A receivership order is a drastic judicial remedy whereby the court appoints a receiver over the assets of a defendant.

Alongside Prohibitory orders, Disclosure (Norwich Pharmacal) orders, Chabra orders, Search (Anton Piller) orders, Anti-suit injunctions and European account preservation orders (all discussed elsewhere on the website), receivership orders form the complete arsenal of interim relief available in Cyprus Courts.

In this publication we examine the nature of receivership orders as well as the limited cases where their issuance will be appropriate.

Receivership Orders: A drastic remedy appropriate only in certain cases

Receivership orders are rightfully considered to be an intrusive, costly and not easily reversible remedy.

A court may be unwilling to appoint a receiver over the property of a defendant if a less drastic remedy (such as a prohibitory order) can adequately safeguard the applicant’s rights.

Thus, receivership orders are usually granted in cases where a prohibitory order is insufficient on its own. Such will be the case if there is a measurable risk that if not granted, a defendant will act in breach of the prohibitory order, or if the structure by which a defendant holds his/her assets is opaque and may allow him/her to dissipate the property.

In addition, a receivership order may also be appropriate if the assets need to be managed so that their value is preserved, e.g., a portfolio of share or commodity options, or where the assets need to be exploited to realize their true worth, e.g., a patent.

Receivership Orders: Cyprus Legal Framework

Having the above restrictions in mind, receivership orders, being in effect interim injunctions, are based on Section 32 of Courts of Justice Law (14/60).

Particularly, Section 32 of Courts of Justice Law (14/60) provides that a court has the discretion to appoint a receiver if it deems that it will be just and convenient (equitable) to do so.

It will be just and convenient to issue the receivership order if there is a real possibility that the defendant may deal with his/her assets in a way to frustrate enforcement of an eventual judgment.

Receivership Orders: Can they be granted ex-parte?

Courts will issue a receivership order on an ex-parte basis (without notice to the other party) if they deem the circumstances right.

Such will be the case if there is an imminent peril of substantial irreparable damage if an immediate appointment is not made.

Receivership Orders: Can they be granted in respect to a foreign company?

In short, yes. If the foreign company is owned by a Cyprus one, the court retains discretion to appoint a Receiver over the assets of the Cyprus company (and thus, over the foreign one).

As it was denoted by the Cyprus Supreme Court, “there is no restriction as to the type of property for which a court exercising civil jurisdiction is empowered to appoint a receiver”.

Note: If the foreign court where the company is situated refuses to recognize the receiver appointed by the Cyprus court, the latter retains discretion to render the appointment effective by issuing orders in personam against persons who are subject to its jurisdiction.

Receivership Orders: Receiver’s duty and qualifications

The Receiver, albeit chosen by the applicant, is still an officer of the court. Thus, he/she should act for the benefit of all parties in the action.

Following the implementation of the Insolvency Counsels Law (64(I)/2015), the appointed receiver must now also be a duly licenced Insolvency Counsel.

Receivership Orders: Contempt of Court

Any violation of a receivership order constitutes contempt of court which is punishable by imprisonment or sequestration of assets or a fine.

Any third party who while aware of the order knowingly and intentionally incites or assists in its violation may also be held liable in contempt of Court.

Cyprus courts will treat any wilful violation with the utmost severity. In a well-known passage, often adopted by Cyprus courts, the Supreme Court denoted the following:

«Invariably disobedience of the order of the court undermines the effectiveness of the judicial process, a defiance of far-reaching social repercussions. Obedience to orders of the court constitutes one of the foundations of civilized life»

Receivership Orders: Our Services

Economou & Co LLC is a trusted Cyprus leader in all matters involving corporate litigation and interim relief. Please contact us if you are interested in:

• Strategic advice re the steps to be undertaken in Cyprus to achieve the desired result
• Advice in respect to all matters concerning corporate litigation, including but not limited to commercial fraud, civil conspiracy, shareholder disputes, jurisdictional conundrums, asset recovery as well as recognition & enforcement proceedings.
• Filing and obtaining interim relief such as receivership orders, prohibitory orders, Chabra orders, disclosure orders (Norwich Pharmacal), tracing orders (Bankers Trust), Search Orders (Anton Piller), gagging orders and anti-suit injunctions