A comparative analysis of derivative action in Cypriot company law: Comparison with English company law and the prospect of statutory reform

Abstract

This article provides a comparative analysis of derivative action in Cypriot company law and submits some proposals for statutory reform on the basis of English company law. The derivative action in Cyprus company law is based on common law and is not codified into the text of Cyprus Companies Law-Chapter 113. Regarding the derivative action, the Courts of Cyprus refer to pre-1960 English cases as authorities. However, as this article explains, Cypriot Courts have not followed all developments with regard to the derivative action in English company law, despite the original and elaborated solutions given to many difficult issues by English cases and the statutory derivative claim under the English Companies Act 2006, which replaced the old ‘exceptions to the rule in Foss v. Harbottle’ regime. In fact, quite a few issues related to the remedy are yet to be considered by Cypriot law; case law is scarce and uncertainty looms over (potential) derivative claimants. Taking into account the origin of Cypriot company law from English company law, the jurisprudential and legislative evolution of the derivative action in English company law constitutes a fertile ground for the modernization of derivative action in Cypriot company law. It is therefore hereby submitted that the Cypriot Courts and the Cypriot legislator seek insight from the rich experiences and the multi-faceted evolution of the English law on derivative action, in an effort to address existing problems and establish a modern and functioning framework.