Security for the Loan. Fixed and Floating Charges under Cyprus Law


Security for the Loan. Fixed and Floating Charges under Cyprus Law.


Charges under Cyprus law, can be of a fixed and floating nature, (i.e fixed and floating charges).

Fixed and floating charges have several features in common:


1) Most charges need to be registered with Cyprus Registrar of Companies and are void against a liquidator, administrator or creditor with an interest in the secured asset if not so registered, thought the contract between the company and the lender is still valid.


2) the charge holder right prevails over other creditors on insolvency.


3) the charge holder can take possession and sell the assets which are the subject of the charge.


Some general principals outlined


A fixed charge will take a priority over a floating charge on the same asset. Creditors are free to enter into the agreement in between themselves to alter the order of priority of their charge.


Fixed Charge


The most attractive security for a lender is land, including buildings and major items of machinery. A Cyprus company can create a number of fixed charges over such assets. Also the subject matter of the charge can be a pledge of share/s certificates. Suppose the chargor is a Cyprus company and such chargor pledges share certificates of the foreign entity, then according to CAP 113 s. 90 a registrable charge is created and same shall be registered with the Registrar of Companies to be valid against the liquidator.

Suppose the company in question goes into receivership or liquidation, then the fixed charge holders are paid out of the proceeds of sale of the relevant asset before any other claimants. This in particular makes a fixed charge a strong security.

In case of fixed charge such involves the transfer of dominion over that asset/property to the extend that the debtor will not be allowed to deal freely with that asset/property in the ordinary course of business.


Floating Charge

If a company has no scope for granting a fixed charge, the English case of Court of Chancery in re Panama, New Zeland and Australian Royal Mail Company (1870) LR 5 Ch App 318 gives an answer and permits the creation of an equitable charge over the company’s undertaking and stock in trade. It is therefore possible to have a charge over the assts such as stock which is constantly changing. The three basic features of the floating charge were analyzed in Re Yorkshire Woolcombers Association Ltd; Houldsworth Woolcombers Association Ltd [1903]2 Ch 284 and are:


a) It is an equitable charge over the whole or a class of the company’s assets for example over the book debts;

b) The assets subject to the charge are constantly changing;

c) The company retains the freedom to deal with the assets in the ordinary course of business until the charge ‘crystallizes’.


A floating charge will crystallize on the company in the following cases, provided the instrument creating the charge, expressly specifies in the charge document: going into receivership, going into liquidation, ceasing trade.

Therefore, once the floating charge crystallizes it becomes fixed and attaches to the asset/property and comes in the pool of assets. The principal effect of crystallization is that the charge ceases to be floating and it becomes specific or fixed and the debtor’s ability to deal with the asset in the ordinary course ceases.

As a matter of practice, the events of default are normally expressly provided for in the charge instrument and those are, amongst others:


(i) Insolvency;

(ii) Presentation of the winding up petition or passing of a resolution to appoint a liquidator;

(iii) Crystallization of any prior or subsequent floating charge;

(iv) Granting of another security to another creditor;

(v) Levying of distress or execution against any of the assets of the debtor;

(vi) Default in paying any financial indebtedness; and

(vii) Incurring further borrowings beyond a certain figure.





For further information on this topic please contact

Mrs. Liza Bokova( ) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)



The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.


Thursday, 17 December 2020 12:05

  CYPRUS: English Guidance on which companies can be considered as “quasi partnerships”.   The leading English case on the above issue is the famous case EBRAHIMI -V- WESTBOURNE GALLERIES LTD...

Wednesday, 02 December 2020 10:12

  CYPRUS: English Guidance on the grounds of winding up of companies on the just and equitable basis   Based on English case law, winding up orders have been made in, among other instances, the...

Thursday, 29 October 2020 12:07

  CYPRUS: Locus standing of shareholder to petition the winding up of his company, on the Just & Equitable Ground   Cypriot Courts have used English case law as guidance, on deciding on the...

Tuesday, 15 September 2020 11:53

  CYPRUS: BILATERAL AGREEMENT BETWEEN CYPRUS AND THE UNITED STATES   The Cyprus Tax Department announced that the bilateral Competent Authority Arrangement (CAA) for the exchange of...

