Frequently asked questions (FAQ) relating to company’s management
What are the responsibilities of Directors in a limited company?
The Board of Directors of the company is responsible for the day to day management of the company’s business. It may be possible for the Articles of Association of the company to allow certain veto rights to the members of the company but that should not restraint the ability of the Directors to manage the company.
What is the minimum and maximum number of the members of the Board of Directors?
A PLC must have at least 2 Directors. A private limited company may have a sole Director. The maximum number of Directors is not governed by law but the Articles of Association of the company may provide it. A limited company must also have a company secretary.
Can a legal entity act as a member of the Board of Directors?
The company’s Articles of Association usually specifically allow corporate entities to serve/act as Directors.
How are the Directors appointed and/or removed?
The procedure is generally governed by the company’s Articles of Association. The first Directors are generally appointed by the founding members of the company. If a vacancy arises in the Board, the existing Directors may, if the Articles so permit, appoint a Director to fill such vacancy. Any Director may be removed without any special reason, following a decision of 50%+1 of the shareholders of the company in a general meeting.
What is the procedure for meetings of the Board of Directors?
The procedure of the meetings of the Board of Directors is governed by the Articles of the company. A meeting may be held in or out of Cyprus. The Directors may elect a Chairman from amongst them. The quorum of the meeting, the notice period by which Directors must be called and the majority with which particular issues are to be decided is determined by the Articles of Association of the company. Unless the Articles specify otherwise, decisions are taken by simple majority. Minutes of the meeting must be taken by the company secretary.
What are the duties of the Directors?
The duties of the Directors arise out of common law and are in general the duty of care and a fiduciary duty against the company.
As far as their powers are concerned, they are responsible for the day to day management and administration of the company and must take decisions on all matters relating to the company’s affairs. The Directors are also in a position, if so allowed by the company’s profit, to declare dividends.
What matters may be decided in a company’s general meeting?
The agenda of such meeting usually includes the following:
- The amendment of the company’s Memorandum and Articles of Association;
- The alteration of the company’s capital;
- The change of company’s name;
- The approval of the company’s Annual Accounts;
- The approval of dividends;
- Issues relating to mergers and re-organizations;
- Decision to wind-up the company;
- Any issue or approval of the Director’s decision expressly provided to be so approved by the Articles;
In the case of a PLC only the agenda may be as follows:
- The approval of a scheme to waive the pre-emption rights of existing shareholders in respect of the issue of new shares
- The approval of the acquisition of the company’s own shares.
Can the company release a Director from a liability?
The Directors are liable in tort to the company if they are found to have acted in a manner inconsistent with their common law duty of care. Moreover they may be liable for breach of fiduciary duty if they are held to have acted against the best interests of the company especially if they have sought to benefit personally.
Any provision, whether contained in the company’s Articles of Association or in any contract between the company and the Director, specifying that a Director may be released from his or her liabilities against the company is by virtue of section 197 of the Companies Law, void.
What is the liability of the Directors vis-a-vis third parties?
Generally speaking the Directors are not liable for contracts entered into by the company, unless they have intended to enter into such contracts with the purpose to defraud third parties. As a matter of criminal law, the Directors are liable if the company fails to pay social security or VAT obligations, however they are not liable for the amounts owed by the company.