During a recent meeting of the Cyprus Bar Association's Committee for Company Law in Nicosia on June 3 2015, its members recognised the urgent need for the comprehensive review and modernisation of company law and governance. The need for reform had been recognised previously and the issue had also been raised in Parliament. However, this time the committee members recognised and stressed the urgent need for reform.
The existing Company Law (Chapter 113), is based on the UK Companies Act 1948. Almost all of the act's articles were copied to form the Company Law and were soon after officially translated into Greek. Following that, the Greek version was considered to be the official version of the law.
It is widely accepted among legal professionals in Cyprus – a view shared among the members of the committee at the aforementioned meeting and before – that the translation of the English document is inaccurate and that many points may be wrong. In several instances, litigators and practitioners have come across contradicting verdicts and decisions in relation to similar issues due to the gaps and ambiguities contained in the Greek version of the law. However, since the enactment of the Company Law, Cyprus has followed its own path and on several occasions has amended the law based on its own needs, considerations and assumptions. Further, after Cyprus's entry into the European Union, Cyprus has had to implement and follow a series of company law directives which were passed to ensure that shareholders across the European Union have access to sufficient and reliable information on companies. Therefore, the existing Company Law is a mixture of the UK Companies Act, Cypriot law (mainly amendments to the Company Law) and EU law, and has been amended several times.(1)
The committee members agreed that most of the aforementioned amendments – especially those which were enacted recently and particularly those enacted after Cyprus's accession to the European Union and to address issues raised by the recent banking crisis and consequent financial situation – made the law more complicated to interpret and follow. As is widely argued among professionals, and was strongly supported during the committee's meeting, the Company Law needs considerable improvement.
Suggestions for modernising the Company Law were made before and during the meeting by various committee members and concerns were raised and discussed to a limited extent. The president, vice-president and other committee members agreed in the majority that the primary objective should be to consolidate the Company Law and introduce the reforms and provisions necessary to meet the needs of today's businesses, especially in terms of efficiency and competitiveness. New provisions should be introduced and enacted to simplify and improve company law, making it easier to understand and apply as well as more flexible. The members also discussed and stressed the need for safeguards against abuse. In particular, they referred to substantive changes that should be made to the law in general and new provisions which should be put in place, in particular in relation to limited liability companies, including:
- the protection of creditors;
- the protection of minorities;
- the statutory codification of the duties of directors and secretaries;
- the abolishment of the ultra vires doctrine; and
- the reconsideration of the many thresholds.
Many committee members referred to the UK Companies Act 2006 and to the recent Irish Company Act 2014 – which officially came into force on June 1 2015 – and to the modern provisions contained in both pieces of legislation. The committee members expressed the view that both laws could serve as valuable sources of information or even as the starting point and/or basic company law instruments which the Cypriot legislature should study and consider when drafting a new, updated, modern, comprehensive and complete piece of legislation which will form the reformed Company Law. The committee members agreed in a majority that the comprehensive review and eventual reform should proceed as soon as possible. Hopefully, this is the start of a new way forward for company law and governance.
For further information on this topic please contact Christiana Aristidou at Democritos Aristidou & Co by telephone (+357 2558 5811) or email (email@example.com). The Democritos Aristidou & Co website can be accessed at www.aristidou.com.
(1) Laws 9/1968, 76/1977, 17/1979, 105/1985, 198/1986, 19/1990, 41(I)/1994, 15(I)/1995, 21(I)/1997, 82(I)/1999, 149(I)/1999, 2(I)/2000, 135(I)/2000, 151(I)/2000, 76(I)/2001, 70(I)/2003, 167(I)/2003, 92(I)/2004, 24(I)/2005, 129(I)/2005, 130(I)/2005, 98(I)/2006, 124(I)/2006, 70(I)/2007, 71(I)/2007, 131(I)/2007, 186(I)/2007, 87(I)/2008, 41(I)/2009, 49(I)/2009, 99(I)/2009, 42(I)/2010, 60(I)/2010, 88(I)/2010, 53(I)/2011, 117(I)/2011, 145(I)/2011, 157(I)/2011, 198(I)/2011, 64(I)/2012, 98(I)/2012, 190(Ι)/2012, 203(Ι)/2012, 6(Ι)/2013, 90(Ι)/2013, 74(Ι)/2014, 75(Ι)/2014, 18(Ι)/2015, 62(Ι)/2015 and 63(Ι)/2015.
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