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Cyprus: Guidance for Cyprus Courts on the duties owned by directors of a company to the shareholders

 

In a recent decision by the High Court of the United Kingdom, the court clarified the following:

 

(a)   General duty of Directors to the Company

 

1.      Directors have a direct relationship with the company alone;

 

2.      As in the case of Prudential Assurance Co Ltd v Newman Industries Ltd (no2) [1982], only a company can sue for wrongs done to the company. Therefore, shareholders cannot sue for losses that are merely derivate or reflective;

 

 

3.      As in the case of Peskin v Anderson [2001], directors owe fiduciary duties to the company as they are agents of the company.

 

(b)   Circumstances in which a Director can owe fiduciary duties to shareholders

 

4.      A Director may owe fiduciary duties to shareholders, depending on whether both have a special factual relationship, meaning one which must be more than usual, giving rise to a relationship of trust and confidence. This is likely to take place in smaller companies;

 

5.      Another circumstance is where there are particular dealings or transactions taking place between the directors and shareholders.

 

As a result the High Court in the case of Sharp & others v Blank & others[2015] EWHC 3220 (Ch), after examining the above  decided to struck out a number of claims filed by shareholders against the Directors for breach of fiduciary duties.

 

 

For further information on this topic please contact

Ms. Nada Starovlah (nstarovlah@pittaslegal.com) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advise should be sought about your specific circumstances.