CYPRUS Law and Practice Contributed by: Kyriacos Scordis, Sofia Tryfonos Avraam and Anna Borovska, Scordis, Papapetrou & Co LLC
prescribed under any regulations that may be imposed by the directors. Public companies are more likely to establish committees of directors, to deal with day-to-day matters or more special - ised or specific items. The Companies Law provides that a director having an interest in a contract or proposed con - tract shall disclose the same in a meeting of the directors, and therefore it is not necessary, nor common, for a separate committee to be estab - lished for the purposes of the matter at hand. The articles of association of a company will contain provisions that either prohibit such director from voting on such contract or restrict the conditions under which such director may vote, with the shareholders having powers to review such prohibition or restriction at general meeting. Public companies may be subject to an addi - tional requirement under the Code, to set up a Remuneration Committee consisting of non- executive (independent) directors to make rec - ommendations to the board to determine the remuneration and benefits of executive direc - tors. 8.3 Business Judgement Rule Cyprus courts do not typically engage in review - ing 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 specific 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, advis - able) for the directors to obtain independent
legal advice before agreeing to or entering a business combination. Also, subcommittees are sometimes assigned to make recommendations to the directors in relation to business combi - nations. Although it is relatively rare, directors may sometimes seek advice from independent consultants. 8.5 Conflicts of Interest The Companies Law provides that directors have the duty to avoid conflict of interest. Unless the directors 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 gen - eral meeting, they must account to the company for the profit they receive if there is a conflict between their interests and the company’s inter - ests. 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.
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 target 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 infor - mation in order to decide on the merits of the bid and provide their views on the effects of accept - ing the bid.
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