The government of Cyprus announced, on 12 February 2021, Covid-19 restrictions applicable to the island’s major districts from 15 February 2021 to 28 February 2021. The latest announcement includes temporary suspensions to rent payments for business leases for the months of January and February 2021 or February and March 2021 if the January rent has already been paid. On 1 February 2021, the European Commission approved a EUR 10.2m scheme to support the self-employed and enterprises affected by the pandemic.

The government first announced restrictions related to Covid-19 on 15 March 2020; government support has since reached EUR 899m in an effort to support the tourism, health, and shipping sectors. Recently, further support to the tourism industry has seen the introduction of a EUR 86.6m scheme which will benefit service providers affected by the pandemic and the government’s restrictions. The scheme was approved by the European Commission under state aid rules on 12 January 2021.

In the Non-Performing Loans (“NPLs”) sphere, KEDIPES  is the company responsible for managing NPLs with licences from the Central Bank of Cyprus. Per its presentation on 30 September 2020, imposition of lockdown measures in March of 2020 resulted in significant limitations to restructuring or recovery solutions, as well as a halt to real estate transactions. KEDIPES also reported that its Project Ledra scheme for the potential sale of performing and restructuring loans with a balance of up to EUR 1.2bn has been affected in terms of structure and timeframe by the government’s decree for the suspension of instalments on loan accounts amounting to EUR 742m until the end of 2020. 


Cyprus is a presidential republic where the president is both head of state and head of government. The country has been an EU member since 2004, although EU law is suspended in areas where the Cypriot government does not exercise effective control. Until independence in 1960, the Cypriot legal system was based on the English legal system. Since then, the laws applicable are the Cypriot Constitution, the laws retained in force by virtue of Article 188 of the Constitution, the principles of Common Law and Equity, and the Laws enacted by the House of Representatives. Following the 2004 amendment to the Constitution, EU law has supremacy over both the Cypriot Constitution and national legislation.


We appreciate the assistance of Nancy Erotocritou and   Elina Mantrali at Harneys with the following discussion on Cypriot law, regulation and practice. 


  • Lending in its own right does not trigger licensing in Cyprus
  • Trust and agency relationships are recognised in terms broadly similar to English law
  • Loans may be transferred by assignment of rights or novation; however, only equitable assignment exists under Cypriot law
  • No withholding tax imposed on interest payable to non-Cypriot lenders
  • Stamp duty is chargeable on every document if it relates to any property situated in Cyprus but payment may be deferred
  • No legal requirement to notify borrower of loan transfer, but it is common practice to do so


Lending in its own right does not trigger licensing in Cyprus, unless this is coupled with the taking of deposits or other repayable funds from the public “in the Republic”, which would trigger licensing in accordance with the EU CRD IV, as implemented in Cyprus.

Consumer protection regulation must be observed when dealing with consumer loans.

The purchase and sale of certain types of loans granted by Cypriot authorised credit institutions (“ACI”) may trigger a licensing requirement under the Sale of Credit Facilities Law 2015, as amended (“SCF Law”). The SCF Law does not apply to credit facilities granted by ACIs to foreign residents or entities or to credit facilities whose scope, governance, or security are not subject to Cypriot law.

Loan transfers under the SCF Law are subject to strict procedural rules as to the content of notices which must be delivered to borrowers and guarantors and the timeframes within which such notices must be delivered.


Loans may be transferred by way of assignment of rights or novation. However, there can only be equitable assignment. As such, the original lender will still be required to be joined to proceedings against a borrower, should the need arise.

No borrower consent is required, subject to contractual provisions included in the agreements. Whilst not required under Cypriot law, it is common practice to notify the borrower in order for the transfer of a loan to be effective.

In a novation context, there is a material risk that the guarantee and/or security is discharged and will need to be retaken.

