In the Appeal Court’s judgment issued recently on 12/07/2024 in the case of"REFERENCE TO THE APPLICATION OF THE APPELLANTS (MINORITY SHAREHOLDERS) and IN RELATION TO Company FAIR CHAMPIONS MERIDIAN LTD, the court clarified some procedural problems that were raised during the first instance judgment.
The application was submitted by the minority shareholders of the company Fair Champions Meridian Ltd and was directed against the majority, requesting the liquidation of the company or, alternatively, the purchase by the majority of their minority shareholding stake.
The application for liquidation of the company, which was accompanied by an affidavit, was based, inter alia, on Article 202 of the Companies Law, Chapter 113, which provides for the possibility of submitting an application to the Court by a minority shareholder in a company, in cases where it is alleged that the affairs of the company are being conducted in a oppressive manner against the minority.
Quoting the first instance court, it said"..It is commonly accepted that the application for winding up a company, based on the provisions of articles 202 and 203-211 of the Companies Law Cap. 113, is registered in the form of an Originating Summons. Also relevant are Regulations 5 and 6 of the Companies Procedural Regulation (396/1944), as amended, which refer to "petition" and "originating summons". It is also commonly accepted that the objection to the opening application for winding up takes the procedural form of the notice of intention to object which is entered in interlocutory applications, as provided by form 47 of the Rules of Civil Procedure......
On the other hand, however, I do not agree with the position of the learned advocates of the defendants' request that it is permissible to display a counterclaim with the specific type of notice of intent to object. There is no provision in the relevant procedural rule (D.48 i.4(1)) for combining a counterclaim with the notice of intent to object. Additionally, neither in the articles of Chapter 113 related to the liquidation of the company (articles 202 and 203-211) nor in any regulation of either the Procedural Regulation 396/1944 or the Wingding Up Regulations of 1933-1938 is there any provision for filing a counterclaim to an application for liquidation of a company.
Based on the above, I conclude that it is not permissible to display a counterclaim with the notice of intention to object. I do not agree with the position of the learned advocates of the defendants who claim that the possible acceptance of the requested treatment will violate their constitutionally guaranteed right to appeal to the Court. They have every right to file their own separate winding up petition, based on their own grounds, without this amounting to an abuse of court process, as they wrongly claim."
The appeal court agreed with the judgment of the lower court in that Respondent’s in oppression proceedings cannot file with their objection a counter claim or a counter petition for that matter. They will have to file a separate Application if they have a counter claim, and thereafter they can examine whether there is a possibility to request that the two trials of the application and the cross-claim can be heard together to avoid unnecessary costs but also, the risk of having two contradictory judgments on the same matter. The rule now under Cyprus law is quite clear. No counter application or counter claim can be filed by the Respondent Majority Shareholders or Oppressive Shareholders within the context of a Winding Up Petition due to oppression.
Our office has handled various Oppression of Minority Proceedings. For more info and advice regarding litigation in shareholder and or other company law disputes under the Cyprus laws and procedural rules in Cyprus, contact us at con.clerides@clerideslegal.com
Constantinos Clerides, Partner at Phoebus, Christos Clerides & Associates LLC