CYPRUS Law and Practice Contributed by: George Middleton, Christoforos Iosif and Michalis Kramvis, Chryssafinis & Polyviou LLC
for unfair prejudice or oppression against minority shareholders; and • requesting a general meeting to propose and con- sider resolutions to effect changes in the company (such as changes to the composition or conduct of
reducing waste and enhancing procurement, eliminating or minimising administrative and selling costs, etc); • aiming to maintain a good relationship with share- holders while making sure their concerns are prop- erly addressed and resolved in an optimal manner; • regularly evaluating its capital structure and invest- ments – if a company is at a peak or downside, cash should be used to pay dividends and return capital to shareholders; • evaluating its customer strategy and reviewing rev- enue sources (as not all revenue is good revenue), and evaluating whether the company has unprofit- able customers; and • monitoring or paying attention to any looming activist activity in Cyprus or across the global mar- ket, to assess potential areas of attack or share- holder activists’ concerns. If faced with an activist shareholder, it is vital for a company to prepare well ahead of the general meeting in the following ways: • researching the activists to understand their back- ground, previous actions, goals and weaknesses before engaging with them; • being careful before disclosing any insider and sensitive information of the company to share- holder activists and understanding their concerns before doing so; • being careful how it publicly responds to share- holder activists, to avoid any defamatory state- ments; • promoting that it is taking all reasonable steps to resolve the issues brought forward by the activists; and • communicating with its shareholders and advisers to fully appreciate the views of its shareholders and the public, and the issues raised by the sharehold- er activists.
the board of directors). 11.4 Recent Trends
Companies and directors have been more suscepti- ble to shareholder activism since the global economic crisis and its effects in Cyprus. A current trend is that directors may consider the effect of the environmental and communal operations of the company and the need to act fairly towards its shareholders in their effort to act in good faith and promote the success of a company for the benefit of its shareholders as a whole. Shareholders (and the public) expect a higher level of transparency, account- ability and liability from company directors when it comes to corporate governance, insider dealing and the suitability of each member of a company’s board of directors to manage a company. 11.5 Most Active Shareholder Groups Although there is no official database, there are strong indications that hedge funds are active in Cyprus. 11.6 Proportion of Activist Demands Met To date, there has been no disclosure of information on what proportion of activist demands are met. 11.7 Company Prevention and Response to Activist Shareholders Typical strategies that a company might consider in responding to shareholder activism include: • evaluating and scrutinising each board member’s independence and compensation, their skills and ethos, and (more importantly) whether their skills are sufficiently complementary to enable every member of the board to fulfil its responsibilities towards the company; • conducting regular strategic reviews to identify potential areas of challenge by shareholder activ- ists; • assessing its operating costs and considering ways to reduce costs (costs of services and goods,
Responding at a General Meeting At a general meeting, a company can:
• set out an action plan and strategy of the board of directors, establishing how the company will respond to the questions or issues raised by the shareholder;
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