Cyprus: Guidance of Cyprus Courts on issue of appointment of Lawyers by the Directors of a Company
Recently, the District Court of Paphos granted a decision in relation to the appointment of a Lawyer to act on behalf of a Company in judicial proceedings as follows:
(a) The Court provided reference to the English textbook Solicitor’s Responsibility, which stated that the irregularity of the appearance filed by a lawyer on behalf of a Company- Defendant to an action can be raised at any stage of the proceedings even at its final stage. A Lawyer who enters an appearance on behalf of a Defendant, impliedly warrants or contracts that he has the authority to do so. However when a lawyer appears on behalf of a Defendant, without his knowledge or his authorization, then that Defendant can seek the cancellation of such an appearance;
(b) Powers to appoint a Lawyer to act on behalf of a Company are in place. They are exercised in accordance with the Articles of Association of the Company and also the Companies Law Cap 113 (“the Law”)jointly and cover the total number of Directors and not each one separately. Even the powers of the Board of Directors and the Board Meetings are governed by the Companies Law Cap 113;
(c) Furthermore, it was stated that in cases where there is a deadlock between two Directors of a Company, then a shareholders’ meeting can be held and which shall exercise the powers of the Directors; and
(d) The Court held that the appointment of a lawyer which was done by the sole signature of only one director was invalid because such appointment should have been approved by the Board of directors of the Company as per the provision of the Articles of Association and the Law. Consequently, due to the invalidity of such appointment, the appearance and representation of the relevant company by the specific law, was cancelled.
The above decision reaffirms the position that a Company acts through its board of directors as a body and/or organ and not through any individual director or member of such board of directors.
For further information on this topic please contact
Ms. Nada Starovlah (email@example.com) at SOTERIS PITTAS & CO LLC,
by telephone (+357 25 028460) or by fax (+357 25 028461)
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