In respect of guarantors, Cypriot contract law requires that they are notified. Whilst Cypriot law does not apply to non-Cypriot finance documents, it is common practice in Cyprus to deliver notice to guarantors regarding any changes to the circumstances of a loan and receive the confirmation of the guarantor on the continuation of the guarantee. New lenders should note that strict requirements apply in respect of notifying individual guarantors prior to them entering into the relevant guarantee; non-compliance may render the guarantee invalid.

If there are undrawn funds, then a novation rather than an assignment may be necessary.

Participation agreements are a familiar structure/instrument in Cyprus.


Trust and agency relationships are governed by Cypriot contract law and are recognised on terms broadly similar to English law. Security trustee arrangements may trigger additional considerations under the Cypriot Administrative Service Providers Law 2012, which regulates, among others, the provision of trustee services in Cyprus.

New lenders may take the benefit of the security by way of assignment of rights (noting that the original lender remains in the picture), novation or by releasing and retaking it.

If the security agent is liable to be wound up under Cypriot law, the assets held on behalf of a lender do not form part of the estate of the security agent on winding up.


No deduction or withholding on account of tax is required to be made, under Cypriot law, from any payment that may be required to be made by each domestic borrower (with no permanent establishment outside of Cyprus) to a non-Cypriot tax resident. Special defence contribution tax may need to be deducted from interest on loans payable to a domestic lender in the ordinary course of that lender’s business, at a rate of 30%.

There is no requirement to deduct or withhold tax in relation to the proceeds of a claim under a guarantee or the proceeds of enforcing security.

Stamp duty is chargeable on every document if it relates to any property situated in Cyprus or to any matter or thing which is performed or done in Cyprus, irrespective of the place where it is executed. Payment of stamp duty can be deferred (not avoided) if the document is executed outside of Cyprus, until the relevant document is brought into Cyprus (e.g. because the document is needed as evidence in court proceedings). 


Notice must be given in order to bind third parties without knowledge. Where security is registrable, updated filings and registrations may be required to update public records and to bind third parties, such as other creditors or a liquidator.

According to section 4 of Capital Gains Tax ("CGT") Law, on any gains accruing from a disposal of property, there shall be levied and paid a tax at the rate of 20% on such gains. Per law, “property” means immovable property situated in Cyprus and shares which represent property situated in Cyprus. Shares in a company, except shares of a company listed on the Stock Exchange which are exempt, the property of which includes immovable property in Cyprus are subject to CGT. In computing the capital gain, the sales proceeds are not the amount of the selling price of the shares, but the value of the immovable property owned by the company on the date of the disposal of the shares. Thus, the calculation of the gain subject to CGT is made as if the company has actually disposed of its immovable property.


The LMA published an overview of LIBOR transition considerations for its wider suite of documentation. The LMA stated that market participants should switch to risk-free reference rates in new and refinanced loans. If that is not possible, such loans should include robust conversion mechanisms or hardwired fallbacks. Further, the LMA set out milestones for the cessation of LIBOR lending. All new GBP LIBOR-referencing loans expiring after the end of 2021 should cease by the end of Q1 2021; similarly, USD, CHF, and JPY LIBOR loans fall under the Q2 2021 milestone. The LMA stated that the rate switch method may also be used by market participants who wish to transition their loans but are not operationally ready for compounded in arrear risk-free reference rates.

The LMA further stated that where hedging is a relevant consideration, market participants should consider how their loan documents interact with ISDA documentation. Specifically, hedging documentation and loan documentation that both reference risk-free reference rates should align to avoid basis risk. In that respect, ISDA has issued an IBOR Fallbacks Supplement and an IBOR Fallbacks Protocol. The former applies to all new cleared and non-clear derivatives, while the latter enables parties to incorporate the fallbacks into their legacy non-cleared derivatives (provided they adhere to the Protocol).

In respect of guarantees and security provided under the loan, the LMA overview states that parties should seek legal advice in relevant jurisdictions to ascertain whether confirmation of guarantees or retaking of securities is required.


