CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
8.3 Business Judgement Rule Cyprus courts do not typically engage in reviewing the judgement of the directors or the fairness of the terms of a bid relating to a takeover. Their judgement would not ordinarily be challenged by the courts unless spe - cific action is brought against directors for breach of their fiduciary duties in M&A transactions. This is very rarely encountered. 8.4 Independent Outside Advice It is relatively common (and, of course, advisable) for the directors to obtain independent legal advice before agreeing to or entering a business combina - tion. Also, subcommittees are sometimes assigned to make recommendations to the directors in relation to business combinations. Although it is relatively rare, directors may sometimes seek advice from independ - ent consultants. 8.5 Conflicts of Interest The Companies Law provides that directors have the duty to avoid conflict of interest. Unless the direc - tors are allowed to have a personal profit due to the constitution of the company or due to the fact that it has been approved at a general meeting, they must account to the company for the profit they receive if there is a conflict between their interests and the company’s interests. Under the Law in Cyprus, the directors can be sued for breach of this duty and may be found personally liable to the company for damages. If the director made a profit out of the business transaction, then they will be liable to pay that profit to the company. In general, however, a conflict of interest of directors has rarely been the subject of judicial scrutiny in Cyprus.
merits of the bid and provide their views on the effects of accepting the bid. 9.2 Directors’ Use of Defensive Measures Directors in Cyprus can use defensive measures only if they obtain the authorisation of the general meeting of shareholders. Until such approval, the directors are not entitled to take measures to obstruct or prevent a bid, with the exception of seeking alternative bids. 9.3 Common Defensive Measures Some of the defensive measures are described in the Takeover Bids Law in the context of anti-abuse provi - sions. Generally, such measures include: • issuance of shares; • suspension of transfer restrictions; • suspension of voting restrictions or enhanced vot - ing rights; • granting of enhanced voting rights; • entering into agreements with third parties or mak - ing offers (bids); • board appointments coupled with restrictions on Irrespective of any decisions at general meeting (approving defensive measures), the directors’ fiduci - ary duty to the company remains unchanged. This means that any defensive measure pursued must be in the best interests of the company. In addition, they must not put themselves in the position where their personal interest and the interest of the company and shareholders is likely to conflict. 9.5 Directors’ Ability to “Just Say No” In terms of a hostile tender offer or generally an offer for the acquisition of shares in a public company, the short answer is no, the directors are not at liberty to object to the offer as it is addressed to the share - holders. On the contrary, their actions to frustrate or delay (defensive actions) are regulated and require shareholder consent; and they are obliged to draw up and publicly release a document as soon as possible and in no more than 15 working days from receiving the offer, reporting their view of the bid, the possible effects of the implementation of the bid on the com - other appointments; and • seeking alternative bids. 9.4 Directors’ Duties
9. Defensive Measures 9.1 Hostile Tender Offers
Hostile tender offers are permitted in Cyprus and a bid may be accepted even when the board of the tar - get company does not recommend it. However, the directors must always act in the best interests of the company as a whole and present the holders of the securities with information in order to decide on the
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