Securitisation 2025 Comparisons

The assets (both consumer and business) that are most commonly securitised in Cyprus are collateralised loan obligations, including performing and non-performing credit facilities.

Securitisation of the aforementioned financial assets is usually for the purpose of financing the acquisition of a non-performing loan (NPL) portfolio, which occurs when the purchaser buys the loan portfolio directly from the original lender or via the acquisition of the company (special-purpose vehicle (SPV) or credit purchaser) to which the original lender has transferred the NPL portfolio. In particular, such financing is secured by creating collateral over the NPL and non-NPL portfolios (collectively, the loan portfolio), to the benefit of the financier.

The principal applicable laws and regulations that have a material effect on the structures referred to in 1.2 Structures Relating to Financial Assets are:

• the Sale of Credit Facilities and Related Matters Law (169(I)/2015) (the “Sale of Loans Law”), where the majority of the transactions held on the island involving financial assets were concluded pursuant to this law; and
• the Credit Servicers and Credit Purchasers Law (122(I)/2024) – this newly introduced law was enacted to transpose Directive (EU) 2021/2167 on credit servicers and credit purchasers into Cyprus law.

The Securitisation Law (88(I)/2018) transposes Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017, providing a general framework for securitisation (the “Securitisation Regulation”) in Cypriot law. However, it is not the standard legal regime under which the majority of the securitisation transactions occurred in Cyprus in the past few years, as described in 1.2 Structures Relating to Financial Assets.

The vehicles to which loan portfolios have been transferred by 8 November 2024 (such loan portfolios shall be referred to herein as “legacy portfolios”) were incorporated in Cyprus, as this was a requirement under the Sale of Loans Law (as defined in 1.3 Applicable Laws and Regulations), which secures the transfer of a loan portfolio by imposing a rebuttable assumption on the transfer. This law also ensures the updating of public registries, without the imposition of any expenses.

The credit enhancement tools used in securitisation financing transactions normally include:

• subordination between lenders (with the original lender having priority regarding the settlement of liability created through the loan portfolio transaction documents) through a waterfall debt repayment structure; and
• collateralisation via share pledges over (i) the SPV holding the loan Portfolio (as defined in 1.1 Common Financial Assets) and (ii) the subsidiaries that normally hold the immovable property assets obtained via the settlement of the debts of underlying debtors, and via assignment over the NPL portfolio receivables and charges over the bank accounts of the SPV.

The issuer is normally the person issuing notes, the proceeds of which are applied towards financing the acquisition of the SPV (as defined in 1.2 Structures Relating to Financial Assets). The issuer is normally held by businesses that are regulated as securitisation vehicles under the relevant Luxembourg law and are affiliates of the direct shareholder of the SPV.

The role of the sponsor (the initiator of the financing transaction) is normally held by another affiliate of the direct shareholder of the SPV (as defined in 1.2 Structures Relating to Financial Assets). The sponsor is normally another Luxembourg-registered entity and is the sole owner of the issuer.

The originator/seller under the Sale of Loans Law (as defined in 1.3 Applicable Laws and Regulations) is the original lender that sells the loan portfolio (as defined in 1.1 Common Financial Assets), and which often participates in the securitisation as a lender. The originators in the securitisation transactions that occurred in relation to legacy portfolios (as defined in 1.4 Special Purpose Entity (SPE) Jurisdiction) were Cypriot banking institutions. In the secondary market of sale of legacy portfolios, the originators/sellers will primarily be credit-acquiring companies, as defined under the Sale of Loans Law.

Underwriters and replacement agents are normally identified in the transaction documents under the term “arranger”, with said role normally being held by financial institutions known worldwide that undertake the role to attract investors and assist in arranging the financing mechanics. It is not mandatory for an underwriter and replacement agent to be appointed.

The financial assets referred to in 1.1 Common Financial Assets are managed by credit servicers, which are authorised under the:

• Sale of Loans Law (as defined in 1.3 Applicable Laws and Regulations) for transactions that were held before 8 November 2024; and
• the Credit Servicers and Credit Purchasers Law (as defined in 1.3 Applicable Laws and Regulations) for transactions held after 8 November 2024.

