The issuance of a Charging Order constitutes an execution method when followed by an Order for Sale of the charged asset, as provided by the Law on Charging Orders of 1992 (31 (Ι)/1992) (the ‘Law’). Below, we examine the main provisions of the Law in an attempt to clarify its application and spirit.
Article 3 of the Law states that, following a judgment or order of the Court, the person called to pay the debt (the ‘Judgment Debtor’) to another person (the ‘Judgement Creditor’), is entitled, for the purpose of enforcing the judgment, to apply to the Court for the issuance of a Charging Order over the interest of the judgment debtor in assets which are covered by the Law with the purpose of securing payment of the amount owed. The amount charged is the amount which the Creditor is owed under the terms of the judgment, plus accrued interest and costs.
For this purpose, Article 4 of the Law specifies the assets for which a Charging Order may be issued on the interest of a Judgment Debtor to the kinds of assets as mentioned below:
To avoid any doubt, Article 2 provides the following definition of the word “Stock” as follows:
“stock includes shares, debenture and other securities of the legal entity, irrespective of them constituting or not a charge on the assets of the said legal entity”
Article 3(5) also indicates that any Charging Order issued may extend to any dividend or income payable regarding the charged asset. Furthermore, any Charging Order issued ex parte can, on the basis of an application by the Debtor or a person having an interest in the charged asset, be annulled or amended by the Court.
The Law governs the issuance of two types of charging orders: the issuance of final orders as mentioned by Article 3 of the Law and the issuance of interim orders as mentioned by Article 9 of the Law. Final orders are issued for the purposes of judgement execution, while interim orders are issued pending the court proceedings and are governed, in addition to Article 9 of the Law, by Article 7 and 9 of the Civil Procedure Law, Cap 6 and Article 32 of the Courts of Justice Law 14/60. We will only deal with final Charging Orders for the purposes of the present publication.
The Court must, on the issuance of a Charging Order, clarify and set the corresponding consequences for each charged asset as mentioned in Article 5(1). So, for example, in the case of a unit trust the Court will set as a consequence, according to Article 5(1)(d), a prohibition on the acquisition of units or of transactions related thereto by any physical or legal person exercising responsibilities in accordance with the trust. In addition, the effect of a Charging Order is to prevent any legal entity from registering any transfer or proceeding with any sale of the Debtor’s shares. The Court may set more than one consequence as the case requires, such as in the case of bonds held by a legal entity, thereby banning disposal and/or prohibiting payment of any dividend derived from the charged asset. Evidently, following service of such an Order, an obligation is imposed on any person served to comply with the contents of the Order.
It is important to note that the issuance of a Charging Order by itself does not constitute a method of execution. As mentioned, however, in the beginning, when paired with an Order for Sale, the issuance of both Orders included on a by summons application shall be deemed to be a method of execution. The law has recognized the ability to proceed with both remedies in a single application, as in the case of Ιωάννου (Σιαρματτά) v. Εμπορικής Τράπεζας της Ελλάδος Α.Ε. (2000) 1Γ Α.Α.Δ. 1463.
The satisfaction of the judgement debt is of paramount importance and it is to be considered as the driving force of all measures to be taken in this regard. This is the reason behind the provision (always within the context of reasonableness) of unlimited and in parallel use of execution measures as provided by Article 14 of the Civil Procedure Law, Cap 6.
Nevertheless, the Court retains discretionary powers to reject such an application if the measure applied for is considered oppressive. The meaning of oppression has recently been discussed and clarified by the case of Συνεργατικής Πιστωτικής Εταιρείας Στροβόλου Λτδ v. Σακκή κ.ά., Πολ. Έφ. Ε145/14, ημ. 15.11.19
A Sale Order is an Order issued by the Creditor with which any charged assets are sold, disposed of or liquidated. The Court, however, before issuing a Sale Order, must obtain the views of all interested parties, including the Official Receiver and Registrar of Companies, the company's advisors or other legal entity, with the purpose of verifying the interest of the Judgement Debtor and the interest of all those who may have interest on the charged assets or may be affected by the sale, liquidation or disposal. As a note, the sale of shares, which is the most frequently charged asset, is carried out under a public auction according to the provisions of Article 8 of the Law.
Furthermore, the Court retains the ability to appoint a Receiver upon examination of the Sale Order, in order to ensure the recovery of the secured amount. Following its appointment by the Court, the Receiver acquires the charged asset for the Creditor along with all rights and obligations of the Debtor over the charged asset until the Court repeals his appointment. The Receiver’s powers are further listed under Article 7(3) of the Law, separated in two categories: those provided only with the Court’s approval and those not demanding one.
Inevitably, one can come to the conclusion that the purpose of the Charging Order is the subsequent sale, disposal or liquidation of the charged assets.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Agis Charalambous, at telephone +357 22447777 or via email email@example.com