Cyprus Companies Law (Cap. 113) provides that every private company shall have at least one director and every public تأسيس شركة في دبي shall have at least two directors (s.170). Furthermore, every company must have a secretary and a sole director shall not be also secretary. However, in the case of a single-member private liability company the sole director can be also the company secretary (s.171).
According to section 174 of Cap.113, the acts of a director or manager are valid notwithstanding any defect which may afterwards be discovered in his/her appointment or qualification. Since directors have powers to take important decisions several duties are imposed on them so that to guarantee that the companies’ interests are well-protected. It should be clarified that there is no difference in principle between executive, non-executive or nominee directors. Have in mind that the duties owed by the Directors are owed to the company and not to individual shareholders.
According to the Law, a Director owes a duty to the company to act in good faith in the best interests of the company. This duty is known as the ‘fiduciary duty’. In other words, the director is obliged to promote the profitability of the company and protect company’s interest. The principal duty of the director is to act in the best interests of the company as a whole, and that is usually taken to denote the interest of shareholders both present and future.
Directors shall act in good faith in what they consider to be the interests of the company. Directors must act in accordance with company’s constitution, i.e. the memorandum of articles and association, and shall exercise their powers only for the purposes allowed by law. Directors must not use company property, information or opportunity for their own or anyone else’s interest, unless allowed to by the company’s constitution or in particular cases where such use has been disclosed to the company in general meeting and the company has approved it.
Directors shall not agree to restrict their powers to exercise an independent judgement. Nevertheless, if they consider in good faith that this it is in the interests of the company for a transaction to be entered into, they may restrict their powers to exercise an independent judgement by agreeing to act in a precise way to attain this.
In case there is a conflict between directors’ interests or duties and the interests of the company, then directors are obliged to account to the company for any benefit they receive from the transaction. Nonetheless, directors are not obliged to account for the benefit if they are allowed to have that interest by company’s constitution, or the interest has been disclosed and approved by the company in general meeting.
In the course of a winding up of a company it appears that directors continue to allow a company to incur credit even though they knew or ought to have known that the company had no reasonable prospect of paying, then following the sections 307 and 312 of Cap.113, they may become personally liable for that credit unless they can prove that they have taken every step, in order to minimise and/or eliminate the possible loss.
However, the absence of clear authority makes it difficult to define exactly what the above definition entails. The first part of the definition indicates an ‘objective’ or a ‘benchmark’ test of what ‘the reasonable person’ might expect of a director in specific circumstances. The second part of the test requires that in case that particular director has a particular skill or level of experience, then he/she is obliged to exercise that particular skill in addition to the benchmark test.
