The questions below are intended to help shareholders identify and, if relevant, negotiate certain (indicative only) matters regarding regulation of a Cyprus company.
The questions are aimed at providing a starting point for discussions between the owners regarding the establishment of a management structure of a Cyprus company. Note that not all the matters stated are relevant in all circumstances.
2. Shares, transfer of shares, shareholders and shareholder meetings
- The proportions shareholders will hold shares in the company;
- If there will be different classes of shares / providing different rights to different classes of shares?
- Whether special provisions are required as to a share of deceased members.
2.2 Transfer of shares
- Whether the right to transfer shares is to be restricted;
- Whether transfers will be permitted between existing shareholders, family members, family trusts or to associated companies?
- Whether new company issue of shares need to be offered first to existing shareholders pro rata?
- Whether there are to be pre-emption rights to share sales/transfers;
- Whether the directors are to be given discretion to suspend the registration of shares, or block the transfer of shares, always or only in certain circumstances?
- Whether a purchasing shareholder(s) is to be given a period of time to pay a leaving shareholder?
- Will immediate lump sum payment be required or will instalment or deferred payment be accepted?
2.3 Valuation of shares
- Basis for valuation of shares on departure of a shareholder:
- pro rata – according to the percentage shareholding in the company and the value of the company);
- whether any specific accounting principles which should be applied;
- whether the company should be valued on an asset basis (i.e. its current assets less its current liabilities) or on an earnings basis (a multiple on profits)?
- whether future potential of the company should be valued and if so, how?
- The time to be devoted to the business;
- A duty to notify of litigation plus other major occurrences to the other shareholders;
- A duty to maintain control of the company’s assets;
- A right to management information and inspect books of the company at its premises;
- Are non-competition covenants required? e.g. not to compete against the company during trading of company and for a specified period after ceasing to be a shareholder.
2.5 Shareholder meetings
- What the quorum is to be for shareholders meetings;
- Whether the Chairman has a casting vote;
- How a deadlock situation is resolved.
- Will policies be required in relation to specific issues, for example, approval of business plans; dividends; working capital; long term finance and loan capital; shareholders guarantees of borrowings;
- Will the consent of all, a majority or only one of the shareholders be required for any situation, including;
- issue of new shares;
- alterations to share capital;
- introduction of new shareholders;
- change in the nature of the company’s business or commencement of a new business by the company;
- expansion into a new geographical area;
- signing of major contracts;
- substantial sale of assets or disposal of business by the company;
- amalgamation or merger;formation, acquisition and disposal of subsidiaries;
- charging assets of the company;
- borrowings in excess of limit;
- capital expenditure in excess of limit;
- lending or giving security or financial accommodation;
- appointment and dismissal of directors/employees/agents;
- directors and other employees remuneration;
- acquisition and/or disposal of property;
- factoring and/or assignment of debts;
- alterations to memorandum and articles;
- alterations to company’s status as private company;
- winding up;
- change of accounting reference date and/or auditors;
- dealings in intellectual property;
- acquisition of shares or debentures or participation in any partnership or joint venture by the company;
- legal action (except trade debt recovery) in the name of the company;
- unusual or long term transactions;
- alteration to bank mandate;
- transactions with connected persons.
3. Directors / Board meetings
- Should there be a maximum and minimum number;
- Who can appoint/remove a director;
- Requirement to secure, as far as possible, continuance in office of any person as director;
- Share qualification required to be Director;
- Whether the directors will have a Service contract.
3.2 Board meetings
- What the quorum for directors meetings will be;
- Whether the Chairman has a casting vote;
- How a deadlock situation is resolved;
- How often will board meetings be held; Whether Directors powers to be restricted on certain matters (eg borrowing powers).
4. How can we assist you?
A shareholders agreement establishes the rights and responsibilities of all shareholders and sets out how the company should be operated. We can assist by advising and drafting a shareholders’ agreement to suit your needs. Contact us at to discuss your circumstances.
If you have a query or wish to receive further information, please contact us using [email protected]
Theodorou Law is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law.