The Securitisation Law (as defined in 1.3 Applicable Laws and Regulations) applies to transactions where a “securitisation vehicle” is deployed.

Investors are persons who either hold interest in the purchaser of a loan portfolio or act as financiers in a securitisation transaction. These roles confer no responsibilities under the law but ensure compliance with the financing documents. Persons who hold interest in the purchaser of a loan portfolio are normally vehicles with no substantive operations and international vehicles in the form of investment funds, whereas financiers are normally European Economic Area (EEA) banking institutions.

Even though the appointment of a bond/note trustee is not required under the applicable laws, the securitisation structure normally entails the appointment of internationally reputable entities, which offer loan management, cash management and portfolio management services, as paying agents having the right to exercise the rights, powers, authorities and discretions of multiple financiers (noteholders) and have a role in co-ordinating the repayment of the notes and monitoring the allocation of the receivables of the SPV in specific accounts operating – and charged – in relation to the securitisation transaction (defined in 1.2 Structures Relating to Financial Assets).

The appointment of a security trustee/agent is not required under the applicable laws. However, the securitisation structure normally entails the appointment of internationally reputable entities, which offer loan management, cash management and portfolio management services, to act as security trustees/agents in the name of which the collaterals described under 1.5 Material Forms of Credit Enhancement are granted. The role of the security trustee largely relates to activities requiring the release and/or execution of any of the collaterals. The same person could be appointed as both the paying agent and the security trustee.

The transfer of a loan Portfolio to an SPV (as defined in 1.2 Structures Relating to Financial Assets) is, as a matter of practice, carried out via a scheme of arrangement ratified by a court, since the SPV is a subsidiary of the seller/original lender who is in turn a legal person registered pursuant to the Companies Law. A ratified scheme of arrangement is binding on the liquidator and thus bankruptcy remote.

The principal warranties in the documentation that capture the transfer of an SPV and a loan portfolio (as defined in 1.2 Structures Relating to Financial Assets) relate to representations of the original lender/seller regarding:

• the lawfulness of the origin of the loans and collaterals (receivables), their continuously prudent servicing, the minimum recoverable amounts thereunder and the perfection of the relevant collateral; and
• the financial standing and limited activities of the SPV.

The securitisation/financing documentation, on the other hand, grants investors rights of monitoring and imposes certain limitations on the ability of the SPV to dispose of its assets, in order to ensure the interests of the investors/financiers, while also making sure that the business/operation of the SPV, which primarily and often exclusively relates to debt collection, is not impeded.

Breach of the principal warranties triggers the dispute resolution mechanism set out in the documentation, which normally provides for amicable negotiations before the buyer has the right to bring a claim requesting damages for breach of contract.

The perfection of the assignment over NPL portfolio receivables and the charges over the bank accounts of the SPV, described in 1.5 Material Forms of Credit Enhancement, is completed by filing a registration notice with the Registrar of Companies; these are granted by the SPV, which is normally a Cyprus-registered company, and enforced in the manner described in 3.2 Principal Warranties.

Transfers of the financial assets described in 1.1 Common Financial Assets carry the following formalities/perfection requirements, depending on the law pursuant to which the transfer occurs.