Thursday, 10 September 2020 15:07


Tuesday, 28 July 2020 10:35

  Cyprus: Cyber Libel or Defamation committed through the Internet and jurisdiction of Cypriot Courts   We live in a society where people fought to secure their right of freedom of expression....

Friday, 10 July 2020 11:19

  Cyprus: Enforcement of Arbitral Award – Are the criteria of Article IV of New York Convention rigid rules?   In the recent decision of the District Court of Nicosia in Smagin ν. Kalken Holdings...

Wednesday, 01 July 2020 16:53

  CYPRUS: The Bilateral Treaty between Russia-Cyprus does not give jurisdiction to Cypriot Courts to adjudicate on an application filed directly by a judgment creditor for enforcement of Russian...

Tuesday, 23 June 2020 14:51

  Cyprus: Corporate Measures undertaken by the government in response to COVID-19   As part of the measures taken by the Cypriot government to support companies/businesses affected by the...

Friday, 19 June 2020 10:16

  CYPRUS: Cypriot Courts do not have jurisdiction to adjudicate on an application for enforcement of foreign judgments and foreign arbitration awards when both applicant judgment creditor and...

Wednesday, 17 June 2020 11:47

  Cyprus -Russia. Cyprus Double Tax Treaty   What will happen to Cyprus Russia Double Tax Treaty?   A rather unexpected announcement by the Russian President, on 25 March 2020 made in an effort...

Thursday, 04 June 2020 12:09

  CYPRUS: English Guidance on the Correct Test to Apply for Existence of Legal Advice Privilege   In a recent judgment issued by the English Court of Appeal in R ( Ltd) -v- Civil Aviation...

Wednesday, 20 May 2020 09:40

  CYPRUS: Guidance from common Law cases, regarding the requirements to be met by an Applicant for the issue of a Court order to place a voluntary liquidation of a Cypriot Company, under...

Monday, 04 May 2020 11:44

  CYPRUS: Power of the Court to Order the Continuation of a Mareva Injunction and Receivership Post Judgment, in Aid of Execution   Under Cyprus Law, any interim order or interim relief granted...

Tuesday, 14 April 2020 16:48

  CYPRUS: Creditors who have locus standi to petition the winding up of a Cypriot Company   Section 213 of Cyprus Companies Laws CAP. 113 (“CAP. 113”), provides about the persons who have locus...

Monday, 06 April 2020 16:14

  Soteris Pittas & Co LLC contributes the Cyprus Chapter for the 12th edition of the Dispute Resolution Review   Soteris Pittas & Co LLC is pleased to announce that the 12th edition of...

Thursday, 05 March 2020 15:21

  Cyprus: Necessary Ingredients for Ascribing Accessory Liability to Third Parties for Dishonest Assistance   The main authority on the subject of dishonest assistance is the case of Royal Brunei...

Thursday, 13 February 2020 10:52

  Cyprus: Attributing the Knowledge of a Person to that of the Corporation   On the issue of attribution of knowledge of a person to a corporate entity, Cypriot Courts have in inter alia the...

Wednesday, 05 February 2020 10:59

  Security for the Loan. Fixed and Floating Charges under Cyprus Law.   Charges under Cyprus law, can be of a fixed and floating nature, (i.e fixed and floating charges). Fixed and floating...

Thursday, 30 January 2020 10:02

  CYPRUS: When a Cypriot Company shall be deemed “insolvent”, thus giving jurisdiction to Cypriot Court to issue a winding order   Section 211 (e) of Companies Law CAP. 113 (“CAP. 113”),...

Friday, 24 January 2020 11:27

  Double Tax Treaty between Cyprus and Republic of Kazakhstan   On May 30th, 2018, the successful final round of negotiation within the conclusion of the negotiation of the Convention for the...

Thursday, 09 January 2020 12:03


Subscribe to our Publications

We are dedicated to providing our clients with outstanding, highly personalized, legal representation.
Chrysanthou Mylona 10 
3030 - Limassol, Cyprus
© Soteris Pittas & Co LLC. All Rights Reserved.