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 ([email protected]) at Soteris Pittas & Co L.L.C., by phone +357 25 028460 or by fax +357 25 028461