• Sale of Loans Law (as defined in 1.3 Applicable Laws and Regulations):
1. pre-sale – the original lender/seller publishes its intention to sell the financial assets described in 1.1 Common Financial Assets in the Official Gazette of the Republic of Cyprus (the “Official Gazette”) – and in three newspapers with daily circulation – and by posting an intention letter 45 days prior to the sale, with the borrower/guarantor/security provider having the right to purchase the credit facility themselves; and
2. post-sale – the original lender/seller and the SPV notify, in writing, (i) the Registrar of Companies, the Land Registry, the Cyprus Stock Exchange and any other competent authority of the Republic of Cyprus that maintains a registry where the securities are kept, on the day after the transfer the latest; (ii) the borrower and security providers of the transfer, within 15 days; and (iii) the Central Bank of Cyprus (CBC) within five business days after the transfer, by giving information and data regarding the sale agreement date, the book value of the loan portfolio (as defined in 1.2 Structures Relating to Financial Assets) and the total number and value of the loans that are captured under the Arrears Management Directive (which captures loans with a balance up to EUR1 million), and – by the date after the transfer – giving details on the names and nationalities of the beneficial owners of the credit purchaser, provided they hold more than 10% in the latter.
• Credit Servicers and Credit Purchasers Law (as defined in 1.3 Applicable Laws and Regulations):
1. post-sale – (i) as soon as possible after the transfer date, the original lender/seller and the credit purchaser provide notice of the transfer date, and the date of their agreement, via publication in the Official Gazette; and (ii) as soon as possible after the transfer date, and by the next working day at the latest, the original lender/seller and the credit purchaser provide notice of the transfer to the Registrar of Companies, the Land Registry, the Cyprus Stock Exchange and any other competent authority of the Republic of Cyprus that maintains a registry where the securities are kept.
• Securitisation Law:
1. pre-sale: the original lender/seller shall notify the underlying borrower/guarantor/security providers of its intention to transfer the relevant credit facility either via publication in three newspapers with daily circulation or via a written notice to each borrower/guarantor/security provider; and
2. post-sale: as soon as possible after the transfer date, the Registrar of Companies, the Land Registry, the Cyprus Stock Exchange and any other competent authority of the Republic of Cyprus that maintains a registry where the securities are kept is to be notified of the transfer.

The principal covenants in securitisation/financing documentation are normally divided into the following categories:

• financial covenants of the issuer (as described in 2.1 Issuers) relating to, among other things, the ratio of the value of the real estate assets that form part of the transaction (either as charged properties securing the loan portfolio or as real estate properties owned by an SPV following the application of restructuring solutions to the loan portfolio) against the contractual value  of the loan portfolio (as defined in 1.2 Structures Relating to Financial Assets); and
• obligor undertakings given by the issuer, the guarantor (which is often the credit purchaser) and the credit purchaser’s subsidiaries that hold real estate property relating to, among other things, obtaining all relevant authorisations and acting in compliance with all applicable laws and underlying agreements when servicing the loan portfolio (as defined in 1.2 Structures Relating to Financial Assets), bound by certain restrictions with regard to the disposal of the loan portfolio’s assets and the creation of financial indebtedness.

These covenants are enforced in the manner described in 3.2 Principal Warranties.

The principal servicing provisions in securitisation/financing documentation oblige the credit purchaser/SPV (as defined in 1.2 Structures Relating to Financial Assets) to enter into a servicing agreement, the terms of which must be reasonably acceptable to the majority of the investors (whose role is discussed in 2.6 Investors), with an authorised credit servicer. The termination of the relevant servicing agreement is also regulated under the servicing provisions.

These provisions are enforced in the manner described in 3.2 Principal Warranties.

The principal defaults in the securitisation documentation are the unremedied failure of payment by the issuer (as described in 2.1 Issuers) on the due date; any misrepresentation by the issuer, the guarantor (which is often the credit purchaser) or subsidiaries of the credit purchaser that hold real estate property; any cross-default of existing financial indebtedness; insolvency; misappropriation of the proceeds; unauthorised reduction of share capital; and violation of the negative pledge.

These defaults are enforced in the manner described in 3.2 Principal Warranties.

The principal indemnities in the securitisation documentation usually cover the indemnification (as discussed in 2.1 Issuers) of:

• any investor (as discussed in 2.6 Investors) against any payments/obligations/liabilities incurred under the relevant finance documentation by the issuer;
• the bond/note trustee (as discussed in 2.7 Bond/Note Trustees) and the security trustee/agent (as discussed in 2.8 Security Trustees/Agents) against any loss/liability incurred in relation to the performance of their duties, except where the loss/liability was caused by the latter’s negligence or wilful misconduct; and
• the financial parties involved (eg, investors/noteholders, bond/note trustee) where any payment by the issuer is made in a currency other than the one prescribed as the currency in which payments are to be made under the securitisation documentation, or where violation of the securitisation documentation’s undertakings, representations or warranties results in loss/liability.

