CYPRUS Law and Practice Contributed by: George Middleton, Christoforos Iosif and Michalis Kramvis, Chryssafinis & Polyviou LLC
various documents and registers kept by the company; and (k) have a share certificate issued to them in re- spect of their shares. • They can sue the company in order to compel it to conform to its constitutional documents and the rules governing the conduct of its affairs where the shareholders cannot remedy the defect com- plained of. • They can sue the company and the shareholders controlling the company if such shareholders use their power of control to defraud or oppress minor- ity shareholders. • They can petition the court for relief on the ground that the affairs of the company are being conduct- ed in a manner that is oppressive to certain mem- bers, including themselves. In such a case, the court may make any order it deems fit for remedy- ing the matters complained of if it is satisfied that the company’s affairs are being conducted oppres- sively and that the oppression would justify making a winding-up order on the ground that it is just and equitable, and may: (a) regulate the future conduct of the company’s affairs; (b) order that the shares of any shareholders shall be purchased by other shareholders or by the company; or (c) alter the company’s memorandum and articles. • Upon the application of members holding at least 10% of the company’s issued share capital, a shareholder can request the Department of Regis- trar of Companies to investigate the affairs of the company. • Subject to the satisfaction of certain conditions, they can file a derivative action for wrongs done to the company by its directors, majority shareholders or third parties. 10.2 Remedies Against the Directors Other than in the context of a derivative action, it will be very difficult and unlikely for a shareholder to succeed in legal proceedings against the company’s directors/officers. In the process of winding up a company, a sharehold- er may apply to the court for an order that a director or officer of the company who has misapplied or retained
or become liable or accountable for any money or property of the company, or who has been guilty of any misfeasance or breach of trust in relation to the company, repays or restores the money or property or any part thereof, or contributes such sum to the com- pany’s assets by way of compensation as the court In certain circumstances, a shareholder may bring a so-called “derivative action” in order to remedy a wrong done to the company or to compel the com- pany to conduct its affairs in accordance with its constitutional documents or the rules of law govern- ing it, even though no wrong has been done to said shareholder personally and even though the majority of their fellow shareholders do not wish the action to be brought. shall consider appropriate. 10.3 Derivative Actions The two basic requirements that will need to be satis- fied for a derivative action to be successful are that: • the alleged wrong or breach of duty is one that is incapable of being ratified by a simple majority of shareholders of the company; and • the alleged wrongdoers are in control of the com- pany, so that the company – which is the “proper claimant” – cannot claim itself. 11. Shareholder Activism 11.1 Legal and Regulatory Provisions Shareholder activism has become more noticeable over recent years, especially after the global economic crisis and its effects in Cyprus, but it is not particularly widespread in Cyprus, due to the very small number of Cypriot listed companies that have institutional and/ or sophisticated investors. The legal and regulatory tools used to facilitate share- holder activism could include: • posing a question at a general meeting (Section 128C of the Companies Law); • putting items on the agenda of the general meeting and tabling draft resolutions (Section 127B of the Companies Law);
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