Director's Fiduciary Duties Under Cyprus Law: Navigating Responsibilities and Repercussions
Introduction
A firm understanding of directors' fiduciary duties is a critical aspect for anyone holding this key position in a Cyprus-based company. Stemming from common law and equity, these duties are rooted in the fiduciary relationship between the director and the company, owed to the company and, by extension, all of its members. This article provides a comprehensive overview of these duties and the potential legal repercussions of their breach.
Principal Fiduciary Duties Owed by Directors
Under Cyprus law, the following are some of the principal fiduciary duties owed by directors to their company:
Duty to act in good faith in the best interests of the company: A director must at all times act in what he considers are the best interests of the company.
Duty to not act for or be influenced by any improper or non-material purpose. Where directors have several actuating purposes, some proper and some improper, the duty will be broken if directors allow themselves to be influenced by any improper purpose.
Duty not to fetter own discretion: A director cannot restrict himself from exercising independent judgment on the company's behalf.
Duty to act within powers: A director must act in accordance with the company's articles of association.
Duty to avoid conflicting interests and duties: As fiduciaries, directors must not place themselves in a position which there is a conflict between their duties to the company and their personal interests. Good faith must not only be done but manifestly be seen to be done, and the law will not allow a fiduciary to place himself in a situation in which his judgment is likely to be biased and then to escape liability by denying that it was in fact biased.
Duty to not exploit position for personal benefit: Directors must not accept any benefit from a third party which is conferred because of his or her being a director or doing or not doing anything as a director, and must account for any benefit obtained by any third party. The term “benefit” includes any benefit from a misuse of property.
Consequences of Breaching Fiduciary Duties
The following remedies area available:
Court Order or Declaration: Prohibits the exercise of the directors’ powers.
Damages or Compensation: In tort or for breach of contract and/or Restitution.
Action in Rem or Constructive Trust Claim: Legal recourse for breach of duties.
Accounting for Profits: Directors may be ordered to account for any profits made through the breach of duties.
Further, fiduciaries in certain cases may be exposed to criminal liability. The Criminal Courts stress the high standards of fidelity in such cases and offenses are punishable by up to seven years imprisonment.
Conclusion
Navigating the complexities of directors' fiduciary duties under Cyprus law can be challenging, but the importance of understanding these duties cannot be overstated. Directors must adhere to their duties to protect not only the company but also their position. Our experienced legal team is available to guide you through these duties and ensure that your actions align with the legal boundaries.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Klitos Platis by email at klitos@kleanthousplatis.com.