These indemnities are enforced in the manner described in 3.2 Principal Warranties.

The terms and conditions relating to bonds/notes are customarily included in a subscription/facility agreement, which mainly covers the following:

• the conditions that need to be satisfied in order for an investor/noteholder to be required to subscribe for the said bonds/notes/securities, and the procedural steps that need to be taken in order for the subscription to be completed;
• the repayment schedule, including the circumstances that trigger the obligation of mandatory prepayment (such as a change of control) and the right of prepayment;
• the payment terms, including the distribution and allocation of amounts received by the obligors (as described in 3.4 Principal Covenants) to the accounts opened and maintained in the name of the bond trustee (as discussed in 2.7 Bond/Note Trustees), financial terms, including the calculation and payment terms of the interest, and risk allocation provisions covering potential market disruption events and increased costs due to any changes in applicable law; and
• the negotiated and agreed warranties (discussed in 3.2 Principal Warranties), covenants (discussed in 3.4 Principal Covenants), defaults (discussed in 3.6 Principal Defaults) and indemnities (discussed in 3.7 Principal Indemnities).

The use of derivatives is not customary in Cyprus. The market practice is for hedging agreements to be entered into by the issuer (as discussed in 2.1 Issuers) to hedge against interest rate risks in connection with the securitisation documentation.

It is not mandatory to prepare an offering memorandum/prospectus to accompany an application for the shares or debentures of a company incorporated pursuant to the Cyprus Companies Law, Chapter 113 where:

• the shares or debentures are privately offered; or
• the application is a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures.

The preparation of an offering memorandum/prospectus is mandatory where the shares (or other securities) are offered to the public or admitted to trading in a regulated market, per the Public Offer and Prospectus Law.

The disclosure obligations for securitisation transactions derive from the Securitisation Law (defined in 1.3 Applicable Laws and Regulations) and the directives issued by the CBC pursuant to said Law.

The CBC (as defined in 4.1 Specific Disclosure Laws or Regulations) has yet to issue directives regulating disclosure under the Securitisation Law, but the general rules applicable impose the following obligations on securitisation special purpose entities (SSPEs; as defined in 6.1 Insolvency Laws) and the servicers:

• allow duly authorised officers of the CBC, or qualified persons who have been appointed for this purpose, to enter their premises and investigate their operations and activities, while granting them access to any books, documents, records or/and information deemed necessary for carrying out their supervisory activities – persons who obtain access shall treat all information as confidential; and
• all processing of personal data of the borrower and/or guarantor for the purposes of securitisation, including during the negotiation phase (irrespective of whether a deal is concluded), shall be treated in compliance with the General Data Protection Regulation (GDPR) and the national legislation transposing it into Cypriot law – the persons entitled to receive such information are identified in the Securitisation Law, namely the CBC, an SPE (or its authorised representative) and any consultants (including auditors) and credit rating agencies.

The Securitisation Law does not include any risk retention provisions. However, the Securitisation Regulation (as defined in 1.3 Applicable Laws and Regulations) includes risk retention obligations that shall be applied to all originators operating under the Securitisation Law since the Securitisation Regulation is directly applicable and enforceable against Cypriot citizens.

Under the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations), SPEs (as defined in 6.1 Insolvency Laws) and authorised servicers are jointly and separately responsible for submitting to the CBC (as defined in 4.1 Specific Disclosure Laws or Regulations), six months after the end of the financial year at the latest, the audited financial statements of an SSPE, including the auditor’s report and all necessary information, for assessment of the risks undertaken by the company.

The securitisation activities of rating agencies are not regulated under the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations).

The CBC (as defined in 4.1 Specific Disclosure Laws or Regulations) has the power to impose administrative sanctions and/or fines on banks that do not comply with their obligations regarding disclosure of exposures to securitisation positions (Business of Credit Institutions Law, Section 41D(1)(ib) and Article 449 of Regulation (EU) 557/2013).

As noted in 3.9 Derivatives, the use of derivatives in Cyprus is not customary, and no specific rules apply.

The Securitisation Law (as defined in 1.3 Applicable Laws and Regulations) includes several tools for the protection of investors, particularly the following.

