In May 2015 the Cypriot government completeda major overhaul of the countryÕs corporate and personal insolvency lawframework and regulation of insolvency practitioners as part of a memorandum ofunderstanding entered into by Cyprus with the International Monetary Fund (theÒIMFÓ), the European Commission andthe European Central Bank. The IMF has contributed significantly to theinception of the new insolvency law framework, but has not been able to provideimplementation assistance.
The Ministry of Energy, Commerce and Industry(the ÒMinistryÓ) and the InsolvencyService (the ÒInsolvency ServiceÓ),consider that further strengthening of the regulatory framework for insolvencypractitioners was necessary in the areas of training, supervision anddiscipline to achieve a common standard of regulation and coordination betweenthe different licensing bodies i.e. the Insolvency Service, the Bar Associationand the Association of Chartered Accountants. As part of this exercise it will be possible to establish a frameworkfor cooperation on training of insolvency practitioners, which is needed toraise professional standards and improve the quality and efficiency ofinsolvency proceedings. Only initial training on the legal structure of the newinsolvency framework was conducted for insolvency practitioners in 2015 andsuch training was restricted to the insolvency practitioners licensed duringthe transitional period as it was defined by Ministerial decree according tothe Insolvency PractitionersÕ Law. Core training therefore needs to beconducted focusing on the financial, commercial and legal skills needed byinsolvency practitioners to manage insolvency cases effectively.
Strengthening CyprusÕ regulatory frameworkfor insolvency practitioners in the areas of training, supervision anddiscipline, will help to achieve a common standard of regulation andcoordination between the three different licensing bodies. It will in turn strengthen the insolvencypractitioner profession, which has an important role in the effectiveimplementation of the Insolvency Framework and it will boost the economy.Further training is also expected to raise standards within the profession andis linked to matters of supervision and discipline. It is noted that continuoustraining of insolvency practitioners is mandatory pursuant to the InsolvencyPractitionersÕ Law and that failure to meet the continuous training requirementis a grounds for disciplinary action by the regulator.
A well-established insolvency framework enables investors tobetter assess and manage transaction risk and is therefore of great importancefor all fully functioning market economies. This project is expected toincrease the efficiency of the current insolvency framework and indirectly helpwith the resolution of high non-performing loans in the banking sector. The principal objective is to improve bothadministration of the corporate and personal insolvency framework in Cyprus sothat it can better achieve its economic purposes, including respectively thefair and efficient reorganisation of businesses that are capable of rescue andeffective liquidation of businesses that are no longer viable and theassistance for over-indebted natural persons. This will help to improve theinvestment climate in the country and contribute to efforts to reduce the highlevel of non-performing loans and to facilitate economic activity.
The Ministry partneredwith the European Bank for Reconstruction and Development (the ÒEBRDÓ) for a programme to support thecapacity building for insolvency practitioners to ensure a high level ofprofessionalism and management of insolvency cases and legislative and otherproposals to improve the existing supervisory framework for insolvencypractitioners with a view to achieve proper coordination among the differentsupervisory authorities.
The Programmeprovided under the support measures is being implemented for 18 months, and wasfinanced for Û180,000. This amount allowedto the partners to proceed with (i) an analysis and assessment of the existingregulatory framework for insolvency practitioners in Cyprus; (ii) a draftproposal in respect of harmonisation and cooperation between the variouslicensing bodies of insolvency practitioners; (iii) a report and trainingmethodology for insolvency practitioners; and (iv) capacity-building and training of insolvency practitioners ininsolvency proceedings.