November 08 2010
In July 2010 Cyprus took action to implement the EU Shareholder Rights Directive (2007/36/EC) by transposing it into the Company Law (Cap 113) 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. The new provisions also aim to facilitate shareholder participation in general meetings of publicly listed companies and ensure that shareholders are provided with proper and complete information regarding the meetings in a timely and efficient manner.
The new provisions apply to companies which have their registered office in Cyprus and whose shares are admitted to trading on a regulated market that is situated or operates within an EU member state. However, they do not apply to companies dealing with 'collective investment schemes' (as defined in the Open-Ended Undertakings for Collective Investments in Transferable Securities Law) and entities whose sole purpose is to invest collective capital gathered from the public, the operation of which is based on spreading risk without undertaking any legal or administrative control, which are regulated by the relevant authorities and have a custodian pursuant to the Open-Ended Undertakings for Collective Investments in Transferable Securities Law.
The law provides that publicly traded companies are now obliged to ensure that all members in the same position are treated equally with regard to the exercise of voting rights and participation in general meetings.
Those members that hold at least 20% of the issued share capital of the company have the right to force the directors to convene an extraordinary general meeting.
In order to safeguard these new rights, the law now provides that members of publicly traded companies need no longer be physically present at general meetings. They may now participate in general meetings and exercise their voting rights electronically.
Thus, publicly listed companies are obliged by law to put in place the necessary electronic mechanisms in order to offer these rights to their members. The standard and quality of these electronic mechanisms must meet the expectations set down by the law, regardless of high implementation and maintenance costs.
The new provisions also simplify the existing proxy regime by facilitating the participation of members in general meetings by proxy. The amended law also provides that a proxy can be appointed or revoked by a member electronically. A member can appoint more than one proxy for attendance and voting at a general meeting in relation to shares held in different operation accounts for different clients.
The new law introduces new rules on the statutory notice period for convening general meetings. This may now vary depending on whether the members can have access and vote by electronic means, and whether a special resolution was made at the previous general meeting approving a 14-day notification period. However, calling an annual general meeting requires a notification period of 21 days.
At least 21 days before the date of the general meeting, the company must upload onto its website:
Furthermore, the company must upload onto its website, as early as possible upon receipt, the proposed resolutions submitted by its members. If, for technical reasons, these resolutions cannot be uploaded, the company must include a notification on its website informing members that they will be sent by mail.
Members that hold at least 5% of the share capital of the company and represent at least 5% of the voting rights of all members that are entitled to vote at general meetings may add an item to the proposed agenda, provided that reasons are given to justify its addition or the member proposes a resolution for its approval at the general meeting. These rights must be exercised at least 42 days before the meeting to which they relate and the proposals must be received by the company either in hard-copy format or electronically within this timeframe.
One of the most welcome changes introduced by the new provisions is the right of shareholders to ask questions relating to items on the agenda of a general meeting. However, the right to have those questions answered is subject to certain reservations and thus, to a certain extent, is a qualified right. The law provides that this right is subject to any measures that can be taken by the government or the company itself to safeguard the inspection of members' identities, the proper holding of the general meeting and the preparation and protection of the confidentiality and business interests of the publicly traded company. Companies trading on a regulated market can provide general answers to questions within the same context.
To simplify matters, the new law further provides that if the relevant information is already on the company's website, an answer is not required.
The new provisions are expected to help members of publicly traded companies to obtain a clearer understanding of the activities of these companies and enable them to exercise better their rights therein. It is also anticipated that this will improve the corporate governance of these companies and increase transparency in their activities and business decisions, thus operating as a regulatory mechanism for the interests of their members.
For further information on this topic please contact Stella Kammitsi at Chryssafinis & Polyviou by telephone (+357 22 67 9760), fax (+357 22 67 9750 ) or email (email@example.com).
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