.
A charge is similar to a mortgage. Basically, a charge embraces all the rights of a mortgagee without transferring ownership. Charges may appear as a consequence of an agreement or by operation of law. It should be clarified that express charges can be either fixed or floating. A fixed charge is produced over certain assets. Regarding immovable character, an express charge is nevertheless called “mortgage”. However, an express charge has substituted the use of the traditional mortgage.
Except for immovable character and capital assets, fixed charges are not applied to assets such as merchandise since there are regularly being replaced. In this case, fixed charges need to be continually produced and released which is not functional. however, a “floating” charge can be produced over all the assets of the company now and then, or maybe one class of assets, i.e. stock in trade.
In Cyprus, registration of charges is regulated by the “The Companies Law” (Cap. 113). Specifically, the provisions of sections 90(1) and 90(2) of the Companies Law cover all the necessary procedures that need to be followed so that to proceed with registration of charges. According to Section 90(1), charges need to be registered with the Registrar of Companies. If they are not registered, they are not valid.
Base on the provisions of section 90(2) the section 90(1) applies to the following charges:
a) a charge for the purpose of securing any issue of debentures;
b) a charge on uncalled proportion capital of the company;
c) a charge on book debts of the company;
d) a floating charge on the undertaking or character of the company;
e) a charge on calls made but not paid;
f) a charge on a ship or any proportion in a ship;
g) a charge on goodwill, on a patent or a licence under a patent, on a trade mark or on a copyright or a license under a copyright;
h) a charge on any other movable character produced or evidenced by an instrument, where the company retains possession of such character;
I) a charge on immovable character, wherever situate, or any interest therein;
It should be underlined that in case the charge is produced in Cyprus, then the period of registration is 21 days after the date of its creation. However, in case a charge is produced out of the Republic of Cyprus including character located outside of Cyprus, then the period of registration is 42 days after the date of its creation.
It should be stressed that the provisions of Section 90(2) do NOT apply to:
- pledges of shares in companies and rights deriving from it;
- agreements for the provision of financial collaterals within the context of the Financial Collateral Agreement Law, as may be amended and apply now and then.
A company has a duty to report and continue a register of charges:
A company is obliged to send to the Registrar of Companies the particulars of every charge produced by the company and the issues of debentures of a series requiring registration under section 90. Nevertheless, the registration of any charge can be done during the application course of action by any interested person. If the registration is effected by some person other that the company, then that person has the right to ask the company to pay him/her back the amount of the applicable fees paid by him/her to the Registrar.
Furthermore, every company is obliged to continue at the registered office of the company a register of charges and include all charges with all the necessary details. In case an officer of the company intensively and willfully authorises or allows the omission of any entry required to be made following the provisions of the Law, he/she will be liable to a fine up to €427.