CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Anna Borovska and Constantinos Kazamias, Scordis, Papapetrou & Co LLC
11. Activism 11.1 Shareholder Activism
pany’s interests and the reasons on which these are based. They must be ready to explain their opinion of the offer at all times, if requested. In the case of other business combinations, such as a merger offer, the directors are able to “just say no”, provided they are always acting in the best interests of the company, without putting the issue to the share - holders of the company.
Shareholder activism is not an established notion, nor is it particularly exercised in Cyprus, not least due to the size of the market, which is of no interest to large funds or strategic investors who would have the capa - bility and resources to support and carry out such activism. Having said that, since 2013 (which saw the collapse of the banking sector and thus destruction of shareholder value in relation to one public entity, creation of unwilling shareholders in another) and gen - eral changes in a number of public companies with the break-up of the dominance of existing sharehold - ing interests, there have been increased instances of shareholder activism. Overall, in Cyprus, the legislative framework of M&As provides for a greater degree of transparency and accountability from the board of directors in relation to corporate governance of the company but also the Companies Law provides shareholders with certain powers and rights to fair treatment, allowing them to initiate certain actions to protect themselves, such as the following: • to call meetings; • to pose questions at a general meeting; • to put items on the agenda of the general meeting and table draft resolutions; • to vote against resolutions; • to remove a director; and • to file a court petition for the protection of minority shareholder rights. 11.2 Aims of Activists Even though shareholder activism is a growing trend in Cyprus, it is still not very common for activists to encourage companies to enter into M&A transactions, spin-offs or major divestitures. 11.3 Interference With Completion As activist interference with completion is not a com - mon practice, it is difficult to comment. Having said that, it is more likely than not for activists to seek to interfere with the completion of announced transac - tions in Cyprus rather than other matters relating to a company.
10. Litigation 10.1 Frequency of Litigation
As one may expect, seasoned businesspeople seek to resolve disputes amicably but, from time to time, disputes do end up before a judge or a tribunal, for breach of conditions/representations/warranties, enforcement of rights or even the unwinding of an arrangement or other relief. 10.2 Stage of Deal There is no hard and fast rule as regards the stage of the deal at which litigation is commonly brought; each case depends on its particular circumstances. 10.3 “Broken-Deal” Disputes The business community in Cyprus has been impact - ed more due to the diminished international activity of companies involved with the Ukrainian or Russian markets as a result of the conflict and subsequent sanctions imposed by the US, UK and Europe, as opposed to the impact of the COVID-19 pandemic on transactions being frustrated and litigated in court over this. At the same time, the pandemic may well have caused issues for retail enterprises, leading to subsequent M&A activity. The COVID-19 pandemic did cause a re-think of trans - action documentation, so as to ensure that it includes (or includes more extensive) warranty and indemnity protections for such situations.
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