• An SPE (as defined in 6.1 Insolvency Laws), prior to the commencement of its operation as a securitisation vehicle, shall be authorised by the CBC (as defined in 4.1 Specific Disclosure Laws or Regulations). To grant said authorisation, the CBC shall be satisfied that:
1. the memorandum of association or other constituting documents of the SPE shall provide that the activities of the SPE are limited to those reasonably required for conducting transactions intended or required to effect the securitisation and other related or ancillary activities;
2. the management body of the SPE shall be made up of persons who have good character and good repute and who are not members of the management body of the originator;
3. the servicer of the SPE is an entity that performs the servicing functions of the underlying securitisation assets, including those set out in the following, and can only be one of the regulated entities that are entitled to act as authorised servicers under the Securitisation Law in relation to (i) the segregation of assets and cash flows arising from the securitised exposures of an SSPE, so that they are clearly identified; (ii) the management of all cash inflows and outflows for each underlying exposure of a securitisation and the keeping of adequately detailed records; (iii) ensuring that the securitised exposures and any funds arising from – or in connection with – the securitised exposures held by the servicer for the account of the SSPE are held in a trust in favour of the SPE and shall not be available for any other creditor of the servicer; (iii) the collection and management of information related to the situation of the credit agreements, the borrower and the securitised exposures; (iv) providing information services to investors; (v) the management of the financial instruments of the securitisation; and (vi) the provision of information on the underlying exposures in order to update the central credit register (Artemis Credit Bureau).
• The (internal and external) auditor of an SSPE is required to immediately notify the CBC of any decision or event concerning the management of the SSPE that may, as he or she has become aware of during his or her audit:
1. constitute a breach of important legislative or regulatory provisions that put into question the conditions for authorisation of the servicer or govern the activities of the servicer;
2. affect the continuous and proper functioning of the SSPE; and/or
3. lead to refusal to certify the accounts, or to the expression of reservations or qualified or adverse opinion in his or her report for the servicer – the auditor carries out such notification simultaneously with the management body of the SPE and the servicer, as long as there are no compelling reasons to the contrary.

There are no principal laws or regulations that regulate the securitisation of financial assets by banks, other than the laws identified in 1.3 Applicable Laws and Regulations. Importantly, and irrespective of a bank’s support in a securitisation, banks shall continue to comply with their obligations under the Business of Credit Institution Law (the “BCI Law”), which is the domestic law that transposes Regulation (EU) 575/2013 (the “Capital Requirements Regulation” (CRR)) and Directive (EU) 2013/36 (the “Capital Requirements Directive” (CRD)) into Cypriot law.

In that respect, under the BCI Law:

• the CBC (as defined in 4.1 Specific Disclosure Laws or Regulations) determines the level of liquidity requirements necessary to capture liquidity risks to which a bank is, or might be, exposed on the basis of, among other things, a review and evaluation carried out in accordance with Annex III, which covers the extent to which the funds held by the bank in respect of assets that it has securitised are adequate in regard to the economic substance of the transaction, including the degree of risk transfer achieved – furthermore, if a bank is found to have provided implicit support to a securitisation on more than one occasion, the CBC shall take appropriate measures reflective of the increased expectation that it will provide future support to the securitisation, thus failing to achieve a significant transfer of risk; and
• the CBC may impose sanctions where a bank is exposed to the credit risk of a securitisation position without satisfying the conditions set out in Article 405 of Regulation (EU) No 575/2013 (noting that the requirements on risk retention that were laid down in Article 405 of Regulation (EU) No 575/2013 are now laid down in Article 6 of Regulation (EU) 2017/2402, as explained in the Commission Delegated Regulation (EU) 2023/2175).

An entity that is entitled to lawfully act as a securitisation special purpose entity (SPE; as defined in 6.1 Insolvency Laws) in compliance with the Securitisation Law is a person who:

• is established as a limited liability company, trust or other legal entity for the purpose of taking on one or more securitisations; and
• has activities limited to those necessary for the achievement of this purpose, and a structure or contractual provisions that are intended to separate the obligations of the SPE from those of the originator (the SPE does not include the originator).

