In Cyprus and according to the rule established by FOSS v HARBOTTLE, when a wrong is being committed against a company, the company should be the claimant in any Court action to protect its rights. Thus, the majority of the shareholders must agree to issue Court proceedings. No minority shareholder can initiate such Court action when the majority of the shareholders of the company are in favour of the alleged wrong actions. Nonetheless, there are four exceptions to this rule:
1. ULTRA VIRES OR ILLEGAL ACTS: A shareholder can initiate a personal action against the company when the company ratifies an illegal act or an act which is outside the scope of its constitution.
2. ACTS REQUIRING A SPECIAL MAJORITY: A company cannot approve acts which require a special resolution simply by a majority only sufficient for an ordinary resolution and not a special resolution. A company is not permitted to breach its own Articles. In this case it is not the company that has been wronged but the individual shareholders which were affected by this breach of the Articles of the company.
3. ACTS INFRINGING THE PERSONAL RIGHTS OF A SHAREHOLDER: A shareholder whose personal rights have been infringed can take action against the company or individual shareholders.
4. FRAUD AGAINST THE MINORITY SHAREHOLDERS: A shareholder can sue when fraudulent conduct and/or misappropriation of the company's assets took place. This fraud might involve wrong being committed against the company and/or individual minority shareholders.
ACTIONS AVAILABLE TO MINORITY SHAREHOLDERS
A. Personal action against the company for infringing the personal rights of a shareholder for reasons such as acting illegally or ultra vires and not complying with proper procedures.
B. Derivative action, whereby the claimant's right of action derives from that of the company but the company itself has not pursued legal action. This applies to cases of fraud. Any damages received if the claim is successful will be awarded to the company itself and not to the individual shareholder who brought the claim.
C. Group litigation can take place to address the infringement of the rights of not just one but several shareholders of a company.
Some of the most common available remedies to oppressed minority shareholders are:
1. A Court order regulating the future affairs of the company in question.
2. A Court order for the purchase of the shares of any shareholder of the company from another shareholder.
3. A Court order for the purchase of the shares of certain shareholders by the company itself.
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.