Company Directors

Who can be a Director?

• Company Directors can be individuals or any other body corporate.
• There is no legal age limit for individuals.
• A person who is currectly under an order of bankruptcy by the court or a person convicted of company fraud cannot be appointed as Director. (sec 179 & 180)
• Minimum Number of Directors required
  • Private companies - 1
  • Public companies - 2

Appointment & Termination Process

First AGM - Initial Directors

Initial Directors are appointed at the time of incorporation either by naming them in the articles of the company and/or by submitting form HE3 First Directors and Secretary.  A letter of consent from each director is also required to indicate their consent to their appointment.

Further, money laundering laws of cyprus require that the identity of each director is established, see know your client. 

Subsequently, at the 1st AGM of the company all directors retire from office, and are eligible for re-election.

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Subsequent Meetings - New Directors

The articles of a company give power to the Board of Directors to appoint other directors to either fill an existing vacancy or as an addition to existing directors.  The company constitution will usually indicate the number of directors that can exist at any given time. 

Once a new director has been appointed by the board, the decision must be ratified (by ordinary resolution) at the Annual General Meeting (AGM) by the members.  A separate resolution needs to be made for each Director appointed.

A HE4 form (Notification of Change of Directors or Secretary or their particulars) is required to be lodged with the Registrar.

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Subsequent Meetings - Renewal of Existing Directors

At subsequent AGMs one third or the nearest to one third (of directors longest in service) shall retire from office. Retiring directors are eligible for re-election.

Only directors retiring are eligible for re-election.  Persons recommended by directors are also eligible for re-election/election.

A person proposed by a member who has given notice in writing twenty one (21) days prior to the meeting, of his intention to propose a new director for election, as well as a signed notice in writing of acceptance by the proposed person to be elected, also qualifies the nominated person for election. 

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Termination

A company may by ordinary resolution remove a director before the expiration of his period of office.

Section 178 of Cap 113 gives power to members at general meeting to remove directors but provides safeguards for the director and provides an opportunity for that director to address the board.  If the director also holds shares in the company he/she must particpate in the vote.

A special notice (21 days) is required for any resolution to remove a director or to replace another director removed at a general meeting.  The company must send a copy of the special notice to the director concerned, and the director, whether or not he is a member of the company, is entitled to be heard at the meeting.  The following steps need to take place during the meeting

• The passing of an ordinary resolution
• Shareholders vote on the directors removal at AGM or can propose his/her removal at an EGM (members having 10% of the issued capital can propose a directors removal, but written notice is required to the board to hold a general meeting).
• The directors send a special notice calling the EGM meeting within 21 days of the receipt of the written notice by the members,
to all the members who are entitled to attend and vote, including the terminated director.
• The director who is to be terminated can require the company to circulate his written representations, which must be read out at the meeting if there was no time for circulation.
• The director is allowed to attend and vote if he/she is also a shareholder.

If the director is deprived of these rights then the removal is void

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Directors Duties

Directors have a fiduciary duty to the company as a whole to act in good faith and for the benefit of the company taking into account the interests of shareholders, employees, creditors etc., but above all take into account the interests of the company as a whole.

Directors are prohibited from personally benefitting from their position (e.g. should not engage in a competing business, should not disclose confidential information, etc.)

Directors have a duty

• not to make a private profit at the expense of the company
• to disclose any interest in a contract made between the company and their personal business entity (company) 
• of skill and care, to exercise skill and care in the performance of their duties BUT only need to show reasonable skill and care
• to inform shareholders if the company suffers a serious loss of capital
• to not put themselves in a position of conflict with the company 

Further

• for any resolution to be passed by directors a quorum must be reached.  The quorum is usually specified in the constitution
• Companies are prohibited from making loans to directors unless
   a) it is to a subsidiary where the director is the holding company
   b) it is for the benefit of the company in meeting expenditure incurred or to be incurred by them for the company
   c) the company is in the business of lending money
• Companies are prohibited from making tax-free payments to directors

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Directors Meetings

Any director can call a meeting.  Each director has one (1) vote and the quorum required, if the company articles are silent, Table A defaults to 2 directors.

A director who cannot vote because of their interest in a contract cannot be counted as part of the quorum. 

The chairman has the casting vote.  If a meeting can't be held,  a signed written resolution is valid as a decision passed at a meeting.  Minutes are kept which prima facie is evidence of a decision.

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