The following guide provides instructions on how to submit a proof of debt claim against a company in Cyprus. It covers the legal basis for debt claims, the necessary documentation, and the review process to ensure your claim is valid and processed efficiently.

Important Update on FBME Bank Ltd

On 15th July 2024, it was announced that the deadline for the submission of proof of debt claims by the depositors and creditors of FBME Bank Ltd (under liquidation) was extended following an order issued by the Nicosia District Court on 27th June 2024. The new deadline for the submission of proof of debt claims is 30th September 2024.

The proof of debt form must be completed by the creditor or their representative to have the right to vote at a creditors' meeting and to collect a dividend if the company has any assets to distribute. Details on how the submission must be carried out are set out on FBME’s liquidation website, which may be accessed here.

Verification of debt is crucial in insolvency proceedings as it ensures that all claims against a company's assets are legitimate and properly documented. This process helps in the fair distribution of the company's assets among creditors, maintaining transparency and trust in the insolvency process.

Continue to our firm’s guide to learn how to submit a proof of debt claim against a company in Cyprus. Understand the legal basis, required documentation, and the review process to ensure your claim is valid and processed efficiently.

Importance of Verification of Debt in Insolvency

Verification of debt is a fundamental aspect of insolvency proceedings, ensuring the orderly and equitable distribution of a company's remaining assets. When a company is wound up, numerous creditors may submit claims to recover outstanding debts. The verification process serves as a safeguard, ensuring that each claim is legitimate, accurately quantified, and supported by appropriate documentation.

Key Reasons for Verification

1. Prevention of Fraudulent Claims: By meticulously verifying each debt, the process helps prevent fraudulent or inflated claims. This ensures that the company’s limited assets are not wrongfully diverted to illegitimate claimants, thus protecting the interests of genuine creditors.
2. Fair Distribution of Assets: Verification is essential for achieving a fair and proportional distribution of the company’s assets. It ensures that all creditors receive their due share based on the verified amount of their claims, adhering to the principle of pari passu.
3. Transparency: Adhering to legal requirements, such as those stipulated in the Companies Law, Cap. 113, verification promotes transparency and accountability in insolvency proceedings. It reassures creditors that the process is conducted impartially and in accordance with the law.
4. Reduction of Disputes: A thorough verification process can significantly reduce the likelihood of disputes among creditors. By providing clear and justified grounds for accepting or rejecting claims, it minimizes ambiguities and potential conflicts, facilitating a smoother liquidation process.
5. Efficient Management of the Estate: For liquidators and official receivers, the verification process aids in the efficient management of the insolvent estate. It provides a clear and accurate picture of the company's liabilities, enabling more effective planning and execution of asset distribution.

Legal Basis

According to the Companies Law, Cap. 113, all claims against a company, whether present or future, certain or contingent, ascertained, or only in damages, shall be admissible to proof against the company (s.298).

How to Submit Proof of Debt

To recover a debt or claim incurred prior to the date of the winding-up order, creditors must submit a written verification of their debt to the official receiver or liquidator within 35 days of the winding-up order publication in the Official Gazette of the Republic of Cyprus. Extensions may be requested (s.251).

Submission Requirements

1. Creditors must submit a duly completed verification form as per the Companies (Liquidation) Regulations. The form must be signed by the creditor or their authorized representative. Creditors who wish to be represented by an authorized individual, must provide a duly signed, notarized and apostilled Power of Attorney.
2. The proof of debt form should be accompanied by evidence appended thereto proving the debt or claim as of the date of the winding-up order.
3. The debt verification form must indicate whether the creditor is secured or unsecured. In the event the creditor is secured, and have disposed their security, they may only verify for the remaining debt amount, after deducting the amount they have recovered from the disposal of the security. In the event the secured creditor wishes to submit a debt verification for the whole of his debt, then he shall surrender his security and then may be allowed to prove as if he was not secured.
4. All claims must be submitted in Euro or converted to Euro based on the official currency index as of the winding-up order date. The European Central Bank exchange rate is typically used, available here.
5. If the verification form is signed within the Republic of Cyprus, the form must be signed before the Court Registrar or other person authorised to administer oaths, such as a lawyer, registered to administer oaths in accordance with section 3(iv) of Cap.18. If the verification form is signed outside the Republic of Cyprus, it must be signed before a person competent to administer oaths and the signature must be legalized or certified from the Embassy of Cyprus or the competent authority of the particular jurisdiction.

Review Process

The liquidator or official receiver reviews the proof of debt and supporting documents. The liquidator acts in a quasi-judicial capacity (Tanning Research Laboratories Inc v O'Brien [1990] 8 ACLC 248) and it is his statutory duty to ensure the company's property is distributed fairly among creditors (Re Menastar Finance Limited (in liquidation) [2003] 1 BCLC 338).

Appeals Process

If the liquidator rejects the proof, he shall provide the creditor with grounds for his decision in writing. If the creditor is not satisfied by the decision of the official receiver or liquidator, then they may bring an action before the Court within 21 days from the day that they were notified about the decision of the official receiver or liquidator.

Our Firm’s Services

At E. ECONOMOU & CO LLC we specialize in providing comprehensive legal services to assist creditors in the submission and verification of debt claims in insolvency proceedings. Our experienced team is dedicated to ensuring that your claims are accurately documented and submitted within the required deadlines.

We offer expert guidance on preparing the necessary documentation, navigating the verification process, and representing your interests in creditor meetings and court proceedings.

Our firm is committed to protecting your rights and maximizing your recovery from insolvent estates. Contact us today for personalized legal support and to learn more about how we can assist you with your debt claims in Cyprus.