We are normally engaged to issue legal opinion letters where a Cyprus incorporated company is involved in a transaction. In most cases the Cyprus Company belongs to a group of companies which are incorporated in other jurisdictions. The most common transactions are loans from banks or other lending institutions outside Cyprus. In most cases the Cyprus Company is a guarantor or provides collateral or security for the loan or credit facilities such security could include pledging of shares they hold in other companies outside Cyprus.
The object of the legal opinion is to ensure that, in case of liquidation the bank will be protected or in case of default or otherwise in the loan repayment or of other breach of the loan agreements the bank will be able to call in their security within the course of pursuance of recovery or of legal proceedings. The legal opinion provides assurance that the Cyprus company providing the security for the loan is of good standing with full capacity to enter into the loan agreement and in general that there was full compliance with Cyprus law.
B. Nature of Legal Opinion
Legal opinion is the instrument that allows parties to a transaction to obtain a qualified opinion from a Counsel on the subject, object and other issues related to the conclusion of the transaction. It is a document drawn up by a competent lawyer on any specific question or problem.
Before entering into any commercial transaction, the parties to such a transaction must carefully consider the nature and volume of the transaction, as well as legal issues related to it.
A legal opinion for a bank is necessary in order to ensure that the activity carried out by the Cyprus Company is legal and does not contradict the legislation of the country of incorporation. A legal opinion for a bank is also necessary in order to reduce risks in case of liquidation or loan defaults. The legal opinion for the bank will confirm that the Cyprus Company carries out its activities without violating the laws of Cyprus and that it is of good standing and has the legal capacity to provide the security for the loan.
A proper legal opinion for the bank is characterized by strict language, clarity of the issues to be addressed and clear conclusions and answers with reference to the existing legislation and judicial precedent.
It is important to remember that drawing up a legal opinion on absolutely any issues, we are responsible for our opinions, as we conduct legal and factual research, analysis and verification.
It is for this reason that providing a legal opinion is a rather specialized assignment demanding thorough knowledge of the subject, skills and experience which we certainly possess as legal opinions fall within the main stream of the legal work we handle.
The law does not establish any specific form that a lawyer must adhere to when drawing up a legal opinion. Having said that legal opinion has a certain form developed over the centuries, by practicing lawyers from countries around the globe.
C. Structure of a Legal Opinion
The legal opinion is addressed to a specific banking institution or other entity, defines the exact issues to be addressed and the specific points to be looked at and the answers to be given. The legal documents that must be scrutinized are specifically listed, the assumptions relied upon and qualifications to which the opinion is subject are outlined. The common wording which is used before proceeding in expressing the conclusion of the issuer of the opinion is ‘’ on the basis of the forgoing assumptions and subject to the qualifications set forth below we are of the opinion so far as the laws of Cyprus as at the date of this opinion are concerned that:-‘’
A legal opinion is an educated expression of opinion on the various legal issues to be addressed supported by reference to legal provisions and judicial precedent as studied and relied upon and understood by an experienced and capable lawyer.