Folli Follie (“FF Group”)

FF Group, the Greek fashion company, announced on 11 January 2021 that it had completed bridge funding with EUR 13,007,018 notes being issued and fully subscribed for. In December of 2020, the company, which is overseen by a court-appointed management team, announced that the interim report by PwC was delivered. The report raises significant questions about the company’s results in the fiscal years from 2007 to 2017, suggesting that the FF Group had “substantially erroneous” results which, according to the report, misled the public. Specifically, in 2017, sales were allegedly inflated by USD 1bn and equity by USD 2bn. The report further states that methods allegedly used by FF Group to inflate its sales and profitability included “merry-go-around” transactions through its company’s own subsidiaries in Asia (this included the sale of products from one company of the group to another company of the group through the use of intermediaries), and the alleged use of fictional transactions. Further, the report highlights alleged exchanges between company executives that mention a meeting with officials from the Hellenic Capital Markets Commission in order to secure political support for the FF Group.

The report has been provided to the Athens prosecutor in charge of an investigation against the former FF Group CEO and his son.

Vallourec S.A. (“Vallourec”)

Vallourec, the tubular solutions company, announced its full year 2020 results on 17 February 2021, which detailed that as of 12 February 202192 per cent of creditors supported its agreement in principle with its main creditors. This marks an increase from when the agreement was originally announced on 3 February 2021, between Vallourec and creditors holding 61.5 per cent of Vallourec’s total amount of financial debt. The agreement constitutes a significant step in Vallourec’s restructuring efforts to rebalance its capital structure. Under the agreement, Apollo and SVPGlobal will become Vallourec’s largest shareholders. The implementation of the agreement will require approval of two-thirds of shareholders in a meeting scheduled for 20 April 2021, as well as the approval of the Commercial Court of Nanterre. In terms of 2021 outlook, Vallourec’s full year results indicate that it expects gradual recovery in the oil and gas tubular goods North American markets. In the EMEA region, resuming tender activity in 2021 is expected to favourably impact 2022 activity.

Seadrill Partners LLC (“Seadrill”)

Seadrill, the drilling contractor, announced filing of Chapter 11 voluntary petitions on 1 December 2020. The first plan and disclosure statement were filed on 13 February 2021; the plan includes provision  for the equitisation of USD 2.7bn of indebtedness under the debtors’ term loan credit agreement. The disclosure statement also includes references to new master service agreements with Energy Drilling Management and Vantage Drilling International, which will be Seadrill Partners’ go-forward service providers.

Avanti Communications PLC (“Avanti”)

Avanti, the satellite technology provider, announced the completion of a capital raise and refinancing on 15 February 2021. The company secured a material extension to its super senior facility maturity date to 31 January 2022, a maturity extension to its lien credit facility, and a capital injection of USD 30m from existing junior lenders.

Tele Columbus AG (“Tele Columbus”) 

Tele Columbus, the German fiber network operator, announced on 16 February 2021 that it submitted the change-of-control confirmation to Morgan Stanley-backed investment vehicle Kublai GmbH (“Kublai”),  thereby satisfying one of the conditions precedent of the takeover offer submitted by Kublai. Tele Columbus’ management board and supervisory board had, on 8 February 2021, recommended that shareholders accept the voluntary public takeover offer, which will entail a rights offering in the amount of EUR 475m. In doing so, Tele Columbus also stated that, due to its high level of debt, it was not able to take out further loans that would enable it to finance its Fiber Champion strategy; without the transaction’s success, debt would not be reduced and implementing the Fiber Champion strategy would be impossible. The six-week acceptance period ends on 15 March 2021; an acceptance rate of 50 per cent plus one share is required, as well as regulatory approvals.  Tele Columbus aims to invest EUR 2bn in network infrastructure and fibre expansion; a binding pre-contract with 1&1 Drillisch is subject to the execution of the takeover offer. 


Please contact Louisa WattIden AslLucy Hartland or Menelaos Karampetsos with any queries regarding this month's Trade Alert.