The Contracts Law provides the legal framework for establishing legally valid and enforceable agreements in Cyprus. However, in real-life commercial situations, parties may not always achieve the certainty required to ensure that an agreement or contract term is valid and enforceable. The pressure associated with reaching an agreement often causes parties to defer important contract terms in order to close a deal at the expense of certainty and, ultimately, enforceability.
The provisions on the striking off of Cypriot companies set out in the Companies Law were recently amended to introduce a simplified process to reinstate a company which is struck off as a result of failure to file mandatory documents or to pay the annual levy to the registrar. The simplified process aims to enable companies that are struck off due to irregularity to be reinstated within two years, without having to resort to the courts
When an initial coin offering (ICO) is structured through a Cypriot company, directors' duties are highly relevant. The directors must approve the framework within which the ICO will be launched. While doing so, directors are legally required to protect the company's interests in line with their fiduciary duties. When directors also invest their own funds in an ICO, under Cypriot law, they must still maintain a conflict-free position.
Shareholder petitions of unfair prejudice have been compared to divorce petitions. Indeed, these shareholder disputes tend to carry the same level of acrimony, especially when courts are faced with the option of deciding the sale of one shareholder's shares to another. Fairness is at the heart of the courts' consideration when deciding cases of unfair prejudice and shareholder oppression.
Specific rules apply to the service of court and judicial documents and judgments issued by Cypriot or foreign courts in Cyprus. Among other things, companies must publish details of their registered offices with the Registrar of Companies upon incorporation and file a notification with the registrar within 14 days of any change of address. In addition, the private service of documents must be carried out by a Supreme Court-licensed private process server.
The concept of a 'golden share' was devised to maintain control of newly privatised companies as they adjust to the free market environment or to prevent takeover by overseas shareholders of private companies operating in fields of national interest. Cypriot company law is silent on the rights enshrined in golden shares. However, case law provides that golden shares represent a separate class of shares, which enable holders to exercise veto rights by having weighted voting rights on specific matters.
Shareholders of a Cyprus company have the right to request that the directors convene an extraordinary general meeting (EGM), and the directors are legally obliged to do so within a specified time. For the EGM to be legally valid, it must be made only by those who hold at least one-tenth of the company's paid-up share capital and have the right to vote in general meetings. Further, it must be signed and deposited at the company's registered office and must be called within 21 days of the request.
The EU Corporate Social Responsibility Directive regarding the publication of non-financial information by certain groups of large companies was recently transposed into domestic law. Pursuant to the Transposing Law, such companies must publish non-financial reports on how they address environmental protection, social responsibility, human rights, anti-corruption and bribery, and diversity on company boards in terms of age, gender and educational and professional backgrounds.
Shareholders' excitement over a new joint venture can be overshadowed when issues concerning the available options for exit from the investment arise for discussion. It is prudent for shareholders to address the full spectrum of their investment as early as possible, including the start-up stage and the operation of and exit from the investment. Company law and practice provide tools to create the boundaries necessary to protect shareholders' business relationships from third parties and each other.
The third amendment to the Companies Law recently took effect, substantially amending the information which must be included in financial statement reports. The director's report has effectively been replaced by a broader management report, which aligns with the increased transparency required in financial dealings. Failure to comply with the new reporting requirements constitutes a criminal offence and may lead to imprisonment of the company's officers and a fine.
A recent bill submitted to Parliament for review makes directors accountable to the Tax Department for taxes due on company assets. Under the bill, company directors or other persons exercising management and control over a company will be required to submit an annual return listing the company's assets. Further, they will be required to ensure that the company pays all taxes due to the relevant authorities.
The board of directors of a company cannot bring a claim against wrongdoers controlling the company to prevent the oppression of minority shareholders. Instead, an oppressed shareholder can bring a derivative claim under common law. The latest amendments to the Companies Law provided clarity to the operation of companies; it is worth examining the applicable rules of derivative actions in that context.
The Cyprus partnership law was recently amended to introduce the partnership limited by shares. Its introduction is expected to attract a significant number of investors from across the European Union; the vehicle is likely to be used in particular by Polish closed-end fund structures carrying out commercial transactions. The amending law has also made it possible for alternative investment funds to be formed as limited liability partnerships.
During a recent meeting of the Cyprus Bar Association's Committee for Company Law, committee members recognised the urgent need for the comprehensive review and modernisation of company law and governance. The issue has also been raised in Parliament and hopefully marks the start of a new way forward for company law and governance to meet the needs of today's businesses.
A new law on the regulation of fiduciaries, administration businesses and company directors is expected to be tabled before the House of Representatives before the end of 2012. Among other things, it aims to regulate the provision of administration services to companies and establish licensing procedures and rules on the provision of corporate services, offering security to clients and strengthening confidence in the sector.
The Companies Law provides that each company with subsidiaries must consolidate its financial accounts with those of its subsidiary companies as prescribed by international accounting standards. The basic provisions of the law on consolidated accounts were recently amended to illustrate the circumstances in which companies may be exempt from these obligations.
In July 2010 Cyprus took action to implement the EU Shareholder Rights Directive by transposing it into the Company Law by virtue of Amendment Law 60(I)/2010. The amendment law introduced new rights for shareholders of publicly listed companies to attend and vote at general meetings remotely, gain access to relevant information and raise questions, among other things.
Including: Corporate personality and shareholder liability; Incorporation procedure - corporate forms and documentation; Share capital and different share classes; Shareholders; Directors; Accounts, auditing and annual returns; Dissolution and winding-up; Legalization and apostillation of corporate documentation.
The Company Law recently underwent significant changes. One such change was the deletion and replacement of Sections 114 to 117, which contained anachronistic provisions regarding the maintenance of corporate share registers. The new sections have removed references to Cyprus's old colonial status and modernized the relevant provisions to bring them into line with today's commercial requirements.
It is a long-established rule that a Cypriot company must have a corporate seal, which must be kept at the company's registered office under the custody of the company secretary as directed by the board of directors. Recent amendments to the Company Law have clarified the position on corporate seals.