CYPRUS Law and Practice Contributed by: Ioanna Solomou, Stephanos Ayiomamitis, Andria Kouloumi and Lefteris Eleftheriou, Michael Kyprianou & Co LLC
Directors’ remuneration for public listed companies’ directors’ remuneration shall follow the following prin - ciple: “Companies should establish a formal and transpar - ent procedure for developing a policy on executive director’s remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his/her remuneration.” This generally requires shareholder approval of the remuneration policy and a binding or advisory vote on remuneration reports, depending on the struc - ture adopted by the company. Additionally, there are extensive disclosure obligations for public listed com - panies, including detailed reporting of directors’ remu - neration in annual reports and remuneration reports, which must be made publicly available to sharehold - ers and filed with the relevant authorities. Failure to comply with the above requirements may result in a range of consequences, including civil liabil - ity for breach of fiduciary duty, restitution of improperly paid remuneration, shareholder claims and, in certain cases, regulatory sanctions for directors of regulated entities. In Cyprus, the relationship between a company and its shareholders is primarily contractual in nature, arising from the Companies Law and the company’s memorandum and articles of association, which bind the company and its members as if each had signed them. Shareholders are the owners of the company but do not manage its day-to-day affairs. The share - holders exercise their rights through general meetings, voting, and the appointment or removal of directors. Their rights typically include receiving dividends (if declared), attending and voting at meetings, and shar - ing in surplus assets on a winding-up. This relationship is governed by statute, the compa - ny’s constitutional documents and, where applicable, shareholders’ agreements, as well as general princi - ples of company law such as minority protection (eg, 4. Shareholders 4.1 Companies and Shareholders
remedies for unfair prejudice) and directors’ fiduciary duties owed to the company. As for transparency, Cyprus companies are required to maintain a register of members (shareholders). Basic shareholder information is filed with the Reg - istrar of Companies and is publicly accessible (sub - ject to payment of a fee), meaning that the names of registered shareholders can generally be obtained from official records. However, additional beneficial ownership information may also be recorded in the separate ultimate beneficial ownership (UBO) regis - ter in accordance with anti-money laundering (AML) regulations. 4.2 Role of Shareholders Shareholders do not typically participate in the day- to-day management of the business, since the man - agement of the company is generally vested in the board of directors in accordance with the Companies Law. Their role is mainly limited to exercising con - trol through general meetings, such as appointing and removing directors, approving certain reserved matters, and voting on key corporate decisions (eg, amendments to the articles or major transactions). As a general rule, shareholders cannot directly instruct or bind the board in the exercise of its management powers, unless the articles of association expressly provide otherwise. However, shareholders may influ - ence management indirectly by passing resolutions (particularly where specific matters are reserved for shareholder approval) or by changing the composition of the board. In closely held companies, shareholders’ agreements may also regulate decision-making and effectively require directors to act in a certain way, although directors must still comply with their fiduci - ary duties to act in the best interests of the company. 4.3 Shareholder Meetings Shareholder meetings are required under the Com - panies Law. Every company must hold an annual general meeting (AGM) each year (with the first AGM held within 18 months of incorporation and thereafter no more than 15 months apart), unless it is a single- member private company, which may dispense with AGMs by written resolution. In addition to AGMs, extraordinary general meetings (EGMs) may be con -
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