Concerning whether there any activities that SPEs or other securitisation entities try to avoid in order not to be regulated in certain ways, please refer to 4.10 SPEs or Other Entities.

No government-sponsored entities participate in the securitisation market in Cyprus.

Entities investing in the securitisation transactions described previously are normally investment firms and credit institutions operating in the EEA.

There is no applicable information in this jurisdiction.

Synthetic securitisation (ie, securitisation where the transfer of risk is achieved by the use of credit derivatives or guarantees, and the exposures being securitised remain exposures of the originator) is permitted in Cyprus, provided the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations) is complied with. It is not customary to use synthetic securitisation in the Cypriot market.

Generally, insolvency laws can affect securitisation/Cypriot SPEs in the same manner in which they affect any other legal entity, since the Companies Law (Chapter 113) – which regulates the winding-up of Cypriot limited liability companies – is applicable to SPVs, which are regulated as securitisation SPEs under the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations), and neither the credit servicers nor credit purchasers regulated under the Sale of Loans Law and the Credit Servicers and Credit Purchasers Law, respectively, are immune to the Cyprus insolvency law (ie, the Companies Law, Chapter 113). The main difference with respect to the impact of insolvency laws on securitisation/SPEs and other entities is that the winding-up of an SPE requires the involvement of the competent authority – ie, the CBC (as defined in 4.1 Specific Disclosure Laws or Regulations).

Please refer to 6.3 Transfer of Financial Assets and 6.5 Bankruptcy-Remote SPE for more details on the impact of insolvency on securitisation transactions.

An SPE (as defined in 6.1 Insolvency Laws) shall abide by the requirements set out in 4.8 Investor Protection, which include the appointment of a servicer to manage the pool of purchased receivables or the underlying credit exposures on a day-to-day basis, determining which servicer shall be authorised by the CBC (as defined in 4.1 Specific Disclosure Laws or Regulations) and the submission of an application documenting the servicer’s compliance with the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations), which in turn provides that the servicer shall comply with the Directive on Internal Governance of Credit Institutions (which currently provides that the management body shall comprise at least seven – but no more than 13 – members, two of which shall be executive, and the majority independent).

Under the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations), where the exposures are transferred or assigned to an SPE (as defined in 6.1 Insolvency Laws) in compliance with the provisions of said Law for the purposes of securitisation – notwithstanding the provisions of any other law or directives issued pursuant to the Securitisation Law that apply to the originator, the SPE, the underlying debtor or any other third parties – the transfer of exposures from the originator to the SPE is final, absolute and binding for any insolvency official appointed for the purpose of liquidation of the originator/transferor, irrespective of the date of his or her appointment.

In particular, the transfer is absolute and a true sale is effected, separating the titles of the exposures from the originator, once the predetermined conditions agreed by the originator and the SPE are satisfied. However, this only applies if the transfer or assignment relates to the total amount of each exposure – and not to only part of it – and is made in writing and signed by, or on behalf of, the originator and the SPE and is appropriately witnessed.

Furthermore, under the Securitisation Law, an originator that intends to transfer exposures to an SPE for securitisation purposes shall provide notice of its intention within 30 calendar days before proceeding with the transfer of said exposures by:

• publishing notice of the transfer in a prominent position in three newspapers with daily circulation; or
• providing written notification to the underlying borrowers, collateral providers and guarantors of such exposures.

A notification, either by way of publication or written notification, includes the following information and assurances:

