CYPRUS Law and Practice Contributed by: Marcos Georgiades, Dominique Pelides and Panayiota Elia, Georgiades & Pelides
4. Governance 4.1 Corporate Governance Requirements Law and Regulation The main sources of a bank’s corporate govern - ance requirements are as follows: • the Banking Law and directives issued by the CBC under the Banking Law (including the Governance Directives); • the Companies Law, which deals with the formation and management of companies in Cyprus, among other matters; and • common law (developed by case law); for example, the directors of a bank established in Cyprus are subject to a number of common law duties that apply generally to companies incorporated in Cyprus. In addition, the articles of association of a bank incorporated in Cyprus regulate (subject to the provisions of the Companies Law) matters such as shareholders’ and directors’ meetings, the powers of the directors and transfers of shares. The Banking Law and the Governance Directives require each bank to have robust governance arrangements, including a clear organisational structure with well-defined, transparent and con - sistent lines of responsibility, and effective pro - cesses to identify, manage, monitor and report the risks to which it is or may be exposed, as well as adequate internal control mechanisms, including sound administration and accounting procedures and remuneration policies and prac - tices that are consistent with and promote sound and effective risk management. Such arrange - ments, processes and mechanisms must be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the bank’s business model and activities.
directly or indirectly dispose of a qualifying hold - ing, or to reduce a qualifying holding below the thresholds referred to above, in a bank estab- lished in Cyprus, must provide advance notice to the CBC. Banks whose shares are admitted to trading on a regulated market must inform the CBC, at least on an annual basis, of the names of their members who hold a qualifying holding and their shareholding percentages. Additionally, informa - tion regarding the ultimate beneficial ownership of every shareholder holding 5% or more of a bank must be submitted to the CBC. In addition, under the Transparency Require - ments (Securities Admitted to Trading on a Reg - ulated Market) Law of 2007, Law No 190(I)/2007 (as amended), a person who acquires or dispos - es of shares in a bank admitted to trading on a regulated market that carry the right to vote must, within the required time period, notify the bank and the Cyprus Securities and Exchange Commission (“CySEC”) of the percentage of their voting rights if such percentage reaches or exceeds (or, in the case of a disposal, falls below) 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the total voting rights of the bank as a result of the acquisition. The bank must notify the CySEC and the Cyprus Stock Exchange (in its capacity as the national Mechanism for the Central Storage of Regulated Information) and publish the information on its website. The Business of Insurance and Reinsurance and Other Related Matters Law of 2016, Law No 38(I)/2016 (as amended) imposes additional reporting requirements if the bank concerned holds shares in an insurance undertaking.
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