CYPRUS Law and Practice Contributed by: George Middleton, Christoforos Iosif and Michalis Kramvis, Chryssafinis & Polyviou LLC
11.2 Aims of Shareholder Activism Financial Reasons The principal financial goals of an activist shareholder may include: • seeking to have the company return capital to its shareholders; • requiring the company to enter into a specific transaction (which may be beneficial to the com- pany) or to generate income to ultimately increase the share price so that they can make a profit from selling the shares; • setting the terms of a particular transaction; or • blocking the company from entering into a particu- lar transaction or carrying out business in a par-
• requesting an extraordinary general meeting (Sec- tion 126 of the Companies Law); • voting against resolutions (Section 135 of the Com- panies Law); • requiring the circulation or publication of a state- ment by the company (Section 134 of the Compa- nies Law); • removing a director (Section 178 of the Companies Law); • filing a court petition by minority shareholders (Section 202 of the Companies Law); or • pursuing a derivative claim. Additional regulatory/legislative provisions relevant to shareholder activism include: • the right of shareholders to receive information about statutory books and records (Sections 84, 99, 100 (1), 108, 187 (5) and 192 (6) of the Compa- nies Law); • the right of shareholders to receive information on audited financial statements (Section 152 of the Companies Law); and • the obligation of listed companies to provide for and secure the fair treatment of their shareholders (Section 130 of the Securities and Cyprus Stock Exchange Law (L. 14 (I)/1993) – the “CSE Law”). Case Studies In a recent much-publicised case, minority sharehold- ers (holding just over 10% of a publicly listed com- pany) contested the sale of a hotel by the company. They took various actions to achieve their objectives, including: • negotiating with the board of directors; • submitting resolution proposals to the general meeting for the cancellation of the sale of the hotel; • submitting a complaint to the Cyprus Securities and Exchange Commission (CySEC) on the basis of a breach of Section 130 of the CSE Law; • filing a court application for the winding-up of the company; and • filing a civil claim and seeking injunctions, dam- ages and other remedies against the company.
ticular sector or territory. Non-Financial Reasons
The principal non-financial goals of an activist share- holder include influencing the board of directors with
the ultimate goal to change: • the company’s strategy; or
• the composition of the board, installing directors who are more competent, ethical or environmen- tally friendly, or who have a different strategy aimed at improving corporate governance. 11.3 Shareholder Activist Strategies Shareholder activism is not particularly widespread in Cyprus. The activism strategy would depend on the particular goals of the shareholder(s) concerned and the shareholdings in the company held by its remain- ing shareholders. Key strategies that may be used by activist sharehold- ers include: • requesting a copy of the company’s share register to contact other shareholders and ensure that they are duly informed about the affairs of the company; • privately approaching the board of directors to voice concerns and, if these concerns are not addressed in a satisfactory manner, warning the board that legal and public action will be taken; • taking or threatening to take derivative action for breach of directors’ fiduciary duties, or a claim
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