On July 8 2018 the Cyprus Parliament approved a package of legislative measures aimed at creating market security, stability and growth, and strengthening the legal framework to deal with non-performing loans. The amendments took effect on July 31, when the amending laws were published in the government Gazette. The principal changes are as follows:
- A new law creates a framework for debt securitisation under the supervision of the Central Bank of Cyprus. The debtor's obligations and rights, and the obligations and rights of any guarantors, remain unchanged after the securitisation of the loan and any security is unaffected. The sale and transfer of the loan to the special purpose vehicle (SPV) is final and binding on the transferor, and in the event of the subsequent insolvency of the transferor, there will be no recourse against the transferee.
- The Transfer and Mortgage Law of 1965 has been amended to make it possible, in the event of the sale of one or more of multiple loans secured by the same mortgage, for the mortgagee to allocate the mortgage between the loans at its discretion.
- The Sale of Credit Facilities and Related Matters Law of 2015 has been amended to provide that no fees on the transfer of property or of a charge are payable by the buyer. In addition, clearer rules have been introduced regarding the outcome of the sale of credit facilities, the transfer rights and obligations, priorities, the continuation of lawsuits and retention of documents.
- The Insolvency of Natural Persons (Personal Repayment Plans and Debt Relief Orders) Law of 2015 has been amended to simplify procedures and facilitate rehabilitation of debtors who have not committed offences.
- Amendments to the Companies Law have been made to further facilitate debt restructuring and promote corporate rescue. The moratorium during the tenure of an examiner ceases if the company does not fulfil its obligations, and creditors may take measures to enforce their debts.
Reduction of non-performing debt is generally seen as the key to recovery of the real economy, and it is to be hoped that the amendments will facilitate and speed up the process.