May 22, 2020

Banking and Finance: Sale of Credit Facilities

The mitigation of the issue of non-performing loans (“NPLs”) in the Cypriot banking system is expected to have a positive impact on the resilience of Cyprus Banks. The Sale of Credit Facilities and Related Matters Law N. 86(I)/2018 amending Law No.169(I)/2015 contributes to the deleverage of the NPLs in the Cyprus market.

Key definitions for the purposes of interpretation and application of the Law regulating:

authorisation” shall mean a granted authorisation for acquiring credit facilities by virtue of the provisions of the Law.

‘‘authorised credit institution or ACI’’ shall have the meaning attributed to the term in article 2 of the Business of Credit Institutions Laws

‘‘borrower’’ shall mean a person to whom a credit facility is provided; ‘‘qualifying holding’’ shall mean the direct or indirect holding in the credit acquiring company which represents 10% or more of the capital or of the voting rights of the company or which makes it possible to exercise a significant influence over the management of that company;

‘‘credit acquiring company’’ shall mean a company authorised under this Law to acquire credit facilities;

credit institution” for the purpose of this Law shall mean an ACI and a branch that operates in the Republic by virtue of article 10A of the Business of Credit Institutions Law;

Scope of the Law

The Law applies to credit facilities granted to natural persons where the total balance of the credit facilities to that natural person, at the time of the transfer, for every ACI, does not exceed one million euro (€1.000.000); and (b) credit facilities granted to micro and small enterprises as these are defined in the European Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (2003/361/EC) where the total balance of the credit facilities to that enterprise or group of connected enterprises, at the time of the transfer, for every ACI, does not exceed one million euro (€1.000.000). Whereas, credit facilities in excess of the aforesaid limits, will be governed by articles 18 and 19 of the Law.

Sale of Credit Facility

Prior to the selling of whole of part of its credit facilities, a credit or financial institution shall (a) either notify its intention to sell or dispose the whole or part of its portfolio of credit facilities or (b) call the borrower and his guarantors to submit, within a period of forty five days (45), a proposal to purchase his credit facility under sale.

Importantly, any credit facility that is transferred from a credit or financial institution or credit acquiring company, hereafter ‘‘the transferor’’, to the acquirer, is deemed to be transferred to that acquirer at the time of transfer and all rights and obligations arising from the credit facility agreement of the account thus transferred, are automatically transferred to the relationship between the borrower and the acquirer and thereby shall continue to be valid between the borrower and the acquirer.

It is noteworthy that such transfer does not affect any procedure in progress pursuant the provisions of The Insolvency Individuals (Personal Plans Repayment and Debt Waiver Order) Law, or Part IVA of the Companies’ Law nor does it affect any results pursuant to the implementation of provisions these laws. However, nor does such transfer affect the right of the borrower to submit an application for Insolvency Settlement under the Insolvency Individuals (Personal Plans Repayment and Debt Waiver Order) Law or the right of the borrower or other person to appoint an examiner pursuant to Part IVA of the Companies Law.

As regards obligations of the transferor, the transferor is obliged to submit, every six (6) months, to the Central Bank of Cyprus a report which is publicised and which includes: (i) data on the number and amount of credit facilities, by category, that have been sold to any legal person, and (ii) data on the number and amount of credit facilities, by category, that have been purchased by the borrower.

Notifications by acquirer to borrowers and guarantors

Each credit or financial institution or credit acquiring company shall inform the borrower, the latest within five working days from the acquisition, that the credit facility agreement and related collaterals have been transferred to another person. Each credit acquiring company shall provide the borrower with all relevant contact details of the persons responsible for the handling of the credit facilities transferred thereto and of the new account numbers.

Administrative fines

If a legal person contravenes or fails to comply with this Law, or with the conditions of authorization issued by virtue of this Law or with any Directive of the Central Bank by virtue to this Law, the Governor of the Central Bank may, after calling to account the legal person, the consultants or directors, as appropriate,- (a) impose on that legal person, for every infringement an administrative fine up to the amount of two hundred and fifty thousand euro (€250.000) depending on the seriousness of the offense and, if the infringement is continued or repeated and the legal person or director or manager refuses or fails to comply, may impose a fine of one hundred euro (€100) and up to thirty thousand euro (€30.000) for each day the contravention continues, and/or (b) suspend or revoke the licence of that legal person by providing a fully reasoned decision.


Cyprus has long been a fundamental, geostrategic location as the third largest island in the Mediterranean crossroads of Europe, Asia and Africa. Organisations ranging from private or family businesses, startups and multinationals have established headquarters in Cyprus. As a member of the European Union since 2004 and the Eurozone in 2008, Cyprus enhanced its role as robust and reliable destination for key players in various industries and sectors. The professional services industry evolved to cater for businesses of local and international clients, in line with the risks of the Digital Age and the challenges of globalisation.

The Cyprus market will no doubt bounce back strong again. However, it is still too soon to speculate an accurate timeline of recovery given the existing uncertainty swift developments locally and internationally in response to the Covid-19 disease.


The Finance Practice Group of our firm advises on local and cross-border, secured and unsecured financing and refinancing transactions.

Our forward-thinking professionals swiftly derive our clients’ requirements and design strategic initiatives that can be implemented to give them a competitive edge. We do so by combining our technical skills and commercial awareness to provide innovative, customised solutions.

We undertake negotiation and implementation of all relevant processes.

Please find below an outline of the services offered by our Finance Practice Group.

  • Asset Finance
  • Legal Due Diligence
  • Debt Collection
  • Security Registration and Enforcement
  • Debt/Equity Swaps
  • Debt/Asset Swaps
  • Hire Purchase Agreements
  • Debt Refinancing
  • Schemes of Arrangement
  • Restructuring and Reorganisation
  • Insolvency
  • Winding-up
  • Tax

Please do not hesitate to contact us if you have any question or require any assistance in such matters.

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K. A. Kourtellos & Co LLC is regulated by the Cyprus Bar Association
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