Cyprus Companies Law (Cap. The Cyprus Companies Law (Cap. 113) stipulates that each private company must have at most one director, and that every public company must have at minimum two directors (s.170). Every company must also have a secretary. A sole director cannot be the secretary. In the case of a private limited company with only one member, the sole director may be the secretary (s.171).
Section 174 of Cap.113 states that the acts of directors and managers are valid regardless of any defects discovered after their appointment or qualification. Directors have the power to make important decisions and are subject to several obligations to ensure that the interests of the company are protected.
Director’s Duties:
A. Fiduciary Duty
b. Duty to exercise skill, care
c. Statutory Duties
It is important to clarify that the principle of directorship does not differ between nominee, executive and non-executive directors. Keep in mind that Directors are responsible for the company’s performance and not individual shareholders.
Fiduciary duty:
The Law states that a director owes the company a duty to act in good faith and in the company’s best interests. This duty is called the “fiduciary obligation”. This means that the director must promote the company’s profitability and protect the company’s interests.
Director’s primary duty is to act in best interest of the company, which is often taken to mean the interests of current and future shareholders.
The fiduciary obligation can be described as follows in practice:
1. Directors must act in good faith for the company’s best interests.
2. Directors must act according to the company’s constitution. The memorandum and articles of association. Directors must act in accordance with company’s constitution.
3. Directors are forbidden from using company property, information, or opportunities for their own benefit or that of others, except as permitted by the company’s Constitution or in specific cases where the company has approved such use.
4. Directors cannot agree to limit their ability to exercise independent judgment. However, directors may agree to limit their power to exercise independent judgment if they believe it is in the company’s best interests to enter into a transaction.
5. Directors are required to report to the company any benefits they receive as a result of transactions if there is conflict between their interests or duties and those of the company. Directors are not required to account for any benefit, unless they have been allowed to have it by company constitution or if the interest has been disclosed to the company’s general meeting.
6. Directors should act fair as members of the company.
7. It appears that directors allow companies to continue to borrow credit during a company winding down. If they fail to prove that they took every step to minimize or eliminate any loss, they could be personally liable.
Care and skill:
Re D’ Jan of London Limited [1993] B.C.C. outlines the modern approach to duty of care. Re D’ Jan of London Limited [1993] B.C.C. 646, an important English case relating to directors’ duties of care, is the leading example. “The conduct of: A reasonably diligent person refers to a person who has both (a) the general skills, knowledge and experience that can reasonably be expected from a person performing the same functions in relation to the company as that director and (b) that director’s general knowledge, experience, skill, and skill.
It is difficult to determine what the above definition means because there is no clear authority. The first part of this definition is an ‘objective’ (or a benchmark) test of what a reasonable person might expect from a director under specific circumstances. The second part of this test states that if a director has a specific skill or level of expertise, he/she must exercise that skill in addition to the benchmark.
Statutory Duties
The Companies Law and other legislation impose a number of statutory obligations on directors. The Income Tax, VAT and Customs & Excise Legislations, Health and Safety and Environmental legislation.
Directors are subject to the following statutory liabilities under the Companies Law:
* Register of Directors & Secretary (s.
* Register of Directors Interests (s.
* Disclosure of loss of office payment in connection to transfer of shares in company (s.185)
* Disclosure of interest in contracts (s.191)
* Direct loans (s.188-189);
* Prospectus offers (s.31 -.39);
* Pre-emption rights/Transfer of shares (s.71-82);
* Fraudulent trading (s.311)
* Balance sheet and profit and loss account (s.142);
* Falsification or destruction of company documents (s.308)
* Duties in the antecedent or course of winding down (s.207, section 213)
* Annual return and Directors’ report (s.151);
* Available for review and investigation (s. 141);
Keep this in mind:
Companies Law makes breaching director’s duties a criminal offense. Penalties can range from a default penalty to two years imprisonment. Directors are also liable for any losses caused by their breach of duties. Directors could be prosecuted by the Inland Revenue or Customs & Excise Department for tax-related offenses.
