The year 2010 saw the House of Representatives of the Republic introducing several amendments to the Cyprus Companies Act (the ‘Law’) aiming predominantly at harmonizing the Law with EU Directive 2007/36/EC on the exercise of certain rights of shareholders in Cyprus companies whose shares are admitted to trading in a regulated market in an EU member state (hereinafter “Listed Company/ies”).
The main amendments in the Cyprus Companies Act were introduced by Law 60(I) of 2010 which to begin with, imposed an obligation on Listed Companies to ensure equal treatment for all shareholders who are in the same position with regard to participation and exercise of voting rights in the general meeting.
The legislator introduced provisions aimed at enhancing the rights of shareholders of Listed Companies throughout the community, through mainly the provision of specific information prior to the general meeting by the Listed Company including by electronic means, the right of certain shareholders to put items on the agenda and to table draft resolutions, the participation of the shareholders in the general meeting by electronic means and the right to ask questions and receive answers and other related provisions. Other amendments introduced by Law 42(I) and Law 88(I) are also briefly discussed.
Law 60(I) of 2010
Information prior to the general meeting
Law 60(I) introduced provisions to regulate the notice of the general meeting which must be issued by the Listed Company without any specific cost, in a manner ensuring fast access to it on a non-discriminatory basis and using such media as may reasonably be relied upon for the effective dissemination of information to the public throughout the community. The information to be provided includes, among others, matters such as the time, place, agenda and procedures to be followed by a shareholder and rights for participation and voting (including electronically) regarding the general meeting, including the right of shareholders to put items on the agenda and to table draft resolutions, the date of record, the right to ask questions and appoint a proxy holder. It must also be indicated where and how the full documents and draft resolutions may be obtained, and on which web site the information referred to above will be made available.
The information to be included on such web site is also specified by the Law, and such must be available for a continuous period beginning not later than 21 days before the general meeting. Such information or documents include, among others, the notice of the general meeting, copies of the draft resolutions, the number of shares and votes in force at the date of such notice, the documents to be submitted to the general meeting and the forms to be used to vote by proxy and to vote by correspondence. Draft resolutions tabled by shareholders shall be added to the web site as soon as practicable.
Right to put items on the agenda of the general meeting and to table draft resolutions
New provisions now confer the right to put items on the agenda of the general meeting and to table draft resolutions (at least 42 days prior to the general meeting) to a shareholder or shareholders holding at least 5 % of the issued share capital representing at least 5% of the total voting rights of all the shareholders which have a right to vote at the general meeting. In order to better enable a member to benefit from the above provisions of the Law, the Listed Company must ensure that the date of the next annual general meeting is published on its web site at least 45 days prior to the date of such meeting or the end of the previous financial year, whichever is earlier.
Requirements for participation and voting in the general meeting
The Law also ensures that the rights of a shareholder to participate in a general meeting and to vote in respect of his shares are not subject to any requirement that his shares be deposited with, or transferred to, or registered in the name of, another person before the general meeting. Further, a shareholder is free to sell or otherwise transfer his shares anytime during the period between the record date, and the date of the relevant general meeting, so long as the right to sell would not be subject to any restriction to which it is not subject to at other times. A person may be registered in the register of members the latest until the record date so that it may be able to exercise its right to participate and vote in general meeting and any subsequent changes/entries in such register are not taken into account for determining a person’s right to vote.
Participation in the general meeting by electronic means
An important new provision enables Listed Companies to offer to their shareholders participation in the general meeting by electronic means and may be subject only to such requirements and constraints as are necessary mainly to ensure the identification of the persons participating and the security and accuracy of the electronic communication. Such means include real-time transmission of the general meeting, real-time two-way communication enabling shareholders to address the general meeting from a remote location and a mechanism for casting votes, whether before or during the general meeting, without such shareholder being physically present at the meeting, or the need to appoint a proxy holder who is physically present at the meeting.
Right to ask questions
Another important provision gives the right to every shareholder to ask questions related to items on the agenda of the general meeting and receive answers provided such answer has not been already given on the company’s web site, subject to the measures which the Listed Company may take to ensure the identification of shareholders and matters relating to interference with the preparation and order of the general meetings or questions infringing the confidentiality, or the business interests of the company.
The existing provisions of the Law were specifically extended to Listed Companies and introduced the use of electronic means. It is possible therefore, for a proxy holder to be appointed by electronic means at the given address, and such notification of appointment must be accepted by the Listed Company, and may be made subject only to such procedural requirements and constraints as are necessary to ensure the identification of shareholder of the proxy holders or the content of the voting instructions. The Listed Company must offer a shareholder at least one effective method of notification by electronic means.
The amended provisions also state that anything in the Articles of the Listed Company, apart from the requirement that the proxy holder possess legal capacity, shall be void to the extent that it affects the eligibility of persons to be appointed as proxy holders.
Removal of certain impediments to the effective exercise of voting rights.
Provisions were added in the Law for the more effective exercise of voting rights allowing a shareholder in a poll voting in a general or class meeting not to have to use all his votes or cast all the votes to be used in the same manner, and further allowing a Listed
Company in case of such voting, to include a vote cast before the meeting by correspondence. However, a Listed Company is only obligated to count the votes cast before the meeting by correspondence as above which were received before the prescribed date and time, on condition that such date and time do not exceed 24 hours before the vote.
Further provisions were enacted regarding the information which must be announced by a Listed Company regarding the results of voting. Further, the Listed Company shall ensure that it shall announce on its web site the voting results as prescribed by the Law, not later than the end of the 14th day after the date of the meeting.
Requirement to convene extraordinary general meeting and length of notice period
The directors of a Listed Company have now the obligation to immediately convene an extra ordinary general meeting pursuant to the requisition of shareholders of the company which hold at the date of the requisition not less than the one twentieth (1/20) of the paid up capital of the company which carries voting rights at general meetings. The length of the notice period required for calling general meetings in the case of Listed Companies is prescribed by the Law.
Equal treatment of members
A general provision has been introduced on Listed Companies to ensure the equal treatment of members having the same position in relation to the exercise of voting and participation rights in general meetings.
Amendments introduced by Law 88(I) and Law 42 (I) of 2010
Provisions have been introduced by Law 88 (I) elaborating on the liability of directors for failing to comply with their obligations for ensuring that the financial statements and the directors’ report are prepared and published in accordance with the provisions of the Law. Further the financial thresholds for a group to qualify as a “small sized group” have been increased.
Amendments introduced by Law 42(I) were in relation to provisions of the Law giving rights to certain persons to request and receive certain financial information in electronic or printed form without charge.
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