Legal Recourse Under Article 202
Article 202 of the Companies Act provides a legal framework for minority shareholders in Cyprus facing oppressive conduct by majority shareholders. Key provisions include:
- Filing a Petition: Any member claiming oppressive conduct can file a petition in court.
- Court's Consideration: If the court finds the company's affairs are being conducted oppressively, it can issue orders to regulate future operations or even to facilitate or order a buyout of shares.
- Changes to Articles of Association: The court can alter the company's articles or memorandum to better protect minority interests.
Case Law on the meaning of Oppression
What constitutes "oppression" is explained in the decision of the Judicial Committee of the House of Lords in the case of Scottish Co-Operative Wholesale Society Ltd. v. Meyer [1958] 3 All E.R. 66; (1959) A.C 324. The term includes behavior that involves a lack of probity or fair dealing towards the members of the company concerning their rights as shareholders. In contrast, inefficiency or negligence in the management of the company's affairs does not constitute oppressive behavior.
- The grievance must relate to members of the company, in their capacity as such.
- The matters complained of must relate to the conduct of the affairs of the company.
- They must be such as not only to make the winding up of the company just and equitable but so as to lead to the conclusion that the affairs of the company have been conducted in a manner which can properly be described as oppressive to the petitioner.
Examples of Oppressive Situations
Minority shareholders may face various challenges, including:
- The failure to distribute minutes from general meetings.
- The failure to distribute dividends.
- The unjust removal of key members from company control.
- The recording of financial statements without member approval.
- The dismissal of auditors without consultation.
- The alienation of company assets for the benefit of majority shareholders' relatives without proper notice.
- A breakdown of trust and communication within corporate decision-making.
Conclusion
Article 202 serves as a crucial tool for minority shareholders in Cyprus, allowing them to address and rectify oppressive actions. By empowering these shareholders to seek judicial intervention, the article fosters a fairer corporate environment and helps protect their interests. Engaging with legal counsel familiar with corporate law enhances the ability of minority shareholders to navigate these issues effectively.
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.
