Cyprus: The Full Disclosure Of Everything To Everybody Doctrine – The Decline Of The Management And Control Test And The EU Directıve 2017/828

Last Updated: 11 September 2019
Article by Kinanis LLC

Most Popular Article in Cyprus, September 2019

INTRODUCTION

The law as to Listed Companies will undergo significant changes upon the implementation of the European Union Directive 2017/828, (hereinafter to referred to as "the Directive").

As per the Directive, the shareholders of Listed Companies, upon relevant request by the Listed Company they hold shares, will be fully disclosed and identified to the company. Transparency of certain acts of institutional investors, asset managers and proxy advisors are also regulated by the Directive.

At the same time, the shareholders of the Listed Company acquire certain rights related to its management.

The Directive applies to Listed Companies which have their registered office in a Member State and their shares are admitted to trading on a regulated market situated or operating within a Member State.

The Directive aims to encourage more active and direct involvement of the shareholders in company matters. At the same time, it looks to the smooth operation of the company, revolutionizing though the role of the shareholders in Listed Company matters. On the other hand, the involvement of the shareholders in the company decision making process, is shaking the notion of management and control lying so far on the hands of the Board of Directors!

It is also worth noting that the Directive was to be implemented into the national law of each Member State by June 10, 2019, except from the provisions in relation to the identification of shareholders, the transmission of information and the facilitation of shareholders' rights, whose transposition is set to September 2020.

The Directive has not yet been implemented in the national law of the Republic of Cyprus. It remains to be seen how this important Directive will be implemented. The implementation of the Directive will affect drastically the operation of Listed Companies.

THE RULES ESTABLISHED BY THE DIRECTIVE

In order to achieve its objectives, the Directive establishes four sets of rules which need to be implemented accordingly by Member States.

These are:

i) The identification of shareholders,

ii) The shareholders' rights in relation to the remuneration of directors,

iii) The transparency of institutional investors, asset managers and proxy advisors, and

iv) The transparency and approval of the company's related party transactions.

DETAILS AS TO THE RULES ESTABLISHED

i) Identification of Shareholders

According to the Directive, Listed Companies, the shares of which are admitted to trading on a regulated market situated or operating within a Member State, will have the right to identify their shareholders.

In this respect, they may ask any intermediary in a chain of intermediaries, holding this information, to provide the information on the identity of their shareholders.

Intermediaries must also enable the shareholders to participate in and vote at general meetings either by themselves or by instructing intermediaries to do so on their behalf.

Listed Companies must upon request, confirm to their shareholders that their vote has been recorded and taken into account at the relevant general meeting.

Certain thresholds of minimum share percentage holding may be implemented. According to the Directive, Member States, may provide that the request for shareholders identification can be done only if the shareholders are holding more than 0.5% of the shares or voting rights. This threshold though is not mandatory and lawyer percentage may be the threshold or no threshold at all.

The Directive lays down provisions as to the length this information will be held by the company. Also, it provides that the disclosure of such sensitive information by the intermediaries to the company is done lawfully, in compliance with a particular law, so that they will not be faced with claims for unjustified disclosure of confidential information.

The Directive goes further to indicate that the minimum level of information on shareholder identity should include at least the name and contact details of the shareholder in the case of a physical person and the registration number, in the case of a legal person.

ii) Rights to remuneration of directors – "say on pay" right

The Directive, also establishes the shareholders' right to vote on the remuneration policy of the directors of the company at least every four years and ensure that the directors are paid in accordance with the remuneration policy.

In addition, the Directive requires the companies to provide to the shareholders a report with clear information on the remuneration of their directors.

The Directive leaves up to the Member States the choice for the vote on the remuneration policy to be binding or merely advisory.

iii) Transparency of Institutional Investors, Asset Managers and Proxy Advisors

The Directive requires Member States to ensure that institutional investors and asset managers disclose to the public how the investment strategy they follow is aligned with the profile of the companies, how it contributes to the performance of their assets and the duration of their liabilities.

Further, the proxy advisors are obliged by the Directive, for the first time, to publish the code of conduct they apply along with a report on how this code is applied.

They are obliged to publish on their website the information relating to their advice, voting recommendations and researches carried out in this respect as well as to communicate to their clients of any conflict of interest that may influence the preparation of their research, advice or voting recommendations.

iv) Transparency and approval of the company's related party transactions

Member States will need to secure that material transactions between the company and related parties are publicly announced, accompanied by a report indicating whether the transaction is fair and reasonable. The said transactions are required to be approved by the general meeting of the shareholders or by the administrative or supervisory body of the company, if such body is in place.

The law implementing the Directive must define what a material transaction is.

In this way shareholders are informed about related party transactions on material issues and take active part in approving same or not.

OBSERVATIONS – COMMENTS

It remains to be seen how Cyprus and the rest of EU Member States will implement the Directive.

The Directive will disturb drastically how Listed Companies will be operating in certain matters. The involvement of shareholders in company decision making processes, is a new concept coming though in direct conflict with the management and control test as this is identified so far as being the sole prerogative of the Board of Directors.

The full disclosure of the identity of the shareholders is in line with the current transparency principle in the business world: ... "All is known and open and nothing is kept secret".

With the Directive, the transparency principle is applied also to Listed Companies for their shareholders, institutional investors, asset managers, proxy managers and related party transactions.

Will this possibility through the Directive, giving the right to Listed Companies to know in detail the identity of their shareholders, extend to third bodies such as professionals, lawyers, accountants and banks, requesting to know in detail the identities of the shareholders of Listed Companies?

It remains to be seen whether such bodies, and especially the banks, will implement the idea of the Directive in a broad sense. We wouldn't be surprised at some stage to see in full force such requirement imposed especially by the banks as to the identification of the shareholders of Listed Companies ...!

One is certain: We move to a new era, ... "The full disclosure of everything to everybody"!

Will this have a positive effect on business or not? Will this affect the investments negatively or not? Time will show.

The way the Directive will be implemented in each Member State will play its role too, as the Directive itself leaves considerable discretion on Member States national implementation. Wise approach is needed.

The moving sand ...is still in full force!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions