We are pleased to have successfully represented a leading European company operating in the food sector in a significant decision by the District Court of Nicosia—the first judgment interpreting the new procedural framework governing derivative actions under Part 20 of the new Civil Procedure Rules.
The case involved a shareholder dispute concerning the proposed sale of an asset within a complex international structure. A minority shareholder sought leave to bring a derivative claim, alleging fraud, breach of fiduciary duty, and conspiracy—including claims against our client, a major player in the European food industry with an annual turnover of €3 billion.
One of the Claimant’s arguments was that the value of the shares to be sold was not €40 million as stated, but at least €55 million.
Framework under Part 20 of the Civil Procedure Rules
Under Part 20 of the new Civil Procedure Rules, the Claimant in a derivative claim must obtain leave of the Court to continue the claim by demonstrating that there is a prima facie case on the merits. The Court adopted and applied the test set out by the English courts in Abouraya v Sigmund [2014] EWHC 277 (Ch), stating:
“…a prima facie case is a higher test than a seriously arguable case, and I take it to mean a case that, in the absence of an answer by the defendant, would entitle the claimant to judgment….”
As the Court noted, taking into account the special nature of a derivative claim, “the threshold should be set very high.”
Court’s Findings
The Court, agreeing with our submissions, held that the Claimant failed to meet this high threshold and therefore dismissed the application for leave to continue the derivative claim. In particular, the Court found that:
- Our client had no fiduciary or legal obligations to any party;
- Its involvement in the process—such as cooperating with due diligence and waiving pre-emption rights—was legitimate and commercially reasonable.
Significance of the Decision
This decision sets a key precedent in Cyprus company law and provides important guidance on the application of the new prima facie test for derivative actions.
Our client was represented in the court case by our Managing Partner, Theodoros Economou.
You can find a link to the court judgment here.
