Financial Assistance - IBA Corporate and M&A Law Committee 2012 (by Celia Pourgoura)

INTRODUCTION

This paper sets out an overview of the laws regulating the financial assistance principles in Cyprus as it’s currently been described by The Cyprus Companies Law, CAP.113 (hereinafter the ‘Law’).

GENERAL OVERVIEW

Financial assistance is the assistance given by a company for the purchase of its shares or those of its holding companies.

DIRECTOR’S AUTHORITY TO BIND THE COMPANY

In general practice the Directors have authority to bind the Company. Even if a particular person does not have actual authority to bind the Company with respect to a particular transaction, if he/she had apparent authority to do so, the Company is still bound. This person who does not have the actual authority will be liable to the Company for acting in excess of his/her authorities.

DIVIDENDS PAID BY CYPRUS COMPANIES

The term dividend is not defined in the Cypriot relevant legislation.

The term was interpreted by case law and the most accurate definition which can be provided is that a ‘dividend is the amount paid from the profits of a limited liability company to each shareholder even to a parent company’.

Shareholders Agreement under the Cyprus Law

What is the need of a shareholders’ agreement under the Cyprus law and what is its importance?

The use of large number of Cyprus Companies as vehicles for carrying out joint ventures, have let those joint venture partners enter into Shareholder’s Agreements without fully understanding the consequences of their contractual arrangements.

A Shareholders agreement is an important and integral part of any company for one reason: because things change in business. Every expert lawyer or business person will recommend that you have a Shareholders agreement set up.