Our Firm represented a minority shareholder of a Cypriot holding company of a Group of companies of foreign interests operating in the oil and gas sector (“the shareholder” and “the Company”) in a civil action against the company.
The shareholder claimed damages arising out of the dilution of her shareholding from 14.57% to 4.85% through an increase of share capital which was decided by the majority shareholders. The Court accepted the Claimant’s contentions that the increase of capital was decided despite the fact that the Company was not in need of financing. It also decided that fixing the price at a lower amount than the true value of the shares, was done with the purpose of diluting the shareholding of the minority shareholder to the benefit of the Chairman of the Board of Directors and majority shareholder.
According to case law, the Courts are unwilling to interfere in the process of decision-making between shareholders, but in this particular case the evidence before the Court made it obvious that the Company’s Board of Directors’ decision to propose a capital increase of US$120 million was not associated with any legitimate business activity or bona fide investment requirement.
The Court gave judgment in favour of the shareholder and awarded damages for the amount of $202.375.830 bearing legal interest bringing the total amount to $272.533.734. This case had a significant bearing amongst the Cypriot legal community, not only because of the amount in question, which was impressively high for Cypriot standards, but also because of the importance and novelty of the issue at hand.