CYPRUS Law and Practice Contributed by: Ioanna Solomou, Stephanos Ayiomamitis, Andria Kouloumi and Lefteris Eleftheriou, Michael Kyprianou & Co LLC
that there is sufficient independence and oversight over the board’s operations. 3.4 Appointment and Removal of Directors/ Officers Directors are appointed by an ordinary resolution of the members or by a resolution of the board. The members of a company may proceed with an ordinary resolution for the removal of a director from their office at any time. The members can proceed with the stated removal regardless of any provision in the articles of association of the company or any agreement between the director and the company. The removal of a director before expiry of their direc - torship period requires a special notice of 28 days. It is important to note that the law does not restrict the right of the director who is removed from their position to receive compensation or damages in respect of the termination of their appointment as a director. 3.5 Independence of Directors In Cyprus, directors’ independence and conflicts of interest are primarily governed by the Cyprus Com - panies Law, supplemented (for listed companies) by the Cyprus Corporate Governance Code. Directors owe fiduciary duties to act in good faith and in the best interests of the company, and must exercise independent judgement – free from external influ - ence or personal bias. Where a director has a direct or indirect interest in a transaction, they are required to disclose the nature and extent of that interest to the board, and typically must abstain from voting on the relevant matter (subject to the company’s articles). Public companies are also expected to have a suffi - cient number of independent non-executive directors, with independence assessed based on criteria such as absence of material business relationships or close ties with management. 3.6 Legal Duties of Directors/Officers Directors are subject to a range of statutory duties imposed not only by the Companies Law but also by other applicable legislation, including laws relating to income tax, VAT, customs and excise, health and safety, and environmental protection. Under the Com - panies Law, directors have specific statutory obliga -
tions towards the company, its shareholders and the public. These include duties relating to: • the maintenance of the register of directors and secretary; • the register of directors’ interests; and • the disclosure of payments for loss of office made in connection with the transfer of shares in the company. Directors are also required to disclose interests in con - tracts, comply with restrictions on loans to directors, and adhere to provisions governing prospectus offers and pre-emption rights in relation to the transfer of shares. Further obligations arise in relation to fraudu - lent trading, the preparation and filing of profit and loss accounts and balance sheets, and the prohibition of falsification of books or destruction of company documents. Additional duties apply in the context of winding-up, including those arising before or during liquidation proceedings. Directors must also ensure compliance with requirements relating to directors’ reports and annual returns, as well as the preparation and avail - ability of financial statements for review and investi - gation. 3.7 Responsibility/Accountability of Directors Directors owe their duties to the company and its members. Directors must: • act honestly and at all times in the best interests of the company; • not make secret profits; • not exceed or abuse their powers; and • use skill and care when exercising all duties. The duties of directors fall under two main categories: • duties of care and skill; and • duties of loyalty and good faith Duties of Care and Skill The law typically defines these duties based on the following principles:
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