How to appoint and remove officers in a Cypriot subsidiary

A company must have at least one director and a secretary. The sole director cannot be also the secretary of the company except in the case of private limited liability companies which have a single member (shareholder).

There are no requirements or restrictions as to the persons who may be appointed except that a company cannot have:

• as secretary a corporation the sole director of which, is a sole director of the company; or
• as sole director a corporation the sole director of which is secretary to the company.

These restrictions do not apply in the case of private limited liability companies which have a single member (shareholder).

The first officers are appointed on incorporation of the company by the subscribers to the memorandum and articles of association of the company. The procedures for further appointments, renewal of office or replacements are determined in the articles of association. The relevant provisions typically specify which corporate body is competent for each action and any majorities that may apply. Notification of appointment of any change must be given to the Registrar of Companies by the company within fourteen days by submitting a relevant form.

There is no statutory restriction under the Companies Law, Cap. 113, and the officers of the company can freely resign. Notification of resignation must be given to the Registrar of Companies by the company within fourteen days by submitting a relevant form. The statute provides for procedures for notification of the resignation to the Registrar of Companies unilaterally in the event that the company fails to notify any resignation in breach of its obligations. Note however that if there is a contract between the officer and the company, there might be contractual provisions restricting the right to freely resign and regulating the consequences in this regard.

The process for the removal of a director prior to the expiration of the period of office is provided for in section 178 of the Companies Law, Cap. 113. The removal will need to be decided by an ordinary resolution of the members, regardless any agreement with the director or the provisions of the articles of association. However, certain steps need to be followed beforehand:

• special notice (i.e. notice of not less than twenty-eight days) shall be required of any resolution to remove a director or to appoint somebody in replacement of a director so removed at the meeting at which he is removed; and
• on receipt of such intended resolution to remove a director, the company must send a copy of the intended resolution to the director concerned; and
• the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.

The director concerned may, if he/she wishes, make representations in writing to the company, not exceeding a reasonable length, and request their notification to members of the company. The company is obliged to (unless these are received by it too late for it to do so):

• state the fact of the representations having been made in any notice of the resolution given to members of the company; and
• send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company);
• if a copy of the representations is not sent because it was received too late or because of the company's default, the director may require that the representations shall be read out at the meeting (without prejudice to his right to be heard orally).

A court may order that any representations need not be sent out and need not be read out at the meeting if it is satisfied that the abovementioned rights conferred to the director are being abused to secure needless publicity for matters which would be deemed as defamatory.

Commonly, the articles of association replicate the statutory requirements as regards the removal of a director and in certain cases they may provide for supplementary provisions. In case of conflict the statutory provisions will prevail.

The removal of the secretary is not regulated in the Companies Law, Cap.113. This matter would be addressed in the articles of association which usually give competence to the board of directors.

The statutory provisions in relation to the removal of a director do not deprive such person from any right to compensation or damages payable to him in respect to the termination of the appointment. Provision for compensation would typically be made in the contractual dealings between the parties involved, i.e. the company and the officer. For example, if there was a contract of service between the director and the company, such person may have a claim for damages for breach of such contract.