• any charges or taxes relating to the transfer and securitisation of the exposures and related collaterals to the SPE are not borne by the underlying debtor;
• the transfer of exposures from an originator to an SSPE, for the purposes of securitisation, does not affect the rights and responsibilities of the underlying debtor with regard to the process laid down in the Code of Conduct, which is annexed to the Arrears Management Directive, or another procedure that is applicable to and applied by the originator on the basis of the existing legislation or/and directives of the CBC;
• the transfer of exposures from an originator to an SPE, for the purposes of securitisation, does not affect the right of the underlying debtor to submit an application for an insolvency settlement, nor the right of the underlying debtor or other persons concerning the appointment of an examiner pursuant to Part IVA of the Companies Law;
• any procedure that is in progress pursuant to the Insolvency of Natural Persons (Personal Repayment Schemes and Debt Relief Orders) Law or Part IVA of the Companies Law is not affected by the transfer and continues to be carried out by the underlying debtor and the servicer;
• an explanation in relation to the application, or not, of the right of set-off in the event of liquidation of the originator under Section 298B of the Companies Law; and
• information as to the identity of the servicer, clarification that the servicer henceforth assumes the role of the data protection officer, and an explanation to the debtor of the duties of the data protection officer that arise from Regulation (EU) 2016/679 and the Cypriot law transposing it.

Under the Securitisation Law (as defined in 1.3 Applicable Laws and Regulations), no proceedings taken in relation to the originator under the Resolution of Credit Institutions and Investment Firms Law, including any resolution, liquidation or dissolution proceedings, early intervention measures or reorganisation, and any proceedings affecting creditors’ rights, shall have any effect on:

• the SPE (as defined in 6.1 Insolvency Laws), including the rights thereof in relation to either the securitised exposures or the originator; or
• securitised exposures, cash flows or any other assets in respect of the securitised exposures.

In Cyprus, it is customary to include limited recourse provisions in the securitisation documentation.

Generally, no taxation is imposed on an SPE due to the transfer thereto – from the originator – of the financial assets discussed in 1.1 Common Financial Assets. Tailored tax advice, which may vary depending on the type of securitisation transaction, is obtained by tax practitioners who are directly engaged by the issuer and/or the sponsor (described in 2.1 Issuers and 2.2 Sponsors, respectively).

A Cypriot tax resident is obliged to pay tax – at the rate specified in Law No 118(I)/2002 (the “Income Tax Law”) – on income accruing or arising from sources both within and outside the Republic of Cyprus, in respect of its revenue in the form of, among other things, interest that constitutes part of its normal business activities. Therefore, an SPE would be liable for payment of such taxes if it is a Cypriot tax resident. Tailored tax advice is normally obtained by tax practitioners who are directly engaged by the issuer and/or the sponsor, as described in 2.1 Issuers and 2.2 Sponsors, respectively.

Where the SPE is not a Cypriot resident, withholding tax (under the Special Contribution to the Defence Fund Law) could be imposed on any interest or dividend it receives if it is a tax resident (only) in a jurisdiction that has been classified by the EU as noncooperative for tax purposes, and if it receives dividends from any company that is a Cyprus tax resident.

Tailored tax advice is normally obtained by tax practitioners who are directly engaged by the issuer and/or the sponsor, as described in 2.1 Issuers and 2.2 Sponsors, respectively.

Pursuant to the provisions of the Cypriot Stamp Duty Law, stamp duty is imposed on, amongst others, agreements and/or other kinds of documents that refer to any asset that is in Cyprus, or to matters or things that will be performed or take place in Cyprus irrespective of whether these documents were executed in Cyprus or abroad. Where an agreement for which stamp duty is imposed is executed outside Cyprus, it shall have no admissibility in any court in Cyprus unless it is duly stamped. Therefore, the transfer of receivables documentation and financing/securitisation documentation (both discussed in 3.2 Principal Warranties) will as a matter of principle require the payment of stamp duty.

In accordance with Law No 95(I)/2000 (the “VAT Law”), VAT is charged on (among other things) the delivery of services within Cyprus. Therefore, an SPE will be required to either charge, or be charged with, VAT for any services that it supplies or is the recipient of to the extent that the conditions for the imposition of tax under the VAT Law are satisfied.

However, tailored tax advice is normally obtained by tax practitioners who are directly engaged by the issuer and/or the sponsor, as described in 2.1 Issuers and 2.2 Sponsors, respectively.

Legal practitioners do not give tax opinions for securitisation transactions in Cyprus.

No significant legal issues arise in Cyprus in connection with the accounting rules that apply to securitisations.

Concerning how legal practitioners deal with such legal issues, please refer to 7.4 Other Taxes and 7.5 Obtaining Legal Opinions.