Cyprus: Nominee Shareholder "Cutting The Strings Of The Marionette"

In a previous publication " Nominee shareholders – valid trusts arrangements or a mere façade?" exploring the related issues we had indicated that our firm had launched legal proceedings against, among others, a nominee shareholder unwilling to co-operate with the beneficial owners of the shares. During proceedings at interim stage on an ex parte basis, the Cyprus Court issued prohibitory interim orders against such nominee shareholder and the officers of the company - service provider to prevent alienation of the shares in issue pending final adjudication of the dispute. We had then commented that this could be interpreted as a prima facie indication of the readiness of the Cyprus Court to protect the beneficiary's rights over the shares and that the law of trusts will always find the path to operate in aid of the beneficiary.

The facts preceding the above proceedings, although complicated, can provide a better understanding of the case and the gist of the Court's approach in the interim judgment. The ultimate beneficial owner had initially signed a trust deed with the nominee shareholder who was the sole shareholder of company X.

The interim prohibitory orders were issued, among others, against three companies providing company and administrative services and with which company X had an agreement. Subject to that agreement, the three companies had to provide their services to company X. Nonetheless, it is interesting to note that the three companies belong to the law firm that has been representing them as well as company X in the proceedings.

As a result of the trust deed and the agreement for the provision of services between the three company-service provider companies with company X, the latter would accordingly provide the services agreed in the trust deed with the ultimate beneficial owner via the, as mentioned above, three companies. As it emerged from the facts of the case, the nominee shareholder and the officers of the company-service provider failed to follow the instructions of the ultimate beneficial owner and more importantly they did not act to his benefit as they were under a duty to do.

The relationship of trust between on the one hand the ultimate beneficial owner (UBO) and the three company–service provider companies which belong to the aforesaid law firm has been, according to the Judge who delivered the judgment for the interim step in the case, breached by the law firm itself. While the lawyers acting as fiduciaries accept the existence of the trust relationship between the ultimate beneficial owner and the sole shareholder of company X, they receive and materialize the instructions of a person other than the ultimate beneficial owner, namely the former ultimate beneficial owner who, for his own reasons, manipulates and wants to exert full control of company X.

Interestingly, the Court questioned the professionalism of the particular law firm, an issue which the Attorney General of the Republic of Cyprus has, according to the Judge, to examine in order to determine the possible, on their behalf, commission of disciplinary offences.

The facts of the current case give once again rise to the question, does the "trust" between the trustee- nominee shareholder and the ultimate beneficial owner worth its name or does it simply constitute a mere façade? Are the arrangements between the two strong enough to maintain the relationship between the rights' holder and the trustee as it would be the case in a normal trust scenario?

Complications may be said to arise from the very facts themselves and the involvement of more actors which is an evident departure from the normal model of trust and the triangle relationship of beneficiary-settlor-trustee. However, the Court has exhibited an evident readiness and willingness to prevent any abuse which leads to the detriment of the ultimate beneficial owner by treating the above relationship between the nominee shareholder and the ultimate beneficial owner as a trust.

It could be argued that this constitutes a constructive or resulting trust which the Court imposes to benefit a party (here the UBO) that has been wrongfully deprived of his rights. This may better guarantee that the fiduciary duty owed by the nominee shareholder and the providers of company services will retain its full force as it would be the case in a normal trust scenario and thus bring the analogous repercussions to the wrongdoer. There is thus an attempt in the current case to avoid the situation where in the absence of a traditional trust model the UBO would have otherwise been deprived of the rights in his own assets.

Should the relationship based on the above model be equated to a trust? The question is answered by the majority of actors involved in the area in the affirmative. The nominee shareholder supposedly acts to the benefit of the UBO, but as it can be seen from the above facts and in the absence of strong mechanisms to control a nominee shareholder, the latter can easily turn into a marionette manipulated and/or controlled by people other than the ultimate beneficial owner. Although one can hardly be convinced that the above relationship constitutes a trust, what is nonetheless certain is that the application that our firm has filed within the context of the above proceedings by which it requests Order of the Court ordering the removal of the trustee (who is the nominee shareholder in the present), will lead to cutting the strings of the marionette...

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

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

Marina Himoni
Similar Articles
Relevancy Powered by MondaqAI
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
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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 (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

To Use 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.


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.


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